NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED
IN CANADIAN DOLLARS)
(UNAUDITED)
1.
Company Overview and Basis of Presentation
Nature
and History of Operations
Notox
Technologies Corp. (formerly Tropic International Inc.) (the “Company”) was incorporated under the laws of the state
of Nevada on October 29, 2007 under the name Rockford Minerals Inc.
On June 28, 2013, the Company completed a reverse takeover transaction with Tropic Spa Inc.
(“TSI”), a private Ontario corporation that manufactured and sold Home Mist Tanning units that deliver a full-body
application. As a result of this transaction, the Company became a holding company operating through TSI.
On
December 6, 2013, the Company changed its name to Tropic International Inc. as a result of a merger with a wholly-owned subsidiary
incorporated solely to effect the name change. On November 19, 2018, the Company again changed its name to Notox Technologies
Corp.
On
June 13, 2016, the Company completed an asset acquisition transaction with Notox Bioscience Inc. (“Notox”), a private
Nevada corporation incorporated on May 31, 2016 for the purpose of acquiring 100% of the right, title and interest in and to an
exclusive license agreement (the “License Agreement”) with The Cleveland Clinic Foundation (the “Clinic”),
an Ohio not-for-profit corporation. As a result of this transaction, the Company is a holding company operating through both TSI
and Notox.
As
reflected in the accompanying condensed consolidated financial statements, the Company has a deficit of $12,249,108 (August 31,
2018 - $11,783,486) since inception, a working capital deficiency of $3,446,326 (August 31, 2018 - $3,203,961) and a stockholders’
deficiency of $2,652,597 (August 31, 2018 - $2,306,865). This raises 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 its ability to raise additional capital and
to implement its business plan. The accompanying condensed consolidated financial statements do not include any adjustments that
might be necessary if the Company is unable to continue as a going concern.
Management
has evaluated the Company’s ability to continue as a going concern by assessing its ability to meet its obligations as they
become due within one year from the date of issue of the financial statements. Management’s assessment included the following
factors:
|
●
|
The
Company’s financial condition as at the date of issue of the financial statements;
|
|
●
|
The
Company’s actual or anticipated conditional and unconditional obligations due within
one year from the date of issue of the financial statements;
|
|
●
|
The
funds necessary to maintain the Company’s operations considering its current financial
condition, obligations and other expected cash flows; and
|
|
●
|
Other
conditions and events that may affect the Company’s ability to meet its obligations
within one year from the date of issue of the financial statements.
|
The
Company’s operating expenses are estimated to be approximately $100,000 per year. As at February 28, 2019, the Company’s
current cash liabilities total $3,443,360 (August 31, 2018 - $2,942,000). Of this amount, accounts payable and accrued
liabilities are $1,876,870, advances from related parties/shareholders are $565,732 and license assignment fee and accrued interest
payable $1,000,758 – is payable to related parties and/or major shareholders who have not and will not require payment until
such time as sufficient cash flow is available.
The
Company’s CEO and President have committed to providing financing if and when necessary to fund the Company’s estimated
$100,000 cash operating expenses for the year ended August 31, 2019.
NOTOX
TECHNOLOGIES CORP. (FORMERLY TROPIC INTERNATIONAL INC.)
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED
IN CANADIAN DOLLARS)
(UNAUDITED)
1.
Company Overview and Basis of Presentation (continued)
Basis
of Presentation, Measurement and Consolidation
The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the United States (“US GAAP”) for interim financial information and the Securities and Exchange
Commission (“SEC”) instructions to Form 10-Q and Article 8 of SEC Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted accounting principles for complete financial statements and
should be read in conjunction with the Company’s audited financial statements for the years ended August 31, 2018
and 2017 and their accompanying notes.
The
accompanying unaudited condensed consolidated financial statements are expressed in Canadian Dollars (“CAD”). In the
opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation
of financial position and results of operations for the interim periods presented have been reflected herein. Operating results
for the six months ended February 28, 2019 are not necessarily indicative of the results that may be expected for the year ending
August 31, 2019.
