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. X 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). X 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.
PART I – FINANCIAL INFORMATION
CANTABIO PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|
|
September 30,
|
|
|
March
31,
|
|
|
|
|
2016
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
Cash
|
|
$
|
12,629
|
|
|
$
|
52,110
|
|
|
Total Current Assets
|
|
|
12,629
|
|
|
|
52,110
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
12,629
|
|
|
$
|
52,110
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
Current labilities
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
|
257,137
|
|
|
|
225,498
|
|
|
Accrued technology access fee
|
|
|
189,669
|
|
|
|
173,414
|
|
|
Due to officers
|
|
|
-
|
|
|
|
6,420
|
|
|
Note payable to related party
|
|
|
10,022
|
|
|
|
16,562
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
$
|
456,828
|
|
|
$
|
421,894
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value, (250,000,000 shares authorized 26,805,270 shares issued and outstanding as of September 30, 2016 and March 31, 2016)
|
|
|
26,805
|
|
|
|
26,805
|
|
|
Stock subscriptions
|
|
|
985,000
|
|
|
|
500,000
|
|
|
Additional paid in capital
|
|
|
99,324
|
|
|
|
99,324
|
|
|
Accumulated deficit
|
|
|
(1,555,328
|
)
|
|
|
(995,913
|
)
|
|
Total Stockholders' Equity (Deficit)
|
|
|
(444,199
|
)
|
|
|
(369,784
|
)
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES & STOCKHOLDERS' (DEFICIT)
|
|
$
|
12,629
|
|
|
$
|
52,110
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
CANTABIO PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended September 30,
|
|
|
For the six months ended September 30,
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research & development
|
|
$
|
69,070
|
|
|
$
|
2,326
|
|
|
$
|
181,802
|
|
|
$
|
2,326
|
|
|
General & administrative
|
|
|
218,521
|
|
|
|
150,231
|
|
|
|
372,849
|
|
|
|
244,781
|
|
|
Total operating expenses
|
|
|
287,591
|
|
|
|
152,557
|
|
|
|
554,651
|
|
|
|
247,107
|
|
|
Loss from operations
|
|
|
(287,591
|
)
|
|
|
(152,557
|
)
|
|
|
(554,651
|
)
|
|
|
(247,107
|
)
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(3,995
|
)
|
|
|
-
|
|
|
|
(7,864
|
)
|
|
|
-
|
|
|
Foreign currency transaction gain (loss)
|
|
|
(1,962
|
)
|
|
|
(1,738
|
)
|
|
|
3,100
|
|
|
|
(6,614
|
)
|
|
Total other expense, net
|
|
|
(5,957
|
)
|
|
|
(1,738
|
)
|
|
|
(4,764
|
)
|
|
|
(6,614
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(293,548
|
)
|
|
$
|
(154,295
|
)
|
|
$
|
(559,415
|
)
|
|
$
|
(253,721
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share - basic and diluted
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
26,805,000
|
|
|
|
14,824,000
|
|
|
|
26,805,000
|
|
|
|
14,824,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
CANTABIO PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
Six months ended
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
2016
|
|
|
2015
|
|
|
Cash Flows From Operating Activities
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(559,415
|
)
|
|
$
|
(253,721
|
)
|
|
Adjustments to reconcile net loss to cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
Gain on foreign currency translation
|
|
|
(1,234
|
)
|
|
|
-
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
|
31,638
|
|
|
|
63,920
|
|
|
Accrued technology access fee
|
|
|
16,256
|
|
|
|
-
|
|
|
Prepaid expenses
|
|
|
-
|
|
|
|
(4,253
|
)
|
|
Due to officers
|
|
|
(6,420
|
)
|
|
|
1,151
|
|
|
Net cash used in operating activities
|
|
|
(519,175
|
)
|
|
|
(192,903
|
)
|
|
Cash Flows From Financing Activities
|
|
|
|
|
|
|
|
|
|
Proceeds from notes payable related party
|
|
|
10,022
|
|
|
|
34,178
|
|
|
Repayment to notes payable related party
|
|
|
(15,328
|
)
|
|
|
(36,800
|
)
|
|
Stock subscriptions
|
|
|
485,000
|
|
|
|
250,000
|
|
|
Net cash provided by financing activities
|
|
|
479,694
|
|
|
|
247,378
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
(39,481
|
)
|
|
|
54,475
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at beginning of period
|
|
|
52,110
|
|
|
|
209
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of period
|
|
$
|
12,629
|
|
|
$
|
54,684
|
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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, all of which synergize 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 which display loss of function during disease conditions.
