UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from: __________to __________
KYTO TECHNOLOGY AND LIFE SCIENCE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE |
| 000-50390 |
| 65-1086538 |
| (Commission |
| (I.R.S. Employer | |
of Incorporation) |
| File Number) |
| Identification No.) |
13050 Paloma Road, Los Altos Hills, CA 94022
(Address of Principal Executive Office) (Zip Code)
(408) 313 5830
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report) |
Title of each class | Trading Symbol | Exchange |
Common stock | KBPH | OTC QB |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (ss. 232.405 of this chapter) during the preceding 12 (or for such shorter period that the registrant was required to submit such files). [ ] Yes [X] No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
[ ] | Large accelerated filer |
| Accelerated filer | [ ] |
[ ] | Non-accelerated filer |
| Smaller reporting company | [X] |
[ ] | Emerging growth company |
|
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). [ ] Yes [X] No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
5,836,832 Common Shares - $.01 Par Value - as of July 30, 2020
1
KYTO Technology and Life Science, Inc.
For the quarterly period ended June 30, 2020
INDEX
| PART I. FINANCIAL INFORMATION |
|
|
|
|
Item 1. | Financial Statements |
|
| Condensed Balance Sheets as of June 30, 2020 (Unaudited) and March 31, 2020 | 3 |
| Unaudited Condensed Statements of Operations for the Three Months Ended June 30, 2020 and 2019 | 4 |
| Unaudited Condensed Statements of Stockholders’ Equity for the Three Months Ended June 30, 2020 and 2019 | 5 |
| Unaudited Condensed Statements of Cash Flows for the Three Months Ended June 30, 2020 and 2019 | 6 |
| Schedule of Investments as of June 30, 2020 (Unaudited) and March 31, 2020 |
|
| Notes to Unaudited Condensed Financial Statements | 9 |
|
|
|
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. | 20 |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk. | 23 |
Item 4. | Controls and Procedures. | 23 |
|
|
|
| PART II. OTHER INFORMATION |
|
|
|
|
Item 1. | Legal Proceedings. | 24 |
Item 1A. | Risk Factors. | 24 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. | 24 |
Item 3. | Defaults Upon Senior Securities. | 24 |
Item 4. | Mine Safety Disclosures | 24 |
Item 5. | Other Information | 24 |
Item 6. | Exhibits | 24 |
| Signatures | 26 |
2
ITEM 1. FINANCIAL STATEMENTS
PART I - FINANCIAL INFORMATION
Kyto Technology and Life Science, Inc.
Condensed Balance Sheets
|
| June 30, |
| March 31, |
|
| 2020 |
| 2020 |
|
| (Unaudited) |
|
|
ASSETS |
|
|
|
|
Current Assets |
|
|
|
|
Cash | $ | 126,329 | $ | 33,756 |
Receivables |
| - |
| 500 |
Investments |
| 2,915,499 |
| 2,665,499 |
Total Assets | $ | 3,041,828 | $ | 2,699,755 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
Current Liabilities |
|
|
|
|
Accounts payable & accrued liabilities | $ | 29,037 | $ | 26,394 |
Accrued liabilities & loans - related party |
| 8,000 |
| 5,750 |
Total Current Liabilities |
| 37,037 |
| 32,144 |
|
|
|
|
|
Commitments and Contingencies |
| - |
| - |
|
|
|
|
|
Stockholders' Equity |
|
|
|
|
Preferred stock authorized but not designated, $.01 par value 19,800,000 shares, none issued and outstanding as of June 30, 2020 and March 31, 2020 |
| - |
| - |
Series A preferred convertible stock, $.01 par value, 4,200,000 shares designated, 4,200,000 issued and outstanding as of June 30, 2020 and March 31, 2020 |
| 42,001 |
| 42,001 |
Series B preferred convertible stock, $0.01 par value, 6,000,000 shares designated, 1,281,250 and 812,500 issued and outstanding as of June 30, 2020 and March 31, 2020, respectively |
| 12,188 |
| 8,125 |
Common stock, $.01 par value, 40,000,000 shares authorized, 5,836,832 issued and outstanding as of June 30, 2020 and March 31 2020 |
| 58,368 |
| 58,368 |
Additional paid-in capital |
| 36,315,354 |
| 35,943,369 |
Accumulated deficit |
| (33,423,120) |
| (33,384,252) |
Total Stockholders' Equity |
| 3,004,791 |
| 2,667,611 |
|
|
|
|
|
Total Liabilities and Stockholders' Equity | $ | 3,041,828 | $ | 2,699,755 |
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed financial statements. |
3
Kyto Technology and Life Science, Inc.
Condensed Statements of Operations
(Unaudited )
|
| For the Three months Ended June 30, | ||
|
| 2020 |
| 2019 |
Revenue | $ | 500 | $ | 3,250 |
Operating Expenses |
|
|
|
|
General and administrative |
| 39,368 |
| 204,848 |
Total Operating Expenses |
| 39,368 |
| 204,848 |
|
|
|
|
|
Loss from Operations |
| (38,868) |
| (201,598) |
Interest expense, net |
| - |
| - |
|
|
|
|
|
Net Loss before taxes |
| (38,868) |
| (201,598) |
Income (tax) benefit |
| - |
| - |
|
|
|
|
|
Net Loss | $ | (38,868) | $ | (201,598) |
Weighted average number of shares outstanding |
|
|
|
|
basic and diluted |
| 5,836,832 |
| 5,836,832 |
|
|
|
|
|
Net loss per share - basic and diluted | $ | (0.01) | $ | (0.03) |
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed financial statements. |
4
Kyto Technology and Life Science, Inc.
Condensed Statements of Stockholders' Equity
(Unaudited)
| Preferred A Stock # |
| Preferred A Stock Amount |
| Preferred B Stock # |
| Preferred B Stock Amount |
| Common Stock # |
| Common Stock Amount |
| Additional Paid-in Capital |
| Accumulated Deficit |
| Total |
Balance, March 31, 2019 | 2,612,500 | $ | 26,125 |
| - | $ | - |
| 5,836,832 | $ | 58,368 | $ | 34,090,092 | $ | (32,610,853) | $ | 1,563,732 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) for the three months ended June 30, 2019 | - |
| - |
| - |
| - |
| - |
| - |
| - |
| (201,598) |
| (201,598) |
Sale of Series A Preferred stock at $0.80 per share | 1,081,250 |
| 10,813 |
| - |
| - |
| - |
| - |
| 854,187 |
| - |
| 865,000 |
Compensation expense on stock options | - |
| - |
| - |
| - |
| - |
| - |
| 101 |
| - |
| 101 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2019 | 3,693,750 | $ | 36,938 |
| - | $ | - |
| 5,836,832 | $ | 58,368 | $ | 34,944,380 | $ | (32,812,451) | $ | 2,227,235 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2020 | 4,200,000 | $ | 42,001 |
| 812,500 | $ | 8,125 |
| 5,836,832 | $ | 58,368 | $ | 35,943,369 | $ | (33,384,252) | $ | 2,667,611 |
Net (loss) for the three months ended June 30, 2020 | - |
| - |
| - |
| - |
| - |
| - |
| - |
| (38,868) |
| (38,868) |
Sale of Series B Preferred stock at $0.80 per share | - |
| - |
| 468,750 |
| 4,063 |
| - |
| - |
| 370,937 |
| - |
| 375,000 |
Compensation expense on stock options | - |
| - |
| - |
| - |
| - |
| - |
| 1,048 |
| - |
| 1,048 |
Balance, June 30, 2020 | 4,200,000 | $ | 42,001 |
| 1,281,250 | $ | 12,188 |
| 5,836,832 | $ | 58,368 | $ | 36,315,354 | $ | (33,423,120) | $ | 3,004,791 |
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|
|
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|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed financial statements.
