What changed in this filing

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Item 2. Management’s Discussion and Analysis

2019-06-17 compared with 2018-12-18 · 145 added, 191 removed, 152 unchanged (69% of the section changed)

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Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our financial statements are stated in U.S.

Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

In this quarterly report, unless otherwise specified, all dollar amounts are expressed in U.S.

Dollars (US$) and all references to “common shares” refer to the common shares in our capital stock.

Our financial statements are stated in Canadian Dollars (C$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

In this quarterly report, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars (C$) and all references to “common shares” refer to the common shares in our capital stock.

As used in this quarterly report, the terms “we”, “us”, “our” and “our company” mean Pivot Pharmaceuticals Inc., unless otherwise indicated.

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· 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.

On September 23, 2017, we entered into a collaboration and license agreement with SolMic GmbH (“Solmic”) whereby we acquired worldwide rights to Solmic’s Solubilisation 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.

On December 19, 2017, we commenced trading on the Canadian Securities Exchange under the symbol "PVOT".

On February 28, 2018, we completed the acquisition of ERS Holdings, LLC (“ERS”) pursuant to an Exchange Agreement dated as of February 10, 2018 among Pivot Pharmaceuticals Inc.

(“Pivot”), ERS and the members of ERS.

As consideration for the purchase, we paid $333,333 in cash on closing and will pay an additional $333,333 six (6) and twelve (12) months after closing for total cash payment of $1 million.

On September 7, 2018, the payment due six (6) months after closing was extended to September 30, 2018.

On February 28, 2018, we completed the acquisition of Pivot Naturals, LLC (previously ERS Holdings, LLC) (“Pivot Naturals”) pursuant to an Exchange Agreement dated as of February 10, 2018 among Pivot Pharmaceuticals Inc.

("Pivot"), Pivot Naturals and the members of Pivot Naturals.

As consideration for the purchase, we paid US$333,333 in cash on closing and will pay an additional US$333,333 six (6) and twelve (12) months after closing for total cash payment of US$1 million.

The payment due six (6) months after closing was paid in September 2018.

The payment due twelve (12) months after closing has been extended to May 31, 2019 for an extension fee of 2.5% per month payable in cash and/or shares of common stock.

In addition, we also issued 5,000,000 shares of our common stock and will pay royalties on future net sales.

ERS has developed a patented technology called “RTIC” Ready-To-Infuse-Cannabis, relating to the transformation of cannabis oil into powder for infusion into a variety of food and beverage products such as capsules, K-Cups, stick packs, baked mixes, liquid shots, protein shakes, topicals, lotions, and bottled beverages.

Pivot Naturals has developed a patented technology called “RTIC” Ready-To-Infuse-Cannabis, relating to the transformation of cannabis oil into powder for infusion into a variety of food and beverage products such as capsules, K-Cups, stick packs, baked mixes, liquid shots, protein shakes, topicals, lotions, and bottled beverages.

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

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

On August 7, 2018, we entered into a licensing agreement with Solubest Ltd.

(“Solubest”) whereby we acquired worldwide rights for the use, development and commercialization of its patented Solumer™ Oral Drug Delivery Technology (“Solumer™”) for the improved bioavailability, delivery and commercialization of CBD, THC and other biocannabis-based products.

On August 7, 2018, we entered into a licensing agreement with Formulex Pharma Innovations (formerly Solubest Ltd.) (“Formulex”) whereby we acquired worldwide rights for the use, development and commercialization of its patented Solumer™ Oral Drug Delivery Technology ("Solumer™") for the improved bioavailability, delivery and commercialization of CBD, THC and other biocannabis-based products.

Financial consideration included:

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· Monthly license fee from execution of the agreement until commercialization;

· Monthly development fee of licensed products;

· Milestone payments upon commercialization and aggregate net sales of $5,000,000.

On December 17, 2018, we entered into a joint venture arrangement whereby we hold 50% of the issued and outstanding shares of Pivot-Cartagena Joint Venture Inc.

(“Pivot-Cartagena JV”).

