Item 1. Financial Statements
CANNABICS PHARMACEUTICALS INC.
Consolidated Balance Sheets
|
|
May 31,
|
|
|
August 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
Unaudited
|
|
|
Audited
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
357,629
|
|
|
$
|
265,982
|
|
Prepaid expenses and other receivables
|
|
|
154,784
|
|
|
|
284,496
|
|
Held for trading Investments
|
|
|
1,076,637
|
|
|
|
3,256,456
|
|
Current royalties
|
|
|
–
|
|
|
|
500,000
|
|
Total current assets
|
|
|
1,589,050
|
|
|
|
4,306,934
|
|
|
|
|
|
|
|
|
|
|
Available for sale Investment
|
|
|
3,028,308
|
|
|
|
6,010,946
|
|
Long term royalties
|
|
|
–
|
|
|
|
3,863,000
|
|
|
|
|
|
|
|
|
|
|
Equipment, net
|
|
|
910,818
|
|
|
|
1,002,286
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
5,528,176
|
|
|
$
|
15,183,166
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
206,493
|
|
|
|
215,229
|
|
Due to a related party
|
|
|
223,645
|
|
|
|
223,645
|
|
Total current liabilities
|
|
|
430,138
|
|
|
|
438,874
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity (deficit):
|
|
|
|
|
|
|
|
|
Preferred stock, $.0001 par value, 5,000,000 shares authorized, no shares issued and outstanding.
|
|
|
–
|
|
|
|
–
|
|
Common stock, $.0001 par value, 900,000,000 shares authorized, 135,080,441 shares issued and outstanding at May 31 2020 and 134,498,775 shares issued and outstanding at May 19 2019 and August 31, 2019.
|
|
|
13,508
|
|
|
|
13,450
|
|
Additional paid-in capital
|
|
|
15,372,310
|
|
|
|
15,300,250
|
|
issuance of warrants
|
|
|
2,784,388
|
|
|
|
2,784,387
|
|
Other comprehensive income
|
|
|
(172,625
|
)
|
|
|
2,810,013
|
|
Accumulated deficit
|
|
|
(12,899,543
|
)
|
|
|
(6,163,807
|
)
|
Total stockholders' equity ( deficit )
|
|
|
5,098,038
|
|
|
|
14,744,292
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity
|
|
$
|
5,528,176
|
|
|
$
|
15,183,166
|
|
See accompanying notes to consolidated
financial statements.
CANNABICS PHARMACEUTICALS INC.
Consolidated Statements of Operations
and Comprehensive Loss
(Unaudited)
|
|
For
the Three Months Ended
|
|
|
For the Nine Months Ended
|
|
|
|
May
31,
|
|
|
May
31,
|
|
|
May
31,
|
|
|
May 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Net
revenue
|
|
$
|
1,886
|
|
|
$
|
2,160
|
|
|
$
|
4,950
|
|
|
$
|
7,785
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development expense
|
|
|
370,084
|
|
|
|
333,759
|
|
|
|
1,280,533
|
|
|
|
1,065,986
|
|
General
and administrative expenses
|
|
|
322,316
|
|
|
|
447,923
|
|
|
|
1,097,155
|
|
|
|
1,265,658
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
692,400
|
|
|
|
781,682
|
|
|
|
2,377,688
|
|
|
|
2,331,644
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(690,514
|
)
|
|
|
(779,522
|
)
|
|
|
(2,372,738
|
)
|
|
|
(2,323,859
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
(Loss) Income
|
|
|
(35,161
|
)
|
|
|
232,073
|
|
|
|
(4,362,998
|
)
|
|
|
4,850,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) income
|
|
|
(725,675
|
)
|
|
|
(547,449
|
)
|
|
|
(6,735,736
|
)
|
|
|
2,526,242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit
from available for sale assets
|
|
|
2,672,221
|
|
|
|
987,099
|
|
|
|
(172,625
|
)
|
|
|
5,871,456
|
|
Total
comprehensive (income) loss
|
|
$
|
1,946,546
|
|
|
$
|
439,650
|
|
|
$
|
(6,908,361
|
)
|
|
$
|
8,397,698
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per share - basic and diluted:
|
|
$
|
(0.005
|
)
|
|
$
|
0.040
|
|
|
$
|
(0.050
|
)
|
|
$
|
0.019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
shares outstanding - Basic and Diluted
|
|
|
135,035,442
|
|
|
|
135,221,626
|
|
|
|
134,611,567
|
|
|
|
132,087,744
|
|
See accompanying notes to consolidated financial
statements.