5
Kyto Technology and Life Science, Inc.
Condensed Statements of Cash Flows
(Unaudited)
|
| For the three months ended |
| For the three months ended | |
|
| June 30, 2020 |
| June 30, 2019 | |
CASH FLOW FROM OPERATING ACTIVITIES |
|
|
|
| |
Net loss | $ | (38,868) | $ | (201,598) | |
Adjustments to reconcile net loss to net cash used in operating activities |
|
|
|
| |
Option compensation expense |
| 1,048 |
| 101 | |
|
|
|
|
| |
Changes in operating assets and liabilities |
|
|
|
| |
Receivables |
| 500 |
| - | |
Deferred fundraising expenses |
| - |
| (124,013) | |
Accounts payable and accrued liabilities |
| 2,643 |
| 17,931 | |
Net cash used in operating activities |
| (34,677) |
| (307,579) | |
|
|
|
|
| |
CASH FLOW FROM INVESTING ACTIVITIES |
|
|
|
| |
Purchase of equity investments |
| (250,000) |
| (323,497) | |
Net cash used in investing activities |
| (250,000) |
| (323,497) | |
|
|
|
|
| |
CASH FLOW FROM FINANCING ACTIVITIES |
|
|
|
| |
Proceeds from sales of Series A Preferred stock |
| - |
| 865,000 | |
Proceeds from sales of Series B Preferred stock |
| 375,000 |
| - | |
Advances from related party |
| 2,250 |
| (2,250) | |
Net cash provided by financing activities |
| 377,250 |
| 862,750 | |
|
|
|
|
| |
Net increase in cash |
| 92,573 |
| 231,674 | |
|
|
|
|
| |
Cash at beginning of period |
| 33,756 |
| 93,634 | |
Cash at end of period | $ | 126,329 | $ | 325,308 | |
|
|
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| |
Supplemental Cash Flow Information: |
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|
|
| |
Interest Paid | $ | - | $ | - | |
Taxes Paid | $ | 800 | $ | 800 | |
|
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| |
Supplemental disclosure of non-cash investing and financing activities | $ | - | $ | - | |
|
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| |
The accompanying notes are an integral part of these unaudited condensed financial statements. |
6
Kyto Technology and Lif Science Inc
Schedule of investments
As of June 30, 2020
Portfolio Company | Industry | Investment and approximate ownership |
| Cost |
| Fair value | Percentage of net assets (a) | ||
SAFE Investment – Not readily marketable |
|
|
|
|
|
|
| ||
Cnote Group, Inc | Fintech | 4.3 % ownership | $ | 51,500 | $ | 51,500 | 1.71% | ||
Mitre Medical Corp | Life Science | 0.6 % ownership |
| 75,000 |
| 75,000 | 2.50% | ||
Total SAFE Investment – Not readily marketable |
|
| $ | 126,500 | $ | 126,500 | 4.21% | ||
|
|
|
|
|
|
|
| ||
Preferred Stock Investment – Not readily marketable |
|
|
|
|
|
|
| ||
Shyft (FKA Crater Group Inc) | Technology | 3.4 % ownership | $ | 51,500 | $ | 51,500 | 1.71% | ||
Colabs Inc | Life Science | 5.0 % ownership |
| 50,000 |
| 50,000 | 1.66% | ||
Neuroflow Inc | Life Science | 7.5 % ownership |
| 150,000 |
| 150,000 | 4.99% | ||
FemtoDX Inc | Life Science | 42,436 series A preferred stock – 5.0 % ownership |
| 100,000 |
| 100,000 | 3.33% | ||
Deep Blue Medical Advances Inc | Life Science | 10,431 series A preferred stock – 1.0 % ownership |
| 49,997 |
| 49,997 | 1.66% | ||
Otomagnetics Inc | Life Science | 3.3 % ownership |
| 100,000 |
| 100,000 | 3.33% | ||
Trellis Bioscience LLC | Life Science | 0.5 % ownership |
| 50,000 |
| 50,000 | 1.66% | ||
Valfix Medical Inc | Life Science | 2.9 % ownership |
| 50,000 |
| 50,000 | 1.66% | ||
Trellis Bioscience LLC | Life Science | 0.5 % ownership |
| 50,000 |
| 50,000 | 1.66% | ||
Lowell Therapeutics Inc | Life Science | 5.0 % ownership |
| 50,000 |
| 50,000 | 1.66% | ||
Altis Biosystems Inc | Life Science | 0.6% ownership |
| 50,000 |
| 50,000 | 1.66% | ||
|
|
|
|
|
|
|
| ||
Total Preferred Stock Investment – Not readily marketable |
|
| $ | 751,497 | $ | 751,497 | 25.01% | ||
|
|
|
|
|
|
|
| ||
Common Stock Investment – Not readily marketable |
|
|
|
|
|
|
| ||
Boardwalk Tech | Technology | 150,000 units of common stock and warrant – 4.9% ownership | $ | 73,500 | $ | 73,500 | 2.45% | ||
Total Common Stock Investment – Not readily marketable |
|
| $ | 73,500 | $ | 73,500 | 2.45% | ||
|
|
|
|
|
|
|
| ||
Other Investment – Not readily marketable |
|
|
|
|
|
|
| ||
Exodos Life Sciences LP | Life Science | General Partnership Class A-1 Unit – 1.5 % ownership | $ | 206,000 | $ | 206,000 | 6.86% | ||
Enduralock LLC | Technology | Unit of LLC - 1.5 % ownership |
| 30,000 |
| 30,000 | 1.00% | ||
Green Sun Medical LLC | Life Science | Class A-1 units @ $22.80 per unit |
| 50,000 |
| 50,000 | 1.66% | ||
Green Sun Medical LLC | Life Science | Class A-1 units @ $22.80 per unit |
| 25,000 |
| 25,000 | 0.83% | ||
Green Sun Medical LLC | Life Science | Class A-1 units @ $22.80 per unit |
| 25,000 |
| 25,000 | 0.83% | ||
|
|
|
|
|
|
|
| ||
Total Other Investment – Not readily marketable |
|
| $ | 336,000 | $ | 336,000 | 11.18% | ||
|
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|
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| ||
Convertible Loan Investment – Not readily marketable |
|
|
|
|
|
|
| ||
Seal Rock Therapeutics, Inc. | Life Science | Convertible note, 5%, no fixed term | $ | 78,000 | $ | 78,000 | 2.60% | ||
Achelios Therapeutics Inc. | Life Science | Convertible note, 8%, due December 31, 2021 |
| 100,000 |
| 100,000 | 3.33% | ||
Sensing Electromagnetic Plus corp | Technology | Convertible note, 6%, due August 29, 2020 |
| 50,000 |
| 1 | 0.00% | ||
INBay Technology Inc | Technology | Convertible note, 24%, due October 26, 2020 |
| 50,000 |
| 50,000 | 1.66% | ||
Basepaws Inc | Technology | Convertible note, 1%, due April 30, 2020 |
| 50,000 |
| 50,000 | 1.66% | ||
Kitotech Medical Inc | Life Science | Convertible note, 6%, due December 19, 2020 |
| 100,000 |
| 100,000 | 3.33% | ||
Sensing Electromagnetic Plus corp | Technology | Convertible note, 5%, due January 24, 2021 |
| 11,048 |
| 1 | 0.00% | ||
Cnote Group, Inc | Fintech | Convertible note, 4%, due December 18, 2020 |
| 50,000 |
| 50,000 | 1.66% | ||
Promaxo, Inc. | Life Science | Convertible note, 8%, due September 1, 2020 |
| 250,000 |
| 250,000 | 8.32% | ||