Pivot-Cartagena JV will develop and commercialize cannabis-infused non-alcoholic beverages combining the industry expertise of Licorera del Sur with our patented Solumer™ and RTIC™ powderization technologies.

Our principal executive office is located at 1275 West 6th Avenue, Vancouver, B.C.

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Our Current Business

We are an emerging biopharmaceutical company engaged in the development and commercialization of therapeutic pharmaceuticals and nutraceuticals, as well as drug delivery platform technologies.

Our company focuses on pharmaceutical development of proprietary drug delivery technologies for multiple indications using small molecules, biological and botanical (e.g.

cannabinoids) products to treat unmet medical needs.

In September 2017, we in-licensed a patented topical transdermal drug delivery technology platform, BiPhasix, and an oral drug delivery technology, Solmic Micelle, for delivery of cannabinoids.

We have also acquired the Ready-To-Infuse Cannabis technology in February 2018 and the Thrudermic Transdermal Nanotechnology (transdermal) in March 2018.

Our wholly-owned subsidiaries, Pivot Green Stream Health Solutions Inc.

(“PGS”) and Pivot Naturals, LLC (“Pivot Naturals”) (formerly, ERS), focus on the research, development, and commercialization of cannabinoid based nutraceuticals.

PGS will generate data to support the safety and efficacy of cannabinoids as Natural Health Product (“NHPs”) as outlined in Health Canada Regulations in order to make particular health claims.

Health Canada publishes the Natural Health Products Regulations (“NHPR”) which set out the requirements governing the sale, manufacture, packaging, labelling, importation, distribution and storage of NHPs.

According to Health Canada, the objective of the NHPR is to provide reasonable assurance that products offered for sale in Canada are safe, efficacious and of high quality.

PGS may also follow applicable and harmonized regulations for product development and commercialization in the US, European Union and Asia Pacific regions.

Alternatively, PGS will commercialize certain cannabinoid products with a Licensed Producer and/or Licensed Distributor as per the regulations concerning Access to Cannabis for Medical Purposes Regulations (“ACMPR”) since certain active ingredients in cannabinoids remain restricted until new legislation permits ease of development and distribution in 2018.

Lastly, PGS may also develop products containing cannabinoid active ingredients obtained from industrial hemp according to the Industrial Hemp Regulations (“IHR”) permitting such products provided they are sourced from industrial hemp.

Otherwise stated, this means that the plants and plant parts of the genera Cannabis, the leaves and flowering heads of which do not contain more than 0.3% THC w/w, and includes the derivatives of such plants and plant parts.

PGS’s pipeline targets indications such as cancer supportive care, pain and inflammation, women’s sexual dysfunction, dermatology and eye disease.

Our overall strategy includes the following:

Acquire market-ready natural health products from third-parties for rebranding and re-sale;

Acquire cannabinoid-based food additives for medical consumer sales;

Develop cannabinoid-based natural health products using our BiPhasix topical platform technology;

Develop pharmaceutical products delivered using our BiPhasix topical platform technology;

Obtain partnerships with Health Canada approved Authorized Licensed Producers and/or Licensed Distributors, which can provide restricted and non-restricted cannabinoids as per the ACMPR or the IHR;

Acquire novel proprietary drug delivery technologies, for example, metered dose, intra-nasal, suppositories;

Make an application at the appropriate time to acquire Health Canada’s Authorized Licensed Producers and Licensed Dealers licenses as per the ACMPR;

Out-license our platform technologies to Licensed Producers or Licensed Distributors and other drug developers;

Secure and develop further intellectual property;

Opportunistically acquire later‑stage drug candidates that provide new treatment options to address unmet medical needs in health care;

Establish partnerships with large and specialty pharmaceutical companies and/or biotechnology companies to collaboratively develop and/or commercialize our products.

We are a bio-cannabis consumer products company engaged in the commercialization of patented, science-based, premium health and wellness products.

We have invested in the acquisition and licensing of patented drug delivery technologies and have developed and tested differentiated cannabis formulations using pharmaceutical grade CBD and THC isolates as active ingredients.

