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EX-31.1 - CERTIFICATION - Kyto Technology & Life Science, Inc.kbph_ex311.htm
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-K /A

þ  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Fiscal Year Ended March 31, 2010

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
KYTO BIOPHARMA INC.
(Exact name of registrant as specified in its charter)
 
FLORIDA 
 
65-1086538
(State or Other Jurisdiction of Incorporation or Organization)
 
(I.R.S. Employer Identification Number)
 
B1-114 BELMONT STREET, TORONTO ONTARIO CANADA 
 
M5R 1P8
(Address of Principal Executive Offices)
 
(Zip Code)
               
Registrant's telephone number, including area code (416) 960-8790
 
Securities registered pursuant to Section 12(g) of the Act:

COMMON STOCK, $.0001 PAR VALUE
(Title of Class)
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  o No   þ
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  þ No   o
 
Check whether the issuer  (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, and (2) has been subject to such filing requirements for the past 90 days.
 Yes  þ No   o

Check if there is no disclosure of delinquent filers pursuant to Item 405 of Regulation S-K contained in this form, and no disclosure will be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
þ
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No þ

The aggregate market value of the voting common stock held by non-affiliates of the Registrant on September 30, 2009, was approximately $ 467,712.

The Registrant had 12,998,482 shares of common stock, .0001 par value per share, outstanding on June 18, 2010,
 


 
 

 
 

TABLE OF CONTENTS
FORM 10-K
FOR FISCAL YEAR ENDED MARCH 312010
 
   
Page
 
PART I
     
       
ITEM 1
Business
   
3
 
ITEM 2.
Properties
   
9
 
ITEM 3.
Legal Proceedings
   
9
 
ITEM 4.
Submission of Matters to a Vote of Security Holders
   
9
 
         
PART II
       
         
ITEM 5. 
Market for Registrants Common Equity and Related Stockholders Matters
   
10
 
ITEM 6
Selected Financial Data
   
11
 
ITEM 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operation
   
12
 
ITEM 8 .
Financial Statements and Supplementary Data
   
17
 
ITEM 9.
Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
   
17
 
ITEM 9A.
Controls and Procedures
   
17
 
PART III
       
         
ITEM 10.
Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act
   
19
 
ITEM 11.
Executive Compensation
   
21
 
ITEM 12.
Security Ownership of Certain Beneficial Owners and Management
   
24
 
ITEM 13.
Certain Relationships and Related Transactions
   
26
 
ITEM 14.
Principal Accountants Fee and Services
   
26
 
         
PART IV
       
         
ITEM 15.
Exhibits and Reports on Form 8K
   
27
 
Signatures
      29  
Exhibits
         
                         .                                                                                                                                      
 
2

 
 
 
EXPLANATORY NOTE

This Amendment No. 1 to the Annual Report on Form 10-K for the year ended March 31, 2010 contains restated financial statements correcting an error in the financial statements contained in the Annual Report on Form 10-K for the year ended March 31, 2010 as originally filed with the Securities and Exchange Commission on June 30, 2010.  Please see Note 2 to the Notes to the Audited Financial Statements for a description of the accounting error which lead to the restatement.  As a result of this restatement, we are also amending disclosure which appears in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 9A.(T). Controls and Procedures, and Part III, Item 13. Certain Relationships and Related Party Transactions, and Director Independence.  This amended Form 10-K also contains currently dated certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 as Exhibits 31.1, 31.2 and 32.1. Except for the exhibits referenced in the preceding sentence, the exhibits included in Item 15 of this report speak as of the date of the original filing.
 
        Except as described above, no other information in the original filing has been updated and this Amendment continues to speak as of the date of the original filing. Other events occurring after the filing of the original filing or other disclosures necessary to reflect subsequent events have been or will be addressed in other reports filed with or furnished to the SEC subsequent to the date of the original filing.

PART I
   
ITEM 1.  BUSINESS
 
(A) BUSINESS DEVELOPMENT
 
Kyto Biopharma, Inc. was originally formed under the name of B. Twelve, Inc., a Florida corporation, filed with the Department of State on March 5, 1999. Also, on March 5, 1999, the Company acquired B Twelve Limited as a wholly-owned subsidiary Canadian corporation.
 
On April 27, 1999, the Company filed an amendment to its Articles of Incorporation, increasing its authorized capital stock from 1,000 shares of common stock with a Par Value of $1.00 per share, to 25,000,000 shares of common stock with a Par Value of $1.00 per share and 1,000,000 shares of preferred stock, also with a Par Value of $1.00 per share.
 
In August, 2001, the Company filed an amendment to its Articles of Incorporation, changing the Par Value of its common stock from $1.00 per share to $0.0001 Par Value per share.
 
On August 14, 2002, the Company filed an amendment to its Articles of Incorporation, changing the name to KYTO BIOPHARMA, INC.
 
The Company filed a Uniform Business Report (UBR) with the Department of State, State of Florida, for the year 2008 and paid all required fees. Its status is active.
 
(B) BUSINESS OF ISSUER
 
(1) Principal Products and Markets
 
Kyto Biopharma, Inc. (Kyto) was formed to acquire a patent portfolio and the rights to early-stage compounds which have potential use as therapeutic agents for the treatment of cancer and diseases of the immune system. The Company has subsequently built itself into a development stage biopharmaceutical company that develops receptor-mediated technologies to control the uptake of vitamin B12 by non-controlled proliferative cells. Vitamin B12 regulates one of two major cellular pathways for the production of folates, the cell's primary source of carbon and the progenitor for the synthesis of DNA.
 
Kyto is currently engaged in the development of a portfolio of potential targeted biologic treatments based on:
 
i) the therapeutic effect of vitamin B12 depletion by receptor modulators, and
     
ii) the use of monoclonal antibodies to block the vitamin B12 uptake by cancer cells.
 
Kyto's portfolio consists of molecules at the research and development stage which may ultimately prove useful in the treatment of certain types of cancer and inflammatory diseases. Kyto believes that there are several human therapeutics applications for its drug candidates. Specifically, a number of properties of the Company's vitamin B12 depletion and monocbnal antibody technologies suggest a potential role for its drug candidates in the therapy of solid tumors such as colorectal and breast cancer in addition to treatment of leukemias. The following table summarizes the Company's research and product development programs:
 
 
3

 
 
Monoclonal Antibodies
Development
Transport protein
Receptor
Oncology
Oncology
Development
Growth Blockers
Receptor modulators
Oncology
Proof of concept
 
Kyto's growth blocker and monoclonal antibody technologies are applicable to a very broad range of therapeutic areas. Each specific technology has the potential to target a large number of therapeutic targets for creation of drug candidates. New drug candidates can be synthesis from:
 
(a) Existing drugs;
 
(b) Generic drugs;
 
(c) Molecules in development, and;
 
(d) Molecules with attractive biological activity and potency that were never developed because of too short half-life of activity for commercial utility or inadequate safety profile.
 
As mentioned above, Kyto has created a class of agents known as receptor modulators, with the selectivity of the natural ligand (vitamin B12) for its receptor, that cause a reduction in the number of receptors through alterations in receptor movement on the surface of and within the cell. Treatment with such drugs eventually results in cells devoid of receptors triggering the death of the cancer cells, biological response known as apoptosis.
 
The second aspect of Kyto's business is the development of human antibodies. The Company is developing monoclonal antibodies as vitamin B12 receptor control agents for certain pharmaceutical applications including treatment of cancer and autoimmune diseases. Many of the product development issues for antibodies have been addressed over the last ten years including immunogenicity and scale-up manufacturing for therapeutic applications resulting in the approval or pending approval of a number of products in the United States (U.S.) and Europe.
 
(2) Competitive Business Conditions and Adverse Factors
 
The Company has identified the following companies as competitors and/or comparable to the activities of Kyto:
 
(3) Research and Development Programs
 
Kyto believes that there are several applications for its drug candidates. A number of properties of our drug delivery and vitamin B12 depletion technologies suggest a potential role for its drug candidates in the therapy of solid tumors such as colorectal and breast cancer in addition to treatment of leukemias. Specifically, Kyto's research and product development programs include the following projects:
 
 
4

 
 
Vitamin B12 Depletion
Monoclonal Antibodies 
     
Transport protein
 
Receptor
Oncology 
 
Oncology 
Development
 
Development
Medarex Inc.
The Research Foundation of State
University of New York 
Receptor Modulators
     
Growth blockers
Oncology
Proof of concept
The Research Foundation of State
University of New York 
 
On October 2006, the Company signed an Extension Modification of Research Collaboration Agreement with the Research Foundation of State University of New York (RFSUNY) regarding the research and development of the use of monoclonal antibodies to block the vitamin B12 uptake by cancer cells for funding consideration of $119,647 to be appropriated for the initial 12 months of the conduct of the research plan from November 2006 through October 2007. The Company shall amend patent No. 5,688,504 to legally establish joint ownership with RFSUNY. The initial payment for the first six months was made in November 2006 and the second payment was made in May 2007.
 
In May 2007, the company extended the agreement with RFSUNY regarding the research and development of the use of monoclonal antibodies to block the vitamin B12 cancer cells for additional $125,406. A payment of $62,703 was made in January 2008.  During the year ended March 31, 2009, the company once again extended the agreement with RFSUNY, paying a total of  $141,161, to cover the period ending June 2009.
 
(4) Distribution of Products
 
Because of capital constraints, the Company has decided to focus its financial resources for the development of its monoclonal antibodies.   At this time Kyto is in the process of evaluation and sourcing a vendor to produce either fully humanized or mouse-human chimeric antibodies
 
As the first drug candidate paclitaxel conjugated to vitamin B12 enters the formal preclinical program the
 
The Company has no specific marketing plans beyond those mentioned above. Future marketing will depend upon the amount of capital realized by the Company.
 
 
5

 
 
(5) Patents
 
Kyto's patent strategy has been to develop an "umbrella" of patents protecting its core technology and their therapeutic uses and the underlying technologies used to create them. The Company has filed a number of patent applications in the United States, the PCT Member Countries, Japan, and in most other jurisdictions to protect its proprietary rights in the development of its technologies and products. To date, 18 patents have been issued. Kyto is co-assignee on the issued and pending patents along with different universities. The following is a list of the issued patents:
 
PATENT NO. 
 
TITLE
 
ISSUED
NZ252,559
 
Anti-receptor agents to the vitamin B12/transcobalamin II receptor 
 
14/02/97
US5,688,504
 
Anti-receptor and growth blocking agents to the vitamin B12/transcobalamin II receptor and binding sites
 
18/11/97
US5,739,287
 
Biotinylated cobalamins 
 
14/04/98
US5,840,712
 
Water soluble vitamin B12 receptor modulating agents and methods relating thereto
 
24/11/98
US5,840,880 
 
Vitamin B12 receptor modulating agents
 
24/11/98
US5,869,465
 
Methods for receptor modulation and uses thereto
 
09/02/99
US6,083,926
 
Water soluble vitamin B12 receptor modulating agents and methods relating thereto
 
04/07/00
CA2,135,277
 
Anti-receptor and growth blocking agents to the vitamin B12/transcobalamin II receptor and use in preventing cellular uptake of vitamin B12
 
 24/04/01
NZ323,127
 
Vitamin B12 receptor modulating agents and methods related and methods related thereto
 
12/07/01
KR297,310
 
Anti-receptor and growth blocking agents to the vitamin B12/transcobalamin II receptor and use in preventing cellular uptake of vitamin B12
 
21/05/01
CH0754189
 
Receptor modulating agents and methods relating thereto
 
09/10/2002
DE0754189
 
Receptor modulating agents and methods relating thereto
 
09/10/2002
FR0754189
 
Receptor modulating agents and methods relating thereto 
 
09/10/2002
GB0754189
 
Receptor modulating agents and methods relating thereto
 
09/10/2002
US7416728
 
Growth Blocking Agents
 
26/08/2008
CA2199940
 
Anti-receptor and growth blocking agents to Vitamin B12/transcobalmin II Receptor and binding sites
 
13/09/2005
 
 
6

 
 
6) Regulatory Environment
 
Kyto's pre-clinical and clinical trials, as well as the manufacturing and marketing of its potential products, are subject to extensive regulation for safety and efficacy by various governmental authorities around the world. The United States Food and Drug Administration ("FDA") plays a key role since it regulates drug approval for the world's largest market.
 
The process of studying drugs intended for use in humans usually begins with pre-clinical studies involving only animals. These pre-clinical studies are followed by studies that involve humans on a scale to assess safety and which are then expanded to a larger group to assess safety and efficacy. These various studies are usually broken into four phases with multiple studies generally conducted within each phase. Throughout these pre-clinical and clinical studies drug concentrations are measured in biological fluid samples as part of the assessment of drug safety and efficacy.
 
PRECLINICAL STUDIES
 
Preclinical drug studies involve the evaluation of drug testing in animals in a preliminary effort to determine toxicity, correct doses, side effects and efficacy in animals to provide evidence of the safety of the drug prior to its administration to humans. Bioanalytical research involves the use of instruments that can detect and measure trace quantities of drugs, metabolites, genetic material and other products in biological samples.
 
CLINICAL STUDIES
 
Upon successful completion of pre-clinical studies the drug undergoes a series of evaluations in humans including healthy volunteers. The pharmaceutical Company sponsoring the new drug must file an Investigational New Drug application (IND), which includes results from the pre-clinical evaluations and provides comprehensive descriptions of the proposed human clinical studies. There are four generally accepted Phases in clinical studies, but the Phase may overlap:
 
Phase I
These studies usually take one year to complete and are conducted  on a small number of healthy human subjects to evaluate the  drug's pharmacological actions, toxicity, metabolism and pharmacokinetics.
   
Phase II       
These studies take an average of two years to complete and are carried out on a relatively small number of patients suffering from the targeted condition or disease, to determine the drug's effectiveness and dose response relationship. This phase provides additional safety data and the first substitutive evidence of the drug's efficacy in humans.
   
Phase III 
These studies take an average of two years to three years to complete and involve tests on a much larger population of patients suffering from the targeted condition or disease, typically several hundred to several thousand patients. Such studies measure the drug's efficacy and its side effects on a large scale and typically involve numerous hospitals and clinics.
   
