exhibit_99-1.htm

EX-99.1 2 exhibit_99-1.htm JUNE 30, 2014 FINANCIAL STATEMENTS exhibit_99-1.htm

EXHIBIT 99.1

PACIFIC THERAPEUTICS LTD.

(A Development Stage Company)

CONDENSED INTERIM FINANCIAL STATEMENTS

Six month period ended June 30, 2013, 2014

(Expressed in Canadian Dollars)

Unaudited – Prepared by Management

PACIFIC THERAPEUTICS LTD.

Condensed Interim Financial Statements

30, June 2014

(Unaudited – See “Notice to Reader” below)

In accordance with National Instrument 51-102 released by the Canadian Securities Administrators, the Company discloses that its external auditors have not reviewed the condensed interim financial statements for the period ended 30 June 2014.

PACIFIC THERAPEUTICS LTD.

(A Development Stage Company)

Condensed Interim Statements of Financial Position

(Expressed in Canadian Dollars)

AS AT:	Jun 30, 14			Dec 31, 13
	$			$
ASSETS
CURRENT
Cash and cash equivalents		1,905			180,692
Goods and Services Tax/Harmonized Sales Tax Receivable		2,223			7,391
Prepaid expenses and deposits		13,920			36,605
		18,048			224,688
NON-CURRENT ASSETS
PROPERTY AND EQUIPMENT (Note 3)		1,835			2,443
INTANGIBLE ASSETS (Note 4)		61,777			59,913
		81,660			287,044

LIABILITIES
CURRENT
Trade payable and accrued liabilities		193,615			226,201
Convertible note (Note 6)		-			30,900
Due to related parties (Note 5)		554,198			470,087
		747,813			727,188
SHAREHOLDERS' DEFICIENCY
Share capital (Note 7)		2,699,210			2,699,210
Warrant and option reserve (Note 7)		221,512			123,704
Deficit accumulated during the development stage		(3,586,875	)		(3,263,058	)
		(666,153	)		(440,144	)
		81,660			287,044

Nature and Continuance of Operations (Note 1)

Subsequent Events (Note 10)

On behalf of the Board:

“Douglas H. Unwin”	Director	“Doug Wallis”	Director
Douglas H. Unwin		Doug Wallis

The accompanying notes are an integral part of these condensed interim financial statements.

PACIFIC THERAPEUTICS LTD.

(A Development Stage Company)

Condensed Interim Statements of Loss and Comprehensive Loss

(Expressed in Canadian Dollars)

	Three Months ended			Three Months ended			Six Months ended			Six Months ended
	Jun 30, 14			Jun 30, 13			Jun 30, 14			Jun 30, 13
Expenses
Advertising and promotion	$	3,719		$	16,562		$	15,165		$	36,662
Amortization of property and equipment		203			855			608			1,709
Amortization of intangible assets		1,725			957			2,682			1,915
Bank charges and interest		1,291			4,678			3,284			9,281
Donation		-			-			500			-
Insurance		6,997			5,615			13,994			9,795
Investor relations		11,250			23,750			11,250			46,250
Office and miscellaneous		609			1,434			2,885			3,377
Professional fees		48,213			23,514			75,272			39,268
Rent and occupancy costs		3,600			2,402			7,200			6,003
Share based payments		25,868			34,847			97,808			34,847
Telephone and utilities		550			215			719			712
Transfer agent		2,294			1,808			4,832			3,257
Travel		3,273			200			7,844			936
Wages and benefits		40,000			40,560			80,000			75,560
	$	149,592		$	157,397		$	324,043		$	269,572
Interest expense
Interwest loan interest	$	-		$	900		$	-		$	1,800
	$	-		$	900		$	-		$	1,800
Other Expenses (Income)
Exchange loss/(gain)	$	-		$	46		$	(226	)	$	46
Loss/(gain) on derivative liability (Note 6)		-			(5,695	)		-			13,255
Write-off of license (Note 4)		-			-			-			42,510

Net Loss and Comprehensive Loss	$	(149,592	)	$	(152,648	)	$	(323,817	)	$	(327,183	)

Loss per share Basic and Diluted	$	(0.00	)	$	(0.01	)	$	(0.01	)	$	(0.01	)
Weighted average number of common shares outstanding		37,456,825			25,861,550			37,456,825			25,861,550

The accompanying notes are an integral part of these condensed interim financial statements.

