UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October
31, 2014
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______to______.
Commission File Number: 333-139915
LIGHTLAKE THERAPEUTICS INC.
(Exact name of registrant as specified in
its charter)
Nevada |
|
46-4744124 |
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
|
|
|
96-98 Baker Street, First Floor, London, England |
|
W1U 6TJ |
(Address of principal executive offices) |
|
(Zip Code) |
44 (0) 203 617 8739
(Registrant’s telephone number, including
area code)
n/a
(Former name, former address and former
fiscal year, if changed since last report)
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. Yes ¨ No x
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 (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x
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. See definitions
of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.:
Large
Accelerated Filer ¨
Accelerated Filer ¨
Non-Accelerated Filer ¨ (Do
not check if a smaller reporting company) Smaller Reporting Company x
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Indicate the number of shares
outstanding of each of the issuer’s classes of common stock: As of December 5, 2014, there were 182,010,212 shares,
$0.001 par value per share, of common stock outstanding.
LIGHTLAKE THERAPEUTICS INC.
Quarterly Report on Form 10-Q for the
Period Ended October 31, 2014
TABLE
OF CONTENTS
CAUTIONARY STATEMENT ON FORWARD-LOOKING
INFORMATION
This Quarterly Report on Form 10-Q (this
“Report”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act
of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because
they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,”
“estimate,” “intend,” “could,” “should,” “would,” “may,”
“seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,”
“forecast,” “potential,” “continue” negatives thereof or similar expressions. Forward-looking
statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about
the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors
that may cause our actual results, level of activity, performance or achievement to be materially different from the results of
operations or plans expressed or implied by such forward-looking statements.
We cannot predict all of the risks and
uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions
described in such statements or that our objectives and plans will be achieved and we do not assume any responsibility for the
accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various
places throughout this Report and include information concerning possible or assumed future results of our operations, including
statements about potential acquisition or merger targets; business strategies; future cash flows; financing plans; plans and objectives
of management, any other statements regarding future acquisitions, future cash needs, future operations, business plans and future
financial results, and any other statements that are not historical facts.
These forward-looking statements represent
our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other
factors. Many of those factors are outside of our control and could cause actual results to differ materially from the
results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions,
the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time
than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as
of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed
in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary
statements contained or referred to in this Report.
Except to the extent required by law, we
undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events,
a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.
CERTAIN TERMS USED IN THIS REPORT
When this report uses the words “we,”
“us,” “our,” “Lightlake,” and the “Company,” they refer to Lightlake Therapeutics
Inc. “SEC” refers to the Securities and Exchange Commission.
PART I—FINANCIAL INFORMATION
Item 1. Financial
Statements.
Lightlake Therapeutics Inc.
Financial Statements
For the Three Months Ended
October 31, 2014 and 2013
Lightlake Therapeutics Inc.
Balance Sheets (Unaudited)
As of
October 31, 2014 and July 31, 2014
| |
October 31, | | |
July 31, | |
| |
2014 | | |
2014 | |
| |
| | |
| |
Assets | |
| | | |
| | |
Current assets | |
| | | |
| | |
Cash and cash equivalents | |
$ | 1,147,636 | | |
$ | 254,770 | |
Prepaid expenses and other current assets | |
| 534,542 | | |
| 24,079 | |
Total current assets | |
| 1,682,178 | | |
| 278,849 | |
| |
| | | |
| | |
Other assets | |
| | | |
| | |
Patents and patent applications (net of accumulated amortization of $5,986 at October 31, 2014 and $5,642 at July 31, 2014) | |
| 21,464 | | |
| 21,808 | |
Total assets | |
$ | 1,703,642 | | |
$ | 300,657 | |
| |
| | | |
| | |
Liabilities and Stockholders' Deficit | |
| | | |
| | |
Liabilities | |
| | | |
| | |
Current liabilities | |
| | | |
| | |
Accounts payable and accrued liabilities | |
$ | 71,750 | | |
$ | 200,604 | |
Accrued salaries and wages | |
| 1,638,231 | | |
| 1,416,651 | |
Due to related parties | |
| 350,000 | | |
| 350,000 | |
Total current liabilities | |
| 2,059,981 | | |
| 1,967,255 | |
| |
| | | |
| | |
Deferred revenue | |
| 3,278,344 | | |
| 1,411,470 | |
Total liabilities | |
| 5,338,325 | | |
| 3,378,725 | |
| |
| | | |
| | |
Stockholders' deficit | |
| | | |
| | |
Common stock; par value $0.001; 200,000,000 shares authorized; | |
| | | |
| | |
178,991,893 shares issued and outstanding at October 31, 2014 and | |
| | | |
| | |
178,207,278 shares issued and outstanding at July 31, 2014 | |
| 178,991 | | |
| 178,206 | |
Additional paid-in capital | |
| 43,294,876 | | |
| 43,076,939 | |
Accumulated deficit during the development stage | |
| (47,108,550 | ) | |
| (46,333,213 | ) |
Total stockholders' deficit | |
| (3,634,683 | ) | |
| (3,078,068 | ) |
Total liabilities and stockholders' deficit | |
$ | 1,703,642 | | |
$ | 300,657 | |
The accompanying notes are an integral part of these unaudited financial statements.
Lightlake Therapeutics Inc.
Statements of Operations (Unaudited)
For the three months ended
October
31, 2014 and 2013
| |
2014 | | |
2013 | |
| |
| | |
| |
Operating expenses | |
| | | |
| | |
General and administrative | |
$ | 708,013 | | |
$ | 1,481,983 | |
Research and development | |
| 52,101 | | |
| 57,590 | |
Total operating expenses | |
| 760,114 | | |
| 1,539,573 | |
| |
| | | |
| | |
Loss from operations | |
| (760,114 | ) | |
| (1,539,573 | ) |
| |
| | | |
| | |
Other income (expense) | |
| | | |
| | |
Interest expense | |
| (8,212 | ) | |
| (125,547 | ) |
Change in derivative | |
| - | | |
| (48,713 | ) |
Loss on foreign exchange | |
| (7,011 | ) | |
| - | |
Total other income (expense) | |
| (15,223 | ) | |
| (174,260 | ) |
| |
| | | |
| | |
Loss before provision for income taxes | |
| (775,337 | ) | |
| (1,713,833 | ) |
| |
| | | |
| | |
Provision for income taxes | |
| - | | |
| - | |
| |
| | | |
| | |
Net loss | |
$ | (775,337 | ) | |
$ | (1,713,833 | ) |
| |
| | | |
| | |
Loss per common share: | |
| | | |
| | |
Basic and diluted | |
$ | (0.00 | ) | |
$ | (0.01 | ) |
Weighted average common shares outstanding | |
| | | |
| | |
Basic and diluted | |
| 178,836,694 | | |
| 166,210,611 | |
Lightlake Therapeutics Inc.
