NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
June
30, 2021
NOTE
1 – DESCRIPTION OF BUSINESS
Kyto
Technology and Life Science, Inc. (the “Company”) was formed as a Florida corporation on March 5, 1999 under the name of
B Twelve, Inc. In August, 2002, the Company changed its name from B Twelve, Inc. to Kyto BioPharma Inc. and in May 2018, the name was
changed again to Kyto Technology and Life Science, Inc. In July 2019, the Company was re-incorporated as a Delaware company. The Company
operates virtually, from public locations or the homes of its officers, and does not currently lease any office space.
The
Company was originally formed to acquire and develop proprietary drugs for the treatment of cancer, arthritis, and other autoimmune diseases
and had been evaluating a number of strategies. As of March 31, 2018, the Company had accumulated a deficit of $32,380,746 from all prior
operations. In April 2018, the Board adopted a new business plan focused on the development of early-stage technology and life science
businesses through early-stage investment funding. The Company has recruited a number of experienced investment consultants from a network
that includes angel investors, corporate managers, sophisticated early-stage investors and successful entrepreneurs with experience across
a number of technology and life science products and markets, and relies on input from these advisors in conducting due diligence and
making investment decisions. In order to offset the risk in early-stage investing, the Company works with angel investment groups and
other sophisticated investors and participates only after these groups have completed due diligence and committed to invest, in effect
becoming lead investors. The Company then completes its own due diligence and invests under identical terms as the lead investors. The
Company will do follow-on investments in existing portfolio companies, assuming adequate progress, when portfolio companies initiate
new financing rounds. The Company currently does not typically invest more than $250,000 in any single investment. Generally, the Company’s
investments represent less than 5% ownership interests, and the Company therefore has no effective control or influence over the management
or commercial decisions of the companies in which it invests. The Company plans to generate revenue from realized gains from the sale
of the businesses in which it has invested, or some or all of its shareholdings in those cases where portfolio companies go public. Generally,
it is expected that investments will be realized from an exit within a period of four to five years following initial investment. Such
exits or liquidity events are outside the Company’s control and depend on merger and acquisition (“M&A”) transactions
or an initial public offering (“IPO”) which may result in cash or equity proceeds. Accordingly, it is difficult to forecast
revenue, net income, and cash flow. Other than making its initial and, potentially, follow-on investments in its portfolio companies,
the Company does not provide any financial support to any of its investees.
The
Company has one regular employee – the CEO, Mr, Paul Russo. Prior to December 31, 2020, was acting as a consultant to the Company
and did not receive contractual compensation for his services in the form of cash. As of January 1, 2021, Mr. Russo was engaged as an
employee of the Company at a salary of $400,000 per annum of which 60% is paid monthly, and the balance deferred to be paid once the
Company lists and starts trading on the Nasdaq exchange. The full terms of Mr. Russo’s employment are described in an engagement
letter filed on Form 8-K on February 1, 2021, which was approved by the Compensation committee of the Board of Directors on that date.
During the three months ended June 30, 2021, Mr. Russo received $80,000 gross payroll, no consulting fees and no options were granted.
During the three months ended June 30, 2020, Mr. Russo received no payroll or consulting fees , and no options were granted to him.
The
Company has created a portfolio of minority investments in early-stage start-up companies and derives its revenue opportunity from the
sale of those investments. Such sales are outside the Company’s control and depend on M&A transactions or IPOs which may result
in cash or equity proceeds. Accordingly, it is difficult to forecast revenue, net income, and cash flow. As of the date of this filing,
the Company had approximately $500,000 of cash to cover its operating expenses, and new investment requirements and is continuing to
raise additional funding on a recurring monthly basis. If successful, it will have sufficient funding for further investments and ongoing
operations. However, there is no assurance that the Company will be able to raise sufficient cash to cover its requirements on attractive
terms, if at all, and whether it will be able to continue as a going concern. These conditions raise substantial doubt about the Company’s
ability to continue as a going concern. The accompanying condensed interim financial statements have been prepared assuming the Company
will continue to operate as a going concern and do not include any adjustments that might result from the outcome of this uncertainty.
Stay at home orders and general economic uncertainties arising out of the current Covid-19 epidemic have created additional delays and
uncertainty. To date there has been no disruption to the Company’s business operations, although some of its portfolio investment
companies report delays in their programs.
At
March 31, 2020, management determined that the Company was an investment company for purposes of ASC 946 disclosure, and committed to
follow the specialized accounting and reporting guidance contained therein. Accordingly, a new company, Kyto Investments, Inc. (“KI”)
was incorporated in Delaware in December 2020 in preparation for a restructuring and an N-2 Registration Statement filed in March 2021
for review by the SEC. KI is an internally managed, closed-end investment company that has elected to be regulated as a business development
company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). Immediately upon effectiveness
of this N-2 Registration Statement, the Company will merge with KI and the Company will be the surviving entity. As of the completion
of the merger, the Company will constitute a “successor issuer” for the purposes of Rule 414 under the Securities Act and
may continue the current offering by filing post-effective amendments to the Registration Statements. Prior to the merger, the Company
had fewer than 100 non affiliated investors and filed under the 1934 Act relying on exemption Rule 3( c )(1).