PACIFIC THERAPEUTICS LTD.

(A Development Stage Company)

Condensed Interim Statements of Changes in Shareholders’ Deficiency

(Expressed in Canadian Dollars)

	Number of common shares		Share capital			Share Subscriptions received			Warrant and option reserve			Deficit			Total
			$			$			$			$			$
Balance at December 31, 2012		22,586,825		1,995,716			30,000			206,212			(2,662,918	)		(430,990	)
Common shares issued for cash @ $0.05		1,800,000		90,000			(30,000	)		-			-			60,000
Share issue costs		-		(7,030	)		-			2,030			-			(5,000	)
Loss for the period		-		-			-			-			(174,535	)		(174,535	)
Balance at March 31, 2013		24,386,825		2,078,686			-			208,242			(2,837,453	)		(550,525	)
Common shares issued for cash @ $0.05		2,200,000		110,000			-			-			-			110,000
Share issue costs		-		(19,907	)		-			9,906			-			(10,001	)
Share based payments		-		-			-			34,847			-			34,847
Loss for the period		-		-			-			-			(152,648	)		(152,648	)
Balance at June 30, 2013		26,586,825		2,168,779			-			252,995			(2,990,101	)		(568,327	)
Common shares issued for cash @ $0.05		-		-			54,000			-			-			54,000
Share based payments		-		-			-			4,986			-			4,986
Loss for the period		-		-			-			-			(104,895	)		(104,895	)
Balance at September 30, 2013		26,586,825		2,168,779			54,000			257,981			(3,094,996	)		(614,236	)
Common shares issued for cash @ $0.05		9,830,000		491,500			(54,000	)		-			-			437,500
Share issue costs		-		(13,069	)		-			4,070			-			(8,999	)
Shares exchanged for debt @ $0.05		1,040,000		52,000			-			-			-			52,000
Share based payments		-		-			-			2,359			-			2,359
Shares and expiry of options and finders warrants		-		-			-			(140,706	)		140,706			-
Loss for the period		-		-			-			-			(308,768	)		(308,768	)
Balance at December 31, 2013		37,456,825		2,699,210			-			123,704			(3,263,058	)		(440,144	)
Share based payments		-		-			-			71,940			-			71,940
Loss for the period		-		-			-			-			(174,225	)		(174,225	)
Balance at March 31, 2014		37,456,825		2,699,210			-			195,644			(3,437,283	)		(542,429	)
Share based payments		-		-			-			25,868			-			25,868
Loss for the period													(149,592	)		(149,592	)
Balance at June 30, 2014		37,456,825		2,699,210			-			221,512			(3,586,875	)		(666,153	)

The accompanying notes are an integral part of these condensed interim financial statements.

PACIFIC THERAPEUTICS LTD.

(A Development Stage Company)

Condensed Interim Statements of Cash Flows

(Expressed in Canadian Dollars)

	Six Months ended			Six Months ended
	Jun 30, 14			Jun 30, 13
	$			$
Cash flows used in operating activities
Net loss and comprehensive loss		(323,817	)		(327,183	)
Adjustments for items not affecting cash
Amortization of property and equipment		608			1,709
Amortization of intangible assets		2,682			1,915
Share based payments		97,808			34,847
Loss on derivative liability		-			13,255
Changes in non-cash working capital balances
Advances		-			(1,500	)
Goods and Services Tax/Harmonized Sales Tax recoverable		5,168			(1,467	)
Prepaid expenses		22,685			81,244
Write-off of license		-			42,510
Accounts payable and accrued liabilities		51,525			39,618
		(143,341	)		(115,052	)
Cash flows used in investing activities
Additions to intangible assets		(4,546	)		(4,218	)
		(4,546	)		(4,218	)
Cash flows from/(used in) financing activities
Issue of common shares for cash		-			173,063
Subscriptions received		-			(30,000	)
Issuance of finders' warrants		-			11,936
Promissory note		(30,900	)		8,844
Shareholder demand loan		-			(45,553	)
Due to shareholders					(6,947	)
		(30,900	)		111,343

Change in cash and cash equivalents		(178,787	)		(7,927	)
Cash and cash equivalents, beginning of period		180,692			9,854
Cash and cash equivalents, end of period		1,905			1,927

The accompanying notes are an integral part of these condensed interim financial statements.