Statement of Shareholders' Deficit (Unaudited)
For the three months ended
October 31, 2014
| |
| | |
| | |
| | |
Deficit | | |
| |
| |
| | |
| | |
Additional | | |
During the | | |
| |
| |
Common Stock | | |
Paid In | | |
Development | | |
| |
| |
Shares | | |
Amount | | |
Capital | | |
Stage | | |
Total | |
| |
| | |
| | |
| | |
| | |
| |
Balance at July 31, 2014 | |
| 178,207,278 | | |
$ | 178,206 | | |
$ | 43,076,939 | | |
$ | (46,333,213 | ) | |
$ | (3,078,068 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Stock issued for services | |
| 784,615 | | |
| 785 | | |
| 43,938 | | |
| - | | |
| 44,723 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Stock based compensation from issuance of stock options | |
| - | | |
| - | | |
| 173,999 | | |
| - | | |
| 173,999 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss | |
| - | | |
| - | | |
| - | | |
| (775,337 | ) | |
| (775,337 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at October 31, 2014 | |
| 178,991,893 | | |
$ | 178,991 | | |
$ | 43,294,876 | | |
$ | (47,108,550 | ) | |
$ | (3,634,683 | ) |
The accompanying notes are an integral part of these unaudited financial statements.
Lightlake Therapeutics Inc.
Statements of Cash Flows (Unaudited)
For the three months ended
October 31, 2014 and 2013
| |
2014 | | |
2013 | |
| |
| | |
| |
Cash flows provided by (used in) operating activities | |
| | | |
| | |
Net loss | |
$ | (775,337 | ) | |
$ | (1,713,833 | ) |
Adjustments to reconcile net loss to net cash | |
| | | |
| | |
used by operating activities: | |
| | | |
| | |
Amortization | |
| 344 | | |
| 419 | |
Issuance of common stock for services | |
| 44,723 | | |
| 110,668 | |
Stock based compensation from issuance of options | |
| 173,999 | | |
| 1,080,201 | |
Accreted interest on debt discounts | |
| - | | |
| 132,428 | |
Change in derivative | |
| - | | |
| 48,713 | |
Changes in assets and liabilities: | |
| | | |
| | |
(Increase) decrease in prepaid expenses and other current assets | |
| (510,463 | ) | |
| 8,500 | |
Decrease in accounts payable | |
| (128,854 | ) | |
| (16,424 | ) |
Increase in accrued salaries and wages | |
| 221,580 | | |
| 74,414 | |
Net cash used by operating activities | |
| (974,008 | ) | |
| (274,914 | ) |
| |
| | | |
| | |
Cash flows provided by (used in) investing activities | |
| - | | |
| - | |
| |
| | | |
| | |
Cash flows provided by (used in) financing activities | |
| | | |
| | |
Borrowings from related parties | |
| - | | |
| - | |
Borrowings on convertible notes payable | |
| - | | |
| - | |
Payments to related parties on notes payable | |
| - | | |
| - | |
Investment received in exchange for royalty agreement | |
| 1,866,874 | | |
| - | |
Issuance of common stock for cash | |
| - | | |
| - | |
Net cash provided from financing activities | |
| 1,866,874 | | |
| - | |
| |
| | | |
| | |
Net increase (decrease) in cash and cash equivalents | |
| 892,866 | | |
| (274,914 | ) |
Cash and cash equivalents, beginning of period | |
| 254,770 | | |
| 598,623 | |
Cash and cash equivalents, end of period | |
$ | 1,147,636 | | |
$ | 323,709 | |
| |
| | | |
| | |
Supplemental disclosure | |
| | | |
| | |
Interest paid during the period | |
$ | - | | |
$ | 125,547 | |
Taxes paid during the period | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
Non-Cash Transactions | |
| | | |
| | |
Debt discounts attributable to derivative valuation | |
$ | - | | |
$ | 132,428 | |
Settlement of derivative liability | |
$ | - | | |
$ | 8,820 | |
Cashless exercise of warrants | |
$ | - | | |
$ | 1,524 | |
Derivative liability | |
$ | - | | |
$ | 337,413 | |
The accompanying notes are an integral part of these unaudited financial statements.
Lightlake Therapeutics Inc.
Notes to (Unaudited) Financial Statements
| 1. | Organization and Basis of Presentation |
Lightlake
Therapeutics Inc. (“Lightlake”, “we”, “our”, the “Company”) is a biopharmaceutical
company focused on treatments for common addictions, including Binge Eating Disorder, and related disorders, including a treatment
to reverse opioid overdoses.
The
accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles in the
United States of America for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly,
these condensed financial statements do not include all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation
have been included and such adjustments are of a normal recurring nature. These financial statements should be read in conjunction
with the financial statements for the year ended July 31, 2014 and notes thereto and other pertinent information contained in the
Form 10-K the Company has filed with the Securities and Exchange Commission (the “SEC”).
The results of operations for
the three months ended October 31, 2014 are not necessarily indicative of the results for the full fiscal year ending July 31,
2015.
The accompanying financial statements
have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the
liquidation of liabilities in the normal course of business. However, the Company has incurred significant losses and is dependent
on obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain the necessary
funding it could cease operations as a new enterprise. This raises substantial doubt about the Company’s ability to continue
as a going concern. These financial statements do not include any adjustments that might result from this uncertainty.
The Company will need to seek
additional funding. The Company currently does not have a specific plan of how the Company will obtain such funding; however, the
Company anticipates that additional funding will be in the form of debt financing and/or equity financing from the sale of the
Company’s common stock and/or in the form of financing from the sale of interests in the Company’s prospective products.
At this time, the Company cannot provide investors with any assurance that the Company will be able to obtain sufficient funding
to meet the Company’s obligations over the next twelve months. The Company does not have any arrangements in place for any
future financing and may seek to obtain additional short-term loans from its officers and directors to meet its short-term funding
needs.
| 3. | Summary of Significant Accounting Policies |
Use
of estimates
The Company prepares its financial
statements in conformity with accounting principles generally accepted in the United States of America ("GAAP"), which
require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Prepaid supplies
As of October 31, 2014, the Company
has prepaid supplies of $493,360, which it will use in its clinical trials and the development of its products for testing purposes
to meet the U.S. Food and Drug Administration requirements for approval of its treatment to reverse opioid overdoses. The Company
expects to amortize these prepaid supplies to research and development costs as these are used over the course of its clinical
studies and testing period.
Deferred revenue
Amounts from nonrefundable investments
received in exchange for net profit interests in the Company’s prospective products are recognized as deferred revenue and
will be amortized on a straight-line basis over the contracted or estimated period of performance. The period of performance over
which the revenues are recognized is typically the period over which the research and/or development is expected to occur or manufacturing
services are expected to be provided. Such investments are contingently convertible to equity and as such, no amortization to revenue
has been recorded. (see Note 5)
Recently Issued Accounting
Pronouncements
The Company has implemented all
new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are
any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations.
| 4. | Related Party Transactions |
At October 31, and July 31, 2014,
the Company had loans outstanding with its three directors (two of which are officers), in the total amount of $350,000.