Shyft (FKA Crater Group Inc) | Technology | Convertible note, 8%, due March 18, 2020 |
| 50,000 |
| 50,000 | 1.66% | ||
Achelios Therapeutics Inc. | Life Science | Convertible note, 8%, due December 31, 2021 |
| 25,000 |
| 25,000 | 0.83% | ||
SageMedic Corp | Life Science | Convertible note, 8%, due April 12, 2021 |
| 50,000 |
| 50,000 | 1.66% | ||
Beam Semiconductor Inc | Technology | Convertible note, 8%, due June 30, 2020 |
| 150,000 |
| 150,000 | 4.99% | ||
INBay Technology Inc | Technology | Convertible note, 12%, due July 9, 2021 |
| 30,000 |
| 30,000 | 1.00% | ||
Lifewave Biomedical Inc | Life Science | Convertible note, 6%, due December 31, 2020 |
| 30,000 |
| 30,000 | 1.00% | ||
Cyberdontics Inc | Life Science | Convertible note, 8%, due September 4, 2022 |
| 30,000 |
| 30,000 | 1.00% | ||
Light Line Medical Inc | Life Science | Convertible note, 8%, due September 9, 2021 |
| 30,000 |
| 30,000 | 1.00% | ||
Visgenx Inc | Life Science | Convertible note, 6%, due December 31, 2020 |
| 30,000 |
| 30,000 | 1.00% | ||
Every Key Inc | Technology | Convertible note, 5%, due December 11, 2023 |
| 100,000 |
| 100,000 | 3.33% | ||
Achelios Therapeutics Inc. | Life Science | Convertible note, 8%, due December 31, 2021 |
| 50,000 |
| 50,000 | 1.66% | ||
Lifewave Biomedical Inc | Life Science | Convertible note, 6%, due December 31, 2020 |
| 70,000 |
| 70,000 | 2.33% | ||
Light Line Medical Inc | Life Science | Convertible note, 8%, due February 10, 2022 |
| 70,000 |
| 70,000 | 2.33% | ||
INBay Technology Inc | Technology | Convertible note, 12%, due February 21, 2022 |
| 50,000 |
| 50,000 | 1.66% | ||
Cyberdontics Inc | Life Science | Convertible note, 8%, due February 27, 2023 |
| 35,000 |
| 35,000 | 1.16% | ||
Xpan Inc | Life Science | Convertible note, 8%, due March 4, 2022 |
| 50,000 |
| 50,000 | 1.66% | ||
Beam Semiconductor Inc | Technology | Convertible note, 8%, due March 5, 2021 |
| 50,000 |
| 50,000 | 1.66% | ||
Xpan Inc | Life Science | Convertible note, 8%, due March 4, 2022 |
| 25,000 |
| 25,000 | 0.83% | ||
Xpan Inc | Life Science | Convertible note, 8%, due March 4, 2022 |
| 25,000 |
| 25,000 | 0.83% | ||
|
|
|
|
|
|
|
| ||
Total Convertible Loan Investment - Not readily marketable |
|
|
| 1,689,048 |
| 1,628,002 | 54.18% | ||
|
|
|
|
|
|
|
| ||
Total |
|
| $ | 2,976,545 | $ | 2,915,499 | 97.03% | ||
|
|
|
|
|
|
|
| ||
(a) Percentages are based on net assets of $3,004,791 as of June 30, 2020 |
7
Kyto Technology and Lif Science Inc
Schedule of investments
As of March 31, 2020
Portfolio Company | Industry | Investment and approximate ownership |
| Cost |
| Fair value | Percentage of net assets (a) | |
SAFE Investment - Not readily marketable |
|
|
|
|
|
|
| |
Cnote Group, Inc | Fintech | 4.3 % ownership | $ | 51,500 | $ | 51,500 | 1.9% | |
Mitre Medical Corp | Life Science | 0.6 % ownership |
| 75,000 |
| 75,000 | 2.8% | |
Total SAFE Investment - Not readily marketable |
|
| $ | 126,500 | $ | 126,500 | 4.7% | |
|
|
|
|
|
|
|
| |
Preferred Stock Investment - Not readily marketable |
|
|
|
|
|
|
| |
Shyft (FKA Crater Group Inc) | Technology | 3.4 % ownership | $ | 51,500 | $ | 51,500 | 1.9% | |
Colabs Inc | Life Science | 5.0 % ownership |
| 50,000 |
| 50,000 | 1.9% | |
Neuroflow Inc | Life Science | 7.5 % ownership |
| 150,000 |
| 150,000 | 5.6% | |
FemtoDX Inc | Life Science | 42,436 series A preferred stock - 5.0 % ownership |
| 100,000 |
| 100,000 | 3.7% | |
Deep Blue Medical Advances Inc | Life Science | 10,431 series A preferred stock - 1.0 % ownership |
| 49,997 |
| 49,997 | 1.9% | |
Otomagnetics Inc | Life Science | 3.3 % ownership |
| 100,000 |
| 100,000 | 3.7% | |
Trellis Bioscience LLC | Life Science | 0.5 % ownership |
| 50,000 |
| 50,000 | 1.9% | |
Valfix Medical Inc | Life Science | 2.9 % ownership |
| 50,000 |
| 50,000 | 1.9% | |
Trellis Bioscience LLC | Life Science | 0.5% ownership |
| 50,000 |
| 50,000 | 1.9% | |
Total Preferred Stock Investment - Not readily marketable |
|
| $ | 651,497 | $ | 651,497 | 24.4% | |
|
|
|
|
|
|
|
| |
Common Stock Investment - Not readily marketable |
|
|
|
|
|
|
| |
Boardwalk Tech | Technology | 150,000 units of common stock and warrant - 4.9% ownership | $ | 73,500 | $ | 73,500 | 2.8% | |
Total Common Stock Investment - Not readily marketable |
|
| $ | 73,500 | $ | 73,500 | 2.8% | |
|
|
|
|
|
|
|
| |
Other Investment - Not readily marketable |
|
|
|
|
|
|
| |
Exodos Life Sciences LP | Life Science | General Partnership Class A-1 Unit - 1.5 % ownership | $ | 206,000 | $ | 206,000 | 7.7% | |
Enduralock LLC | Technology | Unit of LLC - 1.5 % ownership |
| 30,000 |
| 30,000 | 1.1% | |
Total Other Investment - Not readily marketable |
|
| $ | 236,000 | $ | 236,000 | 8.8% | |
|
|
|
|
|
|
|
| |
Convertible Loan Investment - Not readily marketable |
|
|
|
|
|
|
| |
Seal Rock Therapeutics, Inc. | Life Science | Convertible note, 5%, no fixed term | $ | 78,000 | $ | 78,000 | 2.9% | |
Achelios Therapeutics Inc. | Life Science | Convertible note, 8%, due December 31, 2021 |
| 100,000 |
| 100,000 | 3.7% | |
Sensing Electromagnetic Plus corp | Technology | Convertible note, 6%, due August 29, 2020 |
| 50,000 |
| 1 | 0.0% | |
INBay Technology Inc | Technology | Convertible note, 24%, due October 26, 2020 |
| 50,000 |
| 50,000 | 1.9% | |
Basepaws Inc | Technology | Convertible note, 1%, due April 30, 2020 |
| 50,000 |
| 50,000 | 1.9% | |
Kitotech Medical Inc | Life Science | Convertible note, 6%, due December 19, 2020 |
| 100,000 |
| 100,000 | 3.7% | |
Sensing Electromagnetic Plus corp | Technology | Convertible note, 5%, due January 24, 2021 |
| 11,048 |
| 1 | 0.0% | |
Cnote Group, Inc | Fintech | Convertible note, 4%, due December 18, 2020 |
| 50,000 |
| 50,000 | 1.9% | |
Promaxo, Inc. | Life Science | Convertible note, 8%, due September 1, 2020 |
| 250,000 |
| 250,000 | 9.4% | |
Shyft (FKA Crater Group Inc) | Technology | Convertible note, 8%, due March 18, 2020 |
| 50,000 |
| 50,000 | 1.9% | |
Achelios Therapeutics Inc. | Life Science | Convertible note, 8%, due December 31, 2021 |
| 25,000 |
| 25,000 | 0.9% | |