Phase IV 
This final phase involves monitoring the long-term benefits and risks of a drug after it has entered the market. These studies also involve examining the efficacy and safety of different dosage forms or focusing on specific sub-populations of patients for evaluation of the drug's efficacy and safety. Such studies  can be carried out on thousands to tens of thousands of patients.
 
 
7

 
 
Upon completion of Phase III clinical studies, the pharmaceutical company sponsoring the new drug assembles all the preclinical and clinical data in the form of a New Drug Application (NDA), for submission to the FDA, or a New Drug Submission (NDS) for the TPP. The review process generally takes 12 to 18 years before the drug receives approval for marketing.
 
In Canada, these activities are regulated by the Food and Drug Act. The approval procedure is substantially similar to that of the FDA, but the rules and regulations promulgated there under are enforced by the Therapeutic Products and Programs ("TPP") of Health Canada. Outside the United States and Canada, and whether or not the FDA or TPP approval has been obtained, approval of a product by local regulatory authorities must be obtained prior to the commencement of commercial sales of the product in a given country. The requirements governing the conduct of clinical trials and product approvals vary widely from country to country, and the time required for approval may be longer or shorter than that required for FDA or TPP approval. Although there are some procedures for unified regulatory filings for certain European countries, in general, each country at this time has its own procedures and requirements.
 
Drug manufacturing is also regulated, thus companies are required to ensure compliance with GMPs quality standards that require the control of production activities, raw-material procurement, complaint management, product recalls, labeling and promotional material. In addition to these standards, which are common to all drugs, manufacturers of biopharmaceutical products must demonstrate that their products are homogeneous from one lot to the next, failing which the applicable regulatory authority may prohibit the sale of a lot and possibly require that a product be recalled.
 
(7) Research and Development Costs
 
Others conduct research and development on behalf of the Company under contractual agreements and such costs are charged to expense as incurred. Research and development expense was $146,347, $216,926, and $1,664,951for the years ended March 31, 2010, 2009, and for the period from March 5, 1999 (inception) to March 31, 2010, respectively.
 
(8) Employees
 
The Company has no employees, full-time or part-time. The President of Kyto Biopharma, Inc. is acting as consultant to the Company and does not receive compensation.
 
C) REPORTS TO SECURITY HOLDERS
 
The Bylaws of Kyto Biopharma, Inc. are silent regarding an annual report to shareholders. Kyto Biopharma, Inc. is a reporting company and files reports with the U.S. Securities and Exchange Commission (SEC). The Company is required to file quarterly reports (Form 10-Q) and an annual report (Form 10-K) with the SEC. The annual report includes an audited financial statement.
 
Any materials that the Company filed with the Securities and Exchange Commission may be read and copied at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Further, you may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SECD-0330. The Company is an electronic filer and the SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission. That site is http://www.sec.gov.
 
 
8

 
 
ITEM 2.  DESCRIPTION OF PROPERTY
 
The Company occupies office space on a month-to-month basis and therefore has no leasehold interest. The Company pays a fee to Credifinance Capital Corp., a related party, at the rate of approximately $3,300 monthly, which includes rent of approximately $1,700 and certain administrative services, such as bookkeeping, copying and printing, courier services, and telephone.
 
The Company owns no investments.
 
ITEM 3.  LEGAL PROCEEDINGS
 
There is no litigation of any type whatsoever pending or threatened by or against the Company, its officers and directors.
 
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
There were no shareholders meetings during the period covered by this report.
 
 
9

 
 
PART II
 
ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
The following discussions should be read in conjunction with the financial statements and related notes which are included in this Form 10-K for the year ending March 31, 2010. Statements made below which are not historical facts are forward-looking statements. Forward-looking statements involve a number of risks and uncertainties including, but not limited to, general economic conditions and our ability to develop our products. For further information regarding our business, competition and risk factors, refer to this Company's Form 10-K filed with the U.S. Securities Exchange Commission.
 
(A) MARKET INFORMATION
 
Our common stock has traded on the OTC Bulletin Board(R), or OTCBB, since August 04, 2005. The Company's common stock is quoted on the Electronic Bulletin Board of the OTC market, under the trading symbol KBPH. The following table sets forth, for the calendar quarters indicated, the high and low closing prices for our common stock as reported by OTCBB for fiscal years ended March 31, 2010 and 2009. The quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission and may not represent actual transactions. The market for the common stock has been sporadic and there have been long periods during which there were few, if any, transactions in the common stock and no reported quotations. Accordingly, reliance should not be placed on the quotes listed below, as the trades and depth of the market may be limited, and therefore, such quotes may not be a true indication of the current market value of the Company's common stock.
 
   
Common Stock
 
   
High
   
Low
 
Fiscal Year Ended March 31, 2010
           
First quarter
 
$
1.70
   
$
0.55
 
Second quarter
   
1.5
     
1.50
 
Third quarter
   
1.5
     
0.45
 
Fourth quarter
   
1.01
     
0.30
 
                 
Fiscal Year Ended March 31, 2009
               
First quarter
 
$
1.35
   
$
1.35
 
Second quarter
   
3.00
     
1.35
 
Third quarter
   
3.00
     
1.70
 
Fourth quarter
   
1.70
     
1.70
 
 
There were 12,998,482 shares of common stock outstanding as of the end of the fiscal year ended March 31, 2010.
 
(B) HOLDERS
 
According to information provided to us by the transfer agent for our shares of Common Stock, as of March 31, 2010, there were 16 holders of record of the shares of Common Stock, including depositories. Based upon information we have received from some of these record owners, we believe there are more than 150 beneficial holders of our shares of Common Stock.
 
 
10

 
 
(C) DIVIDENDS
 
The Company has not paid any dividends to date and has no plans to do so in the foreseeable future.
 
(D) SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS.
 
None
 
ITEM 6.  SELECTED FINANCIAL DATA
 
Earnings per share for each of the fiscal years shown below are based on the weighted average number of shares outstanding.

   
Years ended March 31,
 
   
2010
   
2009
 
Revenues
    -       -  
                 
Net Loss
  $ (591,293 )   $ (643,096 )
                 
Earning Loss Per Share
  $ (0.05 )   $ (0.05 )
                 
Total assets
  $ 170,014     $ 60,316  
                 
Total liabilities
  $ 1,122,797     $ 582,386  
 
 
 
11

 
 
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATION
 
(A) PLAN OF OPERATION
 
The Company had not been profitable and had no revenues from operations since its inception in March 1999. As reflected in the accompanying audited consolidated financial statements, in 2010 the company had, a net loss of $ 591,293 ,  a working capital deficiency of $ 1,118,353 , a stockholders' deficiency of $ 952,783 , and a deficit accumulated during development stage of $ 17,065,962 at March 31, 2010. These factors raise substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company's ability to further implement its business plan, raise capital, and generate revenues. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Research and development expense was $146,347, $216,926, and $1,664,951 for the years ended March 31, 2010, 2009, and for the period from March 5, 1999 (inception) to March 31, 2010, respectively.
 
During the period ending March 31, 2010, the Company continued to evaluate its Intellectual Property Portfolio. Under the recommendation from Patent Attorneys, management and consultants, Kyto has elected to cancel patent protection in non essential jurisdictions, to allow more focus to be placed on Kyto’s monoclonal antibody technologies.
 
The Company’s R&D efforts are progressing with respect to the development of a novel cancer therapy through the regulation of Vitamin B12 uptake. To date the Company has, conclusively identified the protein and the gene encoding the Vitamin B12 receptor, isolated and cloned three monoclonal antibodies to the Vitamin B12 receptor, and is proceeding toward the development of fully humanized antibodies.
 
An article authored by two of Kyto’s consulting scientists (Dr. Quadros and Dr. Sequeira) describing findings relating to Kyto’s process, was published in “Blood” magazine, on September 8, 2008, in an article titled “The protein and the gene encoding the receptor for the cellular uptake of transcobalamin-bound cobalamin”. “Blood” magazine is published by the American Society of Hematology.
 
Nearing the end of fiscal year 2008, Kyto proceeded with its planned antibody strategy and collaborated with a 3 rd party vendor to acquire antibodies. The development of this antibody technology will be overseen by RFSUNY and is currently in the early stages of development. The Company does not yet have an estimate of the total costs associated with this development. As the Company has no current revenues from operations, management fully expects to incur additional liabilities in order to fund the development of this strategy.
 
Over the next twelve months the company will focus its efforts on further developing its antibodies with the assistance of an outsourced manufacturer and the help of scientists from RFSUNY and MD Anderson, with the goal of developing fully humanized antibodies. At this time Kyto has had success in demonstrating kills to a variety of cancer cells expressing the Vitamin B12 receptor.
 
The efforts of the Company's R&D have produced notable accomplishments with respect to the development of a novel cancer therapy through the regulation of Vitamin B12 uptake, an essential nutrient for cells. For the first time, the Company has conclusively identified the protein and the gene encoding the
 
Vitamin B12 receptor. The work on utilizing the Vitamin B12 pathway provides for several strategies aimed at preventing the proliferation of cancer cells.
 
During the period ending March 31, 2010, the Company conducted a comprehensive review of its existing Intellectual Property portfolio with the assistance various IP legal firms and consultants. As a result of this review, the Company has elected to drop some of its patents while funding the remaining patents in full.
 
 
12

 
 
The Company is currently a development stage company and its continued existence is dependent upon the Company's ability to resolve its liquidity problems, principally by obtaining additional debt financing and/or equity capital. The Company has yet to generate an internal cash flow, and until the sales of its product begins, the Company is very dependent upon debt and equity funding. The Company must successfully complete its research and development resulting in a saleable product. However, there is no assurance that once the development of the product is completed and finally gains Federal Drug and Administration clearance, that the Company will achieve a profitable level of operations.
 
The Company has, as of the end of its fiscal year (March 31, 2010), $ 1,112,797 in liabilities. During 2010 the Company advanced $265,931 to a newly founded US based biotechnology company, Targeted Payload Therapeutics Inc. ("TPT"), a related party.  Subsequent to year end the Company has deemed this advance uncollectable because the company cancelled the agreement with TPT as a result of irreconcilable differences among the management of TPT which prevented the project from moving forward. As of result we deemed the amount as non-recoverable  and has written it off.   This has adversely impacted the Company’s liquidity.   The Company estimates that it will require up to $100,000 to meet operating costs, excluding research and development costs, and up to $300,000 for research and development costs for this fiscal year. In addition, with the help of its scientific partners, the Company is reviewing its technology and assessing the best way of pursuing its development.The report of our Independent Registered Public Accounting Firm on our March 31, 2010 financial statements includes an explanatory paragraph indicating that there is substantial doubt about our ability to continue as a going concern due to substantial recurring losses from operations, cash used in operations, stockholders' deficit and significant accumulated deficit and working capital deficit. Our ability to continue as a going concern will be determined by our ability to obtain additional funding and maintain operations. We do not currently have sufficient financial resources to fund our operations. Therefore, we need additional funds to continue these operations. Should the financing we require to sustain our working capital needs be unavailable or prohibitively expensive when we require it, we would be forced to curtail our business operations.
 
On February 10, 2010 Kyto executed an “Executive Licensing Agreement” with The Research Foundation of State University of New York, “RFSUNY”, allowing Kyto to license certain technology surrounding the Human Transcobalamin Receptor.  The licensing agreement is active until the expiry of the patent rights.  The rights primarily relate to the patent: “Transcobalamin Receptor Polypeptides, Nucleic Acids, and Modulators Thereof, and Related Methods of Use in Modulating Cell Growth and Treating Cancer and Cobalamin Deficiency”.
 
(B) LIQUIDITY AND CAPITAL RESOURCES
 
To meet the projected cash requirements as stated above, the Company intends to obtain cash loans from one or more of its stockholders. As the date of filing of this Form 10-K with the U.S. Securities and Exchange Commission, the Company did not receive any commitments of any of its stockholders to provide operating loan funds for the Company. We are also looking at merger opportunities or to acquire companies and products to raise capital. We expect to form strategic alliances for product development and to out-license the commercial rights to development partners. By forming strategic alliances with third parties, we believe that our technologies and related products can be more rapidly developed and successfully introduced into the marketplace.
 
The Company's plan of operation for the next twelve months is to continue to focus its efforts on finding new sources of capital and on research activities and the development of its drug candidates which maximize the utility and application of its platform technologies. Management expects the Company to incur additional operating losses over the next several years as research and development efforts, preclinical and clinical testing activities and manufacturing scale-up efforts expand. To date, we have not had any material product sales and do not anticipate receiving any revenue from the sale of products in the upcoming year. Our sources of working capital have been equity financings and interest earned on investments.
 
 
13

 
 
The Company operates in a rapidly changing environment that involves a number of factors, some of which are beyond management's control, such as financial market trends and investors' appetite for new financings. It should also be emphasized that, should the Company not be successful in completing its own financing (either by debt or by the issuance of securities from treasury), the Company may be unable to continue to operate as a going concern.
 
(C) OFF-BALANCE SHEET ARRANGEMENT
 
None.
 
(D) COMPETITION
 
There are a number of companies that are involved in the development and/or production, improved method of delivery or analogs of paclitaxel include but are not limited to Bristol-Myers Squibb Company, Cell Therapeutics Inc., Ivax Corporation, Bioxell Pharma Inc., Supratek Pharma Inc., Enzon Inc., Napro Biotherapeutics Inc., F.H. Faulding & Co. Limited, Phytogen Inc., Aphios Corporation, Taxolog Inc., Cytoclonal Pharmaceutics Inc., Protarga Inc., and Mylan Laboratories Inc.
 
