UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
Amendment No. 1
FORM 10-Q/A
Amendment No. 1
[X] ☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period endedJune 30, 20192021
or
[ ]☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from: _____________ to _____________
KYTO TECHNOLOGY AND LIFE SCIENCE, INC.
(Exact name of registrant as specified in its charter)
| 000-50390 | 65-1086538 | ||
(Commission | (I.R.S. Employer | |||
of Incorporation) | File Number) | Identification No.) |
13050 Paloma Road, Los Altos Hills, CA94022
(Address of Principal Executive Office) (Zip Code)
(408) 313 5830(650)204 7896
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
| Title of each class | Trading Symbol | Exchange | ||
| Common stock | KBPH | OTC QB |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X ]Yes [ ]☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss. 232.405 of this chapter) during the preceding 12 (or for such shorter period that the registrant was required to submit and post such files). [ ] Yes [X] ☐Yes ☒ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer |
| Accelerated filer |
| ||
| Non-accelerated filer |
| Smaller reporting company |
| ||
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). [ ]☐ Yes [X] ☒ No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
5,836,832 Common Shares - $.01 Par Value - as of July 31, 2019September 28, 2021
EXPLANATORY NOTE
The sole purpose of this This Amendment #No. 1 (the “Amendment”) to the Quarterly Report on Form 10-Q ("Form 10-Q"of KYTO TECHNOLOGY AND LIFE SCIENCE, INC (the “Company”) for the quarter ended June 30, 2021, originally filed with the Securities and Exchange Commission on October 01, 2021 (the “Original Form 10-Q”) is being filed to complete the filing by tagging the Original Form 10-Q for iXBRL which not originally included as a result of technical difficulties
KYTO Technology and Life Science, Inc.
For the quarterly period ended June 30, 2021
INDEX
2
PART I - FINANCIAL INFORMATION
| ITEM 1. | FINANCIAL STATEMENTS |
Kyto Technology and Life Science, Inc.
Condensed Statements of Assets and Liabilities
| June 30, | March 31, | |||||||
| 2021 | 2021 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Investments at fair value (cost of $6,952,145 and $5,686,545, respectively) | $ | 8,140,007 | $ | 6,821,407 | ||||
| Cash | 481,506 | 1,437,868 | ||||||
| Deferred offering costs | 170,889 | 169,891 | ||||||
| Total Assets | $ | 8,792,402 | $ | 8,429,166 | ||||
| LIABILITIES | ||||||||
| Liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | 182,951 | $ | 193,141 | ||||
| Accrued liabilities - related parties | 72,205 | 51,420 | ||||||
| Common stock subscription liability | - | 1,191,442 | ||||||
| Total Liabilities | 255,156 | 1,436,003 | ||||||
| Commitments and Contingencies (Note 3) | - | - | ||||||
| Net Assets | ||||||||
| Preferred stock authorized but not designated, $ par value shares, issued and outstanding as of June 30, 2021 and March 31, 2021, respectively | - | - | ||||||
| Series A preferred convertible stock, $ par value, shares designated, issued and outstanding as of June 30, 2021 and March 31, 2021, respectively | 42,001 | 42,001 | ||||||
| Series B preferred convertible stock, $ par value, shares designated, and issued and outstanding as of June 30, 2021 and March 31, 2021, respectively | 43,202 | 36,289 | ||||||
| Preferred stock, value | - | - | ||||||
| Common stock, $ par value, shares authorized, and issued and outstanding as of June 30, 2021 and March 31 2021, respectively | 132,689 | 99,831 | ||||||
| Additional paid-in capital | 41,610,332 | 39,772,228 | ||||||
| Accumulated deficit | (33,290,978 | ) | (32,957,186 | ) | ||||
| Total Net Assets | 8,537,246 | 6,993,163 | ||||||
| Total Liabilities and Net Assets | $ | 8,792,402 | $ | 8,429,166 | ||||
The accompanying notes are an integral part of these condensed interim financial statements.
3
Kyto Technology and Life Science, Inc.
Condensed Statements of Operations
(Unaudited)
| 1 | 2 | |||||||
| For the three months ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| INVESTMENT INCOME | ||||||||
| Interest and other income | $ | - | $ | - | ||||
| Total investment income | - | - | ||||||
| EXPENSES | ||||||||
| Professional fees | 166,954 | 12,938 | ||||||
| Other operating expenses | 219,838 | 25,930 | ||||||
| Total expenses | 386,792 | 38,868 | ||||||
| Net investment loss | (386,792 | ) | (38,868 | ) | ||||
| Net change in unrealized gain from investments | 53,000 | - | ||||||
| Net decrease in net assets resulting from operations | $ | (333,792 | ) | $ | (38,868 | ) | ||
| Loss per Common Share, Basic and Fully diluted | ||||||||
| Net decrease in net assets resulting from operations per common share | $ | (0.03 | ) | $ | (0.01 | ) | ||
| Weighted average common shares outstanding | 13,268,871 | 5,836,832 | ||||||
The accompanying notes are an integral part of these condensed interim financial statements.
4
Kyto Technology and Life Science, Inc.
Condensed Statements of Changes in Net Assets
( Unaudited)
| Preferred A | Preferred B | Common | Additional | |||||||||||||||||||||||||||||||||
| Preferred A | Stock | Preferred B | Stock | Common | Stock | Paid-in | Accumulated | |||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||
| Balance, March 31, 2020 | 4,200,000 | $ | 42,001 | 812,500 | $ | 8,125 | 5,836,832 | $ | 58,368 | $ | 35,943,369 | $ | (33,384,252 | ) | $ | 2,667,611 | ||||||||||||||||||||
| Net decrease in net assets resulting from operations | (38,868 | ) | (38,868 | ) | ||||||||||||||||||||||||||||||||
| Sale of Series B Preferred stock at $ per share |
- | 468,750 | 4,063 | - | 370,937 | 375,000 | ||||||||||||||||||||||||||||||
| Sale of common stock at $0.40 per share | ||||||||||||||||||||||||||||||||||||
| Sale of common stock at $0.40 per share, shares | ||||||||||||||||||||||||||||||||||||
| Compensation expense from stock options | 1,048 | 1,048 | ||||||||||||||||||||||||||||||||||
| Balance, June 30, 2020 | 4,200,000 | $ | 42,001 | 1,281,250 | $ | 12,188 | 5,836,832 | $ | 58,368 | $ | 36,315,354 | $ | (33,423,120 | ) | $ | 3,004,791 | ||||||||||||||||||||
| Balance, March 31, 2021 | 4,200,000 | $ | 42,001 | 3,628,906 | $ | 36,289 | 9,983,082 | $ | 99,831 | $ | 39,772,228 | $ | (32,957,186 | ) | $ | 6,993,163 | ||||||||||||||||||||
| Balance | 4,200,000 | $ | 42,001 | 3,628,906 | $ | 36,289 | 9,983,082 | $ | 99,831 | $ | 39,772,228 | $ | (32,957,186 | ) | $ | 6,993,163 | ||||||||||||||||||||
| Net decrease in net assets resulting from operations | (333,792 | ) | (333,792 | ) | ||||||||||||||||||||||||||||||||
| Sale of Series B Preferred stock at $ per share |
- | 691,250 | 6,913 | 546,089 | 553,002 | |||||||||||||||||||||||||||||||
| Sale of common stock at $ per share | 3,285,789 | 32,858 | 1,281,458 | 1,314,316 | ||||||||||||||||||||||||||||||||
| Compensation expense from stock options | 10,557 | 10,557 | ||||||||||||||||||||||||||||||||||
| Balance, June 30, 2021 | 4,200,000 | $ | 42,001 | 4,320,156 | $ | 43,202 | 13,268,871 | $ | 132,689 | $ | 41,610,332 | $ | (33,290,978 | ) | $ | 8,537,246 | ||||||||||||||||||||
| Balance | 4,200,000 | $ | 42,001 | 4,320,156 | $ | 43,202 | 13,268,871 | $ | 132,689 | $ | 41,610,332 | $ | (33,290,978 | ) | $ | 8,537,246 | ||||||||||||||||||||
The accompanying notes are an integral part of these condensed interim financial statements.
5
Kyto Technology and Life Science, Inc.
Condensed Statements of Cash Flows
(Unaudited)
| 1 | 2 | |||||||
| Three months ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| Operating activities: | ||||||||
| Net decrease in net assets resulting from operations | $ | (333,792 | ) | $ | (38,868 | ) | ||
| Adjustments to reconcile net decrease in net assets resulting from operations to net cash used in operating activities | ||||||||
| Net change in unrealized gain on investments | (53,000 | ) | - | |||||
| Stock option compensation expenses | 10,557 | 1,048 | ||||||
| Change in operating assets and liabilities | ||||||||
| Other current assets | - | 500 | ||||||
| Deferred fundraising expenses | (998 | ) | - | |||||
| Accounts payable and accrued liabilities | (10,190 | ) | 2,643 | |||||
| Accrued liabilities to related parties | 20,785 | 2,250 | ||||||
| Purchase of investments | (1,265,600 | ) | (250,000 | ) | ||||
| Net cash used in operating activities | (1,632,238 | ) | (282,427 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Sale of Common Stock | 122,874 | - | ||||||
| Sale of Series B Preferred stock | 553,002 | 375,000 | ||||||
| Net cash provided by financing activities | 675,876 | 375,000 | ||||||
| Net increase/(decrease) in cash | (956,362 | ) | 92,573 | |||||
| Cash, beginning of period | 1,437,868 | 33,756 | ||||||
| Cash, end of period | $ | 481,506 | $ | 126,329 | ||||
| Supplemental cash flow information | ||||||||
| Interest paid | $ | - | $ | - | ||||
| Taxes paid | $ | 800 | $ | 800 | ||||
| Supplemental schedule of noncash financing activities: | ||||||||
| Conversion of common stock subscription liability to common stock | $ | 1,191,442 | $ | - | ||||
The accompanying notes are an integral part of these condensed interim financial statements.
6
Kyto Technology and Life Science, Inc.