The loans mature on January 6, 2015 and are subject to annual interest of 8.5%. In the event that at least one-third and one-sixth
of the amount due plus interest is not repaid by September 30, 2014 and December 25, 2014, respectively, certain penalties will
apply. As of October 1, 2014, the outstanding loan balances are subject to a penalty rate of 6% per annum due to non-payment of
the required repayment amounts.
Lightlake Therapeutics Inc.
Notes to (Unaudited) Financial Statements
On July 22, 2014, the Company
received a $3,000,000 commitment from a foundation, from which the Company has the right to make capital calls for the research,
development, marketing, commercialization, and any other activities connected to the Company’s treatment to reverse opioid
overdoses, certain operating expenses, and any other purpose consistent with the goals of the foundation. On August 13 and September
8, 2014 the Company received investments of $422,344 and $444,530, respectively, from the foundation in exchange for a 0.844687%
and a 0.888906% interest, respectively, in the Company’s opioid overdose reversal treatment.
On September 9, 2014, the Company
entered into an agreement and subsequently received funding from an individual investor in the amount of $500,000 for use by the
Company for any purpose. In exchange for this funding, the Company agreed to provide the investor with a 0.98% interest in the
Net Profit as related to the Company’s treatment to reverse opioid overdoses. Net profit is defined as the pre-tax profit
generated from the product after the deduction of all expenses incurred by and payments made by the Company in connection with
the product, including but not limited to an allocation of Company overhead. The investor also has rights with respect to its 0.98%
interest if the treatment is sold or the Company is sold. Additionally, the Company may buyback interests from the investor within
two and one half years or after two and a half years of the investment at a price of two times or three and a half times, respectively,
the relevant investment amount represented by the interests to be bought back. If the product is not introduced to the market and
not approved by the U.S. Food and Drug Administration or an equivalent body in Europe and not marketed within 24 months the investor
will have a 60 day option to receive 5,000,000 shares of common stock in lieu of the interest in the product.
On September 17, 2014, the Company
entered into an agreement and subsequently received additional funding totaling $500,000 for use by the Company for any purpose.
In exchange for this funding, the Company agreed to provide the investor with a 1.0% interest in the Company’s Binge Eating
Disorder treatment product and pay the investor 1.0% of the net profit generated from this treatment in perpetuity. Net profit
is defined as the pre-tax profit generated from the product after the deduction of all expenses incurred by and payments made by
the Company in connection with the product, including but not limited to an allocation of Company overhead. If the product is not
approved by the U.S. Food and Drug Administration within 36 months the investor will have a sixty day option to receive 6,250,000
shares of common stock in lieu of the 1.0% interest in the product.
Lightlake Therapeutics Inc.
Notes to (Unaudited) Financial Statements
Common Stock
On November 26, 2014, the Company amended its articles
of incorporation to increase its authorized capital stock from 200,000,000 common shares to 1,000,000,000 common shares.
In August 2014, the Company issued
784,615 shares to consultants for services rendered. The shares have a fair value of $44,723 based on stock prices at issuance
dates.
Stock Based Compensation
As required by the Stock Compensation
Topic, ASC 718, the Company measures and recognizes compensation expense for all share based payment awards made to the officers
and directors based on estimated fair values. Stock based compensation expense recognized for the three months ended October 31,
2014 was $173,999.
On August 2, 2014, the Company
granted 3,000,000 stock options with an exercise price of $0.10 per share to a consultant for services rendered. These options
have a term of 5 years and vested immediately. The Company has valued these options using the Black Scholes option pricing model
which resulted in a fair market value of $173,999 which have been fully recognized as expense for the three months ended, October
31, 2014. The assumptions used in the valuation were as follows:
Market value of stock on measurement date | |
$0.058 |
Risk-free interest rate | |
1.73% |
Dividend yield | |
0% |
Volatility factor | |
413% |
Term | |
5.0 years |
Stock option activity for three months ended October
31, 2014 is presented in the table below:
| |
Number of Shares | | |
Weighted- average Exercise Price | | |
Weighted- average Remaining Contractual Term (years) | | |
Aggregate Intrinsic Value | |
Outstanding at July 31, 2014 | |
| 304,750,000 | | |
| 0.09 | | |
| 8.56 | | |
$ | 12,000 | |
Granted | |
| 3,000,000 | | |
| 0.10 | | |
| 5.00 | | |
| | |
Forfeited/expired/cancelled | |
| - | | |
| - | | |
| - | | |
| | |
Outstanding at October 31, 2014 | |
| 307,750,000 | | |
| 0.09 | | |
| 8.27 | | |
$ | - | |
Exercisable at October 31, 2014 | |
| 162,025,000 | | |
| 0.10 | | |
| 8.19 | | |
$ | - | |
Warrants
Warrant activity for quarter ended October 31, 2014
is presented in the table below:
| |
Number of Shares | | |
Weighted- average Exercise Price | | |
Weighted- average Remaining Contractual Term (years) | | |
Aggregate Intrinsic Value | |
Outstanding at July 31, 2014 | |
| 125,475,239 | | |
| 0.20 | | |
| 4.33 | | |
$ | - | |
Granted | |
| - | | |
| | | |
| - | | |
| | |
Exercised | |
| - | | |
| | | |
| - | | |
| | |
Outstanding at October 31, 2014 | |
| 125,475,239 | | |
| 0.20 | | |
| 4.33 | | |
$ | - | |
Exercisable at October 31, 2014 | |
| 52,975,239 | | |
| 0.20 | | |
| 4.08 | | |
$ | - | |
Lightlake Therapeutics Inc.
Notes to (Unaudited) Financial Statements
On October 31, 2014, the Company
entered into an agreement and subsequently received funding from an individual investor in the amount of $500,000 for use by the
Company for any purpose. In exchange for this funding, the Company agreed to provide the investor with a 0.98% interest in the
Net Profit as related to the Company’s treatment to reverse opioid overdoses. Net profit is defined as the pre-tax profit
generated from the product after the deduction of all expenses incurred by and payments made by the Company in connection with
the product, including but not limited to an allocation of Company overhead. The investor also has rights with respect to its 0.98%
interest if the treatment is sold or the Company is sold. Additionally, the Company may buyback the interest from the investor
within two and one half years or after two and a half years but no later than four years of the investment at a price of two times
or three and a half times, respectively, of the investment amount. If the product is not introduced to the market and not approved
by the U.S. Food and Drug Administration or an equivalent body in Europe and not marketed within 24 months the investor will have
a 60 day option to receive 5,000,000 shares of common stock in lieu of the interest in the product.
On
November 13, 2014, the Company made a capital call of $1,033,614 from the aforementioned foundation (see Note 5) in exchange for
a 2.067228% interest in the Company’s opioid overdose reversal treatment.