In addition to the competition, as noted above, the Company faces certain adverse conditions/and/or risks factors as outlined below:
 
• KYTO'S BUSINESS STRATEGY REQUIRES THAT IT ESTABLISH AND MAINTAIN GOOD STRATEGIC ALLIANCES. Currently, Kyto is seeking strategic alliances. We have limited experience in establishing and maintaining such strategic alliances and cannot give any assurance that we will be successful in establishing one or more relationships. Our strategy for the research, development and commercialization of our potential biopharmaceutical products may require us to enter into various arrangements with corporate and academic collaborators, licensors, licensees and others, in addition to our existing relationships with other parties. Specifically, we may seek to joint venture, sublicense or enter other marketing arrangements with parties that have an established marketing capability or we may choose to pursue the commercialization of such products on our own. We may, however, be unable to establish such additional collaborative arrangements, license agreements, or marketing agreements as we may deem necessary to develop, commercialize and market our potential pharmaceutical products on acceptable terms. Furthermore, if we maintain and establish arrangements or relationships with third parties, our business may depend upon the successful performance by these third parties of their responsibilities under those arrangements and relationships.
 
 
14

 
 
• KYTO HAS NO EXPERIENCE IN MANUFACTURING, PROCURING PRODUCTS IN COMMERCIAL QUANTITIES OR MARKETING, CONDUCTING CLINICAL TRIALS, REGULATORY APPROVAL PROCESS AND ONLY LIMITED EXPERIENCE IN NEGOTIATING, SETTING-UP OR MAINTAINING RESEARCH COLLABORATION AND THERE IS NO ASSURANCE THAT IT WILL SUCCESSFULLY ENGAGE OR CONTINUE TO ENGAGE IN ANY OF THESE ACTIVITIES. If we are unable to obtain or retain third party manufacturing on commercially acceptable terms, we may not be able to commercialize our products as planned. Our potential dependence upon third parties for the manufacture of our products may adversely affect our ability to generate profits or acceptable profit margins and our ability to develop and deliver such products on a timely and competitive basis. Kyto may be unable to obtain the raw materials used in the production of some of its bioconjugates in sufficient quantity to meet demand when and if such product is approved. By example, paclitaxel is derived from certain varieties of yew trees and is also used in one of the Company's drug candidates. To date, Kyto has not entered into an agreement with a supplier to provide sufficient quantity or quality of any drugs used in the construction of its bioconjugates. Kyto does not have internal facilities for the manufacture of any of its products for clinical or commercial production.
 
• MANY OF KYTO'S DRUG CANDIDATES ARE STILL IN RESEARCH AND PRECLINICAL DEVELOPMENT, WHICH MEANS THAT THEY HAVE NOT YET BEEN TESTED ON HUMANS. The Company will need to commit significant time and resources to develop these and additional product candidates. Kyto is dependent on the successful completion of clinical trials and obtaining regulatory approval in order to generate revenues. Specifically, its drug candidates that appear to be promising at early stages of development may not reach the market for a number of reasons. Potential products may: i) be found ineffective or cause harmful side effects during preclinical testing or clinical trials, ii) fail to receive necessary regulatory approvals,
iii) be difficult to manufacture on a large scale, iv) be uneconomical to produce, v) fail to achieve market acceptance, vi) be precluded from commercialization by proprietary rights of third parties, or vii) third parties may market superior or equivalent drugs.
 
• KYTO HAS BASED MANY OF ITS DRUG CANDIDATES ON UNPROVEN NOVEL TECHNOLOGIES, AND IT MAY NEVER DEVELOP THEM INTO COMMERCIAL PRODUCTS. Our primary focus is on our research and development activities of drug candidates covered by proprietary biopharmaceutical patents and patent applications. Research and development activities, by their nature, preclude definitive statements as to the time required and costs involved in reaching certain objectives. Actual research and development costs, therefore, could exceed budgeted amounts and estimated time frames may require extension. Cost overruns, unanticipated regulatory delays or demands, unexpected adverse side effects or insufficient therapeutic efficacy will prevent or substantially slow our research and development effort and our business could ultimately suffer. We anticipate that we will remain principally engaged in research and development activities for an indeterminate, but substantial, period of time. Furthermore, preclinical results in animal studies may not predict outcome in human clinical trials.
 
• KYTO MAY NOT BE SUCCESSFUL IN PROTECTING ITS INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS. Our success depends, in part, on our ability to obtain U.S. and foreign patent protection for our drug candidates and processes, preserve our trade secrets and operate our business without infringing the proprietary rights of third parties. Legal standards relating to the validity of patents covering pharmaceutical and biotechnological inventions and the scope of claims made under such patents are still developing and there is no consistent policy regarding the breadth of claims allowed in biotechnology patents. The patent position of a biotechnology firm is highly uncertain and involves complex legal and factual questions. The Company cannot assure you that any existing or future patents issued to, or licensed by, us will not subsequently be challenged, infringed upon, invalidated or circumvented by others. Kyto cannot assure investors that any additional patents will issue from any of the patent applications owned by, or licensed to, us. Furthermore, any rights that we may have under issued patents may not provide us with significant protection against competitive products or otherwise be commercially viable.
 
 
15

 
 
In addition, patents may have been granted to third parties or may be granted covering products or processes that are necessary or useful to the development of our drug candidates. If our drug candidates or processes are found to infringe upon the patents or otherwise impermissibly utilize the intellectual property of others, our development, manufacture and sale of such drug candidates could be severely restricted or prohibited. In such event, we may be required to obtain licenses from third parties to utilize the patents or proprietary rights of others. Kyto cannot assure investors that it will be able to obtain such licenses on acceptable terms, if at all. If we become involved in litigation regarding our intellectual property rights or the intellectual property rights of others, the potential cost of such litigation, regardless of the strength of our legal position, and the potential damages that we could be required to pay could be substantial.
 
• OWNERSHIP OF OUR SHARES IS CONCENTRATED, TO SOME EXTENT, IN THE HANDS OF A FEW INVESTORS, WHICH COULD LIMIT THE ABILITY OF OUR OTHER STOCKHOLDERS TO INFLUENCE THE DIRECTION OF THE COMPANY: Credifinance Capital Corp. owned approximately 69.1% of our common stock as of March 31, 2010. Accordingly, they collectively may have the ability to significantly influence or determine the election of all of our directors or the outcome of most corporate actions requiring stockholder approval. They may exercise this ability in a manner that advances their best interests and not necessarily those of our other stockholders.
 
• OUR SECURITIES ARE QUOTED ON THE OVER-THE-COUNTER BULLETIN BOARD. The Over-the-Counter Bulletin Board is an inter-dealer, over-the-counter market that provides significantly less liquidity than the NASDAQ Stock Market or national or regional exchanges. Securities traded on the Over-the-Counter Bulletin Board are usually thinly traded, highly volatile, have fewer market makers and are not followed by analysts. The Securities and Exchange Commission's order handling rules, which apply to NASDAQ-listed securities, do not apply to securities quoted on the Over-the-Counter Bulletin Board. Quotes for stocks included on the Over-the-Counter Bulletin Board are not listed in newspapers. Therefore, prices for securities traded solely on the Over-the-Counter Bulletin Board may be difficult to obtain and holders of our securities may be unable to resell their securities at or near their original acquisition price, or at any price.
 
• WE WILL REQUIRE ADDITIONAL FINANCING TO SUSTAIN OUR OPERATIONS AND WITHOUT IT WE WILL NOT BE ABLE TO CONTINUE OPERATIONS. We do not currently have sufficient financial resources to fund our operations. Therefore, we need additional funds to continue these operations. The ability of the Company to secure sources of funding will depend on a number of factors including, the prevailing market price of our common stock the results of our research and development programs, the timing and results of preclinical and clinical trials, our ability to maintain existing and establish new collaborative agreements with other companies to provide funding to us, technological advances, and activities of competitors and other factors and the extent to which we are able to secure working capital from other sources, such as through the sale of debt or sale of stock. If sufficient financing is not available or if we are unable to license and sell our technologies and related products, we will need to secure another source of funding in order to satisfy our working capital needs.
 
If we do raise additional funds by issuing equity securities, further dilution to existing stockholders would result and future investors may be granted rights superior to those of our existing stockholders. If adequate funds are not are not available to us through additional equity offerings, we may be required to delay, reduce the scope of or eliminate one or more of our research and development programs or to obtain funds by entering into arrangements with collaborative partners or others that require us to issue additional equity securities or to relinquish rights to certain technologies or drug candidates that we would not otherwise issue or relinquish in order to in order to continue independent operations. Should the financing we require to sustain our working capital needs be unavailable or prohibitively expensive when we require it, we would be forced to curtail our business operations.
 
• THERE IS SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN DUE TO SIGNIFICANT RECURRING LOSSES FROM OPERATIONS, CASH USED IN OPERATIONS, STOCKHOLDERS' DEFICIT, ACCUMULATED DEFICIT AND WORKING CAPITAL DEFICIT ALL OF WHICH MEANS THAT WE MAY NOT BE ABLE TO CONTINUE OPERATIONS UNLESS WE OBTAIN ADDITIONAL FUNDING. The report of our Independent Registered Public Accounting Firm on our March 31, 2010 financial statements includes an explanatory paragraph indicating that there is substantial doubt about our ability to continue as a going concern due to substantial recurring losses from operations, cash used in operations, stockholders' deficit and significant accumulated deficit and working capital deficit. Our ability to continue as a going concern will be determined by our ability to obtain additional funding and maintain successful operations. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty
 
 
16

 
 
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
Attached audited consolidated financial statements for KYTO BIOPHARMA, INC. AND SUBSIDIARY for the fiscal years ended March 31, 2010, 2009 and Cumulative from March 5, 1999 (Inception) to March 31, 2010 can be found beginning on page F-1.
 
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
 
The Company did not change accountant during the year and to the date of this registration statement and there are no disagreements with the findings of said accountants.
 
ITEM 9A.  CONTROLS AND PROCEDURES
 
Disclosure Controls and Procedures

The Company’s President who serves as its principal executive officer and principal financial and accounting officer is responsible for establishing and maintaining disclosure controls and procedures for the Company as defined in Rules 13a-15(e) and 15d-(15(e) of the Securities Exchange Act of 1934.  Disclosure controls and procedures are controls and procedures designed to reasonably assure that information required to be disclosed in the Company’s reports filed under the Securities Exchange Act of 1934, such as this report, is recorded, processed, summarized and reported within the time periods prescribed by SEC rules and regulations, and to reasonably assure that such information is accumulated and communicated to our management, including our President who also acts as our principal financial and principal accounting officer, to allow timely decisions regarding required disclosure.

The Company’s management does not expect that our disclosure controls or our internal controls will prevent all error and 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. In addition, 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 a company have been detected. These inherent limitations include 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 systems 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 these inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Under the supervision and with the participation of our management, including our President who serves as our principal executive officer and our principal financial and accounting officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the period ended March 31, 2010 (the “Evaluation Date”). As of the Evaluation Date, the Company’s President who also serves as its principal financial and accounting officer, initially concluded that the Company maintained disclosure controls and procedures that were effective in providing reasonable assurance that information required to be disclosed in it reports under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods prescribed by SEC rules and regulations, and that such information is accumulated and communicated to the Company’s management to allow timely decisions regarding required disclosure.
 
As described elsewhere herein, in August 2010 we determined that our financial statements for the year ended March 31, 2010 could not be relied upon because we did not properly impair a related party receivable.  As a result of this error, we have restated our consolidated balance sheet at March 31, 2010 and related consolidated statement of operations, consolidated statement of changes in stockholders’ deficiency and consolidated statement of cash flows for the year ended March 31, 2010.  Because of this error, our President who also serves as our principal executive officer and principal financial and accounting officer, has subsequently concluded that our disclosure controls and procedures were not effective at March 31, 2010 such that the information relating to our company required to be disclosed in our Securities and Exchange Commission reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) is accumulated and communicated to our management, including our President, to allow timely decisions regarding required disclosure as a result of a material weaknesses.  We failed to properly disclose that we had terminated an agreement with a related party which led to a conclusion that amounts advanced to that related party were non-recoverable.  A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of our annual or interim financial statements would not be prevented or detected.
 
 
17

 
 
Management’s Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934.  The Company’s management assessed the effectiveness of its internal control over financial reporting as of March 31, 2010.  In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework .  The Company’s management initially concluded that, as of March 31, 2010 the Company’s internal control over financial reporting was effective based on this criteria.   However, as a result of the error in our financial statements described above which has led to a restatement, our management has determined that as of March 31, 2010 there was a material weakness in our internal control over financial reporting as a result of our inability to properly impair a related party receivable.  In order to remediate this weakness, we will institute enhanced disclosure policies to ensure that information i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) is accumulated and communicated to our management, including our President, to allow timely decisions regarding required disclosure as well as instituting enhanced procedures for evaluating related party receivables.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.  The Company’s management's report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.

Changes in Internal Control over Financial Reporting

There was no change in the Company’s internal control over financial reporting identified in connection with the Company’s evaluation that occurred during our last fiscal quarter (our fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.
 
 
18

 
 
PART III
 
ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS, PROMOTORS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
 
(A) IDENTIFY DIRECTORS AND EXECUTIVE OFFICERS
 
NAME
 
AGE
 
POSITION
Georges Benarroch
 
63
 
President & Chief Executive Officer, Director
         
Don MacAdam
 
63
 
Director
         
Jean-Luc Berger, Ph.D. 
 
46
 
Director
         
Uri Sagman, M.D. FRCPC
 
56
 
Director
 
The business experience of the persons listed above during the past five years are as follows:
 
MR. GEORGES BENARROCH, PRESIDENT & CHIEF EXECUTIVE OFFICER; DIRECTOR.
 
Director of the Company since May 5, 2000. Mr Benarroch was elected as President and Chief Executive Officer effective February 27, 2006. Mr. Benarroch is the President and Chief Executive Officer of Credifinance Capital Corp.. Mr. Benarroch  is also, the President & CEO of Gilla Inc., a public company.
 
MR. DONALD MACADAM, DIRECTOR.
 
Director of the Company since November 17, 1999. Since January 2000, Mr. MacAdam is a consultant to technology companies. He is currently President and Chief Executive Officet of MBVax Bioscience, a private Canadian biotechnology company. From 1997 to 1999, he was President and Chief Executive Officer of Tm Bioscience Corporation. Prior to Tm Bioscience Corporation, Mr. MacAdam was President of CRS Robotics Corporation from 1993 to 1996. Both Tm Bioscience Corporation and CRS Robotics Corporation are public companies.
 
