ALTEROLA BIOTECH INC. - Quarter Report: 2015 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

Alterola Biotech, Inc.

(Exact name of Registrant as specified in its charter)

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 [X] 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 (§ 229.405 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 [ ] No [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

[X] Yes [ ] No

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 114,980,000 common shares as of April 23, 2015

PART I - FINANCIAL INFORMATION

Item 1.     Financial Statements

Our financial statements included in this Form 10-Q are as follows:

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q.  In the opinion of management, all adjustments considered necessary for a fair presentation have been included.  Operating results for the interim period ended March 31, 2015 are not necessarily indicative of the results that can be expected for the full year.

ALTEROLA BIOTECH, INC.

BALANCE SHEETS
(unaudited)

See accompanying notes to financial statements. 

ALTEROLA BIOTECH, INC.

STATEMENTS OF OPERATIONS
(unaudited)

See accompanying notes to financial statements.

ALTEROLA BIOTECH, INC.

STATEMENTS OF CASH FLOWS
(unaudited)

See accompanying notes to financial statements.

ALTEROLA BIOTECH, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

MARCH 31, 2015

NOTE 1 – NATURE OF BUSINESS

Alterola Biotech, Inc. (“Alterola” and the “Company”) is a start-up company and was incorporated in Nevada on July 21, 2008. The Company was formed for the purpose of acquiring exploration and development stage mineral properties.

On October 1, 2008, the Company incorporated JRE Exploration Ltd, (“JRE”) a wholly owned subsidiary in Canada for the purpose of holding its Canadian mineral claims.

On May 3, 2010, the Company changed its focus to the development of intellectual property and accordingly sold JRE to the former president. (See Note 3). In keeping with the change of business focus, on July 9, 2010, the Company changed its name to Alterola Biotech Inc.

Effective July 9, 2010, the Board of Directors authorized a 10 for 1 forward stock split on the issued common shares. The authorized number of common shares was increased from 90,000,000 to 140,000,000 common shares with a par value of $0.001. The number of authorized Preferred shares remained unchanged at 10,000,000 with a par value of $0.001. All references in the accompanying financial statements to the number of common shares have been restated to reflect the forward stock split.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting Basis

The Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP” accounting).  The Company has adopted a September 30 fiscal year end.

Basis of Presentation

The accompanying unaudited interim financial statements of Alterola Biotech Inc. have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s registration statement filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for the financial statements to be not misleading have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year 2014 as reported in Form 10-K, have been omitted.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires 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 the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

ALTEROLA BIOTECH, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

MARCH 31, 2015

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.

Intellectual Property

The Company does not amortize intangible assets with indefinite useful lives, rather such assets are required to be tested for impairment at least annually or sooner whenever events or changes in circumstances indicate that the assets may be impaired. The Company amortizes its intangible assets with definite lives over their estimated useful lives and reviews these assets for impairment. The Company will amortize its acquired intangible assets with definite lives over the estimated economic life of the completed product. During the year ending September 30, 2011, the value of the intellectual property was determined to be $0 and impairment expense of $21,500 was recorded.

Website Development Costs

Costs incurred in developing and maintaining a website are charged to expense when incurred for the planning, content population, and administration or maintenance of the website. All development costs for the application, infrastructure, and graphics development are capitalized and subsequently reported at the lower of unamortized cost or net realizable value. Capitalized costs will be amortized using straight-line basis over two years, the estimated economic life of the completed website. As of March 31, 2015, the Company’s website was not in service; accordingly no amortization has been recorded during the periods ended March 31, 2015 and 2014.

Fair Value of Financial Instruments

Alterola’s financial instruments consist of cash and cash equivalents, accrued expenses, accrued interest and notes payable. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.

Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.

In addition to defining fair value, the disclosure requirements around fair value establish a fair value hierarchy for valuation inputs which is expanded. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels which is determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

Level 1 – inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.

ALTEROLA BIOTECH, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

MARCH 31, 2015

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Fair Value of Financial Instruments (continued)

Level 2 – inputs are based upon significant observable inputs other than quoted prices included in Level 1, such as quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.