Condensed Schedule of Investments as of June 30, 2021
(Unaudited)
| Portfolio Company | Industry | Investment | Cost | Fair value | % of net assets (a) | |||||||||||
| Convertible loan investments | ||||||||||||||||
| Abfero Pharmaceuticals Inc | Life science | Convertible Note, 6% due, December 2022 | $ | 100,000 | $ | 101,118 | 1.2% | |||||||||
| Abfero Pharmaceuticals Inc | Life science | Convertible Note, 6% due, December 2022 | $ | 100,000 | $ | 101,118 | 1.2% | |||||||||
| Achelios Therapeutics Inc. | Life science | Convertible Note, 8% due, December 2021 | 100,000 | 123,167 | 1.4% | |||||||||||
| Achelios Therapeutics Inc. | Life science | Convertible Note, 8% due December 2021 | 25,000 | 29,532 | 0.3% | |||||||||||
| Achelios Therapeutics Inc. | Life science | Convertible Note, 8% due December 2021 | 50,000 | 55,578 | 0.7% | |||||||||||
| Achelios Therapeutics Inc. | Life science | Convertible Note Sidecar, 25% discount. No interest | 50,000 | 50,000 | 0.6% | |||||||||||
| AOA DX Inc | Life science | Convertible Note, 4%, due May 2024 | 100,000 | 100,559 | 1.2% | |||||||||||
| Avisi Technologies Inc | Life science | Convertible Note, 8% due July 2022 | 50,000 | 53,671 | 0.6% | |||||||||||
| Basepaws Inc | Life science | Convertible Note, 1% due April 2020 | 50,000 | 162,444 | 1.9% | |||||||||||
| Beam Semiconductor Inc | Technology | Convertible Note, 8% due April 2022 | 150,000 | 174,033 | 2.0% | |||||||||||
| Beam Semiconductor Inc | Technology | Convertible Note, 8% due March 2021 | 50,000 | 55,282 | 0.6% | |||||||||||
| Beam Semiconductor Inc | Technology | Convertible Note, 8% due March 2022 | 100,000 | 101,688 | 1.2% | |||||||||||
| Corinnova Inc | Life science | Convertible Note, 6% due December 2024 | 100,000 | 103,699 | 1.2% | |||||||||||
| Cyberdontics Inc | Life science | Convertible Note, 8% due September 2022 | 30,000 | 34,366 | 0.4% | |||||||||||
| Cyberdontics Inc | Life science | Convertible Note, 8% due February 2023 | 35,000 | 38,751 | 0.5% | |||||||||||
| Cyberdontics Inc | Life science | Convertible Note, 0% no due date | 35,000 | 36,995 | 0.4% | |||||||||||
| Deep Blue Medical Advances Inc | Life science | Convertible Note, 6% due June 2022 | 50,000 | 51,595 | 0.6% | |||||||||||
| Every Key Inc | Technology | Convertible Note, 5% due December 2023 | 100,000 | 107,767 | 1.3% | |||||||||||
| Identical Inc | Life science | Convertible Note, 2% due May 2022 | 100,000 | 101,271 | 1.2% | |||||||||||
| INBay Technology Inc | Technology | Convertible Note, 12% due October 2020 | 50,000 | 66,077 | 0.8% | |||||||||||
| INBay Technology Inc | Technology | Convertible Note, 12% due July 2021 | 30,000 | 37,121 | 0.4% | |||||||||||
| INBay Technology Inc | Technology | Convertible Note, 12% due February 2022 | 50,000 | 58,137 | 0.7% | |||||||||||
| INBay Technology Inc | Technology | Convertible Note, 12% due December 2022 | 40,000 | 42,748 | 0.5% | |||||||||||
| INBay Technology Inc | Technology | Convertible Note, 12% due December 2023 | 50,000 | 51,414 | 0.6% | |||||||||||
| Iris R&D Group Inc | Technology | Convertible Note, 8% May 2023 | 50,000 | 50,438 | 0.6% | |||||||||||
| Kiana Analytics Inc | Technology | Convertible Note, 3% December 2022 | 100,000 | 101,570 | 1.2% | |||||||||||
| Kitotech Medical Inc | Life science | Convertible Note, 6% due December 2020 | 100,000 | 244,629 | 2.9% | |||||||||||
| Kitotech Medical Inc | Life science | Convertible Note, 6% due November 2022 | 75,000 | 84,761 | 1.0% | |||||||||||
| Lifewave Biomedical Inc | Life science | Convertible Note, 6% due December 2020 | 30,000 | 33,279 | 0.4% | |||||||||||
| Lifewave Biomedical Inc | Life science | Convertible Note, 6% due December 2020 | 70,000 | 75,857 | 0.9% | |||||||||||
| Lifewave Biomedical Inc | Life science | Convertible Note, 6% due December 2021 | 50,000 | 50,403 | 0.6% | |||||||||||
| mmTron Inc | Technology | Convertible Note, 4% due April 2023 | 100,000 | 100,022 | 1.2% | |||||||||||
| Navaux Inc | Life science | Convertible Note, % due | 60,000 | 61,933 | 0.7% | |||||||||||
| Neuro42 Inc. | Life science | Convertible Note, 8% due December 2023 | 50,000 | 51,556 | 0.6% | |||||||||||
| Octagon Therapeutics Inc | Life science | Convertible Note, 5% due June 2021 | 50,000 | 51,719 | 0.6% | |||||||||||
| Octagon Therapeutics Inc | Life science | Convertible Note, 5% due June 2021 | 50,000 | 51,589 | 0.6% | |||||||||||
| Perikinetics Inc | Life science | Convertible Note, 6% due May 2022 | 100,000 | 103,814 | 1.2% | |||||||||||
| Preview Medical Inc | Life science | Convertible Note, 7% due January 2023 | 100,000 | 103,184 | 1.2% | |||||||||||
| SageMedic Corp | Life science | Convertible Note, 8% April 2021 plus warrants | 50,000 | 58,877 | 0.7% | |||||||||||
| SageMedic Corp | Life science | Convertible Note, 8% December 2022 plus warrants | 75,000 | 78,436 | 0.9% | |||||||||||
| Sensing Electromagnetic Plus Corp | Technology | Convertible Note, Fully reserved | 50,000 | 1 | 0.0% | |||||||||||
| Sensing Electromagnetic Plus Corp | Technology | Convertible Note, Fully reserved | 11,048 | 1 | 0.0% | |||||||||||
| Single Pass Inc | Life science | Convertible Note, 6% April 2024 | 50,000 | 50,214 | 0.6% | |||||||||||
| Valfix Medical Inc | Life science | Convertible Note, 8% December 2021 | 50,000 | 53,507 | 0.6% | |||||||||||
| Xpan Inc | Life science | Convertible Note, 8% due March 2022 | 50,000 | 55,293 | 0.6% | |||||||||||
| Xpan Inc | Life science | Convertible Note, 8% due June 2022 | 25,000 | 27,044 | 0.3% | |||||||||||
| Xpan Inc | Life science | Convertible Note, 8% due June 2022 | 25,000 | 27,035 | 0.3% | |||||||||||
| Total convertible loan investments | $ | 2,866,048 | $ | 3,252,175 | 38.1% | |||||||||||
| United States | $ | 2,046,048 | $ | 2,342,246 | 27.4% | |||||||||||
| Canada | 470,000 | 525,419 | 6.2% | |||||||||||||
| Rest of World | 350,000 | 384,510 | 4.5% | |||||||||||||
| Total convertible loan investments | $ | 2,866,048 | $ | 3,252,175 | 38.1% | |||||||||||
Continued on next page
The accompanying notes are an integral part of these condensed interim financial statements.
7
Continued from previous page
Kyto Technology and Life Science, Inc.
Condensed Schedule of Investments as of June 30, 2021
(Unaudited)
| Portfolio Company | Industry | Investment | Cost | Fair value | % of net assets (a) | |||||||||||
| Preferred stock investments | ||||||||||||||||
| Altis Biosystems | Life science | shares of Series Seed Preferred | $ | 50,000 | $ | 50,000 | 0.6% | |||||||||
| Astrocyte Pharmaceuticals Inc | Life science | shares of Series A Preferred | 100,000 | 104,778 | 1.2% | |||||||||||
| Cnote Group, Inc | Fintech | shares of series Seed-2 Preferred (converted SAFE) | 51,500 | 59,783 | 0.7% | |||||||||||
| Cnote Group, Inc | Fintech | shares of Series Seed-3 Preferred (converted note) | 50,000 | 66,247 | 0.8% | |||||||||||
| Colabs Inc | Life science | shares of Series A-1 Preferred | 50,000 | 50,000 | 0.6% | |||||||||||
| Connectus Services Ltd | Technology | shares of Series Seed Preferred | 100,000 | 100,000 | 1.2% | |||||||||||
| Deep Blue Medical Advances Inc | Life science | shares of Series A Preferred | 49,996 | 49,996 | 0.6% | |||||||||||
| Eumentis Thereapeutics Inc | Life science | shares of Series A Preferred | 100,000 | 100,000 | 1.2% | |||||||||||
| FemtoDX Inc | Life science | shares of Series A Preferred | 100,000 | 159,835 | 1.9% | |||||||||||
| Healionics Corporation | Life science | of Series A-1 Preferred | 100,000 | 100,000 | 1.2% | |||||||||||
| i-Lumen Scientific Inc. | Life science | shares of Series A Preferred plus warrants | 50,000 | 50,000 | 0.6% | |||||||||||
| i-Lumen Scientific Inc. | Life science | shares of Series A Preferred plus warrants | 50,000 | 50,000 | 0.6% | |||||||||||
| Inhalon Biopharma Inc | Life science | shares of Series Seed Preferred | 99,997 | 99,997 | 1.2% | |||||||||||
| Light Line Medical Inc | Life science | shares of Series Seed Preferred (converted note) | 30,000 | 38,031 | 0.4% | |||||||||||
| Light Line Medical Inc | Life science | shares of Series Seed Preferred (converted note) | 70,000 | 106,049 | 1.2% | |||||||||||
| Light Line Medical Inc | Life science | shares of Series Seed preferred | 25,000 | 25,000 | 0.3% | |||||||||||
| Light Line Medical Inc | Life science | shares of Series A Preferred plus warants | 50,000 | 50,000 | 0.6% | |||||||||||
| Lowell Therapeutics Inc | Life science | shares of Series A Preferred | 50,000 | 50,000 | 0.6% | |||||||||||
| Lowell Therapeutics Inc | Life science | shares of Series A Preferred | 50,000 | 50,000 | 0.6% | |||||||||||
| Makani Science Inc | Life science | shares of Series Seed Preferred | 50,000 | 50,000 | 0.6% | |||||||||||
| Micronic Technologies Inc | Technology | shares of Series Seed-1 Preferred plus warrants | 100,000 | 100,000 | 1.2% | |||||||||||
| Neuroflow Inc | Life science | shares of Series Seed -2 Preferred | 150,000 | 224,998 | 2.6% | |||||||||||
| Neuroflow Inc | Life science | shares of Series B Preferred | 100,000 | 212,497 | 2.5% | |||||||||||
| New View Surgical, Inc. | Life science | shares of Series A-1 Preferred | 75,000 | 75,000 | 0.9% | |||||||||||
| Orion Biotechnology Inc | Life science | shares of Series A Preferred | 100,000 | 100,000 | 1.2% | |||||||||||
| Otomagnetics Inc | Life science | shares of Series A-1 Preferred plus warrants | 100,000 | 100,000 | 1.2% | |||||||||||
| Promaxo | Life science | shares of Series B-1 Preferred, (converted note) | 250,000 | 531,738 | 6.2% | |||||||||||
| Seal Rock Therapeutics, Inc. | Life science | shares of Series Seed Preferred, (converted note) | 78,000 | 80,329 | 0.9% | |||||||||||
| Shyft (FKA Crater Group Inc) | Technology | shares of Series A-1 Preferred (converted note) | 51,500 | 97,940 | 1.1% | |||||||||||
| Shyft (FKA Crater Group Inc) | Technology | shares of Series A Preferred (converted note) | 50,000 | 64,626 | 0.8% | |||||||||||
| Shyft (FKA Crater Group Inc) | Technology | shares of Series A-1 Preferred (plus warrants) | 50,000 | 50,000 | 0.6% | |||||||||||
| Trellis Bioscience LLC | Life science | shares of Series B Preferred plus warrants | 50,000 | 50,000 | 0.6% | |||||||||||
| Trellis Bioscience LLC | Life science | shares of Series B Preferred plus warrants | 50,000 | 50,000 | 0.6% | |||||||||||
| Trellis Bioscience LLC | Life science | shares of Series B Preferred plus warrants | 100,000 | 100,000 | 1.2% | |||||||||||
| Valfix Medical Inc | Life science | shares of Series Seed Preferred | 50,000 | 50,000 | 0.6% | |||||||||||
| Visgenx Inc | Life science | shares of Series Seed-1 Preferred (converted note) | 30,000 | 46,352 | 0.5% | |||||||||||
| Visgenx Inc | Life science | shares of Series Seed Preferred (converted note) | 25,000 | 25,648 | 0.3% | |||||||||||
| Visgenx Inc | Life science | shares of Series Seed Preferred (converted note) | 15,003 | 15,393 | 0.2% | |||||||||||
| Total Preferred stock investments | $ | 2,700,997 | $ | 3,384,237 | 39.6% | |||||||||||
| United States | $ | 2,450,997 | $ | 3,134,237 | 36.7% | |||||||||||
| Canada | 200,000 | 200,000 | 2.3% | |||||||||||||
| Rest of World | 50,000 | 50,000 | 0.6% | |||||||||||||
| Total Preferred stock investments | $ | 2,700,997 | $ | 3,384,237 | 39.6% | |||||||||||
| Common stock investments | ||||||||||||||||
| BendaRX Corp | Life science | Common shares | $ | 100,000 | $ | 150,000 | 1.8% | |||||||||
| BendaRX Corp | Life science | Common shares | 100,000 | 150,000 | 1.8% | |||||||||||
| Boardwalk Tech | Technology | Common shares | 65,600 | 65,600 | 0.8% | |||||||||||
| Boardwalk Tech | Technology | Common shares | 73,500 | 91,995 | 1.1% | |||||||||||
| Sanaby Health Sponsor LLC | Life science | Common shares | 100,000 | 100,000 | 1.2% | |||||||||||
| Total Common stock investments | $ | 439,100 | $ | 557,595 | 6.5% | |||||||||||
| United States | $ | 239,100 | $ | 257,595 | 3.0% | |||||||||||
| Canada | 200,000 | 300,000 | 3.5% | |||||||||||||
| Rest of World | - | - | 0.0% | |||||||||||||
| Total Common stock investments | $ | 439,100 | $ | 557,595 | 6.5% | |||||||||||
| SAFE investments | ||||||||||||||||
| Infinidome Ltd | Technology | SAFE | $ | 50,000 | $ | 50,000 | 0.6% | |||||||||
| Infinidome Ltd | Technology | SAFE | 50,000 | 50,000 | 0.6% | |||||||||||
| Madorra Inc | Life science | SAFE | 100,000 | 100,000 | 1.2% | |||||||||||
| Mitre Medical Corp | Life science | SAFE | 75,000 | 75,000 | 0.9% | |||||||||||
| Mitre Medical Corp | Life science | SAFE | 50,000 | 50,000 | 0.6% | |||||||||||
| Orion Biotechnology Inc. | Life science | SAFE | 100,000 | 100,000 | 1.2% | |||||||||||
| Total SAFE investments | $ | 425,000 | $ | 425,000 | 5.0% | |||||||||||
| United States | 125,000 | 125,000 | 1.5% | |||||||||||||
| Canada | 100,000 | 100,000 | 1.2% | |||||||||||||
| Rest of World | 200,000 | 200,000 | 2.3% | |||||||||||||
| Total SAFE investments | $ | 425,000 | $ | 425,000 | 5.0% | |||||||||||
Continued on next page
The accompanying notes are an integral part of these condensed interim financial statements.
