What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2019-05-03 compared with 2018-05-01 · 92 added, 77 removed, 95 unchanged (64% of the section changed)

4 unchanged sentences

Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this annual report, particularly in the section entitled “Risk Factors” of this annual report.

Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

Our audited financial statements are stated in Canadian Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

Purchase of Significant Equipment

We do not intend to purchase any significant equipment over the next twelve months.

We expect to incur capital expenditures on our facilities and purchase equipment required for production, upon sufficient financing, in order to pursue our business plans.

Personnel Plan

We do not expect any material changes in the number of employees over the next 12 month period (although we may enter into employment or consulting agreements with our officers or directors).

We do and will continue to outsource contract employment as needed.

Over the next 12-month period, we expect to increase the number of employees as required in order to pursue our business plans.

Results of Operations

5 unchanged sentences

Gain on disposal of asset

Gain on settlements of debentures

Gain on repayment of promissory note

Gain on settlements of debt

Interest expense

During the year ended January 31, 2018, we disposed of our shares of common stock of IndUS and IndUS net liabilities for 3,800,000 shares of common stock of Pivot, which resulted in a gain on disposal of asset of $609,311.

In addition, we recorded a gain on settlement of debentures related to conversion of debentures into our common stock, settlement of accounts payable into common stock and conversion of accrued management fees into a promissory note upon the disposal of our shares of IndUS common stock.

Interest income

Loss on extinguishment of convertible debentures

Deferred tax recovery

For the year ended January 31, 2019, our net loss increased by $8,929,244.

During the year ended January 31, 2019, we completed the acquisitions of the Thrudermic Transdermal Nanotechnology and Pivot Naturals, LLC and its RTIC patents and entered into a joint venture to produce and commercialize cannabis-infused beverages.

We also performed due diligence on other potential transactions.

The result of these activities was an increase to operating expenses.

Pursuant to the acquisitions, we entered into employment contracts which increased our salaries and wages expense.

Should our company be successful in securing continued financing for the development of our platform technologies, we expect our future expenses to be consistent with our expenses for the year ended January 31, 2019.

In addition to the above increased expenses, we settled convertible debentures totaling $1,500,000 through the issuance of 3,750,000 units, with each unit consisting of one common stock and one share purchase warrant, which resulted in a loss on extinguishment of convertible debentures of $1,221,603 being included in other income (expenses).

Our operating expenses for our years ended January 31, 2019 and 2018 are outlined in the table below:

2 unchanged sentences

Due diligence costs

Finders’ fee expense

Foreign exchange loss

General and administrative

Management fees

Licensing fees

Professional fees

Research and development

Operating expenses for year ended January 31, 2018 decreased by $4,974,397 as compared to the comparative period in 2017.

In 2017, $1,304,738 of stock-based compensation was included in general and administrative expense as a result of 700,000 common stock issued for services and grants of 6,320,833 options to purchase our common stock.

In 2018, $148,909 of stock-based compensation was included in general and administrative to recognize 350,000 shares of our common stock issued to third party service providers and 100,000 stock options granted to members of our advisory board.

Management fees decreased by $3,815,810 from the year ended January 31, 2017 to the year ended January 31, 2018.

In 2017, 5,000,000 options to purchase our common stock granted to management.

In 2018, no options were granted.

Sales and marketing

Wages and salaries

Write-off of inventory

Operating expenses

Operating expenses for year ended January 31, 2019 increased by $5,489,195 as compared to the comparative period in 2018.

We completed the acquisitions of the Thrudermic Transdermal Nanotechnology and Pivot Naturals, LLC and its RTIC patents, entered into an agreement to access the Solumer™ technology, completed due diligence on other potential transactions and entered into a joint venture to produce and commercialize cannabis-infused beverages.

These activities resulted in increased due diligence costs, finders’ fee expense, consulting fees included in general and administrative, license fees and legal fees included in professional fees.

Research and development expense increased due to activities we undertook to prepare our products for commercialization.

Pursuant to the acquisitions of the Thrudermic Transdermal Nanotechnology and Pivot Naturals, LLC, we entered into employment contracts which increased our salaries and wages expense.

Depreciation and amortization increased due to amortization of intangible assets acquired as part of the acquisitions.

During fiscal 2019, we secured a manufacturing facility in California, USA and a facility in Quebec, Canada in preparation for commercialization of products, which resulted in rent expense.

We have not earned any revenues since our inception and we do not anticipate earning revenues in the upcoming quarter.

1 unchanged sentence

Our company has a stock option plan which was adopted and approved by our shareholders on December 30, 2015.

During our fiscal year ended January 31, 2017:

7,250,000 stock options with exercise price of $0.70 and maturity on February 22, 2021 were granted to directors, officers and consultants,

29,000 stock options with exercise price of $0.34, maturity on May 2, 2021 and vesting on May 3, 2016 (26,000 stock options), November 2, 2016 (1,000 stock options), May 2, 2017 (1,000 stock options) and November 2, 2017 (1,000 stock options) were granted to a consultant, and

41,833 stock options with exercise price of $0.05 and maturity on January 23, 2022 were granted to related parties pursuant to the Agreement and Plan of Merger and Acquisition Agreement dated as of November 4, 2015 between our company and IndUS.

