Item 1.
Financial Statements
CANNABICS PHARMACEUTICALS INC.
Consolidated Balance Sheets
|
|
Restated
|
|
|
|
|
|
|
November 30,
|
|
|
August 31,
|
|
|
|
2015
|
|
|
2015
|
|
|
|
(unaudited)
|
|
|
(Audited)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
9,561
|
|
|
$
|
25,229
|
|
Prepaid expenses and other Receivables
|
|
|
10,287
|
|
|
|
274
|
|
Total current assets
|
|
|
19,848
|
|
|
|
25,503
|
|
|
|
|
|
|
|
|
|
|
Equipment, net
|
|
|
2,785
|
|
|
|
3,201
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
22,633
|
|
|
$
|
28,704
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
114,385
|
|
|
$
|
113,847
|
|
Promissory note, net of discount
|
|
|
2,647
|
|
|
|
–
|
|
Due to a related party
|
|
|
224,483
|
|
|
|
224,483
|
|
Total current liabilities
|
|
|
341,515
|
|
|
|
338,330
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity (deficit):
|
|
|
|
|
|
|
|
|
Common stock, $.0001 par value, 900,000,000 shares authorized, 102,153,333 and 101,503,333 shares issued and outstanding at November 30, 2015 and August 31, 2015, respectively
|
|
|
10,215
|
|
|
|
10,150
|
|
Additional paid-in capital
|
|
|
1,005,297
|
|
|
|
959,362
|
|
Accumulated deficit
|
|
|
(1,334,394
|
)
|
|
|
(1,279,138
|
)
|
Total stockholders' equity (deficit)
|
|
|
(318,882
|
)
|
|
|
(309,626
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity (deficit)
|
|
$
|
22,633
|
|
|
$
|
28,704
|
|
|
|
|
|
|
|
|
|
|
CANNABICS PHARMACEUTICALS INC.
Consolidated Statements of Operations
(Unaudited)
|
|
For
the Three Months Ended
|
|
|
|
Restated
November 30,
|
|
|
November 30,
|
|
|
|
2015
|
|
|
2014
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
$
|
7,406
|
|
|
|
24,368
|
|
Professional and Consulting fees
|
|
|
23,500
|
|
|
|
17,637
|
|
Legal fees
|
|
|
10,974
|
|
|
|
9,915
|
|
Sales and marketing expenses
|
|
|
491
|
|
|
|
31,000
|
|
Research and development expense
|
|
|
8,397
|
|
|
|
299
|
|
Transfer agent
|
|
|
974
|
|
|
|
–
|
|
Interest expenses and bank charges
|
|
|
780
|
|
|
|
–
|
|
Depreciation
|
|
|
415
|
|
|
|
368
|
|
Total operating expenses
|
|
$
|
52,937
|
|
|
$
|
83,587
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(52,937
|
)
|
|
|
(83,587
|
)
|
Other Income (loss)
|
|
|
(2,319
|
)
|
|
|
–
|
|
Loss before income taxes
|
|
$
|
(55,256
|
)
|
|
$
|
(83,587
|
)
|
Net loss from discontinued operations
|
|
|
–
|
|
|
|
(44,071
|
)
|
Provision for income taxes
|
|
|
–
|
|
|
|
–
|
|
Net profit (loss)
|
|
$
|
(55,256
|
)
|
|
$
|
(127,658
|
)
|
|
|
|
|
|
|
|
|
|
Net loss per share
- basic and diluted:
|
|
$
|
0.001
|
|
|
$
|
0.001
|
|
Net (loss)
|
|
$
|
(55,256
|
)
|
|
$
|
(127,658
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares
|
|
|
100,618,327
|
|
|
|
100,556,678
|
|
See accompanying notes to consolidated financial
statements.
CANNABICS PHARMACEUTICALS INC.
Consolidated Statements of Cash Flows
(Unaudited)
|
|
For the Three Months Ended
|
|
|
|
Restated
November 30,
|
|
|
November 30,
|
|
|
|
2015
|
|
|
2014
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net Profit (loss)
|
|
$
|
(55,256
|
)
|
|
$
|
(127,658
|
)
|
Depreciation
|
|
|
415
|
|
|
|
368
|
|
Stock issued for services
|
|
|
26,000
|
|
|
|
–
|
|
Stock to be issued for services
|
|
|
–
|
|
|
|
17,500
|
|
Amortization of discount
|
|
|
2,414
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts Receivable
|
|
|
(10,013
|
)
|
|
|
(4,222
|
)
|
Accounts payable and accrued liabilities
|
|
|
771
|
|
|
|
(2,302
|
)
|
Due to related party
|
|
|
|
|
|
|
6,683
|
|
Net cash used in operating activities
|
|
|
(35,668
|
)
|
|
|
(109,631
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Acquisition of equipment
|
|
|
–
|
|
|
|
(3,710
|
)
|
Net cash used in investing activities
|
|
|
–
|
|
|
|
(3,710
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from convertible note
|
|
|
20,000
|
|
|
|
–
|
|
Proceeds from sale of common stock
|
|
|
–
|
|
|
|
78,333
|
|
Net cash provided by financing activities
|
|
|
20,000
|
|
|
|
78,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effects of exchange rates on cash
|
|
|
–
|
|
|
|
1,858
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash
|
|
|
(15,668
|
)
|
|
|
(33,150
|
)
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of the period
|
|
|
25,229
|
|
|
|
65,618
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of the period
|
|
$
|
9,561
|
|
|
$
|
32,468
|
|
See accompanying notes to consolidated financial
statements.
