MARIPOSA HEALTH, INC. - FORM 10-Q

Attached files

file	filename
EX-32.1 - EXHIBIT 32.1 - MARIPOSA HEALTH, INC.	v451976_ex32-1.htm
EX-31.2 - EXHIBIT 31.2 - MARIPOSA HEALTH, INC.	v451976_ex31-2.htm
EX-31.1 - EXHIBIT 31.1 - MARIPOSA HEALTH, INC.	v451976_ex31-1.htm

U. S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED, SEPTEMBER 30, 2016

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO ___________

Commission File Number: 000-51443

MARIPOSA HEALTH, INC.

(Exact name of registrant as specified in its charter)

Delaware

47-1201309

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

888 Prospect Avenue

La Jolla, California 92037

(Address of Principal Executive Offices)

(858) 528 2677

(registrant’s telephone number)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of regulation S-T (paragraph 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerate filer ¨

Accelerated filer ¨

Non-accelerated filer ¨

(Do not check if a smaller reporting company)

Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of November 10, 2016 there were 10,399,688 shares of the issuer’s common stock, $0.0001 par value, outstanding.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets as of September 30, 2016 (unaudited) and June 30, 2016	F-1

Consolidated Statements of Operations for the Three Months Ended September 30, 2016 and 2015 (unaudited)	F-2

Consolidated Statements of Cash Flows for the Three months Ended September 30, 2016 and 2015 (unaudited)	F-3

Notes to Consolidated Financial Statements (unaudited)	F-4

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1

Item 3. Quantitative and Qualitative Disclosures About Market Risk	10

Item 4. Controls and Procedures	10

PART II - OTHER INFORMATION

Item 1. Legal Proceedings	11

Item 1A. Risk Factors	11

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	11

Item 3. Defaults Upon Senior Securities	11

Item 4. Mine Safety Disclosures	12

Item 5. Other Information	12

Item 6. Exhibits	13

Signatures	14

-i-

MARIPOSA HEALTH INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

IN US$

ASSETS	September 30, 2016			June 30, 2016
	(Unaudited)
CURRENT ASSETS
Cash	$	137		$	8,816
Other current assets		-			4,752
TOTAL CURRENT ASSETS		137			13,568

NON-CURRENT ASSETS
Intangible assets, net (TA-270)		278,383			279,087
In-process research and development (HI-164OV)		432,713			421,757
TOTAL NON-CURRENT ASSETS		711,096			700,844

TOTAL ASSETS	$	711,233		$	714,412

LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
Accounts payable and accrued expenses	$	1,151,711		$	906,507
Current portion of long-term debt		350,000			350,000
Shareholder loan		15,269			14,882
TOTAL CURRENT LIABILITIES		1,516,980			1,271,389

NON-CURRENT LIABILITIES
Long-term debt, net of current portion		357,304			348,257
TOTAL NON-CURRENT LIABILITIES		357,304			348,257

TOTAL LIABILITIES		1,874,284			1,619,646

STOCKHOLDERS' DEFICIT
Preferred stock ($.0001 par value, 5,000,000 shares authorized; none issued and outstanding)		-			-
Common stock ($.0001 par value, 100,000,000 shares authorized, 10,399,688 and 10,399,688 shares issued and outstanding respectively)		1,040			1,040
Additional paid-in capital		4,846,256			4,846,256
Other accumulated comprehensive income		280,921			282,037
Accumulated deficit		(6,291,268	)		(6,034,567	)
TOTAL STOCKHOLDERS' DEFICIT		(1,163,051	)		(905,234	)

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	711,233		$	714,412

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

F-1

MARIPOSA HEALTH INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

IN US$

	For The Three Months Ended
	September 30, 2016			September 30, 2015

Net revenue	$	-		$	-
Cost of revenue		-			-
Gross profit		-			-

Operating expenses
Research and development		17,186			31,243
Depreciation and amortization		7,894			7,571
Compensation - directors and officers		120,333			132,000
General and administration expenses		85,651			124,089
Total operating expenses		231,064			294,903

Loss from operations		(231,064	)		(294,903	)

Other income (expense)
Interest expense, net of interest income		(25,637	)		(43,805	)
Total Other income (expense)		(25,637	)		(43,805	)

(Loss) from operations before income taxes		(256,701	)		(338,708	)

Provision for income taxes		-			-

Net loss		(256,701	)		(338,708	)
Other comprehensive loss
Foreign currency translation		(1,116	)		3,337

Comprehensive loss	$	(257,817	)	$	(335,371	)

Net loss per share
Basic and Diluted:
Basic	$	(0.025	)	$	(0.035	)
Diluted	$	(0.025	)	$	(0.035	)

Weighted average number of shares used in computing basic and diluted net loss per share:

Basic		10,399,688			9,561,211
Diluted		10,908,796			10,390,319

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

F-2

MARIPOSA HEALTH, INC., AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

IN US$

	For The Three Months Ended
	September 30, 2016			September 30, 2015

Net loss	$	(256,701	)	$	(338,708	)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization		7,894			7,571
Amortization of debt discount		-			23,063
(Increase) decrease in assets:
Other current assets		4,473			(3,852	)
Increase in current liabilities:
Accounts payable and accrued expenses		245,484			111,048
Net cash provided by (used in) operating activities		1,150			(200,878	)

Cash flows from financing activities
Proceeds from borrowings, net of repayments		-			97,867
Net cash provided by financing activities		-			97,867

Effect of exchange rate changes		(9,829	)		37,080

Net increase (decrease) in cash and cash equivalents		(8,679	)		(65,931	)
Cash and cash equivalents at the beginning of the period		8,816			77,045

Cash and cash equivalents at the end of the period	$	137		$	11,114

Supplemental disclosures
Cash paid during the period for:
Income tax payments	$	-		$	-
Interest payments	$	-		$	-

Supplemental schedule of non-cash financing activities:
Warrants Issued with Promissory Note	$	-		$	8,360

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

F-3

MARIPOSA HEALTH, INC. AND SUBISIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2016 AND 2015

Note 1 – Basis of Presentation and SUMMARY OF Significant Accounting Policies

Description of BUSINESS

Mariposa Health, Inc. (“Mariposa US” or the “Company”) was incorporated under the laws of the State of Delaware on June 23, 2014 with the intention to serve as a vehicle to effect an asset acquisition, merger, exchange of capital stock or other business combination with a domestic or foreign business. On December 8, 2014, our sole officer and director, Richard Chiang, entered into a Share Purchase Agreement pursuant to which he sold 10,000,000 shares of our common stock that he owned to Expert Capital Investments Limited for an aggregate purchase price of $40,000. These shares represented 100% of our issued and outstanding common stock. Effective upon the closing date of the Share Purchase Agreement, Expert Capital Investments Limited became our sole stockholder. On March 5, 2015, we filed an Amended and Restated Certificate of Incorporation under which we changed our name to Mariposa Health, Inc. and effected a 1:5 reverse split to reduce our outstanding shares of common stock from 10,000,000 shares to 2,000,000 shares and to authorize a classified Board of Directors. Under a classified Board of Directors, directors serve staggered, three-year terms. Approximately one-third of our board of directors will be elected each year.