Working with our network of pharmaceutical product experts, we have created a catalogue of bioavailable, stable cannabis products.

Our products will be manufactured at current Good Manufacturing Practices (“GMP”) accredited facilities in Canada, California, Vermont and Germany.

Our products will initially be marketed under our “Pivot Naturals” brand and distributed globally through established wholesale, retail, e-commerce and government partners.

Our premium branded product line includes tablets, capsules and soft gels, bulk powder, stick packs, infused beverages, oral solutions, lotions, creams, gels, gums, mints, candies, intimate lubricant and pet supplements.

Our strategic priorities are to:

Continue to build our industry leading portfolio of patented drug delivery technologies;

Commercialize our bio-cannabis product lines;

Secure global distribution channels for our product lines;

Establish partnerships with large and specialty pharmaceutical companies and/or biotechnology companies to collaboratively develop and/or commercialize certain products in our portfolio.

Our Research and Development Strategy

Our management team has implemented a business minded and cost conscious approach to product research and development by focusing on development of novel therapies to address unmet needs in health care.

Our research and development strategy will apply novel drug delivery options for new and/or existing drugs or NHPs.

For a drug to be successful it must be both efficacious and acceptably safe.

Before a drug may be commercially marketed, it must be scrutinized and approved by applicable health authorities (such as Health Canada and the FDA in the United States) in each country or jurisdiction where it is sought to be sold.

In pharmaceutical research and development, clinical trials are conducted to assess the safety and efficacy of the drug and the data to be collected for such new drugs.

Health authorities then scrutinize the preclinical and clinical data and determine, based on the results, whether a drug may be sold to the public.

Similarly, clinical trials can only take place once satisfactory information has been gathered on the quality of the product and its non-clinical safety, and approval to conduct clinical trials has been granted by the appropriate health authority in the country where the trial is scheduled to take place.

Clinical trials involving new drugs are commonly classified into four phases.

Each phase of the drug approval process is treated as a separate clinical trial.

The drug development process will normally proceed through all four phases over many years.

If the drug successfully passes through Phases I, II and III, it will usually be approved by the national regulatory authority for use in the general population.

Phase IV trials are ‘post approval’ studies.

Due to the considerable cost that may be required to complete a full series of clinical trials, the burden of paying for all the necessary people and services is usually borne by the sponsor, who may be the pharmaceutical or biotechnology company that developed the drug that is the subject of the study.

Since the diversity of roles may exceed the resources of the sponsor, clinical trials are often managed by outsourced partners such as contract research organizations.

Furthermore, approval rates for new drugs at each clinical trial stage are prohibitively low, which may require the sponsor to finance additional trials or abandon the drug under development altogether.

We will also develop products regulated under Canada’s Natural Health Products Guidance and support claims with clinical based data as per current regulations.

Preclinical safety studies for pharmaceutical or NHP product development will be conducted over the next 12 months to advance at least one of our product candidates.

Our management team has implemented a business-minded and cost-conscious approach to product research and development by focusing on development of bio-cannabis nutraceuticals and selling the finished products into markets where regulations permit.

We will use contract development and manufacturing organizations on a fee for service basis to perform any research or development that is required.

Our Platform Technologies

BiPhasix Transdermal Drug Delivery Technology (Topical Platform)

Pivot has acquired worldwide rights from Altum for its patented topical transdermal drug delivery technology platform, or BiPhasix, which we will use for the delivery and commercialization of cannabinoid, cannabidiol (“CBD”) and tetrahydrocannabinol (“THC”) based products.

We have acquired worldwide rights from Altum Pharmaceuticals Inc.

for its patented topical transdermal drug delivery technology platform, or BiPhasix, which we will use for the delivery and commercialization of cannabinoid, CBD and THC-based products.

The BiPhasix technology has the potential to deliver drugs less invasively than by injections.

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Thrudermic Transdermal Nanotechnology (Topical Platform)

Pivot has acquired the worldwide rights to Thrudermic’s patented Transdermal Nanotechnology for the development and commercialization of transdermal cannabinoids.