During our fiscal year ended January 31, 2018, 100,000 stock options with exercise price of $0.39 and maturity on November 14, 2022 were granted.

During our fiscal year ended January 31, 2019, 200,000 stock options with exercise price of $1.67 and maturity on March 11, 2023 and 100,000 stock options with exercise price of US$0.32 and maturity on October 28, 2023 were granted.

During our fiscal year ended January 31, 2018, 100,000 stock options with exercise price of US$0.39 and maturity on November 14, 2022 were granted.

We currently do not have any other equity compensation plans or arrangements.

4 unchanged sentences

Working Capital (Deficit)

$ (4,844,352 )

Net Cash used in Operating Activities

$ (4,977,590 )

Net Cash used in Investing Activities

1 unchanged sentence

Effects of exchange rate changes on cash

(Decrease) Increase in Cash During the Period

(Decrease) Increase in Cash During the Year

We will require additional funds to fund our budgeted expenses over the next 12 months.

4 unchanged sentences

Specifically, we estimate our expenses and working capital requirements for the next 12 months to be as follows:

Product Development

Development of BiPhasix Topical Cream (20g)

Development of Thrudermic Topical Tube (20g)

Development of Solmic Oral Dropper Bottle (30ml)

Development of Ready-to-infuse Powderized Products

Product Registration and Regulatory

Data Generation to Claim Indications

Manufacturing and Supply

Sales and Marketing Costs

Product manufacture

facility capital expenditures

Patent maintenance

Sales and marketing

General and administrative

1 unchanged sentence

If we secure less than the full amount of financing that we require, we will not be able to carry out our complete business plan and we will be forced to proceed with a scaled back business plan based on our available financial resources.

Funds raised will be used towards the recruitment of appropriate management and research and development (“R&D”) personnel, as well as towards product development expenditures.

Specifically, the funds will be used to cover R&D expenses associated with 1) manufacturing scale-up of our products at a GMP-certified, high potency drug manufacturing facility;

2) development and manufacture of formulation of our products at a GMP-certified product manufacturing facility for administration of the drug candidates in animals (for safety evaluation) and subsequently to humans 3) submission to appropriate regulatory authorities for NHP registration.

We anticipate that we will incur substantial losses for the foreseeable future.

We have negative cash flows from current operating activities and may continue to be unprofitable.

Even if we carry out our expanded research and development activities on our products, there is no guarantee that we will be able to market them or derive any revenues from their sale.

Although we are anticipating commercialization to commence on some of our product initiatives over the next 12 months, anticipated revenues will not be sufficient to finance our business plan.

Although we are anticipating commercialization to commence on some of our product initiatives over the next 12 months, anticipated revenues may not be initially sufficient to finance our business plan.

We intend to raise capital through equity and, if necessary, debt financing.

We anticipate that the bulk of any additional funding we receive will be in the form of equity financing from the sale of our common stock.

However, we do not have any financing arranged and we cannot provide any assurance that we will be able to raise sufficient funds from the sale of our common stock to fund our operations or planned research and development activities.

In the absence of such financing, we will not be able to carry out our planned research and development activities.

Even if we are successful in obtaining equity financing to fund our operations and research and development activities, there is no assurance that we will obtain the funding necessary to pursue any advanced research and development following the completion of our planned clinical trials.

If we do not continue to obtain additional financing, we may be forced to abandon our business plan.

In the absence of such financing, we will not be able to carry out our planned development activities.

There is no assurance that we will be able to maintain operations at a level sufficient for an investor to obtain a return on his investment in our common stock.

Any modifications to our plans will be based on many factors, including the results of our R&D and the amount of available capital.

Any modifications to our plans will be based on many factors, including the amount of available capital.

Further, the extent to which we carry out our development of planned products is dependent upon the amount of financing available to us.

Future Financings

We will require additional financing in order to enable us to proceed with our plan of operations, as discussed above, including approximately $24.25 million over the next 12 months to pay for product development, sales and marketing and general and administrative expenses.

We will require additional financing in order to enable us to proceed with our plan of operations, as discussed above, including approximately $12.25 million over the next 12 months to pay for capital expenditures, product development, sales and marketing and general and administrative expenses.

These cash requirements are in excess of our current cash and working capital resources.

4 unchanged sentences

There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our planned business activities.

We presently do not have any arrangements for additional financing for the expansion of our operations, and no potential lines of credit or sources of financing are currently available for the purpose of proceeding with our plan of operations.

We are currently completing due diligence on a $15 million private placement and strategic partnership, which would provide financing for the expansion of our operations.

There is no guarantee that this financing will close.

Contractual Obligations

1 unchanged sentence

Going Concern

We have not generated any revenues and are dependent upon obtaining outside financing to carry out our operations and pursue our pharmaceutical research and development activities.

We have not generated any revenues and are dependent upon obtaining outside financing to carry out our operations and pursue our development and commercialization activities.