The carrying value of the Company’s financial assets and liabilities which consist of cash, accounts payable and accrued liabilities, and notes payable are valued using level 1 inputs. The Company believes that the recorded values approximate their fair value due to the short maturity of such instruments. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, exchange or credit risks arising from these financial instruments.

Income Taxes

Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.

Revenue Recognition

The Company will recognize revenue when products are fully delivered or services have been provided and collection is reasonably assured.

Loss Per Common Share

Basic loss per share is calculated using the weighted-average number of common shares outstanding during each reporting period. Diluted loss per share includes potentially dilutive securities such as outstanding options and warrants, using various methods such as the treasury stock or modified treasury stock method in the determination of dilutive shares outstanding during each reporting period. The Company does not have any potentially dilutive instruments.

Stock-Based Compensation

Stock-based compensation is accounted for at fair value in accordance with ASC Topic 718. To date, the Company has not adopted a stock option plan and has not granted any stock options.

During the year ended September 30, 2013, the Company issued 37,000,000 shares of common stock to its director.

Recent Accounting Pronouncements

Alterola does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow.

ALTEROLA BIOTECH, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

MARCH 31, 2015

NOTE 3 – INTELLECTUAL PROPERTY

Pursuant to an Assignment Agreement dated May 3, 2010 (the “Agreement”), the Company acquired from the president of the Company a 100% undivided right in and to all intellectual property relating to certain chewing gum compositions having appetite suppressant activity. Consideration given for the acquisition was 55,000,000 Common shares of the Company with a fair value of $16,500. During the year ended September 30, 2010, the Company incurred a further $5,000 in patent application fees. During the year ended September 30, 2011, the Company determined that the value of the intellectual property was $0 and recognized impairment expense of $21,500.

NOTE 4 – ACCRUED EXPENSES

Accrued expenses consisted of the following at March 31, 2015 and September 30, 2014:

ALTEROLA BIOTECH, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

MARCH 31, 2015

NOTE 5 – NOTES PAYABLE

Notes payable consisted of the following at March 31, 2015 and September 30, 2014:

The Convertible note is convertible at the option of the holder. The number of shares of common stock into which the convertible note will be converted is determined by the Fair Market Price (“FMV”) of the common stock at the date of conversion. In the event there is no determinable market price the FMV shall be:

a) The share price at the last private offering of the common stock, or, b) the 30 day moving average of the Common Stock in the event a public listing of the common stock has taken place.

Notes payable in the amount of $130,000 are currently in default as of the date of issuance of these financial statements.

Interest expense related to these notes was $7,725 and $7,000 for the periods ended March 31, 2015 and 2014, respectively.

Financing costs are amortized over the term of the loan. As of March 31, 2015 financing costs of $nil has been expensed in the statement of operations and unamortized financing costs of $nil are deferred on the balance sheet.

ALTEROLA BIOTECH, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

MARCH 31, 2015

NOTE 6 – CAPITAL STOCK

The Company has 140,000,000 shares of $0.001 par value common stock authorized and 10,000,000 shares of $0.001 par value preferred stock authorized.

On August 6, 2008, the Company issued 55,000,000 common shares to the Company’s president at $0.001 per share for total proceeds of $55,000.

On September 22, 2008, the incumbent president resigned as both an officer and director and a new president and director was appointed. At the request of the departing president, the Company’s board of directors rescinded his share subscription for 55,000,000 common shares and repaid the subscription proceeds of $55,000.

On September 22, 2008, the Company issued 55,000,000 common shares to the Company’s new president at $0.00095 per share for total proceeds of $52,246.

On September 22, 2008, the Company issued 39,600,000 common shares at approximately $0.00149 per share for total proceeds of $55,740 pursuant to a private placement. On September 30, 2008, the Company issued 2,400,000 common shares at approximately $0.00149 per share for total proceeds of $3,467 pursuant to a private placement. The Company paid a commission of $5,700 for net proceeds of $53,507 for these private placements.