DR. JEAN-LUC BERGER, PH.D., DIRECTOR.
 
Director of the Company since inception on March 5, 1999, Dr. Berger was President and Chief Executive Officer of the Company from May 15, 2001 to February 27, 2006. Co-founder of Kyto, he joined the Company as Chief Operating Officer in September 2000. Dr Berger resigned as President and Chief Executive Officer effective February 27, 2006. Prior to joining the Company, Dr. Berger was a Pharmaceutical/Biotechnology analyst with Credifinance Securities Limited, a Toronto-based, institutional investment and research firm, since 1996. Dr. Berger obtained his M. Sc. from Universite de Montreal, his Ph.D. from Universite LAVAL and completed his post-doctoral studies at McGill University and has over thirty publications and scientific communications to his credit.
 
 
19

 
 
DR. URI SAGMAN, M.D ., DIRECTOR
 
Director of the Company since inception on July 27, 2007, Dr. Sagman ,studied medicine at McGill University, The University of Calgary, The University of Toronto and Oxford University. Dr. Sagman is a well-respected researcher who has received numerous awards and citations including the Young Investigator awards of the American Society of Clinical Oncology (ASCO) and the American Association for Cancer Research (AACR). He is trained as a medical oncologist, is a fellow of the Royal College of Physicians and Surgeons of Canada and is a fellowship recipient of the Medical Research Council of Canada. He co-founded several companies including C Sixty, Inc., a Canadian nanomedicine company focused on the development of fullerene antioxidants for the treatment of Parkinson's disease, Alzheimer's disease as well certain skin conditions related to aging and UV exposure. Dr. Sagman is also founder and chairman of GRN Capital Inc., a financial services corporation with merchant banking and investment banking operations based in Toronto. Separately, Dr. Sagman serves as Chairman of GRN Health International Inc., a globally-based academic research organization dedicated to medical research.
 
(B) IDENTIFY SIGNIFICANT EMPLOYEES
 
The Company does not expect to receive a significant contribution from employees that are not executive officers.
 
(C) FAMILY RELATIONSHIPS
 
There are no directors, executive officers or persons nominated or persons chosen by the Company to become a director or executive officer of the Company who are directly related to an individual who currently holds the position of director or executive officer or is nominated to one of the said positions.
 
(D) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
 
There are no material events that have occurred in the last five years that would affect the evaluation of the ability or integrity of any director, person nominated to become a director, executive officer, promoter or control person of the Company.
 
(E) AUDIT COMMITTEE
 
The Company has currently no audit committee. The Board of Directors approved the financial statements for the previous year.
 
 
20

 
 
ITEM 11.  EXECUTIVE COMPENSATION
 
(A) SUMMARY COMPENSATION TABLE
 
The following table sets forth all annual and long term compensation for services in all capacities rendered to Kyto by its executive officers and directors for each of the last four most recently completed fiscal years.
 
   
Annual Compensation                        
 
Long-Term Compensation
                   
Awards
 
Payouts 
All Other Name and Payouts Principal  Position
 
 
Year
 
Salary
  ($)
 
Bonus
 ($)
 
Other Annual
Compensation
 ($)
 
 Securities Under Options/SARs
Granted
(#)
 
Restricted Shares
or  Restricted
Share Units 
($)
 
 
LTIP
($)
                             
Jean-Luc Berger, Director
 
2010
 
None
             
None
   
   
2009
 
None
             
None
   
   
2008
 
None
             
None
   
   
2007
 
None
             
None
   
                             
Georges Benarroch, Director
 
2010
 
None
             
None
   
   
2009
 
None
             
None
   
President and Chief Executive Officer
 
2008
 
None
             
None
   
   
2007
 
None
             
None
   
                             
Donald MacAdam, Director
 
2010
 
None
             
None
   
   
2008
 
None
             
None
   
   
2008
 
None
             
None
   
   
2007
 
None
             
None
   
 
 (1) On February 26, 2008 Kyto Biopharma Inc issued to Dr. Uri Sagman 500,000 common shares ($0.5 per share) for consulting service.
 
 
21

 
 
(B) OPTION/SAR GRANTS TABLE
 
The following table (presented in accordance with the Regulation) sets forth stock options granted under the Share Incentive Plan during fiscal year 2002 to the name key employees. There were no grants to key employees in fiscal years 2010, 2009, 2008, and 2007.
 
Name
 
Number of Securities
Underlying Options/SARs Granted (#)
 
% of Total Options/SARs Granted
P[topms/SARs Granted  to Employees
in Fiscal Year
 
Exercise or Base Price ($Sh)
 
Expiration Date
Jean-Luc Berger
 
262,500
 
31
 
$0.0001
 
Exercised in November 2001
Uri Sagman 
 
587,500
 
69
 
$0.0001
 
Exercised in February 2002
 
(C) AGGREGATED OPTION/SAR EXERCISE IN LATEST FISCAL YEAR AND FISCAL YEAR END OPTION/SAR VALUE TABLE
 
The following table (presented in accordance with the Regulation) sets forth details of all exercises of stock options/SARs during the fiscal year end March 31, 2002 (none in fiscal years 2009, 2008, 2007 and 2006) by the named executive officer and employees and the fiscal year-end value of unexercised options/SARs on an aggregated basis:
 
Name
 
Shares Acquired on
 Exercise
(#)
 
Value Realized
 ($)
 
Number of Securities Underlying 
Options/SARs Granted at FY-End (#)     
Exercisable/Unexercisable              
 
Value of Unexercised In-the-Money  
Options/SARs at FY-End ($) Exercisable/Unexercisable
Jean-Luc Berger
 
262,500
 
262,474
 
-- 
 
-- 
Uri Sagman
 
587,500
 
587,441
 
-- 
 
-- 
 
(E) LONG-TERM INCENTIVE ("LTIP") AWARDS TABLE
 
None
 
 
22

 
 
(D) COMPENSATION OF DIRECTORS
 
All directors hold office until the next annual meeting of stockholders and until their successors have been duly elected and qualified. There are no agreements with respect to the election and compensation of directors. The Board of Directors appoints officers annually and each executive officer serves at the discretion of the Board of Directors. The Company does not have any standing committees at this time.
 
The Company does not currently maintain insurance for the benefit of the directors and officers of Kyto against liabilities incurred by them in their capacity as directors or officers of Kyto. Kyto does not maintain a pension plan for its employees, officers or directors.
 
No director shares were granted in fiscal years  2010 and 2009 .
 
Dr.Uri Sagman, a new director of company received 500,000 restricted common shares for consulting service during fiscal year 2008.
 
None of the directors or senior officers of Kyto and no associate of any of the directors or senior officers of Kyto was indebted to the Company during the financial period ended March 31, 2010 of Kyto other than for routine indebtedness.
 
(F) EMPLOYMENT CONTRACTS
 
None
 
(G) REPORT ON REPRICING OF OPTIONS/SARS
 
None

 
23

 
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
(A) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
The following persons (including any group as defined in Regulation S-B, Section 228.403) are known to the Company, as the issuer, to be beneficial owner of more than five percent (5%) of any class of the said issuer's voting securities.
 
TITLE OF CLASS
 
NAME AND ADDRESS OF BENEFICIAL OWNER
 
COMMON
SHARES
   
PERCENTAGE OF CLASS
 
                 
Common 
 
Credifinance Capital Corp. (1)
Delaware, United States
   
8,983,219
     
69.1
%
                     
Common 
 
Medarex Inc. 
New Jersey, United States
   
1,300,000
     
10.0
%
                     
Common
 
Dr. Uri Sagman 
Toronto, Ontario, Canada
   
1,402,025
     
10.7
%
 
(1) Credifinance Capital Corp. is a privately held Delaware corporation. A director and officer of Kyto, Georges Benarroch is the President & C.E.O. of Credifinance Capital Corp.
 
(B) On May 24, 2008, Kyto and the Company entered into an agreement to receive up to 500,000 convertible preferred shares at $1.00 per share of Kyto in satisfaction of amounts due to the Company. The preferred share stock has no readily available fair values. For financial accounting purposes, these investments are presented at cost basis.
 
TITLE OF CLASS 
 
NAME AND ADDRESS  OF  BENEFICIAL OWNER    
 
PREFERRED
SHARES
   
PERCENTAGE OF CLASS
 
                 
Convertible  Preferred
 
Credifinance Capital Corp. (1) 
   
473,624
     
100.0
%
 
 
24

 
 
(C) SECURITY OWNERSHIP OF MANAGEMENT
 
TITLE OF CLASS
 
NAME AND ADDRESS  OF BENEFICIAL OWNER                                 
 
COMMON
SHARES
   
PERCENTAGE
OF CLASS
 
                 
 Common 
 
Georges Benarroch (1)  
   
177,412
     
1.4
%
 Common 
 
Dr. Jean-Luc Berger 
   
527,025
     
4.0
%
 Common 
 
Don MacAdam (2) 
   
30,025
     
0.2
%
 Common 
 
Uri Sagman 
   
1,402,025
     
10.7
%
 
(1) Georges Benarroch is the President and Chief Executive Officer of Credifinance Capital Corp which owns 8,983,219 common shares representing 69.1% of issued shares and 473,624 convertible preferred shares represented 100% of issued shares.
(2) Don MacAdam owns 27,025 common shares directly and 3,000 common shares through A360 Inc., a private holding company.
 
(D) CHANGES IN CONTROL
 
There is no such arrangement which may result in a change in control of the Company.
 
 
25

 
 
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
(A) CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
Detail of related party transactions are described in note 5 of the consolidated Financial Statements.
 
During the year ended March 31, 2010, we loaned $265,931 to a newly founded US based biotechnology company, Targeted Payload Therapeutics Inc. ("TPT"), a related party. Amounts loaned under this notes were non- interest bearing, unsecured, due on demand and did not follow any specific repayment terms. TPT was created to commercialize licensed technology which was developed at leading medical centers of excellence in the USA.  Mr. Georges Benarroch, our CEO and member of our Board of Directors, and Dr. Uri Sagman, a member of our Board of Directors, are also the founders of TPT.  In May 2010, we cancelled the agreement with TPT.  Accordingly, as we deem the amounts owed us by TPT as non-recoverable, at March 31, 2010 we have written off this loan receivable in the amount of $265,931.
 
(B) TRANSACTIONS WITH PROMOTORS
 
Georges Benarroch would be considered as a promoter of the Company. Georges Benarroch, is the President & CEO of Credifinance Capital Corp which owns 8,983,219 common shares representing 69.1% of issued shares and 473,624 convertible preferred shares represented 100% of issued shares
 
ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES
 
The Board of Directors appointed Jewett, Schwartz, Wolfe, and Associates. ("Jewett") as our independent auditors for the fiscal years ending March 31, 2010.
 
(1) Audit Fees
 
Jewett our Independent Registered Public Accounting firm billed an aggregate of $25,500 for the following professional services: audit of our annual consolidated financial statements for the fiscal year ended March 31, 2010 included in our annual report on Form 10-K and review of our interim financial statements included in our quarterly reports on Form 10-Q.
 
(2) Tax Fees
 
No professional services were rendered by Jewett, Schwartz, Wolfe and Associates for tax compliance, tax advice, and tax planning the fiscal years ended March 31, 2010.
 
(3) All Other Fees
 
Not applicable.
 
 
26

 
 
ITEM 15. EXHIBITS AND REPORTS ON FORM 8-K
 
(A) LISTING OF EXHIBITS
 
EXHIBIT NUMBER
 
 DESCRIPTION
     
3(i)(a)
 
Articles of Incorporation of Kyto Biopharma, Inc.*
3(i)(b) 
 
Articles of Amendment changing name to Kyto Biopharma, Inc.*
3(ii) 
 
Bylaws of Kyto Biopharma, Inc.*
 
Section 302 Certification of the principal executive officer **
31.2   Section 302 Certification of the 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 of the principal executive officer and principal financial accounting officer **
 
* Filed as Exhibit to Company's Form 10-SB on September 12th, 2003, with the Securities and Exchange Commission ** Filed as Exhibit with this Form 10-K /A .
 
(B) Code of Ethics
 
Kyto Biopharma Inc. will conduct its business honestly and ethically wherever we operate in the world. We will constantly improve the quality of our services, products and operations and will create a reputation for honesty, fairness, respect, responsibility, and integrity, trust and sound business judgment. No illegal or unethical conduct on the part of officers, directors, employees or affiliates is in the company's best interest. Kyto Biopharma Inc. will not compromise its principles for short-term advantage. The ethical performance of this company is the sum of the ethics of the men and women who work here. Thus, we are all expected to adhere to high standards of personal integrity.
 
Officers, directors, and employees of the company must never permit their personal interests to conflict, or appear to conflict, with the interests of the company, its clients or affiliates. Officers, directors and employees must be particularly careful to avoid representing Kyto Biopharma Inc. in any transaction with others with whom there is any outside business affiliation or relationship. Officers, directors, and employees shall avoid using their company contacts to advance their private business or personal interests at the expense of the company, its clients or affiliates.
 
No bribes, kickbacks or other similar remuneration or consideration shall be given to any person or organization in order to attract or influence business activity. Officers, directors and employees shall avoid gifts, gratuities, fees, bonuses or excessive entertainment, in order to attract or influence business activity.
 
Officers, directors and employees of Kyto Biopharma Inc. will often come into contact with, or have possession of, proprietary, confidential or business-sensitive information and must take appropriate steps to assure that such information is strictly safeguarded. This information - whether it is on behalf of our company or any of our clients or affiliates - could include strategic business plans, operating results, marketing strategies, customer lists, personnel records, upcoming acquisitions and divestitures, new investments, and manufacturing costs, processes and methods. Proprietary, confidential and sensitive business information about this company, other companies, individuals and entities should be treated with sensitivity and discretion and only be disseminated on a need-to-know basis.
 
