Item 1.
Financial Statements
CANNABICS
PHARMACEUTICALS INC.
Consolidated
Balance Sheets
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May 31,
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August 31,
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2016
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2015
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(UnAudited)
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(Audited)
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ASSETS
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Current assets:
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Cash and cash
equivalents
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$
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88,502
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$
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25,229
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Prepaid
expenses and other receivables
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$
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2,047
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$
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274
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Total
current assets
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90,549
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25,503
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Equipment,
net
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1,955
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3,201
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Total
assets
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$
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92,504
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$
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28,704
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LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
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Current liabilities:
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Accounts payable and accrued
liabilities
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$
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214,594
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$
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113,847
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Derivative liability
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$
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2,354
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$
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–
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Deferred revenue
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7
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$
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50,000
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–
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Due to
a related party
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3
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$
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224,483
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$
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224,483
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Total
current liabilities
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491,431
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338,330
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Stockholders' equity (deficit):
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Common stock, $.0001 par value,
900,000,000 shares authorized,
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107,026,665 and 101,503,333
shares issued and outstanding at
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May 31, 2016 and
August 31, 2015, respectively
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4
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10,703
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10,150
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Additional paid-in capital
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1,108,168
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959,362
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Accumulated
deficit
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(1,517,798
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)
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(1,279,138
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)
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Total
stockholders' equity (deficit)
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(398,927
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)
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(309,626
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)
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Total
liabilities and stockholders' equity (deficit)
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$
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92,504
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$
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28,704
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See accompanying
notes to consolidated financial statements.
CANNABICS
PHARMACEUTICALS INC.
Consolidated
Statements of Operations and Comprehensive Loss
(Unaudited)
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For
the Three Months Ended
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For the Nine months ended
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May
31, 2016
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May 31,
2015
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May
31, 2016
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May 31,
2015
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Net revenue
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$
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50,000
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$
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–
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$
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62,500
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$
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–
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Cost of
revenue
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–
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–
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–
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–
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Gross profit
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50,000
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–
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62,500
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–
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Operating expenses:
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General and administrative
expenses
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$
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48,315
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$
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62,817
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$
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153,230
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$
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201,338
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Sales and marketing expenses
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–
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19,836
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$
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791
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$
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50,836
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Research
and development expense
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15,530
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71,189
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$
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122,555
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$
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84,293
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Total
operating expenses
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63,845
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153,842
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276,576
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336,467
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Loss from operations
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(13,845
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)
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(153,842
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)
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(214,076
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)
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(336,467
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)
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Other (
income ) and expense
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Foreign exchange gain
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–
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–
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1,386
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–
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Financial Loss
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(12,635
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)
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–
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(25,970
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)
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–
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Loss before income
taxes
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(26,480
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)
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(153,842
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)
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(238,660
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)
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(336,467
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)
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Provision
for income taxes
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–
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–
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–
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–
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Net
loss
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$
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(
26,480
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)
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$
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(153,842
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)
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$
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(238,660
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)
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$
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(336,467
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)
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Net
loss per share - basic and diluted:
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$
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0.000
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$
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(0.002
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)
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$
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(0.002
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)
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$
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(0.003
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Net
loss
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$
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(
26,480
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)
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$
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(153,842
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)
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$
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(238,660
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)
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$
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(336,467
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)
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Weighted average number of
shares
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outstanding
- Basic and Diluted
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104,885,216
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100,665,616
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102,983,381
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100,618,327
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See accompanying
notes to consolidated financial statements.
CANNABICS
PHARMACEUTICALS INC.
