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KYTO Technology and Life Science, Inc.

For the quarterly period ended September 30, 2018

INDEX

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ITEM 1. FINANCIAL STATEMENTS  

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KYTO TECHNOLOGY AND LIFE SCIENCE INC.

September 30, 2018

NOTE 1 – DESCRIPTION OF BUSINESS

Kyto Technology and Life Science, Inc. was formed as a Florida corporation on March 5, 1999 under the name of B12 Inc. In August, 2002, the Company changed its name from B Twelve, Inc. to Kyto BioPharma Inc. and in May 2018, the name was changed again to Kyto Technology and Life Science, Inc.

The Company was originally formed to acquire and develop innovative minimally toxic and non-immunosuppressive proprietary drugs for the treatment of cancer, arthritis, and other proliferate and autoimmune diseases and had been looking at a number of strategies to become active.  In April, 2018, the Board adopted a new business plan focused on the development of early stage technology and life science businesses through early stage investment funding. The Company has recruited a number of experienced investment consultants from a network that includes angel investors, corporate managers, and successful entrepreneurs across a number of technology and life science products and markets and relies on input from these advisors in conducting due diligence and making investment decisions. In order to offset the risk in early stage investing, the Company works with angel investment groups and participates only after these groups have committed to invest and does not plan to invest more than $200,000 in any single investment. The Company plans to generate revenue from two sources: (i) the sale of advisory services to its target investments and (ii) realised gains from the sale of the businesses in which it has invested. Generally, it is expected that investments will be realised from an exit within a period of four years.

NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

In preparing financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the period presented. Actual results may differ from these estimates.

Significant estimates during 2018 include the valuation allowance of stock options and warrants.

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 September 30, 2018 and March 31, 2018, respectively. 

CONCENTRATIONS

The Company maintains its cash in bank deposit accounts, which, at times, may exceed federally insured limits. As of September 30, 2018, the Company did not have any deposits in excess of federally insured limits. The Company has not experienced any losses in such accounts through September 30, 2018 and March 31, 2018, respectively.

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NET LOSS PER COMMON SHARE

In accordance with Statement of Financial Accounting Standards Accounting Standard Codification Topic 260, "Earnings per Share", basic earnings per share is computed by dividing the net income less preferred dividends for the period by the weighted average number of common shares outstanding. Diluted earnings per share is computed by dividing net income less preferred dividends by the weighted average number of common shares outstanding including the effect of common stock equivalents. Common stock equivalents, consisting of stock options and warrants, have not been included in the calculation, as their effect is anti-dilutive for the periods presented. 

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 date for stock settled awards, and at subsequent exercise or settlement for cash-settled awards. Under this method, the Company records an expense equal to the fair value of the options or warrants issued. The fair value is computed using the Black Scholes options pricing model. The Company did not grant any options or warrants prior to March 31, 2018.

INCOME TAXES

The Company accounts for income taxes under the Financial Accounting Standards Accounting Standard Codification Topic 740 "Accounting for Income Taxes" ("Topic 740"). Under Topic 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under Topic 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period, which includes the enactment date.

INVESTMENTS

The Company carries investments at the lower of cost or fair market value. These investments are accounted for as cost method investments in accordance with ASC 325 as we own less than 20% of the voting securities and do not have the ability to exercise significant influence over operating and financial policies of the entities. The Company reviews the performance of the underlying investments to determine their current and future potential value and liquidity. In the event that Management considers the value of an investment to be impaired, the carrying value of the investment will be written down by an impairment charge to reflect Management’s estimated valuation.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures”, for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing US GAAP that require the use of fair value measurements which establishes a framework for measuring fair value and expands disclosure about such fair value measurements.

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:

Level 1: Observable inputs such as quoted market prices in active markets for identical assets or liabilities

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data

Level 3: Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.