On December 1, 2014, the Company
and Aegis Therapeutics, LLC (“Aegis”), entered into a Material Transfer, Option and Research License Agreement (the
“License Agreement”) that provides the Company with an exclusive royalty-free research license for a period of time
to Aegis’ proprietary delivery enhancement and stabilization agents, including Aegis’ ProTek® and Intravail®
technologies (collectively, the “Technology”) to enable the Company to conduct a feasibility study of opioid antagonists
when used with the Technology. During this period of time, the Company may also evaluate its interest in having an exclusive license
to the Technology for use with opioid antagonists to treat, diagnose, predict, detect or prevent any disease, disorder, state,
condition or malady in humans (the “Possible License”). Aegis has granted the Company an exclusive option to obtain
the Possible License for a certain period after the study is completed.
In consideration of the license
granted to the Company pursuant to the License Agreement, the Company is required to pay to Aegis a nonrefundable study fee.
Item 2. Management’s Discussion
and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis
of the results of operations and financial condition for the three months ended October 31, 2014 and 2013 and should be read in
conjunction with our financial statements, and the notes to those financial statements that are included elsewhere in this report.
Overview
Lightlake is an early stage biopharmaceutical
company using the Company’s expertise in opioid antagonists to develop innovative treatments for common addictions and related
disorders. The Company was incorporated in the State of Nevada on June 21, 2005, as Madrona Ventures, Inc. and on September
16, 2009, the Company changed its name to Lightlake Therapeutics Inc. The Company’s fiscal year end is July 31. The
Company’s strategy is to develop treatments to addictions and related disorders based on the Company’s expertise using
opioid antagonists. The Company currently is developing a treatment for reversing opioid overdoses in collaboration with the National
Institute on Drug Abuse (“NIDA”), part of the National Institutes of Health (“NIH”). The Company also is
developing a new approach for the treatment of overweight and obese patients with Binge Eating Disorder.
Currently, Lightlake is focused on developing:
(i) a treatment to reverse opioid overdoses, (ii) a treatment for overweight and obese patients with Binge Eating Disorder, which
is thought to be the most common eating disorder in the United States today, and (iii) a treatment for patients with Bulimia Nervosa,
which is a condition estimated to be affecting five million people in the United States at this time.
To date, Lightlake has carried out operations
to utilize the patent and patent applications, including European Patent EP1681057B1 and US Patent Application 11/031,534, which
were acquired on August 24, 2009 from Dr. David Sinclair. The Company was informed on October 15, 2010, that the US Patent application
was approved. These patents are related to a method for treating eating disorders by repeatedly administering naloxone in a dosage
sufficient to block the effects of opiate agonists to a subject suffering from an eating disorder caused by one or more related
problem responses (the “Sinclair Method”). The Sinclair Method was developed by Dr. David Sinclair and originally intended
for the treatment of alcohol dependency. In 1990, Dr. Sinclair discovered that the opioid antagonist naltrexone, when used correctly
in the presence of drinking alcohol, resulted in a 78% success rate, with patients abstaining from alcohol or consuming it at safe
levels. H. Lundbeck A/S’s Selincro (nalmefene), was recently approved in Europe, and the treatment regimen is based on Dr.
Sinclair’s work.
In 1989, Dr. Sinclair patented his "Method
for Treating Alcohol Drinking Responses,” also known as the “Sinclair Method,” and in 1994, the FDA approved
the use of naltrexone as a treatment for alcohol dependency. Since then, this form of treatment has been used by medical practices
around the globe as an effective treatment for alcoholism. As stated above, the Company continues to explore various medical applications
of this method. The Company aims to broaden its product pipeline, and anticipates commencing further trials based on its existing,
as well as potential patents that relate to the use of opioid antagonists.
Principal Products or Services and Markets
Opioid Overdose Reversal
Naloxone is a medicine currently available
through injection that can rapidly reverse the overdose of prescription and illicit opioids. Lightlake’s new intranasal delivery
system of naloxone could widely expand its availability and use in preventing opioid overdose deaths.
On April 24, 2013, Lightlake announced
that it had signed a collaboration agreement with the Division of Pharmacotherapies and Medical Consequences of Drug Abuse (“DPMCDA”)
of the National Institute on Drug Abuse (“NIDA”), part of the National Institutes of Health (“NIH”), to
co-develop a treatment for the reversal of opioid overdoses. Under the terms of the agreement, the DPMCDA of NIDA agreed to sponsor
a Phase I clinical study designed to evaluate the pharmacokinetic properties of the Company’s product candidate in 14 healthy
volunteer subjects. Assuming successful completion of this study, NIDA planned to file an investigational new drug application
(“IND”) for a final larger study. The goal of the collaboration has been to establish a clinical development plan and
regulatory pathway that would potentially result in FDA approval and commercialization of a new pharmaceutical treatment that effectively
reverses opioid overdoses.
With respect to Lightlake’s potential
treatment for reversing opioid overdoses, on April 16, 2013 and May 30, 2013, the Company entered into agreements and subsequently
received funding from one investor in the amounts of $600,000 and $150,000, respectively, for the research, development, marketing
and commercialization of the Company’s aforementioned treatment. In exchange for these investments, the Company agreed to
provide the investor with 6.0% and 1.5%, respectively, interests in the Net Profit as related to the Company’s treatment
to reverse opioid overdoses. Net profit is defined as the pre-tax profit generated from the product after the deduction of all
expenses incurred by and payments made by the Company in connection with the product, including but not limited to an allocation
of Company overhead. The investor also has rights with respect to its 6.0% and 1.5% interests if the treatment is sold or the Company
is sold. If the product is not introduced to the market and not approved for marketing within 24 months of the dates of investment,
the investor will have a 60 day option to receive 7,500,000 and 1,875,000 shares of common stock in lieu of the 6.0% and 1.5% interests
in the product, respectively.
On July 17, 2013, Lightlake entered into
a three year consulting agreement for consulting and advisory services related to the development of the Company’s potential
treatment for opioid addiction. In exchange for these services, the Company has agreed to provide the consultant with a 5.0% interest
in the Net Profit as related to the Company’s treatment to reverse opioid overdoses. Net profit is defined as the pre-tax
profit generated from the product after the deduction of all expenses incurred by and payments made by the Company in connection
with the product, including but not limited to an allocation of Company overhead. The consultant also has rights with respect to
its 5.0% interest if the treatment is sold or the Company is sold. If the product is not introduced to the market and not approved
for marketing within 24 months the consultant will have a 60 day option to receive 6,250,000 shares of common stock in lieu of
the 5.0% interest in the product.
On September 23, 2013, Lightlake commenced
a two-week patient trial for the treatment to reverse opioid overdoses in collaboration with NIDA. This study was designed to evaluate
the pharmacokinetic properties of the Company's intranasal naloxone application for the novel intranasal naloxone application.
