PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The following discussions should be read in conjunction with the financial statements and related notes which are included in this Form 10-K for the year ending March 31, 2016. Statements made below which are not historical facts are forward-looking statements. Forward-looking statements involve a number of risks and uncertainties including, but not limited to, general
economic conditions and our ability to develop our products. For further information regarding our business, competition and risk factors, refer to this Company's Form 10-K filed with the U.S. Securities Exchange Commission.
(A) MARKET INFORMATION
As of February 23, 2011, our stock quotation coverage moved from the FINRA operated OTC Bulletin Board to the OTC Markets Group, Inc.'s OTCQB under the same symbol "KBPH."
In September, 2009, the Financial Industry Regulatory Authority (FINRA), which owns and operates the Over-the-Counter Bulletin Board (OTCBB), announced that it wished to divest itself of the ownership and operation of the OTCBB and intended to sell to an independent third party the OTCBB.com web site, URL, and reservation rights, certain OTCBB.com content; and the OTCBB
trademark. Given the uncertainty of the fate of the FINRA operated OTCBB, there has been a large migration of market makers from the OTCBB quotation system to the OTC Link quotation system.
Our common stock had traded on the OTC Bulletin Board(R), or OTCBB, since August 04, 2005. The Company's common stock is quoted on the Electronic Bulletin Board of the OTC market, under the trading symbol KBPH. The following table sets forth, for the calendar quarters indicated, the high and low closing prices for our common stock as reported by OTCBB for fiscal years
ended March 31, 2016 and 2015. The quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission and may not represent actual transactions. The market for the common stock has been sporadic and there have been long periods during which there were few, if any, transactions in the common stock and no reported quotations. Accordingly, reliance should not be placed on the quotes listed below, as the trades and depth of the market may be limited, and therefore, such quotes may not be a true
indication of the current market value of the Company's common stock.
|
|
|
|
|
Fiscal Year Ended March 31, 2016
|
|
|
First quarter
|
$
11.00
|
$
10.00
|
Second quarter
|
10.00
|
9.50
|
Third quarter
|
9.50
|
5.00
|
Fourth quarter
|
5.00
|
5.00
|
|
|
|
|
|
|
Fiscal Year Ended March 31, 2015
|
|
|
First quarter
|
$
8.00
|
$
1.00
|
Second quarter
|
8.00
|
8.00
|
Third quarter
|
2.50
|
14.00
|
Fourth quarter
|
11.50
|
11.00
|
There were 3,139,747 shares of common stock outstanding as of the end of the fiscal year ended March 31, 2016.
(B) HOLDERS
According to information provided to us by the transfer agent for our shares of Common Stock, as of March 31, 2016, there were 17 holders of record of the shares of Common Stock, including depositories. Based upon information we have received from some of these record owners, we believe there are more than 150 beneficial holders of our shares of Common Stock.
(C) DIVIDENDS
The Company has not paid any dividends to date and has no plans to do so in the foreseeable future.
(D) SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS.
None
ITEM 6. SELECTED FINANCIAL DATA
Earnings per share for each of the fiscal years shown below are based on the weighted average number of shares outstanding.
2015
|
|
|
Net Loss
|
$
(90,378
)
|
$
(13,914,286
)
|
|
|
|
Loss Per Share
|
$
(0.03
)
|
$
(6.16
)
|
|
|
|
Total assets
|
$
32
|
$
2
|
|
|
|
Total liabilities
|
$
132,232
|
$
41,824
|
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATION
(A) PLAN OF OPERATION
The Company had not been profitable and had no revenues from operations since its inception in March 1999. As reflected in the accompanying audited financial statements, in 2016 the company had, a net loss of $90,378 a working capital deficiency of $132,200, a stockholders' deficiency of $132,200, and accumulated deficit of $32,195,990 at March 31, 2016. These factors
raise substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company's ability to further implement its business plan, raise capital, and generate revenues. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
(B) LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital deficit of $132,200 and $41,822 as of March 31, 2016 and 2015 respectively. Cash were $32 and $2 as of March 31, 2016 and 2015 respectively.
Cash from operating activities:
The company’s cash outflow from operations of $26,810 for the year ended March 31, 2016 was $5,771 below cash outflow from operating activities as of March 31, 2015 which was $32,581.
Cash from financing activities:
The company’s net cash flow from financing activities of $26,839 for the year ended March 31, 2016 was $5,741 below the cash flow from financing activities for the year ended March 31, 2015, which was $32,580.