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NOTE 3 – INVESTMENT

During the three months ended September 30, 2018, the Company made an aggregate investment of $200,000 in three separate early stage companies.  In no case was there any financial or management control over the investment targets, and the ownership interest was below 15%.  Accordingly, the Company carries these investments at cost and reviews results and expectations of target companies with target management on at least a quarterly basis to determine if there is any impairment in value, in which case the carrying value of the investment would be revalued.  Management reviewed all investments in the quarter ended September 30, 2018 and there were no adjustments made for impairment.

NOTE 4 – ACCOUNTING STANDARDS UPDATES

Significant Recent Accounting Pronouncements

Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying unaudited condensed financial statements.

NOTE 5 – RELATED PARTY TRANSACTIONS

At September 30, 2018, $6,550 was due and payable to related parties. Of this amount $5,050 was due to the Company Chief Financial Officer for services provided and advances made by him to the Company, and $1,500 was due to the Chief Executive Officer as reimbursement for expenses incurred in the normal course of business.

The Company now operates virtually, and from public locations, and no longer leases any office space from related parties.

(A)PREFERRED STOCK 

As of September 30, 2018 and March 31, 2018, there are 2,000,000 shares of Series A preferred stock (“Series A”) authorized at a par value of $1.00 per share. The Company has outstanding 1,337,500 shares of Series A as a result of the sale during the six months ended September 30, 2018 of 937,500 Units for $750,000 at $0.80 per Unit in a private placement to accredited investors, and 400,000 Units for the conversion of $320,000 of related party debt. The Units consist of one Series A share and one warrant per Unit. The Series A can either be converted into Common Shares upon listing of the Company on Nasdaq or elect to receive $1.60 per share.  In the event of any liquidation or winding up of the Company, the holders of the Series A shall be entitled to receive in preference to the holders of Common Shares a per share amount equal to two times (2 X) their original purchase price plus any declared but unpaid dividends (the Liquidation Preference). All share issuances and obligations are recognized on the books and stock register, however, as at the date of this report certificates have not been delivered as a result of administrative delays in transferring to the Company’s selected stock transfer agent.

(B)COMMON STOCK 

The Company has authorized 100,000,000 shares of common stock at a par value of $0.0001 per share. As of September 30, 2018, and March 31, 2018 a total of 5,027,703 and 3,139,747 shares of the Company’s common stock were issued and outstanding, respectively.

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(C)PRIVATE PLACEMENT 

In April 2018, in a non-brokered private placement, the Company offered accredited investors an opportunity to purchase a minimum of 875,000 and maximum of 1,500,000 Units. These Units consist of one Series A (convertible into one common share) and one warrant (exercisable into one common share at $1.20 per share for a period of three years). The Preferred Shares can be converted into Common Shares upon listing of the Company on NASDAQ, or redeemed for $1.60 per share.  In the event of any liquidation or winding up of the Company, the holders of preferred shares shall  be entitled to receive in preference to the holders of Common Shares a per share amount equal to (2x) the Original Purchase price plus any declared but unpaid dividends (“Liquidation preference”).  The Units are priced at $0.80 per unit.

In April 2018, a total of $320,000 of related party loans and accrued liabilities were converted into Units consisting of 400,000 shares of Series A, and 400,000 Warrants to purchase common stock at $1.20 per share. Additionally, since April 2018, the Company has sold 937,500 investment units to accredited investors in a private placement for $750,000 in cash.

(D)STOCK OPTIONS 

In April 2018, the Company approved the introduction of the Kyto Technology and Life Science, Inc. Incentive Stock Option Plan for the benefit of employees, consultants and directors, with the objective of securing the benefit of services for stock options rather than cash salaries.  In the six months ended September 30, 2018, the Company granted a total of 2,697,085 options at an exercise price of $0.006 per share. On May 18, 2018, 1,887,956 options vested upon the initial closing of the private placement and were exercised for $11,328.  The remaining balance of 809,129 options will become fully vested upon the final close of the private placement after the sale of 1,500,000 units.