SageMedic Corp | Life Science | Convertible note, 8%, due April 12, 2021 |
| 50,000 |
| 50,000 | 1.9% | |
Beam Semiconductor Inc | Technology | Convertible note, 8%, due June 30, 2020 |
| 150,000 |
| 150,000 | 5.6% | |
INBay Technology Inc | Technology | Convertible note, 12%, due July 9, 2021 |
| 30,000 |
| 30,000 | 1.1% | |
Lifewave Biomedical Inc | Life Science | Convertible note, 6%, due December 31, 2020 |
| 30,000 |
| 30,000 | 1.1% | |
Cyberdontics Inc | Life Science | Convertible note, 8%, due September 4, 2022 |
| 30,000 |
| 30,000 | 1.1% | |
Light Line Medical Inc | Life Science | Convertible note, 8%, due September 9, 2021 |
| 30,000 |
| 30,000 | 1.1% | |
Visgenx Inc | Life Science | Convertible note, 6%, due December 31, 2020 |
| 30,000 |
| 30,000 | 1.1% | |
Every Key Inc | Technology | Convertible note, 5%, due December 11, 2023 |
| 100,000 |
| 100,000 | 3.7% | |
Achelios Therapeutics Inc. | Life Science | Convertible note, 8%, due December 31, 2021 |
| 50,000 |
| 50,000 | 1.9% | |
Lifewave Biomedical Inc | Life Science | Convertible note, 6%, due December 31, 2020 |
| 70,000 |
| 70,000 | 2.6% | |
Light Line Medical Inc | Life Science | Convertible note, 8%, due February 10, 2022 |
| 70,000 |
| 70,000 | 2.6% | |
INBay Technology Inc | Technology | Convertible note, 12%, due February 21, 2022 |
| 50,000 |
| 50,000 | 1.9% | |
Cyberdontics Inc | Life Science | Convertible note, 8%, due February 27, 2023 |
| 35,000 |
| 35,000 | 1.3% | |
Xpan Inc | Life Science | Convertible note, 8%, due March 4, 2022 |
| 50,000 |
| 50,000 | 1.9% | |
Beam Semiconductor Inc | Technology | Convertible note, 8%, due March 5, 2021 |
| 50,000 |
| 50,000 | 1.9% | |
Total Convertible Loan Investment - Not readily marketable |
|
|
| 1,639,048 |
| 1,578,002 | 59.2% | |
|
|
|
|
|
|
|
| |
Total |
|
| $ | 2,726,545 | $ | 2,665,499 | 99.9% | |
|
|
|
|
|
|
|
| |
(a) Percentages are based on net assets of $2,667,611 as of March 31, 2020 |
8
KYTO TECHNOLOGY AND LIFE SCIENCE INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
June 30, 2020
NOTE 1 – DESCRIPTION OF BUSINESS
Kyto Technology and Life Science, Inc. 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 not lease any office space.
The Company was originally formed to acquire and develop innovative minimally toxic and non-immunosuppressive proprietary drugs for the treatment of cancer, arthritis, and other autoimmune diseases and had been looking at a number of strategies to become active. 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, and successful entrepreneurs 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 participates only after these groups have completed due diligence and committed to invest, and 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 realised gains from the sale of the businesses in which it has invested. Generally, it is expected that investments will be realised from an exit within a period of four years following investment. Such sales are outside its control and depend on M&A transactions which may result in cash or equity proceeds. Accordingly, it is difficult to forecast revenue, net income, and cash flow. In 2018, the Company developed a business plan to make investments in early stage private companies. 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 of contained therein. Other than making its initial investments in its portfolio companies, the Company does not provide any financial support to any of its investees.
The Company has no regular employees, full-time or part-time. . The chief executive officer of Kyto Technology and Life Science, Inc. is acting as a consultant to the Company and does not receive contractual compensation for his services in the form of cash. In the year ended March 31, 2020 he was granted 800,000 stock options as incentive compensation and an ex gratia bonus of $216,000 in recognition of his performance in raising funding, performance of due diligence, and making investments.
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 its control and depend on M&A transactions which may result in cash or equity proceeds. Accordingly, it is difficult to forecast revenue, net income, and cash flow. The Company currently has approximately $126,000 in the bank and is now actively marketing the first $3 million tranche of a Series B round with a target close date of September 2020. The average monthly expenses for the three months ended June 30, 2020 were approximately $13,000 per month so the Company has sufficient cash to fund its operations through the close of its Series B round if it simply manages its existing investments. However it plans to ramp up monthly expenditure to market and ensure the success of the Series B round, whereupon, if successful it will have sufficient funding for further investments and ongoing operations. In the event that the Series B close is delayed, management has the ability to slow down expenditure and defer future investment opportunities to balance its cash flow accordingly. While there is a degree of uncertainty in this business model, the Company has two viable alternative options to ensure continuity of liquidity and ongoing operations. However, there is no assurance that the Company will be able to continue as a going concern, and stay at home orders, and general economic uncertainties arising out of the current Covid-19 epidemic create additional delay and uncertainty.
9
KYTO TECHNOLOGY AND LIFE SCIENCE INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
June 30, 2020
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, 2020 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, 2020, included in the Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the “SEC”) on June 30, 2020
The company’s 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.
The financial information associated with the June 30, 2020 and March 31, 2020 financial statements contain all adjustments and eliminations, consisting of only normal recurring adjustments, necessary for a fair presentation in accordance with GAAP.
