UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

———————
FORM 10-Q
———————
 
þ   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended December 31, 2010June 30, 2011
 
or
 
¨   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from: _____________ to _____________

KYTO BIOPHARMA, INC.
(Exact name of registrant as specified in its charter)

FLORIDA 000-50390 65-1086538
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)

B1-114 Belmont Avenue Toronto, Ontario Canada M5R 1P8
(Address of Principal Executive Office) (Zip Code)
 
(416) 960-8790
(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.    þ 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).   o 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.
 
Large accelerated filero Accelerated filero
Non-accelerated filero Smaller reporting companyþ
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    ¨  Yes    þ  No
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
12,998,482 Common Shares - $0.0001 Par Value - as ofJanuary  13, August 12, 2011
 
 
 
 
UNITED STATES
KYTO BIOPHARMA, INC. AND SUBSIDIARY
(A Development Stage Company)

For the quarterly period ended June 30, 2011

INDEX
 
PART I. FINANCIAL INFORMATION   
     
Item 1.Financial Statements   1 
      
 Condensed Consolidated Balance Sheets as of  December 31, 2010June 30, 2011 (Unaudited) and March 31, 20101
Unaudited Consolidated Statements of Operations for the Three and Nine Months Ended   December 31, 2010 and 2009 and for the period from March 5, 1999 (Inception) to December 31, 2010  2
Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended   December 31, 2010 and 2009 and for the period from March 5, 1999 (Inception) to December 31, 2010  2011  3 
      
 Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended   June 30, 2011 and 2010 and for the period from March 5, 1999 (Inception) to June 30, 2011  4
Unaudited Condensed Statement of Stockholders’ Deficit for three months ended June 30, 20115
Unaudited Condensed  Consolidated Statements of Cash Flows for the Three Months Ended   June 30, 2011 and 2010 and for the period from March 5, 1999 (Inception) to June 30, 2011  6
Notes To Unaudited  Condensed Consolidated Financial Statements    47 
      
Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations.      911 
      
Item 3.Quantitative and Qualitative Disclosures About Market Risk.  1012 
      
Item 4. Controls and Procedures.  1113 
      
PART II. OTHER INFORMATION    
      
Item 1.   Legal Proceedings.   1214 
      
Item 1A.Risk Factors.   1214 
      
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.  1214 
      
Item 3. Defaults Upon Senior Securities.  1214 
      
Item 4.(Removed and Reserved)  1214 
      
Item 5.Other Information  1214 
      
Item 6.Exhibits  1215
Signatures16 

 
2
 
 
PART I - FINANCIAL INFORMATION
 
ITEM 1.FINANCIAL STATEMENTS
 
KYTO BIOPHARMA, INC. AND SUBSIDIARY
Kyto Biopharma, Inc. and Subsidiary
(A Development Stage Company)
 Condensed Consolidated Balance Sheets
  CONSOLIDATED BALANCE SHEET S
 
 June 30,  March 31, 
 December 31,  March 31,  2011  2011 
 2010  2010  (Unaudited)    
 (Unaudited)          
ASSETSASSETS ASSETS    
Current Assets            
Cash $1,100  $4,444  $4,891  $863 
                
Total Current Assets  1,100   4,444   4,891   863 
                
Other Assets        
Patent Rights  165,570   165,570 
        
        
                
                
Total Assets $166,670  $170,014  $4,891  $863 
                
LIABILITIES AND STOCKHOLDERS' DEFICITLIABILITIES AND STOCKHOLDERS' DEFICIT LIABILITIES AND STOCKHOLDERS' DEFICIT     
                
Current Liabilities                
Accounts payable $34,460  $6,518  $26,120  $12,760 
Accrued liabilities  15,667   32,667 
Accrued liabilities - related party  15,667   36,668   39,000   29,000 
Accrued interest payable - related party  64,409   59,329   67,887   66,139 
Accrued interest payable - preferred convertible stock  69,349   49,486 
Dividends payable - preferred convertible stock  83,008   76,137 
Loan payable-related party  1,045,096   870,796   1,115,096   1,066,096 
Note payable-related party  100,000   100,000   100,000   100,000 
Total Current Liabilities  1,328,981   1,122,797   1,446,778   1,382,799 
                
Commitments and Contingencies                
                
Stockholders' Deficit                
Preferred convertible stock, $1.00 par value, 1,000,000 shares                
authorized, 473,624 issued and outstanding as of December 31, 2010     
and March 31, 2010 respectively  473,624   473,624 
authorized, 473,624 issued and outstanding as of        
June 30, 2011 and March 31, 2011 respectively  473,624   473,624 
Common stock, $0.0001 par value, 25,000,000 shares                
authorized, 12,998,482 issued and outstanding as of                
December 31, 2010 and March 31, 2010 respectively  1,300   1,300 
June 30, 2011 and March 31, 2011 respectively  1,300   1,300 
Additional paid-in capital  15,815,489   15,815,489   15,919,306   15,904,542 
Deficit accumulated during development stage  (17,275,540)  (17,065,962)  (17,658,934)  (17,584,219)
Accumulated other comprehensive loss  (177,184)  (177,234)  (177,183)  (177,183)
                
Total Stockholders' Deficit  (1,162,311)  (952,783)  (1,441,887)  (1,381,936)
                
Total Liabilities and Stockholders' Deficit $166,670  $170,014  $4,891  $863 
 
See Accompanying Notes to Unaudited Consolidated Financial Statements.