We have acquired the worldwide rights to Thrudermic’s patented Transdermal Nanotechnology for the development and commercialization of transdermal cannabinoids.

Developed in Israel, the Thrudermic lipid-based nano dispersion technology for topical cannabinoids uses FDA approved materials.

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Solmic Solubilization Drug Delivery Technology (Oral Platform)

Pivot has acquired the worldwide rights to Solmic’s Solubilisation Technology for the development and commercialization of cannabinoid-containing natural extracts.

Solmic’s technology allows active ingredients to become water soluble without changing their composition and nature.

Solubilized substances that are packed in micelles are protected from degradation from light, stomach acid, and from enzymes released in the intestinal tract.

The micellisation process results in a stable, homogenous and transparent mixture, which significantly increases uptake of fat soluble ingredients from the gut into the blood system of fat soluble ingredients, resulting in greater bioavailability.

We will enter into purchase agreements with Solmic GmbH (“Solmic”) for the purchase of Solmic’s oral 1% Micelle solution.

Subject to meeting annual minimum order quantities, we will receive worldwide exclusive rights to this product, made with patented Micelle technology.

Solumer Drug Delivery Technology (Oral Platform)

Pivot has acquired the worldwide rights to Solubest’s Solumer Technology for the oral delivery of cannabinoids, such as CBD and THC, with improved bioavailability.

We have acquired the worldwide rights to Formulex’s Solumer Technology for the oral delivery of cannabinoids, such as CBD and THC, with improved bioavailability.

The Solumer Technology allows to convert the cannabinoids to powder for tablets and capsules and the powder can be dispersed in liquids to give a clear solution that is colorless, and flavorless for beverage applications.

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The derived powder may then be encapsulated and infused for use in beverages, edibles, lotions and additional health and personal care products.

The RTIC process is conducive for manufacturing of a wide array of products, including:

Capsules/Tablets:

One of our patents is issued for use in capsules and tablets.

Another of our patents has numerous claims for adding other active ingredients to tablets and capsules, such as Melatonin or Gingko Biloba, allowing for specific treatment for targeted effects.

Efficient mass production of capsules, conforming to GMP standards is part of our core competencies and manufacturing capabilities.

Production of capsules is scheduled for the second quarter of the calendar year 2019.

Beverage/Additive Stick Packs:

Single-serve stick packs are convenient and functional when used in hot beverages.

Stick packs are also highly functional.

Production of stick packs is scheduled for the second quarter of the calendar year 2019.

Pet Products:

Our patented cannabis powder will also be mass produced and packaged in bulk for both consumer pet health needs.

Production of pet powders is scheduled for the second quarter of calendar year 2019.

Lotions and Topical Creams:

Our patented lotion and topical technology will be mass produced and packaged for consumer health needs.

Production of lotions and topical creams is scheduled for the first quarter of calendar 2019.

The RTIC process is conducive for manufacturing of a wide array of products.

Our Product Development Initiatives

Our product development initiatives will address unmet medical needs in health care.

In addition to our bio-cannabis nutraceutical product pipeline, we have the opportunity develop a pharmaceutical pipeline in the future, financing permitting.

DELIVERY TECHNOLOGY

GLOBAL MARKET SIZE (1)

ESTIMATED PRODUCT LAUNCH

Solmic Solubilisate / Oral

Solmic Solubilisate / Oral or RTIC/Solumer Tablet

Cancer supportive care (CINV) (chemo-induced nausea and vomiting)

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Restless leg syndrome

Solmic Solubilisate / Oral

Solmic Solubilisate / Oral or RTIC/Solumer Tablet

Pain and inflammation (for opioid withdrawal)

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Cancer supportive care (mucositis relief)

BiPhasix / Topical

BiPhasix/Thrudermic / Topical

Female sexual dysfunction (HSDD) (hypoactive sexual desire disorder)

BiPhasix / Topical

BiPhasix/Thrudermic / Topical

Pain and inflammation (joints/opioid withdrawal)

BiPhasix / Topical

BiPhasix/Thrudermic / Topical

Dermatology (skin irritation/redness/ itching)

BiPhasix / Topical

BiPhasix/Thrudermic / Topical

Eye disease (glaucoma, intra-ocular pressure)

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Pain and inflammation (opioid withdrawal)

Solmic Solubilisate / Oral

Solmic Solubilisate / Oral or RTIC/Solumer

Migraine (nausea, vomiting, dizziness, sensitivity to light, sounds and smells)

(1) Derived from IMS data

We have no plans to initiate any clinical trials of our pharmaceutical pipeline at this time.