CANNABICS PHARMACEUTICALS INC.
Consolidated Statements of Stockholders' Equity (Deficit)
|
|
Common
stock
|
|
|
Additional
paid in
|
|
|
|
|
|
Unrealized
gain (loss) on available-for-sale financial
|
|
|
Accumulated
|
|
|
Total
stockholders’ equity
|
|
|
|
Shares
|
|
|
Amount
|
|
|
capital
|
|
|
Warrants
|
|
|
gain
|
|
|
deficit
|
|
|
(deficit)
|
|
Balance, August 31, 2019
|
|
|
134,498,775
|
|
|
$
|
13,450
|
|
|
$
|
15,300,250
|
|
|
|
2,784,387
|
|
|
$
|
2,810,013
|
|
|
$
|
(6,163,807
|
)
|
|
$
|
14,744,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares of common stock for cash
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury stock
|
|
|
(30,000
|
)
|
|
|
(3
|
)
|
|
|
(29,997
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(30,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for services, net
|
|
|
611,666
|
|
|
|
61
|
|
|
|
102,059
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
102,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(5,578,515
|
)
|
|
|
–
|
|
|
|
(5,578,515
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(6,735,736
|
)
|
|
|
(6,735,736
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, May 31, 2020
|
|
|
135,080,441
|
|
|
$
|
13,508
|
|
|
$
|
15,372,310
|
|
|
|
2,784,387
|
|
|
$
|
(2,768,502
|
)
|
|
$
|
(12,899,543
|
)
|
|
$
|
2,502,161
|
|
|
|
Common
stock
|
|
|
Additional
paid in
|
|
|
|
|
|
Unrealized
fain (loss) on available-for-sale financial
|
|
|
Accumulated
|
|
|
Total equity
|
|
|
|
Shares
|
|
|
Amount
|
|
|
capital
|
|
|
Warrants
|
|
|
gain
|
|
|
deficit
|
|
|
(deficit)
|
|
Balance, February 29, 2020
|
|
|
135,035,441
|
|
|
$
|
13,504
|
|
|
$
|
15,372,316
|
|
|
|
2,748,387
|
|
|
$
|
(2,844,846
|
)
|
|
$
|
(12,173,868
|
)
|
|
$
|
3,115,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for services, net
|
|
|
45,000
|
|
|
|
4
|
|
|
|
44,996
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
45,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
76,344
|
|
|
|
–
|
|
|
|
76,344
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(725,675
|
)
|
|
|
(725,675
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, May 31, 2020
|
|
|
135,080,441
|
|
|
$
|
13,508
|
|
|
$
|
15,372,310
|
|
|
|
2,784,387
|
|
|
$
|
(2,768,502
|
)
|
|
$
|
(12,899,543
|
)
|
|
$
|
2,511,161
|
|
CANNABICS PHARMACEUTICALS INC.
Consolidated
Statements of Stockholders' Equity (Deficit) (continued)
|
|
Common
stock
|
|
|
Additional
paid in
|
|
|
|
|
|
Unrealized
gain (loss) on available-for sale financial
|
|
|
Accumulated
|
|
|
Total
stockholders’ equity
|
|
|
|
Shares
|
|
|
Amount
|
|
|
capital
|
|
|
Warrants
|
|
|
gain
|
|
|
deficit
|
|
|
(deficit)
|
|
Balance, August 31, 2018
|
|
|
121,575,388
|
|
|
$
|
12,158
|
|
|
$
|
9,840,420
|
|
|
|
89,722
|
|
|
$
|
–
|
|
|
$
|
(7,296,777
|
)
|
|
$
|
2,645,523
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares of common stock for cash
|
|
|
10,277,777
|
|
|
|
1,028
|
|
|
|
4,363,138
|
|
|
|
2,784,387
|
|
|
|
–
|
|
|
|
–
|
|
|
|
7,148,553
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares of common stock for Investment
|
|
|
2,263,943
|
|
|
|
226
|
|
|
|
909,707
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
909,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for services, net
|
|
|
341,667
|