Consolidated
Statements of Cash Flows
(Audited)
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For the nine months ended
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May 31, 2016
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May 31, 2015
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2016
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2015
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Cash flows from operating activities:
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Net (Loss) Profit
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$
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(238,660
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)
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$
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(336,467
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)
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Depreciation
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1,245
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1,103
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Stock issued for services
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19,850
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35,500
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Stock to be issued for services
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–
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10,000
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Change in fair value of derivative
liability
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2,354
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–
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Amortization of discount
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20,000
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–
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Changes in operating assets
and liabilities:
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–
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–
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Accounts Receivable and pre
paid expenses
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(1,773
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)
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9,619
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Deferred revenue
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50,000
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–
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Accounts payable and accrued
liabilities
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96,257
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(6,516
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)
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Due to
related party
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–
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135,684
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Net
cash used in operating activities
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(50,727
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)
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(151,077
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)
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Cash flows from investing activities:
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Acquisition
of equipment
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–
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(3,711
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)
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Net
cash used in investing activities
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–
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(3,711
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)
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Cash flows from financing activities:
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Proceeds from Promissory
note
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20,000
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–
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Proceeds
from sale of common stock
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94,000
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|
78,333
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Net
cash provided by financing activities
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114,000
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|
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78,333
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Effects of exchange
rates on cash
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|
|
–
|
|
|
|
(762
|
)
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Net Increase in cash
|
|
|
63,273
|
|
|
|
(77,217
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)
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Cash and cash equivalents
at beginning of year
|
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25,229
|
|
|
|
98,768
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Cash
and cash equivalents at end of Quarter
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$
|
88,502
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|
|
$
|
21,551
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|
See accompanying
notes to consolidated financial statements.
Notes to Consolidated
Financial Statements (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.
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%.
On May 21, 2014,
the Company changed its name, via merger in the state of Nevada, to Cannabics Pharmaceuticals Inc. At this time the Company has
changed its course of business to pharmaceutical 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 in Israel.
On February
24, 2016, the Company filed a new patent application for the company’s slow release medical capsules with the US Patent
& Trademark Office, as noted in their Press Release of that date.
On
March 22
nd
, 2016, the Company announced the start of a regulated Clinical Study for Cancer Patients in Israel under
the auspices of the Rambam Medical Center and the Ministry of Health. This clinical study involves patients with advanced cancer
and cancer anorexia cachexia syndrome (CACS), endpoints examined are weight gain appetite, quality of life and a marker for anti-cancer
activity. Quality of life in patients with CACS is directly related to loss of appetite and loss of weight. This study examines
the influence of Cannabics Pharmaceuticals SR capsules on both of these common effects of cancer and cancer treatment. Secondary
outcome measures are improvement in appetite, reduction in TNF-alpha level, safety assessment for early psychiatric side-effects,
quality of life and evaluation of muscle strength. While this study is taking place in Israel, it is fully registered with the
US NIH under
"Cannabics Capsules as Treatment to Improve Cancer Related CACS in Advanced Cancer Patients",
Identifier
NCT02359123, and may be found at https://clinicaltrials.gov/ct2/show/NCT02359123
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.
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 7, 2016.
Principles
of Consolidation
The consolidated
financial statements include the accounts of Cannabics Pharmaceuticals Inc. and its wholly-owned subsidiary, G.R.I.N. Ultra Ltd.
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 contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company has incurred a net loss of $238,660 for the nine months
ended May 31, 2016 and has incurred cumulative losses since inception of $1,517,798. 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.
Research and Development Costs
The
Company accounts for research and development costs in accordance with ASC 730 “Research and Development”. ASC 730
requires that research and development costs be charged to expense when incurred. Research and development costs charged to expense
were $15,530 and $71,189 for the three months ended May 31 2016 and 2015, respectively, and $122,555 and 84,293 for the nine
months ended May 31 2016 and 2015, respectively.
Revenues
Revenue is recognized
when all of the following criteria are met: there is persuasive evidence of an arrangement; the product has been delivered or
services have been rendered; the fee is fixed and determinable; and collectability is probable.
During the 3
month period which ended on May 31
st
2016, the company received $50,000 for a license option agreement.
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.
Note 2 – Intangible
Assets
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 has issued 18,239,594 shares of
its common stock to acquire the entire institutional knowledge of Cannabics, Inc., which primarily consists of the human Brain
Trust in its team of experts, the cumulative result of their years of scientific 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 short-term projects of the Company.
Since that time,
Management has determined that fair value measurement is not allowable where there are entities under common control and cost
should be used based on the carrying book value of the seller’s intangible. So that the only value ascribed to this transaction
is the cash received for the transfer of the additional shares to the controlling parent company.
Note 3 –
Related Party Transactions
On July 24,
2014, the Company executed a Collaboration & Exclusivity Agreement with Cannabics, Inc., 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 entire institutional knowledge of Cannabics Inc. as well as $150,000. See notes 2 and 8 for additional information.