To meet the projected cash requirements as stated above, the Company intends to obtain cash loans from one or more of its stockholders. As the date of filing of this Form 10-K with the U.S. Securities and Exchange Commission, the Company did not receive any commitments of any of its stockholders to provide operating loan funds for the Company. We are also looking at merger
opportunities or to acquire companies and products to raise capital. We expect to form strategic alliances for product development and to out-license the commercial rights to development partners. By forming strategic alliances with third parties, we believe that our technologies and related products can be more rapidly developed and successfully introduced into the marketplace.
The Company's plan of operation for the next twelve months is to continue to focus its efforts on finding new sources of capital and on research activities and the development of its drug candidates which maximize the utility and application of its platform technologies. Management expects the Company to incur additional operating losses over the next several years as
research and development efforts, preclinical and clinical testing activities and manufacturing scale-up efforts to expand. To date, we have not had any material product sales and do not anticipate receiving any revenue from the sale of products in the upcoming year. Our sources of working capital have been equity financings and interest on investment.
The Company operates in a rapidly changing environment that involves a number of factors, some of which are beyond management's control, such as financial market trends and investors' appetite for new financings. It should also be emphasized that, should the Company not be successful in completing its own financing (either by debt or by the issuance of securities from
treasury), the Company may be unable to continue to operate as a going concern.
(C) OFF-BALANCE SHEET ARRANGEMENT
None.
● THERE IS SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN DUE TO SIGNIFICANT RECURRING LOSSES FROM OPERATIONS, CASH USED IN OPERATIONS, STOCKHOLDERS' DEFICIT, ACCUMULATED DEFICIT AND WORKING CAPITAL DEFICIT ALL OF WHICH MEANS THAT WE MAY NOT BE ABLE TO CONTINUE OPERATIONS UNLESS WE OBTAIN ADDITIONAL FUNDING. The report of our Independent Registered
Public Accounting Firm on our March 31, 2016 and 2015 financial statements includes an explanatory paragraph indicating that there is substantial doubt about our ability to continue as a going concern due to substantial recurring losses from operations, cash used in operations, stockholders' deficit and significant accumulated deficit and working capital deficit. Our ability to continue as a going concern will be determined by our ability to obtain additional funding and maintain successful operations. Our financial
statements do not include any adjustments that might result from the outcome of this uncertainty
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Attached audited financial statements for KYTO BIOPHARMA, INC. for the fiscal years ended March 31, 2016 and 2015 can be found beginning on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
The Company did not change accountant during the year and to the date of these financial statements and there are no disagreements with the findings of said accountants.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that material information required to be disclosed in our periodic reports filed under the Securities Exchange Act of 1934, as amended, or 1934 Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to ensure that such information
is accumulated and communicated to our management, including our chief executive officer/chief financial officer (principal financial officer) as appropriate, to allow timely decisions regarding required disclosure. During the year ended March 31, 2016 we carried out an evaluation, under the supervision and with the participation of our management, including the principal executive officer and the principal financial officer (principal financial officer), of the effectiveness of the design and operation of our
disclosure controls and procedures, as defined in Rule 13(a)-15(e) under the 1934 Act. Based on this evaluation, because of the Company’s limited resources and limited number of employees, management concluded that our disclosure controls and procedures were ineffective as of March 31, 2016.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is designed to provide reasonable assurances regarding the reliability of financial reporting and the preparation of the financial statements of the Company in accordance with U.S. generally accepted
accounting principles, or GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate.
With the participation of our Chief Executive Officer/ Chief Financial Officer (principal financial officer), our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of March 31, 2016 based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
("COSO"). Based on our evaluation and the material weaknesses described below, management concluded that the Company did not maintain effective internal control over financial reporting as of March 31, 2016 based on the COSO framework criteria. Management has identified control deficiencies regarding the lack of segregation of duties and the need for a stronger internal control environment. Management of the Company believes that these material weaknesses are due to the small size of the Company’s
accounting staff. The small size of the Company’s accounting staff may prevent adequate controls in the future, such as segregation of duties, due to the cost/benefit of such remediation. To mitigate the current limited resources and limited employees, we rely heavily on direct management oversight of transactions, along with the use of legal and accounting professionals. As we grow, we expect to increase our number of employees, which will enable us to implement adequate segregation
of duties within the internal control framework.