If we are unable to generate future cash flows, raise equity or secure alternative financing, we may not be able to continue our operations and our business plan may fail.

6 unchanged sentences

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America.

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with United States Generally Accepted Accounting Principles.

Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses.

1 unchanged sentence

We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financial statements.

Reporting Currency

Effective February 1, 2018, the Company changed its reporting currency from US Dollars to Canadian Dollars as it expects to conduct increasing transactions and financing based on the Canadian Dollars.

This will reduce the impact of increased volatility of the US Dollars to Canadian Dollars exchange rate on the Company’s reported operating results.

The aligning of the reporting currency with the underlying operations will better depict the Company’s results of operations for each period.

The related financial statements prior to February 1, 2018 have been represented to Canadian Dollars as if the financial statements originally had been presented in Canadian Dollars since the earliest periods presented.

Use of Estimates

The preparation of these 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 financial statements and the reported amounts of revenues and expenses during the reporting period.

Our company regularly evaluates estimates and assumptions related to the recoverability of long-lived assets, valuation of convertible debentures, assumptions used to determine the fair value of stock-based compensation and derivative liabilities, and deferred income tax asset valuation allowances.

Our 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 our company may differ materially and adversely from our company’s 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 and assumptions used to determine the fair values of stock-based compensation, warrants and warrants issued with shares units.

Estimates and assumptions have also been made on the recoverable amount of intangible assets, fair value of debentures for the purpose of evaluating modification versus extinguishments, fair value of convertible debentures and deferred income tax asset.

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 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.

Long-lived Assets

Foreign Currency Translation

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

and Thrudermic, LLC, is the Canadian dollar.

The functional currency of the wholly-owned subsidiary, Pivot Naturals, LLC, is the US dollar.

Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at the rates of exchange in place at the balance sheet date.

Transactions in currencies other than the functional currency during the year are converted into the functional currency at the applicable rates of exchange prevailing when the transactions occurred.

Transaction gains and losses are recognized in the consolidated statement of operations and comprehensive loss.

Assets and liabilities of the companies are translated from their respective functional currencies to the reporting currency at the exchange rates at the balance sheet dates, equity accounts are translated at historical exchange rates and revenues and expenses are translated at the average exchange rates in effect during the reporting period.

The resulting foreign currency translation adjustment are recorded in other comprehensive loss.

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 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

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 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.

Our financial instruments consist principally of cash, accounts payable and accrued liabilities, due to related parties, convertible debentures, promissory note and acquisition obligation.

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.

Equipment are recorded at cost less accumulated depreciation and accumulated impairment losses.

Depreciation is recorded using the straight-line method to depreciate the cost of equipment over its estimated useful life of six years.

In accordance with ASC 360, “Property, Plant and Equipment”, our company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable.

7 unchanged sentences

An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.

Intangible Assets

Intangible assets consists of costs incurred to acquire license, patents and unpatented technology.

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 intangible assets over their estimated useful lives:

Unpatented technology

Impairment of Intangible Assets

When facts and circumstances indicate that the carrying value of definite-lived intangible assets may not be recoverable, management assesses the recoverability of the carrying value by preparing estimates of sales and the resulting profit and cash flows expected to result from the use of the asset or asset group and its eventual disposition.

If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount, we recognize an impairment loss.

The impairment loss recognized is the amount by which the carrying amount of the asset or asset group exceeds the fair value.

We use a variety of valuation methodologies to determine the fair value of these assets, including discounted cash flow models.

Stock-Based Compensation

Our company records stock-based compensation in accordance with ASC 718, Compensation – Stock-Based Compensation , using the fair value method.

The Company records stock-based compensation in accordance with ASC 718, Compensation – Stock-Based Compensation to determine the fair value of share options and account for stock-based compensation expenses using an estimated forfeiture rate at the time of grant and revising the rate, if necessary, in subsequent periods if actual forfeitures differ from initial estimates.

Stock-based compensation expenses are recorded net of estimated forfeitures such that expenses are recorded only for those share-based awards that are expected to vest.

All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

Derivative Financial Instruments

Derivative financial instruments that are not classified as equity and are not used in hedging relationships are measured at fair value.

Subsequent changes to fair value are recorded in the statement of operations.

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

6 unchanged sentences

During the years ended January 31, 2019 and 2018, there were no charges for interest or penalties.

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.

Our company’s financial instruments consist principally of cash, amounts receivable, accounts payable, and accrued liabilities, due to related parties and convertible debenture.

Pursuant to ASC 820, the fair value of our cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets.

We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

Foreign Currency Translation

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

Our company’s presentation currency is the US dollar.

Monetary assets and liabilities are translated using the exchange rate prevailing at the balance sheet date.

Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction.

Expenses are translated at average rates for the period.

Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income.

Results of operations are translated into our company’s presentation currency, US dollars, at an appropriate average rate of exchange during the year.

Net assets and liabilities are translated to US dollars for presentation purposes at rates of exchange in effect at the end of the period.

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

Recent Accounting Pronouncements

3 unchanged sentences

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 7. Management’s Discussion and Analysis