|
|
|
34
|
|
|
|
215,841
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
215,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expiration of warrants
|
|
|
–
|
|
|
|
–
|
|
|
|
89,722
|
|
|
|
(89,722
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
5,871,456
|
|
|
|
–
|
|
|
|
5,871,456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2,526,242
|
|
|
|
2,526,242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, May 31, 2019
|
|
|
134,458,775
|
|
|
$
|
13,446
|
|
|
$
|
15,418,827
|
|
|
|
2,784,387
|
|
|
$
|
5,871,456
|
|
|
$
|
(4,770,535
|
)
|
|
$
|
19,317,582
|
|
|
|
Common
stock
|
|
|
Additional
paid in
|
|
|
|
|
|
Unrealized
gain (loss) on available-for sale financial
|
|
|
Accumulated
|
|
|
Total
stockholders’ equity
|
|
|
|
Shares
|
|
|
Amount
|
|
|
capital
|
|
|
Warrants
|
|
|
gain
|
|
|
deficit
|
|
|
(deficit)
|
|
Balance, February 29, 2019
|
|
|
132,194,831
|
|
|
$
|
13,219
|
|
|
$
|
14,509,120
|
|
|
|
2,748,387
|
|
|
$
|
4,884,357
|
|
|
$
|
(4,223,086
|
)
|
|
$
|
17,967,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for services, net
|
|
|
2,263,944
|
|
|
|
227
|
|
|
|
909,707
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
909,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive gain
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
987,099
|
|
|
|
–
|
|
|
|
987,099
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(547,449
|
)
|
|
|
(547,449
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, May 31, 2019
|
|
|
134,458,775
|
|
|
$
|
13,446
|
|
|
$
|
15,418,827
|
|
|
|
2,784,387
|
|
|
$
|
5,871,456
|
|
|
$
|
(4,770,535
|
)
|
|
$
|
19,317,581
|
|
See accompanying notes to consolidated financial
statements.
CANNABICS PHARMACEUTICALS INC.
Consolidated
Statements of Stockholders' Equity (Deficit) (continued)
For the years ended August 31, 2019
|
|
Common stock
|
|
|
Additional paid in
|
|
|
|
|
|
Accumulated
|
|
|
Total stockholders’ equity
|
|
|
|
Shares
|
|
|
Amount
|
|
|
capital
|
|
|
Warrants
|
|
|
deficit
|
|
|
(deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, August 31, 2018
|
|
|
121,575,388
|
|
|
$
|
12,158
|
|
|
$
|
9,840,420
|
|
|
|
89,722
|
|
|
$
|
(7,296,777
|
)
|
|
$
|
2,645,523
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares of common stock for cash
|
|
|
10,277,777
|
|
|
|
1,028
|
|
|
|
4,441,384
|
|
|
|
2,784,387
|
|
|
|
–
|
|
|
|
7,226,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for services
|
|
|
2,645,610
|
|
|
|
264
|
|
|
|
1,018,445
|
|
|
|
–
|
|
|
|
–
|
|
|
|
1,018,709
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expiration of warrants
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(89,722
|
)
|
|
|
–
|
|
|
|
(89,722
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive profit
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2,810,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit for the year ended August 31, 2018
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
1,132,970
|
|
|
|
1,132,970
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, August 31, 2019
|
|
|
134,498,775
|
|
|
$
|
13,450
|
|
|
$
|
15,300,249
|
|
|
|
2,784,387
|
|
|
$
|
(6,163,807
|
)
|
|
$
|
14,744,292
|
|
See accompanying notes to consolidated financial
statements.
CANNABICS PHARMACEUTICALS INC.