Pacific Therapeutics Ltd.

(A Development Stage Company)

Notes to Condensed Interim Financial Statements

Six Months Ended June 30, 2014 and 2013

1.	NATURE AND CONTINUANCE OF OPERATIONS

Pacific Therapeutics Ltd. (the “Company" or "PTL") was incorporated under the laws of the Province of British Columbia, Canada on September 12, 2005. The Company is a development stage company focused on developing proprietary drugs to treat certain types of lung disease including fibrosis. On October 14, 2011, the Company became a reporting company in British Columbia and was approved by the Canadian Securities Exchange (“CSE”) and opened for trading on November 16, 2011.

PTL has financed its cash requirements primarily from share issuances and payments from research collaborators. The Company's ability to realize the carrying value of its assets is dependent on successfully bringing its technologies to market and achieving future profitable operations, the outcome of which cannot be predicted at this time. It will be necessary for the Company to raise additional funds for the continuing development of its technologies.

The condensed interim financial statements have been prepared on a going concern basis, which contemplates continuity of operations and the realization of assets and settlement of liabilities in the ordinary course of business. The Company is subject to risks and uncertainties common to drug discovery companies, including technological change, potential infringement on intellectual property of and by third parties, new product development, regulatory approval and market acceptance of its products, activities of competitors and its limited operating history. Management is aware, in making its assessment, of material uncertainties related to events or conditions that may cast significant doubt upon the Company’s ability to continue as a going concern. The condensed interim financial statements do not include any adjustments that might result from the outcome of this uncertainty.

2.	STATEMENT OF COMPLIANCE AND BASIS OF PRESENTATION

These condensed interim financial statements were approved and authorized for issue by the Board of Directors on August 27, 2014.

(a)	Statement of Compliance

These unaudited condensed interim financial statements, including comparatives, have been prepared in accordance with International Financial Reporting Standard 34 “Interim Financial Reporting” (“IAS 34”) using accounting policies consistent with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and Interpretations of the IFRS Interpretations Committee.

These unaudited condensed interim financial statements do not include all of the information required of a full annual financial report and should be read in conjunction with the annual financial statements of the Company for the year ended December 31, 2013.

(b)	Basis of Presentation

These condensed interim financial statements were prepared on a historical cost basis and are presented in Canadian dollars which is the Company’s functional currency. All financial information has been rounded to the nearest dollar.

(c)	Use of Estimates

The preparation of condensed interim financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed interim financial statements and the reported amounts of revenues and expenditures during the reporting periods. Although these estimates are based on management’s best knowledge of current events and actions, actual results ultimately may differ from those estimates.

Pacific Therapeutics Ltd.

(A Development Stage Company)

Notes to Condensed Interim Financial Statements

Six Months Ended June 30, 2014 and 2013

3.	PROPERTY AND EQUIPMENT

Cost
Balance at:	Computer Equipment		Furniture and Fixtures		Leasehold Improvements		Lab Equipment		Total

December 31, 2012	$	5,876	$	-	$	-	$	5,784	$	11,660
December 31, 2013	$	5,876	$	-	$	-	$	6,200	$	12,076
June 30, 2014	$	5,876	$	-	$	-	$	6,200	$	12,076

Amortization
Balance at:	Computer Equipment		Furniture and Fixtures		Leasehold Improvements		Lab Equipment		Total

December 31, 2012	$	5,662	$	-	$	-	$	1,550	$	7,212
Amortization for the year		96		-		-		2,325		2,421

December 31, 2013	$	5,758	$	-	$	-	$	3,875	$	9,633
Amortization for the period		27		-		-		581		608

June 30, 2014	$	5,785	$	-	$	-	$	4,456	$	10,241

Carrying amounts
Balance at:	Computer Equipment		Furniture and Fixtures		Leasehold Improvements		Lab Equipment		Total

December 31, 2012	$	214	$	-	$	-	$	4,234	$	4,448
December 31, 2013	$	118	$	-	$	-	$	2,325	$	2,443
June 30, 2014	$	91	$	-	$	-	$	1,744	$	1,835

Pacific Therapeutics Ltd.

