exhibit_15-6.htm

EX-15.6 19 exhibit_15-6.htm (UNAUDITED) QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2013 exhibit_15-6.htm

Exhibit 15.6

PACIFIC THERAPEUTICS LTD.

(A Development Stage Company)

FINANCIAL STATEMENTS

Six month periods ended June 30, 2013 and 2012

(Expressed in Canadian Dollars)

Unaudited – Prepared by Management

NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS

Under National Instrument 51-102, Part 4, subsection, 4.3 (3)(a), if an auditor has not performed a review of the interim financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor.

The accompanying unaudited interim financial statements of Pacific Therapeutics Ltd. (“the Company”) have been prepared by and are the responsibility of the Company’s management.

The Company’s independent auditor has not performed a review of these interim financial statements in accordance with the standards established by the Canadian Institute of Chartered Accountants for a review on interim financial statements by an entity’s auditor.

PACIFIC THERAPEUTICS LTD.

(A Development Stage Company)

Statements of Financial Position

(Expressed in Canadian Dollars)

AS AT:	30-Jun-13			31-Dec-12
	$			$
ASSETS
CURRENT
Cash and cash equivalents		1,927			9,854
Advances		1,500			-
Harmonized sales tax recoverable		2,276			809
Prepaid expenses		16,200			97,444
		21,903			108,107
NON-CURRENT ASSETS
PROPERTY AND EQUIPMENT (Note 3)		3,155			4,864
INTANGIBLE ASSETS (Note 4)		53,355			93,562
		78,413			206,533

LIABILITIES
CURRENT
Accounts payable and accrued liabilities		381,490			341,872
Convertible note (Note 6)		25,583			16,739
Derivative liability (Note 6)		44,144			30,889
Shareholder demand loan (Note 5)		-			45,553
Due from shareholders (Note 5)		195,523			202,470
		646,740			637,523
SHAREHOLDERS' DEFICIENCY
Share capital (Note 7)		2,168,779			1,995,716
Subscriptions received (Note 7)		-			30,000
Contributed surplus		252,995			206,212
Deficit accumulated during the development stage		(2,990,101	)		(2,662,918	)
		(568,327	)		(430,990	)
		78,413			206,533

Nature and Continuance of Operations (Note 1) and Commitments (Note 10)

Subsequent Events (Note 11)

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 financial statements.

PACIFIC THERAPEUTICS LTD.

(A Development Stage Company)

Statements of Comprehensive Loss

(Expressed in Canadian Dollars)

	Three Months ended			Three Months ended			Six Months ended			Six Months ended
	30-Jun-13			30-Jun-12			30-Jun-13			30-Jun-12

Expenses
Advertising and promotion	$	16,562		$	4,140		$	36,662		$	5,083
Amortization of property and equipment		855			453			1,709			905
Amortization of intangible assets		957			957			1,915			1,915
Bank charges and interest		4,678			135			9,281			266
Computer		-			-			-			1,130
Insurance		5,615			4,247			9,795			8,207
Investor relations		23,750			12,200			46,250			16,950
Office and miscellaneous		1,434			1,707			3,377			2,263
Professional fees		23,514			26,063			39,268			34,913
Rent and occupancy costs		2,402			2,764			6,003			7,611
Repairs		-			414			-			414
Research and development		-			-			-			3,807
Stock based compensation		34,847			-			34,847			11,564
Telephone and utilities		215			849			712			1,986
Transfer agent		1,808			1,591			3,257			1,646
Travel		200			1,770			936			1,770
Wages and benefits		40,560			25,446			75,560			51,043
	$	157,397		$	82,736		$	269,572		$	151,473

Interest (income) expense
Interwest loan interest	$	900		$	-		$	1,800		$	-
ISA interest incurred		-			-			-			3,001
ISA accretion of deemed discount		-			-			-			69,520
Shareholder loan accretion of deemed discount (Note 5)		-			6,320			-			12,229
Interest expense on convertible note (Note 6)		-			-			-			(30	)
	$	900		$	6,320		$	1,800		$	84,720
Other Expenses (Income)
Exchange loss (gain)	$	46		$	-		$	46		$	-
Loss (Gain) on derivative liability (Note 6)		(5,695	)		-			13,255			-
Write-off of license (Note4)		-			-			42,510			-

Net Loss and Comprehensive Loss	$	(152,648	)	$	(89,056	)	$	(327,183	)	$	(236,193	)

Loss per share Basic and Diluted	$	(0.01	)	$	(0.00	)	$	(0.01	)	$	(0.01	)
Weighted average number of common shares outstanding		25,861,550			21,232,577			24,700,637			21,133,116

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

PACIFIC THERAPEUTICS LTD.

