Attached files
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended
June 30, 2018
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the
transition period
from _________________ to __________________
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Commission File Number: 000-54905
Cantabio Pharmaceuticals Inc.
(Exact name of registrant as specified in its charter)
Delaware
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000-54905
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99-0373067
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(State
or other jurisdiction of incorporation)
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(Commission
File Number)
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(IRS
Employer Identification No.)
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1250 Oakmead Pkwy
Sunnyvale, California
(Address
of principal executive offices)
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94085
(Zip
Code)
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844-200-2826
Registrant’s telephone number, including area
code
N/A
(Former name or former address, if changed since last
report)
Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act
during the past 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90
days. ☒
Yes ☐No
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§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 ☐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
accelerated filer
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☐
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Accelerated
filer
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☐
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Non-accelerated
filer
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☐
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(Do not
check if a smaller reporting company)
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Smaller
reporting company
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☒
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Emerging
Growth Company
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☐
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Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange
Act). ☐Yes
☒
No
As of August 17, 2018, there were 56,510,521 shares of the issuer’s common stock issued
and outstanding.
CANTABIO PHARMACEUTICALS, INC
FORM 10-Q
TABLE OF CONTENTS
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PART I - FINANCIAL INFORMATION
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Item 1.
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Condensed
Consolidated Interim Financial Statements (Unaudited)
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2
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Condensed
Consolidated Balance Sheets as of June 30, 2018 and March 31,
2017
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2
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Condensed
Consolidated Statements of Operations for the three months ended
June 30, 2018 and 2017
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3
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Condensed
Consolidated Statements of Cash Flows for the three months ended
June 30, 2018 and 2017
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4
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Notes
to Condensed Consolidated Financial Statements
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5
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Item 2.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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12
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Item 3.
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Quantitative
and Qualitative Disclosures About Market Risk
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13
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Item 4.
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Controls
and Procedures
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14
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PART II – OTHER INFORMATION
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Item 1.
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Legal
Proceedings
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14
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Item 1A.
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Risk
Factors
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14
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Item 2.
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Unregistered
Sales of Equity Securities and Use of Proceeds
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14
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Item 3.
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Defaults
Upon Senior Securities
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14
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Item 4.
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Mine
Safety Disclosures
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14
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Item 5.
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Other
Information
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14
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Item 6.
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Exhibits
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15
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SIGNATURES
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16
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1
PART I – FINANCIAL INFORMATION
CANTABIO PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
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June
30,
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March
31,
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2018
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2018
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ASSETS
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Current
Assets
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Cash
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$185,236
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$109,426
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Prepaid
expenses
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-
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-
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Total
Current Assets
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185,236
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109,426
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TOTAL
ASSETS
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$185,236
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$109,426
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LIABILITIES
& STOCKHOLDERS' EQUITY
(DEFICIT)
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Current
Liabilities
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Accounts
payable and accrued expenses
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657,871
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606,751
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Accrued
technology access fee
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158,968
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171,105
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Secured
convertible debentures
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1,371,126
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947,160
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Convertible
debt related party
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300,512
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257,614
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Total
Current Liabilities
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2,488,477
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1,982,630
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TOTAL
LIABILITIES
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$2,488,477
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$1,982,630
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Stockholders'
Equity (Deficit)
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Common stock,
$0.001 par value, (250,000,000 shares authorized, 53.9 million and
51.9 million shares issued and outstanding as of June 30, 2018 and
March 31, 2018, respectively)
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53,864
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51,857
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Stock
subscriptions
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1,060,000
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1,060,000
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Additional
paid in capital
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1,169,584
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1,134,763
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Accumulated
deficit
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(4,586,689)
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(4,119,824)
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Total Stockholders'
Equity (Deficit)
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(2,303,241)
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(1,873,204)
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TOTAL
LIABILITIES & STOCKHOLDERS' EQUITY
(DEFICIT)
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$185,236
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$109,426
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The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
2
CANTABIO PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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June
30, 2018
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June
30,2017
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Operating