Results of Operations

The following summary of our results of operations should be read in conjunction with our financial statements for the period ended October 31, 2018, which are included herein.

Our operating results for the three and nine months ended October 31, 2018 and 2017 are summarized as follows:

The following summary of our results of operations should be read in conjunction with our financial statements for the period ended April 30, 2019, which are included herein.

Our operating results for the three months ended April 30, 2019 and 2018 are summarized as follows:

Three Months Ended

Nine Months Ended

Due diligence costs

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General and administrative

$ (1,609,280 )

Lease expense

Lease liability expense

Licensing fees

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Sales and marketing

Write-off of equipment

Total Other Income (Expenses)

$ (1,965,711 )

$ (2,377,031 )

Net Income (Loss)

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$ (2,104,876 )

For the nine months ended October 31, 2018, our net loss increased by $6,621,724 from a net income of $205,362 during the prior period to a net loss of $6,416,362 in the current period.

For the three months ended October 31, 2018, our net loss increased by $3,908,247 from a net income of $530,726 during the prior period to a net loss of $3,377,521 in the current period.

Net incomes during the three and nine months ended October 31, 2017 resulted primarily from the recognition of gain on settlements of debts related to accrued consulting fees forgiven, debts converted into shares of our common stock, as well as conversion of accrued liabilities related to our past Chief Executive Officer into a promissory note.

Net loss increased during the three and nine months ended October 31, 2018 due to the following.

In March 2018, our company secured convertible debentures totaling $3,926,804 ($5,000,000 Canadian Dollars), which allowed our company to pursue development of our platform technologies and to secure and develop further intellectual property.

During the nine months ended October 31, 2018, we completed the acquisitions of the Thrudermic Transdermal Nanotechnology and Pivot Naturals, LLC and its RTIC patents and performed due diligence on other potential transactions, which resulted in increases to amortization, due diligence costs, consulting fees within general and administrative costs, professional fees and research and development for both the three and nine months ended October 31, 2018.

Pursuant to these acquisition, 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 nine months ended October 31, 2018.

In addition to the above increased expenses, we settled convertible debentures totaling $1,144,601 ($1,500,000 Canadian Dollars) 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 $1,508,836 being included in other income (expenses).

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

For the three months ended April 30, 2019, our net loss decreased by $230,753.

Net loss decreased primarily from decreases in due diligence costs, general and administrative, professional fees and research and development, offset by increases amortization, licensing fees, rent and salaries and wages.

During the three months ended April 30, 2018, we completed the acquisitions of the Thrudermic Transdermal Nanotechnology and Pivot Naturals, LLC (formerly ERS Holdings, LLC) and its RTIC patents, which increased due diligence costs, consulting fees within general and administrative costs, professional fees and research and development.

Research and development work performed during the three months ended April 30, 2018 included development of CBD topical and oral formulations, including permeability studies.

During the three months ended April 30, 2019, we conducted animal dermal studies using CBD formulations developed.

Increases in expenses during the three months ended April 30, 2019 were due to the following.

For the 2019 quarter, we paid licensing fees to Formulex pursuant to a licensing agreement on the Solumer technology entered into in August 2018.

We also made lease payments on our facilities in Quebec, Canada and California, USA, both of which were entered into in July 2018.

Salaries and wages increased by $264,542 for the three months ended April 30, 2019.

For the three months ended April 30, 2018, salaries paid on employment contracts entered into pursuant to the acquisitions of Thrudermic and RTIC patents began in March 2018 and were not paid for the full interim period.