8
Continued from previous page
Kyto Technology and Life Science, Inc.
Condensed Schedule of Investments as of June 30, 2021
(Unaudited)
| Portfolio Company | Industry | Investment | Cost | Fair value | % of net assets (a) | ||||||||||
| Other investments | |||||||||||||||
| Enduralock LLC | Technology | .1 Series A-1 Ownership Units | $ | 30,000 | $ | 30,000 | 0.4% | ||||||||
| Enduralock LLC | Technology | .7 Series A-1 Ownership Units | 35,000 | 35,000 | 0.4% | ||||||||||
| Exodos Life Sciences LP | Life science | Class A-1 Preferred Ownership Units | 206,000 | 206,000 | 2.4% | ||||||||||
| Green Sun Medical LLC | Life science | Class A-1 Ownership units | 50,000 | 50,000 | 0.6% | ||||||||||
| Green Sun Medical LLC | Life science | Class A-1 Ownership units | 25,000 | 25,000 | 0.3% | ||||||||||
| Green Sun Medical LLC | Life science | Class A-1 Ownership units | 25,000 | 25,000 | 0.3% | ||||||||||
| Green Sun Medical LLC | Life science | Class A-1 Ownership units | 100,000 | 100,000 | 1.2% | ||||||||||
| Riso Capital Fund I, LP | Technology | Ownership units | 50,000 | 50,000 | 0.6% | ||||||||||
| Total other investments | $ | 521,000 | $ | 521,000 | 6.1% | ||||||||||
| United States | $ | 521,000 | $ | 521,000 | 6.1% | ||||||||||
| Canada | - | - | 0.0% | ||||||||||||
| Rest of World | - | - | 0.0% | ||||||||||||
| Total other investments | $ | 521,000 | $ | 521,000 | 6.1% | ||||||||||
| Total investments | |||||||||||||||
| United States | 5,382,145 | 6,380,078 | 74.7% | ||||||||||||
| Canada | 970,000 | 1,125,419 | 13.2% | ||||||||||||
| Rest of World | 600,000 | 634,510 | 7.4% | ||||||||||||
| Total other investments | $ | 6,952,145 | $ | 8,140,007 | 95.3% | ||||||||||
| (a) based on total net assets of | $ | 8,537,246 | |||||||||||||
The accompanying notes are an integral part of these condensed interim financial statements.
9
Kyto Technology and Life Science, Inc.
Condensed Schedule of Investments as of March 31, 2021
(Unaudited)
| Portfolio Company | Industry | Investment | Cost | Fair value | % of net assets (b) | |||||||||||
| Convertible loan investments | ||||||||||||||||
| Achelios Therapeutics Inc. | Life science | Convertible Note, 8% due, December 2021 | $ | 100,000 | �� | $ | 121,173 | 1.7% | ||||||||
| Achelios Therapeutics Inc. | Life science | Convertible Note, 8% due December 2021 | 25,000 | 29,033 | 0.4% | |||||||||||
| Achelios Therapeutics Inc. | Life science | Convertible Note, 8% due December 2021 | 50,000 | 54,581 | 0.8% | |||||||||||
| Avisi Technologies Inc | Life science | Convertible Note, 8% due July 2022 | 50,000 | 52,674 | 0.8% | |||||||||||
| Basepaws Inc | Life science | Convertible Note, 1% due April 2020 | 50,000 | 162,319 | 2.3% | |||||||||||
| Beam Semiconductor Inc | Technology | Convertible Note, 8% due April 2022 | 150,000 | 171,041 | 2.4% | |||||||||||
| Beam Semiconductor Inc | Technology | Convertible Note, 8% due March 2021 | 50,000 | 54,285 | 0.8% | |||||||||||
| Corinnova Inc | Life science | Convertible Note, 6% due December 2024 | 100,000 | 102,318 | 1.5% | |||||||||||
| Cyberdontics Inc | Life science | Convertible Note, 8% due September 2022 | 30,000 | 33,768 | 0.5% | |||||||||||
| Cyberdontics Inc | Life science | Convertible Note, 8% due February 2023 | 35,000 | 38,053 | 0.5% | |||||||||||
| Cyberdontics Inc | Life science | Convertible Note, 0% no due date | 35,000 | 36,296 | 0.5% | |||||||||||
| Deep Blue Medical Advances Inc | Life science | Convertible Note, 6% due June 2022 | 50,000 | 50,863 | 0.7% | |||||||||||
| Every Key Inc | Technology | Convertible Note, 5% due December 2023 | 100,000 | 106,521 | 1.5% | |||||||||||
| Identical Inc | Life science | Convertible Note, 2% due May 2022 | 100,000 | 100,844 | 1.4% | |||||||||||
| INBay Technology Inc | Technology | Convertible Note, 12% due October 2020 | 50,000 | 59,721 | 0.9% | |||||||||||
| INBay Technology Inc | Technology | Convertible Note, 12% due July 2021 | 30,000 | 34,149 | 0.5% | |||||||||||
| INBay Technology Inc | Technology | Convertible Note, 12% due February 2022 | 50,000 | 56,641 | 0.8% | |||||||||||
| INBay Technology Inc | Technology | Convertible Note, 12% due December 2022 | 40,000 | 41,552 | 0.6% | |||||||||||
| Kiana Analytics Inc | Technology | Convertible Note, 3% December 2022 | 100,000 | 100,847 | 1.4% | |||||||||||
| Kitotech Medical Inc | Life science | Convertible Note, 6% due December 2020 | 100,000 | 243,133 | 3.5% | |||||||||||
| Kitotech Medical Inc | Life science | Convertible Note, 6% due November 2022 | 75,000 | 83,738 | 1.2% | |||||||||||
| Lifewave Biomedical Inc | Life science | Convertible Note, 6% due December 2020 | 30,000 | 32,831 | 0.5% | |||||||||||
| Lifewave Biomedical Inc | Life science | Convertible Note, 6% due December 2020 | 70,000 | 74,810 | 1.1% | |||||||||||
| Navaux Inc | Life science | Convertible Note, % due | 60,000 | 61,036 | 0.9% | |||||||||||
| Neuro42 Inc. | Life science | Convertible Note, 8% due December 2023 | 50,000 | 50,559 | 0.7% | |||||||||||
| Octagon Therapeutics Inc | Life science | Convertible Note, 5% due June 2021 | 50,000 | 51,110 | 0.7% | |||||||||||
| Octagon Therapeutics Inc | Life science | Convertible Note, 5% due June 2021 | 50,000 | 50,966 | 0.7% | |||||||||||
| Perikinetics Inc | Life science | Convertible Note, 6% due May 2022 | 100,000 | 102,318 | 1.5% | |||||||||||
| Preview Medical Inc | Life science | Convertible Note, 7% due January 2023 | 100,000 | 101,918 | 1.5% | |||||||||||
| SageMedic Corp | Life science | Convertible Note, 8% April 2021 plus warrants | 50,000 | 57,879 | 0.8% | |||||||||||
| SageMedic Corp | Life science | Convertible Note, 8% December 2022 plus warrants | 75,000 | 77,088 | 1.1% | |||||||||||
| Sensing Electromagnetic Plus Corp | Technology | Convertible Note, Fully reserved | 50,000 | 1 | 0.0% | |||||||||||
| Sensing Electromagnetic Plus Corp | Technology | Convertible Note, Fully reserved | 11,048 | 1 | 0.0% | |||||||||||
| Valfix Medical Inc | Life science | Convertible Note, 8% December 2021 | 50,000 | 52,510 | 0.8% | |||||||||||
| Xpan Inc | Life science | Convertible Note, 8% due March 2022 | 50,000 | 54,296 | 0.8% | |||||||||||
| Xpan Inc | Life science | Convertible Note, 8% due June 2022 | 25,000 | 26,545 | 0.4% | |||||||||||
| Xpan Inc | Life science | Convertible Note, 8% due June 2022 | 25,000 | 26,540 | 0.4% | |||||||||||
| Total Convertible loan investments | $ | 2,216,048 | $ | 2,553,954 | 36.5% | |||||||||||
| United States | $ | 1,596,048 | $ | 1,868,557 | 26.7% | |||||||||||
| Canada | 370,000 | 407,561 | 5.8% | |||||||||||||
| Rest of World | 250,000 | 277,836 | 4.0% | |||||||||||||
| Total Convertible loan investments | $ | 2,216,048 | $ | 2,553,954 | 36.5% | |||||||||||
Continued on next page
The accompanying notes are an integral part of these condensed interim financial statements.
10
Continued from previous page
Kyto Technology and Life Science, Inc.