The
unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Significant
intercompany accounts and transactions have been eliminated.
2.
Summary of Significant Accounting Policies
Principles
of Consolidation
The
accompanying condensed consolidated financial statements include the financial statements of the Company, TSI, Notox, 1894632
Ontario Inc. (“Subco”), and 1894631 Ontario Inc., the Company’s subsidiaries. All significant inter-company
balances and transactions have been eliminated.
Use
of Estimates
The
preparation of financial statements in conformity with US GAAP requires the Company to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and reported amounts of revenue and expenses during the reporting period. Actual results could differ
from those estimates. On an ongoing basis, the Company evaluates its estimates, including those related to equipment, fair values
of intangible assets, useful lives of intangible assets and the likelihood of realization of its deferred tax assets
.
The
Company bases its estimates on assumptions that are believed to be reasonable, the results of which form the basis for making
judgments about the carrying values of assets and liabilities.
Fair
Value of Financial Instruments
Carrying
values of cash, accounts payable and accrued liabilities, advances from related parties/shareholders, license assignment fee and
accrued interest payable and stock subscribed approximate fair value because of the short-term nature of these items. Amounts
receivable consists primarily of Harmonized Sales Tax (“HST”) receivable from the Government of Canada. HST is not
a financial instrument.
NOTOX
TECHNOLOGIES CORP. (FORMERLY TROPIC INTERNATIONAL INC.)
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED
IN CANADIAN DOLLARS)
(UNAUDITED)
3.
Reverse Takeover
On
June 28, 2013 (the “Closing Date”), the Company, its wholly-owned subsidiary Subco and TSI entered into a share exchange
agreement (the “Exchange Agreement”) with certain of the shareholders of TSI (the “Selling Shareholders”)
pursuant to which the Company acquired 39,015,439 common shares, or approximately 78% of the issued and outstanding shares, of
TSI in exchange for the issuance of 39,015,439 preferred shares of Subco to the Selling Shareholders on a one-for-one basis. Each
one preferred share of Subco is exchangeable into one share of the Company’s common stock at the option of the holder subject
to certain restrictions.
On
February 17, 2015, the Company, Subco, TSI and the Selling Shareholders entered into an amendment to the Exchange Agreement in
order to correct certain administrative errors in the Exchange Agreement and provide for the post-closing execution of the Exchange
Agreement by those shareholders of TSI who were not original signatories thereto. In addition, the Selling Shareholders approved
certain changes to the rights, privileges, restrictions and conditions attached to the preferred shares of Subco by consent in
writing. This included extending the automatic expiration date in respect of the preferred shares of Subco from June 30, 2015
to June 30, 2017. On February 22, 2017, this automatic expiration date was further extended to December 31, 2018, and on December
27, 2018, this date was further extended to December 31, 2020.
4.
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 at the measurement date. There is a three-tier fair value hierarchy, which prioritizes the inputs
used in measuring fair value as follows:
Level
1 – Observable inputs such as quoted prices in active markets for identical assets or liabilities;
Level
2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets
or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable
market data for substantially the full term of the assets or liabilities; and
Level
3 – Unobservable inputs that are supported by little or no market activity, which require management judgment or estimation.
The
Company measures its financial instruments at fair value.
The
carrying value of cash deposits is a reasonable estimate of its fair value due to the short maturity of the financial instrument.
The
Company’s stock purchase warrants are measured at fair value on a recurring basis.
5.