CANNABICS PHARMACEUTICALS INC.
Notes to Consolidated Financial Statements
November 30, 2015
(Unaudited)
Note 1 – Nature of Business, Presentation and Going
Concern
Organization
Cannabics Pharmaceuticals Inc. (the "Company"),
was incorporated in the State of Nevada, on September 15, 2004, under the name of Thrust Energy Corp. The Company was originally
engaged in the exploration, exploitation, development and production of oil and gas projects within North America, but was unable
to operate profitably.
On April 25, 2014, the Company experienced
a change in control. Cannabics, Inc. (“Cannabics”) acquired a majority of the issued and outstanding common stock of
the Company in accordance with stock purchase agreements by and between Cannabics and Thomas Mills (“Mills”). On
the closing date, April 25, 2014, pursuant to the terms of the Stock Purchase Agreement, Cannabics purchased from Mills 20,500,000
shares of the Company’s outstanding restricted common stock for $198,000, representing 51%.
On May 21, 2014, the Company changed its name,
via merger in the state of Nevada, to Cannabics Pharmaceuticals Inc. As of May 21, 2014, the Company has changed its course of
business to laboratory research and development.
On July 31, 2014, Cannabics
Pharmaceuticals Inc. filed its exclusive Patent Application with the US Patent & Trademark Office (USPTO), which covers
the proprietary technology developed by its team of experts in the field of cannabinoid long acting lipid based formulations.
This patent is the basis for the company’s “CANNABICS SR” technology, which consists of the IP for
standardized and long acting medical cannabis capsules, designed for patients suffering from diverse indications.
Simultaneously this Patent was filed with the PCT division of the Israeli Patent Office (ILPO) in order to provide
International IP protection. On February 24, 2016 Cannabics pharmaceuticals filed a new patent application for the
company’s slow release capsules.
On August 25, 2014, the Company organized G.R.I.N.
Ultra Ltd. (“GRIN”), an Israeli corporation, as a wholly-owned subsidiary. GRIN provides research and development activities
for the Company’s products in Israel.
On October 7, 2015, the Company executed an
Intellectual Property & Subsidiary Assignment and an Assignment & Assumption of Debt & Liabilities Agreement with
Cannabics, Inc., a Delaware Corporation, related party, and majority holder of the Issuer. Said Agreements were executed as part
of a restructuring of the Company, whereby the Research and Development components were at that time made separate from the Issuer’s
continuing business operations. Per the Agreements, Cannabics, Inc. has assumed $362,000 of the Issuer’s debts and liabilities
in return for Assignment of the provisional patent noted above related to High Throughput Screening and the Issuer’s subsidiary
“Grin Ultra, Ltd.”.
As a result of the
October 7, 2015,
the Intellectual Property & Subsidiary Assignment and an Assignment of Debt & Liabilities Agreement executed with Cannabics,
Inc., the results from the former subsidiary were presented as a discontinued operation.
On February 22, 2016, the company filed a
board resolution and 8K which expressed the cancelation and reverse of this October 7, 2015 Intellectual Property &
Subsidiary Assignment and an Assignment of Debt & Liabilities Agreement resolutions, and means that the wholly owned
subsidiary Grin Ultra and the IP retroactively remain within the company.
Stock Split
On June 3, 2014, the Company's Board of Directors
declared a two-to-one forward stock split of all outstanding shares of common stock. The stock split was approved by FINRA on June
25, 2014. The effect of the stock split increased the number of shares of common stock outstanding from 40,880,203 to 81,760,406.
All common share and per common share data in these financial statements and related notes hereto have been retroactively adjusted
to account for the effect of the stock split for all periods presented prior to June 3, 2014. The total number of authorized common
shares and the par value thereof was not changed by the split.