1
KYTO BIOPHARMA, INC. AND SUBSIDIARY
 (A Development Stage Company)
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
              For the period from 
              March 5, 1999 
  For The Three Months Ended  For The Nine Months Ended  (inception) to 
  December 31  December 31  December 31, 
  2010  2009  2010  2009  2010 
                
Operating Expenses               
Compensation $-  $-  $-  $-  $1,750,636 
Depreciation and amortization  -   -   -   -   814,183 
Consulting  8,353   14,000   52,118   41,999   9,911,927 
Bad debt  -   -   -   -   12,819 
Director fees  -   -   -   -   314,100 
Financing fees  -   -   -   -   28,781 
Professional fees  4,887   5,844   14,786   28,026   259,722 
General and administrative  14,357   9,525   41,955   29,656   645,679 
Research and development  16,264   39,672   32,076   130,756   1,697,027 
Loss on debt conversion  -   -   -   -   519,795 
Impairment loss  -   -   -   -   1,191,846 
Total Operating Expenses  43,861   69,041   140,935   230,437   17,146,515 
                     
                     
Other Income (Expenses)                    
Interest income  -   -   -   -   4,922 
Interest expense  (8,415)  (8,401)  (24,943)  (23,787)  (151,455)
Loss on debt forgiveness  -   -   (43,690)  -   (230,956)
Loss on disposal of equipment  -   -   -   -   (567)
Foreign currency transaction gain  -   (129)  (10)  (63)  249,031 
Total Other Income (Expense), net  (8,415)  (8,530)  (68,643)  (23,850)  (129,025)
                     
                     
Net Loss $(52,275) $(77,571) $(209,578) $(254,287) $(17,275,540)
                     
                     
Comprehensive Income (Loss)                    
Foreign currency translation gain (loss)  -   139   50   10   (177,184)
                     
                     
Total Comprehensive Loss $(52,275) $(77,432) $(209,528) $(254,277) $(17,452,724)
                     
                     
Weighted average number of shares outstanding                    
during the year - basic and diluted  12,998,482   12,743,610   12,998,482   12,743,610     
                     
                     
Net loss per share - basic and diluted $(0.00) $(0.01) $(0.02) $(0.02)    
See Accompanying Notes to Unaudited Consolidated Financial Statements.

2
KYTO BIOPHARMA, INC. AND SUBSIDIARY
 (A Development Stage Company)
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
         For the period from 
         March 5, 1999 
   For the Nine Months Ended December 31,  (Inception) to 
   2010  2009  December 31, 2010 
Cash Flows from Operating Activities:         
Net loss $(209,578) $(254,287) $(17,275,540)
Adjustment to reconcile net loss to net cash provided by (used in)            
operating activities:            
Depreciation and amortization  -   -   814,183 
Recognition of services rendered by consultant  -   -   10,227,893 
Stock based consulting expense  -   -   854,345 
Stock based director fees  -   -   314,100 
Stock based rent and administrative fees  -   -   167,028 
Preferred convertible stock issued for interest due on outstanding preferred convertible stock  -   -   13,890 
Common stock warrants issued as financing fee  -   -   3,783 
Loss on disposal of equipment  -   -   567 
Impairment loss  -   -   1,191,846 
Loans receivable from related party-written off  43,689   -   299,783 
Gain on settlement of accounts payable  -   -   (59,654)
Loss on settlement of accounts payable  -   -   519,795 
Amortization of stock based financing fee  -   -   25,010 
Changes in operating assets and liabilities:            
    Loan receivable  (43,689)  -   (309,620)
    Prepaids and other assets  -   44,229   (5,000)
    Accounts payable and accrued expenses  6,941   20,944   535,998 
    Related party accounts payable, accrued interest, and accrued liabilities  24,943   23,787   109,439 
Net Cash Used in Operating Activities  (177,694)  (165,327)  (2,572,154)
              
Cash Flows from Investing Activities:            
  Purchase of property and equipment  -   -   (4,463)
Net Cash Used in Investing Activities  -   -   (4,463)
              
Cash Flows from Financing Activities:            
  Proceeds from common stock issuance, net of offering cost
  -   -   958,222 
  Loan proceeds from related parties, net  174,300   153,738   1,823,471 
  Repayment of loan to related parties  -   -   (26,792)
Net Cash Provided by Financing Activities  174,300   153,738   2,754,901 
              