As
a BDC, the Company will be required to comply with certain regulatory requirements. The Company also intends to elect to be treated for
U.S. federal income tax purposes as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code
of 1986, as amended (the “Code”). As a RIC, the Company is required to comply with additional regulatory requirements. The
Company has prepared and submitted sequentially two N-2 Registration Statements to the SEC for review but has not yet received final
approval of its registration as at the filing date of this report.
NOTE
2 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
(A)
BASIS OF PRESENTATION
The
accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles
(“U.S. GAAP”) for interim financial information with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly,
these unaudited condensed financial statements do not include all of the information and disclosures required by U.S. GAAP for complete
financial statements. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments
(consisting only of normal recurring adjustments), which the Company considers necessary, for a fair presentation of those financial
statements. The results of operations and cash flows for the three months ended June 30, 2021 may not necessarily be indicative of results
that may be expected for any succeeding quarter or for the entire fiscal year. The information contained in this Quarterly Report on
Form 10-Q should be read in conjunction with the audited financial statements of the Company for the year ended March 31, 2021, included
in the Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the “SEC”) on August 10, 2021.
The
Company’s condensed interim financial statements are prepared in accordance with U.S. generally accepted accounting principles
(GAAP), which requires the use of estimates, assumptions and the exercise of subjective judgment as to future uncertainties. Actual results
could differ from those estimates, assumptions, and judgments. Significant items subject to such estimates will include determining the
fair value of investments, revenue recognition, income tax uncertainties, stock-based compensation, and other contingencies.
The
Company’s financial statements are prepared using the specialized accounting principles of Accounting Standards Codification Topic
946, Financial Services—Investment Companies (ASC Topic 946). In accordance with this specialized accounting guidance, the Company
recognizes and carries all of its investments at fair value with changes in fair value recognized in earnings. Additionally, the Company
will not apply consolidation or equity method of accounting to its investments. The Company carries its liabilities at amounts payable,
net of unamortized premiums or discounts. The Company does not currently plan to elect to carry its liabilities at fair value. Net assets
are calculated as the carrying amounts of assets, including the fair value of investments, less the carrying amounts of its liabilities.
(B)
INVESTMENT TRANSACTIONS AND NET REALIZED AND UNREALIZED GAIN OR LOSS ON INVESTMENTS
The
Company generates increases or decreases in its net assets from the sale of complete or partial investments following a merger or acquisition
(“M&A”) transaction or restructuring or from the revaluation of portfolio company investments to recognize changes in
their value, either upwards or downwards. As a minority, early-stage investor, the Company does not have the ability to manage the timing
or acceptance of liquidity events that will realize its investments, nor the ability to predict when they may happen, although as a general
guideline, it would expect such events to occur approximately four to five years after its investments are made. The Company will record
the changes in value from investment activities upon completion of sale and receipt of net proceeds, after deducting related transaction
expenses as realized gains or losses. Realized gains or losses on the sale of investments, or upon the determination that an investment
balance, or portion thereof, is not recoverable, are calculated using the specific identification method. The Company measures realized
gains or losses by calculating the difference between the net proceeds from the repayment or sale and the cost basis of the investment.
Net change in unrealized appreciation or depreciation reflects the change in the fair values of the Company’s portfolio investments
during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation when gains or losses
are realized. The Company is in regular contact with the management of its portfolio investment companies to provide a basis for valuation
changes or impairment reviews. The Company does not expect to receive interest and principal repayments on its convertible notes and
generally expects these notes to convert into equity securities upon completion of qualified subsequent financings. Accrued interest
is then recorded as an adjustment to fair value.
(C)
INCOME TAXES
The
Company accounts for income taxes under the Financial Accounting Standards Accounting Standard Codification 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.
(D)
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 the three months ended June 30, 2021 and June 30, 2020 include the valuation of the investment portfolio, deferred tax
assets, tax valuation allowance, stock options and warrants.
(E)
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 June 30, 2021 and March 31, 2021, respectively.
(F)
CONCENTRATIONS
The
Company maintains its cash in bank checking and deposit accounts, which, at times, may exceed federally insured limits. As of June 30,
2021 and March 31, 2021, the Company’s bank balance exceeded the federally insured limit by approximately $230,000 and $1.2 million,
respectively. The Company has not experienced any losses in such accounts through June 30, 2021.
(G)
STOCK-BASED COMPENSATION
Financial
Accounting Standards Board Accounting Standards Codification Topic 718, “Stock Compensation” requires generally that all
equity awards granted to employees and consultants be accounted for at fair value. This fair value is measured at grant date 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. The Company
granted 250,000 and 120,000 options to consultants and advisors during the three months ended June 30, 2021 and June 30, 2020, respectively.
(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
preferred stock, stock options and warrants, have not been included in the calculation, as their effect is anti-dilutive for the periods
presented. The following table sets out the number of shares used in calculating fully- diluted EPS using the if-converted method.