Condensed Schedule of Investments as of March 31, 2021 - continued
(Unaudited)
| Preferred stock investments | ||||||||||||||||
| Altis Biosystems | Life science | shares of Series Seed Preferred | $ | 50,000 | $ | 50,000 | 0.7% | |||||||||
| Astrocyte Pharmaceuticals Inc | Life science | shares of Series A Preferred | 100,000 | 100,000 | 1.4% | |||||||||||
| Cnote Group, Inc | Fintech | shares of series Seed-2 Preferred (converted SAFE) | 51,500 | 59,783 | 0.9% | |||||||||||
| Cnote Group, Inc | Fintech | shares of Series Seed-3 Preferred (converted note) | 50,000 | 66,247 | 0.9% | |||||||||||
| Colabs Inc | Life science | shares of Series A-1 Preferred | 50,000 | 50,000 | 0.7% | |||||||||||
| Connectus Services Ltd | Technology | shares of Series Seed Preferred | 100,000 | 100,000 | 1.4% | |||||||||||
| Deep Blue Medical Advances Inc | Life science | shares of Series A Preferred | 49,997 | 49,997 | 0.7% | |||||||||||
| Eumentis Thereapeutics Inc | Life science | shares of Series A Preferred | 100,000 | 100,000 | 1.4% | |||||||||||
| FemtoDX Inc | Life science | shares of Series A Preferred | 100,000 | 159,835 | 2.3% | |||||||||||
| i-Lumen Scientific Inc. | Life science | shares of Series A Preferred plus warrants | 50,000 | 50,000 | 0.7% | |||||||||||
| i-Lumen Scientific Inc. | Life science | shares of Series A Preferred plus warrants | 50,000 | 50,000 | 0.7% | |||||||||||
| Inhalon Biopharma Inc | Life science | shares of Series Seed Preferred | 99,997 | 99,997 | 1.4% | |||||||||||
| Light Line Medical Inc | Life science | shares of Series Seed Preferred (converted note) | 30,000 | 38,031 | 0.5% | |||||||||||
| Light Line Medical Inc | Life science | shares of Series Seed Preferred (converted note) | 70,000 | 106,049 | 1.5% | |||||||||||
| Light Line Medical Inc | Life science | shares of Series Seed preferred | 25,000 | 25,000 | 0.4% | |||||||||||
| Light Line Medical Inc | Life science | shares of Series A Preferred plus warants | 50,000 | 50,000 | 0.7% | |||||||||||
| Lowell Therapeutics Inc | Life science | shares of Series A Preferred | 50,000 | 50,000 | 0.7% | |||||||||||
| Lowell Therapeutics Inc | Life science | shares of Series A Preferred | 50,000 | 50,000 | 0.7% | |||||||||||
| Micronic Technologies Inc | Technology | shares of Series Seed-1 Preferred plus warrants | 100,000 | 100,000 | 1.4% | |||||||||||
| Neuroflow Inc | Life science | shares of Series Seed -2 Preferred | 150,000 | 224,998 | 3.2% | |||||||||||
| Neuroflow Inc | Life science | shares of Series B Preferred | 100,000 | 212,497 | 3.0% | |||||||||||
| New View Surgical, Inc. | Life science | shares of Series A-1 Preferred | 75,000 | 75,000 | 1.1% | |||||||||||
| Otomagnetics Inc | Life science | shares of Series A-1 Preferred plus warrants | 100,000 | 100,000 | 1.4% | |||||||||||
| Promaxo | Life science | shares of Series B-1 Preferred, (converted note) | 250,000 | 531,738 | 7.6% | |||||||||||
| Seal Rock Therapeutics, Inc. | Life science | shares of Series Seed Preferred, (converted note) | 78,000 | 80,329 | 1.1% | |||||||||||
| Shyft (FKA Crater Group Inc) | Technology | shares of Series A-1 Preferred | 51,500 | 97,940 | 1.4% | |||||||||||
| Shyft (FKA Crater Group Inc) | Technology | shares of Series A Preferred (converted note) | 50,000 | 64,626 | 0.9% | |||||||||||
| Shyft (FKA Crater Group Inc) | Technology | shares of Series A-1 Preferred (converted note) | 50,000 | 50,000 | 0.7% | |||||||||||
| Trellis Bioscience LLC | Life science | shares of Series B Preferred plus warrants | 50,000 | 50,000 | 0.7% | |||||||||||
| Trellis Bioscience LLC | Life science | shares of Series B Preferred plus warrants | 50,000 | 50,000 | 0.7% | |||||||||||
| Trellis Bioscience LLC | Life science | shares of Series B Preferred plus warrants | 100,000 | 100,000 | 1.4% | |||||||||||
| Valfix Medical Inc | Life science | shares of Series Seed Preferred | 50,000 | 50,000 | 0.7% | |||||||||||
| Visgenx Inc | Life science | shares of Series Seed-1 Preferred (converted note) | 30,000 | 46,352 | 0.7% | |||||||||||
| Visgenx Inc | Life science | shares of Series Seed Preferred (converted note) | 25,000 | 25,648 | 0.4% | |||||||||||
| Visgenx Inc | Life science | shares of Series Seed Preferred (converted note) | 15,003 | 15,392 | 0.2% | |||||||||||
| Total Preferred stock investments | $ | 2,450,997 | $ | 3,129,458 | 44.8% | |||||||||||
| United States | $ | 2,300,997 | $ | 2,979,458 | 42.6% | |||||||||||
| Canada | 100,000 | 100,000 | 1.4% | |||||||||||||
| Rest of World | 50,000 | 50,000 | 0.7% | |||||||||||||
| Total Preferred stock investments | $ | 2,450,997 | $ | 3,129,458 | 44.8% | |||||||||||
| Common stock investments | ||||||||||||||||
| BendaRX Corp | Life science | Common shares | $ | 100,000 | $ | 150,000 | 2.1% | |||||||||
| BendaRX Corp | Life science | Common shares | 100,000 | 150,000 | 2.1% | |||||||||||
| Boardwalk Tech | Technology | Common shares | 73,500 | 91,995 | 1.3% | |||||||||||
| Total common stock investments | $ | 273,500 | $ | 391,995 | 5.6% | |||||||||||
| United States | $ | 73,500 | $ | 91,995 | 1.3% | |||||||||||
| Canada | 200,000 | 300,000 | 4.3% | |||||||||||||
| Rest of World | - | - | 0.0% | |||||||||||||
| Total common stock investments | $ | 273,500 | $ | 391,995 | 5.6% | |||||||||||
| SAFE investments | ||||||||||||||||
| Infinidome Ltd | Technology | SAFE | $ | 50,000 | $ | 50,000 | 0.7% | |||||||||
| Infinidome Ltd | Technology | SAFE | 50,000 | 50,000 | 0.7% | |||||||||||
| Mitre Medical Corp | Life science | SAFE | 75,000 | 75,000 | 1.1% | |||||||||||
| Mitre Medical Corp | Life science | SAFE | 50,000 | 50,000 | 0.7% | |||||||||||
| Orion Biotechnology Inc. | Life science | SAFE | 100,000 | 100,000 | 1.4% | |||||||||||
| Total SAFE investments | $ | 325,000 | $ | 325,000 | 4.6% | |||||||||||
| United States | $ | 125,000 | $ | 125,000 | 1.8% | |||||||||||
| Canada | 100,000 | 100,000 | 1.4% | |||||||||||||
| Rest of World | 100,000 | 100,000 | 1.4% | |||||||||||||
| Total SAFE investments | $ | 325,000 | $ | 325,000 | 4.6% | |||||||||||
| Other investments | ||||||||||||||||
| Enduralock LLC | Technology | .1 Series A-1 Ownership Units | $ | 30,000 | $ | 30,000 | 0.4% | |||||||||
| Enduralock LLC | Technology | .7 Series A-1 Ownership Units | 35,000 | 35,000 | 0.5% | |||||||||||
| Exodos Life Sciences LP | Life science | Class A-1 Preferred Ownership Units | 206,000 | 206,000 | 2.9% | |||||||||||
| Green Sun Medical LLC | Life science | Class A-1 Ownership units | 50,000 | 50,000 | 0.7% | |||||||||||
| Green Sun Medical LLC | Life science | Class A-1 Ownership units | 25,000 | 25,000 | 0.4% | |||||||||||
| Green Sun Medical LLC | Life science | Class A-1 Ownership units | 25,000 | 25,000 | 0.4% | |||||||||||
| Riso Capital Fund I, LP | Technology | Ownership units | 50,000 | 50,000 | 0.7% | |||||||||||
| Total other investments | $ | 421,000 | $ | 421,000 | 6.0% | |||||||||||
| United States | $ | 421,000 | $ | 421,000 | 6.0% | |||||||||||
| Canada | - | - | 0.0% | |||||||||||||
| Rest of World | - | - | 0.0% | |||||||||||||
| Total Other investments | $ | 421,000 | $ | 421,000 | 6.0% | |||||||||||
| Total investments | $ | 5,686,545 | $ | 6,821,407 | 97.5% | |||||||||||
| United States | $ | 4,516,545 | $ | 5,486,010 | 78.4% | |||||||||||
| Canada | 770,000 | 907,561 | 13.0% | |||||||||||||
| Rest of World | 400,000 | 427,836 | 6.1% | |||||||||||||
| Total investments | $ | 5,686,545 | $ | 6,821,407 | 97.5% | |||||||||||
| ( b ) based on total net assets of | $ | 6,993,163 |
The accompanying notes are an integral part of these condensed interim financial statements.
11
KYTO TECHNOLOGY AND LIFE SCIENCE INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
June 30, 2021
NOTE 1 – DESCRIPTION OF BUSINESS
Kyto Technology and Life Science, Inc. (the “Company”) was formed as a Florida corporation on March 5, 1999 under the name of B Twelve, Inc. In August, 2002, the Company changed its name from B Twelve, Inc. to Kyto BioPharma Inc. and in May 2018, the name was changed again to Kyto Technology and Life Science, Inc. In July 2019, the Company was re-incorporated as a Delaware company. The Company operates virtually, from public locations or the homes of its officers, and does not currently lease any office space.
The Company was originally formed to acquire and develop proprietary drugs for the treatment of cancer, arthritis, and other autoimmune diseases and had been evaluating a number of strategies. As of March 31, 2018, the Company had accumulated a deficit of $32,380,746 from all prior operations. In April 2018, the Board adopted a new business plan focused on the development of early-stage technology and life science businesses through early-stage investment funding. The Company has recruited a number of experienced investment consultants from a network that includes angel investors, corporate managers, sophisticated early-stage investors and successful entrepreneurs with experience across a number of technology and life science products and markets, and relies on input from these advisors in conducting due diligence and making investment decisions. In order to offset the risk in early-stage investing, the Company works with angel investment groups and other sophisticated investors and participates only after these groups have completed due diligence and committed to invest, in effect becoming lead investors. The Company then completes its own due diligence and invests under identical terms as the lead investors. The Company will do follow-on investments in existing portfolio companies, assuming adequate progress, when portfolio companies initiate new financing rounds. The Company currently does not typically invest more than $250,000 in any single investment. Generally, the Company’s investments represent less than 5% ownership interests, and the Company therefore has no effective control or influence over the management or commercial decisions of the companies in which it invests. The Company plans to generate revenue from realized gains from the sale of the businesses in which it has invested, or some or all of its shareholdings in those cases where portfolio companies go public. Generally, it is expected that investments will be realized from an exit within a period of four to furnish Exhibit 101five years following initial investment. Such exits or liquidity events are outside the Company’s control and depend on merger and acquisition (“M&A”) transactions or an initial public offering (“IPO”) which may result in cash or equity proceeds. Accordingly, it is difficult to forecast revenue, net income, and cash flow. Other than making its initial and, potentially, follow-on investments in its portfolio companies, the Company does not provide any financial support to any of its investees.
The Company has one regular employee – the CEO, Mr, Paul Russo. Prior to December 31, 2020, was acting as a consultant to the Company and did not receive contractual compensation for his services in the form of cash. As of January 1, 2021, Mr. Russo was engaged as an employee of the Company at a salary of $400,000 per annum of which 60% is paid monthly, and the balance deferred to be paid once the Company lists and starts trading on the Nasdaq exchange. The full terms of Mr. Russo’s employment are described in an engagement letter filed on Form 10-Q8-K on February 1, 2021, which was approved by the Compensation committee of the Board of Directors on that date. During the three months ended June 30, 2021, Mr. Russo received $80,000 gross payroll, 0 consulting fees and options were granted. During the three months ended June 30, 2020, Mr. Russo received 0 payroll or consulting fees , and options were granted to him.
12
The Company has created a portfolio of minority investments in early-stage start-up companies and derives its revenue opportunity from the sale of those investments. Such sales are outside the Company’s control and depend on M&A transactions or IPOs which may result in cash or equity proceeds. Accordingly, it is difficult to forecast revenue, net income, and cash flow. As of the date of this filing, the Company had approximately $500,000 of cash to cover its operating expenses, and new investment requirements and is continuing to raise additional funding on a recurring monthly basis. If successful, it will have sufficient funding for further investments and ongoing operations. However, there is no assurance that the Company will be able to raise sufficient cash to cover its requirements on attractive terms, if at all, and whether it will be able to continue as a going concern. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed interim financial statements have been prepared assuming the Company will continue to operate as a going concern and do not include any adjustments that might result from the outcome of this uncertainty. Stay at home orders and general economic uncertainties arising out of the current Covid-19 epidemic have created additional delays and uncertainty. To date there has been no disruption to the Company’s business operations, although some of its portfolio investment companies report delays in their programs.
At March 31, 2020, management determined that the Company was an investment company for purposes of ASC 946 disclosure, and committed to follow the specialized accounting and reporting guidance contained therein. Accordingly, a new company, Kyto Investments, Inc. (“KI”) was incorporated in Delaware in December 2020 in preparation for a restructuring and an N-2 Registration Statement filed in March 2021 for review by the SEC. KI is an internally managed, closed-end investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). Immediately upon effectiveness of this N-2 Registration Statement, the Company will merge with KI and the Company will be the surviving entity. As of the completion of the merger, the Company will constitute a “successor issuer” for the purposes of Rule 414 under the Securities Act and may continue the current offering by filing post-effective amendments to the Registration Statements. Prior to the merger, the Company had fewer than 100 non affiliated investors and filed under the 1934 Act relying on exemption Rule 3( c )(1).