License Agreement, Net
On
December 1, 2012, Zoran Holding Corporation (“ZHC”) and the Clinic entered into the License Agreement whereby the
Clinic granted ZHC an exclusive worldwide license and a non-exclusive worldwide license in the field of aesthetics and pain to
make, use, offer to sell, sell and import certain products throughout the term of the License Agreement. Royalties and other payments
are payable quarterly. Notox is required to achieve two commercial milestones: regulatory filings submitted to regulatory authorities
by November 30, 2019 and first commercial sale within nine months following regulatory approval. Failure to achieve these milestones,
without satisfactory justification, constitutes a material breach of the License Agreement giving the Clinic the right, but not
the obligation, to convert the License Agreement to a non-exclusive license or terminate the License Agreement. The Clinic has
the right to verify Notox’s compliance with the License Agreement.
Within
30 days following Notox’s receipt of the first regulatory approval, Notox is required to reimburse the Clinic for current
patenting costs. All patenting costs, patent office fees and outside patent counsel costs will, at the Clinic’s option,
either be paid directly by Notox or by the Clinic with the Clinic invoicing Notox, provided that Notox has no obligation to pay
or reimburse the Clinic until after first regulatory approval has been obtained. Upon termination or expiration of the License
Agreement, all accrued and unreimbursed patenting costs become immediately due and payable to the Clinic. As of February 28, 2019,
all accrued and unreimbursed patenting costs totaled $237,341 (August 31, 2018 - $227,707).
Pursuant
to above, the fair value and gross carrying value of the License Agreement is as follows:
License
Agreement
|
|
$
|
133,212
|
|
Cash
|
|
|
131
|
|
Accrued
liabilities
|
|
|
(5,423
|
)
|
Capital
stock exchanged (50,000,000 shares at US$0.002 per share)
|
|
$
|
127,920
|
|
Fair
value of License Agreement
|
|
$
|
133,212
|
|
Acquisition
costs
|
|
|
19,519
|
|
Assignment
fee (US$1,000,000)
|
|
|
1,347,000
|
|
Gross
carrying value of License Agreement
|
|
$
|
1,499,731
|
|
|
|
February
28, 2019
|
|
|
|
Gross
carrying amount
|
|
|
Accumulated
amortization
|
|
|
Net
carrying amount
|
|
License
Agreement
|
|
$
|
1,499,731
|
|
|
$
|
468,665
|
|
|
$
|
1,031,066
|
|
|
|
August
31, 2018
|
|
|
|
Gross
carrying amount
|
|
|
Accumulated
amortization
|
|
|
Net
carrying amount
|
|
License
Agreement
|
|
$
|
1,499,731
|
|
|
$
|
374,932
|
|
|
$
|
1,124,799
|
|
NOTOX
TECHNOLOGIES CORP. (FORMERLY TROPIC INTERNATIONAL INC.)
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED
IN CANADIAN DOLLARS)
(UNAUDITED)
5.
License Agreement, Net (continued)
As
of February 28, 2019, amortization expense on the License Agreement for the next six years was expected to be as follows:
|
|
Amount
|
|
Year
ending:
|
|
|
|
|
2019
|
|
$
|
93,733
|
|
2020
|
|
|
187,466
|
|
2021
|
|
|
187,466
|
|
2022
|
|
|
187,466
|
|
2023
|
|
|
187,466
|
|
2024
|
|
|
187,469
|
|
Total
|
|
$
|
1,031,066
|
|
6.
Accounts Payable and Accrued Liabilities
Accounts
payable and accrued liabilities consisted of:
|
|
February
28, 2019
|
|
|
August
31, 2018
|
|
Trade
payables
|
|
$
|
1,728,941
|
|
|
$
|
1,412,277
|
|
Vendor
accruals
|
|
|
147,929
|
|
|
|
170,414
|
|
Accounts
payable and accrued liabilities
|
|
$
|
1,876,870
|
|
|
$
|
1,582,691
|
|
7.
Related Party Transactions and balances
All
transactions with related parties occurred in the normal course of business and were measured at the exchange amount, which was
the amount of consideration agreed upon between management and the related parties.