SCHEDULE OF EARNINGS PER SHARE
|
Class
of shares
|
|
Three months ended
June 30, 2021
|
|
|
Common
Stock
|
|
|
13,268,871
|
|
|
Common
stock subscribed not issued
|
|
|
-
|
|
|
Series
A preferred stock
|
|
|
4,200,000
|
*
|
|
Series
B preferred stock
|
|
|
4,320,156
|
*
|
|
Options
|
|
|
2,759,250
|
*
|
|
Warrants
|
|
|
1,596,667
|
*
|
|
|
|
|
|
|
|
Total
shares used in calculating fully-diluted EPS
|
|
|
13,268,871
|
|
|
*
|
These shares excluded from the calculation of fully-diluted
EPS as the result would be anti-dilutive.
|
(I
) INVESTMENT AND VALUATION OF INVESTMENT AT FAIR VALUE
The
Company reviews the performance of its investments based on available information, including management reports, press releases, web
site announcements and progress reports, third party equity updates, management interviews and, where accessible, financial reports,
to determine their current and future potential value and liquidity. In the event that Management considers the value of an investment
to be impaired, the carrying value of the investment will be written down by an impairment charge to reflect Management’s estimated
valuation. The Company recognized impairment of one of its investments which was written down by $61,046 in September 2019. The Company
has not experienced any other impairment write-downs in any prior or subsequent periods.
The
Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820,
“Fair Value Measurements and Disclosures”, for assets and liabilities measured at fair value on a recurring basis. ASC 820
establishes a common definition for fair value to be applied to existing US GAAP that require the use of fair value measurements which
establishes a framework for measuring fair value and expands disclosure about such fair value measurements.
Fair
value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants. Fair value is an exchange price notion under which fair value is the price in an orderly transaction between market
participants to sell an asset or transfer a liability in the market in which the reporting entity would transact for the asset or liability.
The
Company has established procedures to estimate the fair value of its investments which the Company’s board of directors has reviewed
and approved. The Company will use observable market data to estimate the fair value of investments to the extent that market data is
available. In the absence of quoted market prices in active markets, or quoted market prices for similar assets or in markets that are
not active, the Company will use the valuation methodologies described below with unobservable data based on the best available information
in the circumstances, which incorporates the Company’s assumptions about the factors that a market participant would use to value
the asset.
For
investments for which quoted market prices are not available, which will comprise most of our investment portfolio, fair value will be
estimated by using the income, market, or back-solve approach. The income approach is based on the assumption that value is created by
the expectation of future benefits discounted to a current value and the fair value estimate is the amount an investor would be willing
to pay to receive those future benefits. The market approach compares recent comparable transactions to the investment. The back solve
method involves comparing available data over a period of time and inferring a new valuation based on changes from a known starting point,
for example the cost of an investment. Adjustments are made for any dissimilarity between the comparable transactions and the investments.
These valuation methodologies involve a significant degree of judgment on the part of our management and board.
In
determining the appropriate fair value of an investment using these approaches, the most significant information and assumptions may
include, as applicable: available current market data, including relevant and applicable comparable market transactions, applicable market
yields and multiples, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral,
the investment’s ability to make payments, its earnings and discounted cash flows, the markets in which the company does business,
comparisons of financial ratios of peer companies that are public, merger and acquisition comparables, the principal market and enterprise
values, environmental factors, subsequent financings by the portfolio investment, among other factors.
The
estimated fair values will not necessarily represent the amounts that may be ultimately realized due to the occurrence or nonoccurrence
of future circumstances that cannot be reasonably determined. Because of the inherent uncertainty of the valuation of the investments,
the estimate of fair values may differ significantly from the value that would have been used had a broader market for the investments
existed.
The
authoritative accounting guidance prioritizes the use of market-based inputs over entity-specific inputs and establishes a three-level
hierarchy for fair value measurements based upon the transparency of inputs to the valuation. The three levels of valuation hierarchy
are defined as follows:
Level
1: Observable inputs such as quoted market prices in active markets for identical assets or liabilities
Level
2: Observable market-based inputs or unobservable inputs that are corroborated by market data
Level
3: Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.
Most of the Company’s investments are Level 3.
Critical
accounting policies and practices are the policies that are both most important to the portrayal of our financial condition and results,
and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about
matters that are inherently uncertain. These include estimates of the fair value of our Level 3 investments and other estimates that
affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements and the reported amounts
of certain revenues and expenses during the reporting period. It is likely that changes in these estimates will occur in the near term.
Our estimates are inherently subjective in nature and actual results could differ materially from such estimates. See “Note 1 –
Significant Accounting Policies” to our financial statements as of March 31, 2021 as filed with the SEC on August 10, 2021, for
further detail regarding our critical accounting policies and recently issued or adopted accounting pronouncements.
(J)
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.
(K)
DEFERRED OFFERING COSTS
Since
April 2019, the Company has conducted a series of sales of common and preferred stock to fund its ongoing investment program and cost
of operations. Typically, it expects that this series, from start to finish, may take from six to nine months and in order to match the
cost and benefits of this process, the Company adopted a policy of capitalizing direct expenses incurred in the course of fund raising,
with the intention of netting accumulated expenses against proceeds from sale of equity, and reporting the net funds raised at the close.