On December 3, 2013, Lightlake announced
that the initial findings of its clinical trial with NIDA supported the Company’s intranasal delivery of naloxone as a promising
innovative treatment for reversing opioid overdoses. Initial data from the study showed that the Company’s naloxone nasal
spray potentially can be delivered into the blood stream at least as quickly as the injection process currently used by hospitals,
first responders, and others treating opioid overdoses.
On March 14, 2014, Lightlake filed US Provisional
Application No. 61/953,379. This application addresses delivery devices and methods of treating opioid overdoses through the administration
of intranasal naloxone.
On May 15, 2014, Lightlake entered into
an agreement and subsequently received funding from an individual investor in the amount of $300,000 for use by the Company for
any purpose. In exchange for this funding, the Company agreed to provide the investor with a 1.5% interest in the Net Profit as
related to the Company’s treatment to reverse opioid overdoses. Net profit is defined as the pre-tax profit generated from
the product after the deduction of all expenses incurred by and payments made by the Company in connection with the product, including
but not limited to an allocation of Company overhead. The investor also has rights with respect to its 1.5% interest if the treatment
is sold or the Company is sold. If the product is not introduced to the market and not approved for marketing within 24 months
the investor will have a 60 day option to receive 3,750,000 shares of common stock in lieu of the 1.5% interest in the product.
On July 9, 2014, Lightlake announced that
it signed an agreement with a commercial contract manufacturer to commence production of its naloxone-based opioid overdose reversal
treatment. The Company expected that this manufacturer would be able to provide sufficient manufacturing capacity at cGMP production
facilities to enable commercialization of the Company’s treatment on a global scale.
On July 9, 2014, Lightlake filed US Provisional
Application No. 62/022,268 with respect to the Company’s treating opioid overdoses through the administration of intranasal
naloxone.
On July 22, 2014, Lightlake received a
$3,000,000 commitment, from which the Company has the right to make capital calls, from a foundation for the research, development,
marketing, commercialization, and any other activities connected to the Company’s treatment to reverse opioid overdoses,
certain operating expenses, and any other purpose consistent with the goals of the foundation. In exchange for funds invested by
the foundation the Company agreed to provide the foundation with pro-rata share up to a 6.0% interest in the Net Profit as related
to the Company’s treatment to reverse opioid overdoses. Net profit is defined as the pre-tax profit generated from the product
after the deduction of all expenses incurred by and payments made by the Company in connection with the product, including but
not limited to an allocation of Company overhead. The foundation also has rights with respect to its up to 6.0% interest if the
treatment is sold or the Company is sold. Additionally, the Company may buyback interests from the foundation within two and one
half years or after two and a half years of the initial investment at a price of two times or three and a half times, respectively,
the relevant investment amount represented by the interests to be bought back. If the product is not approved by the U.S. Food
and Drug Administration or an equivalent body in Europe for marketing and is not actually marketed within 24 months the foundation
will have a 60 day option to receive shares of the Company’s common stock at a rate of 10 shares for every dollar of its
investment. On July 28, 2014 the Company received an initial investment of $111,470 from the foundation in exchange for a 0.22294%
interest. On August 13 and September 8, 2014 the Company made capital calls of $422,344 and $444,530, respectively, from the foundation
in exchange for 0.844687% and 0.888906% interests in the Net Profit as related to the Company’s treatment to reverse opioid
overdoses.
On July 23, 2014, Lightlake announced that
it filed an IND with respect to its naloxone-based opioid overdose reversal nasal spray. The Company also announced that it received
an additional commitment from NIDA to fund a second study with respect to the Company’s nasal spray, and the Company announced
on December 4, 2014 that this study had begun.
On September 9, 2014, Lightlake entered
into an agreement and subsequently received funding from an individual investor in the amount of $500,000 for use by the Company
for any purpose. In exchange for this funding, the Company agreed to provide the investor with a 0.98% interest in the Net Profit
as related to the Company’s treatment to reverse opioid overdoses. Net profit is defined as the pre-tax profit generated
from the product after the deduction of all expenses incurred by and payments made by the Company in connection with the product,
including but not limited to an allocation of Company overhead. The investor also has rights with respect to its 0.98% interest
if the treatment is sold or the Company is sold. Additionally, the Company may buyback interests from the investor within two and
one half years or after two and a half years of the investment at a price of two times or three and a half times, respectively,
the relevant investment amount represented by the interests to be bought back. If the product is not introduced to the market and
not approved by the U.S. Food and Drug Administration or an equivalent body in Europe and not marketed within 24 months the investor
will have a 60 day option to receive 5,000,000 shares of common stock in lieu of the interest in the product.
On December 4, 2014, Lightlake announced
that the Company has begun a trial designed to evaluate its intranasal naloxone application for opioid overdose. The trial is being
conducted in partnership with NIDA.
Binge Eating Disorder
Lightlake is developing a treatment for
Binge Eating Disorder derived from the “Sinclair Method.” Patients suffering from Binge Eating Disorder typically exhibit
a lack of control eating foods typically high in sugar, fat, or salt, and are able to override the feeling of fullness. When these
patients eat foods with high levels of sugar, salt, or fat, the opioidergic system is activated, which causes the firing of the
neurons that release endorphins. The endorphins then bind to opioid receptors on other neurons and activate these opioid receptors,
which reinforces addictive behavior. By blocking these opioid receptors with an opioid antagonist, the effect these endorphins
have each time these foods are eaten is counteracted.
Lightlake considers naloxone the optimal
opioid antagonist to address Binge Eating Disorder as naloxone remains in the brain for two hours, which is the duration of a typical
binge. Long-lasting opioid antagonists like naltrexone and nalmefene are sufficient for treating alcoholism and drug addiction,
but the short-acting opioid antagonist naloxone works to selectively remove only unhealthy eating responses. Moreover, the Company
believes that its treatment is well-suited for treating Binge Eating Disorder as it is unlikely to be used in a truly chronic manner.
The Company expects that patients will only administer the treatment when they have the urge to binge eat, and the Company expects
that they will require less of the spray over time as they regain control of their eating habits.
In November 2009, Lightlake’s clinical
trial team in Helsinki, Finland was granted ethical approval to begin screening subjects for the Phase II clinical trials of the
opioid antagonist-based nasal spray treatment for Binge Eating Disorder.
On May 6, 2010, Lightlake was granted ethical
approval for the Phase II trials. A preliminary meeting with the FIMEA Regulatory Authority was held on May 7, 2010
and their requirements for approval were obtained. Moreover, these trials were supervised under the direction of trial coordinator
Professor Hannu Eero Rafael Alho, Professor of Addiction Medicine at the University of Helsinki. Crown CRO, a Finnish
research organization provided the external validation for the Phase II trial.
In 2011, Lightlake commenced a randomized
double-blind placebo controlled Phase II trial investigating the use of naloxone intranasally as a treatment for Binge Eating Disorder.