Consolidated Statements of Cash Flows
(Unaudited)
|
|
For the nine months Ended,
|
|
|
|
May
31,
|
|
|
May 31,
|
|
|
|
2020
|
|
|
2019
|
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
|
Net Income
(Loss)
|
|
$
|
(6,735,736
|
)
|
|
$
|
2,526,242
|
|
Adjustments required
to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
167,190
|
|
|
|
142,009
|
|
Interest
on loans
|
|
|
–
|
|
|
|
–
|
|
Royalties
receivables valuation
|
|
|
4,363,000
|
|
|
|
(4,827,000
|
)
|
Stock
issued for services
|
|
|
72,120
|
|
|
|
215,875
|
|
Profit
from held for trading investments
|
|
|
(48,546
|
)
|
|
|
(68,528
|
)
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
Receivable and pre paid expenses
|
|
|
129,712
|
|
|
|
(128,460
|
)
|
Accounts
payable and accrued liabilities
|
|
|
(8,736
|
)
|
|
|
(85,247
|
)
|
Net
cash used in operating activities
|
|
|
(2,060,996
|
)
|
|
|
(2,225,109
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
|
Available
for sale investments
|
|
|
–
|
|
|
|
(1,920,000
|
)
|
Held
for trading Investments
|
|
|
2,228,365
|
|
|
|
(3,786,343
|
)
|
Acquisition
of equipment
|
|
|
(75,722
|
)
|
|
|
(185,932
|
)
|
Net
cash used in investing activities
|
|
|
2,152,643
|
|
|
|
(5,892,275
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
|
Proceeds
from sale of common stock
|
|
|
–
|
|
|
|
7,294,266
|
|
Costs
of raising capital
|
|
|
–
|
|
|
|
(76,989
|
)
|
Net
cash provided by financing activities
|
|
|
–
|
|
|
|
7,217,277
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate fluctuations on cash
|
|
|
|
|
|
|
|
|
Net increase (Decrease)
in cash
|
|
|
91,647
|
|
|
|
(900,107
|
)
|
Cash
and cash equivalents at beginning of the Period
|
|
|
265,982
|
|
|
|
1,393,608
|
|
Cash
and cash equivalents at end of the Period
|
|
$
|
357,629
|
|
|
$
|
493,501
|
|
See accompanying notes to consolidated financial
statements.
CANNABICS PHARMACEUTICALS INC.
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.
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. On the closing date, April 25, 2014, pursuant to the terms
of the Stock Purchase Agreement, Cannabics purchased 41,000,000 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. The Company’s principle offices are in Bethesda,
Maryland. The Company changed its course of business to laboratory research and development.
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.
On August 25, 2014, the Company organized
G.R.I.N. Ultra Ltd. (“GRIN”), an Israeli corporation, as a wholly-owned subsidiary. GRIN will provide research and
development activities for the Company’s products in Israel.
On July 24, 2017, the Company announced
the establishment of its genetics laboratory to develop diagnostic tools based on human genome, tumor genetics and specific cannabinoids.
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 August 31, 2019 annual financial statements included in our Form 10-K, filed with the U.S. Securities
and Exchange Commission (“SEC”) on November 29, 2019.
Principles of Consolidation
The consolidated financial statements include
the accounts of the Company and GRIN. 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. While the Company has incurred a net loss of $6,735,736 for the nine months ended May 31, 2020,
it has incurred cumulative losses since inception of $12,899,543. 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.
Research and Development Costs
The Company accounts for research and development
costs in accordance with Accounting Standards Codification 730 “Research and Development” (“ASC 730”).
ASC 730 requires that research and development costs be charged to expense when incurred. Research and development costs charged
to expense were $1,280,553 and $1,065,986 for the nine months ended May 31, 2020 and 2019, respectively.
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 – Related Party Transactions
During the nine months ending May 31, 2020,
the Company paid $336,137 in salaries, including socials benefits, to two directors, compared to $394,514 for the nine months ending
May 31, 2019.
The Company had a balance outstanding at
May 31, 2020 and at May 31, 2019 of $223,645, payable to Cannabics, Inc. The advance is due on demand and bears no interest.
Note 3 – 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.
Note 4 – Commitments and Contingencies
The company leases its office in Tel Aviv.
In May, 2019, the Company extended its lease agreement for an additional twelve-month extension which expires on April 1st,
2021. The monthly lease is $1,390.
Effective June 1, 2018, the Company entered
into a 36-month car lease for one of its executive officers.
The company leases its Laboratory in Rehovot.
In May, 2019, the Company extended its lease agreement for an additional twelve-month extension which expires on April 1st,
2021. The monthly lease is $3,600.
As security for its obligation under a
property lease agreement, car lease and credit cards, the Company’s subsidiary provided a bank guarantee in the amount of
$51,000.
Note 5 – Subsequent Events
On June 10th, 2020, the Company
executed an MOU with Cannomed Medical Cannabis Industries, Ltd., an Israeli listed public company (CNMD) to develop cannabis cultivars
specifically targeted to treat cancer.
The Company has evaluated subsequent events
through the date the financial statements were issued and filed with the SEC and has determined that there are no other such events
that warrant disclosure or recognition in the financial statements.
Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of Operations.