Following
are the related party balances and transactions:
|
a)
|
Related
party balances
|
Advances
from related parties include:
|
●
|
At
February 28, 2019, the Company owed $232,000 (August 31, 2018 - $232,000) in advances
payable to the President of the Company. These advances are unsecured and bear interest
at 3% per annum. Accrued interest payable to the President totaled $36,629 at February
28, 2019 (August 31, 2018 - $32,538).
|
|
●
|
At
February 28, 2019, the Company owed $102,837 (August 31, 2018 - $51,000) in advances
payable to the CEO of the Company. This balance bears no interest and has no repayment
terms.
|
Accounts
payable and accrued liabilities include:
|
●
|
At
February 28, 2019, the Company owed $1,185,624 (August 31, 2018 - $1,090,187) in consulting
fees to the President, CEO, and former CFO of the Company.
|
NOTOX
TECHNOLOGIES CORP. (FORMERLY TROPIC INTERNATIONAL INC.)
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED
IN CANADIAN DOLLARS)
(UNAUDITED)
7.
Related Party Transactions and balances (continued)
|
b)
|
Related
party transactions
|
During
the six months ended February 28, 2019, the Company had the following transactions with related parties:
|
●
|
Consulting
fees expense of $81,765 (six months ended February 28, 2018 - $157,178) in connection
with the services provided by the companies controlled by the President and CEO of the
Company.
|
|
●
|
Interest
expense of $5,534 (six months ended February 28, 2018 - $761) in connection with advances
owing to the President and other shareholders of the Company.
|
|
●
|
The
CEO of the Company advanced $28,836 (six months ended February 28, 2018 - $46,000). These
advances are unsecured, bear no interest and have no repayment terms.
|
8.
Advances from Shareholders
Advances
payable to shareholders totaled $145,000 at February 28, 2019 (August 31, 2018 - $145,000) These advances are unsecured and bear
interest at 3% per annum, with no specific repayment terms. Interest expense of $2,157 was incurred on these advances during the
six months ended February 28, 2019 (six months ended February 28, 2018 - $2,157). Accrued interest payable to shareholders totaled
$19,128 at February 28, 2019 (August 31, 2018 - $16,971).
9.
License Assignment Fee Payable
Pursuant
to the amendment to the Share Exchange Agreement, the Company will pay an aggregate of US$1,000,000 to Zoran K Corporation, a
private Ontario corporation (“ZKC”), in the form of a one-time assignment fee. The assignment fee payable is
repayable in monthly instalments of US$50,000 beginning on October 1, 2016. Upon completion of any equity financing pursuant to
which the Company raises gross proceeds of at least US$1,000,000, the outstanding balance is to be repaid in full.
Since
September 1, 2017, interest of 24% per annum, compounding annually, has been accrued on the outstanding balance payable. Interest
expense of $281,032 was accrued on the balance payable during the six months ended February 28, 2019. At February 28, 2019, the
balance of the license assignment fee payable and interest payable to ZKC was $1,000,758 (August 31, 2018 - $882,257). See Note
5.
10.
Commitments
On
December 1, 2015, the Company entered into consulting agreements with 1040614 Ontario Ltd., a private Ontario corporation (the
“Old 1040614 Agreement”), and MCM Consulting, an Ontario sole proprietorship (the “Old MCM Agreement”,
and together with the Old 1040614 Agreement, the “Old Agreements”). Pursuant to the Old 1040614 Agreement, 1040614
Ontario Ltd. (“1040614”), through its principal, performed various services related to business development,
strategic planning and capital-raising for the Company. Pursuant to the Old MCM Agreement, the sole proprietor of MCM Consulting
(“MCM”) acted in the capacity of CEO of the Company. On June 13, 2016, the Old 1040614 and MCM Agreements were
terminated and replaced by the 1040614 and MCM Agreements (see below). As at February 28, 2019, 1040614 and MCM are each entitled
to $80,770 (August 31, 2018 - $80,770) in accrued remuneration in respect of the Old Agreements.