Basis of Presentation
The accompanying unaudited financial statements
have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for
interim financial statement presentation and in accordance with Form 10-Q/A. Accordingly, they do not include all of the information
and footnotes required in annual financial statements. In the opinion of management, the unaudited financial statements contain
all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position and results of
operations and cash flows. The results of operations presented are not necessarily indicative of the results to be expected for
any other interim period or for the entire year.
These unaudited financial statements should
be read in conjunction with our 2015 annual financial statements included in our Form 10-K, filed with the U.S. Securities and
Exchange Commission (“SEC”) on January 5, 2016.
CANNABICS PHARMACEUTICALS INC.
Notes to Consolidated Financial Statements
November 30, 2015
(Unaudited)
Note 1 – Nature of Business, Presentation and Going
Concern (Continued)
Principles of Consolidation
The consolidated financial statements are
restated to include the accounts of Cannabics Pharmaceuticals Inc. and its wholly-owned subsidiary, G.R.I.N. Ultra Ltd. In
our original 10-Q of January 22, 2016 the subsidiary Grin Ultra was presented as discontinued operation. All significant
inter-company balances and transactions have been eliminated in consolidation.
Going Concern
The accompanying unaudited financial statements
have been prepared on a going concern basis, which contemplate the realization of assets and the satisfaction of liabilities in
the normal course of business. The Company has incurred a net loss of $55,256 for the three months ended November 30, 2015 and
has incurred cumulative losses since inception of $.1,334,394 These conditions raise substantial doubt about the ability of the
Company to continue as a going concern.
The ability of the Company to continue as
a going concern is dependent upon its abilities to generate revenues, to continue to raise investment capital, and develop and
implement its business plan. No assurance can be given that the Company will be successful in these efforts
.
The unaudited financial statements do not include
any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of
liabilities that might be necessary should the Company be unable to continue as a going concern. Management believes that actions
presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to
continue as a going concern. No assurance can be given that the Company will be successful in these efforts.
Reclassifications
Certain amounts in the prior period financial
statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported
losses, total assets, or stockholders’ equity as previously reported.
CANNABICS PHARMACEUTICALS INC.
Notes to Consolidated Financial Statements
November 30, 2015
(Unaudited)
Note 2 – Related Party Transactions
On October 7, 2015, the Company executed an
Intellectual Property & Subsidiary Assignment and an Assignment & Assumption of Debt & Liabilities Agreement with
Cannabics, Inc., a Delaware Corporation, related party, and majority holder of the Issuer. Said Agreements were executed as part
of a restructuring of the Company, whereby the Research and Development components were at that time made separate from the Issuer’s
continuing business operations.
On February 22, 2016, the Company and Cannabics Inc., a Delaware
Corporation, related party, and majority holder of the Issuer did execute a Rescission Agreement, wholly rescinding the previous
Agreements noted supra. As such, all Intellectual Property, provisional patents, assigned Debts and the Company’s Subsidiary
“Grin Ultra Ltd.” are now reincorporated as part of the company.
Note 3 – Restatement of Financial
Statements
As described in note 1, the Intellectual Property &
Subsidiary Assignment and an Assignment of Debt & Liabilities Agreement executed with Cannabics, Inc., the results from
the former subsidiary were presented as discontinued operation. As a result of the February 22, 2016 Rescission Agreement the
Grin Ultra wholly owned subsidiary was included and consolidated in this 10-Q/A report of Cannabics Pharmaceuticals Inc.
Additionally, prepaid expenses and discount on the promissory note
are corrected.
The revisions applied to the affected individual line items in the
consolidated financial statements are as follows:
CANNABICS PHARMACEUTICALS INC.
Consolidated
Balance Sheets
|
|
November 30, 2015
|
|
|
|
As previously
|
|
|
|
|
|
As
|
|
|
|
reported
|
|
|
Adjustments
|
|
|
restated
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
9,728
|
|
|
|
(167
|
)
|
|
$
|
9,561
|
|
Prepaid expenses and other receivables
|
|
|
127,768
|
|
|
|
(117,481
|
)
|
|
|
10,287
|
|
Related party
|
|
|
137,517
|
|
|
|
(137,517
|
)
|
|
|
–
|
|
Total current assets
|
|
|
275,013
|
|
|
|
(255,165
|
)
|
|
|
19,848
|
|
Equipment, net
|
|
|
2,785
|
|
|
|
–
|
|
|
|
2,785
|
|
Total assets
|
|
$
|
277,798
|
|
|
$
|
(255,165
|
)
|
|
$
|
22,633
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
100,505
|
|
|
$
|
13,880
|
|
|
$
|
114,385
|
|
Promissory note, net of discount
|
|
|
20,000
|
|
|
$
|
(17,353
|
)
|
|
$
|
2,647
|
|
Due to a related party
|
|
|
–
|
|
|
$
|
224,483
|
|
|
$
|
224,483
|
|
Total current liabilities
|
|
|
120,505
|
|
|
|
221,010
|
|
|
|
341,515
|
|
Total liabilities
|
|
|
120,505
|
|
|
|
221,010
|
|
|
|
341,515
|
|
Commitments and contingencies
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
Stockholders' equity (deficit):
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
10,215
|
|
|
|
–
|
|
|
|
10,215
|
|
Additional paid-in capital
|
|
|
985,297
|
|
|
|
20,000
|
|
|
|
1,005,297
|
|
Accumulated deficit
|
|
|
(838,219
|
)
|
|
|
(496,175
|
)
|
|
|
(1,334,394
|
)
|
Total stockholders' equity (deficit)
|
|
|
157,293
|
|
|
|
(476,175
|
)
|
|
|
(318,882
|
)
|
Total liabilities and stockholders' equity (deficit)
|
|
$
|
277,798
|
|
|
$
|
(255,165
|
)
|
|
$
|
22,633
|
|
CANNABICS PHARMACEUTICALS INC.