Company Overview
We are a pioneer in the constellation of
cannabis cancer and diagnostics. Personalization of cannabinoid-based treatments is our main scope, addressing the rapidly growing
yet unmet need of cancer patients who are prescribed with cannabis. The multifactorial benefits of cannabis create an arising need
that may unravel a new attitude to cancer treatment and prevention. The palliative aspects of cannabis such as reducing pain and
nausea, propel the market to create over-the-counter and pharmaceutical grade cannabis products to cancer patients. With minor
side effects and no toxicity, the only barrier to millions of cancer patients is worldwide regulation. The legalization of cannabis
worldwide is being generated both by medical and financial processes exposing and legitimizing cannabis consumption as a medical
treatment. The number of cancer patients, caregivers and doctors that are exposed to cannabis is growing rapidly as new countries
i.e. Germany, Canada, Australia and others adopt new regulations and introduce natural cannabis products to the health system.
Since the palliative properties of cannabis as pain and nausea reduction are widely accepted by physicians, along with a growing
body of clinical proof, and patient advocating these benefits; we believe that in next decade a large percentage of cancer patients
worldwide will be treated with cannabis in varied medications both pharmaceutical and as a nutraceutical. It is already scientifically
proven that cannabinoids impact cell cycle though partially known biological mechanisms and impact many aspects of human biology
and health. This unique situation in which a highly active compound (i.e. THC, CBD) consumed by large portions of the population
creates an unmet need to decipher the biological and clinical prospects of these compounds. Cannabics’ vision is to build
a platform of data from which medications can be formulated, patients diagnosed and treated in a personalized manner. Our goal
is to seek novel technologies in cancer medicine and assimilate them into cannabinoid medicine. The results we have gained in performing
invitro studies and clinical studies are part of a growing holistic prospect of the treatment of cancer and other indications with
cannabis.
We have recently published a scientific
paper on the results our first clinical study on our SR capsules as a treatment for CACS in advanced cancer patients and leveraged
our R&D lab to develop new formulations. As pioneers in this mission, we hope and believe that the database we create and the
knowledge we gain will serve many cancer patients who are medicated with cannabis and will lead to better and more predictable
therapy outcomes. The still confining U.S. regulation creates an advantage for Cannabics which is specifically licensed to conduct
such research and clinical studies by the Israeli Ministry of Health.
Cancer and Cannabinoids
Natural products have served as vital resources
for cancer therapy (e.g.,Vinca alkaloids, paclitaxel, etc., which are used as conventional chemotherapeutic agents) and
are also sources for novel drugs. Natural products from plants therefore represent an excellent resource for targeted therapies,
as phytochemicals and herbal mixtures multiple targets at the same time. Furthermore, the problem of drug resistance may
be approached by integrating phytochemicals and phyto-therapy into academic western medicine through derivation and integration
of data and as adjunct to conventional treatments. The integration of phytochemicals and phyto-therapy into cancer medicine
represents a valuable asset to chemically synthesized chemicals and therapeutic antibodies. Cannabinoids are excellent candidates
for this approach. Cannabinoids are a class of over 60compounds derived from the plant cannabis sativa, as well as the synthetic
or endogenous versions of these compounds. Cannabinoids show specific cytotoxicity against tumor cells, while protecting healthy
tissue from apoptosis. These effects are exerted through cannabinoid receptors CB1 and CB2 in mammals and through non-receptor
signaling pathways. Recent studies suggest that cannabinoids contribute to maintaining balance in cell proliferation and that targeting
the endo-cannabinoid system can affect growth of several different types of cancer, including gliomas, breast, colon, prostate,
and hepatocellular carcinoma.
Personalized Cancer Treatments
Despite significant progress in cancer
diagnostics and development of novel therapeutic regimens, successful treatment of advanced forms of cancer is still
a challenge and may require personalized therapeutic approaches. Our government licensed Israeli facility operates a
unique research and development laboratory which combines high throughput screening (HTS) capabilities with the most advanced data
tools. The HTS platform allows us to test vast number of compounds on cancerous cell lines and fresh biopsy tissues to record and
measure the therapeutics effects of these compounds. Our advantage is in the specialized library which is composed of a collection
of cannabis extracts and pure natural and synthetic cannabinoids. The library will also include a costumed cannabinoid matrix,
to assess the possible interaction of combination therapy.