NOTE 2 – LIQUIDITY AND GOING CONCERN
The accompanying financial statements have been prepared in conformity with the accounting principles generally accepted in the United States of America (“U.S. GAAP”) which contemplate continuation of the Company as a going concern. As of September 30, 2016, the Company had a working capital deficit of $0.44 million and historical and expected cash outflows from operations. These factors and others raise substantial doubt about the Company's ability to continue as a going concern.
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
Basis of Presentation
The accompanying unaudited condensed consolidated interim financial statements include the accounts of the Company and its subsidiaries. All material intercompany balances and transactions have been eliminated.
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. GAAP for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”) and on the same basis as the Company prepares its annual audited consolidated financial statements. The condensed consolidated balance sheet as of September 30, 2016, condensed consolidated statements of operations for the three and six months ended September 30, 2016 and 2015, and the condensed consolidated statements of cash flows for the six months ended September 30, 2016 and 2015 are unaudited, but include all adjustments, consisting only of normal recurring adjustments, which the Company considers necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. The results for the three and six months ended September 30, 2016 are not necessarily indicative of results to be expected for the year ending December 31, 2016 or for any future interim period. The condensed consolidated balance sheet at September 30, 2016 has been derived from audited financial statements; however, it does not include all of the information and notes required by U.S. GAAP for complete financial statements.
The accompanying interim period unaudited condensed financial statements and related financial information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Form 10-K.
There have been no material changes in the Company’s significant accounting policies to those previously disclosed in the 2016 Annual Report.
Adoption of Recent Accounting Pronouncements
Fiscal 2017 Accounting Pronouncement Adoptions
Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern
In August 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU No. 2014-15”) that will require management to evaluate whether there are conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the financial statements are issued on both an interim and annual basis. Management will be required to provide certain footnote disclosures if it concludes that substantial doubt exists or when its plans alleviate substantial doubt about the Company’s ability to continue as a going concern. The Company adopted ASU No. 2014-15 in the first quarter of fiscal 2017, and its adoption did not have a material impact on the Company’s financial statements.
Recent Accounting Pronouncements
Fiscal 2019 Accounting Pronouncement Adoptions
Leases
In February 2016, the FASB issued ASU No. 2016-02,
Leases
("ASU 2016-02"). The standard amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU 2016-02 will be effective beginning in the first quarter of 2019. Early adoption of ASU 2016-02 is permitted. The new leases standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The Company is currently evaluating the impact of adopting ASU 2016-02 on our consolidated financial statements.
NOTE 4 – NOTES PAYABLE TO RELATED PARTY
Gergely Toth
On September 13, 2016, Gergely Toth advanced the company approximately $10,000 under a note. The note bore no interest and was payable on demand. That note was repaid on October 18, 2016.
Eden Professional LTD.
On July 22, 2016, the Company repaid approximately $15,000 to satisfy a loan note from Eden Professional Ltd.
NOTE 5 – RELATED PARTY TRANSACTIONS
Consulting agreements with company directors
On July 1, 2016, the Company entered into consulting agreements with Toth and Associates, LTD for Dr. Toth to act as the Company’s CEO (monthly salary approximately $12,000), with Capro, LTD for Dr. Thomas Sawyer to act as the Company’s COO (monthly salary approximately $10,000), and with Eden Professional LTD for Mr. Simon Peace to act as the Company’s CFO (monthly salary approximately $6,000).