On June 17, 2015, Mariposa US entered into the Purchase Agreement with Mariposa Health Pty Limited (“Mariposa Australia”). Pursuant to the Purchase Agreement, at closing, stockholders of Mariposa Australia received one share of Mariposa US’s common stock for each issued and outstanding share of Mariposa Australia’s common stock. As a result, at closing Mariposa US issued 7,561,211 shares of its common stock to the stockholders of Mariposa Australia and reserved 438,789 additional shares of its common stock or a total of 8,000,000 shares of its common stock should holders of warrants issued by Mariposa Australia to certain lenders exercise their rights to acquire up to 438,789 shares of Mariposa US shares of common stock, representing 80% of Mariposa US’s outstanding common stock or 10,000,000 shares of common stock on a fully diluted basis following the Purchase.

Immediately following the execution of the Purchase Agreement the Company appointed Dr. Phillip E. Comans, Kevin M. Lynn and Margaret Bridges as directors, effective at the effective time of the Purchase.

Upon closing of the transaction, under the Purchase Agreement, Mariposa Australia became the surviving corporation, and wholly-owned subsidiary of Mariposa US. The transaction was accounted for as a reverse merger, and the historical financial information is that of Mariposa Australia.

Mariposa Australia is an Australian pharmaceutical R&D company with two projects in Phase II clinical development to treat COPD and asthma and TA-270 an oral anti-inflammatory and anti-oxidant drug, and HI-1640V, a product to address chronic obstructive pulmonary disease ("COPD"), including bronchitis and emphysema.

On June 7, 2015 Mariposa Australia entered into an Exclusive License Agreement (the "License Agreement") with Shanxi Kangbao Biological Product Co., Ltd. ("Shanxi") under which the Company granted to Shanxi an exclusive license to manufacture, trial, produce, make, use, distribute, offer for sell, import and export, market, sell, hire out, lease, supply, or otherwise dispose of the oral vaccine HI-164/HI-164OV product in China, Taiwan, Macao and Hong Kong in return for which Shanxi is to pay Mariposa Health the following (i) milestone payments of up to AUD$8,291,819 (USD$6,440,498), and (ii) potentially significant royalties based upon net sales of our oral vaccine HI-164/HI-164OV product in China, Taiwan, Macao and Hong Kong.

On May 5, 2016 the Company signed a Letter of Intent with the Ohio Clinical Trials Collaborative of Case Western Reserve University to pursue entering an Agreement for the provision of services and clinical trial related to HI-164OV, an oral vaccine targeting a reduction of exacerbations in COPD patients.

F-4

Our strategy is to expedite clinical development, regulatory approval, and commercialization of our COPD product candidates. Phase II clinical data was generated for the oral vaccine to non-typeable H. Influenzae, HI-164OV and an oral treatment (tablet dose form), TA-270, We plan to begin a Phase II trials for HI-164OV and TA-270 at the earliest time depending on the time of obtaining sufficient funding. We plan to assess new dose forms, in particular of TA-270, with the intent to optimize the product and patent offerings. Trials and product development may be conducted in the United States, the European Union ("EU") or Australia depending on clinical and regulatory conditions, and our capacity to engage personnel and contractors. We believe data from these trials and research activities, if positive, may lead to U.S., EU or Australian regulatory approval for the treatment of COPD after completing Phase III trials. If successful in Phase II clinical trials, we plan to partner TA-270 and HI-164OV product candidates with a large pharmaceutical company or biotechnology company to undertake Phase III clinical trials and to gain regulatory approvals in the United States and elsewhere. Alternatively, if funding is available on suitable terms the commercial strategy could involve our undertaking Phase III clinical trials before partnering. The Company expects that data from clinical trials, whether conducted in the United States, EU or Australia, will form part of the regulatory package for each of these territories.

The Company’s operational model is to minimize overhead costs by having a small product development staff to manage third parties in the development process. To reduce financial risk and financing requirements, the Company is directing their resources to the preclinical and early clinical phases of development. The Company plans to co-develop with or to license to marketing partners our therapeutic product candidates where the size of the necessary clinical studies and the cost associated with the later clinical development phases are significant. By forming strategic alliances with pharmaceutical and/or biotech companies, the Company believes that their technology can be more rapidly developed and successfully introduced into the marketplace.

The Company believes there is a significant opportunity for an existing pharmaceutical company that is already supplying drugs to address COPD to add additional treatment therapies or to complement their existing drugs by adding their products to their range of products to be able to validate the compound through Phase II trials.

Patents and Trademarks

Product	Patent family	Purpose	Status	Expiry
TA-270	1	Substance production	Granted in US, EU	9/2019
	2	Improved substance	Granted in US, EU	6/2022
	3	Indication: COPD	Granted	12/2025
MH-003		Indication: Respiratory sleep disturbances	International phase	10/2029
HI-164	1	Isolate selection	Granted in US, EU	8/2025
	2	Probiotic additive	Granted in US, EU	5/2021
	3	Indication: asthma	Pending in US, EU	3/2028
	4	Commercial isolates	Pending in US, EU	9/2029

Note 2 – SUMMARY OF SIGNIFICANT POLICIES

The accompanying unaudited consolidated financial statements of Mariposa Health, Inc. and its subsidiaries have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission requirements for interim financial statements. Therefore, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The financial statements should be read in conjunction with the annual financial statements for the period ended June 30, 2015 of Mariposa Health, Inc.

F-5

The interim financial statements present the consolidated balance sheets, statements of operations and cash flows Mariposa Health, Inc. and its subsidiaries. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States.

The interim financial information is unaudited. In the opinion of management, all adjustments necessary to present fairly the financial position as of September 30, 2016 and the results of operations and cash flows presented herein have been included in the financial statements. All such adjustments are of a normal and recurring nature. Interim results are not necessarily indicative of results of operations for the full year.

Principles of Consolidation

The Company presents its consolidated financial statements in accordance with GAAP. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Mariposa Australia. All significant intercompany transactions and balances have been eliminated upon consolidation.

Use of Estimates

The preparation of the accompanying consolidated financial statements in conformity with GAAP requires Management of the Company to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amount of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. The estimates that are particularly significant to the financial statements include estimates of the Company’s future cash flows in relation to impairment of long-lived assets, amortization of patents and trademarks, foreign currency valuation, and fair values of assets and liabilities. As fair value is a market-based measurement, it is determined based on the assumptions that market participants would use. These estimates and assumptions are based on Management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which Management believes to be reasonable under the circumstances. Such estimates and assumptions are adjusted when facts and circumstances dictate. Actual results could differ from these estimates.

Foreign Currency Translation and Comprehensive Income (Loss)

The Company’s functional currency is the Australian dollar and its reporting currency is the United States dollar. Transactions denominated in the functional currency are converted into United States dollars using the current rate method as noted under Accounting Standard Codification (“ASC”) 830. Under this standard all assets and liabilities are re-valued into the reporting currency at each balance sheet date using the exchange rate in effect at the balance sheet date, with any resulting exchange gains or losses being credited or charged to accumulated other comprehensive income (loss). All revenues, expenses, gains and losses are converted from the functional currency to the reporting currency using weighted-average exchange rates for the periods presented. The foreign currency exchange gain or loss translation is recognized in the consolidated statement of operations.

The resulting translation adjustments are reported under accumulated other comprehensive income as a component of stockholders’ deficit.