(B)REVENUE RECOGNITION
The Company derives revenue from the sale of investments and occasional fees earned from the provision of financial advisory services to portfolio investment companies. 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 guideline, it would expect such events to occur around four years after its investments are made. The Company will book the revenue from investment activities upon completion of sale and receipt of net proceeds, after deducting related transaction expenses. The Company does not recognize any revenue from unrealized gains. The Company is in regular contact with the management of its portfolio investment companies to provide the basis for impairment reviews, and forecasting future revenue and fund raising needs.
(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.
10
KYTO TECHNOLOGY AND LIFE SCIENCE INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
June 30, 2020
NOTE 2 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Significant estimates during the three months ended June 30, 2020 and March 31, 2020 include the valuation of investment valuation, deferred tax asset, 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, 2020 and March 31, 2020, 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, 2020 and March 31, 2020, the Company did not have any deposits in excess of federally insured limits. The Company has not experienced any losses in such accounts through June 30, 2020 and March 31, 2020, respectively.
(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 120,000 and 0 options to consultants and advisors during the three months ended June 30, 2020 and June 30, 2019, 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.
Number of shares used in calculation of diluted EPS | |
Common stock | 5,836,832 |
Series A preferred stock | 4,200,000 |
Series B preferred stock | 1,281,250 |
Stock option | 1,490,000 |
Warrant | 4,200,000 |
| 17,008,082 |
(I)INVESTMENT AND VALUATION OF INVESTMENT AT FAIR VALUE
The Company reviews the performance of the underlying investments including, management reports, press releases, web site announcements and progress reports, Carta 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 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.
11
KYTO TECHNOLOGY AND LIFE SCIENCE INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
June 30, 2020
NOTE 2 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 or market 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. 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 assumption 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 project does business, comparisons of financial ratios of peer companies that are public, merger and acquisition comparable, the principal market and enterprise values, environmental factors, 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.
(J)SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS
In March 2020, the Company adopted 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.
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.
12
KYTO TECHNOLOGY AND LIFE SCIENCE INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
June 30, 2020
NOTE 2 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(K)VOLUNTARY CHANGE IN ACCOUNTING PRINCIPLE
During the fourth quarter of fiscal 2020, the Company made a voluntary change in accounting principle by preparing the company’s financial statements using the specialized accounting principles of Accounting Standards Codification Topic 946, Financial Services—Investment Companies (ASC Topic 946).
The Company made this voluntary change in principle because it believes that the Company now met the characteristics and requirement of being an investment company under ASC 946, and the presentation under ASC 946 better reflects the business purpose and enhances the comparability of its financial statements with many of its industry peers. In accordance with U.S. GAAP, the change was reflected in the financial statements through retrospective application as follows:
| June 30, 2019 | |||||
|
| Prior to |
| Effect of |
|
|
|
| Change |
| Change |
| Adjusted |
Cash | $ | 325,308 | $ | - | $ | 325,308 |
Receivable |
| 1,000 |
| - |
| 1,000 |
Investment |
| - |
| 1,821,545 |
| 1,821,545 |
Deferred fundraising expenses |
| 124,013 |
| - |
| 124,013 |
Current assets |
| 450,321 |
| 1,821,545 |
|
|
|
|
|
|
|
|
|
Investment |
| 1,821,545 |
| (1,821,545) |
| - |
Total assets | $ | 2,271,866 | $ | - | $ | 2,271,866 |
There have been no further changes in the three months ended June 30, 2020.
NOTE 3 – COMMITMENTS AND CONTINGENCIES
The Company has no commitments or contingencies.
NOTE 4 - RELATED PARTY TRANSACTIONS
At June 30, 2020 and March 31, 2020, the Company had accrued and owed $8,000 and $5,750, respectively, to officers of the Company for service fees, telephone and car allowance.
NOTE 5 INVESTMENTS
The following table summarizes the Company’s investment portfolio at June 30, 2020 and March 31, 2020.
|
| June 30, 2020 |
| March 31, 2020 | |||
Number of portfolio companies |
| 31 |
|
| 28 |
| |
Fair value | $ | 2,915,499 |
| $ | 2,665,499 |
| |
Cost | $ | 2,976,545 |
|
| 2,726,545 |
| |
% of portfolio at fair value |
|
|
|
|
|
| |
Convertible notes |
| 1,578,002 | 54% |
| 1,528,002 | 57% | |
Preferred stock |
| 801,497 | 27% |
| 701,497 | 26% | |
Common stock |
| 126,500 | 4% |
| 126,500 | 5% | |
SAFE |
| 73,500 | 3% |
| 73,500 | 3% | |
Other ownership units |
| 336,000 | 12% |
| 236,000 | 9% | |
Total | $ | 2,915,499 | 100% |
| 2,665,499 | 100% |
13
KYTO TECHNOLOGY AND LIFE SCIENCE INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
June 30, 2020
NOTE 5 INVESTMENTS (CONTINUED)
Our investment portfolio represents approximately 97.0% of our net assets at June 30, 2020 and 99.9% at March 31, 2020 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 actual and projected results and independent third party valuation estimates.
The following table presents fair value measurements of investments, by major class, as of June 30, 2020 and March 31, 2020, according to the fair value hierarchy:
June 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
Description |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Corporate convertible loan |
| $ | - |
| $ | - |
| $ | 1,628,002 |
| $ | 1,628,002 |
Corporate equity investments |
|
| - |
|
| - |
|
| 1,287,497 |
|
| 1,287,497 |
Total investments, at fair value |
| $ | - |
| $ | - |
| $ | 2,915,499 |
| $ | 2,915,499 |
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
Description |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Corporate convertible loan |
| $ | - |
| $ | - |
| $ | 1,578,002 |
| $ | 1,578,002 |
Corporate equity investments |
|
| - |
|
| - |
|
| 1,087,497 |
|
| 1,087,497 |
Total investments, at fair value |
| $ | - |
| $ | - |
| $ | 2,665,499 |
| $ | 2,665,499 |
We focus on making our investments in the United States, Canada and Israel. The investment in Canada and Israel were denominated and can be settled in USD.
As of June 30, 2020 |
|
|
|
|
|
|
| ||||||
| America |
| Canada |
| Israel |
| Total | ||||||
Fair value beginning of period | $ | 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 |
| - |
|
| - |
|
| - |
|
| - | ||
Write down of investment |
| - |
|
| - |
|
| - |
|
| - | ||
Fair value June 30, 2020 | $ | 2,370,499 |
| $ | 295,000 |
| $ | 250,000 |
| $ | 2,915,499 | ||
As of March 31, 2020 |
|
|
|
|
|
|
| ||||||
| America |
| Canada |
| Israel |
| Total | ||||||
Fair value beginning of year | $ | 1,448,048 |
| $ | 50,000 |
| $ | - |
| $ | 1,498,048 | ||
New investments |
| 783,497 |
|
| 195,000 |
|
| 250,000 |
|
| 1,228,497 | ||
Proceeds from sale of investments |
| - |
|
| - |
|
| - |
|
| - | ||
Realized gains |
| - |
|
| - |
|
| - |
|
| - | ||
Write down of investment |
| (61,046) |
|
| - |
|
| - |
|
| (61,046) | ||
Fair value March 31, 2020 | $ | 2,170,499 |
| $ | 245,000 |
| $ | 250,000 |
| $ | 2,665,499 |
14
KYTO TECHNOLOGY AND LIFE SCIENCE INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
June 30, 2020
NOTE 5 INVESTMENTS (CONTINUED)
Working on the experience of our technical advisors, we limit our investments to fintech, technology, and life sciences.