Direct expenses include legal fees, investor relations fees, investor roadshows and meeting expenses, and related filing and printing
fees. At June 31, 2021, the Company had deferred $170,889 of such expenses, relating to the preparation and filing of an N-2 Registration
Statement.
NOTE
3 – COMMITMENTS AND CONTINGENCIES
The
Company has no commitments or contingencies as of the date of this filing.
NOTE
4 - RELATED PARTY TRANSACTIONS
At
June 30, 2021 and March 31, 2021, the Company had accrued and owed $72,205 and $51,420, respectively, to officers of the Company for
deferred payroll and consulting service fees.
At
June 30, 2021, officers or directors of the Company held board positions at three portfolio companies: InBay Technology Inc., Exodos
Life Sciences LP, and Achelios Therapeutics Inc.
NOTE
5 – INVESTMENTS
The
following table summarizes the Company’s investment portfolio at June 30, 2021 and March 31, 2021.
SUMMARY OF INVESTMENT PORTFOLIO
|
|
|
June 30,
2021
|
|
|
|
|
|
March 31, 2021
|
|
|
|
|
|
Number of portfolio companies
|
|
|
60
|
|
|
|
|
|
|
|
51
|
|
|
|
|
|
|
Fair value
|
|
$
|
8,140,007
|
|
|
|
|
|
|
$
|
6,821,407
|
|
|
|
|
|
|
Cost
|
|
|
6,952,145
|
|
|
|
|
|
|
|
5,686,545
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of portfolio at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes
|
|
|
3,252,175
|
|
|
|
40
|
%
|
|
|
2,553,954
|
|
|
|
37
|
%
|
|
Preferrred stock
|
|
|
3,384,237
|
|
|
|
42
|
%
|
|
|
3,129,458
|
|
|
|
46
|
%
|
|
Common stock
|
|
|
557,595
|
|
|
|
7
|
%
|
|
|
391,995
|
|
|
|
6
|
%
|
|
SAFE
|
|
|
425,000
|
|
|
|
5
|
%
|
|
|
325,000
|
|
|
|
5
|
%
|
|
Other ownership units
|
|
|
521,000
|
|
|
|
6
|
%
|
|
|
421,000
|
|
|
|
6
|
%
|
|
Total
|
|
$
|
8,140,007
|
|
|
|
100
|
%
|
|
$
|
6,821,407
|
|
|
|
100
|
%
|
Our
investment portfolio represents approximately 95% of our net assets at June 30, 2021 and 98% at March 31, 2021. Investments in early-stage
start up private operating entities are valued based on available metrics, such as relevant market multiples and comparable company valuations,
company specific-financial data including subsequent financings, actual and projected results, and independent third-party valuation
estimates.
SCHEDULE OF INVESTMENTS
|
|
|
As
of June 30, 2021
|
|
|
|
|
Fair
Value
|
|
|
Valuation
Approach/ Technique
|
|
Unobservable
Inputs
|
|
Range/
Weighted Average
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
notes
|
|
$
|
3,252,175
|
|
|
Market
approach
|
|
Precedent
and follow-on transactions
|
|
|
N/A
|
|
|
Preferred
stock in private companies
|
|
|
3,384,237
|
|
|
Market
approach
|
|
Precedent
and follow-on transactions
|
|
|
N/A
|
|
|
Common
stock in private companies
|
|
|
400,000
|
|
|
Market
approach
|
|
Precedent
and follow-on transactions
|
|
|
N/A
|
|
|
SAFE
|
|
|
425,000
|
|
|
Market
approach
|
|
Precedent
and follow-on transactions
|
|
|
N/A
|
|
|
Other
investments
|
|
|
521,000
|
|
|
Market
approach
|
|
Precedent
and follow-on transactions
|
|
|
N/A
|
|
|
Total
Investments
|
|
$
|
7,982,412
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of March 31, 2021
|
|
|
|
|
Fair
Value
|
|
|
Valuation
Approach/
Technique
|
|
Unobservable
Inputs
|
|
Range/
Weighted Average
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
notes
|
|
$
|
2,553,954
|
|
|
Market
approach
|
|
Precedent
and follow-on transactions
|
|
|
N/A
|
|
|
Preferred
stock in private companies
|
|
|
3,129,458
|
|
|
Market
approach
|
|
Precedent
and follow-on transactions
|
|
|
N/A
|
|
|
Common
stock in private companies
|
|
|
300,000
|
|
|
Market
approach
|
|
Precedent
and follow-on transactions
|
|
|
N/A
|
|
|
SAFE
|
|
|
325,000
|
|
|
Market
approach
|
|
Precedent
and follow-on transactions
|
|
|
N/A
|
|
|
Other
investments
|
|
|
421,000
|
|
|
Market
approach
|
|
Precedent
and follow-on transactions
|
|
|
N/A
|
|
|
Total
Investments
|
|
$
|
6,729,412
|
|
|
|
|
|
|
|
|
|
The
following table presents fair value measurements of investments, by major class, as of June 30, 2021 and March 31, 2021, according to
the fair value hierarchy:
SCHEDULE OF INVESTMENTS AT FAIR VALUE MEASUREMENTS OF INVESTMENTS
|
|
|
As
of June 30, 2021
|
|
|
|
|
Quoted
prices in active markets for identical securities
|
|
|
Significant
other observable inputs
|
|
|
Significant
other inputs
|
|
|
|
|
|
Description
|
|
(Level
1)
|
|
|
(Level
2)
|
|
|
(Level
3)
|
|
|
Total
|
|
|
Investments
at Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private
Portfolio Companies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
notes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3,252,175
|
|
|
$
|
3,252,175
|
|
|
Preferred
stock
|
|
|
-
|
|
|
|
-
|
|
|
|
3,384,237
|
|
|
|
3,384,237
|
|
|
Common
stock
|
|
|
-
|
|
|
|
-
|
|
|
|
400,000
|
|
|
|
400,000
|
|
|
SAFEs
|
|
|
-
|
|
|
|
-
|
|
|
|
425,000
|
|
|
|
425,000
|
|
|
Other
ownership interests
|
|
|
-
|
|
|
|
-
|
|
|
|
521,000
|
|