Salaries and wages were higher for the three months ended April 30, 2019 due to the following:

1) We paid salaries to two (2) additional administrative staff in Pivot Naturals, who were hired in June 2018, and 2) Pursuant to the termination of three (3) employees in Pivot Naturals, California wage penalties of approximately $56,100 were incurred.

We have not earned any revenues since our inception.

We anticipate earning revenues from sales of micellized CBD Solutions beginning the second or third quarter of fiscal 2020.

Liquidity and Financial Condition

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$ (5,122,989 )

Our total current assets as of October 31, 2018 were $556,024 as compared to total current assets of $149,253 as of January 31, 2018.

The increase was primarily due to cash received upon issuance of convertible debentures of $3,817,119 ($5,000,000 Canadian Dollars) and issuance of units, consisting of a common stock and a share purchase warrant per unit, of $976,164 (net of share issuance costs), offset with cash used for the payments of past obligations, working capital and business acquisitions.

Our total current liabilities as of October 31, 2018 were $3,650,935 as compared to total current liabilities of $429,200 as of January 31, 2018.

The increase in current liabilities was primarily attributed to convertible debentures of $3,817,119 ($5,000,000 Canadian Dollars) issued during the period and amounts remaining to be paid on the acquisition of Pivot Naturals of $329,419 ($423,923 Canadian Dollars), net of convertible debentures of $1,144,601 ($1,500,000 Canadian Dollars) settled.

Nine Months Ended

$ (4,844,353 )

Our total current assets as of April 30, 2019 were $193,847 as compared to $241,874 as of January 31, 2019.

We received gross proceeds of $1,250,000 from issuance of units, consisting of a common stock and a share purchase warrant, and $300,000 from a promissory note.

These proceeds were used to repay $750,000 of our outstanding convertible debentures, as well as extend the remaining maturity of the convertible debentures to June 2, 2019 for an extension fee of $250,000.

The remainder of the proceeds, plus cash on hand from January 31, 2019, were used to fund key working capital requirements, resulting in an overall decrease in cash.

Current liabilities increased from January 31, 2019 due primarily to the issuance of a promissory note totaling $300,000, recording of a current lease liability of $249,082 pursuant to the adoption of a new accounting standard, ASC 872 Leases, and continuing accruals from services provided by our service providers during the quarter.

This increase was offset by the repayment of $750,000 of our convertible debentures.

Three Months Ended

Net Cash Used In Operating Activities

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Operating Activities

During the nine months ended October 31, 2018, our cash used by operating activities increased by $3,360,663 when compared to cash used in operating activities during the nine months ended October 31, 2017.

During the period, we acquired Pivot Naturals and the Thrudermic Transdermal Nanotechnology, which resulted in increase in due diligence costs, general and administration, professional fees and salaries and wages.

In addition, proceeds from convertible debentures issued during the period allowed our company to pursue our business strategy, including development of our oral and transdermal drug delivery platforms and preparation of our RTIC products for production and commercialization, which resulted in increased research and development costs and rent from securing manufacturing facilities.

During the three months ended April 30, 2019, our cash used by operating activities decreased by $1,851,404 when compared to cash used in operating activities during the three months ended April 30, 2019.

During the prior period, proceeds from convertible debentures issued during the period allowed our company to pursue our business strategy, including development of our oral and transdermal drug delivery platforms and preparation of our RTIC products for production and commercialization, which resulted in increased research and development costs and salaries and wages.

Also, during prior period, we acquired Pivot Naturals and the Thrudermic Transdermal Nanotechnology, which resulted in increase in other operating activities, such as due diligence, general and administrative, professional services.

Investing Activities

During the nine months ended October 31, 2018, we acquired Pivot Naturals through the issuance of 5,000,000 shares of our common stock and a payment of $659,999.

We did not have any investing activities during the nine months ended October 31, 2017.

During the three months ended April 30, 2018, we acquired Pivot Naturals through the issuance of 5,000,000 shares of our common stock and a payment of $428,438 (US$333,333).

We did not have any investing activities during the three months ended April 30, 2019.