Revenue Recognition

Revenue will be recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is probable. Revenue generally is recognized net of allowances for returns and any taxes collected from customers and subsequently remitted to governmental authorities. Revenue will also be recognized in accordance with terms of any agreement entered into by the Company including license agreements.

Cost of Sales

Cost of sales will consist primarily of inventory costs, as well as warehousing costs (including the cost of warehouse labor), third party royalties and research, design and development costs.

F-6

Cash and Cash Equivalents

For purposes of the consolidated statements of cash flows, the Company considers all highly liquid short-term investments with original maturities of three months or less to be cash equivalents.

Intangible Assets

The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate the carrying value of an asset group may not be recoverable. The Company assesses the fair value of the assets based on the amount of the undiscounted future cash flow that the assets are expected to generate and recognizes an impairment loss when estimated undiscounted future cash flow expected to result from the use of the asset, plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. When an impairment is identified, the Company reduces the carrying value of the group of assets to comparable market values, when available and appropriate, or to its estimated fair value based on a discounted cash flow approach, with the corresponding impairment loss reflected in the consolidated statement of operations.

Intangible assets, such as purchased technology, are generally recorded in connection with a business or an asset acquisition. The value assigned to intangible assets is usually based on estimates and judgments regarding expectations for the success and life cycle of products and technology acquired. The Company evaluates the useful lives of its intangible assets each reporting period to determine whether events and circumstances require revising the remaining period of amortization. In addition, the Company reviews intangible assets for impairment when events or changes in circumstances indicate their carrying value may not be recoverable. Management considers such indicators as significant differences in actual product acceptance from the estimates, changes in the competitive and economic environment, technological advances, and changes in cost structure. In the second quarter of fiscal year 2016, the Company performed an impairment analysis on the carrying value of its intangible assets and determined that there was no impairment.

Indefinite-lived assets are not amortized, but are reviewed for impairment annually at the end of each fiscal year and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Purchased technology and other intangible assets, such as patents, are presented at cost, net of accumulated amortization, and are amortized over their estimated useful lives of 1 to 15 years using the straight-line method.

Patents and trademarks are recognized at cost of acquisition only when it is probable that the products they relate to will generate future economic benefits, and the cost of the patent can be reassured reliably. Patents and trademarks that are recognized at cost, have a finite life and are carried at cost less any accumulated amortization and any impairment losses. Patents and trademarks are amortized over their useful life.

In-Process Research and Development

In-process research and development (“IPR&D) represents the fair value assigned to incomplete research projects that the Company acquires through business combinations or developed internally which, at that time, have not reached technological feasibility. Intangible assets associated with IPR&D projects are not amortized until approval is obtained in the United States, subject to certain specified conditions and management judgment. The useful life of an amortizing asset generally is determined by identifying the period in which substantially all of the cash flows are expected to be generated. Management reviews such assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. As of June 30, 2016, in the Company’s annual impairment test, in evaluating the existing IPR&D, Management determined that none of the IPR&D was impaired.

Research and Development

Research expenditures are recognized as an expense as those costs are incurred. Costs incurred on development projects (relating to the design and testing of new or improved products) are recognized as an expense as those costs are incurred, up through the date that the project will achieve technological feasibility, be completed and generate future economic benefits and its costs can be measured reliably. At that time, the costs will be capitalized and reflected as an intangible asset.

F-7

Fair Value of Financial Instruments

For certain types of the Company’s financial instruments, including cash and equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities. ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity,” and ASC 815.

The following table presents assets that are measured at fair value on a recurring basis at September 30, 2016 and June 30, 2016:

September 30, 2016	Total		Level 1		Level 2		Level 3

Liabilities
Convertible note payable	$	357,304	$	-	$	357,304	$	-
Total	$	357,304	$	-	$	357,304	$	-

June 30, 2016	Total		Level 1		Level 2		Level 3

Liabilities
Convertible note payable	$	348,257	$	-	$	348,257	$	-
Total	$	348,257	$	-	$	348,257	$	-

The availability of observable market data is monitored to assess the appropriate classification of financial instruments within the fair value hierarchy. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. In such instances, the transfer is reported at the beginning of the reporting period. The Company evaluated the significance of transfers between levels based upon the nature of the financial instrument and size of the transfer relative to total net assets available for benefits. There were no transfers between Level 1, Level 2, or Level 3 for the periods ended September 30, 2016 and June 30, 2016.

Income Taxes

Current income tax expense is the amount of income taxes expected to be payable for the current year. A deferred income tax liability or asset is established for the expected future tax consequences resulting from the differences in financial reporting and tax bases of assets and liabilities. A valuation allowance is provided if it is more likely than not that some or all of the deferred tax assets will not be realized. In addition to valuation allowances, the Company provides for uncertain tax positions when such tax positions do not meet the recognition thresholds or measurement standards prescribed by the authoritative guidance on income taxes. Amounts for uncertain tax positions are adjusted in periods when new information becomes available or when positions are effectively settled. The Company recognizes accrued interest and penalties related to uncertain tax positions as a component of income tax expense.

F-8

The Company follows ASC 740-10, “Accounting for Uncertainty in Income Taxes”. This requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. Management evaluates tax positions on an annual basis.

The Company files income tax returns in the U.S. federal tax jurisdiction and various state tax jurisdictions. The federal and state income tax returns of the Company are subject to examination by the IRS and state taxing authorities, generally for three years after they were filed.

Earnings Per Share (EPS)

Basic EPS is computed by dividing income (loss) available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS is computed similar to Basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if all the potential common shares in conversion of notes payable, warrants and stock options had been issued and if the additional common shares were dilutive. When the Company has a loss, Diluted EPS is not allowed as the EPS is considered anti-dilutive.

The following table sets for the computation of basic and diluted earnings per share for the three months ended September 30, 2016 and 2015:

	2016			2015
Net Loss	$	(256,701	)	$	(338,708	)

Weighted average number of shares used in computing basic and diluted net loss per share:

Basic		10,399,688			9,561,211
Diluted		10,908,796			10,390,319

Net loss per share
Basic and Diluted:
Basic	$	(0.025	)	$	(0.035	)
Diluted	$	(0.025	)	$	(0.035	)

The effect of the shares and warrant conversions related to the long-term debt (Note 7) has not been taken into consideration as it would be considered anti-dilutive as the Company had a net loss. The Company has reserved 438,789 additional shares of its common stock or a total of 8,000,000 shares of its common stock should holders of warrants issued by Mariposa Australia. In addition, the Company has also issued 320,000 warrants in connection with the promissory note (which have been exercised in October 2015).

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk are cash and other receivables arising from its normal business activities. The Company places its cash in what it believes to be credit-worthy financial institutions. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on its cash.

F-9

Contingencies

Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and legal counsel assess such contingent liabilities, and such assessment inherently involves judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought.

If the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed. Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.

There are no such contingencies noted as of September 30, 2016.

Segment Reporting

Management treats the operation of the Company as one segment being pharmaceutical research and development activities in Australia and Japan.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation. The reclassifications had no effect on the net loss or cash flows of the Company.

New Accounting Pronouncements

In March 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-09, “Compensation - Stock Compensation (Topic 718)”. The amendments in ASU No. 2016-09 were issued as part of the FASB's simplification initiative focused on improving areas of GAAP for which cost and complexity may be reduced while maintaining or improving the usefulness of information disclosed within the financial statements. The amendments focused on simplification specifically with regard to share-based payment transactions, including income tax consequences, classification of awards as equity or liabilities and classification on the statement of cash flows. The guidance in ASU No. 2016-09 is effective for fiscal years beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted. The Company will evaluate the effect of ASU 2016-09 for future periods as applicable.