The Company incurred consulting fees for the six months ended September 30, 2016, and held balances payable at September 30, 2016, as follows:
|
|
|
Expense recognized in the 3 months to
September 30, 2016
|
|
|
Expense recognized in
the 6 months to
September 30, 2016
|
|
|
Accounts payable
at September 30, 2016
|
|
|
|
|
Fees
|
|
|
Fees
|
|
|
|
|
|
Toth and Associates, LTD
|
|
$
|
36,000
|
|
|
$
|
72,000
|
|
|
$
|
62,000
|
|
|
Capro, LTD
|
|
$
|
30,000
|
|
|
$
|
60,000
|
|
|
$
|
60,000
|
|
|
Eden Professional, LTD
|
|
$
|
19,000
|
|
|
$
|
38,000
|
|
|
$
|
56,000
|
|
|
Total
|
|
$
|
85,000
|
|
|
$
|
170,000
|
|
|
$
|
178,000
|
|
NOTE 6 – CAPITAL STOCK
Stock Subscriptions
The Company has received stock subscriptions totalling $485,000 from a syndicate of investors who signed a memorandum of understanding on April 12, 2015, a subscription agreement on October 31, 2015, and an addendum to the October 2015 subscription agreement (the Syndicate).
NOTE 7 – SUBSEQUENT EVENTS
Receipt of further investment funds
The Company received investment funds of $75,000 under the Syndicate agreement.
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.
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 and six months ended September 30, 2016, as compared to the three and six months ended September 30, 2015.
Our operating expenses increased to $287,591 for the three months ended September 30, 2016 from $152,557 in the three months ended September 30, 2015. This increase was primarily the result of initiation of R&D activities following establishment of Cantabio’s laboratory in Budapest, Hungary resulting in a total R&D spend of $69,070 in the three months to September 30, 2016 compared with $2,326 spend on R&D in the same period in 2015. There was also an increase of $68,290 in General and Administrative expenses primarily driven by increased legal and professional fees, investor relations activities and rent.
Operating expenses in the six months to September rose in 2016 to $554,651 from $247,107 in the same period in 2015. Again this is due to commencement of R&D activities during 2016 together with the purchase of certain R&D licenses, driving R&D expense up to $181,802 in 2016 from $2,326 in 2015. Again, we saw increases in G&A expenses to $372,849 in the six months to September 2016 compared with $244,781 for the same period in 2015, largely caused by increases in legal and professional expenses relating to corporate filings, investor relations activities and rent.
We experienced Other Expense in the three months ended September 30, 2016 of $5,957 made up of $3,995 interest expense relating to a technology license and $1,962 of foreign currency transaction loss. Other Expense for the same period of 2015 was a foreign currency transaction loss of $1,738. In the six months to September 30, 2016 Other Expense was $4,764, made up of $7,864 of interest expense partially offset by $3,100 of foreign currency transaction gain. The six months to September 30, 2015 saw an Other Expense of $6,614 foreign currency transaction loss.
As we had no revenues or additional losses in either period, our net losses were the same as our total expenses.
Liquidity and Capital Resources
At September 30, 2016, we had $12,629 in current assets, consisting entirely of cash on hand. Our total current liabilities as of September 30, 2016, were $456,828. Thus, we had negative working capital of $444,199 as of September 30, 2016.
Cash Flows from Financing Activities
. During the six months ended September 30, 2016, financing activities provided $485,000 in proceeds for the future issuance of common stock, compared to $250,000 during the same period last year.
Our financial statements indicate there is substantial doubt about our ability to continue as a going concern as we are dependent on our ability to obtain ongoing financing and ultimately to generate sufficient cash flow to meet our obligations on a timely basis. We can give no assurance that our plans and efforts to achieve the above steps will be successful.
The cost of maintaining our reporting status is estimated to be $120,000 over the next year. If we are unable to obtain necessary financing, we will likely be required to curtail our development plans which could cause us to become dormant. Any investment previously made could be lost in its entirety. Any additional equity financing may involve substantial dilution to our then existing stockholders.
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.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures.
We maintain 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. Disclosure controls are also 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. We evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-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 of this evaluation, management concluded that our disclosure controls and procedures were not effective for the period ended March 31, 2016, due to the following:
1.
Lack of Segregation of Duties: Management is aware that there is a lack of segregation of accounting duties as a result of limited personnel.
2.
Lack of Functioning Audit Committee: We do not have an Audit Committee; our board of directors as a whole currently acts as our Audit Committee. We do not have an independent director.
Changes in internal controls.
There were no changes in our internal control over financial reporting that occurred during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
9