Effect of Exchange Rate on Cash  50   10   (177,184)
              
Net Increase (decrease) in Cash and Cash Equivalents  (3,344)  (11,579)  1,100 
              
Cash and Cash Equivalents at Beginning of Period  4,444   12,754   - 
              
Cash and Cash Equivalents at End of Period $1,100  $1,175  $1,100 
              
              
Supplemental Disclosure of Cash Flow Information:            
  Cash paid for:            
Interest  $-  $-  $- 
Taxes  $-  $-  $- 
              
Supplemental Disclosure of Non-Cash            
  Investing and Financing Activities:            
Conversion of debt to equity $-  $-  $1,102,154 
Stock issued for deferred consulting services $-  $-  $6,750,000 
Conversion of liabilities to note payable $-  $-  $102,023 
Stock issued for debt restructuring anti-dilusion provision $-  $-  $800,000 
Conversion of preferred shares to common shares $-  $-  $250,000 
Stock issued for future services $-  $-  $1,200,000 
Issued common shares for intangible assets $160,570  $-  $2,160,570 
See Accompanying Notes to Unaudited Consolidated Financial Statements.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
 
3
 
Kyto Biopharma, Inc. and Subsidiary
(A Development Stage Company)
 Condensed Consolidated Statements of Operations
(Unaudited)
        For the period from 
        March 5, 1999 
  For The Three Months Ended  (inception) to 
  June 30  June 30, 
  2011  2010  2011 
          
          
Operating Expenses         
Depreciation and amortization $-  $-  $814,183 
General and administrative  51,330   35,022   16,594,778 
             
Total Operating Expenses $51,330  $35,022  $17,408,961 
             
Loss from Operation $51,330  $35,022  $17,408,961 
             
Other Income (Expenses)            
Interest income  -   -   4,922 
Interest expense  (16,513)  -   (189,403)
Loss on debt forgiveness  -   (43,689)  (230,956)
Loss on disposal of equipment  -   -   (567)
Foreign currency transaction gain  -   56   249,039 
Total Other Income (Expense), net  (16,513)  (45,309)  (166,965)
             
             
Net Loss before taxes $(67,844) $(80,331) $(17,575,926)
             
Net Income (Tax) Benefit $-  $-  $- 
             
Net Loss $(67,844) $(80,331) $(17,575,926)
             
     Preferred Stock Dividends  (6,871)  (6,539)  (83,008)
             
Net Loss Attributed to common shareholders $(74,715) $(86,870) $(17,658,934)
             
Comprehensive Income (Loss)            
Foreign currency translation gain (loss)  -   (56)  (177,183)
             
             
Total Comprehensive Loss $(74,715) $(86,926) $(17,836,117)
             
             
Weighted average number of shares outstanding            
during the year - basic and diluted  12,998,482   12,998,482     
             
             
Net loss per share - basic and diluted $(0.01) $(0.01)    
Net loss per share attributable to common share holders - basic and diluted $(0.01) $(0.01)    
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
Kyto Biopharma, Inc. and Subsidiary
(A Development Stage Company)
 Condensed Consolidated Statement of  Stockholders' Deficit
For the Three Months Ended June 30, 2011
(Unaudited)
                 Deficit  Accumulated    
                 Accumulated  Other    
  Preferred Stock  Common Stock  Additional  During  Comprehensive    
  $1.00 par value  $0.0001 par value  Paid - in  Development  Income    
  Shares  Amount  Shares  Amount  Capital  Stage  (Loss)  Total 
                         
Balance, March 31, 2011  473,624  $473,624   12,998,482  $1,300  $15,904,542  $(17,584,219) $(177,183) $(1,381,936)
Imputed Interest  -   -   -   -   14,764   -   -   14,764 
Preferred Stock Dividends                      (6,871)        
Net Loss, 2011  -   -   -   -   -   (67,844)  -   (74,715)
Balance, June 30, 2011  473,624  $473,624   12,998,482  $1,300  $15,919,306  $(17,658,934) $(177,183) $(1,441,887)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
Kyto Biopharma, Inc. and Subsidiary
(A Development Stage Company)
  Condensed Consolidated Statements of Cash Flows
(unaudited)
         For the period from 
         March 5, 1999 
   For the Three Months Ended June 30  (Inception) to 
   2011  2010  June 30, 2011 
Cash Flows from Operating Activities:         
Net loss $(67,844) $(80,331) $(17,575,926)
Adjustment to reconcile net loss to net cash provided by (used in)            
 operating activities:            
 Depreciation and amortization  -   -   814,183 
 Recognition of services rendered by consultant  -   -   10,227,893 
 Stock based consulting expense  -   -   854,345 
 Stock based director fees  -   -   314,100 
 Stock based rent and administrative fees  -   -   167,028 
 Interest Expense  14,764   -   103,817 
 Preferred convertible stock issued for dividend on outstanding preferred convertible stock  -   -   13,890 
 Common stock warrants issued as financing fee  -   -   3,783 
 Loss on disposal of equipment  -   -   567 
 Impairment loss  -   -   1,357,416 
 Loans receivable from related party-written off  -   43,689   299,783 
 Gain on settlement of accounts payable  -   -   (59,654)
 Loss on settlement of accounts payable  -   -   519,795 
 Amortization of stock based financing fee  -   -   25,010 
Changes in operating assets and liabilities:            
 Loan receivable  -   (43,689)  (309,620)
 Prepaids and other assets  -   -   (5,000)
 Accounts payable and accrued expenses  (3,640)  (4,785)  542,659 
 Related party accounts payable, accrued interest, and accrued liabilities  11,748   1,675   103,075 
Net Cash Used in Operating Activities  (44,972)  (83,441)  (2,685,864)
              