Expenses
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Research
and development
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$111,220
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$97,192
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General
& administrative
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124,653
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190,733
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Total Operating
Expenses
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235,873
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287,925
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Loss
From Operations
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(235,873)
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(287,925)
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Other
Income & (Expenses)
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Interest
expense
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(348,992)
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(74,471)
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Change
in fair value of embedded derivatives, including modification
accounting
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118,000
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10,000
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Total
Other Income & (Expenses)
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(230,992)
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(64,471)
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Net
Loss
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$(466,865)
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$(352,396)
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Basic
and Diluted Loss per share
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$(0.01)
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$(0.01)
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Weighted
average number of common shares outstanding
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53,031,199
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27,004,613
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The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
3
CANTABIO PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Three
Months Ended
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June
30,
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June
30,
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2018
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2017
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CASH
FLOWS FROM OPERATING ACTIVITIES
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Net
loss
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$(466,865)
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$(352,396)
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Adjustments to
reconcile net loss to net cash used in operating
activities:
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Accretion
to notes payable to related party
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-
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1,266
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Amortization
of debt discount
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328,233
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58,130
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Change
in fair value of embedded derivative
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(118,000)
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(10,000)
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Share
based compensation for services
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10,000
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39,549
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Changes in
operating assets and liabilities:
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Accounts
payable and accrued expenses
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51,120
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87,955
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Accrued
technology access fee
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(12,137)
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10,012
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Accrued
debenture interest
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18,459
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10,062
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Due
to officers
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-
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-
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Prepaid
Expenses
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-
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1,248
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Net
cash used in operating activities
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(189,190)
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(154,274)
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CASH
FLOWS FROM FINANCING ACTIVITIES
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Proceeds
from issuance of convertible debt related party, net of issuance
cost
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265,000
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127,000
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Proceeds
from issuance of convertible debenture, net of issuance
cost
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-
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-
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Proceeds
from notes payable related party
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-
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Repayment
to notes payable related party
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-
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-
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Share
subscriptions
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-
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-
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Net
cash provided by financing activities
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265,000
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127,000
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Net
increase (decrease) in cash
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75,810
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(27,274)
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Cash at
beginning of period
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109,426
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32,275
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Cash at
end of period
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$185,236
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$5,001
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Schedule of non-cash financing activities
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Recognition
of beneficial conversion feature associated with convertible
debentures
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$-
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$35,000
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Conversion
of secured convertible debentures
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58,733
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-
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Share based compensation for
services
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10,000
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39,549
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The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
4
CANTABIO PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE 1 – ORGANIZATION AND DESCRIPTION OF THE
BUSINESS
Cantabio Pharmaceuticals Inc. (the “Company” or
“Cantabio”) is a preclinical stage biotechnology
company focusing on commercializing novel therapies and the
intellectual property generated from research and development
activities for Parkinson’s disease (PD) and Alzheimer’s
disease (AD). The Company’s strategy involves integration of
therapeutic focus, the targeting of family biophysics, drug
discovery technology and expertise into an innovative drug
discovery approach, which synergizes to identify and develop small
molecule pharmacological chaperones for clinical trials. In
addition, the Company’s research efforts concentrate on the
development of therapeutic proteins that can pass through the
blood-brain barrier and supplement in vivo levels of proteins with
display loss of function during disease conditions.
NOTE 2 – LIQUIDITY AND GOING CONCERN
As of June 30, 2018, the Company had a working capital deficit of
approximately $2.3 million and continues to have losses from
operations due to its research and development
activities.
The Company typically raises capital which it spends on maintaining
its research and corporate operations. At this early stage in the
life of the Company funding is often short term in nature. While
the Company has been proficient in raising funds in the past the
short-term nature of these funding cycles raises substantial doubt
about the Company's ability to continue as a going concern within
one year from the date of this filing.
Management is addressing going concern risk by seeking new sources
of capital and is continuing initiatives to raise capital through
private placements, related party loans and other institutional
sources to meet future working capital requirements. Furthermore,
strategic partnerships, most likely with larger pharmaceutical
industry companies, will be needed to continue to fund research and
development costs as our projects expand. These measures, if
successful, may contribute to reduce the risk of going concern
uncertainties for the Company for at least twelve months from
issuance of these condensed consolidated financial
statements.