Notes to Consolidated Financial Statements
November 30, 2015
(Unaudited)
CANNABICS PHARMACEUTICALS INC.
Restated Consolidated Statements of Operations and Comprehensive Loss
(unaudited)
|
|
For the Three Months Ended November 30, 2015
|
|
|
|
As previously
|
|
|
|
|
|
As
|
|
|
|
reported
|
|
|
Adjustments
|
|
|
restated
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
$
|
4,507
|
|
|
$
|
2,899
|
|
|
$
|
7,406
|
|
Professional and Consulting fees
|
|
|
29,500
|
|
|
|
(6,000
|
)
|
|
|
23,500
|
|
Legal fees
|
|
|
10,974
|
|
|
|
–
|
|
|
|
10,974
|
|
Sales and marketing expenses
|
|
|
491
|
|
|
|
–
|
|
|
|
491
|
|
Research and development expense
|
|
|
3,250
|
|
|
|
5,147
|
|
|
|
8,397
|
|
Transfer agent
|
|
|
974
|
|
|
|
–
|
|
|
|
974
|
|
Interest expenses and bank charges
|
|
|
547
|
|
|
|
233
|
|
|
|
780
|
|
Depreciation
|
|
|
415
|
|
|
|
–
|
|
|
|
415
|
|
Total operating expenses
|
|
|
50,659
|
|
|
|
2,279
|
|
|
|
52,938
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(50,659
|
)
|
|
|
(2,279
|
)
|
|
|
(52,938
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (loss)
|
|
|
491,577
|
|
|
|
(493,895
|
)
|
|
|
(2,318
|
)
|
Total other income (expense)
|
|
|
491,577
|
|
|
|
(493,895
|
)
|
|
|
(2,318
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) profit before income taxes
|
|
|
440,919
|
|
|
|
(496,175
|
)
|
|
|
(55,256
|
)
|
Provision for income taxes
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
Net profit (loss) from continuing operations
|
|
$
|
440,919
|
|
|
$
|
(496,175
|
)
|
|
$
|
(55,256
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive profit (loss)
|
|
$
|
440,918
|
|
|
$
|
(496,175
|
)
|
|
$
|
(55,256
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share - basic and diluted
|
|
$
|
0.004
|
|
|
$
|
(0.001
|
)
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit (loss)
|
|
$
|
440,918
|
|
|
$
|
(496,175
|
)
|
|
$
|
(55,256
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding - Basic
and Diluted
|
|
$
|
100,618,327
|
|
|
$
|
–
|
|
|
$
|
100,618,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statements of Cash Flows
|
|
|
For
the Three Months Ended November 30, 2015
|
|
|
|
As previously
|
|
|
|
|
|
|
As
|
|
|
|
reported
|
|
|
Adjustments
|
|
restated
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Profit (loss)
|
|
$
|
440,919
|
|
|
$
|
(496,175
|
)
|
|
$
|
(55,256
|
)
|
Depreciation
|
|
|
415
|
|
|
|
–
|
|
|
|
415
|
|
Stock issued for services
|
|
|
26,000
|
|
|
|
–
|
|
|
|
26,000
|
|
Amortization of discount
|
|
|
–
|
|
|
|
2,414
|
|
|
|
2,414
|
|
Changes in operating assets and liabilities:
|
|
|
–
|
|
|
|
|
|
|
|
|
|
Accounts Receivable and prepaid expenses
|
|
|
(127,493
|
)
|
|
|
117,480
|
|
|
|
(10,013
|
)
|
Accounts payable and accrued liabilities
|
|
|
(13,342
|
)
|
|
|
14,113
|
|
|
|
771
|
|
Due to (from) related party
|
|
|
(362,000
|
)
|
|
|
362,000
|
|
|
|
–
|
|
Net cash used in operating activities
|
|
|
(35,501
|
)
|
|
|
(168
|
)
|
|
|
(35,669
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Promissory note
|
|
|
20,000
|
|
|
|
–
|
|
|
|
20,000
|
|
Net cash provided by financing activities
|
|
|
20,000
|
|
|
|
–
|
|
|
|
20,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Net increase (decrease) in cash
|
|
|
(15,501
|
)
|
|
|
(168
|
)
|
|
|
(15,669
|
)
|
Cash and cash equivalents at beginning of year
|
|
|
25,229
|
|
|
|
–
|
|
|
|
25,229
|
|
Cash at end of period
|
|
$
|
9,728
|
|
|
$
|
(168
|
)
|
|
$
|
9,560
|
|
CANNABICS PHARMACEUTICALS INC.