During February 2016, FASB issued ASU 2016-02, Leases (Topic 842). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. The new guidance will be effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period and is applied retrospectively. Early adoption is permitted. The Company is currently in the process of assessing the impact the adoption of this guidance will have on the Company’s consolidated financial statements.

During August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements—Going Concern.” The provisions of ASU No. 2014-15 require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this ASU are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company is currently assessing the impact of this ASU on the Company’s consolidated financial statements.

F-10

During June 2014, the FASB issued an Accounting Standards Update No. 2014-10, "Development Stage Entities (Topic 915) - Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation ("ASU 2014-10")". The objective of ASU 2014-10 is to improve financial reporting by reducing the cost and complexity associated with the incremental reporting requirements for development stage entities. ASU 2014-10 is effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. The Company has elected early implementation, as permitted by the standard, for the year ended June 30, 2015. All development stage language disclosures and amounts have been removed as a result of the adoption of ASU 2014-10.

There were other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

Note 3 – GOING CONCERN

The consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which assumes the realization of assets and the satisfaction of liabilities in the normal course of business. For the three months ended September 30, 2016 and 2015, the Company had a net loss of $256,701 and $338,708 and net cash provided by (used in) operating activities of $1,150 and ($200,878). As of September 30, 2016, the Company had $137 of cash.

The Company continues to enact measures to address liquidity, working capital and operating concerns including issuance of capital stock for cash, and repayment of loans, fees and expenses as well as executing new debt financing arrangements, as further described in Note 7 to the consolidated financial statements.

The ability of the Company to continue as a going concern is therefore dependent on the continued forbearance of its creditors and the ability of the Directors to raise additional capital. The Company is confident that creditors will continue to provide extended credit and that they will be able to successfully complete further capital raising initiatives. Accordingly, the continuation of the Company as a going concern is dependent upon the ability of the Company to be able to obtain the continued forbearance of its creditors and its capital raising initiatives.

The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amount of or classification of liabilities that might be necessary as a result of this uncertainty.

NOTE 4 – INTANGIBLE ASSETS AND IN-PROGRESS RESEARCH AND DEVELOPMENT

The Company’s methodology for allocating the purchase price relating to purchase acquisitions is determined through established and generally accepted valuation techniques.

The process of evaluating the potential impairment of intangible assets and in-progress research and development requires significant judgment, especially in emerging markets. The Company regularly monitors current business conditions and other factors including, but not limited to, adverse industry or economic trends, restructuring actions and lower projections of profitability that may impact future operating results.

F-11

A summary of the Company’s technology and intangible assets as of September 30, 2016 and June 30, 2015 is set forth below:

	September 30, 2016			June 30, 2016
TA-270
Original Cost	$	578,458		$	563,811
Less: Accumulated Amortization		(300,075	)		(284,724	)
Balance		278,383			279,087

HI-164OV – IPR&D		432,713			421,757

Total	$	711,096		$	700,844
The amortization of TA-270 is over 10 years as detailed in Note 2.

The Company amortizes its statutory-based intangible assets with finite lives using the straight-line method over the estimated economic lives of the assets, ranging from 1 to 15 years. For the three months ended September 30, 2016 and 2015, amortization expense was $7,894 and $7,571 respectively. Concurrent with the acquisition of Mariposa Australia, the remaining asset value of TA-270 of $278,383 will be amortized over a period of 9 years, the remaining expected useful life of those assets.

As of September 30, 2016, future estimated amortization expense is expected to be as follows:

June 30, 2017	$	23,862
June 30, 2018		31,816
June 30, 2019		31,815
June 30, 2020		31,815
June 30, 2021		31,815
June 30, 2022		31,815
June 30, 2023		31,815
June 30, 2024		31,815
June 30, 2025		31,815
	$	278,383

NOTE 5 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

As of September 30, 2016 and June 30, 2016, accounts payable and accrued expenses are comprised of the following:

	September 30, 2016		June 30, 2016
Trade payables	$	285,281	$	227,432
Accrued officer wages and director fees		628,688		504,499
Accrued interest		138,450		111,765
Other accrued expenses		31,197		41,190
Other payables		68,095		21,621
Total accounts payable and accrued expenses	$	1,151,711	$	906,507

F-12

NOTE 6 – RELATED PARTY TRANSACTIONS

Shareholder Loan

The amount of the shareholder loans on September 30, 2016 and June 30, 2016 was AUD $20,000 (USD $15,269) and AUD $20,000 (USD $14,882). No interest has been accrued on the shareholder loan.

Directors Fees and Salaries

At September 30, 2016 and June 30, 2016, the Company had accrued Directors' fees and salaries in the following amounts:

		September 30, 2016				June 30, 2016
Directors Fees and Salaries		$	628,688			$	504,499

These amounts are included in accounts payable and accrued expenses in the accompanying Consolidated Balance Sheets at September 30, 2016 and June 30, 2016.

NOTE 7 – LONG-TERM DEBT

Convertible Notes

PT Soho Industri Pharmasi

Mariposa Australia entered into a Convertible Note Deed (the "Convertible Note") dated September 29, 2010 with PT Soho Industri Pharmaci in the principal amount of AUD $750,000 that bears interest at 6% per annum and had a maturity date of September 28, 2013 that was amended and replaced by an Unsecured Loan Deed dated May 6, 2015. Soho agreed to amend and replace the Convertible Note. The note holder has converted 60% of the debt to equity in Mariposa US at the time of the Purchase and, assuming a minimum listing price, has agreed to convert the balance AUD $368,204 (USD $281,796) to equity in Mariposa US upon Mariposa Australia listing on a recognized exchange. The Unsecured Loan Deed may be converted into 438,789 of common shares of the Company upon the Company’s ability to list on a recognized US stock exchange. The total accrued interest on the Convertible Note as of September 30, 2016 and June 30, 2016 was $48,687 and $38,826, respectively. These amounts are included in accounts payable and accrued expenses. The Unsecured Loan Deed has interest at 12.5% per annum and a maturity date of May 12, 2018 and is included in long-term liabilities.

The conversion feature of the convertible note is not viewed separately from the debt. Therefore, no value is assigned to the conversion feature.

Lyndcote Holding Pty Ltd

The Company on January 28, 2015 issued a convertible note in the amount of AUD $100,000 (USD $76,570) with interest at 15% per annum and a maturity date of June 30, 2018 and this amount is included in long-term liabilities. The total accrued interest on the Convertible Note as of September 30, 2016 and June 30, 2016 was $19,138 and $15,840, respectively. These amounts are included in accounts payable and accrued expenses.

As of September 30, 2016 and the date of this report the convertible note is outstanding and has not been converted.

F-13

This note is convertible into shares of common stock in accordance with the executed agreement. The lender is to receive 70,319 shares of common stock which is 0.93% of the total shares issued to the Mariposa Australia shareholders in the reverse merger with the Company.