The ability of the Company to continue as a going concern is
dependent upon its ability to raise additional capital and achieve
profitable operations. The accompanying financial statements do not
include any adjustments that might be necessary if the Company is
unable to continue as a going concern.
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Interim Reporting
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with accounting
principles generally accepted in the United States (“U.S.
GAAP”) for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, certain information and footnote disclosures normally
included in annual financial statements prepared in accordance with
U.S. GAAP have been condensed or omitted pursuant to such
Securities and Exchange Commission (“SEC”) rules and
regulations and accounting principles applicable for interim
periods. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair
presentation have been included. Events subsequent to the balance
sheet date have been evaluated for inclusion in the accompanying
condensed consolidated financial statements through the date of
issuance. Operating results for the three months ended June 30,
2018 are not necessarily indicative of the results that may be
expected for the year ending March 31, 2019. These unaudited
condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and the
notes thereto included in the Annual Report on Form 10-K for the
fiscal year ended March 31, 2018.
Use of Estimates
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of expenses during the year.
Management bases its estimates on historical experience and on
other assumptions considered to be reasonable under the
circumstances. However, actual results may differ from the
estimates.
Earnings (Loss) per Share
The Company calculates earnings per share using basic net income
(loss) per common share be computed by dividing net income (loss)
for the period by the weighted average number of common shares
outstanding during the period. The Company does not compute diluted
earnings per share because to do so would be
anti-dilutive.
5
CANTABIO PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Potentially dilutive securities
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June
30,
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June
30,
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2018
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2017
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Convertible
debentures (Note 6)
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25,007,000
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5,865,000
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Convertible debt
related party (Note 7)
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5,908,000
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-
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Stock
subscriptions
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530,000
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530,000
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Recent Accounting Standards
Fiscal 2019 Accounting Pronouncement Adoptions
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash
Flows (Topic 230): Classification of Certain Cash Receipts and Cash
Payments. This new standard clarifies certain aspects of the
statement of cash flows, including the classification of debt
prepayment or debt extinguishment costs or other debt instruments
with coupon interest rates that are insignificant in relation to
the effective interest rate of the borrowing, contingent
consideration payments made after a business combination, proceeds
from the settlement of insurance claims, proceeds from the
settlement of corporate-owned life insurance policies,
distributions received from equity method investees and beneficial
interests in securitization transactions. This new standard also
clarifies that an entity should determine each separately
identifiable source of use within the cash receipts and payments on
the basis of the nature of the underlying cash flows. In situations
in which cash receipts and payments have aspects of more than one
class of cash flows and cannot be separated by source or use, the
appropriate classification should depend on the activity that is
likely to be the predominant source or use of cash flows for the
item. This new standard became effective the Company for us on
April 1, 2018. The new standard does not have a material impact on
our financial statements.
Recently Issued Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842).
ASU 2016-02 increases the transparency and comparability among
organizations by recognizing lease assets and lease liabilities on
the balance sheet and disclosing key information about leasing
arrangements. Certain qualitative and quantitative disclosures are
required, as well as a retrospective recognition and measurement of
impacted leases. The new ASU is effective for fiscal years and
interim periods within those years beginning after December 15,
2018, with early adoption permitted. The Company is currently
evaluating the impact of this new standard and does not expect it
to have a material impact on our financial statements.
In June 2018, the FASB issued Accounting Standards Update (ASU)
2018-07 intended to reduce cost and complexity and to improve
financial reporting for nonemployee share-based payments.