The Company randomly selected 138 patients meeting the criteria for Binge Eating Disorder from over 900 applicants, of which 298
of these applicants had gene samples analyzed, and 127 patients enrolled in the trial. Each patient was randomized to take either
intranasal naloxone or a placebo nasal spray. The Company contracted the Phase II trial operations to Lightlake Sinclair of Helsinki,
Finland.
In April 2012, Lightlake completed a Phase
II clinical trial in Helsinki, Finland to investigate the use of the opioid antagonist naloxone delivered intranasally as a treatment
for Binge Eating Disorder. The Company’s approach was unique, through using a single agent with known safety, delivered intranasally,
in response to behavioral stimuli, and selectively addressing a subset of obese and overweight patients which was thought to represent
up to 25% of this total patient cohort. The Company believed that its approach could deliver successful outcomes in a challenging
area that recently encountered several failures.
On August 8, 2012, Lightlake announced
the final data from the Phase II trial investigating the use of naloxone intranasally as a treatment for Binge Eating Disorder.
Results from this study have been very encouraging, whereby patients receiving naloxone demonstrated a significant reduction over
placebo in reducing bingeing. In addition, the patients receiving the naloxone nasal spray lost weight in the second half of the
study and it would appear that patients with the highest BMI tended to reduce their bingeing the most.
On May 23, 2013, Lightlake presented the
results of the Company’s Phase II clinical trial of its nasal spray treatment for Binge Eating Disorder at the American Psychiatric
Association (“APA”) Annual Meeting in San Francisco. Binge Eating Disorder has been added to the fifth edition of the
APA’s Diagnostic and Statistical Manual of Mental Disorders (“DSM-5”), which was launched at the APA Annual Meeting.
DSM-5 is used by clinicians and researchers to diagnose and classify mental disorders in order to improve diagnoses, treatment,
and research. This manual is the product of more than 10 years of effort by hundreds of international experts in all aspects of
mental health. DSM-5 diagnostic criteria are concise and explicit, intended to facilitate an objective assessment of symptom presentations
in a variety of clinical settings from inpatient to primary care. Binge Eating Disorder is defined in the DSM-5 chapter on Feeding
and Eating Disorders as a diagnosis for individuals who experience persistent, recurrent episodes of overeating, marked by loss
of control and significant clinical distress. The chapter also includes changes in the requirements for diagnosis of Anorexia Nervosa
and Bulimia Nervosa, two potential additional indications for the Company’s treatment.
On December 17, 2013, the Company entered
into an agreement and subsequently received additional funding totaling $250,000 for use by the Company for any purpose. In exchange
for this funding, the Company agreed to provide the investor with a 0.5% interest in the Net Profit as related to the Company’s
Binge Eating Disorder treatment. Net profit is defined as the pre-tax profit generated from the product after the deduction of
all expenses incurred by and payments made by the Company in connection with the product, including but not limited to an allocation
of Company overhead. The investor also has rights with respect to its 0.5% interest if the treatment is sold or the Company is
sold. If the product is not approved by the U.S. Food and Drug Administration within 36 months the investor will have a 60 day
option to receive 3,125,000 shares of common stock in lieu of the 0.5% interest in the product.
On September 17, 2014, Lightlake entered
into an agreement and subsequently received additional funding totaling $500,000 for use by the Company for any purpose. In exchange
for this funding, the Company agreed to provide the investor with a 1.0% interest in the Company’s Binge Eating Disorder
treatment product and pay the investor 1.0% of the net profit generated from this treatment in perpetuity. Net profit is defined
as the pre-tax profit generated from the product after the deduction of all expenses incurred by and payments made by the Company
in connection with the product, including but not limited to an allocation of Company overhead. If the product is not approved
by the U.S. Food and Drug Administration within 36 months the investor will have a sixty day option to receive 6,250,000 shares
of common stock in lieu of the 1.0% interest in the product.
Lightlake now aims to collaborate with
other parties to progress its drug development program for Binge Eating Disorder. The Company has identified suitable centers in
the United States.
Bulimia Nervosa
The Company anticipates launching Phase
II trials to investigate the application of the Company’s technology as a treatment for Bulimia Nervosa, and the Company
is seeking funding to facilitate the launch of these trials. The Company has made arrangements with King’s College London,
UK, to conduct these trials at the institution. In working with King’s College, which has an internationally renowned eating
disorder unit, the Company believes that it will considerably strengthen the Company’s already distinguished research and
development team. Professor Janet Treasure, head of the Eating Disorders Unit at the South London and Maudsley NHS Trust and author
of several well-regarded books on eating disorders, and Professor Ulrike Schmidt, a consultant psychiatrist for the Eating Disorders
Service and a fellow of the Academy for Eating Disorders, would serve as tremendous guides for these Phase II trials.
Results of Operations
The following compares Lightlake’s
operations for the three months ended October 31, 2014 to the same period at October 31, 2013.
Revenues
Lightlake did not have any revenues during
the three months ended October 31, 2014 or 2013, and has generated no revenues since inception, as the Company is devoting substantially
all of its efforts on establishing the business and its planned principal operations have not commenced.
General and Administrative Expenses
General and administrative expenses were
incurred in the amount of $708,013 and $1,481,983 for the three months ended October 31, 2014 and 2013, respectively. The reduction
in expenses as compared to the same period in the prior year was primarily due to a reduction in administrative salaries as no
stock options were issued to officers during the period.
Research and Development Expenses
Lightlake spent $52,101 and
$57,590 during the three months ended October 31, 2014 and 2013, respectively. The year over year decrease of $5,489 was primarily due to less spending on research and development of the Company’s
opioid overdose reversal treatment
Interest Expense
During the three months ended October 31,
2014, interest expense decreased to $8,212 at October 31, 2014 as compared to $125,547 at October 31, 2013. This decrease was due
to a reduction in obligations connected to outstanding convertible debt.
Net Loss
The comparable net loss for the three months
ended October 31, 2014 was $775,337 as compared to the net loss of $1,713,833 for the three months ended October 31, 2013. This
reduction of net loss was due primarily to a reduction in operating expenses of $779,459 together with reduced interest expense
of $117,335 which is the result of the conversion of the derivative debt contracts arising out of Lightlake’s convertible
notes payable occurring in previous quarters.
Liquidity and Capital Resources
Lightlake’s cash position of $1,147,636
at October 31, 2014 is not sufficient to meet the Company’s obligations for the next twelve-month period. As a result, the
Company will need to seek additional funding. The Company currently does not have a specific plan of how the Company will obtain
such funding; however, the Company anticipates that additional funding will be in the form of debt financing and/or equity financing
from the sale of the Company’s common stock and/or in the form of financing from the sale of interests in the Company’s
prospective products. At this time, the Company cannot provide investors with any assurance that the Company will be able to obtain
sufficient funding to meet the Company’s obligations over the next twelve months. The Company does not have any arrangements
in place for any future financing and may seek to obtain additional short-term loans from its officers and directors to meet its
short-term funding needs.