These control deficiencies could result in a misstatement of account balances that would result in a reasonable possibility that a material misstatement to our financial statements may not be prevented or detected on a timely basis. Accordingly, we have determined that these control deficiencies as described above together constitute a material weakness.
In light of this material weakness, we performed additional analyses and procedures in order to conclude that our financial statements for the year ended March 31, 2016 included in this Annual Report on Form 10-K were fairly stated in accordance with US GAAP. Accordingly, management believes that despite our material weaknesses, our financial statements for the year ended
March 31, 2016 are fairly stated, in all material respects, in accordance with US GAAP.
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 temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report
in this Annual Report on Form 10-K.
Limitations on Effectiveness of Controls and Procedures
Our management, including our Chief Executive Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, 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. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon 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. Over time, controls may become inadequate because of changes in conditions, or the degree
of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Changes in Internal Controls
During the fiscal year ended March 31, 2016, there have been no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.
Item 9B. Other Information.
We do not have any information required to be disclosed in a report on Form 8-K during the fourth quarter of fiscal 2016 that was not reported.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTORS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
(A) IDENTIFY DIRECTORS AND EXECUTIVE OFFICERS
NAME
|
|
AGE
|
|
POSITION
|
Georges Benarroch
|
|
69
|
|
President & Chief Executive Officer, Director
|
|
|
|
|
|
Peter Prendergast
|
|
59
|
|
Director
|
The business experience of the persons listed above during the past five years are as follows:
MR. GEORGES BENARROCH, PRESIDENT & CHIEF EXECUTIVE OFFICER; DIRECTOR.
Director of the Company since May 5, 2000. Mr. Benarroch was elected as President and Chief Executive Officer effective February 27, 2006. Mr. Benarroch is the President and Chief Executive Officer of Comindus Finance Corp.
Mr. Benarroch has 30 years of investment banking as well as money management experience. Mr. Benarroch has raised financing for numerous companies, public as well as private and has managed for 30 years investment banking firms. As well he has been the CEO of a multibillion dollar asset management firm.
Peter Prendergast., Director
On August 11, 2014, Peter Prendergast became a director of the company
.
Mr. Prendergast is a
real estate executive
with about 20 years of experience
(B) IDENTIFY SIGNIFICANT EMPLOYEES
The Company does not expect to receive a significant contribution from employees that are not executive officers.
(C) FAMILY RELATIONSHIPS
There are no directors, executive officers or persons nominated or persons chosen by the Company to become a director or executive officer of the Company who are directly related to an individual who currently holds the position of director or executive officer or is nominated to one of the said positions.
(D) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
There are no material events that have occurred in the last five years that would affect the evaluation of the ability or integrity of any director, person nominated to become a director, executive officer, promoter or control person of the Company.
(E) AUDIT COMMITTEE
The Company has currently no audit committee. The Board of Directors approved the financial statements for the previous year.
ITEM 11. EXECUTIVE COMPENSATION
(A) SUMMARY COMPENSATION TABLE
The following table sets forth all annual and long term compensation for services in all capacities rendered to Kyto by its executive officers and directors for each of the last two most recently completed fiscal years.
|
|
|
|
Annual Compensation
|
|
Long-Term Compensation
|
|
|
|
|
|
|
|
|
|
|
Awards
|
|
Payouts
|
All Other Name and Payouts Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Other Annual
Compensation
($)
|
|
Securities Under Options/SARs
Granted
(#)
|
|
Restricted Shares
or Restricted
Share Units
($)
|
|
LTIP
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jean-Luc Berger, Director
|
|
2016
|
|
None
|
|
|
|
|
|
|
|
None
|
|
|
(Resigned)
|
|
2015
|
|
None
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Georges Benarroch, Director
|
|
2016
|
|
None
|
|
|
|
|
|
|
|
None
|
|
|
|
|
2015
|
|
None
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Uri Sagman, Director
|
|
2016
|
|
None
|
|
|
|
|
|
|
|
None
|
|
|
(Resigned)
|
|
2015
|
|
None
|
|
|
|
|
|
|
|
500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter Predergast, Director
|
|
2016
|
|
None
|
|
|
|
|
|
|
|
None
|
|
|
|
|
2015
|
|
None
|
|
|
|
|
|
|
|
None
|
|
|
(B) OPTION/SAR GRANTS TABLE
There were no options granted to employees and no grants to key employees in fiscal years 2016 and 2015.