Currently, the accounting requirements for nonemployee and employee
share-based payment transactions are significantly different. This
ASU expands the scope of Topic 718, Compensation-Stock Compensation
(which currently only includes share-based payments to employees)
to include share-based payments issued to nonemployees for goods or
services. Consequently, the accounting for share-based payments to
nonemployees and employees will be substantially aligned. This ASU
supersedes Subtopic 505-50, Equity-Equity-Based Payments to
Nonemployees. The amendments in this ASU are effective for public
companies for fiscal years beginning after December 15, 2018,
including interim periods within that fiscal year. For all other
companies, the amendments are effective for fiscal years beginning
after December 15, 2019, and interim periods within fiscal years
beginning after December 15, 2020. Early adoption is permitted, but
no earlier than a company's adoption date of Topic 606, Revenue
from Contracts with Customers. The Company is currently evaluating
the impact of this new standard and does not expect it to have a
material impact on our financial statements.
6
CANTABIO PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE 4 – RELATED PARTY TRANSACTIONS
There have been no changes to the Company’s related party
consulting arrangements as they have been disclosed in our most
recently filed form 10K.
7
CANTABIO PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Costs incurred associated with related party transactions noted
above included in general and administrative in the statement of
operations are as follows:
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For
the three months ended June 30,
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2018
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2017
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Operating
expenses:
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Toth and Associates LTD
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$44,000
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$40,000
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Capro LTD
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24,000
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33,000
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Eden Professional LTD
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23,000
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21,000
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Max Zhu Consulting (1)
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3,000
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6,000
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Total related party
transactions
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$94,000
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$100,000
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(1)
Max
Zhu, an investor in and lender to the Company, also works as Head
of Computer Aided Drug Design for the Company under a consultancy
contract.
Accounts payable and accrued expenses includes amounts payable to
related parties of $0.7 and $0.6 million for the period ended June
30, 2018 and March 31, 2018, respectively.
NOTE 5 – CONVERTIBLE DEBENTURES AS AMENDED
New issuance
On June 5, 2018 the Company entered into a new securities purchase
agreement with an accredited investor to place Convertible
Debentures (as amended the “Debentures”) in the
aggregate principal amount of up to $300,000 net
of issuance costs of $35,000 (the “Transaction”). The
Debentures bear interest at the rate of 5% per annum with a
maturity date of June 5, 2019, as may be extended at the option of
the note holder. In addition, the Company must pay to the holder an
annual fee equal to 7% of the amount of the Debentures to assist in
their monitoring costs for the Debentures. The net proceeds of the
financing were used for general corporate matters and for other
expenses. The Debentures may be converted at any time on or prior
to maturity at the lower of $0.05 or 93% of the average of the
three lowest daily volume weighted average price
(“VWAP”) during the 10 consecutive trading days
immediately preceding the conversion date, provided that as long as
we are not in default under the Debenture and the conversion price
is never lower than a stated floor price.
At the same time all previous debentures were amended to align them
with the new agreement. All the Debentures may be converted at any
time on or prior to maturity at the lower of $0.05 or (rather
than $0.10 as previously) or 93% of the average of the three
lowest daily volume weighted average price (“VWAP”)
during the 10 consecutive trading days immediately preceding the
conversion date, provided that as long as we are not in default
under the Debenture and the conversion price is never lower than a
stated floor price. The
Company accounted for the amendment as a debt modification which
resulted in $76,000 impact that was recorded in the change in fair
value of embedded derivatives in the Company’s statements of
operations.
8
CANTABIO PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Embedded Derivatives
The monthly payment provision within the Debentures is a
contingent put option that is required to be separately measured at
fair value, with subsequent changes in fair value recognized in the
Condensed Consolidated Statements of Operations. The Company
estimated the fair value of the monthly payment provision, as of
the issuance date and June 30, 2018 using probability analysis of
the occurrence of a Triggering Date applied to the discounted
maximum redemption premium for any given payment. The probability
analysis utilized in calculating the embedded derivative upon
issuance and at June 30, 2018 was calculated using the following
key inputs:
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June 30, 2018
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March 31, 2018
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Stock
price
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$0.04
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$0.06
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Probability
of Triggering Date
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100%
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100%
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Volatility
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300%
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300%
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Risk-free
rate
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1%
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1%
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Discount
rate
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0%
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0%
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Due to the extinguishment of the notes and the Company’s
sequencing policy the amended notes the Company recorded an
embedded derivative associated with the conversion feature. The
following are the inputs associated with the conversion
feature.