As a BDC, the Company will be required to comply with certain regulatory requirements. The Company also intends to elect to be treated for U.S. federal income tax purposes as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Company is required to comply with additional regulatory requirements. The Company has prepared and submitted sequentially two N-2 Registration Statements to the SEC for review but has not yet received final approval of its registration as at the filing date of this report.
NOTE 2 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information with the instructions to Form 10-Q and Rule 4058-03 of Regulation S-T. Exhibit 101 toS-X. Accordingly, these unaudited condensed financial statements do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments (consisting only of normal recurring adjustments), which the Company considers necessary, for a fair presentation of those financial statements. The results of operations and cash flows for the three months ended June 30, 2021 may not necessarily be indicative of results that may be expected for any succeeding quarter or for the entire fiscal year. The information contained in this Quarterly Report on Form 10-Q providesshould be read in conjunction with the audited financial statements of the Company for the year ended March 31, 2021, included in the Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the “SEC”) on August 10, 2021.
The Company’s condensed interim financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires the use of estimates, assumptions and the exercise of subjective judgment as to future uncertainties. Actual results could differ from those estimates, assumptions, and judgments. Significant items subject to such estimates will include determining the fair value of investments, revenue recognition, income tax uncertainties, stock-based compensation, and other contingencies.
The Company’s financial statements are prepared using the specialized accounting principles of Accounting Standards Codification Topic 946, Financial Services—Investment Companies (ASC Topic 946). In accordance with this specialized accounting guidance, the Company recognizes and carries all of its investments at fair value with changes in fair value recognized in earnings. Additionally, the Company will not apply consolidation or equity method of accounting to its investments. The Company carries its liabilities at amounts payable, net of unamortized premiums or discounts. The Company does not currently plan to elect to carry its liabilities at fair value. Net assets are calculated as the carrying amounts of assets, including the fair value of investments, less the carrying amounts of its liabilities.
13
(B) INVESTMENT TRANSACTIONS AND NET REALIZED AND UNREALIZED GAIN OR LOSS ON INVESTMENTS
The Company generates increases or decreases in its net assets from the sale of complete or partial investments following a merger or acquisition (“M&A”) transaction or restructuring or from the revaluation of portfolio company investments to recognize changes in their value, either upwards or downwards. As a minority, early-stage investor, the Company does not have the ability to manage the timing or acceptance of liquidity events that will realize its investments, nor the ability to predict when they may happen, although as a general guideline, it would expect such events to occur approximately four to five years after its investments are made. The Company will record the changes in value from investment activities upon completion of sale and receipt of net proceeds, after deducting related transaction expenses as realized gains or losses. Realized gains or losses on the sale of investments, or upon the determination that an investment balance, or portion thereof, is not recoverable, are calculated using the specific identification method. The Company measures realized gains or losses by calculating the difference between the net proceeds from the repayment or sale and the cost basis of the investment. Net change in unrealized appreciation or depreciation reflects the change in the fair values of the Company’s portfolio investments during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized. The Company is in regular contact with the management of its portfolio investment companies to provide a basis for valuation changes or impairment reviews. The Company does not expect to receive interest and principal repayments on its convertible notes and generally expects these notes to convert into equity securities upon completion of qualified subsequent financings. Accrued interest is then recorded as an adjustment to fair value.
(C) INCOME TAXES
The Company accounts for income taxes under the Financial Accounting Standards Accounting Standard Codification Topic 740 “Accounting for Income Taxes” (“Topic 740”). Under Topic 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under Topic 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period, which includes the enactment date.
(D) USE OF ESTIMATES
In preparing financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and related notesrevenues and expenses during the period presented. Actual results may differ from these estimates.
Significant estimates during the three months ended June 30, 2021 and June 30, 2020 include the valuation of the investment portfolio, deferred tax assets, tax valuation allowance, stock options and warrants.
(E) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. There were 0 cash equivalents at June 30, 2021 and March 31, 2021, respectively.
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(F) CONCENTRATIONS
The Company maintains its cash in bank checking and deposit accounts, which, at times, may exceed federally insured limits. As of June 30, 2021 and March 31, 2021, the Company’s bank balance exceeded the federally insured limit by approximately $230,000 and $1.2 million, respectively. The Company has not experienced any losses in such accounts through June 30, 2021.
(G) STOCK-BASED COMPENSATION
Financial Accounting Standards Board Accounting Standards Codification Topic 718, “Stock Compensation” requires generally that all equity awards granted to employees and consultants be accounted for at fair value. This fair value is measured at grant date for stock settled awards, and at subsequent exercise or settlement for cash-settled awards. Under this method, the Company records an expense equal to the fair value of the options or warrants issued. The fair value is computed using the Black Scholes options pricing model. The Company granted and options to consultants and advisors during the three months ended June 30, 2021 and June 30, 2020, respectively.
In accordance with Statement of Financial Accounting Standards Accounting Standard Codification Topic 260, “Earnings per Share”, basic earnings per share is computed by dividing the net income less preferred dividends for the period by the weighted average number of common shares outstanding. Diluted earnings per share is computed by dividing net income less preferred dividends by the weighted average number of common shares outstanding including the effect of common stock equivalents. Common stock equivalents, consisting of preferred stock, stock options and warrants, have not been included in the calculation, as their effect is anti-dilutive for the periods presented. The following table sets out the number of shares used in calculating fully- diluted EPS using the if-converted method.
| Class of shares | Three months ended June 30, 2021 | |||
| Common Stock | ||||
| Common stock subscribed not issued | - | |||
| Series A preferred stock | * | |||
| Series B preferred stock | * | |||
| Options | * | |||
| Warrants | * | |||
| Total shares used in calculating fully-diluted EPS | ||||
| * | These shares excluded from the calculation of fully-diluted EPS as the result would be anti-dilutive. |
(I ) INVESTMENT AND VALUATION OF INVESTMENT AT FAIR VALUE
The Company reviews the performance of its investments based on available information, including management reports, press releases, web site announcements and progress reports, third party equity updates, management interviews and, where accessible, financial reports, to determine their current and future potential value and liquidity. In the event that Management considers the value of an investment to be impaired, the carrying value of the investment will be written down by an impairment charge to reflect Management’s estimated valuation. The Company recognized impairment of one of its investments which was written down by $61,046 in September 2019. The Company has not experienced any other impairment write-downs in any prior or subsequent periods.
The Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures”, for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing US GAAP that require the use of fair value measurements which establishes a framework for measuring fair value and expands disclosure about such fair value measurements.
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Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value is an exchange price notion under which fair value is the price in an orderly transaction between market participants to sell an asset or transfer a liability in the market in which the reporting entity would transact for the asset or liability.
The Company has established procedures to estimate the fair value of its investments which the Company’s board of directors has reviewed and approved. The Company will use observable market data to estimate the fair value of investments to the extent that market data is available. In the absence of quoted market prices in active markets, or quoted market prices for similar assets or in markets that are not active, the Company will use the valuation methodologies described below with unobservable data based on the best available information in the circumstances, which incorporates the Company’s assumptions about the factors that a market participant would use to value the asset.
For investments for which quoted market prices are not available, which will comprise most of our investment portfolio, fair value will be estimated by using the income, market, or back-solve approach. The income approach is based on the assumption that value is created by the expectation of future benefits discounted to a current value and the fair value estimate is the amount an investor would be willing to pay to receive those future benefits. The market approach compares recent comparable transactions to the investment. The back solve method involves comparing available data over a period of time and inferring a new valuation based on changes from a known starting point, for example the cost of an investment. Adjustments are made for any dissimilarity between the comparable transactions and the investments. These valuation methodologies involve a significant degree of judgment on the part of our management and board.
In determining the appropriate fair value of an investment using these approaches, the most significant information and assumptions may include, as applicable: available current market data, including relevant and applicable comparable market transactions, applicable market yields and multiples, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the investment’s ability to make payments, its earnings and discounted cash flows, the markets in which the company does business, comparisons of financial ratios of peer companies that are public, merger and acquisition comparables, the principal market and enterprise values, environmental factors, subsequent financings by the portfolio investment, among other factors.
The estimated fair values will not necessarily represent the amounts that may be ultimately realized due to the occurrence or nonoccurrence of future circumstances that cannot be reasonably determined. Because of the inherent uncertainty of the valuation of the investments, the estimate of fair values may differ significantly from the Form 10-Q formatted in XBRL (eXtensible Business Reporting Language).
No other changesvalue that would have been madeused had a broader market for the investments existed.
The authoritative accounting guidance prioritizes the use of market-based inputs over entity-specific inputs and establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the Form 10-Q. This Amendment #1valuation. The three levels of valuation hierarchy are defined as follows:
Level 1: Observable inputs such as quoted market prices in active markets for identical assets or liabilities
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data
Level 3: Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions. Most of the Company’s investments are Level 3.
Critical accounting policies and practices are the policies that are both most important to the Form 10-Q speaksportrayal of our financial condition and results, and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about matters that are inherently uncertain. These include estimates of the fair value of our Level 3 investments and other estimates that affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements and the reported amounts of certain revenues and expenses during the reporting period. It is likely that changes in these estimates will occur in the near term. Our estimates are inherently subjective in nature and actual results could differ materially from such estimates. See “Note 1 – Significant Accounting Policies” to our financial statements as of March 31, 2021 as filed with the SEC on August 10, 2021, for further detail regarding our critical accounting policies and recently issued or adopted accounting pronouncements.
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(J) RECENT ACCOUNTING PRONOUNCEMENTS
Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
(K) DEFERRED OFFERING COSTS
Since April 2019, the Company has conducted a series of sales of common and preferred stock to fund its ongoing investment program and cost of operations. Typically, it expects that this series, from start to finish, may take from six to nine months and in order to match the cost and benefits of this process, the Company adopted a policy of capitalizing direct expenses incurred in the course of fund raising, with the intention of netting accumulated expenses against proceeds from sale of equity, and reporting the net funds raised at the close. Direct expenses include legal fees, investor relations fees, investor roadshows and meeting expenses, and related filing and printing fees. At June 31, 2021, the Company had deferred $170,889 of such expenses, relating to the preparation and filing of an N-2 Registration Statement.
NOTE 3 – COMMITMENTS AND CONTINGENCIES
The Company has no commitments or contingencies as of the date of this filing.
NOTE 4 - RELATED PARTY TRANSACTIONS
At June 30, 2021 and March 31, 2021, the Company had accrued and owed $72,205 and $51,420, respectively, to officers of the Company for deferred payroll and consulting service fees.
At June 30, 2021, officers or directors of the Company held board positions at three portfolio companies: InBay Technology Inc., Exodos Life Sciences LP, and Achelios Therapeutics Inc.
NOTE 5 – INVESTMENTS
The following table summarizes the Company’s investment portfolio at June 30, 2021 and March 31, 2021.
SUMMARY OF INVESTMENT PORTFOLIO
June 30, 2021 | March 31, 2021 | |||||||||||||||
| Number of portfolio companies | 60 | 51 | ||||||||||||||
| Fair value | $ | 8,140,007 | $ | 6,821,407 | ||||||||||||
| Cost | 6,952,145 | 5,686,545 | ||||||||||||||
| % of portfolio at fair value | ||||||||||||||||
| Convertible notes | 3,252,175 | 40 | % | 2,553,954 | 37 | % | ||||||||||
| Preferrred stock | 3,384,237 | 42 | % | 3,129,458 | 46 | % | ||||||||||
| Common stock | 557,595 | 7 | % | 391,995 | 6 | % | ||||||||||
| SAFE | 425,000 | 5 | % | 325,000 | 5 | % | ||||||||||
| Other ownership units | 521,000 | 6 | % | 421,000 | 6 | % | ||||||||||
| Total | $ | 8,140,007 | 100 | % | $ | 6,821,407 | 100 | % | ||||||||
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Our investment portfolio represents approximately 95% of our net assets at June 30, 2021 and 98% at March 31, 2021. Investments in early-stage start up private operating entities are valued based on available metrics, such as relevant market multiples and comparable company valuations, company specific-financial data including subsequent financings, actual and projected results, and independent third-party valuation estimates.