NOTOX
TECHNOLOGIES CORP. (FORMERLY TROPIC INTERNATIONAL INC.)
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED
IN CANADIAN DOLLARS)
(UNAUDITED)
10.
Commitments (continued)
On
June 13, 2016, the Company entered into consulting agreements with 1040614 (the “1040614 Agreement”), MCM (the “MCM
Agreement”) and ZKC (the “ZKC Agreement”). Pursuant to the 1040614 Agreement, 1040614, through its principal,
performs general consulting services on behalf of the Company. Pursuant to the MCM Agreement, the sole proprietor of MCM
acts in the capacity of President of the Company. Pursuant to the ZKC Agreement, ZKC, through its principal, acts in the capacity
of CEO of the Company. Each consulting agreement is for a period of 10 years, with successive automatic renewal periods of two
years until terminated. Pursuant to these consulting agreements, each consultant is entitled to receive the following compensation:
|
●
|
Remuneration
– an aggregate of US$125,000 per annum plus HST on a bi-monthly basis;
|
|
●
|
EPS
Bonus – when the Company generates earnings per share of $0.05, plus any multiple
thereof, the Company shall issue the consultant 1,000,000 shares of the Company’s
common stock and pay the consultant US$250,000 plus HST;
|
|
●
|
Change
of Control Bonus – immediately prior to the completion of a change of control (as
defined in these consulting agreements) the Company shall issue the consultant an aggregate
of 20,000,000 shares of the Company’s common stock; and
|
|
●
|
Additional
Bonus – the company may from time to time pay the consultant one or more bonuses
as determined by the Board of Directors at its sole discretion.
|
Effective
February 3, 2018, the Company terminated the 1040614 Agreement.
On
August 31, 2018, the Company renewed its premises lease for another year beginning on September 1, 2018 for a rental of $21,000
for the year plus HST.
11.
Stockholders’ Deficiency
Authorized
stock
As
at February 28, 2019, the Company was authorized to issue 500,000,000 (August 31, 2018 - 300,000,000) shares of common stock at
a par value of US$0.001.
On
October 9, 2018, the Company’s shareholders and directors approved a change of the Company’s name from Tropic International
Inc. to Notox Technologies Corp. and an increase in the Company’s authorized common stock to 500,000,000 shares. The name
change and authorized common stock increase were effected on November 19, 2018.
At
February 28, 2019, the Company had 57,532,843 shares of common stock legally issued and outstanding (August 31, 2018 -
57,532,843).
NOTOX
TECHNOLOGIES CORP. (FORMERLY TROPIC INTERNATIONAL INC.)
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED
IN CANADIAN DOLLARS)
(UNAUDITED)
11.
Stockholders’ Deficiency (continued)
Share
issuances
During
the six months ended February 28, 2018, the Company completed the following common stock transactions:
|
●
|
On
September 21, 2017, the Company closed a US dollar financing pursuant to which the Company
issued 630,000 units at US$1.00 per unit for gross proceeds of $830,674, with each unit
consisting of one share of the Company’s common stock and one warrant to purchase
one share of common stock exercisable at a price of US$1.40 per share until September
7, 2019. $491,041 was allocated to common stock and $339,633 was allocated to stock purchase
warrants. The Company paid cash finder’s fees of $6,435 and issued 5,000 finder’s
stock purchase warrants exercisable at US$1.40 per warrant share until July 17, 2019,
valued at $2,581 and credited to stock purchase warrants.
|
|
●
|
On
September 21, 2017, the Company issued 10,000 shares of common stock at $0.80 per share
for gross proceeds of $8,000 pursuant to the exercise of warrants during the year ended
August 31, 2017. $2,049 of the gross proceeds received that was allocated to these warrants
has been deducted from additional paid-in capital.
|
There
were no share issuances during the six months ended February 28, 2019.