|
|
521,000
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,982,412
|
|
|
|
7,982,412
|
|
|
Public
Portfolio Companies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
157,595
|
|
|
|
-
|
|
|
|
-
|
|
|
|
157,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Investments at Fair value
|
|
$
|
157,595
|
|
|
$
|
-
|
|
|
$
|
7,982,412
|
|
|
$
|
8,140,007
|
|
|
|
|
As
of March 31, 2021
|
|
|
Description
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
|
March
31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
at Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private
Portfolio Companies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
notes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,553,954
|
|
|
$
|
2,553,954
|
|
|
Preferred
stock
|
|
|
-
|
|
|
|
-
|
|
|
|
3,129,458
|
|
|
|
3,129,458
|
|
|
Common
stock
|
|
|
-
|
|
|
|
-
|
|
|
|
300,000
|
|
|
|
300,000
|
|
|
SAFEs
|
|
|
-
|
|
|
|
-
|
|
|
|
325,000
|
|
|
|
325,000
|
|
|
Other
ownership interests
|
|
|
-
|
|
|
|
-
|
|
|
|
421,000
|
|
|
|
421,000
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,729,412
|
|
|
|
6,729,412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Public
Portfolio Companies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
91,995
|
|
|
|
-
|
|
|
|
-
|
|
|
|
91,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Investments at Fair value
|
|
$
|
91,995
|
|
|
$
|
-
|
|
|
$
|
6,729,412
|
|
|
$
|
6,821,407
|
|
As
of June 30, 2021 and March 31, 2021, all our investments were treated as Level 3 with the exception of one which was invested in common
stock of a public company and treated as Level 1.
Significant
Unobservable Inputs for Level 3 Assets and Liabilities
In
accordance with FASB ASC 820, Fair Value Management, the tables above provide quantitative information about the Company’s
fair value measurements of its Level 3 assets as of June 30, 2021 and March 31, 2021. In addition to the techniques and inputs noted
in the tables above, according to the Company’s valuation policy, the Company may also use other valuation techniques and methodologies
when determining the Company’s fair value measurements. The tables below are not meant to be all-inclusive, but rather provide
information on the significant Level 3 inputs as they relate to the Company’s fair value measurements. To the extent an unobservable
input is not reflected in the tables below, such input is deemed insignificant with respect to the Company’s Level 3 fair value
measurements. Significant changes in the inputs in isolation would result in a significant change in the fair value measurement, depending
on the materiality of the investment.
We
focus on making our investments in the United States, Canada, and Israel. All investments are made and reported in US dollars. Assets
that are denominated in foreign currencies are translated into U.S. dollars at closing rates of exchange on the date of valuation. Transactions
during the year are translated at the rate of exchange prevailing on the date of the transaction. The Company does not isolate that portion
of results of operations resulting from the changes in foreign exchange rates on securities from fluctuations resulting from changes
in market prices of such securities. Such foreign currency translation gains and losses are included in the net realized gains or losses
from investments and net changes in unrealized gain or losses from investments on the statement of operations.
SCHEDULE OF INVESTMENTS IN UNREALIZED GAIN OR LOSSES FOREIGN EXCHANGE RATES ON SECURITIES
|
|
|
America
|
|
|
Canada
|
|
|
Rest
of World
|
|
|
Total
|
|
|
Fair
value March 31, 2021
|
|
$
|
5,486,011
|
|
|
$
|
907,560
|
|
|
$
|
427,836
|
|
|
$
|
6,821,407
|
|
|
New
investments
|
|
|
865,600
|
|
|
|
200,000
|
|
|
|
200,000
|
|
|
|
1,265,600
|
|
|
Proceeds
from sale of investments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Realized
gains
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Change
in value of investments
|
|
|
28,467
|
|
|
|
17,859
|
|
|
|
6,674
|
|
|
|
53,000
|
|
|
Fair
value June 30, 2021
|
|
$
|
6,380,078
|
|
|
$
|
1,125,419
|
|
|
$
|
634,510
|
|
|
$
|
8,140,007
|
|
|
|
|
America
|
|
|
Canada
|
|
|
Rest
of World
|
|
|
Total
|
|
|
Fair
value beginning of year March 31, 2020
|
|
$
|
2,170,499
|
|
|
$
|
245,000
|
|
|
$
|
250,000
|
|
|
$
|
2,665,499
|
|
|
New
investments
|
|
|
200,000
|
|
|
|
50,000
|
|
|
|
-
|
|
|
|
250,000
|
|
|
Proceeds
from sale of investments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Realized
gains
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Change
in value of investments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Fair
value June 30, 2020
|
|
$
|
2,370,499
|
|
|
$
|
295,000
|
|
|
$
|
250,000
|
|
|
$
|
2,915,499
|
|
Working
on the experience of our technical advisors, we limit our investments to fintech, technology, and life sciences.