SCHEDULE OF INVESTMENTS
| As of June 30, 2021 | ||||||||||||
| Fair Value | Valuation Approach/ Technique | Unobservable Inputs | Range/ Weighted Average | |||||||||
| Convertible notes | $ | 3,252,175 | Market approach | Precedent and follow-on transactions | N/A | |||||||
| Preferred stock in private companies | 3,384,237 | Market approach | Precedent and follow-on transactions | N/A | ||||||||
| Common stock in private companies | 400,000 | Market approach | Precedent and follow-on transactions | N/A | ||||||||
| SAFE | 425,000 | Market approach | Precedent and follow-on transactions | N/A | ||||||||
| Other investments | 521,000 | Market approach | Precedent and follow-on transactions | N/A | ||||||||
| Total Investments | $ | 7,982,412 | ||||||||||
| As of March 31, 2021 | ||||||||||||
| Fair Value | Valuation Approach/ Technique | Unobservable Inputs | Range/ Weighted Average | |||||||||
| Convertible notes | $ | 2,553,954 | Market approach | Precedent and follow-on transactions | N/A | |||||||
| Preferred stock in private companies | 3,129,458 | Market approach | Precedent and follow-on transactions | N/A | ||||||||
| Common stock in private companies | 300,000 | Market approach | Precedent and follow-on transactions | N/A | ||||||||
| SAFE | 325,000 | Market approach | Precedent and follow-on transactions | N/A | ||||||||
| Other investments | 421,000 | Market approach | Precedent and follow-on transactions | N/A | ||||||||
| Total Investments | $ | 6,729,412 | ||||||||||
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The following table presents fair value measurements of investments, by major class, as of June 30, 2021 and March 31, 2021, according to the fair value hierarchy:
SCHEDULE OF INVESTMENTS AT FAIR VALUE MEASUREMENTS OF INVESTMENTS
| As of June 30, 2021 | ||||||||||||||||
| Quoted prices in active markets for identical securities | Significant other observable inputs | Significant other inputs | ||||||||||||||
| Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
| Investments at Fair Value | ||||||||||||||||
| Private Portfolio Companies | ||||||||||||||||
| Convertible notes | $ | - | $ | - | $ | 3,252,175 | $ | 3,252,175 | ||||||||
| Preferred stock | - | - | 3,384,237 | 3,384,237 | ||||||||||||
| Common stock | - | - | 400,000 | 400,000 | ||||||||||||
| SAFEs | - | - | 425,000 | 425,000 | ||||||||||||
| Other ownership interests | - | - | 521,000 | 521,000 | ||||||||||||
| - | - | 7,982,412 | 7,982,412 | |||||||||||||
| Public Portfolio Companies | ||||||||||||||||
| Common stock | 157,595 | - | - | 157,595 | ||||||||||||
| Total Investments at Fair value | $ | 157,595 | $ | - | $ | 7,982,412 | $ | 8,140,007 | ||||||||
| As of March 31, 2021 | ||||||||||||||||
| Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| March 31, 2021 | ||||||||||||||||
| Investments at Fair Value | ||||||||||||||||
| Private Portfolio Companies | ||||||||||||||||
| Convertible notes | $ | - | $ | - | $ | 2,553,954 | $ | 2,553,954 | ||||||||
| Preferred stock | - | - | 3,129,458 | 3,129,458 | ||||||||||||
| Common stock | - | - | 300,000 | 300,000 | ||||||||||||
| SAFEs | - | - | 325,000 | 325,000 | ||||||||||||
| Other ownership interests | - | - | 421,000 | 421,000 | ||||||||||||
| - | - | 6,729,412 | 6,729,412 | |||||||||||||
| Public Portfolio Companies | ||||||||||||||||
| Common stock | 91,995 | - | - | 91,995 | ||||||||||||
| Total Investments at Fair value | $ | 91,995 | $ | - | $ | 6,729,412 | $ | 6,821,407 | ||||||||
As of June 30, 2021 and March 31, 2021, all our investments were treated as Level 3 with the exception of one which was invested in common stock of a public company and treated as Level 1.
Significant Unobservable Inputs for Level 3 Assets and Liabilities
In accordance with FASB ASC 820, Fair Value Management, the tables above provide quantitative information about the Company’s fair value measurements of its Level 3 assets as of June 30, 2021 and March 31, 2021. In addition to the techniques and inputs noted in the tables above, according to the Company’s valuation policy, the Company may also use other valuation techniques and methodologies when determining the Company’s fair value measurements. The tables below are not meant to be all-inclusive, but rather provide information on the significant Level 3 inputs as they relate to the Company’s fair value measurements. To the extent an unobservable input is not reflected in the tables below, such input is deemed insignificant with respect to the Company’s Level 3 fair value measurements. Significant changes in the inputs in isolation would result in a significant change in the fair value measurement, depending on the materiality of the investment.
We focus on making our investments in the United States, Canada, and Israel. All investments are made and reported in US dollars. Assets that are denominated in foreign currencies are translated into U.S. dollars at closing rates of exchange on the date of valuation. Transactions during the year are translated at the rate of exchange prevailing on the date of the transaction. The Company does not isolate that portion of results of operations resulting from the changes in foreign exchange rates on securities from fluctuations resulting from changes in market prices of such securities. Such foreign currency translation gains and losses are included in the net realized gains or losses from investments and net changes in unrealized gain or losses from investments on the statement of operations.
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SCHEDULE OF INVESTMENTS IN UNREALIZED GAIN OR LOSSES FOREIGN EXCHANGE RATES ON SECURITIES
| America | Canada | Rest of World | Total | |||||||||||||
| Fair value March 31, 2021 | $ | 5,486,011 | $ | 907,560 | $ | 427,836 | $ | 6,821,407 | ||||||||
| New investments | 865,600 | 200,000 | 200,000 | 1,265,600 | ||||||||||||
| Proceeds from sale of investments | - | - | - | - | ||||||||||||
| Realized gains | - | - | - | - | ||||||||||||
| Change in value of investments | 28,467 | 17,859 | 6,674 | 53,000 | ||||||||||||
| Fair value June 30, 2021 | $ | 6,380,078 | $ | 1,125,419 | $ | 634,510 | $ | 8,140,007 | ||||||||
| America | Canada | Rest of World | Total | |||||||||||||
| Fair value beginning of year March 31, 2020 | $ | 2,170,499 | $ | 245,000 | $ | 250,000 | $ | 2,665,499 | ||||||||
| New investments | 200,000 | 50,000 | - | 250,000 | ||||||||||||
| Proceeds from sale of investments | - | - | - | - | ||||||||||||
| Realized gains | - | - | - | - | ||||||||||||
| Change in value of investments | - | - | - | - | ||||||||||||
| Fair value June 30, 2020 | $ | 2,370,499 | $ | 295,000 | $ | 250,000 | $ | 2,915,499 | ||||||||
Working on the experience of our technical advisors, we limit our investments to fintech, technology, and life sciences.
| Fintech | Technology | Life science | Total | |||||||||||||
| Fair value March 31, 2021 | $ | 126,030 | $ | 1,394,318 | $ | 5,301,059 | $ | 6,821,407 | ||||||||
| New investments | - | 365,600 | 900,000 | 1,265,600 | ||||||||||||
| Proceeds from sale of investments | - | - | - | - | ||||||||||||
| Realized gains | - | - | - | - | ||||||||||||
| Change in value of investments | - | 21,541 | 31,459 | 53,000 | ||||||||||||
| Fair value June 30, 2021 | $ | 126,030 | $ | 1,781,459 | $ | 6,232,518 | $ | 8,140,007 | ||||||||
| Fintech | Technology | Life science | Total | |||||||||||||
| Fair value March 31, 2020 | $ | 101,500 | $ | 685,002 | $ | 1,878,997 | $ | 2,665,499 | ||||||||
| New investments | - | - | 250,000 | 250,000 | ||||||||||||
| Proceeds from sale of investments | - | - | - | - | ||||||||||||
| Realized gains | - | - | - | - | ||||||||||||
| Change in value of investments | - | - | - | - | ||||||||||||
| Fair value June 30, 2020 | $ | 101,500 | $ | 685,002 | $ | 2,128,997 | $ | 2,915,499 | ||||||||
We invest in early-stage private companies developing products or solutions in the fields of fintech, technology and life sciences. Typically, we are investing in interest bearing notes that may be convertible into equity securities upon the completion of qualified subsequent financings, preferred stock, SAFEs or other forms of ownership. Typically notes carry a two year term, and are then rolled over for additional periods if no other maturity triggers have been achieved. If a convertible note investment were, in our judgment, to become impaired, we would reverse the accrued interest and adjust the valuation to reflect management’s assessment of fair value. If a convertible note investment exceeds its maturity date we usually would request the portfolio company to document an extension, as well as consider whether the overdue note, along with all other available performance data and management reviews lead us to consider whether there should be an adjustment in fair value to reflect impairment of the investment.
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SCHEDULE OF ADJUSTMENT IN FAIR VALUE TO REFLECT IMPAIRMENT OF INVESTMENT
| Convertible notes | Preferred stock | Common stock | SAFEs | Other ownership interests | Total | |||||||||||||||||||
| Fair value March 31, 2021 | $ | 2,553,954 | $ | 3,129,458 | $ | 391,995 | $ | 325,000 | $ | 421,000 | $ | 6,821,407 | ||||||||||||
| Conversions into preferred stock | - | - | - | - | - | - | ||||||||||||||||||
| New investments | 650,000 | 250,000 | 165,600 | 100,000 | 100,000 | 1,265,600 | ||||||||||||||||||
| Proceeds from sale of investments | - | - | - | - | - | - | ||||||||||||||||||
| Realized gains | - | - | - | - | - | - | ||||||||||||||||||
| Change in value of investments | 48,221 | 4,779 | - | - | - | 53,000 | ||||||||||||||||||
| Fair value June 30, 2021 | $ | 3,252,175 | $ | 3,384,237 | $ | 557,595 | $ | 425,000 | $ | 521,000 | $ | 8,140,007 | ||||||||||||
| Convertible notes | Preferred stock | Common stock | SAFEs | Other ownership interests | Total | |||||||||||||||||||
| Fair value March 31, 2020 | $ | 1,528,002 | $ | 701,497 | $ | 126,500 | $ | 73,500 | $ | 236,000 | $ | 2,665,499 | ||||||||||||
| Conversions into preferred stock | 50,000 | 100,000 | - | - | 100,000 | 250,000 | ||||||||||||||||||
| New investments | - | - | - | - | - | - | ||||||||||||||||||
| Proceeds from sale of investments | - | - | - | - | - | - | ||||||||||||||||||
| Realized gains | - | - | - | - | - | - | ||||||||||||||||||
| Change in value of investments | - | - | - | - | - | - | ||||||||||||||||||
| Fair value June 30, 2020 | $ | 1,578,002 | $ | 801,497 | $ | 126,500 | $ | 73,500 | $ | 336,000 | $ | 2,915,499 | ||||||||||||
NOTE 6– EQUITY
| (A) | PREFERRED STOCK |
Series A
The Company has sold Series A Stock Units (“Units”) consisting of one share of Series A Preferred Stock and one warrant to purchase a share of Common Stock at $ per share. The Units were sold in a private placement to accredited investors. The Series A Preferred Stock will be converted into shares of Common Stock upon listing of the Company on Nasdaq or NYSE. In the event of any liquidation or winding up of the Company, the holders of the Series A shall be entitled to receive in preference to the holders of shares of Common Stock a per share amount equal to two times (2 X) their original purchase price plus any declared but unpaid dividends (the Liquidation Preference). All share issuances and obligations are recognized on the books and stock register.