Cash Flows from Investing Activities:            
Purchase of property and equipment  -   -   (4,463)
Net Cash Used in Investing Activities  -   -   (4,463)
              
Cash Flows from Financing Activities:            
Proceeds from common stock issuance, net of            
  offering cost  -   -   958,222 
Loan proceeds from related parties, net  49,000   81,500   1,973,971 
Repayment of loan to related parties  -   -   (59,792)
Net Cash Provided by Financing Activities  49,000   81,500   2,872,401 
              
Effect of Exchange Rate on Cash  -   56   (177,183)
              
Net Increase (decrease) in Cash and Cash Equivalents  4,028   (1,885)  4,891 
              
Cash and Cash Equivalents at Beginning of Period  863   4,444   - 
              
Cash and Cash Equivalents at End of Period $4,891  $2,559  $4,891 
              
              
Supplemental Disclosure of Cash Flow Information:            
Cash paid for:            
           Interest $-  $-  $- 
           Taxes $-  $-  $- 
              
Supplemental Disclosure of Non-Cash            
Investing and Financing Activities:            
Conversion of debt to equity $-  $-  $1,102,154 
Stock issued for deferred consulting services $-  $-  $6,750,000 
Conversion of liabilities to note payable $-  $-  $102,023 
Stock issued for debt restructuring anti-dilusion provision $-  $-  $800,000 
Conversion of preferred shares to common shares $-  $-  $250,000 
Stock issued for future services $-  $-  $1,200,000 
Issued common shares for intangible assets $-  $-  $2,160,570 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
KYTO BIOPHARMA, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010June 30, 2011
 
NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
 
Kyto Biopharma, Inc. was formed as a Florida corporation on March 5, 1999. B Twelve, Limited, Kyto Biopharma, Inc.'s wholly-owned Canadian subsidiary (collectively referred to as the "Company"), was also formed on March 5, 1999. On August 14, 2002, the parent Company changed its name from B Twelve, Inc. to Kyto Biopharma, Inc.
 
The Company is a biopharmaceutical company, formed to acquire and develop innovative minimally toxic and non-immunosuppressive proprietary drugs for the treatment of cancer, arthritis, and other proliferate and autoimmune diseases. The Company has subsequently built itself into a development stage biopharmaceutical company that develops receptor-mediated technologies to control the uptake of vitamin B12 by non-controlled proliferative cells.
 
Activities during the development stage include acquisition of financing and intellectual properties and research and development activities conducted by others under contracts.
 
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission for interim consolidated financial information. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of consolidated financial position and results of operations.
 
It is management's opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made, which are necessary for a fair consolidated financial statement presentation. The results for the interim period are not necessarily indicative of the results to be expected for the year.
 
For further information, refer to the audited consolidated financial statements and footnotes of the Company for the year ending March 31, 20102011 included in the Company's Form 10-K.
 
The Company is exposed to foreign exchange rate fluctuations as the financial results of the company’s Canadian subsidiary isare translated into U.S. dollars on consolidation. The functional currency of Kyto’s subsidiary is the Canadian dollar.

NOTE 2 – INTERIM REVIEW REPORTING

The accompanying unaudited condensed consolidated financial statements of Kyto Biopharma, Inc. (the "Company") have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC). Certain information and footnote disclosures, normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such SEC rules and regulations. Nevertheless, the Company believes that the disclosures are adequate to make the information presented not misleading. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's March 31, 20102011 Annual Report as filed on Form 10K. In the opinion of management, all adjustments, in cludingincluding normal recurring adjustments necessary to present fairly the financial position of the Company with respect to the interim condensed consolidated financial statements and the results of its operations for the interim period ended December 31, 2010,June 30, 2011, have been included. The results of operations for interim periods are not necessarily indicative of the results for a full year.
 