On October 29, 2008, the Company issued 2,400,000 common shares at approximately $0.00119 per share for total proceeds of $2,865 pursuant to a private placement.

On January 5, 2010, pursuant to a share subscription agreement, the Company issued 33,330,000 Common Shares at $0.0015 for aggregate proceeds of $50,000.

On May 3, 2010, pursuant to the sale of JRE Exploration Ltd. (Note 3) the Company received 55,000,000 of its Common stock from the former Company president with a fair value of $52,246 for cancellation, as consideration for the sale of JRE, our wholly owned subsidiary.

On November 17, 2010, the President entered into a stock cancellation agreement the Company whereby 40,000,000 common shares were returned to treasury and cancelled. In consideration the Company will issue to the President options to acquire common stock pursuant to the stock option plan which will be adopted by the Company at some time in the future.

On December 21, 2010, the Company issued 250,000 shares at $0.20 for aggregate proceeds of $50,000.

In February 2011, the former President returned 15,000,000 shares of common stock for voluntary cancellation.

On July 16, 2013, the Company issued 37,000,000 shares of common stock to its director for services with a deemed value of $37,000.

The Company has 114,980,000 and 114,980,000 shares of common stock issued and outstanding as of March 31, 2015 and September 30, 2014 respectively. There are no shares of preferred stock issued and outstanding as of March 31, 2015 and September 30, 2014.

ALTEROLA BIOTECH, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

MARCH 31, 2015

NOTE 7 – RELATED PARTY TRANSACTIONS

Alterola neither owns nor leases any real or personal property. An officer has provided office space without charge. There is no obligation for the officer to continue this arrangement. Such costs are immaterial to the financial statements and accordingly are not reflected herein. The officers and directors are involved in other business activities and most likely will become involved in other business activities in the future.

NOTE 8 – SUBSEQUENT EVENTS

In accordance with ASC Topic 855-10, the Company has analyzed its operations subsequent to March 31, 2015 to the date these financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these financial statements. 

Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.   These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions.  We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions.  Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain.  Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.  We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.  Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

Company Overview

On May 3, 2010, we acquired intellectual property relating to certain chewing gum compositions having appetite suppressant activity (the “IP”). Following the acquisition of the IP, we commenced pursuing the development of chewing gums for the delivery of nutraceutical/functional ingredients for applications such as appetite suppressant, cholesterol suppressant, vitamin delivery, antioxidant delivery and motion sickness suppressant.

Our plan is to use our IP and develop and market nutraceutical/functional chewing gum and in the future medicinal chewing gum. We are ardently researching new ways to use chewing gum as a delivery system, expanding on the kinds of applications chewing gum has been used for in the past. We initially expected to reveal functional chewing gum for new applications by the end of 2014, but we were not able to do so. We will first need to raise additional capital to develop our chewing gum for the delivery of medicines.

Our mission is to improve the health and quality of life for millions of people all over the world who are unable to or have difficulty with swallowing tablets. As much as 40% of the adult population and an even greater percentage of the adolescent population have difficulties swallowing pills, and we believe our solutions will greatly benefit them.

Presently, we are focused on nutrition and health chewing gum with natural based ingredients. The products below are currently under development and we are working to file patents to protect the ingredients in these products.

• Appetite suppressor
• Cholesterol suppressor
• Antioxidant gum
• Motion sickness suppressor
• Vitamin gum

In order to implement our business plan, however, we will need to raise funds. We were able to secure small loans to pay the legal and accounting fees needed to keep our reporting filings current with the Securities and Exchange Commission. We will need more funds to meet our timetable of introducing Nutraceutical/functional chewing gum. We expect that we will need capital of $500,000 to develop our product.

Results of Operations for the Three and Six Months Ended March 31, 2015 and 2014

We have generated no revenues since inception and we do not anticipate earning revenues until such time that we are able to market and sell our products.

We incurred operating expenses of $2,611 for the three months ended March 31, 2015, compared with operating expenses of $13,486 for the three months ended March 31, 2014. We incurred operating expenses of $7,470 for the six months ended March 31, 2015, compared with operating expenses of $20,711 for the six months ended March 31, 2014. Our operating expenses for the three and six months ended March 31, 2015 decreased from the same period ended March 31, 2014 mainly as a result of less consulting fees.