 
27

 
 
Misuse of material inside information in connection with trading in the company's securities can expose an individual to civil liability and penalties. Directors, officers, and employees in possession of material information not available to the public are "insiders". Spouses, friends, suppliers, brokers, and others outside the company who may have acquired the information directly or indirectly from a director, officer or employee are also "insiders." The Act prohibits insiders from trading in, or recommending the sale or purchase of, the company's securities, while such inside information is regarded as "material", or if it is important enough to influence you or any other person in the purchase or sale of securities of any company with which we do business, which could be affected by the inside information.
 
The following guidelines should be followed in dealing with inside information:
 
Until the company has publicly released the material information, an employee must not disclose it to anyone except those within the company whose positions require use of the information.
 
Employees must not buy or sell the company's securities when they have knowledge of material information concerning the company until it has been disclosed to the public and the public has had sufficient time to absorb the information.
 
Employees shall not buy or sell securities of another corporation, the value of which is likely to be affected by an action by the company of which the employee is aware and which has not been publicly disclosed.
 
Officers, directors and employees will seek to report all information accurately and honestly, and as otherwise required by applicable reporting requirements.
 
Officers, directors and employees will refrain from gathering competitor intelligence by illegitimate means and refrain from acting on knowledge, which has been gathered in such a manner. The officers, directors and employees of Kyto Biopharma Inc. will seek to avoid exaggerating or disparaging comparisons of the services and competence of their competitors.
 
Officers, directors and employees will obey all Equal Employment Opportunity laws and act with respect and responsibility towards others in all of their dealings. Officers, directors and employees will remain personally balanced so that their personal life will not interfere with their ability to deliver quality products or services to the company and its clients.
 
Officers, directors and employees agree to disclose unethical, dishonest, fraudulent and illegal behavior, or the violation of company policies and procedures, directly to management.
 
Violation of this Code of Ethics can result in discipline, including possible termination. The degree of discipline relates in part to whether there was a voluntary disclosure of any ethical violation and whether or not the violator cooperated in any subsequent investigation.
 
 
28

 
 
SIGNATURES
 
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
KYTO BIOPHARMA, INC.
 
       
 DATE: August 26 , 2010  
By:
/s/ Georges Benarroch
 
   
Name: Georges Benarroch
 
   
Title:  President & C.E.O.
 
       
 
 
Pursuant to the requirements of the Securities Act of 1933, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
 
Signature   Title   Date
         
/s/ Georges Benarroch  
President, Chief Executive Officer, principal executive officer
  August 26, 2010
Georges Benarroch   and principal financial and accounting officer    
         
         
/s/ Don MacAdam   Director   August 26, 2010
Don MacAdam
       
         
         
/s/ Jean-Luc Berger   Director   August 26, 2010
Jean-Luc Berger
       
         
/s/ Uri Sagman   Director   August 26, 2010
Uri Sagman        
         
 
 
 

 
 
29

 
 
Kyto Biopharma, Inc. and Subsidiary
(A Development Stage Company
 
Consolidated Financial Statements
For the year Ended March 31, 2010 and 2009
and for the Period from March 5, 1999(Inception) to March 31,2010
 
Table of Contents
 
Report of Independent Registered Public Accounting Firm
   
F-2
 
Consolidated Balance Sheets
   
F-3
 
Consolidated Statements of Operations
   
F-4
 
Consolidated Statements of Changes in Stockholders' Deficit
   
F-5 / F-7
 
Consolidated Statements of Cash Flows
   
F-8
 
Notes to Consolidated Financial Statements
   
F-9  /  F-22
 
 
 
 
F-1

 
 
Report of Independent Registered Public Accounting Firm

To the board of directors and shareholders of
Kyto Biopharma, Inc.

We have audited the accompanying consolidated balance sheets of Kyto Biopharma, Inc. (A Development Stage Company) as of March 31, 2010 and 2009 and the related statements of operations, changes in stockholders’ deficit and cash flows for the years ended March 31, 2010 and 2009 and for the period from March 5, 1999 (inception) through March 31, 2010. These consolidated financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provided a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Kyto Biopharma, Inc. (A Development Stage Company) as of March 31, 2010 and the results of its operations and its cash flows for the years then ended March 31, 2010 and 2009, and from March 5, 1999 (inception) through March 31, 2010 in conformity with accounting principles generally accepted in the United States.

The accompanying consolidated financial statements referred to above have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1, the Company’s need to seek new sources or methods of financing or revenue to pursue its business strategy, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans as to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
   
/s/  Jewett, Schwartz, Wolfe & Associates
 
   
Hollywood, Florida
 
June 28, 2010 except for Note 2 as to which the date is August  26 , 2010
 

 
F-2

 
 
Kyto Biopharma, Inc. and Subsidiary
(A Development Stage Company)
Consolidated Balance Sheets
 
   
March 31,
   
March 31,
 
   
2010
   
2009
 
   
(Restated)
       
ASSETS
       
Current Assets
           
Cash
  $ 4,444     $ 12,754  
Prepaid expenses
    -       47,562  
Total Current Assets
    4,444       60,316  
                 
Other Assets
               
Patent Rights
    165,570       -  
                 
                 
Total Assets
  $ 170,014     $ 60,316  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
         
                 
Current Liabilities
               
Accounts payable
  $ 6,518     $ 8,317  
Accrued liabilities - related party
    36,668       43,333  
Accrued interest payable - related party
    59,329       52,784  
Accrued interest payable - preferred convertible stock
    49,486       24,128  
Loan payable-related party
    870,796       353,824  
Note payable-related party
    100,000       100,000  
Total Current Liabilities
    1,122,797       582,386  
                 
Commitments and Contingencies
               
                 
Stockholders' Deficit
               
Preferred convertible stock, $1.00 par value, 1,000,000 shares
               
authorized, 473,624 shares issued and outstanding
               
as of March 31, 2010 and 2009 repectively
    473,624       473,624  
Common stock, $0.0001 par value, 25,000,000 shares
               
authorized, 12,998,482  and 12,743,610 shares issued and
               
outstanding as of March 31, 2010 and 2009 respectively
    1,300       1,275  
Additional paid-in capital
    15,815,489       15,654,944  
Deficit accumulated during development stage
    (17,065,962 )     (16,474,669 )
Accumulated other comprehensive loss
    (177,234 )     (177,244 )
                 
Total Stockholders' Deficit
    (952,783 )     (522,070 )
                 
Total Liabilities and Stockholders' Deficit
  $ 170,014     $ 60,316  
                 
 
The accompanying notes are an integral part of these consolidated financial statements
 
 
F-3

 

Kyto Biopharma, Inc. and Subsidiary
(A Development Stage Company)
Consolidated Statements of Operations
 
               
For the period from
 
               
March 5, 1999
 
   
For The Year Ended
   
(inception) to
 
   
March 31
   
March 31
 
   
2010
   
2009
   
2010
 
   
(Restated)
            (Restated)  
Operating Expenses
                 
Compensation
  $ -     $ -     $ 1,750,636  
Depreciation and amortization
    -       -       814,183  
Consulting
    55,998       57,482       9,859,809  
Bad debt
    -       -       12,819  
Director fees
    -       -       314,100  
Financing fees
    -       -       28,781  
Professional fees
    48,026       42,544       244,936  
General and administrative
    42,998       54,853       603,724  
Research and development
    146,347       216,926       1,664,951  
Loss on debt conversion
    -       -       519,795  
Impairment loss
    -       -       1,191,846  
Total Operating Expenses
    293,369       371,805       17,005,580  
                         
                         
Other Income (Expense)
                       
Interest income
    -       -       4,922  
Interest expense
    (31,903 )     (31,713 )     (126,512 )
Gain on debt forgiveness     -       -       78,665  
Loss on related party receivable  (see note 2)
    (265,931 )     -       (265,931 )
Loss on disposal of equipment
    -       -       (567 )
Foreign exchange gains (losses)
    (90 )     (239,578 )     249,041  
Total Other Income (Expense), net
    (297,924 )     (271,291 )     (60,382 )
                         
                         
Net Loss
  $ (591,293 )   $ (643,096 )   $ (17,065,962 )
                         
                         
Comprehensive  Loss
                       
Foreign currency translation gain (loss)
    10       240,763       (177,234 )
                         
                         
Total Comprehensive Loss
  $ (591,283 )   $ (402,333 )   $ (17,243,196 )
                         
                         
Weighted average number of shares outstanding
                       
during the year - basic and diluted
    12,743,610       12,743,610          
                         
                         
Net  Income (Loss) per share - basic and diluted
  $ (0.05 )   $ (0.05 )        
 
The accompanying notes are an integral part of these consolidated financial statements
 
 
F-4

 
 
Kyto Biopharma, Inc. and Subsidiary
(A Development Stage Company)
Consolidated Statement of Changes in Stockholders' Deficiency
Years Ended March 31, 2010 and 2009, and for the period from
March 5, 1999 (Inception) to March 31, 2010
 
                                   
Deficit
   
Accumulated
                               
                                   
Accumulated
   
Other
                               
     
Preferred Stock
   
Common Stock
   
Additional
   
During
   
Comprehensive
               
Deferred
             
     
$1.00 par value
   
$0.0001 par value
   
Paid - in
   
Development
   
Income
   
Deferred
   
Subscription
   
Loan
   
Deferred
       
     
Shares
   
Amount
   
Shares
   
Amount
   
Capital
   
Stage
   
(Loss)
   
Consulting
   
Receivable
   
Fee
   
Expenses
   
Total
 
Common stock issued for services to officer
      -     $ -       300,000     $ 30     $ 299,970     $ -     $ -     $ -     $ -     $ -     $ -     $ 300,000  
Common stock issued for services to consultant
      -       -       255,000       25       254,975       -       -       -       -       -       -       255,000  
Warrants issued to consultant
      -       -       -       -       345,000       -       -       -       -       -       -       345,000  
Net loss, 1999
      -       -       -       -       -       (900,000 )     -       -       -       -       -       (900,000 )
Balance, March 31, 1999
      -       -       555,000       55       899,945       (900,000 )     -       -       -       -       -       -  
Preferred stock issued for cash
      250,000       250,000       -       -       -       -       -       -       -       -       -       250,000  
Offering cost
      -       -       -       -       (17,005 )     -       -       -       -       -       -       (17,005 )
Common stock issued for intangible assets
      -       -       2,000,000       200       1,999,800       -       -       -       -       -       -       2,000,000  
Common stock issued for cash upon exercise
                                                                                                 
of warrants
      -       -       100,000       10       99,990       -       -       -       -       -       -       100,000  
Foreign currency translation loss
      -       -       -       -       -       -       (5,745 )     -       -       -       -       (5,745 )
Net loss, 2000
      -       -       -       -       -       (650,366 )     -       -       -       -       -       (650,366 )
Balance, March 31, 2000
      250,000       250,000       2,655,000       265       2,982,730       (1,550,366 )     (5,745 )     -       -       -       -       1,676,884  
Common stock issued as director fees
      -       -       58,100       6       58,094       -       -       -       -       -       -       58,100  
Common stock issued for cash upon exercise
                                                                                                 
of warrants
      -       -       150,000       15       149,985       -       -       -       -       -       -       150,000  
Common stock issued for cash upon exercise
                                                                                                 
of warrants
      -       -       345,000       35       -       -       -       -       -       -       -       35  
Common stock issued to officer as
                                                                                                 
compensation
      -       -       100,000       10       99,990       -       -       -       -       -       -       100,000  
Common stock issued for cash
      -       -       100,000       10       99,990       -       -       -       -       -       -       100,000  
Common stock issued to consultant for services not yet rendered
      -       -       400,000       40       1,199,960       -       -       (1,200,000 )     -       -       -       -  
Foreign currency translation gain
      -       -       -       -       -       -       60,054       -       -       -       -       60,054  
Net loss, 2001
      -       -       -       -       -       (966,789 )     -       -       -       -       -       (966,789 )
Balance, March 31, 2001
      250,000       250,000       3,808,100       381       4,590,749       (2,517,155 )     54,309       (1,200,000 )     -       -       -       1,178,284  
Preferred stock converted to common stock
      (250,000 )     (250,000 )     250,000       25       249,975       -       -       -       -       -       -       -  
Common stock warrants issued for consulting
                                                                                                 
services
      -       -       -       -       254,346       -       -       -       -       -       -       254,346  
Common stock issued for cash upon exercise
                                                                                                 
of warrants
      -       -       125,000       13       124,987       -       -       -       -       -       -       125,000  
Common stock warrants issued for services
      -       -       -       -       849,915       -       -       -       -       -       -       849,915  
Common stock issued for cash upon exercise
                                                                                                 
of warrants
      -       -       850,000       85       -       -       -       -       -       -       -       85  
Common stock issued to directors as
                                                                                                 
compensation
      -       -       6,000       -       6,000       -       -       -       -       -       -       6,000  
Common stock issued to employees as
                                                                                                 
compensation
      -       -       3,000       -       3,000       -       -       -       -       -       -       3,000  
Common stock issued as loan fee
      -       -       25,000       3       24,997       -       -       -       -       (25,000 )     -       -  
Foreign currency translation gain
      -       -       -       -       -       -       13,397       -       -       -       -       13,397  
Net loss, 2002
      -       -       -       -       -       (2,959,415 )     -       -       -       -       -       (2,959,415 )
Balance, March 31, 2002
      -       -       5,067,100       507       6,103,969       (5,476,570 )     67,706       (1,200,000 )     -       (25,000 )     -       (529,388 )
Stock issued for cash and services
      -       -       225,000       22       224,978       -       -       -       -       -       -       225,000  
Stock issued in settlement of accounts payable,
                                                                                                 
net of redeemable shares
      -       -       100,000       10       99,990       -       -       -       -       -       -       100,000  
Stock issued to settle loans payable, related party
      -       -       102,658       10       102,648       -       -       -       -       25,000       -       127,658  
Common stock issued for services to
                                                                                                 
consultant not yet rendered
      -       -       800,000       80       799,920       -       -       (800,000 )     -       -       -       -  
Stock issued for past and future rent and
                                                                                                 
administrative services
      -       -       65,000       7       64,993       -       -       -       -       -       (30,000 )     35,000  
Common stock warrants issued as financing fee
      -       -       -       -       3,783       -       -       -       -       -       -       3,783  
Foreign currency translation loss
      -       -       -       -       -       -       (80,354 )     -       -       -       -       (80,354 )
Net loss, 2003
      -       -       -       -       -       (319,141 )     -       -       -       -       -       (319,141 )
Balance, March 31, 2003
      -       -       6,359,758       636       7,400,281       (5,795,711 )     (12,648 )     (2,000,000 )     -       -       (30,000 )     (437,442 )
 