However, during the three months ended
October 31, 2014, Lightlake received $500,000 in funding in exchange for a 1.0% interest in the Company’s Binge Eating Disorder
product. In addition, the Company received $1,366,874 in funding in exchange for 2.714% of interests in the Company’s opioid
overdose reversal treatment. These investments increased the cash position of the Company. As stated above, the Company expects
to continue to issue debt and/or equity and/or sell interests in the Company’s prospective products to sustain the implementation
of the Company’s business plan.
The financial position of Lightlake at
October 31, 2014 and the year ended July 31, 2014 showed an increase of $1,402,985 in assets from the year ended July 31, 2014
of $300,657 to $1,703,642. This was due to an increase in the Company’s cash position of $892,866, which was due to the Company
receiving funding of its operations during the quarter as well as prepaid supplies of $493,360. The liabilities at October 31,
2014 increased $1,959,600 to $5,338,325. Included in this increase are the accrual of officer salaries of $221,580 and an increase
in the investment in the Company’s Binge Eating Disorder and opioid overdose reversal treatment of $1,866,874 in exchange
for interests.
Going Concern
Lightlake has not attained profitable operations
and is dependent upon obtaining financing to pursue additional clinical trials with respect to Binge Eating Disorder and to develop
the other parts of the Company’s pipeline. In their report on the Company’s financial statements at October 31,
2014 and July 31, 2014, the Company’s auditors raised substantial doubt about the Company’s ability to continue as
a going concern.
Plan of Operation
During the next year, Lightlake aims to
broaden the Company’s product pipeline, and anticipates commencing further trials based on the Company’s existing as
well as potential patents.
On July 23, 2014, Lightlake announced that
it filed an IND with respect to its naloxone-based opioid overdose reversal nasal spray. The Company also announced that it received
an additional commitment from NIDA to fund a second study with respect to the Company’s nasal spray. The goal is to establish
a clinical development plan and regulatory pathway that will potentially result in FDA approval and commercialization of this treatment.
Lightlake also aims to collaborate with
other parties to progress the Company’s drug development program for Binge Eating Disorder. The Company has identified suitable
centers in the United States.
Lightlake also is looking to commence Phase
II trials to investigate an opioid antagonist-based treatment for Bulimia Nervosa at King’s College London, UK, as the Company
is confident that it can apply the same science to develop a solution for this condition. In working with King’s College,
which has an internationally renowned eating disorder unit, the Company believes that it would considerably strengthen the Company’s
already distinguished research and development team.
At this time, Lightlake cannot provide
investors with any assurance that the Company will be able to obtain sufficient funding to meet the Company’s obligations
over the next twelve months. The Company anticipates that additional funding will be required in the form of debt financing and/or
equity financing from the sale of the Company’s common stock and/or in the form of financing from the sale of interests in
the Company’s prospective products. The Company does not have any arrangements in place for any future funding.
The Company may also seek to obtain short-term loans from the Company’s officers and directors to meet the Company’s
short-term funding needs. The Company has no material commitments for capital expenditures as of October 31, 2014.
Critical Accounting Policies and Estimates
Lightlake believes that the following critical
policies affect the Company’s more significant judgments and estimates used in preparation of the Company’s financial
statements.
Lightlake prepares its financial statements
in conformity with generally accepted accounting principles in the United States of America. These principals require management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Management believes that these estimates are reasonable and have been discussed with the Board of Directors; however, actual
results could differ from those estimates.
Lightlake issues restricted stock to consultants
for various services and employees for compensation. Cost for these transactions are measured at the fair value of the consideration
received or the fair value of the equity instruments issued, whichever is measurable more reliably measurable. The value of the
common stock is measured at the earlier of (i) the date at which a firm commitment for performance by the counterparty to earn
the equity instruments is reached or (ii) the date at which the counterparty's performance is complete.
Lightlake issues options and warrants to
consultants, directors, and officers as compensation for services. These options and warrants are valued using the Black-Scholes
model, which focuses on the current stock price and the volatility of moves to predict the likelihood of future stock moves. This
method of valuation is typically used to accurately price stock options and warrants based on the price of the underlying stock.
Long-lived assets such as property, equipment
and identifiable intangibles are reviewed for impairment whenever facts and circumstances indicate that the carrying value may
not be recoverable. When required impairment losses on assets to be held and used are recognized based on the fair value of the
asset. The fair value is determined based on estimates of future cash flows, market value of similar assets, if available, or independent
appraisals, if required. If the carrying amount of the long-lived asset is not recoverable from its undiscounted cash flows, an
impairment loss is recognized for the difference between the carrying amount and fair value of the asset. When fair values are
not available, Lightlake estimates fair value using the expected future cash flows discounted at a rate commensurate with the risk
associated with the recovery of the assets. The Company did not recognize any impairment losses for any periods presented.
Fair value estimates used in preparation
of the financial statements are based upon certain market assumptions and pertinent information available to management. The respective
carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include
cash, accounts receivable, accounts payable, and accrued expenses. Fair values were assumed to approximate carrying values for
these financial instruments since they are short-term in nature and their carrying amounts approximate fair values or they are
receivable or payable on demand. The fair value of Lightlake’s notes payable is estimated based upon the quoted market prices
for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities.
Off-Balance Sheet Arrangements
Lightlake has no off-balance sheet arrangements
as of October 31, 2014 and July 31, 2014.
Recent Accounting
Pronouncements
From time to time,
new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the
specified effective date. The Company believes that the impact of recently issued standards that are not yet effective will not
have a material impact on the Company’s financial position or results of operations upon adoption.
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Smaller reporting companies are not required
to provide the information required by this item.
Item 4.
Controls and Procedures
Disclosure Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation
of our management, including our Chief Executive Officer and our Chief Financial Officer, we carried out an evaluation of the effectiveness
of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(f) and 15d-15(f)) under the Exchange
Act. Management conducted its evaluation based on the framework in Internal Control – Integrated Framework
issued by the Committee on Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, our Chief Executive
Officer and our Chief Financial Officer have concluded that, as of October 31, 2014, our internal control over financial reporting
was not effective due to material weaknesses in the system of internal control. A material weakness is a deficiency,
or combination of deficiencies, that creates a reasonable possibility that a material misstatement of the annual or interim financial
statements will not be prevented or detected in a timely manner.
Disclosure controls and procedures are
controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted
under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules
and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that
information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to
management, including our Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate,
to allow timely decisions regarding required disclosure.
The material weaknesses assessed by our
management were (1) we have not implemented measures that would prevent the chief executive officer and the chief financial officer
from overriding the internal control system; (2) we do not have an audit committee; (3) we have a lack of outside directors on
the board of directors; and (4) we did not design or maintain effective controls over the completeness and accuracy of our calculation
of stock-based compensation expense. We do not believe that these material weaknesses have resulted in deficient financial reporting
because both the chief executive officer and the chief financial officer are aware of their responsibilities under the SEC’s
reporting requirements and they both personally certify our financial reports.