We incurred other expenses of $4,000, all of which in the form of interest expenses for the three months ended March 31, 2015, as compared to other expenses of $5,094, which consisted of $3,500 and $1,594 for interest expenses and financing costs for the three months ended March 31, 2014, respectively. We incurred other expenses of $7,725, all of which in the form of interest expenses for the six months ended March 31, 2015, as compared to other expenses of $9,625, which consisted of $7,000 and $2,625 for interest expenses and financing costs for the six months ended March 31, 2014, respectively.

We incurred a net loss of $6,611 for the three months ended March 31, 2015, as compared with a net loss of $18,580 for the three months ended March 31, 2014. We incurred a net loss of $15,195 for the six months ended March 31, 2015, as compared with a net loss of $30,336 for the six months ended March 31, 2014.

Liquidity and Capital Resources

As of March 31, 2015, we had $9,156 in current assets and currently liabilities of $235,893. We had a working capital deficit of $226,737 as of March 31, 2015.

Operating activities used $10,844 in cash for the six months ended March 31, 2015, as compared with $13,327 in cash for the same period ended March 31, 2014. Our negative operating cash flow for the six months ended March 31, 2015 was attributable to funding the loss for the period and a decrease in accrued expenses, offset by an increase in accrued interest. Our negative operating cash flow for the same period ended March 31, 2014 was attributable to funding the loss for the period and a decrease in accrued expenses, offset by a decrease in prepaid expenses and an increase in accrued interest.

Financing activities provided $20,000 for the six months ended March 31, 2015 when on November 20, 2014, we entered into a $20,000 Demand Promissory Note (the “Note”) with an outside investor. Under the terms of the Note, simple interest at 10% and all principal are due on demand. In comparison, financing activities provided $6,000 for the same period ended March 31, 2014 as a result of a note payable that is unsecured, non-interest bearing with a finance charge of $1,500 due on March 31, 2014.

Based upon our current financial condition, we do not have sufficient cash to operate our business at the current level for the next twelve months. We intend to fund operations through increased sales and debt and/or equity financing arrangements, which may be insufficient to fund expenditures or other cash requirements. We plan to seek additional financing in a private equity offering to secure funding for operations. There can be no assurance that we will be successful in raising additional funding. If we are not able to secure additional funding, the implementation of our business plan will be impaired. There can be no assurance that such additional financing will be available to us on acceptable terms or at all.

Off Balance Sheet Arrangements

As of March 31, 2015, there were no off balance sheet arrangements.

Going Concern

Our financial statements have been prepared assuming that we will continue as a going concern which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We have incurred cumulative losses of $468,367 for the period July 21, 2008 (inception date) through March 31, 2015, expect to incur further losses in the development of our business and have been dependent on funding operations through the issuance of convertible debt and private sale of equity securities. These conditions raise substantial doubt about our ability to continue as a going concern. Management’s plans include continuing to finance operations through the private or public placement of debt and/or equity securities and the reduction of expenditures. However, no assurance can be given at this time as to whether we will be able to achieve these objectives. The financial statements do not include any adjustment relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.

Item 3.     Quantitative and Qualitative Disclosures About Market Risk

A smaller reporting company is not required to provide the information required by this Item.

Item 4.     Controls and Procedures

Disclosure Controls and Procedures

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of March 31, 2015. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2015, our disclosure controls and procedures were not effective due to the presence of material weaknesses in internal control over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses which have caused management to conclude that, as of March 31, 2015, our disclosure controls and procedures were not effective: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.

Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting

Our company plans to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending September 30, 2015: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended March 31, 2015 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1.     Legal Proceedings

We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

Item 1A:  Risk Factors

A smaller reporting company is not required to provide the information required by this Item.

Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3.     Defaults upon Senior Securities

None

Item 4.     Mine Safety Disclosures

Not applicable.

Item 5.     Other Information

None

Item 6.      Exhibits

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.