Promissory Note

The Company on June 17, 2015 issued a Promissory Note in the amount of up to $500,000 with interest at 10% per annum and a maturity date of October 15, 2015. The proceeds drawn down were used for general working capital. The note is senior to our other debt obligations. All outstanding principal and interest was due on the maturity date, which was 120 days from the closing date of the term loan. The Company is currently negotiating with the lender to extend the maturity date but there is no assurance that it will be successful in doing so in which case it would be subject to the default remedies of the lender under the terms of the note that if they were unable to satisfy could force the Company to seek protection under the U.S. bankruptcy laws. The total accrued interest on the Promissory Note as of September 30, 2016 and June 30, 2016 was $70,000 and $56,767, respectively. These amounts are included in accounts payable and accrued expenses. As of September 30, 2016 the Company had drawn down $400,000 and repaid $50,000 of the principal owed to the lender. The balance of $350,000 is included as a current liability. The Company is accruing interest at the default interest rate of 15% per annum. On June 1, 2016, the Company received a Notice of Default from the lender. The Company has had continued negotiations with the lender on an extension of the maturity date for this note. As of September 30, 2016 and the date of the report, no agreement has occurred.

The Company issued 320,000, five-year warrants with an exercise price of $0.001 in accordance with the Promissory Note. As a result of the issuance of warrants, the Company recognized a debt discount in the amount of $33,440 to be recognized over the four months of the term of the debt. Amortization of the discount for the three months ended September 30, 2016 and June 30 was $0 and $23,063. The lender was issued 320,000 shares of the Company's common stock on October 20, 2015, as a result of the exercise of the warrants under the terms of the Warrant.

At September 30, 2016, the Company has $350,000 included as current liabilities and $357,304 as long-term liabilities.

NOTE 8 – STOCKHOLDERS’ EQUITY (DEFICIT)

Preferred Stock

The Company has authorized preferred stock of 5,000,000 shares with a par value of $0.0001. No shares of preferred stock have been issued to date.

Common Stock

The Company has 100,000,000 shares of authorized common stock with a par value of $0.0001.

The Company has issued 2,000,000 shares of common stock to its founder on June 23, 2014 at par value of $200. On June 17, 2015, as described herein, the Company issued 7,561,211 shares of common stock to acquire Mariposa Australia. On October 20, 2015, the lender of the Promissory Note, PTS, Inc., was issued 320,000 shares of the Company's common stock as a result of the exercise of the warrants under the terms of the Warrant. On May 20, 2016, the Company issued 518,477 shares to Maxim Partners, LLC for the provision of general financial advisory and investment banking services as stated in Maxim Advisory Agreement valued at $622,172. Additionally, another 438,789 shares of common stock have been reserved to account for exercises of warrants held by Mariposa Australia into sharers of the Company’s common stock and 70,319 for the conversion of notes payable.

As of September 30, 2016, the Company has 10,399,688 shares of common stock issued and outstanding.

Warrants

The Company on June 17, 2015 and on July 27, 2015 issued 240,000 and 80,000 warrants, respectively, in accordance with the Promissory Note discussed in Note 5. Each warrant gives the note holder the right to buy one common share at $0.001 before the expiration date of June 17, 2020. The value of the warrants is calculated under the Black-Scholes method, and will be amortized over the period between the issuance date and the expiration date. The amount of the promissory note is presented net of the value of the warrants.

F-14

On October 20, 2015, the 320,000 warrants issued with the Promissory Note was exercised by the lender under the terms of the Warrant.

Warrants Outstanding	September 30, 2016		June 30, 2016
Beginning of Period		438,789		678,789
Issued		-		80,000
Exercised		-		(320,000	)
Forfeited		-		-
		438,789		438,789

The relative fair value of the 320,000 warrants of $33,440 was calculated under the Black-Scholes method using the following assumptions:

Strike price - $0.001

Market Price - $0.1149

Volatility - 100%

5 Year US Treasury Bond Rate - 1.84%

Amortization of the debt discount for the periods ended September 30, 2016 and 2015 was $0 and $23,063.

F-15

NOTE 9 – EMPLOYEE STOCK INCENTIVE PLAN

History

On April 27, 2015, the Board of Directors and stockholders approved the 2015 Stock Incentive Plan (the "Plan") under which employees, officers, directors and consultants are eligible to receive grants of stock options, stock appreciation rights ("SAR"), restricted or unrestricted stock awards, restricted stock units, performance awards, other stock-based awards, or any combination of the foregoing. The Plan authorizes up to 5,000,000 shares of our common stock for stock-based awards.

Administration

The 2015 Plan is administered by the Board of Directors or the committee or committees as may be appointed by the Board of Directors from time to time (the "Administrator"). The Administrator determines the persons who are to receive awards, the types of awards to be granted, the number of shares subject to each such award and the terms and conditions of such awards. The Administrator also has the authority to interpret the provisions of the 2015 Plan and of any awards granted there under and to modify awards granted under the 2015 Plan. The Administrator may not, however, reduce the price of options or stock appreciation rights issued under the 2015 Plan without prior approval of the Company's shareholders.

Eligibility

The 2015 Plan provides that awards may be granted to employees, officers, directors and consultants of Mariposa US or of any parent, subsidiary or other affiliate of the Company as the Administrator may determine. A person may be granted more than one award under the 2015 Plan.

Shares that are subject to issuance upon exercise of an option under the 2015 Plan but cease to be subject to such option for any reason (other than exercise of such option), and shares that are subject to an award granted under the 2015 Plan but are forfeited or repurchased by the Company at the original issue price, or that are subject to an award that terminates without shares being issued, will again be available for grant and issuance under the 2015 Plan.

Terms of Options and Stock Appreciation Rights. The Administrator determines many of the terms and conditions of each option and SAR granted under the 2015 Plan, including whether the option is to be an incentive stock option or a non-qualified stock option, whether the SAR is a related SAR or a freestanding SAR, the number of shares subject to each option or SAR, and the exercise price of the option and the periods during which the option or SAR may be exercised. Each option and SAR is evidenced by a grant agreement in such form as the Administrator approves and is subject to the following conditions (as described in further detail in the 2015 Plan):

(a) Vesting and Exercisability: Options, restricted shares and SARs become vested and exercisable, as applicable, within such periods, or upon such events, as determined by the Administrator in its discretion and as set forth in the related grant agreement. The term of each option is also set by the Administrator. However, a related SAR will be exercisable at the time or times, and only to the extent, that the option is exercisable and will not be transferable except to the extent that the option is transferable. A freestanding SAR will be exercisable as determined by the Administrator but in no event after 10 years from the date of grant.

(b) Exercise Price: Each grant agreement states the related option exercise price, which, in the case of SARs, may not be less than 100% of the fair market value of the Company's shares of common stock on the date of the grant. The exercise price of an incentive stock option granted to a 10% stockholder may not be less than 110% of the fair market value of shares of the Company's common stock on the date of grant.

(c) Method of Exercise: The option exercise price is typically payable in cash, common stock or a combination of cash of common stock, as determined by the Administrator, but may also be payable, at the discretion of the Administrator, in a number of other forms of consideration.