Shares
to be issued
Common
stock to be issued of 98,750 shares ($119,890) is comprised of 18,750 shares to be issued from the exercise of warrants
(as explained below), and 80,000 shares to be issued from private placements as detailed below:
|
●
|
On
February 25, 2019, the Company has to issue 15,000 shares of common stock through a private
placement with a fair value of $19,311 at a rate of U$1.29 per share.
|
|
●
|
On
February 28, 2019, the Company has to issue 65,000 shares of common stock through a private
placement with a fair value of $85,579 at a rate of $1.32 per share.
|
Warrant
exercises
During
the six months ended February 28, 2019, the Company completed the following warrants transactions:
|
●
|
On
November 27, 2018, the Company issued 12,500 shares of common stock at $0.80 per
share for gross proceeds of $10,000 pursuant to the exercise of warrants.
|
|
●
|
As
of February 28, 2019, the Company has to issue.6,250 shares of common stock at $0.80
per share for gross proceeds of $5,000 pursuant to the exercise of warrants during the
period ended February 28, 2019.
|
NOTOX
TECHNOLOGIES CORP. (FORMERLY TROPIC INTERNATIONAL INC.)
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED
IN CANADIAN DOLLARS)
(UNAUDITED)
11.
Stockholders’ Deficiency (continued)
Stock
Purchase Warrants
The
continuity of Canadian dollar denominated stock purchase warrants for the six months ended February 28, 2019 is as follows:
Expiry
Date
|
|
Price
|
|
|
August
31, 2017
|
|
|
Issued
|
|
|
Expired
|
|
|
August
31, 2018
|
|
|
Issued
|
|
|
Expired
|
|
|
February
28,
2019
|
|
October
31, 2018
|
|
$
|
0.80
|
|
|
|
130,000
|
|
|
|
—
|
|
|
|
(12,500
|
)
|
|
|
117,500
|
|
|
|
—
|
|
|
|
(117,500
|
)
|
|
|
—
|
|
At
February 28, 2019, the weighted-average remaining contractual life of Canadian dollar warrants outstanding was 0.00 years (August
31, 2018 - 0.17).
The
continuity of US dollar denominated stock purchase warrants for the six months ended February 28, 2019 is as follows:
Expiry
Date
|
|
Price
|
|
|
August
31, 2017
|
|
|
Issued
|
|
|
August
31, 2018
|
|
|
Issued
|
|
|
Expired
|
|
|
February
28, 2019
|
|
September
30, 2018 – Finder
|
|
|
US$1.40
|
|
|
|
15,000
|
|
|
|
—
|
|
|
|
15,000
|
|
|
|
—
|
|
|
|
(15,000
|
)
|
|
|
—
|
|
October
31, 2018
|
|
|
US$0.80
|
|
|
|
220,770
|
|
|
|
—
|
|
|
|
220,770
|
|
|
|
—
|
|
|
|
(220,770
|
)
|
|
|
—
|
|
November
2, 2018
|
|
|
US$1.40
|
|
|
|
400,000
|
|
|
|
—
|
|
|
|
400,000
|
|
|
|
—
|
|
|
|
(400,000
|
)
|
|
|
—
|
|
July
17, 2019 – Finder
|
|
|
US$1.40
|
|
|
|
—
|
|
|
|
5,000
|
|
|
|
5,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,000
|
|
September
7, 2019
|
|
|
US$1.40
|
|
|
|
—
|
|
|
|
630,000
|
|
|
|
630,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
630,000
|
|
|
|
|
|
|
|
|
635,770
|
|
|
|
635,000
|
|
|
|
1,270,770
|
|
|
|
—
|
|
|
|
(635,770
|
)
|
|
|
635,000
|
|
At
February 28, 2019, the weighted-average remaining contractual life of US dollar warrants outstanding was 0.52 years (August 31,
2018 – 0.59 years).