Notes to Consolidated Financial Statements
November 30, 2015
(Unaudited)
Note 4 - Promissory Note
On November 1, 2015, the company received
a $20,000 loan in the form of a Convertible Promissory Note. The terms of the Note are for six months at 10% interest. Should
the Note be converted at the Holder’s option at maturity, it will convert the full amount of principle plus interest at
the ratio of .02 per share. Note however, that if the company should enter into an equity transaction of $500,000 or more, the
note will then be converted at a 20% discount. The Note is presented net of discount for the beneficial conversion feature.
Note 5 – Stockholders’ Equity
(Deficit)
Authorized Shares
The Company is authorized to issue up to 900,000,000
shares of common stock, par value $0.0001 per share. Each outstanding share of common stock entitles the holder to one vote per
share on all matters submitted to a stockholder vote. All shares of common stock are non-assessable and non-cumulative, with no
pre-emptive rights.
Common Stock
During the year ended August 31, 2015, the
Company issued 713,333 shares of its common stock to 2 investors for cash of $128,333.25, or an average of $0.18 per share, one
of the issuances included 1,600,000 warrants. During the year ended August 31, 2015, the Company issued 540,000 shares of its common
stock to 8 consultants for services rendered at a fair value of $83,123, or an average of $0.16 per share.
During the three month ended December 31, 2015 the company issued
650,000 shares of its common stock to 3 consultants rendered at fair value of $25,935.00.
Note 6–
Commitments and Contingencies
Operating Leases
The Company executed a two-year lease beginning
on December 1, 2014 for office and lab space for approximately $2,600 per month. On March 1, 2015 the company terminated this
lease agreement and as of August 31, 2015, the total amount due was $7,500. Rent expense for the twelve months ended August 31,
2015 was $14,938. The total amount due from the Company as of November 30, 2015 is $7,500.
Note 7 – Subsequent Events
The Company has evaluated subsequent events
through the date the financial statements were issued and filed with the Securities and Exchange Commission.
On February 22, 2016, the Company and Cannabics Inc., a Delaware
Corporation, related party, and majority holder of the Issuer did execute a Rescission Agreement, wholly rescinding the previous
Agreements noted supra. As such, all Intellectual Property, provisional patents, assigned Debts and the Company’s Subsidiary
“Grin Ultra Ltd.” are now reincorporated as part of the company.
Item 2. Management’s Discussion
and Analysis of Financial Condition and Results of Operations.
SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS
We believe that it is important to communicate
our future expectations to our security holders and to the public. This report, therefore, contains statements about future events
and expectations which are “forward-looking statements” within the meaning of Sections 27A of the Securities Act of
1933 and 21E of the Securities Exchange Act of 1934, including the statements about our plans, objectives, expectations and prospects
under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” You
can expect to identify these statements by forward-looking words such as “may,” “might,” “could,”
“would,” ”will,” “anticipate,” “believe,” “plan,” “estimate,”
“project,” “expect,” “intend,” “seek” and other similar expressions. Any statement
contained in this report that is not a statement of historical fact may be deemed to be a forward-looking statement. Although
we believe that the plans, objectives, expectations and prospects reflected in or suggested by our forward-looking statements are
reasonable, those statements involve risks, uncertainties and other factors that may cause our actual results, performance or achievements
to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements,
and we can give no assurance that our plans, objectives, expectations and prospects will be achieved.
Important factors that might cause our
actual results to differ materially from the results contemplated by the forward-looking statements are contained in the “Risk
Factors” section of and elsewhere in our Annual Report on Form 10-K for the fiscal year ended August 31, 2015 and
in our subsequent filings with the Securities and Exchange Commission. The following discussion of our results of operations should
be read together with our financial statements and related notes included elsewhere in this report.
Company Overview
Our Address corporate address is #3 Bethesda
Metro Center, Suite 700, Bethesda, Maryland, 20814; Telephone (877) 424-2429.