During the year
ended August 31, 2015, Cannabics advanced $175,683 to the Company for working capital purposes this advance was in addition to
$48,800 from 2014 resulting in a balance outstanding at August 31, 2015 of $224,483. No additional money was advance during the
last 9 month and this is also the balance as of May 31, 2016. The advance is due on demand and bears no interest.
Note 4 –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
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.
During the year
ended August 31, 2015, the Company issued 540,000 shares of its common stock to 9 consultants for services rendered at a fair
value of $83,123, or an average of $0.16 per share. During the nine month ended May 31st, 2016 the company issued to service providers
1,290,000 shares and 5,174,333 options.
Note 5 –
Commitments and Contingencies
Effective December
1, 2014, the Company executed a two year leases agreement of an office space for its research and development activities in Caesarea,
Israel. On March 1
st
, 2015 the company terminated this lease agreement and as of May 31, 2016, the total amount due
is $4,000
.
Note 6 –
Material Definitive Agreements
On January 25
th
, 2016
Cannabics Pharmaceuticals Inc. executed an exclusive IP Licensing Agreement with Mountain High Products LLC and the Cima Group
LLC for the production and distribution of the Company’s CANNABICS SR technology of medical cannabis capsules in Colorado.
Mountain High LLC, operates under the trade name, Wana Caps.
Note 7-
Deferred Revenue
During the 3
months ending May 31
st
2016, the company received a deposit from a potential strategic investor with whom the company
may proceed towards an eventual final licensing agreement for certain of its technologies.
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
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 Inc.
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 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 and comprehensive patent application for the company’s slow release capsules
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 in the company’s research laboratory in Caesarea, Israel.
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 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.
On
January 25th 2016 Cannabics Pharmaceuticals Inc. executed an exclusive IP Licensing Agreement with Mountain High Products LLC
and the Cima Group LLC for the production and distribution of the Company’s CANNABICS SR technology of medical cannabis
capsules in Colorado. And with, Cima Group LLC which is a related party to mountain high and is charged with their operations
in states outside of Colorado
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 January 29,
2015 the Company executed an Agreement with Rambam Medical Center (Israel) to undertake a controlled pilot study utilizing Cannabics
SR Capsules as palliative treatment to improve cancer related Cachexia and Anorexia Syndrome in advanced stage cancer patients. Rambam
is a world renowned academic hospital acknowledged for their cutting-edge research projects and integration of innovative new
therapies and treatments to over 2 million residents of Northern Israel. You can view the details of this ongoing study from the
NIH website at http://www.cancer.gov/clinicaltrials/search/view?cdrid=769090&version=HealthProfessional&protocolsearchid=12509449.
On February
15, 2015 the Company executed of a Research Agreement with the Technion Research & Development Foundation Ltd (Israel) to
undertake a Research Project entitled "
The Assessment of the Antitumor Activity of the Whole Cannabis Plant Extract,
Components and Derivatives Thereof".
The Research Project is scheduled to last one calendar year. Under the terms
of the Agreement, Cannabics Pharmaceuticals will collaborate under the supervision of Prof. Dedi Meiri, Head of Technion’s
Laboratory of Cancer Biology and Cannabinoid Research. The purpose of this Research is to develop a diagnostic and therapeutic
system to harness the anti-cancer properties of active cannabis-based ingredients. The study will screen and evaluate different
types of human cancer cells treated with a multitude of cannabinoid combinations and observe and catalogue the effects thereof.
Technion is consistently ranked among the world’s top science and Technology Research Universities. The Faculty of Biology
is comprised of 23 independent research groups, focusing on a variety of aspects of Cellular, Molecular and Developmental Biology.
The faculty has extensive collaborations with the pharmaceutical and biotechnology industries.
On May 27, 2015,
Cannabics Pharmaceuticals Inc. successfully filed its exclusive Patent Application with the US Patent & Trademark Office (USPTO),
which covers its System and Method for High Throughput Screening of Cancer Cells. Cannabics’ team of scientists has developed
a high throughput screening system which is specifically designed to give personalized antitumor treatments to cancer patients.