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June 30, 2018
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March 31, 2018
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Stock
price
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$0.04 - $0.06
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$0.06
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Exercise
price
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$0.04 - $0.06
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$0.06
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Volatility
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300%
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300%
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Contractual
term
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0.42 - 1 year
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1 year
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Risk-free
rate
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1%
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1%
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Discount
rate
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0%
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0%
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The fair value estimate of the embedded derivatives is a Level 3
measurement. The roll-forward of the Level 3 fair value
measurement, for the three months ended June 30, 2018, is as
follows:
Balance
at
March
31, 2018
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Issuance
of new debentures
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Change
due to modification
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Net
unrealized (gain)/loss
|
Balance
at
June
30, 2018
|
736,000
|
$281,000
|
$76,000
|
$(195,000)
|
$898,000
|
The approximate carrying value of the Debentures, as of June 30,
2018 and March 31, 2018 is comprised of the following:
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June
30, 2018
|
March
31, 2018
|
Principal value of
5%, convertible, net of conversion
|
$1,000,000
|
$750,000
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Fair value of
embedded derivative
|
898,000
|
736,000
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Accrued
interest
|
23,000
|
22,264
|
Debt
discount
|
(550,000)
|
(561,104)
|
Carrying
value of Secured Convertible Debenture Note
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$1,371,000
|
$947,160
|
As of June 30, 2018, the estimated aggregate fair value of
outstanding convertible notes payable is approximately $1.4
million. The fair value estimate is based on the estimated option
value of the conversion terms. The estimated fair value represents
a Level 3 measurement.
Convertible debenture
During the three months ended June 30, 2018, holders of
approximately $0.1 million in principal amount and accrued interest
with respect to Secured Convertible Debentures exercised the
conversion option and converted into 1.6 million shares of common
stock.
Events of Default or Financial covenants
The Company is in compliance with all terms associated with the
convertible note.
9
CANTABIO PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE 6 – CONVERTIBLE DEBT RELATED PARTY
The analysis utilized in calculating the embedded derivative at
June 30, 2018 and March 31, 2018 was calculated using the following
key inputs:
|
June 30, 2018
|
March 31, 2018
|
Stock
price
|
$0.04
|
$0.02- $0.07
|
Contractual
term
|
0.1 - 0.5
years
|
0.1 - 1.0
years
|
Volatility
|
300%
|
275% - 300%
|
Risk-free
rate
|
1%
|
1%
|
The fair value estimate of the embedded derivative is a Level 3
measurement. The roll-forward of the Level 3 fair value
measurement, for the three months ended June 30, 2018, is as
follows:
Balance
at
March 31, 2018
|
Net
unrealized (gain)/loss
|
Balance
at
June 30, 2018
|
$156,000
|
$(1,000)
|
$157,000
|
The carrying value of the Notes, as of June 30, 2018 and March 31,
2018 is comprised of the following:
|
June
30, 2018
|
March
31, 2018
|
Principal value of
5%, convertible
|
$220,000
|
$220,000
|
Fair value of
embedded conversion option
|
157,000
|
156,000
|
Accrued
Interest
|
23,704
|
15,204
|
Debt
discount
|
(100,192)
|
(133,590)
|
Carrying
value of Secured Convertible Debenture Note
|
$300,512
|
$257,614
|
As of June 30, 2018, the estimated aggregate fair value of
outstanding convertible notes payable is approximately $0.2
million. The fair value estimate is based on the estimated option
value of the conversion terms. The estimated fair value represents
a Level 3 measurement.
Technical default
The notes which are due in January 2018 are in technical default,
although the obligation has not been called by the lender. The note
agreement provided for such circumstances with the effect that the
Company is currently accruing the interest at the default interest
rate of 28%.
10
CANTABIO PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE 7 – CAPITAL STOCK
Issuance of shares for consulting services.