(d) Recapitalization; Change of Control: The number of shares subject to any award, and the number of shares issuable under the 2015 Plan, are subject to proportionate adjustment in the event of a stock dividend, spin-off, split-up, recapitalization, merger, consolidation, business combination or exchange of shares and the like. Except as otherwise provided in any written agreement between the participant and the Company in effect when a change in control occurs, in the event an acquiring company does not assume plan awards (i) all outstanding options and SARs shall become fully vested and exercisable; (ii) for performance-based awards, all performance goals or performance criteria shall be deemed achieved at target levels and all other terms and conditions met, with award payout prorated for the portion of the performance period completed as of the change in control and payment to occur within 45 days of the change in control; (iii) all restrictions and conditional applicable to any restricted stock award shall lapse; (iv) all restrictions and conditions applicable to any restricted stock units shall lapse and payment shall be made within 45 days of the change in control; and (v) all other awards shall be delivered or paid within 45 days of the change in control.

F-16

(e) Other Provisions: The option grant and exercise agreements authorized under the 2015 Plan, which may be different for each option, may contain such other provisions as the Administrator deems advisable, including without limitation, (i) restrictions upon the exercise of the option and (ii) a right of repurchase in favor of the Company to repurchase unvested shares held by an optionee upon termination of the optionee's employment at the original purchase price.

Amendment and Termination of the 2015 Plan

The Administrator, to the extent permitted by law, and with respect to any shares at the time not subject to awards, may suspend or discontinue the 2015 Plan or amend the 2015 Plan in any respect; provided that the Administrator may not, without approval of the stockholders, amend the 2015 Plan in a manner that requires stockholder approval.

There have been no options issued under this plan to date.

NOTE 10 – COMMITMENTS

The Company has entered into employment agreements on June 15, 2015 (effective for the 2016 fiscal year), with its key executives for a period of five years. The expected base salary for these key executives is $500,000, annually. There are opportunities for the executives to earn bonus pay and equity pay when approved by the Board of Directors. There are no bonus or equity pay accrued for in the three months ended September 30, 2016 as there has been no approval for this at this time.

The Company has complied with the terms of its license agreements to date and has no financial commitments.

NOTE 11 – INCOME TAX

Deferred income taxes are determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Company’s assets and liabilities. Deferred income taxes are measured based on the tax rates expected to be in effect when the temporary differences are included in the Company’s tax return. Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases.

As of September 30, 2016, there is no provision for income taxes, current or deferred.

	September 30, 2016
Net operating losses	$	674,189
Valuation allowance		(674,189	)
	$	-

At September 30, 2016, the Company had a net operating loss carry forward in the amount of approximately $1,982,909 available to offset future taxable income through 2036. The Company established valuation allowances equal to the full amount of the deferred tax assets due to the uncertainty of the utilization of the operating losses in future periods.

F-17

A reconciliation of the Company’s effective tax rate as a percentage of income before taxes and federal statutory rate for the three months ended September 30, 2016 is summarized below:

Federal statutory rate	(34.0	)%
State income taxes, net of federal	0.0
Valuation allowance	34.0
	0.0	%

The Australian operations will be part of an Australian tax return the Company will file. The Company does not plan to file a consolidated tax return that includes its Australian subsidiary.

NOTE 12 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events through November 10, 2016. The Company is not aware of any subsequent event which would require recognition or disclosure in the consolidated financial statements.

F-18

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The information set forth and discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations is derived from the Financial Statements of Mariposa Australia and the related notes thereto which are included as exhibits to this current report. The following information and discussion should be read in conjunction with such Financial Statements and notes. Additionally, this Management’s Discussion and Analysis or Plan of Operation constitutes forward-looking statements. We encourage you to review our “Cautionary Note Regarding Forward-Looking Statements” at the front of this current report, and our “Risk Factors” set forth above.

Overview

We were formed in June 2014 to pursue a business combination. On December 8, 2014 our sole shareholder, Richard Chiang, entered into a Share Purchase Agreement with Expert Capital Investments Limited which acquired all our issued and outstanding shares of common stock, elected a new Board of Directors and appointed new management. On June 19, 2015, we entered into a Share Purchase Agreement with Mariposa Australia. Following the Purchase, we changed our name to “Mariposa Health, Inc." Mariposa Australia was formed in 2008 and is an Australian unlisted public company meaning that under the Corporations Act 2001 of Australia it is able to sell to an unlimited number of shareholders but is not listed on the Australian Stock Exchange. Mariposa Australia is a clinical stage biotech company formed in 2003 that started with a single piece of intellectual property for staph-associated snoring and sleep disturbances and built its portfolio through acquisition, re-positioning in the fields of COPD and asthma. On June 7, 2015 we entered into the License Agreement with Shanxi Kangbao Biological Product Co., Ltd. under which we granted to Shanxi an exclusive license to manufacture, trial, produce, make, use, distribute, offer for sell, import and export, market, sell, hire out, lease, supply, or otherwise dispose of our oral vaccine HI-164/HI-164OV product in in China, Taiwan, Macao and Hong Kong in return for which Shanxi is to pay Mariposa Health the following (i) milestone payments of up to AUD$8,291,818.96 (USD$6,440,497.85), of which the first payment of AUD$1,242,327.27 (USD$964,723.29) was made seven days from execution of the License Agreement, and (ii) potentially significant royalties based upon net sales of our oral vaccine HI-164/HI-164OV product in China, Taiwan, Macao and Hong Kong.

After the Purchase, we succeeded to the business of Mariposa Australia as our sole line of business.

Included in this Form 10-Q filing are the consolidated balance sheets of Mariposa US as of September 30, 2016 (unaudited) and June 30, 2016, the consolidated statements of operations of Mariposa US for the three months ended September 30, 2016 and 2015 (unaudited), and the consolidated statements of cash flows of Mariposa US, for the three months ended September 30, 2016 and 2015 (unaudited).

The following is a discussion of (i) our results of operations and financial condition for the three months ended September 30, 2016 as compared to the three months ended September 30, 2015; (ii) our liquidity and capital resources; (iii) off-balance sheet arrangements and (iv) critical accounting policies.

Fiscal Year

Our fiscal year ends on June 30 which is the fiscal year of our predecessor entity. Reference in this Annual Report on Form 10-Q to a fiscal year is reference to the fiscal year ended June 30. For example, references to fiscal 2016 refers to the fiscal year ended June 30, 2016.

For the three months ended September 30, 2016 and 2015

Mariposa Health Inc. and Subsidiaries

Result of Operations:

Note: The following discussion and analysis is in US Dollars rather than Australian Dollars unless indicated otherwise.

Revenue

We have not yet generated any product revenue and may never do so. Our future revenues may be generated primarily through license agreements. The terms of these agreements may include payment to us of upfront license fees, milestone payments, research and development cost sharing and royalties. We will seek to generate revenue from product sales and from future collaborative or strategic relationships. In the future, we expect any revenue we generate will fluctuate from quarter-to-quarter as a result of the timing and amount of payments received and expenses incurred under future collaborations or strategic relationships, if consummated, and the amount and timing of payments we receive upon the sale of our drug candidates, to the extent any are successfully commercialized.