(A Development Stage Company)

Statements of Changes in Shareholders’ Equity

(Expressed in Canadian Dollars)

	Number of common shares		Share capital			Share Subscriptions received		Contributed surplus			Deficit			Total
			$			$		$			$			$
Balance at December 31, 2011		20,989,157		1,765,754			-		162,052			(2,094,115	)		(166,309	)
Share subscriptions received		66,666		10,000			-		-			-			10,000
Stock based compensation		-		-			-		11,564			-			11,564
Loss for the period		-		-			-		-			(147,137	)		(147,137	)
Balance at March 31, 2012		21,055,823		1,775,754			-		173,616			(2,241.252	)		(291,882	)
Common shares issued for cash		789,336		118,401			-		-			-			118,401
Share issue costs		-		(8,500	)										(8,500	)
Loss for the period		-		-			-		-			(89.056	)		(89,056	)
Balance at June 30, 2012		21,845,159		1,885,655			-		173,616			(2,330,308	)		(271,037	)
Common shares issued for cash @ $0.15		741,666		111,250			-		-			-			111,250
Share issue costs		-		(825	)		-		-			-			(825	)
Stock based compensation		-		-			-		25,634			-			25,634
Loss for the period		-		-			-		-			(163,355	)		(163,355	)
Balance at September 30, 2012		22,586,825		1,996,080			-		199,250			(2,493,663	)		(298,333	)
Subscriptions received for 600,000 shares @ $0.05		-		-			30,000		-			-			30,000
Transfer from contributed surplus on expiry of options		-		-			-		(36,665	)		36,665			-
Share issue costs		-		(364	)		-		-			-			(364	)
Warrant reserve		-		-			-		5,799			-			5,799
Stock based compensation		-		-			-		37,828			-			37,828
Loss for the period		-		-			-		-			(205,920	)		(205,920	)
Balance at December 31, 2012		22,586,825		1,995,716			30,000		206,212			(2,662,918	)		(430,990	)

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

PACIFIC THERAPEUTICS LTD.

(A Development Stage Company)

Statements of Changes in Shareholders’ Equity

(Expressed in Canadian Dollars)

	Number of common shares		Share capital			Share Subscriptions received			Contributed surplus		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	)
Stock based compensation		-		-			-			34,847		-			34,847
Loss for the period		-		-			-			-		(152,648	)		(151,748	)
Balance at June 30, 2013		26,586,825		2,168,779			-			252,995		(2,990,101	)		(567,427	)

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

PACIFIC THERAPEUTICS LTD.

(A Development Stage Company)

Statements of Cash Flow

(Expressed in Canadian Dollars)

	For the six month period ended			For the six month period ended
	30-Jun-13			30-Jun-12
	$			$
Cash flows used in operating activities
Net loss and Comprehensive loss		(327,183	)		(236,193	)
Adjustments for items not affecting cash
Amortization of property and equipment		1,709			905
Amortization of intangible assets		1,915			1,915
Amortization of deemed discounts on ISAs, Class B series I preferred shares, shareholder loans, and convertible note		-			81,749
Stock based compensation		34,847			11,564
Loss on derivative liability		13,255			-
Changes in non-cash working capital balances
Advances		(1,500	)		-
Harmonized sales tax recoverable		(1,467	)		(1,454	)
Prepaid expenses		81,244			(79,887	)
Write-off of license		42,510			-
Accounts payable and accrued liabilities		39,618			61,392
		(115,052	)		(160,009	)
Cash flows used in investing activities
Additions to intangible assets		(4,218	)		-
		(4,218	)		-
Cash flows from financing activities
Issue of common shares for cash		173,063			119,901
Subscriptions received		(30,000	)		-
Issuance of finders' warrants		11,936			-
Promissory note		8,844			-
Shareholder demand loan		(45,553	)		-
Due to shareholders		(6,947	)		36,500
		111,343			156,401

Change in cash and cash equivalents		(7,927	)		(3,608	)
Cash and cash equivalents, beginning of period		9,854			6,094
Cash and cash equivalents, end of period		1,927			2,486

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

Pacific Therapeutics Ltd.

(A Development Stage Company)

Notes to Financial Statements

Six month periods ended June 30, 2013 and 2012

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 National Stock exchange (“CNSX”) 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 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. All of these factors create uncertainty in the Company's ability to successfully bring its technologies to market, to achieve future profitable operations and to realize the carrying value of its assets. Given these uncertainties, there is significant doubt as to the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties.