 
47
 
 
KYTO BIOPHARMA, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010June 30, 2011

NOTE 3 – GOING CONCERN
 
As reflected in the accompanying unaudited condensed consolidated financial statements, the Company has a working capital deficiency of $1,327,881$1,441,887, a deficit accumulated during development stage of $17,275,540$17,658,934 and a stockholders' deficit of $1,162,311 as$ 1,441,887as of December 31, 2010.June 30, 2011. The ability of the Company to continue as a going concern is dependent on the Company's ability to further implement its business plan, raise capital, and generate revenues. The unaudited condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
 
The Company has yet to generate an internal cash flow, and until the sales of its product begins, the Company is highly dependent upon debt and equity funding. The Company must successfully complete its research and development resulting in a saleable product. However, there is no assurance that once the development of the product is completed and finally gains Federal Drug and Administration clearance, that the Company will achieve a profitable level of operations.
 
5
KYTO BIOPHARMA, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010

NOTE 4 –- ACCOUNTING STANDARDS UPDATES
 
In December 2010, the FASBSignificant Recent Accounting Pronouncements
Management does not believe that any recently issued, Accounting Standard Update No. 2010-28 (ASU No. 2010-28) “Intangibles – Goodwill and Other (Topic 350).”  ASU No. 2010-28 addresses questions about entities with reporting units with zero or negative carrying amounts because some entities concluded that Step 1 of the goodwill impairment test, as stated in Topic 350, is passed in those circumstances because the fair value of their reporting unit will generally be greater than zero.  The amendments in this update dobut not provide guidance on how to determine the carrying amount or measure the fair value of the reporting unit.  The amendments in this update modify Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts.  For public entities, the amendments in th is update areyet effective, for fiscal years, and interim periods within those years, beginning after December 15, 2010.  Early adoption is permitted.  For nonpublic entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.  Nonpublic entities may early adopt the amendments using effective date for public entities.  The Company is evaluating the impact ASU No. 2010-28 willaccounting standards if currently adopted would have a material effect on the accompanying unaudited condensed consolidated financial statements.
A variety of proposed or otherwise potential accounting standards are currently under study by standard-setting organizations and various regulatory agencies. Because of the tentative and preliminary nature of these proposed standards, management has not determined whether implementation of such proposed standards would be material to the Company’s consolidated financial statements
 
NOTE 5- PATENT RIGHTS
 
On February 10, 2010, the Company purchased a portfolio of patents, patents pending, and related intellectual property (collectively the "Intellectual Property") from a third party in exchange for 254,872 shares of the Company's common stock and cash of $5,000 which was paid during the quarter ending June 30, 2010. The shares were valued at $0.63 per share resulting in total value of $165,570.
 
 Kyto executed an “Executive Licensing Agreement” with The Research Foundation of State University of New York, “RFSUNY”, allowing Kyto to license certain technology surrounding the Human Transcobalamin Receptor.  The licensing agreement is active until the expiry of the patent rights..  The rights primarily relate to the patent: “Transcobalamin Receptor Polypeptides, Nucleic Acids, and Modulators Thereof, and Related Methods of Use in Modulating Cell Growth and Treating Cancer and Cobalamin Deficiency”. The Patents were valued for $165,570.

Patent rights are stated at cost and will be reclassified to intangible assets and amortized on a straight-line basis over the estimated future periods to be benefited  ( twenty years) if and once the patent has been granted by the patent office.  As of December
The Patents were deemed to have been impaired during the year ended March 31, 2010, the Company has2011. The company does not amortized the value of patent rightshave patents portfolio as it has not started generating any future economic benefits.  As per the Company’s management, there is no impairment noted in the value of patent rights as of December 31, 2010.on June 30, 2011.
 
 
68
 
 
KYTO BIOPHARMA, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010

June 30, 2011
NOTE 5 – LOANS PAYABLE – RELATED6 –RELATED PARTY TRANSACTIONS
 
A) LOAN PAYABLE - CFCC
In June 30, 2011, the company owed $1,115,096 to a related party director of the Company. During the ninethree months ended December 31, 2010,June 30, 2011, the Company borrowed $174,300$49,000 from a related party of the Company. The loan is non-interest bearing, unsecured, due on demand, does not follow any specific repayment terms and included in the loans payable- related party balance. As per ASC-835-30 “Imputation of Interest”, interest has been imputed @ 5%p.a. quarterly cumulative and $14,764 has been imputed and accrued as interest.
 
NOTE 6-B) LOAN RECEIVABLE FROM RELATED PARTY (TPT)
 
In June 2009, two of the founders of the Company entered into a Standstill Agreement with the Clayton Foundation to license and commercialize from the Clayton Foundation for Research a portfolio of product candidates based on proprietary technology in part developed at the MD Anderson Cancer Center by Dr Michael Rosenblum, a former director of Kyto Biopharma Inc.