As of June 30, 2020 |
|
|
|
|
|
|
| ||||||
| Fintech |
| Technology |
| Life science |
| Total | ||||||
Fair value beginning of period | $ | 101,500 |
| $ | 685,002 |
| $ | 1,878,997 |
| $ | 2,665,499 | ||
New investments |
| - |
|
| - |
|
| 250,000 |
|
| 250,000 | ||
Proceeds from sale of investments |
| - |
|
| - |
|
| - |
|
| - | ||
Realized gains |
| - |
|
| - |
|
| - |
|
| - | ||
Write down of investment |
| - |
|
| - |
|
| - |
|
| - | ||
Fair value June 30, 2020 | $ | 101,500 |
| $ | 685,002 |
| $ | 2,128,997 |
| $ | 2,915,499 | ||
|
|
|
|
|
|
|
| ||||||
As of March 31, 2020 |
|
|
|
|
|
|
| ||||||
| Fintech |
| Technology |
| Life science |
| Total | ||||||
Fair value beginning of year | $ | 101,500 |
| $ | 262,548 |
| $ | 1,134,000 |
| $ | 1,498,048 | ||
New investments |
| - |
|
| 483,500 |
|
| 744,997 |
|
| 1,228,497 | ||
Proceeds from sale of investments |
| - |
|
| - |
|
| - |
|
| - | ||
Realized gains |
| - |
|
| - |
|
| - |
|
| - | ||
Write down of investment |
| - |
|
| (61,046) |
|
| - |
|
| (61,046) | ||
Fair value March 31, 2020 | $ | 101,500 |
| $ | 685,002 |
| $ | 1,878,997 |
| $ | 2,665,499 |
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.
|
| Convertible notes |
| Preferred stock |
| Common stock |
| SAFEs |
| Other ownership interests |
| Total |
As of June 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
Fair value beginning of period | $ | 1,528,002 | $ | 701,497 | $ | 126,500 | $ | 73,500 | $ | 236,000 | $ | 2,665,499 |
New investments |
| 50,000 |
| 100,000 |
| - |
| - |
| 100,000 |
| 250,000 |
Proceeds from sale of investments |
| - |
| - |
| - |
| - |
| - |
| - |
Realized gains |
| - |
| - |
| - |
| - |
| - |
| - |
Write down of investment |
| - |
| - |
| - |
| - |
| - |
| - |
Fair value June 30, 2020 | $ | 1,578,002 | $ | 801,497 | $ | 126,500 | $ | 73,500 | $ | 336,000 | $ | 2,915,499 |
|
| Convertible notes |
| Preferred stock |
| Common stock |
| SAFEs |
| Other ownership interests |
| Total |
As of March 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
Fair value beginning of year | $ | 764,048 | $ | 401,500 | $ | 126,500 | $ | - | $ | 206,000 | $ | 1,498,048 |
New investments |
| 825,000 |
| 299,997 |
| - |
| 73,500 |
| 30,000 |
| 1,228,497 |
Proceeds from sale of investments |
| - |
| - |
| - |
| - |
| - |
| - |
Realized gains |
| - |
| - |
| - |
| - |
| - |
| - |
Write down of investment |
| (61,046) |
| - |
| - |
| - |
| - |
| (61,046) |
Fair value March 31, 2020 | $ | 1,528,002 | $ | 701,497 | $ | 126,500 | $ | 73,500 | $ | 236,000 | $ | 2,665,499 |
15
KYTO TECHNOLOGY AND LIFE SCIENCE INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
June 30, 2020
(A)PREFERRED STOCK
Series A
As of June 30, 2020 and March 31, 2020, there are 4,200,000 shares of Series A preferred stock (“Series A”) designated at a par value of $.01 per share. These shares were sold as investment Units at $0.80 per Unit in a private placement to accredited investors. The Units consist of one Series A share and one warrant per Unit. The Series A can either be converted at the option of the holder into Common Shares at a conversion price of $0.80 per share or it shall be converted upon listing of the Company on Nasdaq, NYSE or OTC markets or can elect to receive $1.60 per share. 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 Common Shares, a per share amount equal to two times (2x) their original purchase price plus any declared but unpaid dividends (the Liquidation Preference currently $1.60 per share). The shares of Series A shall be non-voting. As of June 30, 2020 and March 31, 2020, there are 4,200,000 shares of Series A outstanding.
Series B
As of June 30, 2020 and March 31, 2020, there are, 6,000,000 shares of Series B preferred stock (“Series B”) designated at a par value of $.01 per share. These shares were sold in a private placement to accredited investors. The Series B can either be converted at the option of the holder into Common Shares at a conversion price of $0.80 per share or it shall be converted upon listing of the Company on Nasdaq, NYSE or OTC markets or the closing of one or more of a series financings resulting in aggregate proceeds of $10,000,000. In the event the Company issues additional securities at a purchase price less than the current conversion price, the conversion price shall be adjusted as defined. 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 Series A and Common Shares, a per share amount equal to the greater of i) one time (1x) their original purchase price plus any declared but unpaid dividends (the Liquidation Preference – currently $0.80 per share) or ii) such amount per share as would have been payable had all shares of Series B been converted into common stock immediately prior to such liquidating event. The shares of Series B shall be voting on an as-converted basis with the common stock. As of June 30, 2020 and March 31, 2020, there are, respectively, 1,281,250 and 812,500 shares of Series B outstanding.
(B)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, 2020, and March 31, 2020 a total of 5,836,832 shares of the Company’s common stock were issued and outstanding. The Company sold 468,750 shares of Series B preferred for $375,000 during the three months ended June 30, 2020.
(C)STOCK OPTIONS
In April 2018, the Company approved the introduction of the Kyto Technology and Life Science, Inc. Incentive Stock Option Plan for the benefit of employees, consultants and directors, with the objective of securing the benefit of services for stock options rather than cash salaries.
In July 2019, the majority of the shareholders of the Company approved the introduction of the Kyto Technology and Life Science 2019 Stock Option and Incentive Plan (“Plan”), and reserved 2 million shares for issuance to directors, officers, consultants and advisors. During the three months ended June 30, 2020, and June 30, 2019, the Company issued a total of 120,000 and 0 non-qualified stock options to consultants and advisors vesting over terms of two years.