(C) LONG-TERM INCENTIVE ("LTIP") AWARDS TABLE
None
(D) COMPENSATION OF DIRECTORS
All directors hold office until the next annual meeting of stockholders and until their successors have been duly elected and qualified. There are no agreements with respect to the election and compensation of directors. The Board of Directors appoints officers annually and each executive officer serves at the discretion of the Board of Directors. The Company does not
have any standing committees at this time.
The Company does not currently maintain insurance for the benefit of the directors and officers of Kyto against liabilities incurred by them in their capacity as directors or officers of Kyto. Kyto does not maintain a pension plan for its employees, officers or directors.
Directors other than Peter Prendergast were granted 100,000 common shares and Uri Sagman was granted 500,000 common shares in fiscal years 2015 and none in 2016.
None of the directors or senior officers of Kyto and no associate of any of the directors or senior officers of Kyto was indebted to the Company during the financial period ended March 31, 2016 of Kyto other than for routine indebtedness.
(E) EMPLOYMENT CONTRACTS
None
(F) REPORT ON REPRICING OF OPTIONS/SARS
None
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(A) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following persons (including any group as defined in Regulation S-B, Section 228.403) are known to the Company, as the issuer, to be beneficial owner of more than five percent (5%) of any class of the said issuer's voting securities.
TITLE OF CLASS
|
NAME AND ADDRESS OF BENEFICIAL OWNER
|
|
COMMON
SHARES
|
|
|
PERCENTAGE OF CLASS
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
Comindus Finance Corp.
Florida, United States
|
|
|
1,737,832
|
|
|
|
55.4
|
%
|
|
|
|
|
|
|
|
|
|
|
Common
|
Georges Benarroch
Toronto, Ontario, Canada
|
|
|
959,252
|
|
|
|
30.5%
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
Dr. Uri Sagman
Toronto, Ontario, Canada
|
|
|
190,503
|
|
|
|
6.7
|
%
|
(B) SECURITY OWNERSHIP OF MANAGEMENT
TITLE OF CLASS
|
NAME AND ADDRESS OF BENEFICIAL OWNER
|
|
COMMON
SHARES
|
|
|
PERCENTAGE
OF CLASS
|
|
|
|
|
|
|
|
|
|
Common
|
Georges Benarroch (1)
|
|
|
959,252
|
|
|
|
30.5
|
%
|
(1) Georges Benarroch is the President and Chief Executive Officer of Comindus Finance Corp.
(C) CHANGES IN CONTROL
There is no such arrangement which may result in a change in control of the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(A) CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Detail of related party transactions are described in notes 3 of the Financial Statements.
At March 31, 2016 and 2015, the Company owed $35,732 and $8,893 to Comindus Finance Corp. Georges Benarroch is the President and Chief Executive Officer of Comindus Finance Corp. The loan is non-interest bearing, unsecured and due on demand and included in the loans payable, related party balance.
During the year ended March 31, 2001, the Company entered into an agreement with Medarex Inc. (‘the vendor’), who is also a principal stockholder, for services totaling $200,000. On November 11, 2002, the Company and vendor mutually agreed that in lieu of the $200,000 payment, the vendor would accept 10,000 shares of the Company's common stock valued at $10.00
totaling $100,000. In addition, the Company also executed a $100,000 unsecured promissory note with the vendor. Under the terms of the promissory note, the obligation bears interest at prime plus 1% (4.25% at March 31, 2014). Interest is accrued and payable quarterly. At March 31, 2016 and 2015, accrued interest totaled $0 and $0, respectively. Comindus Finance Corp, assumed the promissory note during the year ended March 31, 2015.
The Company leases office space and administrative services from a related party principal stockholder. Rent and administrative expense in 2016 and, 2015, was $40,000 and $40,000, respectively and is included in general and administrative expense in the accompanying statements of operations. The Company allocates 50% of these amounts to rent expense. As of March 31, 2016
and 2015, the remaining balance in the accrued liabilities-related party account for the above services was $60,000 and $20,000, respectively.
(B) TRANSACTIONS WITH PROMOTORS
Georges Benarroch would be considered as a promoter of the Company.
Georges Benarroch is holding 959,252 common shares represented by 30.5% of issued shares
.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
(1) Audit Fees
RBSM LLP, Independent Registered Public Accounting firm billed an aggregate of $15,000 and $15,000 for audit of our annual financial statements for the fiscal years ended March 31, 2016 and 2015.