In this proprietary system, biopsies are treated, in-Vitro With innumerous plant extract combinations and the antitumor effects
are screened and calculated
Plan of Operation
We are dedicated
to the development of advanced and sophisticated cannabinoid-based treatments and therapies. The Company’s 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 initial results from our joint research with the Technion Institute have already been released and quite positive.
We intend to monetize our laboratory knowledge to other Bio-Tech and pharmaceutical companies through various joint research arrangements;
while at the same time bringing our flagship technology, Cannabics SR, a standardized time release capsule, to the market where
the licensing regimen is conducive.
Results of
Operations
For the
Three Months Ended May 31, 2016 and 2015
Revenues
During the 3
months ending May 31
st
2016, the company received a $50,000 deposit from a potential strategic investor with whom the
company may proceed towards an eventual final licensing agreement for certain of its technologies. The deposit was forfeited under
the terms of the agreement.
Operating
Expenses
For the three
months ended May 31, 2016 we reduced all our activities and therefore our total operating expenses were $63,845 compared to $153,842
for the three months ended May 31, 2015 resulting in a decrease of $89,997. The decrease is attributable to decreases in general
and administrative expenses of $14,502; research and development expenses of $55,659; and a decrease in sales and marketing
expenses of $19,836.
We
incurred financial expenses of $12,635 compared to Zero for the three month ended on May 31st 2015
As a result, loss from operations was $13,845 for the three months ended May 31, 2016 compared to $153,842 for the three
months ended May 31, 2015 and the total comprehensive loss was $26,480 for three months ended May 31, 2016 compared to
$153,842 for the three months ended May 31, 2015.
For the nine Months Ended May
31, 2016 and 2015
Revenues
We had received
$62,500 from licensing agreements and a licensing option agreement during the nine months ended May 31 2016.
Operating Expenses
For the nine
months ended May 31, 2016 our total operating expenses were $276,576 compared to $336,467 for the nine months ended May 31, 2015
resulting in a decrease of $59,891. The decrease is attributable to decreases in general and administrative expenses of $48,108; sales and marketing expenses of $50,045 offset by an increase in research and development expenses of $38,262.
We
incurred foreign currency translation gain of $1,386 for the nine months ended May 31, 2016 compared to zero for the
nine months ended May 31, 2015. As a result, loss from operations was $214,076 for the nine months ended May 31, 2016
compared to $336,467 for the nine months ended May 31, 2015 and the total comprehensive loss was $238,660 for the nine months
ended May 31, 2016 compared to $336,467 for the nine months ended May 31 2015.
Liquidity and Capital Resources
Overview
As of May
31, 2016, the Company had $88,502 in cash and a deficit in working capital of $400,882. We do not have sufficient resources
to effectuate our business. We expect to incur a minimum of $1,000,000 in expenses during the next twelve months of
operations. We estimate that these expenses will be comprised primarily of general expenses including overhead, legal and
accounting fees, research and development expenses, and fees payable to outside medical centers for clinical
studies.
Liquidity
and Capital Resources during the nine Months Ended May 31, 2016 compared to the nine Months ended May 31, 2015
We used net
cash in operations of $50,727 for the nine months ended May 31, 2016 compared to net cash used in operations of $151,077 for the
nine months ended May 31, 2015. The negative cash flow from operating activities for the nine months ended May 31, 2016 is primarily
attributable to the Company's net loss from operations of $238,660, offset by depreciation of $1,245, stock issued for services
of $19,850,deferred revenues of $50,000, which the company received for a potential licensing agreement and increase of $96,257
in account payables and accrued liabilities. Cash used in operations for the nine months ended May 31, 2015 is primarily attributable
to the Company's net loss from operations of $336,467 offset by stock issued for services of $45,500 and increased liability to
a related party of $135,684 .
Cash used in
investing activities for the nine months ended May 31, 2015 was $3,711, consisting of the acquisition of equipment. We did not
use any cash in any investing activities during the nine months ended May 31, 2016.
Cash
generated in our financing activities was $114,000 consisting of the sale of common stock and proceeds from a promissory note
for the nine months ended May 31, 2016, compared to 78,333 $ cash generated from the sale of common stock during the
comparable period in 2015.
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 May 31, 2016 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 Form10-K as filed on January 7, 2016, for a discussion of our critical accounting policies and
estimates.