2. BASIS OF PRESENTATION

The unaudited condensed consolidated interim financial statements were authorized for issue on August 29, 2013 by the directors of the Company.

Statement of Compliance and conversion to International Financial Reporting Standards

These unaudited condensed consolidated 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 consolidated 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, 2012.

Pacific Therapeutics Ltd.

(A Development Stage Company)

Notes to Financial Statements

Six month periods ended June 30, 2013 and 2012

3. PROPERTY AND EQUIPMENT

Cost

Balance at:	Computer Equipment		Furniture and Fixtures			Leasehold Improvements			Lab Equipment		Total
December 31, 2011	$	5,876	$	8,093		$	8,330		$	-	$	22,299
Additions		-		-			-			6,200		6,200
Disposals		-		(8,093	)		(8,330	)		-		(16,423	)
December 31, 2012	$	5,876	$	-		$	-		$	6,200	$	12,076
Additions		-		-			-			-		-
Disposals		-		-			-			-		-
June 30, 2013	$	5,876	$	-		$	-		$	6,200	$	12,076

Amortization

Balance at:	Computer Equipment		Furniture and Fixtures			Leasehold Improvements			Lab Equipment		Total
December 31, 2011	$	5,487	$	5,110		$	5,344		$	-	$	15,941
Disposals		-		(5,657	)		(5,891	)				(11,548	)
Amortization for the year		175		547			547			1,550		2,819
December 31, 2012	$	5,662	$	-		$	-		$	1,550	$	7,212
Disposals		-		-			-					-
Amortization for the period		159		-			-			1,550		1,709
June 30, 2013	$	5,821	$	-		$	-		$	3,100	$	8,921

Carrying amounts

At December 31, 2011	$	389	$	2,983	$	2,986	$	-	$	6,358
At December 31, 2012	$	214	$	-	$	-	$	4,650	$	4,864
At June 30, 2013	$	55	$	-	$	-	$	3,100	$	3,155

Pacific Therapeutics Ltd.

(A Development Stage Company)

Notes to Financial Statements

Six month periods ended June 30, 2013 and 2012

4. INTANGIBLE ASSETS

Cost

	Technology Licenses (i)			Patents (ii)		Total
Balance at December 31, 2011	$	42,510		$	57,440	$	99,950
Additions		-			6,875		6,875
Disposals		-			-		-
Balance at December 31, 2012	$	42,510		$	64,315	$	106,825
Additions		-			4,218		4,218
Disposals		-			-		-
Written-off		(42,510	)		-		(42,510	)
Balance at June 30, 2013	$	-		$	68,533	$	68,533

Amortization

	Technology Licenses (i)		Patents (ii)		Total
Balance at December 31, 2011	$	-	$	9,319	$	9,319
Amortization for the year		-		3,944		3,944
Balance at December 31, 2012	$	-	$	13,263	$	13,263
Amortization for the period		-		1,915		1,915
Balance at March 31, 2013	$	-	$	15,178	$	15,178

Carrying amounts

At December 31, 2011	$	42,510	$	48,121	$	90,631
At December 31, 2012	$	42,510	$	51,052	$	93,562
At March 31, 2013	$	-	$	53,355	$	53,355

(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 and the asset value was written-off.

(ii)

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 $68,533 (2012 - $64,315). The application is still pending as at June 30, 2013, 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.

Pacific Therapeutics Ltd.

(A Development Stage Company)

Notes to Financial Statements

Six month periods ended June 30, 2013 and 2012

5. DUE TO SHAREHOLDERS

(a) Shareholder demand loan

Shareholders of the Company are owed $Nil as at June 30, 2013 (December 31, 2012 - $45,553) consisting of short term amounts loaned to the company that are unsecured, non-interest bearing, and payable on demand.

(b) Due to shareholders

Due to shareholder balances are unsecured and non-interest bearing, with a due date of January 1, 2013. The balance as at June 30, 2013 was $195,523 (December 31, 2012 - $202,470). This loan is in default and due on demand.

6. CONVERTIBLE NOTES

On September 24, 2012 the Company issued a convertible note (“the Note”) with a face value of $30,000 plus 200,000 two year $0.22 warrants (Bonus Warrants) for $30,000 in cash. The Note has a term of one year and is repayable by the Issuer at any time. 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 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 issuer’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 two 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 estimated fair value of the share options was calculated on the grant date as $18,232.