Advances in understanding many of the
fundamental mechanisms of cancer progression have led to the development of molecular targeted therapies. While
molecular targeted therapeutics continue to improve the outcome for cancer patients, tumor heterogeneity among patients, as
well as intra-tumor heterogeneity, limits the efficacy of these drugs to specific patient subtypes, as well as contributing
to relapse. Furthermore, Intra-tumor heterogeneity is caused by genomic instability in cancer cells, resulting in
the selection of resistant clones, thus limits efficiency of cancer treatment. Hence, there is an actual medical
need for a more personalized approach toward drug development and diagnosis that considers the diversity of cancer
patients, as well as the complex milieu of tumor cells within a single patient.
Drug Sensitivity tests – a functional
assay
Cannabics cutting edge functional platform is matching the correct
cannabis formulation to the patients’ cancer, aiming to improve survival, quality of life and to prevent cross indication
between cannabis and conventional therapy.
Cannabics’ technology represents
the next step in personalized cannabinoid-based cancer medicine, moving prediction capabilities beyond genomics and into the science
of biological response on living patient cells.
Cannabics’ high throughput screening
(“HTS”) capabilities enables the screening of many compounds on cancerous cell lines and biopsies and measure the biological
effects of these compounds. Our advantage is in the specialized library which is composed of a collection of cannabis extracts,
pure and synthetic cannabinoids, conventional chemotherapies and the matrix of all combinations of these varieties.
Our lab is equipped with a collection of
state-of-the-art instruments to enable miniaturization and automation of a variety of biological assays. The automated system is
comprised of:
|
1.
|
High Content Screening Platform, which is an automated cellular imaging and analysis platform designed for quantitative microscopy.
|
|
2.
|
Flow cytometry, which enables multi-parametric single cell analysis.
|
|
3.
|
Automated workstation, for liquid handling for dispensing accurate and reproducible volumes of liquids and compounds.
|
|
4.
|
Multimode microplate reader, designed for fast measurements of numerous biological reactions/processes.
|
The integration of these instruments is
enabled via a robotic arm, which allows a continuous process which utilizes all instruments.
Readouts generated from these instruments
provide us with insights to the effect of our cannabinoid library on parameters such as, proliferation inhibition, apoptosis induction,
angiogenesis prevention and toxicity on cancerous cells.
These experiments will produce multiplexed
data composed of images of cells, cell specific markers and the extent/signal of the biological response. The biological response
will be measured using different concentration of cannabinoids and their combinations, thus determining the most effective cannabinoid
treatment for a specific cancer type.
SR Capsules
We have developed a proprietary capsule
as a treatment to improve cancer related cachexia/anorexia syndrome (“CACS”) in advanced cancer patients. The main
purpose in the treatment of patients with advanced cancer and CACS is to gain weight and improve quality of life (“QoL”).
We believe that QoL in patients with CACS is inversely related to reduced appetite and weight-loss. Our clinical study was led
by Professor Gil Bar-Sela, the Deputy Director of the Division of Oncology at Rambam Health Care Campus, Head of the Palliative
and Supportive Oncology Unit, and Head of the service for melanoma and sarcoma patients. The main endpoints of the treatment of
patients with advanced cancer and CACS are weight gain and QoL. The study was 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. The results of this study were published by Dr. Bar-Sela in Sage Journals
under “Integrative Cancer Therapies” on October 9th, 2019, and may be seen here - https://journals.sagepub.com/doi/full/10.1177/1534735419881498
During this 2nd Quarter, the
following notable events occurred within the Company:
On March 2nd, 2020, the Company
released its findings which reveal a differential effect of extraction methods upon Necrotic efficacy of Cannabis on Gastro-intestinal
Cancer cells. A press release with further details was issued the same date.
On March 11th, 2020, the Company
released its findings which reveal that specific Cultivars have been identified in having a positive anti-tumor effect upon gastric
Adenocarcinoma. A press release with further details was issued the same date.
On April 13th, 2020, the Company
announced its development of a novel Cannabis formulation specifically for the treatment of Colon Cancer. A press release with
further details was issued the same date.
On April 27th, 2020, the Company
announced its appointment of Dr. Zamir Halpern to its Scientific Board. A press release with further details was issued the same
date.
On May 6th, 2020 the Company
announced its filing of a Provisional patent with the USPTO entitled “Composition and Method for Treating Colon Cancer with
Cannabinoids.” A press release with further details was issued the same date.