(2) Audit Related Fees
No other professional services were rendered by RBSM LLP for audit related services rendered during the fiscal years ended March 31, 2016 and 2015.
(3) Tax Fees
No professional services were rendered by RBSM LLP for tax compliance, tax advice, and tax planning the fiscal years ended March 31, 2016 and 2015.
(4) All Other Fees
Not applicable.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2016
NOTE 1 NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) NATURE OF BUSINESS
Kyto Biopharma, Inc. was formed as a Florida corporation on March 5, 1999. Named B Twelve, Limited, Kyto Biopharma, Inc.'s wholly-owned Canadian subsidiary (collectively referred to as the "Company"), was also formed on March 5, 1999. On August 14, 2002, the Company changed its name from B Twelve, Inc. to Kyto Biopharma, Inc.
The Company is a biopharmaceutical company, formed to acquire and develop innovative minimally toxic and non-immunosuppressive proprietary drugs for the treatment of cancer, arthritis, and other proliferate and autoimmune diseases. The Company is currently not in the development stage and was in “development stage” till June 30, 2011.
Activities during the development stage include acquisition of financing and intellectual properties and research and development activities conducted by others under contracts.
(B) GOING CONCERN
As reflected in the accompanying financial statements, the Company has no revenues, a net loss of $90,378 a working capital deficiency of $132,200 a stockholders' deficiency of $132,200 and a deficit accumulated of $32,195,990 at March 31, 2016. The ability of the Company to continue as a going concern is dependent on the Company's ability to further implement its business
plan, raise capital, and generate revenues. The Financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
The Company’s continued existence is dependent upon the Company's ability to resolve its liquidity problems, principally by obtaining additional debt financing and/or equity capital. During the year ended March 31, 2016, the Company received $26,839 in related party debt financing.
The Company has yet to generate an internal cash flow, and until the sales of its product begins, the Company is very dependent upon debt and equity funding. The Company must successfully complete its research and development resulting in a saleable product. However, there is no assurance that once the development of the product is completed and finally gains Federal Drug
and Administration clearance, the Company will achieve a profitable level of operations.
KYTO BIOPHARMA, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2016
NOTE 1 NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(C) USE OF ESTIMATES
In preparing financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the period presented. Actual results may differ from these estimates.
Significant estimates during 2016 and 2015 include, valuation of intangible assets, the valuation allowance of deferred tax assets, and the valuation of non-cash stock based transactions.
(D) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. There were no cash equivalents at March 31, 2016 and 2015, respectively.
(E) CONCENTRATIONS
The Company maintains its cash in bank deposit accounts, which, at times, may exceed federally insured limits. As of March 31, 2016, the Company did not have any deposits in excess of federally insured limits. The Company has not experienced any losses in such accounts through March 31, 2016 and 2015, respectively.
The Company has obtained and continues to obtain a large amount of its funding from loans and equity funding from a principal stockholder related to a director of the Company.
(F) STOCK-BASED COMPENSATION
Financial Accounting Standards Board Accounting Standards Codification Topic 718, Stock Compensation requires generally that all equity awards granted to employees be accounted for at “fair value.” This fair value is measured at grant for stock settled awards, and at subsequent exercise or settlement for cash-settled awards.
Under this method, the Company records an expense equal to the fair value of the options or warrants issued. The fair value is computed using the Black Scholes options pricing model.
(G) INCOME TAXES
The Company accounts for income taxes under the Financial Accounting Standards Accounting Standard Codifcation Topic 740"Accounting for Income Taxes" ("Topic 740"). Under Topic 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under Topic 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period, which includes the enactment date.
KYTO BIOPHARMA, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2016
(H) NET LOSS PER COMMON SHARE
In accordance with Statement of Financial Accounting Standards Accounting Standard Codification Topic. 260, "Earnings per Share", basic earnings per share is computed by dividing the net income less preferred dividends for the period by the weighted average number of common shares outstanding. Diluted earnings per share is computed by dividing net income less preferred
dividends by the weighted average number of common shares outstanding including the effect of common stock equivalents. Common stock equivalents, consisting of stock options and warrants, have not been included in the calculation, as their effect is anti dilutive for the periods presented.
(I) SIGNIFICANT RECENT ACCOUNTING PRONOUNCEMENTS
Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
NOTE 2 COMMITMENTS AND CONTINGENCIES
(A) LEASES
The Company leases office space on a month-to-month basis. The premise is leased from a principal stockholder. Rent expense in 2016 and 2015 was $20,000 and $20,000, respectively and is included in general and administrative expense in the accompanying statements of operations.