On March 2, 2021, in preparation for an intended IPO, the Company made an offer to all its preferred shareholders to protect them against the possibility that the IPO price might be less than their preferred stock price. Accordingly, Series A-1 and Series A-2 Preferred Stock were created, and the holders of Series A Preferred Stock were granted an opportunity to purchase shares of Common Stock at $ per share. If shareholders purchased at least $6,000 of Common Stock, their Series A Preferred Stock were exchanged for Series A-1 which is guaranteed to convert into shares of Common Stock at the same price as the IPO price, and if shareholders purchased a pro-rated amount of Common Stock their Series A Preferred Stock were exchanged for Series A-2 Preferred Stock which in turn is convertible into shares of Common Stock at a discount of to the IPO price. In all other respects the Series A-1 and Series A-2 Preferred Stock has the same rights and obligations as the Series A Preferred Stock. As of June 30, 2021, shares of Series A Preferred Stock had been exchanged for Series A-1 Preferred Stock, and shares of Series A Preferred Stock had been exchanged for Series A-2 Preferred Stock, respectively, leaving outstanding shares of Series A Preferred Stock (“Series A”) designated at a par value of $ per share.
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Series B
There are also shares of Series B Preferred Stock (“Series B”) authorized designated at a par value of $ per share. The Series B can be converted into shares of Common Stock upon listing of the Company on Nasdaq. In the event of any liquidation or winding up of the Company, the holders of the Series B shall be entitled to receive in preference to the holders of Common Shares and Series A Preferred Stock, a per share amount equal to two times (2 X) their original purchase price plus any declared but unpaid dividends (the Liquidation Preference). The holders of Series B shall be entitled to receive out of any funds of the Corporation at a time legally available for the declaration of dividends, dividends at a cumulative rate of 10% under such terms and conditions as the Board shall prescribe, provided, however, that in the event dividends shall be declared, dividends on issued and outstanding Series B shall be payable before any dividends shall be declared or paid upon or set apart for the Common Stock. At June 30, 2021, the Company had sold shares of Series B for proceeds of $3,456,124.
On March 2, 2021, in preparation for an intended future IPO, the Company made an offer to all its preferred shareholders to protect them against the possibility that the IPO price might be less than their preferred stock price. Accordingly, Series B-1 and Series B-2 Preferred Stock (“Series B-1” and “Series B-2”, respectively) were created, and the holders of the Series B were granted an opportunity to purchase shares of Common Stock at $ per share. If shareholders purchased at least $6,000 of common stock, their Series B were exchanged for Series B-1 which is guaranteed to convert into shares of Common Stock at the same price as the IPO price, and if shareholders purchased a pro-rated amount of common stock their Series B were exchanged for Series B-2 which converts into shares of Common Stock at a discount of to the IPO price. In all other respects, the Series B-1 and Series B-2 have the same rights and obligations as the Series B. At June 30, 2021, shares of Series B had been exchanged for Series B-1, and shares of Series B had been exchanged for Series B-2, respectively, leaving outstanding shares of Series B.
The Company sold shares of Series B-1 in the three months ended June 30, 2021 and is still selling Series B-1 shares as at the date of this report.
COMMON STOCK
The Company has authorized shares of common stock at a par value of $ per share. As of June 30, 2021, and March 31, 2021 a total of and shares of the Company’s common stock were issued and outstanding, respectively. During the three months ended June 30, 2021, the Company issued shares of Common Stock for $122,876 in connection with the amendment of preferred stock described in section A above. Also, during the year ended March 31, 2021 a total of shares of Common Stock were subscribed under this program for a total consideration of $ which was accrued as stock subscription liability at March 31, 2021, pending final closing of the round which occurred in April 2021, at which time these shares were recognized as fully-issued shares of common stock.
D) STOCK OPTIONS
In April 2018, the Board approved the introduction of the Kyto Technology and Life Science, Inc. Incentive Stock Option Plan (“the 2018 Plan”) reserving shares for issuance to employees, consultants and directors, with the objective of securing the benefit of services for stock options rather than cash salaries.
In July 2019, the Board approved the introduction of the Kyto Technology and Life Science 2019 Stock Option and Incentive Plan (“2019 Plan”), and reserved million shares for issuance to directors, officers, consultants and advisors. Options granted under the 2019 Plan expire .
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In December 2020, the Board approved the introduction of the Kyto Technology and Life Science 2020 Non Qualified Stock Option Plan (“2020 Plan”), and reserved million shares for issuance to directors, officers, consultants and advisors. Options granted under the 2020 Plan expire December 16, 2030.
During the three months ended June 30, 2021, and June 30, 2020, the Company issued a total of and non-qualified stock options, respectively, to consultants and advisors vesting over terms of years.
| Number of options granted | Weighted average exercise price | Weighted average remaining life years | ||||||||||
| Outstanding March 31, 2021 | 2,634,250 | $ | 0.05 | |||||||||
| Granted | 250,000 | 0.07 | ||||||||||
| Exercised | - | - | - | |||||||||
| Cancelled | - | - | - | |||||||||
| Outstanding June 30, 2021 | 2,884,250 | $ | 0.05 | |||||||||
| Exercisable June 30, 2021 | 1,782,610 | $ | 0.04 | |||||||||
In connection with the grant of stock options the Company recognises the value of the related option expense using the Black Scholes model, with appropriate assumptions for option life, stock value, risk free interest rate, volatility, and cancellations.
SCHEDULE OF FAIR VALUE ASSUMPTIONS - STOCK OPTIONS
| June 30, 2021 | March 31, 2021 | |||||||
| Stock Price at grant date | $ | $ - $ | ||||||
| Exercise Price | $ | $ - $ | ||||||
| Term in Years | - | - | ||||||
| Volatility assumed | % | % - % | ||||||
| Annual dividend rate | % | % | ||||||
| Risk free discount rate | % | % - % | ||||||
The compensation expense calculated at time of grant is amortised over the vesting period for the options granted. During the three months ended June 30, 2021 and 2020, the Company amortized $ and $, respectively, as option expense. The intrinsic value of outstanding options at June 30, 2021 was $, and $ of the option expense upon grant remained unamortized at June 30, 2021 with a remaining vesting period of years.
E) WARRANTS
In conjunction with the sale of stock Units, the Company issued 4,200,000 warrants to purchase common stock at a price of $1.20 per share for a period of three years. The Company values the warrants using the Black Scholes model, with appropriate assumptions for warrant life, stock value, risk free interest rate, and volatility.
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SCHEDULE OF WARRANTS
| Number of warrants | Weighted average exercise price | Weighted average remaining life in years | ||||||||||
| Outstanding March 31, 2021 | 1,596,667 | $ | 1.20 | |||||||||
| Granted | - | |||||||||||
| Exercised | - | - | ||||||||||
| Cancelled | - | - | ||||||||||
| Outstanding June 30, 2021 | 1,596,667 | $ | 1.20 | |||||||||
| Exercisable June 30, 2021 | 1,596,667 | $ | 1.20 | |||||||||
The intrinsic value of outstanding warrants at June 30, 2021 was .
NOTE 7 – FINANCIAL HIGHLIGHTS
SCHEDULE OF FINANCIAL HIGHLIGHTS
| Per share data ( a) | ||||||||
| June 30, 2021 | March 31, 2021 | |||||||
| Net asset value | $ | 0.64 | $ | 1.03 | ||||
| Net increase (decrease) in net assets | $ | (0.03 | ) | $ | 0.06 | |||
| Net unrealized gain (loss) on investments | $ | 0.00 | $ | 0.18 | ||||
| Ratios and Supplemental Data | ||||||||
| Net assets, end of period | $ | 8,537,246 | $ | 6,993,163 | ||||
| Weighted average common shares outstanding, end of period | 13,268,871 | 5,836,832 | ||||||
| Total operating expenses/net assets | 4.5 | % | 11.0 | % | ||||
| Net increase (decrease) in net assets | (3.9) | % | 6.1 | % | ||||
| Total return | (0.9) | % | 1.2 | % | ||||
| (a) | Per share data is based on the weighted average number of common shares outstanding at the end of the period. |
NOTE 8 - SUBSEQUENT EVENTS
Subsequent to June 30, 2021 the Company has sold $1,274,000 of shares of Series B-1 Preferred stock and issued shares of Common Stock, and invested $952,000 in additional investments.
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| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS |
PLAN OF OPERATIONS
Kyto Technology and Life Science, Inc. (the “Company”) was formed as a Florida corporation on March 5, 1999 under the name of B Twelve, Inc. In August, 2002, the Company changed its name from B Twelve, Inc. to Kyto BioPharma Inc. and in May 2018, the name was changed again to Kyto Technology and Life Science, Inc. In July 2019, the Company was re-incorporated as a Delaware company. The Company operates virtually, from public locations or the homes of its officers, and does not currently lease any office space.
The Company was originally formed to acquire and develop proprietary drugs for the treatment of cancer, arthritis, and other autoimmune diseases and had been evaluating a number of strategies. As of March 31, 2018, the Company had accumulated a deficit of $32,380,746 from all prior operations. In April 2018, the Board adopted a new business plan focused on the development of early stage technology and life science businesses through early stage investment funding. The Company has recruited a number of experienced investment consultants from a network that includes angel investors, corporate managers, sophisticated early stage investors and successful entrepreneurs with experience across a number of technology and life science products and markets, and relies on input from these advisors in conducting due diligence and making investment decisions. In order to offset the risk in early-stage investing, the Company works with angel investment groups and other sophisticated investors and participates only after these groups have completed due diligence and committed to invest, in effect becoming lead investors. The Company then completes its own due diligence and invests under identical terms as the lead investors. The Company will do follow-on investments in existing portfolio companies, assuming adequate progress, when portfolio companies initiate new financing rounds. The Company currently does not typically invest more than $250,000 in any single investment. Generally, the Company’s investments represent less than 5% ownership interests, and the Company therefore has no effective control or influence over the management or commercial decisions of the companies in which it invests. The Company plans to generate revenue from realized gains from the sale of the businesses in which it has invested, or some or all of its shareholdings in those cases where portfolio companies go public. Generally, it is expected that investments will be realized from an exit within a period of four to five years following initial investment. Such exits or liquidity events are outside the Company’s control and depend on merger and acquisition (“M&A”) transactions or an initial public offering (“IPO”) which may result in cash or equity proceeds. Accordingly, it is difficult to forecast revenue, net income, and cash flow. Other than making its initial and, potentially, follow-on investments in its portfolio companies, the Company does not provide any financial support to any of its investees.
The Company has one regular employee – the CEO, Mr, Paul Russo. Prior to December 31, 2020, was acting as a consultant to the Company and did not receive contractual compensation for his services in the form of cash. As of January 1, 2021, Mr. Russo was engaged as an employee of the Company at a salary of $400,000 per annum of which 60% is paid monthly, and the balance deferred to be paid once the Company lists and starts trading on the Nasdaq exchange. The full terms of Mr. Russo’s employment are described in an engagement letter filed on Form 8-K on February 1, 2021, which was approved by the Compensation committee of the Board of Directors on that date. During the three months ended June 30, 2021, Mr. Russo received $80,000 gross payroll, no consulting fees and no options were granted. During the three months ended June 30, 2020, Mr. Russo received no payroll or consulting fees, and no options were granted to him.
The Company has created a portfolio of minority investments in early-stage start-up companies and derives its revenue opportunity from the sale of those investments. Such sales are outside the Company’s control and depend on M&A transactions or IPOs which may result in cash or equity proceeds. Accordingly, it is difficult to forecast revenue, net income, and cash flow. As of the date of this filing, the Company had approximately $600,000 of cash to cover its operating expenses, and new investment requirements and is continuing to raise additional funding on a recurring monthly basis. If successful, it will have sufficient funding for further investments and ongoing operations. However, there is no assurance that the Company will be able to raise sufficient cash to cover its requirements on attractive terms, if at all, and whether it will be able to continue as a going concern. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Stay at home orders and general economic uncertainties arising out of the current Covid-19 epidemic have created additional delays and uncertainty. To date there has been no disruption to the Company’s business operations, although some of its portfolio investment companies report delays in their programs.
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At March 31, 2020, management determined that the Company was an investment company for purposes of ASC 946 disclosure, and committed to follow the specialized accounting and reporting guidance contained therein. Accordingly, a new company, Kyto Investments, Inc. (“KI”) was incorporated in Delaware in December 2020 in preparation for a restructuring and an N-2 Registration Statement filed in March 2021 for review by the SEC. KI is an internally managed, closed-end investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). Immediately upon effectiveness of this N-2 Registration Statement, the Company will merge with KI and the Company will be the surviving entity. As of the completion of the merger, the Company will constitute a “successor issuer” for the purposes of Rule 414 under the Securities Act and may continue the current offering by filing post-effective amendments to the Registration Statements. Prior to the merger, the Company had fewer than 100 non affiliated investors and filed under the 1934 Act relying on exemption Rule 3( c )(1).