16
KYTO TECHNOLOGY AND LIFE SCIENCE INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
June 30, 2020
NOTE 6– EQUITY (CONTINUED)
| Number of options granted | Weighted average exercise price | Weighted average remaining life years |
Outstanding March 31, 2019 | - | $ - | - |
Granted | 1,370,000 | 0.033 | 2.32 |
Exercised | - | - | - |
Cancelled | - | - | - |
Outstanding March 31, 2020 | 1,370,000 | $ 0.033 | 2.32 |
Granted | 120,000 | 0.033 | 2.00 |
Exercised | - | - | - |
Cancelled | - | - | - |
Outstanding June 30, 2020 | 1,490,000 | $ 0.033 | 1.73 |
|
|
|
|
Exercisable March 31, 2020 | 619,863 | $ 0.03 | 1.42 |
Exercisable June 30, 2020 | 827,988 | $ 0.03 | 1.59 |
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.
|
| June 30, 2020 |
Stock Price at grant date | $ | 0.033 |
Exercise Price | $ | 0.033 |
Term in Years |
| 232 |
Volatility assumed |
| 71% |
Annual dividend rate |
| 0.0% |
Risk free discount rate |
| 2.00% |
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, 2020 and 2019, the Company amortised $1,048 and $101, respectively, as option expense. The intrinsic value of outstanding options at June 30, 2020 was $20,132, and $7,194 of the option expense upon grant remained unamortized at June 30, 2020.
17
KYTO TECHNOLOGY AND LIFE SCIENCE INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
June 30, 2020
NOTE 6– EQUITY (CONTINUED)
(D)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.
|
| Number of Warrants |
| Weighted Average Exercise price | Weighted Average Remaining life in years |
Outstanding March 31, 2019 | $ | 2,612,500 |
|
| 2.4 |
Granted | $ | 1,587,500 | $ | 1.20 | 3.0 |
Exercised |
| - |
|
|
|
Cancelled |
| - |
|
|
|
Outstanding March 31, 2020 |
| 4,200,000 | $ | 1.20 | 1.9 |
Granted |
| - | $ | - | - |
Exercised |
| - |
|
|
|
Cancelled |
| - |
|
|
|
Outstanding June 30, 2020 |
| 4,200,000 | $ | 1.20 | 1.7 |
|
|
|
|
|
|
Exercisable March 31, 2020 |
| 4,200,000 | $ | 1.20 |
|
Exercisable June 30, 2020 |
| 4,200,000 | $ | 1.20 |
|
The assumptions used for warrants granted in the three months ended June 30, 2019 were as follows:
|
| June 30, 2020 |
Stock Price at valuation | $ | 0.006 |
Exercise Price | $ | 1.20 |
Term in Years |
| 3.00 |
Volatility assumed |
| 73.0% |
Annual dividend rate |
| 0.0% |
Risk free discount rate |
| 1.79% |
At June 30, 2019 the value of the warrants was $0 as the Company did not bifurcate the value of Series A and warrants within the Units sold. The weighted average remaining life of the warrants at June 30, 2020 was 1.7 years. The intrinsic value of outstanding warrants at June 30, 2020 was $0.
18
KYTO TECHNOLOGY AND LIFE SCIENCE INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
June 30, 2020
NOTE 7 – FINANCIAL HIGHLIGHTS
|
| June 30, 2020 |
|
| June 30, 2019 |
Net asset value per share (a) | $ | 0.51 |
| $ | 0.38 |
Net loss per share (a) | $ | 0.01 |
| $ | 0.03 |
Net realized and unrealized gain (loss) on investments per share (a) | $ | - |
| $ | - |
|
|
|
|
|
|
Ratios and Supplemental Data |
|
|
|
|
|
Net assets, end of period | $ | 3,004,791 |
| $ | 2,227,235 |
|
|
|
|
|
|
Common shares outstanding, end of period |
| 5,836,832 |
|
| 5,836,832 |
|
|
|
|
|
|
Total operating expenses/net assets |
| 1.3 | % |
| 9.2 |
Net loss/net assets |
| 1.3 | % |
| 9.1 |
Interest expense and bank fees |
| - | % |
| - |
|
|
|
|
|
|
(a) Per Share Data is based on weighted average number of common shares outstanding for the period. |
NOTE 8 - SUBSEQUENT EVENTS
Subsequent to June 30, 2020 the Company has sold $225,000 of Series B Preferred and invested $75,000 in additional investments.
During the three months ended June 30, 2020, the Company was subject to shelter in place regulations imposed by the State of California in mitigation of the spread of the Corona 19 virus. Since the Company does not have any dedicated office space and works virtually from the homes of its officers, there was no major disruption in working routines which continued by video and teleconference. Uncertainty arising from Covid 19 created a slow down in the rate at which the Company was able to raise Series B funding, and thereby continue to make investments, however the Company did see a reduction in travel and investor relations expenses during the period. The Company has 31 discrete investments in a range of different industry and geographic segments, many of which are in the life science and medical space. While there is clearly a risk that our portfolio companies may be adversely affected in their ability to raise future funding or do business, there have been no management reports revealing major problems and some of our portfolio companies may actually benefit from new opportunities created. We believe that our policy of spreading our investments in relatively small amounts over a large number of portfolio companies helps mitigate some of the risk that might be suffered by any of our investments.
19
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
PLAN OF OPERATIONS
Kyto Technology and Life Science, Inc. 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 not lease any office space.
The Company was originally formed to acquire and develop innovative minimally toxic and non-immunosuppressive proprietary drugs for the treatment of cancer, arthritis, and other autoimmune diseases and had been looking at a number of strategies to become active. 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, and successful entrepreneurs 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 participates only after these groups have completed due diligence and committed to invest, and 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 realised gains from the sale of the businesses in which it has invested. Generally, it is expected that investments will be realised from an exit within a period of four years following investment. Such sales are outside its control and depend on M&A transactions which may result in cash or equity proceeds. Accordingly, it is difficult to forecast revenue, net income, and cash flow. In 2018, the Company developed a business plan to make investments in early stage private companies. 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 of contained therein. Other than making its initial investments in its portfolio companies, the Company does not provide any financial support to any of its investees.
The Company has no regular employees, full-time or part-time. . The chief executive officer of Kyto Technology and Life Science, Inc. is acting as a consultant to the Company and does not receive contractual compensation for his services in the form of cash. In the year ended March 31, 2020 he was granted 800,000 stock options as incentive compensation and an ex gratia bonus of $216,000 in recognition of his performance in raising funding, performance of due diligence, and making investments.
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 its control and depend on M&A transactions which may result in cash or equity proceeds. Accordingly, it is difficult to forecast revenue, net income, and cash flow. The Company currently has approximately $126,000 in the bank and is now actively marketing the first $3 million tranche of a Series B round with a target close date of September 2020. The average monthly expenses for the three months ended June 30, 2020 were approximately $13,000 per month so the Company has sufficient cash to fund its operations through the close of its Series B round if it simply manages its existing investments. However it plans to ramp up monthly expenditure to market and ensure the success of the Series B round, whereupon, if successful it will have sufficient funding for further investments and ongoing operations. In the event that the Series B close is delayed, management has the ability to slow down expenditure and defer future investment opportunities to balance its cash flow accordingly. While there is a degree of uncertainty in this business model, the Company has two viable alternative options to ensure continuity of liquidity and ongoing operations. However, there is no assurance that the Company will be able to continue as a going concern, and stay at home orders, and general economic uncertainties arising out of the current Covid-19 epidemic create additional l delay and uncertainty.
Results of Operations
Revenue: In the three months ended June 30, 2020 and June 30, 2019, the Company billed $500 and $3,250, respectively for management advisory services provided to its investment portfolio companies.
General and Administration Expenses: General and administration expenses include professional fees incurred in the course of SEC filing and compliance, and travel and conference fees associated with fund raising and review of investment deal-flow. In the three months ended June 30, 2020 and June 30, 2019, the Company incurred General and administration expenses of $39,368 and $204,848, of which executive bonus was $4 and $160,000, respectively.