Comparison of the Three Months Ended September 30, 2016 and 2015

The following table summarizes our results of operations for the three months ended September 30, 2016 and 2015, together with the changes in those items in dollars and as a percentage:

MARIPOSA HEALTH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015

IN US$

	For Three Months Ended
	September 30, 2016					September 30, 2015

Net Revenue	$	-				$	-
Cost of revenue		-					-
Gross profit		-					-

Operating expenses

Research and development		17,186		(45	%)		31,243
Depreciation and amortization		7,894		4	%		7,571
Compensation - directors and officers		120,333		(9	%)		132,000
General and administration expenses		85,651		(31	%)		124,089
Total operating expenses		231,064		(22	%)		294,903

Loss from operations		(231,064	)				(294,903	)

Other income (expense)
Interest expense, net of interest income		(25,637	)				(43,805	)
Total Other income (expense)		(25,637	)				(43,805	)

Loss from operations before income taxes		(256,701	)				(338,708	)

Provision for income taxes		-					-

Net loss		(256,701	)				(338,708	)
Other comprehensive (loss) income
Foreign currency translation		(1,116	)	(133	%)		3,337

Comprehensive income (loss)	$	(257,817	)			$	(335,371	)

Net loss per share
Basic and Diluted:
Basic	$	(0.025	)			$	(0.035	)
Diluted	$	(0.025	)			$	(0.035	)

Weighted average number of shares used in computing basic and diluted net loss per share:

Basic		10,399,688					9,561,211
Diluted		10,908,796					10,390,319

Comparison of three months ended September 30, 2016 and 2015

Results of Operations

Operating Expenses. We generally recognize our operating expenses as we incur them in four general operational categories: research and development, depreciation and amortization, clinical and regulatory, director fees and salaries, and general and administration. We also expect to receive additional grants from private institutions and government agencies in the future to help fund some of the cost of our development efforts and we will record these grants as offsets to the costs that are incurred to complete the related work.

•

Research and development expenses consist primarily of employee compensation and consulting costs related to the design, development, and enhancements of our current and potential future products, offset by grant revenue received in support of specific research projects. We expense our research and development costs as they are incurred. We expect research and development expenses to increase in the future as we pursue further enhancements of our existing product and develop technology for our potential future products, TA-270 and HI-164OV. We also expect to receive additional grants in the future that will be offset primarily against research and development costs.

Research and development expenses decreased by $14,057, or 45%, as the Company was focusing on fundraising activities in the three months ended September 30, 2016. Mariposa US expects research and development costs to increase in the future as the Company pursues further enhancements of our existing product and develop technology for our potential future TA-270 and HI-164OV products.

•

Depreciation and amortization expenses consist of the amortization expense related to TA-270. TA-270 was acquired through the acquisition of Mariposa Australia on June 17, 2015. We expect to amortize it over 10 years. In the three months ended September 30, 2016, the Company did not purchase additional property, plant, equipment or intangible assets.

Depreciation and amortization expenses decreased by $323, or 4%, due to the minor foreign exchange rate variation.

•

Clinical and regulatory expenses consist primarily of salaries, travel and related expenses for personnel engaged in clinical and regulatory functions, as well as internal and external costs associated with conducting clinical trials and maintaining relationships with regulatory agencies. We expect clinical and regulatory expenses to increase substantially as we assess the safety and efficacy of enhancements to TA-270 and HI-164OV products, seek to expand the indications for the TA-270 and HI-164OV and prepare to initiate clinical studies of potential future products.

There were no clinical and regulatory costs during the period. The Company expects clinical and regulatory costs to increase in the future as we conduct clinical trials to assess possible enhancements to our existing products, and assess the safety and efficacy of our current products.

•

Compensation, directors and officers consist primarily of the fees and salaries the Company paid to directors and officers.

Compensation, directors and officer’s expenses decreased by $11,667, or 9%, due to the reversal of accrued director fees to Margaret Bridge who resigned on May 1, 2016.

•

General and administrative expenses consist primarily of salaries and related expenses for executive, legal, finance, human resources, information technology and administrative personnel, as well as recruiting and professional fees, patent filing costs, insurance costs and other general corporate expenses, including rent. We expect general and administrative expenses to increase as we add personnel and incur additional costs related to the growth of our business and operation as a public company.

General and administrative expenses decreased by $38,438, or 31%, as the Company was focusing on fundraising activities in the three months ended September 30, 2016. After Mariposa US becomes a listed company, we expect our general and administrative costs to increase as Mariposa US incurs the additional costs of being a listed company, including higher legal, accounting, insurance, exchange listing, and other costs.

•

Interest Expense, Net of Interest Income. Our interest expense, net of interest income is primarily of interest expenses associated with the Company’s two convertible notes and one promissory note.

•

Foreign currency translation (losses) gains decreased by $4,453, or 133%, because the average value of the Australian dollars to the US dollars appreciated in the three months ended September 30, 2016, compared to that of 2015.

•

Net loss. Net loss was $256,701 for the three months ended September 30, 2016, as compared to the net loss of $338,708 for the three months ended September 30, 2015.

Liquidity and Capital Resources

MARIPOSA HEALTH INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015

IN US$

	September 30, 2016			September 30, 2015

Net (loss)	$	(257,701	)	$	(338,708	)

Adjustments to reconcile net (loss) to net cash used in operating activities:
Depreciation and amortization		7,894			7,571
Amortization of debt discount		-			23,063
(Increase) decrease in assets:
Other current assets		4,473			(3,852	)
Increase in current liabilities:
Accounts payable and accrued expenses		245,484			111,048
Net cash provided by (used) in operating activities		1,150			(200,878	)

Cash flows from financing activities
Proceeds from borrowings, net of repayments		-			97,867
Net cash provided by financing activities		-			323,610

Effect of exchange rate changes		(9,829	)		37,080

Net (decrease) in cash		(8,679	)		(65,931	)
Cash at the beginning of the period		8,816			77,045
Cash at the end of the period	$	137		$	11,114

Supplemental disclosures
Cash paid during the period for:
Income tax payments	$	-		$	-
Interest payments	$	-		$	-

Supplemental schedule of non-cash financing activities:
Warrants Issued with Promissory Note	$	-		$	8,360

Our consolidated financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Mariposa Australia has experienced recurring operating losses and negative operating cash flows since inception, and have financed our working capital requirements through the recurring sale of our equity securities. As a result, our independent registered auditors, in their reports on our June 30, 2016 and 2015 consolidated financial statements, has raised doubt about our ability to continue as a going concern (see “Going Concern” below).

We are planning an initial public offering of our common stock and intend to use the proceeds from such offering to invest in our business to develop current product and gain approvals for additional clinical trials.

Mariposa Australia has had operating losses from inception. Operations were funded primarily from the issuance of shares and borrowings. Additionally, key executives took shares in lieu of cash. Mariposa Australia entered into a Convertible Note Deed (the "Convertible Note") dated September 29, 2010 with PT Soho Industri Pharmaci in the principal amount of AUD 750,000 that bears interest at 6% per annum and had a maturity date of September 28, 2013 that was amended and replaced by an Unsecured Loan Deed dated May 6, 2015. Soho agreed to amend and replace the Convertible Note. The noteholder has converted 60% of the debt to equity in Mariposa US at the time of the Purchase and, assuming a minimum listing price, has agreed to convert the balance AUD $368,204 (USD $281,796) to equity in Mariposa US upon Mariposa Australia listing on a recognized exchange. In addition, Mariposa Australia also executed a Convertible Note on January 28, 2015 with Lyndcote Super Pty Ltd for a loan in the principal amount of AUD $100,000 (USD $76,890) with interest at 15% per annum, with a maturity date of June 30, 2018.