|
|
|
Fintech
|
|
|
Technology
|
|
|
Life
science
|
|
|
Total
|
|
|
Fair
value March 31, 2021
|
|
$
|
126,030
|
|
|
$
|
1,394,318
|
|
|
$
|
5,301,059
|
|
|
$
|
6,821,407
|
|
|
New
investments
|
|
|
-
|
|
|
|
365,600
|
|
|
|
900,000
|
|
|
|
1,265,600
|
|
|
Proceeds
from sale of investments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Realized
gains
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Change
in value of investments
|
|
|
-
|
|
|
|
21,541
|
|
|
|
31,459
|
|
|
|
53,000
|
|
|
Fair
value June 30, 2021
|
|
$
|
126,030
|
|
|
$
|
1,781,459
|
|
|
$
|
6,232,518
|
|
|
$
|
8,140,007
|
|
|
|
|
Fintech
|
|
|
Technology
|
|
|
Life
science
|
|
|
Total
|
|
|
Fair
value March 31, 2020
|
|
$
|
101,500
|
|
|
$
|
685,002
|
|
|
$
|
1,878,997
|
|
|
$
|
2,665,499
|
|
|
New
investments
|
|
|
-
|
|
|
|
-
|
|
|
|
250,000
|
|
|
|
250,000
|
|
|
Proceeds
from sale of investments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Realized
gains
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Change
in value of investments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Fair
value June 30, 2020
|
|
$
|
101,500
|
|
|
$
|
685,002
|
|
|
$
|
2,128,997
|
|
|
$
|
2,915,499
|
|
We
invest in early-stage private companies developing products or solutions in the fields of fintech, technology and life sciences. Typically,
we are investing in interest bearing notes that may be convertible into equity securities upon the completion of qualified subsequent
financings, preferred stock, SAFEs or other forms of ownership. Typically notes carry a two year term, and are then rolled over for additional
periods if no other maturity triggers have been achieved. If a convertible note investment were, in our judgment, to become impaired,
we would reverse the accrued interest and adjust the valuation to reflect management’s assessment of fair value. If a convertible
note investment exceeds its maturity date we usually would request the portfolio company to document an extension, as well as consider
whether the overdue note, along with all other available performance data and management reviews lead us to consider whether there should
be an adjustment in fair value to reflect impairment of the investment.
SCHEDULE OF ADJUSTMENT IN FAIR VALUE TO REFLECT IMPAIRMENT OF INVESTMENT
|
|
|
Convertible
notes
|
|
|
Preferred
stock
|
|
|
Common
stock
|
|
|
SAFEs
|
|
|
Other
ownership interests
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value March 31, 2021
|
|
$
|
2,553,954
|
|
|
$
|
3,129,458
|
|
|
$
|
391,995
|
|
|
$
|
325,000
|
|
|
$
|
421,000
|
|
|
$
|
6,821,407
|
|
|
Conversions
into preferred stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
New
investments
|
|
|
650,000
|
|
|
|
250,000
|
|
|
|
165,600
|
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
1,265,600
|
|
|
Proceeds
from sale of investments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Realized
gains
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Change
in value of investments
|
|
|
48,221
|
|
|
|
4,779
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
53,000
|
|
|
Fair
value June 30, 2021
|
|
$
|
3,252,175
|
|
|
$
|
3,384,237
|
|
|
$
|
557,595
|
|
|
$
|
425,000
|
|
|
$
|
521,000
|
|
|
$
|
8,140,007
|
|
|
|
|
Convertible
notes
|
|
|
Preferred
stock
|
|
|
Common
stock
|
|
|
SAFEs
|
|
|
Other
ownership interests
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value March 31, 2020
|
|
$
|
1,528,002
|
|
|
$
|
701,497
|
|
|
$
|
126,500
|
|
|
$
|
73,500
|
|
|
$
|
236,000
|
|
|
$
|
2,665,499
|
|
|
Conversions
into preferred stock
|
|
|
50,000
|
|
|
|
100,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
100,000
|
|
|
|
250,000
|
|
|
New
investments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Proceeds
from sale of investments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Realized
gains
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Change
in value of investments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Fair
value June 30, 2020
|
|
$
|
1,578,002
|
|
|
$
|
801,497
|
|
|
$
|
126,500
|
|
|
$
|
73,500
|
|
|
$
|
336,000
|
|
|
$
|
2,915,499
|
|
NOTE
6– EQUITY
Series
A
The
Company has sold 4,200,000 Series A Stock Units (“Units”) consisting of one share of Series A Preferred Stock and one warrant
to purchase a share of Common Stock at $0.80 per share. The Units were sold in a private placement to accredited investors. The Series
A Preferred Stock will be converted into shares of Common Stock upon listing of the Company on Nasdaq or NYSE. In the event of any liquidation
or winding up of the Company, the holders of the Series A shall be entitled to receive in preference to the holders of shares of Common
Stock a per share amount equal to two times (2 X) their original purchase price plus any declared but unpaid dividends (the Liquidation
Preference). All share issuances and obligations are recognized on the books and stock register.