Cannabics Pharmaceuticals Inc. (the "Company",
“CNBX”, “we”, “us” or “our”) was incorporated in Nevada on September 15, 2004,
under the name of Thrust Energy Corp. The Company was originally engaged in the exploration, exploitation, development and production
of oil and gas projects within North America, but was unable to operate profitably.
In May 2011, the Company changed its name to
American Mining Corporation, suspending its oil and gas operations and changing its business to toll milling and refining, mineral
exploration and mine development.
On April 25, 2014, the Company experienced
a change in control. Cannabics, Inc. (“Cannabics”) acquired a majority of the issued and outstanding common stock of
the Company in accordance with stock purchase agreements by and between Cannabics and Thomas Mills (“Mills”). On
the closing date, April 25, 2014, pursuant to the terms of the Stock Purchase Agreement, Cannabics purchased from Mills 20,500,000
shares of the Company’s outstanding restricted common stock for $198,000, representing 51%. Cannabics is a US based company
founded in 2012 by a group of researchers from the fields of molecular biology, cancer research and pharmacology.
On May 21, 2014, the Company changed its name,
via merger in the state of Nevada, to Cannabics Pharmaceuticals Inc. The Company’s principle offices are in Bethesda, Maryland.
At the same time the Company has changed its course of business to pharmaceutical research and development.
On June 3rd, 2014, the Company's Board of Directors
declared a two-to-one forward stock split of all outstanding shares of common stock. The stock split was approved by FINRA on June
19
th,
2014. The effect of the stock split increased the number of shares of common stock outstanding from 40,880,203
to 81,760,406. All common share and per common share data in these financial statements and related notes hereto have been retroactively
adjusted to account for the effect of the stock split for all periods presented prior to June 3
rd
, 2014. The total number
of authorized common shares and the par value thereof was not changed by the split.
On June 19
th
, 2014, FINRA granted
final approval of Change of Name & Ticker Symbol of the Corporation from American Mining Corporation to CANNABICS PHARMACEUTICALS
INC., with the new Ticker Symbol of “CNBX”. Said approval was predicated upon Cannabics Pharmaceuticals Inc.’s
filing of Articles of Merger with American Mining Corporation with the Nevada Secretary of State on May 21
st
, 2014.
Under the laws of the State of Nevada, Cannabics Pharmaceuticals Inc. was merged with and into the Registrant, with the Registrant
being the surviving entity. The Merger was completed under Section 92A.180 of the Nevada Revised Statutes, Chapter 92A, as amended,
and as such, does not require the approval of the stockholders of either the Registrant or Cannabics Pharmaceuticals Inc.
On July 24, 2014, the Company executed a Collaboration
& Exclusivity Agreement with Cannabics, Inc. (“Cannabics”), a Delaware corporation and largest shareholder of the
Company. Per the terms of the Agreement, the Company issued 18,239,594 shares of its common stock to acquire the institutional
knowledge of Cannabics, Inc., which primarily consists of in-process Research & Development technology, the cumulative result
of its years of scientific institutional knowledge in the fields of Molecular Biology, Cancer and Pharmacology research. Additionally
Cannabics tendered $150,000 to the Company specifically earmarked as working funds towards prospective projects of the Company.
On July 31
st
, 2014, Cannabics
Pharmaceuticals Inc. filed its exclusive Patent Application with the US Patent & Trademark Office (USPTO), which covers the
proprietary technology developed by its team of experts in the field of cannabinoid long acting lipid based formulations. This
technology is the basis for the company’s “CANNABICS SR” line of products, which consists of standardized and
long acting medical cannabis capsules, designed for patients suffering from diverse indications. Simultaneously this Patent was
filed with the PCT division of the Israeli Patent Office (ILPO) in order to provide International IP protection.
On August 25
th
, 2014, Cannabics Pharmaceuticals Inc.
incorporated a wholly owned subsidiary in Israel, named “G.R.I.N Ultra Ltd”, dedicated to the advanced research and
development. On October 7
th
, 2015, the Company executed an Intellectual Property & Subsidiary Assignment and an
Assignment & Assumption of Debt & Liabilities Agreement with Cannabics, Inc., a Delaware Corporation, related party, and
majority holder of the Issuer. This agreement was reversed on February 22nd, 2016, as the Company and Cannabics Inc., a Delaware
Corporation, related party, and majority holder of the Issuer did execute a Rescission Agreement, wholly rescinding the previous
Agreements noted supra. As such, all Intellectual Property, provisional patents, assigned Debts and the Company’s Subsidiary
“Grin Ultra Ltd.” are now reincorporated as part of the company
On December 18
th
, 2014, Cannabics
Pharmaceuticals Inc. executed a letter of engagement with Mountain High Products in Colorado, for the manufacturing and distribution
of Cannabics SR technology in the Colorado market. Cannabics SR medical cannabis technology will be utilized by Mountain High Products
in strict compliance with Colorado laws and regulations of "Cannabis Infused Edible Products" and distributed to certified
dispensaries through Mountain High's existing distribution channels. channels
On December 31st, 2014, Cannabics Pharmaceuticals
Inc. executed an IP Licensing and Collaboration Agreement with Barak Security Ltd (Israel) for the production and distribution
of the Company’s CANNABICS SR line of medical cannabis products. The IP Licensing Agreement allows for the Company’s
advanced cannabinoid administration technology to be manufactured and distributed in Israel and the Czech Republic, exclusively
through Barak Security’s affiliates and subsidiaries in strict compliance with all local laws and regulations.