On June 7, 2015 Mariposa Australia entered into the License Agreement with Shanxi Kangbao Biological Product Co., Ltd. under which we granted to Shanxi an exclusive license to manufacture, trial, produce, make, use, distribute, offer for sell, import and export, market, sell, hire out, lease, supply, or otherwise dispose of our oral vaccine HI-164/HI-164OV product in in China, Taiwan, Macao and Hong Kong in return for which Shanxi is to pay Mariposa Health the following (i) milestone payments of up to AUD$8,291,819 (USD$6,440,498), of which the first payment of AUD$1,242,327 (USD$964,723) was made seven days from execution of the License Agreement, and (ii) potentially significant royalties based upon net sales of our oral vaccine HI-164/HI-164OV product in China, Taiwan, Macao and Hong Kong. The proceeds for the first payment were received on October 22, 2015.

On June 17, 2015 following the execution of the SPA, we obtained a bridge loan that allowed us to draw down as much as $500,000 from PTS, Inc. for which we issued a promissory note with a maturity date of October 15, 2015 bearing interest of 10% per annum. We issued a warrant that is exercisable for five years at an exercise price equal to $0.001 per share to allow PTS, Inc. to receive up to 400,000 shares of our common stock depending on the amount of the $500,000 which we borrowed.

During the three months ended September 30, 2016, the Company generated $1,150 cash in operating activities, consisting primarily of a net loss of $256,701, offset by increase in trade and other payables of $245,484, decrease in other current assets of $4,473, and depreciation and amortization of intellectual property $7,894. This compares to the three months ended September 30, 2015, when the Company used $200,878 cash in operating activities, consisting primarily of a net loss of $338,708, offset by increase in trade and other payables of $111,048, increase in other current assets of $3,852, depreciation and amortization of intellectual property $7,571, and amortization of the debt discount of $23,063.

The operating activities mainly consist of corporate development and activity associated with seeking a listing in the US and activities associated with the TA-270 and HI-164OV acquired through the acquisition of Mariposa Australia on June 17, 2015.

Financing Activities:

During the three months ended September 30, 2016, financing activities provided no cash to the Company. This compares to the three months ended September 30, 2015 where financing activities provided $96,118 of cash, net of loan repayments.

In the future, funding for the business will come primarily through the issuance of equity and convertible debt, and grants from private institutions and government agencies. Over the next few years, we intend to invest in (1) research and development to advance our existing products and develop next generation products, and (2) clinical and regulatory efforts for our existing product and to assess the feasibility of future products. Additionally, after the completion of the proposed public offering, we expect that our general and administrative expenses will increase as we incur the substantial incremental costs associated with being a public company. There can be no assurance that we will be successful in doing so. The proceeds from this proposed public offering may not be sufficient to finance the company beyond the next 18 to 24 months and we will need to raise additional capital. There can be no assurances that we will be successful in doing so.

We believe that additional capital will be required and be provided through additional financings, however, we cannot assure you that it can secure additional equity or debt financings at acceptable prices to maintain projected operating levels. Our failure to obtain necessary financing, or reduce expenses could impair our ability to stay in business.

Going Concern

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements during the three months ended September 30, 2016 and 2015.

Contractual Obligations

We had no contractual obligations as of September 30, 2016.

Tax Loss Carryforwards

Critical Accounting Policies

The preparation of consolidated financial statements include the accounts of the Company and its wholly owned subsidiary in conformity with generally accepted accounting principles (‘GAAP’) in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The Company relies on historical experience and on other assumptions we to be reasonable under the circumstances in making our judgment and estimates. Actual results could differ from those estimates. The Company considers their critical accounting policies to be those that are complex and those that require significant judgments and estimates, including the following: recognition of revenue, capitalization of development costs, foreign currency translation and income taxes.

Principles of Consolidation and Reporting

The Company presents its financial statements in accordance with GAAP. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Mariposa Australia. All significant intercompany transactions and balances have been eliminated upon consolidation.

Foreign Currency Translation and Comprehensive Income (Loss)

Revenue Recognition

Intangible Assets

Intangible assets, such as purchased technology, are generally recorded in connection with a business or an asset acquisition. The value assigned to intangible assets is usually based on estimates and judgments regarding expectations for the success and life cycle of products and technology acquired. The Company evaluates the useful lives of its intangible assets each reporting period to determine whether events and circumstances require revising the remaining period of amortization. In addition, the Company reviews intangible assets for impairment when events or changes in circumstances indicate their carrying value may not be recoverable. Management considers such indicators as significant differences in actual product acceptance from the estimates, changes in the competitive and economic environment, technological advances, and changes in cost structure. In the second quarter of fiscal year 2015, the Company performed an impairment analysis on the carrying value of its intangible assets and determined that there was no impairment.

In-Process Research and Development

Research and Development

Segment Reporting

Management treats the operation of the Company as one segment being pharmaceutical research and development activities in Australia and Japan.

New Accounting Pronouncements

Item 3. Quantitative and Qualitative Disclosures About Market Risks.

Not applicable.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

Under the supervision and with the participation of the our management, including our President and Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures, as defined in Rule 13a−15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), as of the end of the period covered by this annual report. Based on this evaluation, our President and Chief Financial Officer concluded as of September 30, 2016 that our disclosure controls and procedures were effective such that the information required to be disclosed in the Company’s United States Securities and Exchange Commission (the “SEC”) reports is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and is accumulated and communicated to our management, including our President and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting

Based on our evaluation under the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, our management, with the participation of our President and Chief Financial Officer, concluded that our internal control over financial reporting were effective as of September 30, 2016.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, which permanently exempts non-accelerated filers from complying with Section 404(b) of the Sarbanes-Oxley Act of 2002.

Attached as exhibits to this Form 10-Q are certifications of President ("CEO") and Chief Financial Officer (“CFO”), which are required in accordance with Rule 13a-14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This “Controls and Procedures” section includes information concerning the controls and controls evaluation referred to in the certifications.

Material Weakness Identified

None.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including the CEO/CFO, does not expect that the Disclosure Controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within our company have been detected.

These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions of deterioration in the degree of compliance with policies or procedures.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

We are not aware of any pending legal proceedings against us.

Item 1a. Risk Factors.

Not Applicable.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

The Company is in default of the Promissory Note owed to PTS, Inc. ("PTS"). As of September 30, 2016 the Company had drawn down $400,000 and repaid $50,000 of the principal owed to PTS. The balance of $350,000 is included as a current liability. The total accrued interest on the Promissory Note as of September 30, 2016 was $70,000. The default interest rate is 15% per annum. The Company is in negotiations with PTS to extend the maturity date of the Promissory Note.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibit Number		Description

31.1*		Certification of the Chief Executive Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*		Certification of the Chief Financial Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*		Certification of the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*		XBRL Instance Document

101.SCH*		XBRL Taxonomy Extension Schema

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase

101.DEF*		XBRL Taxonomy Extension Definition Linkbase

101.LAB*		XBRL Taxonomy Extension Label Linkbase

101 PRE*		XBRL Taxonomy Extension Presentation Linkbase

* Filed Herewith

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	MARIPOSA HEALTH, INC.

Dated: November 10, 2016	By:	/s/ Phillip Comans
		Phillip Comans, President and CEO

MARIPOSA HEALTH, INC. - FORM 10-Q - November 10, 2016

Attached files

MARIPOSA HEALTH, INC. Reports