(A Development Stage Company)

Notes to Condensed Interim Financial Statements

Six Months Ended June 30, 2014 and 2013

4.	INTANGIBLE ASSETS

Cost
	Technology Licenses (i)			Patents (ii)		Total

December 31, 2012	$	42,510		$	64,315	$	106,825
Additions		-			13,569		13,569
Write-off		(42,510	)		-		(42,510	)

December 31, 2013	$	-		$	77,884	$	77,884
Additions		-			4,546		4,546

June 30, 2014	$	-		$	82,430	$	82,430

Amortization
	Technology Licenses (i)			Patents (ii)		Total

December 31, 2012	$	-		$	13,263	$	13,263
Amortization for the year		-			4,708		4,708

December 31, 2013	$	-		$	17,971	$	17,971
Amortization for the period		-		$	2,682		2,682

June 30, 2014	$	-		$	20,653	$	20,653

Carrying amounts
	Technology Licenses (i)			Patents (ii)		Total

December 31, 2012	$	42,510		$	51,052	$	93,562
December 31, 2013	$	-		$	59,913	$	59,913
June 30, 2014	$	-		$	61,777	$	61,777

(i)

On January 9, 2013, the technology license agreement with Dalhousie University was terminated due to breach of contract for non-payment of maintenance amounts due, accordingly the technology license was written down to nil.

(ii)

Due to a finite life of patents which begins from the date of application; the Company amortizes all patent costs over the expected life of the patent.

Pacific Therapeutics Ltd.

(A Development Stage Company)

Notes to Condensed Interim Financial Statements

Six Months Ended June 30, 2014 and 2013

(iii)

The Company is currently pursuing a patent application for the compositions and methods of treating fibro proliferative disorders. Costs of this application incurred to date are $78,507 (2013 - $77,884). The application is still pending as at March 31, 2014, however due to a finite life of the patent which begins from the date of application; the Company is amortizing these costs over the expected life of the patent.

5.	DUE TO RELATED PARTIES

Due to related parties as at June 30, 2014 consists of $554,198 (2013 - $470,087). These amounts consist of short term loans, services rendered and expenses paid on behalf of the Company by shareholders and or officers of the Company and are unsecured, non-interest bearing and payable on demand.

6.	CONVERTIBLE NOTE AND DERIVATIVE LIABILITY

On September 24, 2012 the Company issued a convertible note (the “Note”) with a face value of $30,000, issued 200,000 warrants (“Bonus Warrants”) and received $30,000 in cash. The Bonus Warrants with an exercise price of $0.22 expire on September 24, 2014. The Note had a term of one year and was repaid in full in January 2014.

The holder of the Note may convert the whole Note or any portion into units at any time. Each unit will consist of 1 common share (the “Share Option”) and 1 warrant (the “Warrant Option”), with each Warrant Option exercisable to acquire an additional common share for a period of 2 years from the date the Warrant Option was issued. Subject to regulatory approval the conversion price per unit will be at a 25% discount to the ten day weighted average price of the Company’s shares at the date of conversion. Subject to regulatory approval the exercise price per Warrant Option will be at a 25% premium to the ten day weighted average price of the issuer’s shares at the date of conversion. Each Bonus Warrant is exercisable to acquire an additional common share for a period of 2 years from the closing date at a price of $0.22. The Note accrues interest at the rate of 1% per month, payable in quarterly installments.

The fair value of the Bonus Warrants and Share Options were determined using the Black-Scholes Pricing Model. The Black-Scholes Pricing Model is based on several subjective assumptions including the expected life of the option and expected future stock price volatility. Changes in these assumptions can materially affect the estimated fair value of the Company’s stock options. The estimated fair value of the Bonus Warrants was calculated on the grant date as $13,238. The estimated fair value of the share options was calculated on the grant date as $18,232.

The fair value of the Warrant Options was determined using the Geske Price Model. The Geske Price Model is based on several subjective assumptions including the expected life of the option and expected future stock price volatility. Changes in these assumptions can materially affect the estimated fair value of the Company’s stock options. The estimated value of the Warrant Option was calculated on the grant date as $11,600.

Pacific Therapeutics Ltd.