The
Company used the Black-Scholes Option Pricing Model to determine the fair values of unit warrants and finder’s warrants
issued pursuant to private placements during the years ended August 31, 2018 and 2017 with the following assumptions:
|
|
February
28, 2019
|
|
|
August
31, 2018
|
|
Expected
dividend yield
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Risk-free
interest rate
|
|
|
1.78
|
%
|
|
|
1.47%
- 2.04
|
%
|
Expected
stock price volatility
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
Expected
life of warrants
|
|
|
0.63
– 0.77 years
|
|
|
|
0.08
– 2 years
|
|
12.
Risks and Uncertainties
The
Company’s future results of operations involve a number of risks and uncertainties. Factors that could affect its future
operating results and cause actual results to vary materially from expectations include, but are not limited to: current economic
conditions; the Company’s degree of success in securing regulatory approval and marketing products developed pursuant to
the License Agreement; increasing competition; and dependence on its existing management and key personnel.
NOTOX
TECHNOLOGIES CORP. (FORMERLY TROPIC INTERNATIONAL INC.)
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED
IN CANADIAN DOLLARS)
(UNAUDITED)
13.
Accounting Pronouncements
In
August 2018, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update
(“ASU”) 2018-13, “Changes to Disclosure Requirements for Fair Value Measurements”, which will
improve the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes,
modifies, and adds certain disclosure requirements, and is effective for fiscal years, and interim periods within those fiscal
years, beginning after December 15, 2019. The Company will be evaluating the impact this standard will have on the Company’s
financial statements.
In
June 2018, the FASB issued ASU 2018-07 to expand the scope of ASC Topic 718, Compensation -
Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. The pronouncement
is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018, with early
adoption permitted. The Company is currently in the process of evaluating the effects of this pronouncement on the consolidated
financial statements, including potential early adoption.
In
November 2017, the FASB issued ASU 2017-14 amending ASC Topic 605, which states the required steps to achieve the
core principle that a company should recognize revenue when it transfers promised goods or services to customers in an amount
that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company
adopted this pronouncement on a modified retrospective basis. On April 1, 2018, the Company adopted ASU 2017-14 to clarify
existing guidance on revenue recognition.
In
November 2016, the FASB issued ASU 2016-18 addressing the treatment of restricted cash equivalents in ASC Topic 230. This
guidance requires entities to show changes in the total of cash, cash equivalents and restricted cash in the combined statement
of cash flows. On January 1, 2018, the Company adopted ASU 2016-18 to clarify how entities should present restricted cash
and restricted cash equivalents in the statement of cash flows. This guidance was adopted on a retrospective basis, and such adoption
did not have a material impact on the Company’s combined financial position and/or results of operations.
In
February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This guidance revises the accounting related to leases by
requiring lessees to recognize a lease liability and a right-of-use asset for all leases. The new lease guidance also simplifies
the accounting for sale and leaseback transactions. This ASU is effective for annual reporting periods beginning after December
15, 2018 and early adoption is permitted. The Company does not believe the guidance will have a material impact on its consolidated
financial statements.
14.
Subsequent Event
s
The
Company’s management has evaluated subsequent events up to April 19, 2019, the date the accompanying condensed consolidated
financial statements were issued, pursuant to the requirements of ASC 855 and has determined that there have been no events that
have occurred that would require adjustments to the disclosures in the financial statements
.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
quarterly report on Form 10-Q (this “Report”) contains forward-looking statements. The forward-looking statements
are contained principally in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
section of this Report. These statements involve known and unknown risks, uncertainties and other factors which may cause our
actual results, performance or achievements to be materially different from any future results, performances or achievements expressed
or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “anticipates”,
“believes”, “seeks”, “could”, “estimates”, “expects”, “intends”,
“may”, “plans”, “potential”, “predicts”, “projects”, “should”,
“would” and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect
our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these
uncertainties, you should not place undue reliance on these forward-looking statements. Such statements may include, but are not
limited to, information related to: anticipated operating results; relationships with our customers; consumer demand; financial
resources and condition; changes in revenues; changes in profitability; changes in accounting treatment; cost of sales; selling,
general and administrative expenses; interest expense; the ability to produce the liquidity or enter into agreements to acquire
the capital necessary to continue our operations and take advantage of opportunities; legal proceedings and claims.