The services of two biotechnology specialized investment banks were secured in order to prepare a business plan, a valuation of the licenses and raise the funds necessary for the clinical development of targeted anticancer therapeutic proteins.

Through a new entity, Targeted Payload Therapeutics (TPT), funds advanced by a related party were advanced to TPT for the payment of the “Standstill Agreement”, fees related to the services of the 2 investment banks and expenses related to the transaction. The shareholders of TPT upon closing were: Kyto Biopharma Inc., Dr. Sagman, a director and one of the founders of the Company, the Clayton Foundation and scientists instrumental in bringing the transaction and continuing the development of the pipeline of products.
 
During the year ended March 31, 2010, Kyto loaned $265,931 to a newly founded US based biotechnology company, TPT. Amounts loaned under this note was non- interest bearing, unsecured, due on demand and do not follow any specific repayment terms.TPT was created to commercialize licensed technology which was developed at leading medical centers of excellence in the USA. Two of the founders of Kyto, Mr. Georges Benarroch and Dr. Uri Sagman, are also the founders of TPT. Kyto also loaned additional $43,689 during the quarter ending June 30, 2010.
 
On May 7, 2010 the Company announced the cancellation of its agreement with Targeted Payload Therapeutics Inc. ("TPT") and pursue any activities under Standstill Agreement. For the periods ending Decemberyears ended  March 31, 20102011 and March 31, 2010, the Company had written off an impaired loan of $43,689 and $265,931, respectively, towards loss incurred as a consequence of cancellation of agreement with TPT.

C) ACCRUED LIBILITIES

The Company leases office space and administrative services from a related party principal stockholder and is included in general and administrative expense in the accompanying consolidated statements of operations. The Company allocates 50% of these amounts to rent expense. As of June 30, 2011, the remaining balance in the accrued liabilities-related party account for the above services was $39,000.

D) NOTES PAYABLE

During the year ended March 31, 2001, the Company entered into an agreement with a vendor, who is also a principal stockholder, for services totalling $200,000. On November 11, 2002, the Company and vendor mutually agreed that in lieu of the $200,000 payment, the vendor would accept 100,000 shares of the Company's common stock valued at $1.00 totalling $100,000. In addition, the Company also executed a $100,000 unsecured promissory note with the vendor. Under the terms of the promissory note, the obligation bears interest at prime plus 1% (4.25% at June 30, 2011). Interest is accrued and payable quarterly.

At June 30, 2011 and March 31, 2011, accrued interest totalled $67,887 and $66,139 respectively.

 
79
 

KYTO BIOPHARMA, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December  31, 2010June 30, 2011
 
NOTE 7- EQUITY

A) CONVERTIBLE PREFERRED STOCK

On May 24, 2007 the Company entered into an agreement with Credifinance Capital Corp, a related party, to issue up to 500,000 Convertible Preferred Stock at $1.00 per share. This agreement is on an installment basis. During the year ended March 31, 2008, the Company issued 473,624 shares of Convertible Preferred Stock to Credifinance Capital Corp. for a total of $473,624 to satisfy a related party loan payable. Convertible Preferred Stock may be converted into Common Shares at a price of $0.45 per Common Share. The Convertible Preferred Stock bears interestdividend at a rate of 5% per annum. Preferred Convertible Stock has the same voting rights as Common Stock. Interest expenseDividend accrued on the Convertible Preferred Stock through December 31June 30, 2011 was $69,349.$83,008. As of June 30, 2011, 473,624 convertible preferred shares were outstanding.

B) COMMON STOCK

In January 2006, the Company issued 94,054 shares valued at $0.75 per share based on the quoted trade price in payment of various expenses totaling $47,027 to a finance company controlled by a director of the company and to a director. The Company recorded a loss on debt conversion of $23,513. In February 2008, the company issued 500,000 shares valued at $0.50 per share in payment of consulting service to Dr. Uri Sagman, 159,999 shares valued at $0.50 per share to Credifinance Capital Corp. for rent and administration fees, and 3,408 shares valued at $0.50 per share to Credifinance Capital Corp. for satisfaction of the balance of the related party loan payable.

In March 2010, the Company issued 254,872 shares valued at $0.63 per share, in exchange for Patent rights.
 
As of June 30, 2011, 12,998,482 common shares were outstanding.
NOTE 8 - SUBSEQUENT EVENTS
 
Management evaluated all activities of the Company through the issuance date of the Company’s Unaudited Condensed Consolidated financial statements and concluded that no subsequent events have occurred that would require adjustments or disclosures into the unaudited condensed consolidated financial statementsstatements.
 
 
810
 
 
ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
 
PLAN OF OPERATION
 
During the year ending March 31, 2010,2011, the Company has continued to conduct a comprehensive review of its existing Intellectual Property portfolio with the assistance various IP legal firms and consultants. As a result of this review, the Company has elected to drop some of its patents while funding the remaining patents in full.
 