(B) REGULATION
The business of the Company is subject to various governmental regulations in the United States of America, Canada, and other countries, which must approve any Company products before commencement of commercial sales and which regulate the manufacturing of pharmaceuticals.
NOTE 3 RELATED PARTY TRANSACTION
(A) At March 31, 2016 and 2015, the Company owed $35,732 and $8,893, respectively, to a related party director of the Company. The loan is non-interest bearing, unsecured and due on demand and included in the loans payable, related party balance.
(B) ACCRUED LIABILITIES, RELATED PARTY
The Company leases office space and administrative services from a related party principal stockholder. Rent and administrative expense in 2016 and, 2015, was $40,000 and $40.000, respectively and is included in general and administrative expense in the accompanying statements of operations. The Company allocates 50% of these amounts to rent expense. As of March 31, 2016
and 2015, the remaining balance in the accrued liabilities-related party account for the above services was $60,000 and $20,000, respectively.
KYTO BIOPHARMA, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2016
NOTE 3 STOCKHOLDERS' DEFICIENCY
(A) CONVERTIBLE PREFERRED STOCK
In June 1999, an investor purchased 250,000 units at $1.00 per unit or $250,000 consisting of 250,000 shares of convertible preferred stock and receives warrants to purchase up to 75,000 common shares as follows: 25,000 common stock warrants exercisable at $1.00 per share issued with the preferred stock and another potential 500,000 as discussed below. The preferred stock
was convertible to common stock on a one-for-one basis upon the earlier of:
(i) An initial public offering by the Company, as defined,
(ii) The completion of a reverse take-over transaction,
(iii) A minimum $3,000,000 private equity financing based on a $10,000,000 valuation or,
(iv)The merger of the Company with another corporation or the sale of substantively all the assets of the Corporation.
There was no beneficial conversion feature upon the sale as the value of the common shares into which the preferred shares are convertible are also $10.00 based on contemporaneous transactions.
Upon exercise of the first 25,000 warrants, the investor received another warrant for 25,000 common shares at $10.00 exercise price per share. Upon conversion of the preferred stock, each share of common stock issued shall be coupled with an additional common stock purchase warrant at an exercise price of $10.00 per share with a three-month term. In December 1999 and May
2000, 10,000 and 15,000, respectively, of the first warrant were
exercised and therefore in May 2000 the additional 25,000 warrant were granted with an exercise price of $10.00 expiring June 2003. In June 2001, pursuant to a letter of intent, which was ratified by the shareholders, the preferred shares were converted and the additional 25,000 warrants were granted at an exercise price of $10.00 with an amended term not to exceed five years. There
was no beneficial conversion feature to the warrants as the value of the common stock was still considered to be $10.00 based on contemporaneous transactions at that time. There was no effect of the warrant issuances on operations as all warrants are considered to be purchased as part of the preferred stock unit. The second and third warrants totaling 50,000 common shares remained outstanding at March 31, 2003. In June 2003, 25,000 expired and in June 2006 the remaining 25,000 expired.
In May 2007, Kyto entered into an agreement with Comindus Finance Corp. to issue up to 500,000 convertible preferred shares at $1.00 per share in satisfaction of amounts due to Comindus Finance Corp. During the year ended March 31, 2008 the Company issued 459,734 shares of convertible preferred stock to Comindus Finance Corp
Corp.
to satisfy the related party loan payable. As there is no readily available fair value for the Company's convertible preferred stock, the issuance has been recorded at par value of $1 per share for a total of $459,734. The preferred convertible stock issued to satisfy the related party loan may be converted into common shares at the rate of $4.5 per share for up to two years and bear interest at the rate of 5% per annum. Preferred convertible stock has the same voting rights as common stock. On September 12,
2014 the company changed conversion rate from $4.5 per Common Share to $0.50 per Common Share. On September 12, 2014, the convertible stocks were converted to common stock at a price of $0.50 per share.
KYTO BIOPHARMA, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2016
(B) COMMON STOCK AND OPTIONS
Effective October 15, 2015, Kyto BioPharma Inc. completed a reverse stock split in the amount of a one (1) for ten (10) issued and outstanding shares of common stock.
Reference to common stock shares and per sare amounts have been retroactively restated to give effect of the reverse stock split of one for ten shares.