For the three months ended June 30, 2020 and 2019, the Company’s net loss was $38,868 and $201,598, respectively.
20
Liquidity and Capital Resources
The Company had net assets of $3,004,791 and $2,667,611 at June 30, 2020 and March 31, 2020, respectively. Cash was $126,329 and $33,756 as at June 30, 2020 and March 31, 2020, respectively.
Cash from operating activities
The Company used net cash of $34,677 in operations during the three months ended June 30, 2020 compared $307,579 used in operations for the three months ended June 30, 2019. Main reasons for the higher level in 2019 was the payment of a $160,000 executive bonus and $124,000 deferred fundraising expenses in the three months ended June 30, 2019.
Cash from investing activities
The Company used net cash of $250,000 in investing activities in the three months ended June 30, 2020 compared to $323,497 in the three months ended June 30, 2019. The lower level of investment in the three months ended June 30, 2020 was the result of a slower rate of raising cash from sale of stock and the resulting delay in finding and making suitable investments in the three months ended June 30, 2020.
Cash from financing activities
The Company had a net cash inflow from financing activities of $377,250 in the three months ended June 30, 2020 compared to $862,750 in the three months ended June 30, 2019. This inflow included $375,000 proceeds from the sale of preferred stock in the three months ended June 30, 2020 compared to $865,000 in the corresponding prior period. The Company also generated $2,250 of advances from related parties in the three months ended June 30, 2020, and paid back $2,250 in the three months ended June 30, 2019.
The Company’s plan of operations for the next twelve months is to continue to focus its efforts on finding new sources of capital by means of private placements and to use this funding to fund additional investments as they become available, and to cover operating expenses.
CRITICAL ACCOUNTING POLICIES
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, 2020 and March 31, 2020 include the valuation of investment valuation, deferred tax asset, tax valuation allowance, stock options and warrants.
INVESTMENT AND VALUATION OF INVESTMENT AT FAIR VALUE
The Company reviews the performance of the underlying investments including, management reports, press releases, web site announcements and progress reports, Carta 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 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.
21
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 or market 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. 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 assumption 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 project does business, comparisons of financial ratios of peer companies that are public, merger and acquisition comparable, the principal market and enterprise values, environmental factors, 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.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 2020, the Company adopted 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.
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.
OFF-BALANCE SHEET ARRANGEMENTS
As of the date of this Quarterly Report on Form 10-Q, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
IMPACT OF INFLATION
The Company does not foresee any implications being created by the current rate of inflation.
22
CONTRACTUAL OBLIGATION
The Company has no contractual obligations outside the normal course of business with its vendors, advisors, and consultants.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for smaller reporting company.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that material information required to be disclosed in our periodic reports filed under the Securities Exchange Act of 1934, as amended, or 1934 Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to ensure that such information is accumulated and communicated to our management, including our chief executive officer/chief financial officer (principal financial officer) as appropriate, to allow timely decisions regarding required disclosure. During the quarter ended June 30, 2020 we carried out an evaluation, under the supervision and with the participation of our management, including the principal executive officer and the principal financial officer (principal financial officer), of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13(a)-15(e) under the 1934 Act. Based on this evaluation, because of the Company’s limited resources and limited number of employees, management concluded that our disclosure controls and procedures were ineffective as of June 30, 2020. Notwithstanding this conclusion, we believe that our unaudited condensed financial statements contained in this Quarterly Report fairly present our financial position, results of operations and cash flows for the periods covered thereby in all material respects.
Limitations on Effectiveness of Controls and Procedures
Our management, including our Chief Executive Officer and Chief Financial Officer (principal financial officer), does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Internal Controls over Financial Reporting
During the quarter ended June 30, 2020, there have been no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.
23
ITEM 1. LEGAL PROCEEDINGS
None
Not required for smaller reporting company.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
The Corporation filed a certificate of Designation in July 2019 for the issue of up to 6,000,000 shares of Series B Preferred stock to accredited investors under Rule 506 of Regulation D of the Securities Act 1933. As of the filing date, the Corporation had sold a total of 1,281,250 shares of Series B Preferred stock to accredited investors. The Corporation has submitted a Form D filing to the United States Securities and Exchange Commission for this Offering. The Company will use the net proceeds for investment purposes and operating expenses.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. MINE SAFETY DISCLOSURES
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS
24
INDEX TO EXHIBITS
EXHIBIT NUMBER |
| DESCRIPTION |
3(i)(a) |
| Articles of Incorporation of Kyto Technology and Life Science, Inc.* * |
|
|
|
3(i)(b) |
| Articles of Amendment changing name to Kyto Technology and Life Science, Inc.** 3 (i)(b) Delaware incorporation and revised articles of incorporation .* * |
|
|
|
3(ii) |
| Bylaws of Kyto Technology and Life Science, Inc.** |
|
|
|
| Section 302 Certification of principal executive officer.* | |
| Section 302 Certification of principal financial and accounting officer.* | |
| Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 * | |
| Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* |
* Filed as Exhibit with this Form 10-Q.
**Previously filed with Form 10-K or Form 10-Q.
25
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Kyto Technology and Life Science, Inc. | |
|
|
|
| By: | /s/ Paul Russo |
|
| Paul Russo Chief Executive Officer, principal executive officer, |
Date: August 3, 2020
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Kyto Technology and Life Science, Inc. | |
|
|
|
| By: | /s/ Simon Westbrook |
|
| Simon Westbrook Principal financial and accounting officer |
Date: August 3, 2020
26
EXHIBIT 31.1
Rule 13a-14(a)/15d-14(a) Certification
I, Paul Russo, certify that:
1.I have reviewed this report on Form 10-Q for the period ended June 30, 2020 of Kyto Technology and Life Science, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
August 3, 2020 |
| |
|
|
|
|
| /s/ Paul Russo |
|
| Paul Russo |
|
| Chief Executive Officer, principal executive officer, |
EXHIBIT 31.2
Rule 13a-14(a)/15d-14(a) Certification
I, Simon Westbrook, certify that:
1.I have reviewed this report on Form 10-Q for the period ended June 30, 2020 of Kyto Technology and Life Science, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
August 3, 2020 |
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| /s/ Simon Westbrook |
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| Simon Westbrook |
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| Principal financial and accounting officer |
Section 1350 Certification
In connection with the Quarterly Report of Kyto Technology and Life Science, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2020 as filed with the Securities and Exchange Commission (the “Report”), I, Paul Russo, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. SS. 1350, as adopted pursuant to SS. 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and
2. The information contained in the Report fairly presents, in all material respects, the financial conditions and results of operations of the Company.
Date: August 3, 2020 |
| /s/ Paul Russo |
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| Paul Russo Chief Executive Officer, principal executive officer |
Section 1350 Certification
In connection with the Quarterly Report of Kyto Technology and Life Science, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2020 as filed with the Securities and Exchange Commission (the “Report”), I, Paul Russo, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. SS. 1350, as adopted pursuant to SS. 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and
2. The information contained in the Report fairly presents, in all material respects, the financial conditions and results of operations of the Company.
Date: August 3, 2020 |
| /s/ Simon Westbrook |
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| Simon Westbrook Principal financial and accounting officer |