The efforts of the Company’s R&D have produced notable accomplishments with respect to the development of a novel cancer therapy through the regulation of Vitamin B12 uptake, an essential nutrient for cells. For the first time, the Company has conclusively identified the protein and the gene encoding the Vitamin B12 receptor. The work which is currently done by SUNY on utilizing the Vitamin B12 pathway provides for several strategies aimed at preventing the proliferation of cancer cells.  
 
The company is pleased to announce that on June 29, 2010, the Canadian Patent Office issued the Patents for Canadian Patent Application No, 2187346, in the name of Receptor Modulating Agents and Methods Relating Thereto.  The patentees are The University of Washington  and Kyto Biopharma, Inc.  The application was filed on April 7, 1995 and will remain in force for a period of 20 years from the filing date.
 
The report of our Independent Registered Public Accounting firm dated June 28, 201029, 2011 on our March 31, 20102011 consolidated financial statements includes an explanatory paragraph indicating that there is substantial doubt about our ability to continue as a going concern due to substantial recurring losses from operations, cash used in operations, stockholders’ deficit and significant accumulated deficit and working capital deficit. Our ability to continue as a going concern will be determined by our ability to obtain additional financing and maintain operations. We do not currently have sufficient financial resources to fund our operations. Therefore, we need additional funds to continue these operations. The Company operates in a rapidly changing environment that involves a number of factors, some of which are beyond man agement’smanagement’s control, such as financial market trends and investors’ appetite for new financings. It should be emphasized that, should the Company not be successful in completing its own financing (either by debt or by the issuance of securities from treasury), the Company may be unable to continue to operate as a going concern.
 
In discussions with various collaborative partners, the Company has decided to pursue a specific antibody strategy with the assistance of RFSUNY and an outsourced third party vendor. The development of this antibody technology will be overseen by RFSUNY and is currently in the early stages of development. The Company does not yet have an estimate of the total costs associated with this development. As the Company has no current revenues from operations, management fully expects to incur additional liabilities in order to fund the development of this strategy over the next 9 months.
 
On February 10, 2010 Kyto executed an “Executive Licensing Agreement” with The Research Foundation of State University of New York, “RFSUNY”, allowing Kyto to license certain technology surrounding the Human Transcobalamin Receptor.  The licensing agreement is active until the expiry of the patent rights.  The rights primarily relate to the patent: “Transcobalamin Receptor Polypeptides, Nucleic Acids, and Modulators Thereof, and Related Methods of Use in Modulating Cell Growth and Treating Cancer and Cobalamin Deficiency”.
 
Results of Operations
 
For the nine monthsthree ended December 31, 2010June 30, 2011 the Company’s net loss decreased by $44.709$12,487 to of $209,578$67,844 compared to a net loss of $254,287$80,331 for the ninethree months ended December  31, 2009.June 30, 2010.  The comprehensive loss for the ninethree months ended December 31, 2010 decreaseJune 30, 2011 the Company’s net loss decreased by $44,749$12,155 to $209,528$74,715 compared to a net loss of $254,277$86,870 for the ninethree months ended December 31, 2010.June 30, 2010
 
 
911
 

Liquidity and Capital Resources
 
The Company had working capital deficits of $1,327,881$1,441,887 as of December 31, 2010June 30, 2011 and $1,118,353$1,381,936 as of March 31, 2010.2011. Cash was $1,100$4,891 as of December 31, 2010June 30, 2011 and $4,444$863 as of March 31, 2010.2011.
 
Cash from operating activities
 
The Company’s cash used in operations increased $12,367decreased $38,469 to $177,694$44,972 for the ninethree months ended December 31, 2010June 30, 2011 compared to cash used in operations of $165,327$83,441 for the ninethree months ended December 31, 2009.  June 30, 2010
 
Cash from financing activities
 
The Company’s net cash flows from financing activities increased $20,562decreased $32,500 to of $174,300$49,000 as of December 31, 2010June 30, 2011 compared to cash flows from financing activities of $153,738$81,500 for the ninethree months ended December  31, 2009.June 30, 2010.
 
The Company’s plan of operation for the next twelve months is to continue to focus its efforts on finding new sources of capital and on R&D activities related to the development and application of its antibody technologies..technologies. As of the date of filing of this Form 10-Q with the U.S. Securities and Exchange Commission, the Company did receive a commitment of one of its stockholders to continue to provide operating loan funds to the Company.
 
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
Not required for smaller reporting company.
 