As a BDC, the Company will be required to comply with certain regulatory requirements. The Company also intends to elect to be treated for U.S. federal income tax purposes as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Company is required to comply with additional regulatory requirements. The Company has prepared and submitted sequentially two N-2 Registration Statements to the SEC for review but has not yet received final approval of its registration as at the filing date of this report.
Results of Operations
Revenue: In the three months ended June 30, 2021 and June 30, 2020, the Company reported no realized investment income as there were no liquidity events related to its investment portfolio. The Company reported $53,000 and $0 of unrealized gains from investments respectively, for the three months ended June 30, 2021 and 2020.
Professional fees: In the three months ended June 30, 2021 and June 30, 2020, the Company reported $166,954 and $12,938, respectively, of professional fees, mainly for legal and accounting services.
Other Operating expenses: Other operating expenses include payroll, consulting, and travel and conference fees associated with fund raising and review of investment deal-flow. In the three months ended June 30, 2021 and June 30, 2020, the Company incurred other operating expenses of $219,838 and $25,930, respectively.
For the three months ended June 30, 2021 and 2020, the Company’s net decrease in net assets resulting from operations was $333,792 and $38,868, respectively.
During the three months ended June 30, 2021, the Company was subject to shelter in place regulations imposed by the State of California in mitigation of the spread of the Corona 19 virus. Since the Company does not have any dedicated office space and works virtually from the homes of its officers, there was no major disruption in working routines which continued by video and teleconference. Uncertainty arising from Covid 19 created a slow down in the rate at which the Company was able to raise Series B funding, and thereby continue to make investments, however the Company did see a reduction in travel and investor relations expenses during the period. The Company has more than 60 discrete investments in a range of different industry and geographic segments, many of which are in the life science and medical space. While there is clearly a risk that our portfolio companies may be adversely affected in their ability to raise future funding or do business, there have been no management reports revealing major problems and some of our portfolio companies may actually benefit from new opportunities created. We believe that our policy of spreading our investments in relatively small amounts over a large number of portfolio companies helps mitigate some of the risk that might be suffered by any of our investments.
Liquidity and Capital Resources
The Company had net assets of $8,537,246 and $6,993,163 at June 30, 2021 and March 31, 2021, respectively. Cash was $481,506 and $1,437,868 at June 30, 2021 and March 31, 2021, respectively.
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Cash from operating activities
The Company used net cash of $1,632,238 in operating activities during the three months ended June 30, 2021 compared to $282,427 used for the three months ended June 30, 2020. Main reasons for the higher level in 2021 were an increase in investments in portfolio companies and increased professional fees and operating expenses.
Cash from investing activities
No cash was used in investing activities.
Cash from financing activities
The Company had a net cash inflow from financing activities of $675,876 in the three months ended June 30, 2021 compared to $375,000 in the three months ended June 30, 2020. This inflow included $553,002 proceeds from the sale of Series B preferred stock, and $122,874 proceeds from the sale of common stock, respectively, in the three months ended June 30, 2021, compared to $375,000 from the sale of Series B preferred stock in the corresponding prior period.
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 capital to fund additional investments as they become available, and to cover operating expenses. The Company is planning to uplift from OTC to the NASDAQ market, and raise additional funding from an initial public offering (“IPO)” for which as an initial step it has submitted an N-2 filing to the SEC for review.
CRITICAL ACCOUNTING POLICIES
USE OF ESTIMATES
In preparing financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the period presented. Actual results may differ from these estimates.
Significant estimates at June 30, 2021 and March 31, 2021 include the valuation of investments, deferred tax assets, tax allowance, stock options and warrants.
INVESTMENT AND VALUATION OF INVESTMENT AT FAIR VALUE
The Company reviews the performance of the underlying investments based on available information, including management reports, press releases, web site announcements and progress reports, third party equity updates, subsequent financing transactions, management interviews and, where accessible, financial reports, to determine their current and future potential value and liquidity. In the event that Management considers the value of an investment to be impaired, the carrying value of the investment will be written down by an impairment charge to reflect Management’s estimated valuation. The Company recognized impairment of one of its investments which was written down by $61,046 in September, 2019. The Company has not experienced any other impairment write-downs in any prior or subsequent periods.
The Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures”, for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing US GAAP that require the use of fair value measurements which establishes a framework for measuring fair value and expands disclosure about such fair value measurements.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value is an exchange price notion under which fair value is the price in an orderly transaction between market participants to sell an asset or transfer a liability in the market in which the reporting entity would transact for the asset or liability.
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The Company has established procedures to estimate the fair value of its investments which the Company’s board of directors has reviewed and approved. The Company will use observable market data to estimate the fair value of investments to the extent that market data is available. In the absence of quoted market prices in active markets, or quoted market prices for similar assets or in markets that are not active, the Company will use the valuation methodologies described below with unobservable data based on the best available information in the circumstances, which incorporates the company’s assumptions about the factors that a market participant would use to value the asset.
For investments for which quoted market prices are not available, which will comprise most of our investment portfolio, fair value will be estimated by using the income or market approach. The income approach is based on the assumption that value is created by the expectation of future benefits discounted to a current value and the fair value estimate is the amount an investor would be willing to pay to receive those future benefits. The market approach compares recent comparable transactions to the investment. Adjustments are made for any dissimilarity between the comparable transactions and the investments. These valuation methodologies involve a significant degree of judgment on the part of our management and board.
In determining the appropriate fair value of an investment using these approaches, the most significant information and assumption may include, as applicable: available current market data, including relevant and applicable comparable market transactions, applicable market yields and multiples, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, merger and acquisition comparable, the principal market and enterprise values, environmental factors, financing transactions by the portfolio company, among other factors.
The estimated fair values will not necessarily represent the amounts that may be ultimately realized due to the occurrence or nonoccurrence of future circumstances that cannot be reasonably determined. Because of the inherent uncertainty of the valuation of the investments, the estimate of fair values may differ significantly from the value that would have been used had a broader market for the investments existed.
The authoritative accounting guidance prioritizes the use of market-based inputs over entity-specific inputs and establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation. The three levels of valuation hierarchy are defined as follows:
Level 1: Observable inputs such as quoted market prices in active markets for identical assets or liabilities
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data
Level 3: Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions. Most of our investments fall into this category.
RECENT ACCOUNTING PRONOUNCEMENTS
Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
OFF-BALANCE SHEET ARRANGEMENTS
As of the date of this Quarterly Report on Form 10-Q, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
IMPACT OF INFLATION
The Company does not reflect eventsforesee any implications being created by the current rate of inflation.
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CONTRACTUAL OBLIGATION
The Company has no contractual obligations outside the normal course of business with its vendors, advisors, and consultants.
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Not required for smaller reporting company.
| ITEM 4. | CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that may have occurred subsequentare designed to the original filing date, and does not modify or updateensure that material information required to be disclosed in any way disclosures made in the original Form 10-Q.
Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed notour periodic reports filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 ofunder the Securities Exchange Act of 1934, as amended, or 1934 Act, is recorded, processed, summarized, and otherwisereported 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 three months ended June 30, 2021 we carried out an evaluation, under the supervision and with the participation of our management, including the principal executive officer and the principal financial officer (principal financial officer), of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13(a)-15(e) under the 1934 Act. Based on this evaluation, because of the Company’s limited resources and limited number of employees, management concluded that our disclosure controls and procedures were ineffective as of June 30, 2021. Notwithstanding this conclusion, we believe that our unaudited condensed financial statements contained in this Quarterly Report fairly present our financial position, results of operations and cash flows for the periods covered thereby in all material respects.
Management’s Report on Internal Control over Financial Reporting
With the participation of our Chief Executive Officer and Chief Financial Officer (principal financial officer), our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of June 30, 2021 based on the framework in Internal Controls—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on our evaluation and the material weaknesses described below, management concluded that the Company did not maintain effective internal control over financial reporting as of June 30, 2021 based on the COSO framework criteria. Management has identified control deficiencies regarding the lack of segregation of duties and the need for a stronger internal control environment. Management of the Company believes that these material weaknesses are due to the small size of the Company’s accounting staff. The small size of the Company’s accounting staff may prevent adequate controls in the future, such as segregation of duties, due to the cost/benefit of such remediation. To mitigate the current limited resources and limited employees, we rely heavily on direct management oversight of transactions, along with the use of external legal and accounting professionals. As we grow, we expect to increase our number of employees, which will enable us to implement adequate segregation of duties within the internal control framework. In addition, we have identified the following material weaknesses: (i) the Company utilizes accounting software that does not prevent erroneous or unauthorized changes to previous reporting periods and/or can be adjusted so as not to provide an adequate audit trail of entries made in the accounting software, and (ii) we have identified a material weakness in our internal controls relating to the accounting of transactions that are either highly complex and/or unusual in nature. In such instances, we seek to augment our internal accounting capabilities by obtaining assistance from third-parties who have greater expertise in such areas.
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These control deficiencies could result in a misstatement of account balances that would result in a reasonable possibility that a material misstatement to our financial statements may not be prevented or detected on a timely basis. Accordingly, we have determined that these control deficiencies as described above together constitute a material weakness. However, management believes that despite our material weaknesses, our financial statements for the year ended June 30, 2021 are fairly stated, in all material respects, in accordance with US GAAP.
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 subjectlimited to, liabilitythe 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 those sections.
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.
| ITEM 1. | LEGAL PROCEEDINGS |
None
| ITEM 1A. | RISK FACTORS. |
Not required for smaller reporting company.
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. |
The Corporation filed a certificate of Designation in April 2021 for the issue of up to 3,200,000 shares of Series B-1 Preferred stock to accredited investors under Section 4(2) or Rule 506 of Regulation D of the Securities Act 1933. As of the filing date, the Corporation had sold a total of 3,200,000 shares of Series B-1 Preferred stock to accredited investors. The Company will use the net proceeds for investment purposes and operating expenses.
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
None
| ITEM 4. | MINE SAFETY DISCLOSURES |
Not applicable
| ITEM 5. | OTHER INFORMATION |
ITEM 6.EXHIBITSNone
| ITEM 6. | EXHIBITS |
Index to Exhibits on page 13
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INDEX TO EXHIBITS
EXHIBIT NUMBER | DESCRIPTION | ||
| 3 (i) (a) | Articles of Incorporation of Kyto | ||
Articles of Amendment changing name to Kyto Technology and Life Science | |||
| ** | |||
| 3.4 | Delaware incorporation and revised articles of incorporation ** | ||
| 18.1 | Auditors preferability letter re adoption of ASC 946*** | ||
| 31.1 | Section 302 | ||
| 32.1 |
| ||
Certification pursuant to 18 | |||
| 101.ins | Inline XBRL Instance Document* | ||
| 101.sch | Inline XBRL Taxonomy Schema* | ||
| 101.cal |
| ||
| 101.def | Inline XBRL Taxonomy Definition Linkbase* | ||
| Inline XBRL Taxonomy Label Linkbase* | ||
| 101.pre | Inline XBRL | ||
| 104 | Cover Page Interactive Data File – (formatted in Inline XBRL and contained in Exhibit 101)* |
| * | Filed as Exhibit to Company’s Form 10-SB on September 12, 2003 with the Securities and Exchange Commission. |
| ** | Previously filed with Form 8-K on July 17, 2019. |
| *** | Filed as Exhibit with Form 10-K on July 2, 2020. |
*Filed as Exhibit to Company's Form 10-SB on September 12th, 2003, with the Securities and Exchange Commission
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**Filed as Exhibit with this Form 10-Q.
SIGNATURES
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Kyto Technology and Life Science, Inc. | ||
| By: | /s/ Paul Russo |
Paul Russo Chief Executive Officer, principal executive officer, | ||
Date: August 2, 2019October 06, 2021
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Kyto Technology and Life Science, Inc. | ||
| By: | /s/ Simon Westbrook |
Simon Westbrook Principal financial and accounting officer | ||
Date: August 2, 2019October 06, 2021
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