The accompanying notes are an integral part of these consolidated financial statements
 
 
F-5

 
 
Foreign currency translation loss
      -       -       -       -       -       -       (117,341 )     -       -       -       -       (117,341 )
Amortization of deferred expenses
      -       -       -       -       -       -       -       -       -       -       30,000       30,000  
Net Loss, 2004
      -       -       -       -       -       (34,846 )             -       -       -       -       (34,846 )
Balance, March 31, 2004
      -     $ -       6,359,758     $ 636     $ 7,400,281     $ (5,830,557 )   $ (129,989 )   $ (2,000,000 )   $ -     $ -     $ -       (559,629 )
Stock issued for cash and services
      -       -       500,000       50       249,950       -       -       -       -       -       -       250,000  
Common stock issued for services to consultant not yet rendered
      -       -       4,500,000       450       6,749,550       -       -       (5,343,750 )     -       -       -       1,406,250  
Stock issued to settle loans payable, related party
      -       -       320,000       32       479,968       -       -       -       -       -       -       480,000  
Stock issued for past and future rent and
                                                                                                 
administrative services
      -       -       133,333       13       199,986       -       -       -       (13 )     -       -       199,986  
Foreign currency translation loss
      -       -       -       -       -       -       (87,495 )     -       -       -       -       (87,495 )
Net Loss, 2005
      -       -       -       -       -       (1,963,666 )     -       -       -       -       -       (1,963,666 )
Balance, March 31, 2005
      -     $ -       11,813,091     $ 1,181     $ 15,079,735     $ (7,794,223 )   $ (217,484 )   $ (7,343,750 )   $ (13 )   $ -     $ -       (274,554 )
Stock issued for cash and services
      -       -       173,058       18       173,040       -       -       -       -       -       -       173,058  
Recognition of services rendered by consultant
      -       -       -       -       -       -       -       3,374,950       -       -       -       3,374,950  
Stock issued to settle loans payable, related party
      -       -       14,054       1       10,540       -       -       -       -       -       -       10,541  
Stock issued for past and future rent and
                                                                                                 
administrative services
      -       -       80,000       8       59,992       -       -       -       -       -       -       60,000  
Foreign currency translation loss
      -       -       -       -       -       -       (40,435 )     -       -       -       -       (40,435 )
Net Loss, 2006
      -       -       -       -       -       (3,534,787 )     -       -       -       -       -       (3,534,787 )
Balance, March 31, 2006
      -     $ -       12,080,203     $ 1,208     $ 15,323,307     $ (11,329,010 )   $ (257,919 )   $ (3,968,800 )   $ (13 )   $ -     $ -       (231,227 )
Stock issued for cash and services
      -       -       -       -       -       -       -       -       -       -       -       -  
Recognition of services rendered by consultants
      -       -       -       -       -       -       -       3,968,800       -       -       -       3,968,800  
Stock issued for past and future rent and
                                                                                                 
administrative services
      -       -       -       -       -       -       -       -       13       -       -       13  
Foreign currency translation loss
      -       -       -       -       -       -       (13,866 )     -       -       -       -       (13,866 )
Net Loss, 2007
      -       -       -       -       -       (4,148,725 )     -       -       -       -       -       (4,148,725 )
Balance, March 31, 2007
      -     $ -       12,080,203     $ 1,208     $ 15,323,307     $ (15,477,735 )   $ (271,785 )   $ -     $ -     $ -     $ -     $ (425,005 )
Preferred convertible stock issued to settle loan payable, related party
      459,734       459,734       -       -       -       -       -       -       -       -       -       459,734  
Preferred convertible stock issued to settle 5% interest on
                                                                                                 
convertible preferred stock
      13,890       13,890       -       -       -       -       -       -       -       -       -       13,890  
Common stock issued to settle loan payable, related party
      -       -       3,408       1       1,703       -       -       -       -       -       -       1,704  
Stock issued for rent and administrative services
      -       -       159,999       16       79,984       -       -       -       -       -       -       80,000  
Common stock issued for director fees
      -       -       500,000       50       249,950       -       -       -       -       -       -       250,000  
Foreign currency translation loss
      -       -       -       -       -       -       (146,222 )     -       -       -       -       (146,222 )
Net Loss, 2008
      -       -       -       -       -       (353,838 )     -       -       -       -       -       (353,838 )
Balance, March 31, 2008
      473,624     $ 473,624       12,743,610     $ 1,275     $ 15,654,944     $ (15,831,573 )   $ (418,007 )   $ -       -       -       -     $ (119,737 )
Foreign currency translation gain
      -       -       -       -       -       -       240,763       -       -       -       -       240,763  
Net Loss, 2009
      -       -       -       -       -       (643,096 )     -       -       -       -       -       (643,096 )
Balance, March 31, 2009
      473,624     $ 473,624       12,743,610     $ 1,275     $ 15,654,944     $ (16,474,669 )   $ (177,244 )   $ -     $ -     $ -     $ -     $ (522,070 )
Common stock issued for patent rights
      -       -       254,872       25       160,545       -       -       -       -       -       -       160,570  
Foreign currency translation gain
      -       -       -       -       -       -       -       -       -       -       -       -  
Net Loss, 2010
      -       -       -       -       -       (325,362 )     10       -       -       -       -       (325,352 )
Balance, March 31, 2010, as previously reported
      473,624     $ 473,624       12,998,482     $ 1,300     $ 15,815,489     $ (16,800,031 )   $ (177,234 )   $ -     $ -     $ -     $ -     $ (686,852 )
Restatement (Note 2)
      -       -       -       -       -       (265,931 )     -       -       -       -       -       (265,931 )
                                                                                                     
Balance, March 31, 2010, as restated
      473,624       473,624       12,998,482       1,300       15,815,489       (17,065,962 )     (177,234 )     -       -       -       -       (952,783 )
 
The accompanying notes are an integral part of these consolidated financial statements
 
F-6

 
 
Kyto Biopharma, Inc. and Subsidiary
(A Development Stage Company)
Consolidated Statements of Cash Flows
 
                 
March 5, 1999
 
     
For the Years Ended March 31,
   
(Inception) to
 
     
2010
   
2009
   
March 31, 2010
 
     
(Restated)
          (Restated)  
Cash Flows from Operating Activities:
                 
Net loss
  $ (591,293 )   $ (643,096 )   $ (17,065,962 )
Adjustment to reconcile net loss to net cash provided by (used in)
                       
 
operating activities:
                       
 
Depreciation and amortization
    -       -       814,183  
 
Recognition of services rendered by consultant
    -       -       10,227,893  
 
Stock based consulting expense
    -       -       854,345  
 
Stock based director fees
    -       -       314,100  
 
Stock based rent and administrative fees
    -       -       167,028  
 
Preferred convertible stock issued for interest due on outstanding preferred convertible stock
    -       -       13,890  
 
Common stock warrants issued as financing fee
    -       -       3,783  
 
Loss on disposal of equipment
    -       -       567  
 
Impairment loss
    -       -       1,191,846  
 
Loss on debt forgiveness
    -       -       (9,837 )
 
Gain on settlement of accounts payable
    -       -       (59,654 )
 
Loss on settlement of accounts payable
    -       -       519,795  
 
Amortization of stock based financing fee
    -       -       25,010  
Changes in operating assets and liabilities:
                       
 
Prepaids and other assets
    42,562       (1,876 )     (5,000 )
 
Accounts payable and accrued expenses
    (8,465 )     24,098       529,057  
 
Accounts payable,related party accrued interest, and accrued liabilities
    31,904       31,713       84,496  
Net Cash Used in Operating Activities
    (525,292 )     (589,161 )     (2,394,460 )
                           
Cash Flows from Investing Activities:
                       
Purchase of property and equipment
    -       -       (4,463 )
Net Cash Used in Investing Activities
    -       -       (4,463 )
                           
Cash Flows from Financing Activities:
                       
Proceeds from common stock issuance, net of
                       
 
offering cost
    -       -       958,222  
Loan proceeds from related parties, net
    516,972       353,824       1,649,171  
Repayment of loan to related parties
    -       -       (26,792 )
Net Cash Provided by Financing Activities
    516,972       353,824       2,580,601  
                           
Effect of Exchange Rate
    10       240,763       (177,234 )
                           
Net Increase (decrease) in Cash
    (8,310 )     5,426       4,444  
                           
Cash at Beginning of Period
    12,754       7,328       -  
                           
Cash  at End of Period
  $ 4,444     $ 12,754     $ 4,444  
                           
                           
Supplemental Disclosure of Cash Flow Information:
                       
Cash paid for:
                       
           Interest
 
  $ -     $ -     $ -  
           Taxes
 
  $ -     $ -     $ -  
                           
Supplemental Disclosure of Non-Cash
                       
Investing and Financing Activities:
                       
Conversion of debt to equity
  $ -     $ -     $ 1,102,154  
Stock issued for deferred consulting services
  $ -     $ -     $ 6,750,000  
Conversion of liabilities to note payable
  $ -     $ -     $ 102,023  
Stock issued for debt restructuring anti-dilusion provision
  $ -     $ -     $ 800,000  
Conversion of preferred shares to common shares
  $ -     $ -     $ 250,000  
Stock issued for future services
  $ -     $ -     $ 1,200,000  
Issued common shares for intangible assets
  $ -     $ -     $ 2,000,000  
Common Stock Issued for patent rights
  $ 160,570     $ -     $ 160,570  
 
The accompanying notes are an integral part of these consolidated financial statements
 
 
F-7

 
 
KYTO BIOPHARMA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2010
 
 
NOTE 1 NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
(A) NATURE OF BUSINESS
 
Kyto Biopharma, Inc. was formed as a Florida corporation on March 5, 1999. B Twelve, Limited, Kyto Biopharma, Inc.'s wholly-owned Canadian subsidiary (collectively referred to as the "Company"), was also formed on March 5, 1999. On August 14, 2002, the Company changed its name from B Twelve, Inc. to Kyto Biopharma, Inc.
 
The Company is a biopharmaceutical company, formed to acquire and develop innovative minimally toxic and non-immunosuppressive proprietary drugs for the treatment of cancer, arthritis, and other proliferate and autoimmune diseases. The Company has subsequently built itself into a development stage biopharmaceutical company that develops receptor-mediated technologies to control the uptake of vitamin B12 by non-controlled proliferative cells.
 
Activities during the development stage include acquisition of financing and intellectual properties and research and development activities conducted by others under contracts.
 
(B) PRINCIPLES OF CONSOLIDATION
 
The accompanying consolidated financial statements include the accounts of the Company and its subsidiary. All material intercompany balances and transactions have been eliminated in consolidation.
 
(C) GOING CONCERN
 
As reflected in the accompanying consolidated financial statements, the Company has no revenues, a net loss of $591,293 , a working capital deficiency of $1,118,353, a stockholders' deficiency of $952,783 and a deficit accumulated during the development stage of $17,065,962 at March 31, 2010. The ability of the Company to continue as a going concern is dependent on the Company's ability to further implement its business plan, raise capital, and generate revenues. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
 
The Company is currently a development stage company and its continued existence is dependent upon the Company's ability to resolve its liquidity problems, principally by obtaining additional debt financing and/or equity capital. During the year ended March 31, 2010, the Company received $ 516,972 in related party debt financing.
 
The Company has yet to generate an internal cash flow, and until the sales of its product begins, the Company is very dependent upon debt and equity funding. The Company must successfully complete its research and development resulting in a saleable product. However, there is no assurance that once the development of the product is completed and finally gains Federal Drug and Administration clearance, and that the Company will achieve a profitable level of operations.
 
 
F-8

 
 
NOTE 1  NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
(D) USE OF ESTIMATES
 
In preparing consolidated 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 consolidated financial statements, and revenues and expenses during the period presented. Actual results may differ from these estimates.
 
Significant estimates during 2010 and 2009 and for the period for March 5, 1999 (inception) to March 31, 2010 include depreciable lives on equipment, valuation of intangible assets, the valuation allowance of deferred tax assets, and the valuation of non-cash stock based transactions.
 
 (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 March 31, 2010 and 2009, respectively. 
 
(F) BASIS OF PRESENTATION AND FOREIGN CURRENCY
 
The accompanying consolidated financial statements are presented under accounting principles generally accepted in the United States of America and in United States dollars. There were no cash equivalent at March 31, 2010 and 2009, respectively.
 
The Company's Canadian subsidiary transacts business in the Canadian dollar. The accounts of the Canadian subsidiary are translated to United States dollars using the current rate method. Under the current rate method, all assets and liabilities are translated using exchange rates at the balance sheet date. Revenue and expense items are translated using the average rate of exchange prevailing during the period. Capital transactions are translated at their historical rates. Exchange gains and losses resulting from translation of foreign currencies are recorded in stockholders' deficiency as a cumulative translation adjustment and reflected as a component of other accumulated comprehensive income or loss.
 
Gains and losses resulting from foreign currency transactions are recognized in operations of the period incurred.
 
(G) CONCENTRATIONS
 
The Company maintains its cash in bank deposit accounts, which, at times, may exceed federally insured limits. As of March 31, 2010, the Company did not have any deposits in excess of federally insured limits. The Company has not experienced any losses in such accounts through March 31, 2010 and 2009, respectively.
 
The Company has obtained and continues to obtain a large amount of its funding from loans and equity funding from a principal stockholder related to a director of the Company.
 
(H) EQUIPMENT
 
Equipment is stated at cost, less accumulated depreciation. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is provided using the straight-line method over the estimated useful lives of the assets of five years.
 