During the three months ended June 30, 2018 the Company issued
approximately 0.4 million shares with a fair value of approximately
$10,000 as compensation for services performed.
NOTE 8 – SUBSEQUENT EVENTS
On July 26, 2018 a holder of convertible debentures converted
approximately $0.1 million of principal and interest into
approximately 2.6 million shares of common stock.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition
and results of operations should be read in conjunction with our
financial statements and related notes included elsewhere in this
report.
This Quarterly Report contains forward-looking statements about our
business, financial condition and prospects that reflect
management’s assumptions and beliefs based on information
currently available. The expectations indicated by such
forward-looking statements might not be realized. If any of our
management’s assumptions should prove incorrect, or if any of
the risks and uncertainties underlying such expectations should
materialize, our actual results may differ materially from those
indicated by the forward-looking statements.
The key factors that are not within our control and that may have a
direct bearing on operating results include, but are not limited
to, managements’ ability to raise capital in the future, the
retention of key employees and changes in the regulation of our
industry. There may be other risks and circumstances that
management may be unable to predict.
When used in this Quarterly Report, words such as, "believes,"
"expects," "intends," "plans," "anticipates," "estimates" and
similar expressions are intended to identify forward-looking
statements, although there may be certain forward-looking
statements not accompanied by such expressions.
As of June 30, 2018, we had approximately $185,000 cash in the
bank. This amount will not satisfy our cash requirements for the
next twelve months. We plan to satisfy our future cash requirements
by additional equity financing. This will likely be in the form of
private placements of common stock. Additional equity financing may
not be available to us on acceptable terms or at all, and thus we
could fail to satisfy our future cash requirements.
If we are unsuccessful in raising the additional proceeds through a
private placement offering, we will then have to seek capital from
other sources such as debt financing, which may not be available to
us. However, if such financing were available, we would likely have
to pay additional costs associated with high risk loans and be
subject to an above market interest rate. At such time these funds
are required, management would evaluate the terms of such debt
financing and determine whether the business could manage the debt
load. If we cannot raise additional proceeds via a private
placement of our common stock or secure debt financing we would be
required to cease as a business. As a result, investors in our
common stock would lose all of their investment.
Results of Operations for the three months ended June 30, 2018, as
compared to the three months ended June 30, 2017.
Our operating expenses decreased to $235,873 for the three months
ended June 30, 2018 from $287,925 in the three months ended June
30, 2017. The R&D spend of $111,220 in the three months to June
30, 2018 compares with $97,192 on R&D in the same period in
2017, the increase being due additional spend on third party
contract research organisations. There was a decrease of
approximately $66,000 in General and Administrative to $124,653 in
the three months to June 30, 2018 from $190,733 in the three months
to June 30, 2017. The decrease was largely driven by decreased
legal and professional fees related to fundraising activities and
decreased investor relations spend.
We generated Other Expense in the three months ended June 30, 2018
of $230,992 made up of $348,992 of interest expense, the
overwhelming majority of which relates to amortization of debt
discount connected with convertible instruments, and a $118,000
gain in fair value of an embedded derivative. Other Expense for the
same period of 2017 was $64,471, made up of was $74,471 of interest
expense, partially offset by a $10,000 gain in fair value of an
embedded derivative.
12
Liquidity and Capital Resources
On June 30, 2018, we had approximately $185,000 in current assets,
consisting entirely of cash. Our total current liabilities as of
June 30, 2018, were approximately $2,488,000. Thus, we had negative
working capital of approximately $2,303,000 as of June 30,
2018.
Cash Flows from Financing Activities. During the three months ended June 30, 2018,
financing activities provided $265,000 from a convertible debenture
facility. This compares to approximately $127,000 from a
convertible debenture facility in the same period in
2017.
The Company typically raises capital which it spends on maintaining
its research and corporate operations. At this early stage in the
life of the Company funding is often short term in nature. While
the Company has been proficient in raising funds in the past, the
short-term nature of these funding cycles raises substantial risk
around the Company's ability to continue as a going
concern.