On October 20
th
, 2014, Cannabics
Pharmaceuticals Inc. received Government Certification from the Ministry of Health in Israel for the establishment of an advanced
R&D laboratory dedicated to medical research and development of cannabinoid-based therapies. R&D is conducted to date in
Israel and has resulted in an IP portfolio that includes proprietary formulation methods of cannabinoid extracts that enable a
sustained release PK profile of the active ingredients upon oral administration. Our first technology is “Cannabics SR”
- a standardized, high bioavailability, sustained release medical cannabis capsule that is based on cannabinoid extracts from selected
strains of medical cannabis. The Cannabics SR proprietary formulation was shown to provide a steady state level of beneficial therapeutic
effects within the therapeutic window for 10-12 hours. In Israel, numerous patients (most of them oncology patients) have already
been treated with Cannabics SR capsules; with both patients and doctors reporting high levels of satisfaction from the uniformity
and long lasting therapeutic effects of this unique medical technology.
On November 4
th
, 2014, Cannabics
Pharmaceuticals Inc. executed an IP Licensing and Collaboration Agreement with Kalapa Holdings (Spain) for the production and distribution
of the Company’s CANNABICS SR medical capsules. The IP Licensing Agreement allows for the Company’s advanced cannabinoid
administration technology to be manufactured and distributed in Spain, exclusively through Kalapa Holdings and its subsidiaries
in strict compliance with Spanish law and regulations to certified patients.
On May 27
th,
2015 the Company filed
a Patent with the USPTO entitled “
A Method of in Vitro High Throughput Screening of Cancer Biopsies with Cannabinoid Extracts
”.
In essence this patent takes the next step from the cancer cell knowledge already obtained from cell lines in the Technion Laboratory
and extends it to a system of analyzing cancer cells taken from patient biopsies, and then testing them against a multitude of
cannabinoid combinations for anti-tumor activity via the High Throughput Screening process. This patent formally begins the next
phase of the Company, which is Personalized Medicine (PM). We have developed an automated high-throughput method for the screening
of different types of cancer cells or biopsies treated with a multitude of cannabis extracts. These natural extracts could also
be tested in conjunction with already approved and common synthetic drugs for patients that undergo chemotherapy for the most personally
tailored therapy. This multilayer method is producing a large-scale database that will capture the knowledge gained as to the unique
effects of different combinations of cannabinoid compounds on diverse malignancies. Coextensive with the development of the automated
high-throughput system, we are also developing proprietary and novel compounds targeting diverse and specific types of tumors.
This patent was assigned to Cannabics, Inc., a Delaware Corporation, related party, and majority holder of the Issuer per
the following executed agreement from October 7
th
2015.
On October 7
th
, 2015, the Company executed an Intellectual
Property & Subsidiary Assignment and an Assignment & Assumption of Debt & Liabilities Agreement with Cannabics, Inc.,
a Delaware Corporation, related party, and majority holder of the Issuer. Said Agreements were executed as part of a restructuring
of the Company, whereby the Research and Development components were at that time made separate from the Issuer’s continuing
business operations. Per the Agreements, Cannabics, Inc. has assumed $362,000 of the Issuer’s debts and liabilities in return
for Assignment of the provisional patent noted above related to High Throughput Screening and the Issuer’s subsidiary “tGrin
Ultra, Ltd.”. On February 22nd, 2016, the Company and Cannabics Inc., a Delaware Corporation, related party, and majority
holder of the Issuer did execute a Rescission Agreement, wholly rescinding the previous Agreements noted supra. As such, all Intellectual
Property, provisional patents, assigned Debts and the Company’s Subsidiary “Grin Ultra Ltd.” are now reincorporated
as part of the company
On February 24th 2016 the company filed
a patent with the USPTO for the company’s slow release capsules..