 
F-9

 
 
NOTE 1 NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 (I) LONG-LIVED ASSETS
 
The Company reviews long-lived assets and certain identifiable assets related to those assets for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recoverable. If the undiscounted future cash flows of the long-lived assets are less that the carrying amount, their carrying amount is reduced to fair value and an impairment loss is recognized.
 
(J) STOCK-BASED COMPENSATION
 
Financial Accounting Standards Board Accounting Standards Codification Topic 718, Stock Compensation requires generally that all equity awards granted to employees be accounted for at “fair value.” This fair value is measured at grant for stocksettled 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.
 
(K) RESEARCH AND DEVELOPMENT COSTS
 
Others conduct research and development on behalf of the Company under contractual agreements and such costs are charged to expense as incurred. Research and development expense was $146,347 and  $216,926, and $1,664,951 for the years ended March 31, 2010, 2009, and for the period from March 5, 1999 (inception) to March 31, 2010, respectively.

(L) PATENT RIGHTS

 Acquisition of Patent Rights is stated at cost and will be reclassified to intangible assets and amortized on a straight-line basis over the estimated future periods to be benefited if and once the patent has been granted by the United States Patent and Trademark Office (“USPTO”). The Company will write-off any currently capitalized costs for patents not granted by the USPTO (See note 4).
 
(M) INCOME TAXES
 
The Company accounts for income taxes under the Financial Accounting Standards  Accounting Standard Cordifcation 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 consolidated 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.
 
 
F-10

 
 
NOTE 1  NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 (N) COMPREHENSIVE INCOME
 
The Company accounts for Comprehensive Income under the Financial Accounting Standards Board Statement of Financial Accounting Standards  Accounting Standard Cordification  Topic 220, "Reporting Comprehensive Income" ("Topic  220"). Topic 220 establishes standards for reporting and display of comprehensive income and its components. Comprehensive income is the total of net income (loss) and other comprehensive income (loss).
 
The foreign currency translation gains and losses resulting from the translation of the financial statements of B Twelve, Ltd. expressed in Canadian dollars to United States dollars are reported as Accumulated Other Comprehensive Income or Loss in the Statement of Operations.
 
(O) NET LOSS PER COMMON SHARE
 
In accordance with Statement of Financial Accounting Standards Accounting Standard Cordification Topic. 260, "Earnings per Share", basic earnings per share is computed by dividing the net income less preferred dividends for the period by the weighted average number of common shares outstanding. Diluted earnings per share is computed by dividing net income less preferred dividends by the weighted average number of common shares outstanding including the effect of common stock equivalents. Common stock equivalents, consisting of stock options and warrants, have not been included in the calculation, as their effect is antidilutive for the periods presented. At March 31, 20010, there were convertible preferred shares which could have been potentially been converted into 471,816 shares of common stock, but would be antidilutive.
 
(P) FAIR VALUE OF FINANCIAL INSTRUMENTS
 
Statement of Financial Accounting Standards  Accounting Standard Cordification Topic 820, "Disclosures about Fair Value of Financial Instruments," requires disclosures of information about the fair value of certain financial instruments for which it is practicable to estimate that value. For purposes of this disclosure, the fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation.
 
The carrying amounts of the Company's short-term financial instruments, including other receivables, accounts payable, and loans payable-related parties, approximate fair value due to the relatively short period to maturity for these instruments.
 
 
F-11

 
 
NOTE 1  NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
(Q) ACCOUNTING STANDARDS UPDATES

In January 2010, the FASB has published ASU 2010-01 “Equity (Topic 505)- Accounting for Distributions to Shareholders with Components of Stock and Cash—a consensus of the FASB Emerging Issues Task Force,” as codified in ASC 505,. ASU No. 2010-01 clarifies the treatment of certain distributions to shareholders that have both stock and cash components. The stock portion of such distributions is considered a share issuance that is reflected in earnings per share prospectively and is not a stock dividend. The amendments in this Update are effective for interim and annual periods ending on or after December 15, 2009, and should be applied on a retrospective basis.  The adoption of this ASU did not have a material impact on our consolidated financial statements; however, it may affect any future stock distributions.

In January 2010, the FASB has published ASU 2010-02 “Consolidation (Topic 810)- Accounting and Reporting for Decreases in Ownership of a Subsidiary—a Scope Clarification,” as codified in ASC 810, “Consolidation.” ASU No. 2010-02 applies retrospectively to April 1, 2009, our adoption date for ASC 810-10-65-1 as previously discussed in this financial note. This ASU clarifies the applicable scope of ASC 810 for a decrease in ownership in a subsidiary or an exchange of a group of assets that is a business or nonprofit activity. The ASU also requires expanded disclosures. The amendments in this Update are effective for interim and annual periods ending on or after December 15, 2009, and should be applied on a retrospective basis.    The adoption of this ASU did not have a material impact on our consolidated financial statements; however, it may affect future divestitures of subsidiaries or groups of assets within its scope.

In January 2010, the FASB issued Accounting Standards Update No. 2010-06 applicable to FASB ASC 820-10, Improving Disclosures about Fair Value Measurements . The guidance requires entities to disclose significant transfers in and out of fair value hierarchy levels and the reasons for the transfers and to present information about purchases, sales, issuances and settlements separately in the reconciliation of fair value measurements using significant unobservable inputs (Level 3). Additionally, the guidance clarifies that a reporting entity should provide fair value measurements for each class of assets and liabilities and disclose the inputs and valuation techniques used for fair value measurements using significant other observable inputs (Level 2) and significant unobservable inputs (Level 3). This guidance is effective for interim and annual periods beginning after December 15, 2009 except for the disclosures about purchases, sales, issuances and settlements in the Level 3 reconciliation, which will be effective for interim and annual periods beginning after December 15, 2010. As this guidance provides only disclosure requirements, the adoption of this standard did not impact the Company’s consolidated results of operations, cash flows or financial positions.

In January 2010, the FASB has published ASU 2010-05 “Compensation – Stock Compensation (Topic 718)- Escrowed Share Arrangements and the Presumption of Compensation.  ASU No. 2010-01 clarifies the treatment of certain distributions to shareholders that have both stock and cash components. The stock portion of such distributions is considered a share issuance that is reflected in earnings per share prospectively and is not a stock dividend. The amendments in this Update are effective for interim and annual periods ending on or after December 15, 2009, and should be applied on a retrospective basis.  The adoption of this ASU did not have a material impact on our consolidated financial statements; however, it may affect any future stock distributions.
 
Other ASUs not effective until after March 31,2010, are not expected to have a significant effect on the Company’s consolidated financial position or results of operations.
 
(R) RECLASSIFICATIONS
 
Certain amounts in the March 31, 2009 consolidated financial statements have been reclassified to conform to the March 31, 2010 presentation.
 
 
F-12

 
 
NOTE 2  RESTATEMENT

In the second quarter of 2010, the Company cancelled the agreement with Targeted Payload Therapeutics (“TPT”), a private Nevada registered company, as described in Note 5. As of March 31, 2010, the Company was owed $265,931 from TPT which was considered non-recoverable and impaired as a result of cancellation of agreement in May, 2010 between the Company and TPT. Accordingly, the Company recorded a write off of an impaired loan receivable in the amount of $265,931 for the year ending March 31, 2010, which resulted in an increase of net loss from $325,362, as previously reported to $591,293 as restated, and an increase in deficit accumulated during development stage from $16,800,031, as previously reported to $17,065,962, as restated. This adjustment also resulted in a decline of total assets from $435,945, as previously reported to $170,014, as restated. The Company has reflected the impact of these adjustments in its consolidated financial statements for the year ending March 31, 2010.
 
NOTE 3  PREPAID EXPENSES
 
Prepaid expenses are related to research and development cost. Prepaid research and development costs are amortized as services are performed. For the years ended March 31, 2010 and 2009, the total prepaid expenses were 0 and $47,562, respectively.
 
NOTE 4  PATENT RIGHTS

On  February 10, 2010, the Company purchased a portfolio of patents, patents pending, and related intellectual property (collectively the "Intellectual Property") from a third party in exchange for 254,872 shares of the Company's common stock and an outstanding balance of $5,000. The shares were valued at $0.63 per share resulting in  total value of $165,570.
 
Kyto executed an “Executive Licensing Agreement” with The Research Foundation of State University of New York, “RFSUNY”, allowing Kyto to license certain technology surrounding the Human Transcobalamin Receptor.  The licensing agreement is active until the expiry of the patent rights.  The rights primarily relate to the patent: “Transcobalamin Receptor Polypeptides, Nucleic Acids, and Modulators Thereof, and Related Methods of Use in Modulating Cell Growth and Treating Cancer and Cobalamin Deficiency”.   The Patents were valued for $165,570.
 
NOTE 5  INTANGIBLE ASSETS IMPAIRMENT
 
On June 2, 1999, the Company purchased a portfolio of patents, patents pending, and related intellectual property (collectively the "Intellectual Property") from a third party in exchange for 2,000,000 shares of the Company's common stock. The shares were valued at $1.00 per share based on contemporaneous cash purchases of convertible preferred stock and common stock warrants resulting in a value of $2,000,000. The Company also capitalized certain legal costs.
 
As of March 31, 2002, management performed an impairment analysis of the Intellectual Property. Due to of the Company being in  a development stage along with the inherent difficulties in projecting future revenues, the company recognized an impairment loss for the full remaining book value of the asset totaling $1,191,846 in 2002.
 
NOTE 6 LOAN RECEIVABLE-RELATED PARTY
 
In June 2009, 2 of the founders of the Company entered into a Standstill Agreement with the Clayton Foundation to license and commercialize from the Clayton Foundation for Research a portfolio of product candidates based on proprietary technology in part developed at the MD Anderson Cancer Center by Dr Michael Rosenblum, a former director of Kyto Biopharma Inc.
 
 
F-13

 
 
The services of 2 biotechnology specialized investment banks were secured in order to prepare a business plan, a valuation of the licenses and raise the funds necessary for the clinical development of targeted anticancer therapeutic proteins.
 
Through a new entity, Targeted Payload Therapeutics, Inc. (TPT), funds advanced by a related party were advanced to TPT for the payment of the “Standstill Agreement”, fees related to the services of the 2 investment banks and expenses related to the transaction. The shareholders of TPT upon closing were: Kyto Biopharma Inc.,  Dr Sagman, a director and one of the founders of the Company, the Clayton Foundation and scientists instrumental in bringing the transaction and continuing the development of the pipeline of products.
 
During the year ended March 31, 2010, Kyto loaned $265,931 to a newly founded US based biotechnology company, TPT. Amounts loaned under this note was non- interest bearing, unsecured, due on demand and did not follow any specific repayment terms.TPT was created to commercialize licensed technology which was developed at leading medical centers of excellence in the USA. Two of the founders of Kyto, Mr. Georges Benarroch and Dr. Uri Sagman, are also the founders of TPT.
 
On May 7, 2010 the Company announced the cancellation of its agreement with Targeted Payload Therapeutics Inc. ("TPT")  as a result of irreconcilable differences among the management of TPT which prevented the Company to  pursue activities per Standstill Agreement.  Amounts loaned under the aforesaid note was non- interest bearing, unsecured, due on demand and did  not follow any specific repayment terms . As of March 31, 2010 the Company wrote off the entire amount owed of $265,931 as a result of cancellation of agreement between the Company and TPT (see note 2).
 
 
F-14

 
 
NOTE 7  COMMITMENTS AND CONTINGENCIES
 
(A) LEASES
 
The Company leases office space on a month-to-month basis. The premise is leased from a principal stockholder. Rent expense in 2010, 2009, and for the period from March 5, 1999 (inception) to March 31, 2010 were $18,000, $20,000, and $186,377, respectively and is included in general and administrative expense in the accompanying consolidated statements of operations.
 
(B) REDEEMABLE COMMON STOCK PURSUANT TO PUT OPTION
 
In November 2002 and February 2003, the Company issued an aggregate 273,058 shares of its common stock having a fair value of $273,058 to settle certain accounts payable under a debt settlement agreement ("agreement") with three unrelated parties. Of the total stock issued in connection with the agreement, two of these parties received an aggregate 173,058 shares of common stock. In addition, these two creditors received a written put option for the aggregate 173,058 shares of common stock previously issued. Three years from the date of the initial settlement, the put option holders have a thirty-day period in which to notify the Company of their intent to put the options back to the Company at a redemption price of $1.00 per share. The Company had 90 days from the notification date to make the required payment. These shares expired without redemption during the year ended March 31, 2006.
 
(C) REGULATION
 
The business of the Company is subject to various governmental regulations in the United States of America, Canada, and other countries, which must approve any Company products before commencement of commercial sales and which regulate the manufacturing of pharmaceuticals.
 
(D) LITIGATION
 
A claim against the Company was commenced by SHI Consulting in the amount of $32,416 plus GST for damages resulting from a breach of contract and prejudgment and post judgment interest and costs. The Company counterclaimed for $300,000 for breach of contract plus interest and costs. The claim was dismissed as of March 31, 2009
 
 
F-15

 
 
NOTE 8  LOANS AND NOTES PAYABLE AND ACCRUED LIABILITIES, RELATED PARTIES
 
(A) LOANS PAYABLE, RELATED PARTIES
 
In November 2002, the Company received working capital funds from a principal stockholder totaling $50,000 as part of a $100,000 agreement to provide debt financing.
 
During the year ended March 31, 2004, the Company received the remaining $50,000 portion of the debt financing transaction plus an additional $25,000. All activity with this principal stockholder represents a 100% concentration of all debt financing for the year ended March 31, 2004. All loans are non-interest bearing, unsecured and due on demand. In the first quarter of fiscal 2004, an additional $35,000 loan was received from the same principal stockholder. In October 2004, the $160,000 was exchanged for 320,000 common shares. The Company recognized a loss of $320,000 on this transaction.
 
At March 31, 2005, the Company owed $4,616 to a director of the Company. The loan was non-interest bearing, unsecured and due on demand and included in the loans payable, related party balance. The amount was paid in February 2006, through issuance of stock.
 