(A Development Stage Company)

Notes to Condensed Interim Financial Statements

Six Months Ended June 30, 2014 and 2013

Upon initial recognition, the Company bifurcated the $30,000 proceeds between the component parts of the convertible note using the relative fair value method as follows:

		Estimated Value				Allocation of Proceeds
Current Liabilities
Convertible Loan	Face value of note	$	30,000	41	%	$	12,317
Derivative Liability	Share option		18,232	25	%		7,485
Derivative Liability	Warrant option		11,600	16	%		4,763
Warrant and option reserve	Bonus warrants		13,238	18	%		5,435
		$	73,070	100	%	$	30,000

The discount on the component parts of the convertible note are accredited as interest expense over the one year term of the note. As at December 31, 2013 the derivative liability was re-measured to fair value. This resulted in a gain on derivative liability being recognized on the face of the condensed interim financial statements of $30,889.

7.	SHARE CAPITAL

Authorized

Unlimited

1,500,000

1,000,000

Class A common shares without par value

Class B Series I preferred shares without par value

Class B Series II preferred shares without par value

Issued

37,456,825

NIL

Class A common shares without par value

Class B Series I preferred shares without par value

Class B Series II preferred shares without par value

Class A Common Shares

On February 13, 2013 the Company closed the first tranche of a non-brokered private placement and issued 1,800,000 units at $0.05 per unit for gross proceeds of $90,000, of which $30,000 was recorded during the year ended December 31, 2012. Each unit is comprised of one common share and one-half a purchase warrant, each whole warrant being exercisable for one common share at an exercise price of $0.22 until February 12, 2015. The Company paid finder’s fees of $5,000 and issued 100,000 finders warrants to finders in the first tranche. The finders’ warrants have the same terms as the warrants that are part of the above Units. The fair value of the 100,000 finders’ warrants was $2,742 as estimated at the date of issue using the Black-Scholes pricing model.

On May 1, 2013, the Company closed the second tranche of a non-brokered private placement and issued an additional 2,200,000 units at $0.05 per unit for gross proceeds of $110,000. Each unit is comprised of one common share and one-half a purchase warrant, each whole warrant being exercisable for one common share at an exercise price of $0.22 until May 1, 2015. The Company paid finder’s fees of $10,000 and issued 200,000 finders warrants to finders in the second tranche. The finders’ warrants have the same terms as the warrants that are part of the above Units. The fair value of the 200,000 finders’ warrants was $5,413 as estimated at the date of issue using the Black-Scholes pricing model.

Pacific Therapeutics Ltd.

(A Development Stage Company)

Notes to Condensed Interim Financial Statements

Six Months Ended June 30, 2014 and 2013

On October 8, 2013 the Company closed the first tranche and issued 2,160,000 units for gross proceeds of $108,000. 2,160,000 warrants were issued with an expiration date of October 8, 2016. Each unit is comprised of one common share and one share purchase warrant, each warrant being exercisable for one common share at an exercise price of $0.10 for three years from the closing date of the placement. Finders’ fees were paid in the amount of $4,500 cash and issued 90,000 finders warrants having the same terms as the warrants issued as part of the units. The fair value of the 100,000 finders’ warrants was $2,646 as estimated at the date of issue using the Black-Scholes pricing model.

On October 18, 2013 the Company closed the second tranche and issued 1,980,000 units for gross proceeds of $99,000. 1,980,000 warrants were issued with an expiration date of October 18, 2016. Each unit is comprised of one common share and one share purchase warrant, each warrant being exercisable for one common share at an exercise price of $0.10 for three years from the closing date of the placement Finders fees were paid in the amount of $2,000 cash and issued 40,000 finders warrants having the same terms as the warrants issued as part of the units. The fair value of the 40,000 finders’ warrants was $3,306 as estimated at the date of issue using the Black-Scholes pricing model.

On November 5, 2013 the Company closed the third tranche and issued 6,730,000 units for gross proceeds of $336,500. 6,730,000 warrants were issued with an expiration date of November 5, 2016. Each unit is comprised of one common share and one share purchase warrant, each warrant being exercisable for one common share at an exercise price of $0.10 for three years from the closing date of the placement Finders’ fees were paid in the amount of $2,500 cash and issued 50,000 finders warrants having the same terms as the warrants issued as part of the units. The fair value of the 50,000 finders’ warrants was $1,899 as estimated at the date of issue using the Black-Scholes pricing model.