Results of Operations
For the Three Months Ended May 31, 2020 and 2019
Revenues
We received $1,886 from licensing agreements
in the form of royalties during the three months ended May 31, 2020 compared to $2,160 for the three months ended May 31, 2019.
The reason for the increase in revenues is due to an increase in capsule sales.
Operating Expenses
For the three months ended May 31, 2020
our total operating expenses were $692,400 compared to $781,682 for the three months ended May 31, 2019, resulting in a decrease
of $89,282. The decrease is attributable to a total decrease of $125,607 in general administration, and sales and marketing expenses
and an increase of $36,325 in research and development expenses.
We realized financial loss of $35,161 for
the three months ended May 31, 2020, compared to incurring financial gain of $232,073 for the three months ended May 31, 2019.
The decrease in financial expense was mainly attributable to exchange differences in total of $12,795 and a decrease in capital
gain and held for trading revaluation of $22,366 of. As a result, the net profit was $725,675 for the three months ended May 31,
2020, compared to a net income of $547,449 for the three months ended May 31, 2019.
Net Loss
Net loss was $725,675 compared to net loss
$547,449 for the three months ended May 31, 2020, for the reasons explained above.
For the nine Months Ended May 31, 2020 and 2019
Revenues
We received $4,950 from licensing agreements
in the form of royalties during the six months ended May 31, 2020 compared to $7,785 the six months ended May 31, 2019. The reason
for the increase in revenues is due to an increase in capsule sales.
Operating Expenses
For the nine months ended May 31, 2020,
our total operating expenses were $2,377,688 compared to $2,331,644 for the nine months ended May 31, 2019, resulting in an increase
of $46,044. The increase is attributable to a total decrease of $168,503 in general administration, and sales and marketing expenses
and partially offset by an increase of $214,547 in research and development expenses.
We realized financial loss of $4,326,998
for the nine months ended May 31, 2020, compared to financial income of $4,850,101 for the nine months ended May 31, 2019. The
decrease in financial income was mainly attributable to a valuation of a financial asset, consisting of the Company’s shares
held in Seedo, in the total amount of $4,363,000 and exchange differences in total of $53,341 set off by a capital gain of $26,212
and held for trading valuation of $ 33,207. As a result, the net loss was $6,735,736 for the nine months ended May 31, 2020, compared
to a net income of $3,073,691 for the three months ended May 31, 2019.
Net loss
Net loss was $6,735,736 compare to net
income of $2,256,252 for the nine months ended May 31, 2020 and May 31, 2019, for the reasons explained above.
Other comprehensive profit
We incurred another comprehensive loss
of $2,982,638 for the nine months ended May 31, 2020. The loss was mainly attributable to a valuation of a financial asset, consisting
of the Company’s shares held in Seedo and Wize Pharma, in the total amount of $2,982,638 As a result; the total comprehensive
gain was $8,632,667 for the nine months ended May 31, 2020.
Liquidity and Capital Resources
Overview
As of May 31, 2020, we had $357,629 in
cash compared to $265,982 on August 31, 2019. 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, 2020 compared to the nine Months Ended May 31, 2019
We used cash in operations of $2,060,996
for the nine months ended May 31, 2020 compared to cash used in operations of $2,225,109 for the nine months ended May 31, 2019.
The negative cash flow from operating activities for the nine months ended May 31, 2020 is primarily attributable to the Company's
net loss from operations of $6,735,736, offset by depreciation of $167,190, a decrease in accounts payables and accrued liabilities
of $8,737, a decrease of $129,712 in account receivables and prepaid expenses and an increase in changes in fair value of a financial
asset, consisting of the Company’s shares held in Seedo, of $4,363,000 , capital gain of $26,212 held for trading valuation
of $22,334 and stock issued for services in a total of $72,120.
We had cash flow from investing activities
of $2,152,643 during the nine months ended May 31, 2020, compared to cash flow used in investing of $2,225,109 for the nine months
ended May 31, 2019. The reason for the increase in cash flow from investing activities is due to the Company’s Realization
of some of held for trade investments in in total of $2,228,365 and its purchase of fixed assets in the aggregate amount of $75,722.
We will have to raise funds to pay for
our expenses. We may have to borrow money from shareholders, issue 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, 2019 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, 2019, included in our Annual Report on Form 10-K
as filed on November 29, 2019, for a discussion of our critical accounting policies and estimates.