Management is addressing going concern risk by seeking new sources
of capital and is continuing initiatives to raise capital through
private placements, related party loans and other institutional
sources to meet future working capital requirements. Furthermore,
strategic partnerships, most likely with larger pharmaceutical
industry companies, will be needed to continue to fund research and
development costs as our projects expand. These measures, if
successful, may contribute to reduce the risk of going concern
uncertainties for the Company beyond the next twelve
months.
Our financial statements indicate there is substantial doubt about
our ability to continue as a going concern as this would depend
upon our ability to obtain ongoing financing and ultimately to
generate sufficient cash flow to meet our obligations on a timely
basis. Our plans and efforts to achieve the above steps might not
be successful, which raises substantial doubt about the Company's
ability to continue as a going concern within one year from the
date of this filing.
OFF BALANCE SHEET ARRANGEMENTS
The Company does not have any off-balance sheet arrangements that
have or are reasonably likely to have a current or future effect on
the Company's financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that are material to
investors.
Item 3. Quantitative and Qualitative Disclosures about Market
Risk
Not applicable.
13
Item 4. Controls and Procedures
A set of disclosure controls and procedures designed to ensure that
information required to be disclosed by us in the reports filed
under the Securities Exchange Act, is recorded, processed,
summarized and reported within the time periods specified by the
SEC’s rules and forms is required to be maintained by
management. Disclosure controls should be designed with the
objective of ensuring that this information is accumulated and
communicated to our management, including our chief executive
officer and our chief financial officer, as appropriate, to allow
timely decisions regarding required disclosure. Management
has not designed and currently does not maintain a designed set of
disclosure controls and procedures.
We have not evaluated 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, as amended) as of the end of
the period covered by this report. As a result, management has
concluded that our disclosure controls and procedures were not
effective for the year ended June 30, 2018, due to the
following:
1.
Failure
to design and maintain a set of disclosure and control
procedures
2.
Lack
of segregation of duties as a result of limited personnel.
3.
Lack
of Functioning Audit Committee - We do not have an Audit
Committee, our board of directors currently acts as our Audit
Committee. We do not have an independent
director.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds.
On April 30, 2018, a holder of a convertible debenture converted
$58,733 of interest and principal on such debenture into 1,636,013
shares of our common stock at $0.0359 per share pursuant to the
terms of such debenture.
On May 12, 2018, we issued 370,370 shares of our common stock to a
supplier in satisfaction of invoices worth $10,000.
On July 26, 2018, a holder of a convertible debenture converted
$51,192 of interest and principal on such debenture into 2,646,937
shares of our common stock at $0.01934 per share pursuant to the
terms of such debenture.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None
|
Item 5. Other Information
None.
14
Item 6. Exhibits
31.1
|
Certification
of Principal Executive Officer and Acting Principal Accounting
Officer pursuant to Rule 13a-14 and 15d-14 of the Securities
Exchange Act of 1934
|
31.2
|
Certification
of Chief Financial Officer pursuant to Rule 13a-14 and 15d-14 of
the Securities Exchange Act of 1934
|
32.1
|
Certification
of the Principal Executive Officer and Acting Principal Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
32.2
|
Certification
of the Principal Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
Exhibit 101
101.INS - XBRL Instance Document
101.SCH - XBRL Taxonomy Extension Schema Document
101.CAL - XBRL Taxonomy Extension Calculation Linkbase
Document
101.DEF - XBRL Taxonomy Extension Definition Linkbase
Document
101.LAB - XBRL Taxonomy Extension Label Linkbase
Document
101.PRE - XBRL Taxonomy Extension Presentation Linkbase
Document
15
SIGNATURES
In accordance with the requirements of the Securities Exchange Act
of 1934, the registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Cantabio Pharmaceuticals Inc.
By: /s/ Gergely
Toth
Gergely Toth
Its: President, Chief Executive Officer, Director (Principal
Executive Officer).
August 20, 2018
By: /s/ Simon
Peace
Simon Peace
Its: Chief Financial Officer, Director (Principal Accounting
Officer)
August 20, 2018
16