Share subscriptions received:

On December 31, 2013 all shares had been issued for funds received and the share subscriptions received was $Nil (2012 - $30,000) for a shares subscription for Nil units (2012 – 600,000) as part of a private placement of 1,800,000 units that was completed on February 7, 2013.

Stock options and share based compensation:

As at June 30, 2014 and December 31, 2013, the following stock options were outstanding:

Expiry Date	Exercise Price $	Jun 30, 14	Dec 31, 13
4-Nov-14	0.27	150,000	150,000
5-Mar-15	0.27	375,000	375,000
11-Jun-15	0.06	500,000	-
10-Jan-17	0.10	400,000	-
3-Jul-17	0.10	475,000	475,000
21-Dec-17	0.10	450,000	450,000
4-Apr-18	0.10	350,000	350,000
16-Sep-18	0.10	100,000	100,000
7-Mar-19	0.10	525,000	-
Balance	0.12	3,325,000	1,900,000

The options outstanding and exercisable at June 30, 2014, have a weighted average remaining contractual life of 3.3 years (2013 – 3.1 years). Stock option activity was as follows:

Pacific Therapeutics Ltd.

(A Development Stage Company)

Notes to Condensed Interim Financial Statements

Six Months Ended June 30, 2014 and 2013

	Six months ending				Twelve months ending
	Jun 30, 14				Dec 31, 13
	Options Outstanding		Exercise Price $		Options Outstanding			Exercise Price $
Balance at January 1		1,900,000	$	0.15		1,675,000		$	0.18
Exercised		-		-		-			-
Expired/Cancelled						(225,000	)		0.27
Issued		1,425,000		0.09		450,000			0.10
Balance at period end		3,325,000	$	0.12		1,900,000		$	0.15

The fair value of share based awards is determined using the Black-Scholes Option Pricing model. The model utilizes certain subjective assumptions including the expected life of the option and expected future stock price volatility. Changes in these assumptions can materially affect the estimated fair value of the Company’s stock options.

The Company used the Black-Scholes Option Pricing Model for the grants on January 10, 2014, March 3, 2014 and June 11, 2014 and for multiple stock option grants occurring 2013. The assumptions used in the Black-Scholes Option Pricing Model for employees, directors and consultants were:

	Six months ending	Twelve months ending
	Jun 30, 14	Dec 31, 13
Dividend yield	0%	0%
Expected volatility	299% -301%	164% - 166%
Risk free interest rate	1.63%	1.23% - 1.87%
Expected life in years	5	5
Grant date fair value per share	$0.075 - $0.08	$0.08 - $0.09
Forfeiture rate	4%	4%

Pacific Therapeutics Ltd.

(A Development Stage Company)

Notes to Condensed Interim Financial Statements

Six Months Ended June 30, 2014 and 2013

Warrants

As at June 30, 2014 and December 31, 2013, the following share purchase warrants were issued and outstanding:

Expiry Date	Exercise Price $	June 30, 2014		December 31, 2013
31-Jul-14	$0.15	2,473,334	(1)	2,473,334
28-Aug-14	$0.25	60,000	(2)	60,000
16-Nov-14	$0.15	600,000	(3)	600,000
19-Jun-14	$0.22	56,666		56,666
20-Jun-14	$0.22	732,670		732,670
21-Sep-14	$0.22	747,166		747,166
24-Sep-14	$0.22	200,000		200,000
12-Feb-15	$0.22	1,000,000		1,000,000
1-May-15	$0.22	1,300,000		1,300,000
1-Oct-16	$0.22	2,160,000		2,160,000
8-Oct-16	$0.10	90,000		90,000
18-Oct-16	$0.10	1,980,000		1,980,000
18-Oct-16	$0.10	40,000		40,000
5-Nov-16	$0.10	6,730,000		6,730,000
5-Nov-16	$0.10	50,000		50,000
		18,219,836		18,219,836

(1)	On January 6, 2014 the Company extended the expiry date of 2,473,334 warrants from January 31, 2014, to July 31, 2014.

(2)	On January 6, 2014 the Company extended the expiry date of 60,000 warrants from February 28, 2014, to August 28, 2014.