Also,
forward-looking statements represent our estimates and assumptions only as of the date of this Report. You should read this Report
and the documents that we reference and file or furnish as exhibits to this Report completely and with the understanding that
our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation
to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those
anticipated in any forward-looking statements, even if new information becomes available in the future.
PRESENTATION
OF INFORMATION
Except
as otherwise indicated by the context, references in this Report to “we”, “us” and “our” are
to the combined business of Notox Technologies Corp. (formerly, Tropic International Inc.) and its consolidated subsidiaries.
This
Report includes our interim unaudited condensed consolidated financial statements for the three and six months ended February
28, 2019. These financial statements have been prepared in accordance with generally accepted accounting principles in the United
States (“US GAAP”). All financial information in this Report is presented in Canadian dollars, unless otherwise indicated,
and should be read in conjunction with our interim unaudited condensed consolidated financial statements and the notes thereto
included in this Report.
As
disclosed in our current report on Form 8-K dated July 3, 2013, on June 28, 2013 we completed a share exchange with Tropic Spa
Inc., an Ontario corporation (“Tropic Spa”), 1894632 Ontario Inc., an Ontario corporation (“Subco”), and
certain of the shareholders of Tropic Spa (collectively, the “Tropic Spa Shareholders”), pursuant to which we acquired
78,030,877 common shares, or approximately 78% of the issued and outstanding shares, of Tropic Spa in exchange for the issuance
of 78,030,877 preferred shares of Subco, our wholly owned subsidiary, to the Tropic Spa Shareholders on a one-for-one basis (the
“Share Exchange”). Each preferred share of Subco is exchangeable into one share of our common stock at the option
of the holder thereof, subject to certain restrictions. As a result of the Share Exchange, Tropic Spa became our majority-owned
subsidiary and the former shareholders of Tropic Spa became holders of the preferred shares of Subco, a company that has only
one issued and outstanding common share which is held by us. The transaction was accounted for as a reverse takeover/recapitalization
effected by a share exchange, wherein Tropic Spa is considered the acquirer for accounting and financial reporting purposes. Our
condensed consolidated financial statements are therefore, in substance, those of Tropic Spa.
Also,
as disclosed in our current report on Form 8-K dated July 14, 2016, on June 13, 2016 we completed a share exchange with Notox
Bioscience Inc., a Nevada corporation (“Notox”), and all the shareholders of Notox (collectively, the “Notox
Shareholders”) pursuant to which we acquired all the issued and outstanding shares of Notox from the Notox Shareholders
in exchange for the issuance of 100,000,000 restricted shares of our common stock to the Notox Shareholders on a 1,000-for-one
basis (the “Notox Share Exchange”). In connection with the Notox Share Exchange, Notox acquired 100% of the right,
title and interest in and to an exclusive license agreement dated December 1, 2012, as amended on July 30, 2013 (together, the
“License Agreement”) with the Cleveland Clinic Foundation (the “Clinic”) formerly held by Zoran Holding
Corporation, a private Ontario corporation (“ZHC”), Notox became our wholly-owned subsidiary, and the Notox Shareholders
acquired approximately 89% of our issued and outstanding common stock (52.5% on a fully-exchanged basis). The transaction represented
an asset acquisition and was therefore accounted for under the asset acquisition method.
Finally,
on August 25, 2016, we completed a reverse split of our issued and outstanding common stock at the ratio of one (1) new share
for every two (2) existing shares and caused Subco to do the same. All share and per share amounts have been adjusted to reflect
the reverse split except as otherwise indicated.