Plan of Operation
We are dedicated to the development of advanced
and sophisticated cannabinoid-based treatments and therapies. Our main focus is development and marketing of various new and innovative
therapies and biotechnological tools aimed at providing relief from diverse ailments that respond to active ingredients sourced
from the cannabis plant. These advanced tools include innovative delivery systems for cannabinoids, personalized medicine therapies
and procedures based on cannabis originated compounds and bioinformatics tools. The Company plans to continue to license the slow
release capsules to additional qualified licensed manufacturers in the US and other countries.
Results of Operations,
As a result of the
October 7
th
, 2015, the Intellectual
Property & Subsidiary Assignment and an Assignment of Debt & Liabilities Agreement executed with Cannabics, Inc., the
results from the former subsidiary were presented as a discontinued operation. In this report and as a result of the February
22
nd
2016 Rescission Agreement the consolidated financial statements of Cannabics Pharmaceuticals Inc. includes its
wholly-owned subsidiary, G.R.I.N. Ultra Ltd.
For the Three Months Ended November 30, 2015 and 2014
Revenues
No revenue was reported during the 3 month
period ending November 30, 2015 and during this period last year. The income from the discontinued operation and the Intellectual
Property assignment as described in the 10-Q original report was reversed due to the agreements from February 22
nd
as
described above and in note 1 to this financial statements.
Operating Expenses
For the 3 months ended November 30, 2015
the total operating expenses were $52,937 compared to $126,054 at the same period in 2014. This change is mainly due to a decrease
of marketing expenses from $31,000 to $491 due to the fact that the company hasn’t initiated marketing activity during the
last 3 month period and stopped working with a marketing consultant that provided services last year. G&A, professional and
consulting fee were reduced from $69,137 last year to $30,906 during this quarter due to save in managerial expenses.
Liquidity and Capital Resources
Overview
As of November 30, 2015, the Company had
$9,561 in cash compared to $32,468 on November 30 2014. We do not have sufficient resources to effectuate our business. We expect
to incur a minimum of $500,000 in expenses during the next twelve months of operations. We estimate that these expenses will be
comprised primarily of R&D, general expenses including overhead, legal, accounting fees, and marketing expenses.
Liquidity and Capital Resources during
the Three Months Ended November 30, 2015 compared to the Three Months ended November 30, 2014
We used cash in operations of $35,668 for
the three months ended November 30, 2015 compared to$109,631 cash used in operations during the comparable period in 2014.
We did not use any cash in investing activities during the three months ended November 30, 2015, and $3,710 during the 3 months
ending November 30 2014.
Cash generated in our financing activities
was $20,000 consisting of proceeds from a promissory note, compared to $78,333 cash generated from proceeds of common stock during
the comparable period in 2014.
We will have to raise funds to pay for our
expenses. We may have to borrow money from shareholders or issue debt or equity or enter into a strategic arrangement with a third
party. There can be no assurance that additional capital will be available to us. We currently have no arrangements or understandings
with any person to obtain funds through bank loans, lines of credit or any other sources. Since we have no such arrangements or
plans currently in effect, our inability to raise funds for our operations will have a severe negative impact on our ability to
remain a viable company.
Going Concern
Due to the uncertainty of our ability to meet
our current operating and capital expenses, our independent auditors included an explanatory paragraph in their report on the audited
financial statements for the year ended August 31, 2015 regarding concerns about our ability to continue as a going concern. Our
financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent
auditors.
Our unaudited financial statements have been
prepared on a going concern basis, which assumes the realization of assets and settlement of liabilities in the normal course of
business. Our ability to continue as a going concern is dependent upon our ability to generate profitable operations in the future
and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations
when they become due. The outcome of these matters cannot be predicted with any certainty at this time and raise substantial doubt
that we will be able to continue as a going concern. Our unaudited financial statements do not include any adjustments to the amount
and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.
There is no assurance that our operations will
be profitable. Our continued existence and plans for future growth depend on our ability to obtain the additional capital necessary
to operate either through the generation of revenue or the issuance of additional debt or equity.
Off-Balance Sheet Arrangements
We currently have no off-balance sheet arrangements
that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Policies
The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of America requires us to make a number of estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements. Such estimates and assumptions affect the reported amounts of revenues and expenses during
the reporting period. We base our estimates on historical experiences and on various other assumptions that we believe to be reasonable
under the circumstances. Actual results may differ materially from these estimates under different assumptions and conditions.
We continue to monitor significant estimates made during the preparation of our financial statements. On an ongoing basis, we evaluate
estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates
and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates under different future
conditions.
See Item 7, “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” and Note 2, “Summary of Significant Accounting Policies”
in our audited consolidated financial statements for the year ended August 31, 2015, included in our Annual Report on Form 10-K
as filed on January 7
th
, 2016, for a discussion of our critical accounting policies and estimates.