 
1012
 
 
ITEM 4.
CONTROLS AND PROCEDURES
 
Evaluation of Disclosure Controls and Procedures.  
We maintain “disclosuredisclosure controls and procedures” as such term is definedprocedures that are designed to ensure that material information required to be disclosed in Rule 13a-15(e)our periodic reports filed under the Securities Exchange Act of 1934.  In designing1934, as amended, or 1934 Act, is recorded, processed, summarized, and evaluatingreported within the time periods specified in the SEC’s rules and forms and to ensure that such information is accumulated and communicated to our management, including our chief executive officer/chief financial officer (principal financial officer) as appropriate, to allow timely decisions regarding required disclosure. During the quarter ended June 30, 2011 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, ouras 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 recognizedconcluded that our disclosure controls and procedures were ineffective as of June 30, 2011.
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 disclosure controls and proceduresthe control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, in designing disclosure controls and procedures, ourcan be circumvented by the individual acts of some persons, by collusion of two or more people, or by management necessarily was required to apply its judgment in evaluatingoverride of the cost-benefit relationship of possible disclosure controls and procedures.control. The design of any disclosure con trols and proceduressystem of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Based on his evaluation as of the end of the period covered by this report, our Chief Executive Officer who also serves as our principal financial and accounting officer has concluded that our disclosureOver time, controls and procedures were not effective such that the information relating to our company, required to be disclosed in our Securities and Exchange Commission reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) is accumulated and communicated to our management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure.

Our management concluded that our disclosure controls and procedures were not effective as a result of a material weakness in our disclosure controls and proceduresmay become inadequate because we failed to properly disclose that we had terminated an agreement with a related party which led to a conclusion that amounts advanced to that related party were non-recoverable which also led to a material weakness in our internal control over financial reporting.  In August 2010, immediately prior to the filing of this report, we determined that our financial statements for the year ended March 31, 2010 could not be relied upon because we did not properly impair a related party receivable.  As a result of this error, we have restated our consolidated balance sheet at March 31, 2010 and related consolidated statement of operations, consolidated st atement of changes in stockholders’ deficiency and consolidated statementconditions, or the degree of cash flows forcompliance with the year ended March 31, 2010.  

 During the second quarter  ended September 30, 2010 we instituted  an enhanced disclosure policies to ensure that information is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and  is accumulated and communicated to our management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure, as well as instituting enhancedor procedures for evaluating related party receivables. 

As of December 31, 2010 and asmay deteriorate. Because of the date of this report, we didinherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not maintain effective controls over the control environment  specifically with respect to the fact that our board of directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-B.be detected.
 
Changes in Internal ControlControls over Financial Reporting.   ThereReporting
During the quarter ended June 30, 2011, there have been no changes in our internal control over financial reporting during our last fiscal quarter that hashave materially affected or isare reasonably likely to materially affect our internal controlcontrols over financial reporting.
 
 
1113
 

PART II. OTHER INFORMATION
 
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 .
 
None
 
ITEM 3.DEFAULTS UPON SENIOR SECURITIES
 
None
 
ITEM 4.REMOVED AND RESERVED
 
None
 
ITEM 5.OTHER INFORMATION
 
None.
 
ITEM 6.EXHIBITS
 
Index to Exhibits on page 12.15
 
1214
 
 
INDEX TO EXHIBITS
 
EXHIBIT NUMBER DESCRIPTION
   
3(i)(a) Articles of Incorporation of Kyto Biopharma, Inc.*
   
3(i)(b) Articles of Amendment changing name to Kyto Biopharma, Inc.*
   
3(ii) Bylaws of Kyto Biopharma, Inc.*
   
10.1 Research collaboration agreement between The Research Foundation of State University of New York and B. Twelve Ltd. (Kyto Biopharma, Inc.) [dated August 19, 1999]**
   
10.2 Collaborative Research Agreement to synthesize new vitamin B12 analogs signed between the Company and New York University [dated November 11, 1999]**
   
10.3 Extension/Modification Research Collaboration Agreement between the Research Foundation of State University of New York and B Twelve, Inc., (Kyto Biopharma, Inc.) Modification No. 1 [dated November 01, 2000]**
   
10.4 Debt Settlement Agreement and Put Option (dated November 2002) between Kyto Biopharma, Inc. and New York University.**
   
10.5 Extension/Modification Research Collaboration Agreement between the Research Foundation of State University of New York and Kyto Biopharma, Inc., Modification No. 2 [dated December 2004]. **
   
10.6 Services Agreement between Kyto Biopharma, Inc. and Gerard Serfati [dated November 1, 2004]***
   
31.1
 Section 302 Certification of principal executive officer.**
   
31.2
 Section 302 Certification of principal financial and accounting officer.**
   
32.1
 Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 **
———————
*Filed as Exhibit to Company's Form 10-SB on September 12th, 2003, with the Securities and Exchange Commission
**Filed as Exhibit with this Form 10-Q.

***Previously filed with Form S-8 on November 18, 2004.

 
1315
 

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 Biopharma, Inc.
(Registrant) 
    
Date:  February 14,August 15, 2011By:/s/ Georges Benarroch 
  Georges Benarroch 
  President and Chief Executive Officer 

 
 
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