On August 11, 2014, the number of authorized common stock increased to 100,000,000 from 25,000,000 having a par value of $0.0001, amounting in the aggregate to Ten Thousand Dollars ($10,000)
On August 11, 2014, the number of authorized non-voting preferred stock increased to 2,000,000 from 1,000,000 having a par value of $1.00, amounting in the aggregate to Two million Dollars ($2,000,000)
On September 10, 2014, the Company issued 822,584 shares valued at $8.00 per share based on the quoted trade price in payment of current liabilities totaling $411,292 to Comindus finance Corp controlled by a director of the company. The Company recorded a loss on debt conversion of $6,169,380.
On August 11, 2014, the Company issued 30,000 shares valued at $8.00 per share based on the quoted trade price in payment of directors’ fees totaling $15,000 to directors of the company. The Company recorded a loss on debt conversion of $225,000.
On August 11 2014, the Company issued 40,000 shares valued at $8.00 per share based on the quoted trade price in payment of consulting fees totaling $20,000 to a director of the company. The Company recorded a loss on debt conversion of $300,000.
On September 12, 2014, the Company converted 473,624 convertible preferred shares to 947,284 common shares based on the quoted trade price totaling $473,624, The Company recorded a loss on conversion of $13,798,739.
As of March 31, 2016, 3,139,747 common shares were issued and outstanding.
(C) STOCK OPTIONS AND WARRANTS
As of March 31, 2016, no stock options and warrants were issued and outstanding.
(D) PAR VALUE
In August 2001, the par value of common stock was changed to $0.0001 from $1.00. The change is reflected retroactively for all periods presented in the accompanying financial statements.
(E) EARNINGS PER SHARE
Basic earnings per share are computed by dividing earnings available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflect per share amounts that would have resulted if dilutive potential common stock had been converted to common stock. The following reconciles amounts reported in the financial
statements for the years ended:
|
|
|
Net loss available to common stockholders.
|
$
(90,378
)
|
$
(13,914,286
)
|
Weighted average common shares outstanding
|
3,139,747
|
2,257,669
|
Basic and diluted net loss per share
|
$
(0.03
)
|
$
(6.16
)
|
KYTO BIOPHARMA, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2016
NOTE 4 INCOME TAXES
The Company files separate tax returns for the parent and its Canadian subsidiary. There was no income tax expense or utilization of net operating loss carry forwards for the years ended March 31, 2016 and 2015, due to the Company's net losses.
The Company's tax expense differs from the "expected" tax expense for Federal income tax purposes for the years ended March 31, 2016 and 2015 (computed by applying the United States Federal Corporate tax rate of 34% to loss before taxes), as follows:
|
|
|
|
|
|
Computed "expected" tax benefit
|
$
(30,728
)
|
$
(4,870,000
)
|
Change in deferred tax asset valuation allowance
|
30,728
|
4,870,000
|
|
$
-
|
$
-
|
The above benefit was calculated using a combined federal and state tax estimated rate as noted below
|
|
|
Statutory federal income tax rate
|
34.00
%
|
34.00
%
|
State income taxes
|
1
%
|
1
%
|
Foreign income tax rate difference
|
(1
)%
|
(1
)%
|
Valuation allowance
|
(34.00
)%
|
(34.00
%
|
Effective tax rate
|
(0.0
)%
|
(0.0
)%
|
The effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities at March 31, 2016 are as follows:
Deferred tax assets:
|
|
United States net operating loss carryforward
|
$
10,484,717
|
Canadian net operating loss carryforward
|
-
|
Total gross deferred tax assets
|
10,484,717
|
Less valuation allowance
|
(10,484,717
)
|
Net deferred tax assets
|
$
-
|
The net change in valuation allowance during the year ended March 31, 2016 was an increase of approximately $30,728. The Company's has a net operating loss carry forward of approximately $30,837,405 available to offset net income through 2032.
For the purpose of these estimates, certain stock based expenses aggregating approximately $1,008,000 and impairment loss amounting to $165,570 since inception were considered non-deductible. Actual amounts ultimately deductible may differ from these estimates.
The utilization of the net operating loss carry forwards is dependent upon the ability to generate sufficient taxable income during the carry forward period. In addition, utilization of these carry forwards may be limited due to ownership changes as defined in the Internal Revenue Code.
The Company is subject to taxation in the United States and certain state jurisdictions. The Company’s tax years for 2002 and forward are subject to examination by the United States and applicable state tax authorities due to the carry forward of unutilized net operating losses.