Upon initial recognition, the Company bifurcated the $30,000 proceeds between the component parts of the convertible note using the relative fair value method with $12,317 allocated to convertible loan, $12,248 to share and warrant option (derivative liability) and $5,435 to warrant reserve.

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 June 30, 2013 the derivative liability was re-measured to fair value. This resulted in a loss on derivative liability being recognized on the face of the financial statements of $13,255 (December 31, 2012 - $18,641).

	30-Jun-13			31-Dec-12
Fair value	$	30,000		$	30,000
Unamortized debt discounts
Bonus warrants		(1,358	)		(4,076	)
Share conversion		(1,190	)		(3,572	)
Option conversion		(1,869	)		(5,613	)
	$	25,583		$	16,739

Pacific Therapeutics Ltd.

(A Development Stage Company)

Notes to Financial Statements

Six month periods ended June 30, 2013 and 2012

7. SHARE CAPITAL

Authorized

Unlimited

Class A common shares without par value

1,500,000

Class B Series I preferred shares without par value

1,000,000

Class B Series II preferred shares without par value

Issued

24,386,825

Class A common shares without par value

NIL

Class B Series I preferred shares without par value

NIL

Class B Series II preferred shares without par value

Class A Common Shares

On January 31, 2012 66,666 common share warrants with an exercise price of $0.15 were exercised by an officer of the company for 66,666 common shares and proceeds of $10,000.

On June 20, 2012, the Company completed a private placement of 732,670 units at $0.15 per unit for gross proceeds of $109,901. Each unit is comprised of one common share and one warrant to purchase one common share at $0.22 per share exercisable until June 20, 2014.

On June 20, 2012, certain finders were issued 56,666 units with the same terms as in the foregoing, which were valued at $8,500.

On September 21, 2012, the Company completed a private placement of 741,666 units at $0.15 per unit for gross proceeds of $111,250. Each unit is comprised of one common share and one warrant to purchase one common share at $0.22 per share exercisable until September 21, 2014.

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, with $30,000 relating to the share subscription received before the 2012 yearend. 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.

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.

SHARE SUBSCRIPTIONS RECEIVED

In December 2012 the Company received $30,000 for a share subscription for 600,000 units as part of a private placement of 1,800,000 units that was completed on February 7, 2013. The Company paid issue costs of $5,000 and issued 40,000 warrants to acquire common shares at $0.22 until February 7, 2015 valued at $2,030.

Stock options and share based compensation:

At June 30, 2013, the Company had 2,025,000 (December 31, 2012 - 1,675,000) stock options outstanding, of which 2,025,000 (2012 - 1,650,000) are exercisable, at a weighted average exercise price of $0.16 (2012 - $0.17) per common share, and expiring at various dates from October 31, 2014 to April 4, 2018.

Pacific Therapeutics Ltd.

(A Development Stage Company)

Notes to Financial Statements

Six month periods ended June 30, 2013 and 2012

7. SHARE CAPITAL -continued

As at June 30, 2013 and December 31, 2012, the following stock options were outstanding:

Expiry Date	Exercise Price		30-Jun-13		31-Dec-12
31-Oct-14	$	0.27		150,000		150,000
4-Nov-14		0.27		150,000		150,000
5-Mar-15		0.27		375,000		375,000
1-Jun-15		0.27		75,000		75,000
3-Jul-17		0.10		475,000		475,000
21-Dec-17		0.10		450,000		450,000
04-Apr-18		0.10		350,000		-
Balance	$	0.16		2,025,000		1,675,000

The options outstanding and exercisable at June 30, 2013, have a weighted average remaining contractual life of 3.3 years (2012 – 3.5 years). Stock option activity was as follows:

	2013 - 6 months ending June 30				2012 - 12 months ending December 31
	Options Outstanding		Exercise Price		Options Outstanding			Exercise Price
Balance at January 1		1,675,000	$	0.17		1,650,000		$	0.25
Exercised		-		-		-			-
Expired/Cancelled		-		-		(1,000,000	)		0.24
Issued		350,000		0.10		1,025,000			0.10
Balance at period end		2,025,000	$	0.16		1,675,000		$	0.17

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.

On April 4, 2013, the Company issued 350,000 five year stock options to purchase common shares of the company at $0.10 per share to various employees and directors and consultants. The Company used the Black-Scholes pricing model to determine the value of the options granted. The assumptions used in the Black-Scholes option pricing model for the 350,000 options granted were:

Dividend yield	0%
Expected volatility	254.04%
Risk free interest rate	1.19%
Expected life in years	5
Fair value per share	$10

Pacific Therapeutics Ltd.