On
March 2, 2021, in preparation for an intended IPO, the Company made an offer to all its preferred shareholders to protect them against
the possibility that the IPO price might be less than their preferred stock price. Accordingly, Series A-1 and Series A-2 Preferred Stock
were created, and the holders of Series A Preferred Stock were granted an opportunity to purchase shares of Common Stock at $0.40 per
share. If shareholders purchased at least $6,000 of Common Stock, their Series A Preferred Stock were exchanged for Series A-1 which
is guaranteed to convert into shares of Common Stock at the same price as the IPO price, and if shareholders purchased a pro-rated amount
of Common Stock their Series A Preferred Stock were exchanged for Series A-2 Preferred Stock which in turn is convertible into shares
of Common Stock at a discount of 10% to the IPO price. In all other respects the Series A-1 and Series A-2 Preferred Stock has the same
rights and obligations as the Series A Preferred Stock. As of June 30, 2021, 1,437,500 shares of Series A Preferred Stock had been exchanged
for Series A-1 Preferred Stock, and 2,212,500 shares of Series A Preferred Stock had been exchanged for Series A-2 Preferred Stock, respectively,
leaving outstanding 550,000 shares of Series A Preferred Stock (“Series A”) designated at a par value of $0.01 per share.
Series
B
There
are also 6,000,000 shares of Series B Preferred Stock (“Series B”) authorized designated at a par value of $0.01 per share.
The Series B can be converted into shares of Common Stock upon listing of the Company on Nasdaq. In the event of any liquidation or winding
up of the Company, the holders of the Series B shall be entitled to receive in preference to the holders of Common Shares and Series
A Preferred Stock, a per share amount equal to two times (2 X) their original purchase price plus any declared but unpaid dividends (the
Liquidation Preference). The holders of Series B shall be entitled to receive out of any funds of the Corporation at a time legally available
for the declaration of dividends, dividends at a cumulative rate of 10% under such terms and conditions as the Board shall prescribe,
provided, however, that in the event dividends shall be declared, dividends on issued and outstanding Series B shall be payable before
any dividends shall be declared or paid upon or set apart for the Common Stock. At June 30, 2021, the Company had sold 4,320,156 shares
of Series B for proceeds of $3,456,124.
On
March 2, 2021, in preparation for an intended future IPO, the Company made an offer to all its preferred shareholders to protect them
against the possibility that the IPO price might be less than their preferred stock price. Accordingly, Series B-1 and Series B-2 Preferred
Stock (“Series B-1” and “Series B-2”, respectively) were created, and the holders of the Series B were granted
an opportunity to purchase shares of Common Stock at $0.40 per share. If shareholders purchased at least $6,000 of common stock, their
Series B were exchanged for Series B-1 which is guaranteed to convert into shares of Common Stock at the same price as the IPO price,
and if shareholders purchased a pro-rated amount of common stock their Series B were exchanged for Series B-2 which converts into shares
of Common Stock at a discount of 10% to the IPO price. In all other respects, the Series B-1 and Series B-2 have the same rights and
obligations as the Series B. At June 30, 2021, 1,857,656 shares of Series B had been exchanged for Series B-1, and 2,176,250 shares of
Series B had been exchanged for Series B-2, respectively, leaving outstanding 286,250 shares of Series B.
The
Company sold 691,250 shares of Series B-1 in the three months ended June 30, 2021 and is still selling Series B-1 shares as at the date
of this report.
COMMON
STOCK
The
Company has authorized 40,000,000 shares of common stock at a par value of $0.01 per share. As of June 30, 2021, and March 31, 2021 a
total of 13,268,871 and 9,983,082 shares of the Company’s common stock were issued and outstanding, respectively. During the three
months ended June 30, 2021, the Company issued 307,178 shares of Common Stock for $122,876 in connection with the amendment of preferred
stock described in section A above. Also, during the year ended March 31, 2021 a total of 2,978,611 shares of Common Stock were subscribed
under this program for a total consideration of $1,191,442 which was accrued as stock subscription liability at March 31, 2021, pending
final closing of the round which occurred in April 2021, at which time these shares were recognized as fully-issued shares of common
stock.
D)
STOCK OPTIONS
In
April 2018, the Board approved the introduction of the Kyto Technology and Life Science, Inc. Incentive Stock Option Plan (“the
2018 Plan”) reserving 2,697,085 shares for issuance to employees, consultants and directors, with the objective of securing the
benefit of services for stock options rather than cash salaries.