(3)	On January 18, 2013 the Company extended the expiry date of 600,000 warrants from May 16, 2014, to November 16, 2014.

The warrants outstanding and exercisable at June 30, 2014, have a weighted average remaining contractual life of 1.5 years (2013 – 1.9 years). Warrant activity was as follows:

	Six months ending				Twelve months ending
	June 30, 2014				December 31, 2013
	Warrants Outstanding		Exercise Price $		Warrants Outstanding			Exercise Price $
Opening balance		18,219,836		0.15		5,272,059			0.17
Expired		-		0.15		(602,223	)		0.15
Exercised		-		0.15					0.15
Modified		-		0.15		-			-
Modified		-		0.15		-			-
Issued		-		0.22		13,550,000			0.14
Closing balance		18,219,836		0.15		18,219,836			0.15

Pacific Therapeutics Ltd.

(A Development Stage Company)

Notes to Condensed Interim Financial Statements

Six Months Ended June 30, 2014 and 2013

Loss per share

The weighted average number of shares outstanding for purposes of calculating basic and diluted loss per share at June 30, 2014 was 37,456,825 (2013 – 23,526,825).

8.	RELATED PARTY TRANSACTIONS AND BALANCES

All transactions with related parties are in the normal course of operations.

Details of the transactions between the Company and its related parties are disclosed below:

(a) Related Party Transactions

Six months ended June 30,	2014		2013

Legal fees incurred from a consultant and director of the Company	$	446	$	Nil

(b) Related Party Balances

Balances are due on demand with no fixed term, security or interest.

	30-Jun-14		31-Dec-13

Amounts owing to CFO of the Company for loans and consulting, accounting fees and interest on ISA.	$	103,724	$	86,760
Amounts owing to a director of the Company for legal fees		17,117		17,117
Amounts owing to a director of the Company for consulting fees		10,500
Amounts owing to a director of the Company for interest on ISA		2,964
Amount owing to the CEO and director of the Company for loans, salary, expenses and interest on ISA.		419,893		366,210
	$	554,198	$	470,087

Six months ended June 30,	2014		2013
Salary paid or accrued CEO	$	80,000	$	75,000
Consulting fees paid or accrued CFO		18,000		16,500
Accounting fees paid or accrued to a company controlled by CFO		3,000		-
Share-based payments		67,835		34,847

Total key management personnel compensation	$	168,835	$	126,347

Pacific Therapeutics Ltd.

(A Development Stage Company)

Notes to Condensed Interim Financial Statements

Six Months Ended June 30, 2014 and 2013

During the six months ended June 30, 2014 the Company granted 500,000, 5 year $0.10 incentive stock options that vested at date of grant to officers and directors and 500,000, 1 year $0.06 incentive options that vested at date of grant to and officer and director (During the twelve months ended December 31, 2013, the Company granted 450,000, 5 year $0.10 incentive stock options that vested at date of grant to officers and directors (Note 7).

9.	FINANCIAL INSTRUMENTS AND RISK

As at June 30, 2014, the Company’s financial instruments consist of cash and cash equivalents, trade payables, and due to related parties.

The carrying value of cash and cash equivalents, trade payables, and due to related parties approximate their fair values because of the short term nature of these instruments.

Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risks consist principally of cash and cash equivalents. To minimize the credit risk the Company places these instruments with a high credit quality financial institution.

Liquidity Risk

The Company’s financial liabilities consist of $545,306 due to related parties (Note 8) and $202,507 due to third parties. The amounts due to third parties consist of $23,118 due in 30 - 90 days, and $193,615 90 days and over.

Foreign Exchange Risk

The Company is not exposed to foreign exchange risk on its financial instruments.

Interest Rate Risk

At June 30, 2014, the Company is not exposed to significant interest rate risk as its interest bearing debt is at fixed rates.

10.	SUBSEQUENT EVENTS

On August 5, 2014 the Company announceda non-brokered Offering of the Company’s capital of up to 8,000,000 Units at a price of $0.05 per Unit for aggregate proceeds of CAD $400,000. Each Unit will consist of one common share and one warrant to purchase a common share. One warrant may be exercised to purchase a common share for $0.15 for up to one year. The Company may pay finders a fee consisting of cash and warrants from the proceeds of the proposed Offering. All of the Units issued will be subject to a four-month hold period.