(A Development Stage Company)

Notes to Financial Statements

Six month periods ended June 30, 2013 and 2012

7. SHARE CAPITAL -continued

Warrants

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

Expiry Date	Exercise Price $		30-Jun-13		31-Dec-12
1-Feb-13	$	0.15		-		2,473,334
28-Feb-13	$	0.25		-		60,000
1-Feb-14	$	0.15		2,473,334		-
28-Feb-14	$	0.25		60,000		-
16-May-13	$	0.15		-		600,000
16-May-14	$	0.15		600,000		-
15-Nov-13	$	0.15		602,223		602,223
20-Jun-14	$	0.22		732,670		732,670
20-Jun-14	$	0.22		56,666		56,666
21-Sep-14	$	0.22		747,166		747,166
24-Sep-14	$	0.22		200,000		-
12-Feb-15	$	0.22		1,000,000		-
1-May-15	$	0.22		1,300,000		-
				7,772,059		5,272,059

The warrants outstanding and exercisable at June 30, 2013, have a weighted average remaining contractual life of 1.1 years (2012 – 0.6 years). Warrant activity was as follows:

	2013 – 6 months ending June 30					2012 – 12 months ending December 31
	Outstanding			Weighted Average Exercise Price ($)		Outstanding			Weighted Average Exercise Price ($)
Balance at January 1		5,272,059			0.18		3,830,423			0.16
Expired		-			-		(28,200	)		0.10
Exercised		-			-		(66,666	)		0.15
Modified		(3,133,333	)		0.15		-			-
Modified		3,133,333			0.15		-			-
Issued		2,500,000			0.22		1,536,502			0.22
Balance at period end		7,772,059			0.19		5,272,059			0.18

Pacific Therapeutics Ltd.

(A Development Stage Company)

Notes to Financial Statements

Six month periods ended June 30, 2013 and 2012

8. RELATED PARTY TRANSACTIONS AND BALANCES

All transactions with related parties are in the normal course of operations. Amounts due to or from 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 30-Jun-2013		Six months ended 30-Jun-2012
Accounting fees paid to a shareholder of the Company	$	16,500	$	9,000
Legal fees incurred from a consultant and director of the Company	$	-	$	3,200

(b) Related Party Balances

	30-Jun-2013		31-Dec-2012
Amounts in accounts payable and accrued liabilities owing to a consultant and director of the Company for legal services	$	8,575	$	18,575
Amount in accounts payable and accrued liabilities owing to a shareholder and director of the Company for unpaid salary and expenses	$	181,167	$	100,798
Amounts in accounts payable and accrued liabilities owing to a shareholder of the Company for accounting services	$	42,417	$	22,917

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

	Six months ended 30-Jun-2013		Six months ended 30-Jun-2012
Wages, salaries, and consulting fees	$	75,000	$	50,597
Share-based payments		34,847		11,564

Total key management personnel compensation	$	109,847	$	62,161

Pacific Therapeutics Ltd.

(A Development Stage Company)

Notes to Financial Statements

Six month periods ended June 30, 2013 and 2012

9. FINANCIAL INSTRUMENTS AND RISK

As at June 30, 2013, the Company’s financial instruments consist of cash and cash equivalents, accounts payable and accrued liabilities, shareholder demand loan, a convertible note and a derivative liability. The convertible note has been bifurcated and presented in the financial statements using its component parts.

The fair value of cash and cash equivalents, accounts payable and accrued liabilities and shareholder demand loans approximate their carrying values because of the short term nature of these instruments. These are classified as level 1 in the fair value hierarchy.

The derivative liability is measured at fair value at the end of each reporting period. Because revaluation at fair value includes the use of valuation techniques, the derivative liability is classified as level 3 in the fair value hierarchy.

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 ensures its holding of cash and cash equivalents is sufficient to meet its short-term general and administrative expenditures. All of the Company’s financial liabilities are subject to normal trade terms. The Company does not have investments in any asset-backed deposits. The Company’s liabilities as at June 30, 2013, are due as follows:

Liabilities Outstanding
On demand	$	234,399
0 – 30 days		39,138
31-90 days		125,374
91-365 days		82,959
Over 365 days		164,870
Total	$	646,740

Foreign Exchange Risk

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

Interest Rate Risk

At June 30, 2013 the Company is not exposed to significant interest rate risk as its interest bearing debt is at fixed rates.

11. SUBSEQUENT EVENTS

There were no reportable events occurred during the six month period ended June 30, 2013 to the date the consolidated condensed interim financial statements were authorized by the Board of Directors on August 29, 2013.