In connection with the grant of stock options the Company recognises the value of the related option expense using the Black Scholes model, with appropriate assumptions for option life, stock value, risk free interest rate, volatility, and cancellations. The assumptions used for options granted in the six months ended September 30, 2018 were as follows:

The compensation expense calculated at time of grant is amortised over the vesting period for the options granted.  During the three and six months ended September 30, 2018, the Company amortised $357 and $3,908, respectively, as option expense.

No options were granted in prior periods.

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(E)WARRANTS  

In conjunction with the sale of stock Units, the Company issued 1,337,500 warrants to purchase common stock at a price of $1.20 per share for a period of three years.  The Company values the warrants using the Black Scholes model, with appropriate assumptions for warrant life, stock value, risk free interest rate, and volatility. The assumptions used for warrants granted in the six months ended September 30, 2018 were as follows:

At September 30, 2018 the value of the warrants was $0 as the Company did not bifurcate the value of Series A and warrants within the Units sold. There were no warrants issued or outstanding at March 31, 2018.

NOTE 7 – SUBSEQUENT EVENTS

Subsequent to the September 30, 2018, the Company has raised a total of $300,000, for the sale of another 375,000 investment units.  

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PLAN OF OPERATIONS

Although the Company has $119,356 in the bank at September 30, 2018 and has raised another $300,000 since that date, management recognizes that it currently has no revenue and that revenue generation could be a slow and uncertain process depending on the success and liquidity of the businesses in which it invests. All cash received to date has originated from private placements of equity securities to accredited investors and there is no assurance that the Company will be able to continue to raise such funding to cover new investments and net operating expenses. Accordingly, there is no assurance that the Company will be able to meet its cash obligations when they come due and payable, which raises doubt over the Company’s ability to continue as a going concern for a period of one year from the date of issuance of these financial statements.

Results of Operations

For the three months and six months ended September 30, 2018 the Company’s net loss was $62,382 and $98,223, respectively, compared to a net loss of $20,783 and $39,730 for the three months and six months ended September 30, 2017.

Liquidity and Capital Resources

The Company had a working capital deficit of $316,956 as of March 31, 2018.  As a result of the private placement, the Company’s net working capital increased to $83,057 as of September 30, 2018. Cash was $4 as of March 31, 2018, and $119,356 as of September 30, 2018.

Cash from operating activities

The Company used net cash of $64,997 in operations during the six months ended September 30, 2018 compared to net cash of $11,421 used by operations for the six months ended September 30, 2017.

Cash from financing activities

The Company had a cash inflow from financing activities of $771,349 in the six months ended September 30, 2018 compared to $11,460 in the six months ended September 30, 2017. Cash outflow used in investing activities was $587,000 in the six months ended September 30, 2018 compared to $0 in the six months ended September 30, 2017.

The Company’s plan of operations for the next twelve months is to continue to focus its efforts on finding new sources of capital by means of private placements and to use this funding to fund additional investments as they become available, and to cover operating expenses.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  

Not required for smaller reporting company.

ITEM 4. CONTROLS AND PROCEDURES  

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that material information required to be disclosed in our periodic reports filed under the Securities Exchange Act of 1934, as amended, or 1934 Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to ensure that such information is accumulated and communicated to our management, including our chief executive officer/chief financial officer (principal financial officer) as appropriate, to allow timely decisions regarding required disclosure. During the quarter ended September 30, 2018 we carried out an evaluation, under the supervision and with the participation of our management, including the principal executive officer and the principal financial officer (principal financial officer), of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13(a)-15(e) under the 1934 Act. Based on this evaluation, because of the Company’s limited resources and limited number of employees, management concluded that our disclosure controls and procedures were ineffective as of September 30, 2018.

Limitations on Effectiveness of Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer (principal financial officer), does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Internal Controls over Financial Reporting

During the quarter ended September 30, 2018, there have been no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

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ITEM 1. LEGAL PROCEEDINGS  

None

Not required for smaller reporting company.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES  

ITEM 4. MINE SAFETY DISCLOSURES  

ITEM 5. OTHER INFORMATION  

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ITEM 6. EXHIBITS  

INDEX TO EXHIBITS

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SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date:  October 30, 2018

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