In
July 2019, the Board approved the introduction of the Kyto Technology and Life Science 2019 Stock Option and Incentive Plan (“2019
Plan”), and reserved 2 million shares for issuance to directors, officers, consultants and advisors. Options granted under the
2019 Plan expire May 21, 2029.
In
December 2020, the Board approved the introduction of the Kyto Technology and Life Science 2020 Non Qualified Stock Option Plan (“2020
Plan”), and reserved 2 million shares for issuance to directors, officers, consultants and advisors. Options granted under the
2020 Plan expire December 16, 2030.
During
the three months ended June 30, 2021, and June 30, 2020, the Company issued a total of 250,000 and 120,000 non-qualified stock options,
respectively, to consultants and advisors vesting over terms of two years.
SCHEDULE OF OPTIONS VESTED
|
|
|
Number
of options granted
|
|
|
Weighted
average exercise price
|
|
|
Weighted
average remaining life years
|
|
|
Outstanding
March 31, 2021
|
|
|
2,634,250
|
|
|
$
|
0.05
|
|
|
|
8.13
|
|
|
Granted
|
|
|
250,000
|
|
|
|
0.07
|
|
|
|
9.82
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Outstanding
June 30, 2021
|
|
|
2,884,250
|
|
|
$
|
0.05
|
|
|
|
8.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
June 30, 2021
|
|
|
1,782,610
|
|
|
$
|
0.04
|
|
|
|
8.05
|
|
In
connection with the grant of stock options the Company recognises the value of the related option expense using the Black Scholes model,
with appropriate assumptions for option life, stock value, risk free interest rate, volatility, and cancellations.
SCHEDULE OF FAIR VALUE ASSUMPTIONS - STOCK OPTIONS
|
|
|
June
30, 2021
|
|
|
March
31, 2021
|
|
|
Stock
Price at grant date
|
|
$
|
0.070
|
|
|
|
$ 0.033
- $ 0.078
|
|
|
Exercise Price
|
|
$
|
0.070
|
|
|
|
$ 0.033
- $ 0.078
|
|
|
Term
in Years
|
|
|
0
- 2.00
|
|
|
|
0
- 2.00
|
|
|
Volatility
assumed
|
|
|
196
|
%
|
|
|
71%
- 196%
|
|
|
Annual
dividend rate
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
Risk
free discount rate
|
|
|
0.12
|
%
|
|
|
0.12%
- 2.0%
|
|
The
compensation expense calculated at time of grant is amortised over the vesting period for the options granted. During the three months
ended June 30, 2021 and 2020, the Company amortized $10,557 and $1,048, respectively, as option expense. The intrinsic value of outstanding
options at June 30, 2021 was $63,274, and $45,011 of the option expense upon grant remained unamortized at June 30, 2021 with a remaining
vesting period of 1.39 years.
E)
WARRANTS
In
conjunction with the sale of stock Units, the Company issued 4,200,000 warrants to purchase common stock at a price of $1.20 per share
for a period of three years. The Company values the warrants using the Black Scholes model, with appropriate assumptions for warrant
life, stock value, risk free interest rate, and volatility.
SCHEDULE OF WARRANTS
|
|
|
Number
of warrants
|
|
|
Weighted
average
exercise price
|
|
|
Weighted
average remaining life in years
|
|
|
Outstanding
March 31, 2021
|
|
|
1,596,667
|
|
|
$
|
1.20
|
|
|
|
1.4
|
|
|
Granted
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
Cancelled
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
Outstanding
June 30, 2021
|
|
|
1,596,667
|
|
|
$
|
1.20
|
|
|
|
1.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
June 30, 2021
|
|
|
1,596,667
|
|
|
$
|
1.20
|
|
|
|
1.1
|
|
The
intrinsic value of outstanding warrants at June 30, 2021 was zero.
NOTE
7 – FINANCIAL HIGHLIGHTS
SCHEDULE OF FINANCIAL HIGHLIGHTS
|
Per
share data ( a)
|
|
|
|
|
|
|
|
|
|
June
30, 2021
|
|
|
March
31, 2021
|
|
|
Net
asset value
|
|
$
|
0.64
|
|
|
$
|
1.03
|
|
|
Net
increase (decrease) in net assets
|
|
$
|
(0.03
|
)
|
|
$
|
0.06
|
|
|
Net
unrealized gain (loss) on investments
|
|
$
|
0.00
|
|
|
$
|
0.18
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios
and Supplemental Data
|
|
|
|
|
|
|
|
|
|
Net
assets, end of period
|
|
$
|
8,537,246
|
|
|
$
|
6,993,163
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding, end of period
|
|
|
13,268,871
|
|
|
|
5,836,832
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses/net assets
|
|
|
4.5
|
%
|
|
|
11.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in net assets
|
|
|
(3.9)
|
%
|
|
|
6.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Total
return
|
|
|
(0.9)
|
%
|
|
|
1.2
|
%
|
|
(a)
|
Per share data is based on the weighted average number of common
shares outstanding at the end of the period.
|
NOTE
8 - SUBSEQUENT EVENTS
Subsequent
to June 30, 2021 the Company has sold $1,274,000 of shares of Series B-1 Preferred stock and issued 18,750 shares of Common Stock, and
invested $952,000 in additional investments.