Accordingly, while we have identified material
weaknesses in our system of internal control over financial reporting, we believe we have taken reasonable steps to ascertain that
the financial information contained in this report is in accordance with generally accepted accounting principles. Our management
has determined that current resources would be appropriately applied elsewhere and when resources permit, it will address and remediate
material weaknesses through implementing various controls or changes to controls. At such time, as we have additional financial
resources available to us, we intend to enhance our controls and procedures. We will not be able to assess whether the steps we
intend to take will fully remedy the material weakness in our internal control over financial reporting until we have fully implemented
them and sufficient time passes in order to evaluate their effectiveness.
Limitations on the Effectiveness of
Controls
Our disclosure controls and procedures
are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met.
Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control
issues, if any, within a company have been detected. Based on their evaluation as of the end of the period covered
by this report, management concluded that our disclosure controls and procedures were sufficiently effective to provide reasonable
assurance that the objectives of our disclosure control system were met.
Changes in Internal Control over Financial
Reporting
There have been no changes in our internal
controls over financial reporting identified in connection with the evaluation required by paragraph (d) of Securities Exchange
Act Rule 13a-15 or Rule 15d-15 that occurred in the three months ended October 31, 2014 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.
PART II— OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
There has been a material change in our risk factors:
The Company’s future ability to execute our business plan
depends upon the continued service of Dr. Crystal, our Chief Executive Officer, President and Director. Although Dr. Crystal devotes
35 hours per week to his work for the Company, he has a job as part of the management team, albeit not as an executive officer,
of a private company to which he also devotes 35 hours per week. Dr. Crystal will abide by the doctrine of corporate opportunity,
and will only take for himself a business opportunity if: (1) the opportunity is offered to Dr. Crystal in his individual capacity
and not in his capacity as an officer and director of the Company; (2) the opportunity is not essential to the Company; (3) the
Company has no interest or expectancy with regard to the opportunity, and (4) Dr. Crystal has not employed the resources of the
Company in pursuing or exploiting the opportunity.
Item 2. Unregistered
Sales of Equity Securities and Use of Proceeds.
On August 19, 2014, the Company issued 384,615 and 400,000 shares
in exchange for services rendered. The shares issued in these transactions were valued at market and amounted to $21,923 and $22,800,
respectively.
These shares were issued in reliance
on the exemption under Section 4(2) of the Securities Act. These shares of our common stock qualified for exemption under Section
4(2) since the issuance shares by us did not involve a public offering. The offering was not a “public offering” as
defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering
and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors.
In addition, the investors had the necessary investment intent as required by Section 4(2) since they agreed to and received share
certificates bearing a legend stating that such shares are restricted pursuant to Rule 144 of the Act. This restriction ensures
that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.”
Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities
Act for this transaction.
Item 3. Defaults Upon
Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
As disclosed under Item 1A, Dr. Roger Crystal, the Company’s
Chief Executive Officer, President and Director has a job as part of the management team, albeit not as an executive officer, of
a private company to which he devotes 35 hours per week. He started this job on July 10, 2014.
Item 6. Exhibits
Exhibit
Number |
|
Exhibit Title |
31.1 |
|
Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
31.2 |
|
Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1 |
|
Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
32.2 |
|
Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
101.INS |
|
XBRL Instance Document |
|
|
|
101.SCH |
|
XBRL Taxonomy Schema |
|
|
|
101.CAL |
|
XBRL Taxonomy Calculation Linkbase |
|
|
|
101.DEF |
|
XBRL Taxonomy Definition Linkbase |
|
|
|
101.LAB |
|
XBRL Taxonomy Label Linkbase |
|
|
|
101.PRE |
|
XBRL Taxonomy Presentation Linkbase |
In accordance with SEC Release 33-8238,
Exhibit 32.1 and 32.2 are being furnished and not filed.
SIGNATURES
Pursuant to 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.
|
LIGHTLAKE THERAPEUTICS INC. |
|
|
|
|
|
Date: December 9, 2014 |
By: |
/s/ Dr. Roger Crystal |
|
|
|
Name: Dr. Roger Crystal |
|
|
|
Title: Chief Executive Officer, President and Director |
|
|
|
(Principal Executive Officer) |
|
|
|
|
|
Date: December 9, 2014
|
By: |
/s/ Kevin Pollack |
|
|
|
Name: Kevin Pollack |
|
|
|
Title: Chief Financial Officer and Director |
|
|
|
(Principal Financial and Accounting Officer) |
|
EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE
OFFICER,
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES –OXLEY ACT OF 2002
I, Dr. Roger Crystal, Chief Executive Officer
of Lightlake Therapeutics Inc., certify that:
1. I have reviewed this
Quarterly Report on Form 10-Q of Lightlake Therapeutics Inc.;
2. Based on my knowledge,
this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge,
the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other
certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared; |
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. The registrant's other
certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent
functions):
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: December 9, 2014
|
By: |
/s/ Dr. Roger Crystal |
|
|
Dr. Roger Crystal |
|
|
Chief Executive Officer |
|
|
(Principal Executive Officer) |
|
EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL
OFFICER,
PURSUANT TO 18 U.S.C.
SECTION 1350
AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Kevin Pollack, Chief Financial Officer
of Lightlake Therapeutics Inc., certify that:
1. I have reviewed this
Quarterly Report on Form 10-Q of Lightlake Therapeutics Inc.;
2. Based on my knowledge,
this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge,
the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other
certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared; |
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. The registrant's other
certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent
functions):
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: December 9, 2014
|
By: |
/s/ Kevin Pollack |
|
|
Kevin Pollack |
|
|
Chief Financial Officer
(Principal Financial and Accounting Officer) |
|
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002
In connection with the Quarterly Report
on Form 10-Q of Lightlake Therapeutics Inc. (the “Company") for the period ended October 31, 2014, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), Dr. Roger Crystal, as Chief Executive Officer of
the Company, hereby certifies, pursuant to 18 U.S.C. Section1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that:
(1) The
Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The
information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.
Date: December 9, 2014
|
By: |
/s/ Dr. Roger Crystal |
|
|
Dr. Roger Crystal |
|
|
Chief Executive Officer |
|
|
(Principal Executive Officer) |
|
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002
In connection with the Quarterly Report
on Form 10-Q of Lightlake Therapeutics Inc. (the “Company") for the period ended October 31, 2014, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), Kevin Pollack as Chief Financial Officer of the
Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:
(1) The
Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The
information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of
the Company.
Date: December 9, 2014
|
By: |
/s/ Kevin Pollack |
|
|
Kevin Pollack |
|
|
Chief Financial Officer
(Principal Financial and Accounting Officer) |
|
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