Financing Activities

During the nine months ended October 31, 2018, we received net proceeds of $3,817,119 from convertible debentures, $394,616 from promissory note and $976,164 from issuance of units of our company.

We repaid loan payable and promissory notes of $15,925 and $588,839, respectively.

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

These funds may be raised through equity financing, debt financing, or other sources, which may result in further dilution in the equity ownership of our shares.

There is still 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.

Further, we may continue to be unprofitable.

We need to raise additional funds in the immediate future in order to proceed with our budgeted expenses.

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

Product Development

Estimated Expenses

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

During the three months ended April 30, 2019, our cash provided by financing activities decreased by $4,150,745.

During the three months ended April 30, 2019, we received net proceeds of $1,250,000 from issuance of units, consisting of common stock and share purchase warrant, and $276,000 from a promissory note.

We also repaid $750,000 of our convertible debentures and paid $250,000 for extension of the maturity of the convertible debentures.

During the three months ended April 30, 2018, we received net proceeds of $4,939,975 from convertible debentures and $502,464 from promissory note.

We repaid loan payable and promissory notes totaling $15,925 and $749,769, respectively.

We have estimated our expenses and working capital requirements for the next 12 months to be as follows:

Product manufacture

facility capital expenditures

Patent maintenance

Sales and marketing

General and administrative

Based on our planned expenditures, we will require additional funds of approximately $24.25 million to proceed with our business plan over the next 12 months and the commencement of commercialization of our product initiatives.

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.

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

In May 2019, we closed on non-brokered private placements totaling $15 million, a portion of which were used to settle $2.5 million of our convertible debentures and outstanding obligations.

The remainder of the proceeds will fund our estimated expenses and working capital requirements for the next 12 months.

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.

In addition, if our estimated expenses and working capital requirements for the next 12 months are higher than estimated, additional funds will also be required to fund our business plans.

If required, 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.

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

Accordingly, we will require additional financing in order to continue operations and to repay our liabilities.

There is no assurance that any party will advance additional funds to us in order to enable us to sustain our plan of operations or to repay our liabilities.

We anticipate continuing to rely on equity sales of our common stock in order to continue to fund our business operations.

We may require additional financing in order to enable us to proceed with our plan of operations, as discussed above,

We anticipate revenues on some of our product initiatives to commence over the next 12 months, beginning with sales of micellized CBD Solutions in the European Union, where regulations permit.

Should anticipated revenues be less than estimated, we will need to rely on equity sales of our common stock in order to continue to fund our business operations.

Issuances of additional shares will result in dilution to our existing stockholders.

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.

The amounts presented in the consolidated financial statements do not provide for the effect of inflation on our operations or financial position.

Except as disclosed above regarding the closing of non-brokered private placements totaling $15 million, 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.

The amounts presented in the consolidated condensed financial statements do not provide for the effect of inflation on our operations or financial position.

The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.

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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.

Our 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.

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 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.

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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.

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, accounts payable and accrued liabilities and amounts due to related parties.

Pursuant to ASC 820, the fair value of cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets and derivative liabilities is determined based on “Level 2” inputs, as determined by observable market data.

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.

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

Our company’s presentation currency is the US dollar.

Monetary assets and liabilities are translated using the exchange rate prevailing at the consolidated 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.

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

The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards.

Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse.

Our company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

As of April 30, 2019 and January 31, 2019, our company did not have any amounts recorded pertaining to uncertain tax positions.

Our company files federal and provincial income tax returns in Canada.

Our company recognizes interest and penalties related to uncertain tax positions in tax expense.

During the three months ended April 30, 2019 and 2018, there were no charges for interest or penalties.

Recent Accounting Pronouncements

Our company has implemented all new accounting pronouncements that are in effect and that may impact our consolidated financial statements and we do not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our consolidated financial position or results of operations.

Our company has implemented all new accounting pronouncements that are in effect and that may impact its 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 financial position or results of operations.

Quantitative and Qualitative Disclosure About Market Risk

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What changed 10-Q

Item 2. Management’s Discussion and Analysis