At March 31, 2007, the Company owed $233,430 to a related party of the Company. The loan is non-interest bearing, unsecured and due on demand and included in the loans payable, related party balance. During the year ended March 31, 2008, the company was advanced an additional $228,008. The loan was paid through issuance of 459,734 shares of preferred convertible stock valued at $1 per share and 3,408 shares of common stock valued at $0.50 per share for a total of $461,438. The balance of the related party loan payable as of March 31, 2008 was $0.
 
At March 31, 2010, the Company owed $870,796 to a related party director of the Company. The loan is non-interest bearing, unsecured and due on demand and included in the loans payable, related party balance.
 
(B) ACCRUED LIABILITIES, RELATED PARTY
 
The Company leases office space and administrative services from a related party principal stockholder. Rent and administrative expense in 2010, 2009, and for the period from March 5, 1999 (inception) to March 31, 2010 was $36,000 and $37,500, and $410,254, respectively and is included in general and administrative expense in the accompanying consolidated statements of operations. The Company allocates 50% of these amounts to rent expense. During the year ended March 31, 2008, the Company issued 159,999 shares of common stock valued at $0.50 per share for a total of $80,000 to satisfy accrued rent and administrative expense. As of March 31, 2010 and 2009, the remaining balance in the accrued liabilities-related party account for the above services was $36,667 and $43,333, respectively.
 
(C) NOTE PAYABLE, RELATED PARTY
 
During the year ended March 31, 2001, the Company entered into an agreement with a vendor, who is also a principal stockholder, for services totaling $200,000. On November 11, 2002, the Company and vendor mutually agreed that in lieu of the $200,000 payment, the vendor would accept 100,000 shares of the Company's common stock valued at $1.00 totaling $100,000. In addition, the Company also executed a $100,000 unsecured promissory note with the vendor. Under the terms of the promissory note, the obligation bears interest at prime plus 1% (5.25% at March 31, 2010). Interest is accrued and payable quarterly. At March 31, 2010 and 2009, accrued interest totaled $59,329 and $52,784, respectively. In connection with the promissory note, all principal and accrued interest is payable in full upon the earliest of the following:
 
(i) The date on which the Company raises at least $1,000,000 in funding within a twelve-month period;
 
(ii) The date on which the agreement between the Company, vendor and other unrelated party terminates; or
 
(iii) Three years from the date of the promissory note.
 
Since the note was due in November 2005, the note payable was re-classified to current liabilities at March 31, 2005.
 
 
F-16

 
 
NOTE 9  STOCKHOLDERS' DEFICIENCY
 
(A) CONVERTIBLE PREFERRED STOCK
 
In June 1999, an investor purchased 250,000 units at $1.00 per unit or $250,000 consisting of 250,000 shares of convertible preferred stock and receives warrants to purchase up to 750,000 common shares as follows: 250,000 common stock warrants exercisable at $1.00 per share issued with the preferred stock and another potential 500,000 as discussed below. The preferred stock was convertible to common stock on a one-for-one basis upon the earlier of:
 
(i) An initial public offering by the Company, as defined,
 
(ii) The completion of a reverse take-over transaction,
 
(iii) A minimum $3,000,000 private equity financing based on a $10,000,000 valuation or,
 
(iv) The merger of the Company with another corporation or the sale of substantively all the assets of the Corporation.
 
There was no beneficial conversion feature upon the sale as the value of the common shares into which the preferred shares are convertible are also $1.00 based on contemporaneous transactions.
 
Upon exercise of the first 250,000 warrants, the investor received another warrant for 250,000 common shares at $1.00 exercise price per share. Upon conversion of the preferred stock, each share of common stock issued shall be coupled with an additional common stock purchase warrant at an exercise price of $1.00 per share with a three-month term. In December 1999 and May 2000, 100,000 and 150,000, respectively, of the first warrant were exercised and therefore in May 2000 the additional 250,000 warrant were granted with an exercise price of $1.00 expiring June 2003. In June 2001, pursuant to a letter of intent, which was ratified by the shareholders, the preferred shares were converted and the additional 250,000 warrants were granted at an exercise price of $1.00 with an amended term not to exceed five years. There was no beneficial conversion feature to the warrants as the value of the common stock was still considered to be $1.00 based on contemporaneous transactions at that time. There was no effect of the warrant issuances on operations as all warrants are considered to be purchased as part of the preferred stock unit. The second and third warrants totaling 500,000 common shares remained outstanding at March 31, 2003. In June 2003, 250,000 expired and in June 2006 the remaining 250,000 expired.
 
In May 2007, Kyto entered into an agreement with Credifinance Capital Corp. to issue up to 500,000 convertible preferred shares at $1.00 per share in satisfaction of amounts due to Credifinance Capital Corp. During the year ended March 31, 2008 the Company issued 459,734 shares of convertible preferred stock to a Credifinance Capital Corp. to satisfy the related party loan payable. As there is no readily available fair value for the Company's convertible preferred stock, the issuance has been recorded at par value of $1 per share for a total of $459,734. The preferred convertible stock issued to satisfy the related party loan may be converted into common shares at the rate of $0.45 per share for up to two years and bear interest at the rate of 5% per annum. Preferred convertible stock has the same voting rights as common stock.
 
 
F-17

 

NOTE 9  STOCKHOLDERS' DEFICIENCY (CONTINUED)
 
The Company issued 13,890 shares of preferred stock valued at $1 per share for a total of $13,890 to Credifinance Capital Corp. for the accrued interest due on outstanding convertible preferred stock during the year ended March 31, 2008. These shares may be converted into common shares at the rate of $0.45 per share for up to two years and bear interest at the rate of 5% per annum.
 
As of March 31, 2010, 473,624 convertible preferred shares were outstanding.
 
 (B) COMMON STOCK AND OPTIONS
 
In January 2006, the Company issued 94,054 shares valued at $0.75 per share based on the quoted trade price in payment of various expenses totaling $47,027 to a finance company controlled by a director of the company and to a director. The Company recorded a loss on debt conversion of $23,513.
 
In February 2008, the company issued 500,000 shares valued at $0.50 per share in payment of consulting service to Dr. Uri Sagman, 159,999 shares valued at $0.50 per share to Credifinance Capital Corp. for rent and administration fees, and 3,408 shares valued at $0.50 per share to Credifinance Capital Corp. for satisfaction of the balance of the related party loan payable.

In March 2010, the Company issued 254,872 shares valued at $0.63 per share, in exchange for Patent rights.
 
(C) STOCK OPTIONS AND WARRANTS
 
The Company issues stock options and warrants to employees, service providers, and investors in the course of business.
 
For stock options and warrants issued to non-employees, the Company applies SFAS No. 123. Accordingly, consulting expense of $3,783 and $254,345 were recognized in 2003 and 2002, respectively, upon granting of 25,000 and 125,000 common stock options, respectively. $345,000 was charged to operations in 1999 as reflected in the accompanying consolidated statements of operations from March 5, 1999 (inception) to March 31, 2008.
 
For consolidated financial statement disclosure purposes and for purposes of valuing stock options and warrants issued to consultants, the fair market value of each stock granted was estimated on the grant date using the Black-Scholes Option-Pricing Model in accordance with SFAS 123. The following weighted-average assumptions were used for the year ended March 31:
 
   
2010
   
2009
   
2008
   
2007
   
2006
   
2005
   
2004
   
2003
   
2002
   
2001
   
2000
   
1999
 
Expected Dividend Yield
 
$
--
     
--
     
--
   
­­--
     
--
     
--
     
--
     
--
     
--
     
--
     
--
     
--
 
Risk Free Interest Rate
   
--
     
--
     
--
     
--
     
--
     
--
     
--
     
4.15
%
   
3.57
%
   
--
     
--
     
4.53
%
Expected Volatility
   
--
     
--
     
--
     
--
     
--
     
--
     
--
     
0.00
%
   
0.00
%
   
--
     
--
     
0.00
%
Expected Term
   
--
     
--
     
--
     
--
     
--
     
--
     
--
   
4 Years
   
1 Year
     
--
     
--
   
2 Years
 

 
F-18

 
 
A summary of the options outstanding, which were granted for cash or services are presented below:
 
 Stock Options
 
WARRANTS
   
EXERCISE PRICE
 
             
 Balance at March 31, 2002
   
500,000
   
$
1.00
 
 Granted  
   
25,000
     
1.00
 
 Exercised 
   
-
     
-
 
 Forfeited  
   
-
     
-
 
 Terminated 
   
-
     
-
 
 Balance at March 31, 2003 
   
525,000
   
$
1.00
 
                 
 Granted     
   
-
     
-
 
 Exercised  
   
-
     
-
 
 Forfeited   
   
(250,000
   
1.00
 
 Terminated 
   
-
     
-
 
 Balance at March 31, 2004  
   
275,000
   
$
1.00
 
                 
 Granted  
   
-
     
-
 
 Exercised 
   
-
     
-
 
 Forfeited  
   
-
     
-
 
 Terminated 
   
-
     
-
 
 Balance at March 31, 2005  
   
275,000
   
$
1.00
 
                 
 Granted  
   
-
     
-
 
 Exercised  
   
-
     
-
 
 Forfeited 
   
-
     
-
 
 Terminated 
   
-
     
-
 
 Balance at March 31, 2006 
   
275,000
   
$
1.00
 
                 
 Grant
   
-
     
-
 
 Exercised   
   
-
     
-
 
 Forfeited 
   
(250,000
)
 
$
1.00
 
 Terminated 
   
-
     
-
 
 Balance at March 31, 2007
   
25,000
   
$
1.00
 
                 
 Grant
   
-
     
-
 
 Exercised  
   
-
     
-
 
 Forfeited 
   
(25,000
)  
 
$
1.00
 
 Terminated
   
-
     
-
 
 Balance at March 31, 2008  
   
-
   
$
1.00
 
                 
 Grant
   
-
     
-
 
 Exercised 
   
-
     
-
 
 Forfeited 
   
-
     
-
 
 Terminated 
   
-
     
-
 
 Balance at March 31, 2009
   
-
   
$
1.00
 
                 
 Exercised 
   
-
     
-
 
 Forfeited   
   
-
     
-
 
 Terminated 
   
-
     
-
 
 Balance at March 31, 2010  
   
-
   
$
1.00
 
 Weighted average fair value of options granted for services during 2010   
         
$
-
 

(D) PAR VALUE
 
In August 2001, the par value of common stock was changed to $0.0001 from $1.00. The change is reflected retroactively for all periods presented in the accompanying consolidated financial statements.
 
 
F-19

 
 
 
(E) EARNINGS PER SHARE
 
Basic earnings per share are computed by dividing earnings available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflect per share amounts that would have resulted if dilutive potential common stock had per share reflect per share amounts that would have resulted if dilutive potential common stock had been converted to common stock. The following reconciles amounts reported in the financial statements for the year ended March 31, 2010:
 
   
INCOME 
(DENOMINATOR)
   
SHARES 
(NUMERATOR)
   
PER-SHARE
AMOUNT
 
 Income from continuing operations
 
$
(591,293
)
               
 Less preferred stock dividends 
   
-
                 
                         
 Income available to common stockholders -
                       
 Basic and diluted earnings per share  
   
(591,283
)
 
$
12,743,610
   
$
(0.05
)
 
Effect of dilutive securities
 
The following convertible securities were not included in the computation of diluted earnings per share because the effect of conversion would be antidilutive:
 
SHARES OF POTENTIAL
COMMON STOCK
 
Preferred convertible shares 471,816
 
 
F-20

 
 
NOTE 10 INCOME TAXES
 
The Company files separate tax returns for the parent and its Canadian subsidiary. There was no income tax expense or utilization of net operating loss carryforwards for the years ended March 31, 2010 and 2009, due to the Company's net losses.
 
The blended Canadian Federal and Provincial Corporate tax rate of 41.5% applies to loss before taxes of the Canadian subsidiary. The Company's tax expense differs from the "expected" tax expense for Federal income tax purposes for the years ended March 31, 2010 and 2009, (computed by applying the United States Federal Corporate tax rate of 34% to consolidated loss before taxes), as follows:
 
   
2010
   
2009
 
                 
Computed "expected" tax benefit  
 
$
(201,040
)  
 
$
(218,653
)
Foreign income tax rate differences
   
18,921
     
20,579
 
Change in deferred tax asset valuation allowance 
   
182,119
     
198,074
 
   
$
-
   
$
-
 
The above benefit was calculated using a combined federal and state tax estimated rate as noted below
               
Statutory federal income tax rate
   
34.00
%
       
State income taxes 
   
--
%
       
Foreign income tax rate difference 
   
(3.2
)%
       
Valuation allowance  
   
(30.8
)%
       
Effective tax rate
   
(0.0
)%
       
 
 
F-21

 
 
The effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities at March 31, 2010 are as follows:
 
Deferred tax assets:
     
United States net operating loss carryforward 
 
$
5,452,187
 
Canadian net operating loss carryforward 
   
410,500
 
Total gross deferred tax assets  
   
5,862,687
 
Less valuation allowance
   
(5,862,687
)
Net deferred tax assets 
 
$
-
 
 
The net change in valuation allowance during the year ended March 31, 2010 was an increase of approximately $201,040. The Company's subsidiary has net operating losses of approximately $743,100 at March 31, 2010 available to offset the subsidiaries' net income through 2012 under Canadian Federal and Provincial tax laws and the parent United States entity has a net operating loss carryforward of approximately $16,235,196 available to offset the parent's net income through 2026.
 
For the purpose of these estimates, certain stock based expenses aggregating approximately $1,008,000 since inception were considered non-deductible. Actual amounts ultimately deductible may differ from these estimates.
 
The utilization of the net operating loss carryforwards is dependent upon the ability to generate sufficient taxable income during the carryforward period. In addition, utilization of these carryforwards may be limited due to ownership changes as defined in the Internal Revenue Code.
  The Company is subject to taxation in the United States and certain state jurisdictions. The Company’s tax years for 2002 and forward are subject to examination by the United States and applicable state tax authorities due to the carry forward of unutilized net operating losses. Certain subsidiaries of the Company are subject to examination by the Canadian tax authorities as per the laws and regulations of Canada.
 
 
 
F-22