PHOENIX LIFE SCIENCES INTERNATIONAL LIMITED
Consolidated Balance Sheets
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November 30, 2015
$
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February 28, 2015
$
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Unaudited
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Audited
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ASSETS
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|
|
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|
|
|
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Cash
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2,425
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|
|
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9,400
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|
Accounts receivable
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|
|
—
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|
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|
2,300
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|
Notes receivable, related party
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250,184
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|
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258,122
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Inventory
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1,194,106
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|
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1,211,340
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Prepaid inventory
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|
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—
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|
|
|
141,664
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|
Total Current Assets
|
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|
1,446,715
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|
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1,622,826
|
|
|
|
|
|
|
|
|
|
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Security deposit
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|
|
—
|
|
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|
1,250
|
|
Total Assets
|
|
|
1,446,715
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|
|
|
1,624,076
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|
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LIABILITIES
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Current Liabilities
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Accounts payable and accrued liabilities
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562,837
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|
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|
409,701
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|
Due to related parties
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|
161,250
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|
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50,000
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|
Current Liabilities
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|
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724,087
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|
459,701
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|
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|
|
|
|
|
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Convertible notes payable, net
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180,113
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|
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194,746
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|
Convertible notes payable, CannaVest
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|
|
1,280,148
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|
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1,222,027
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|
Derivative liability, Typenex Note
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151,529
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|
|
|
169,868
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|
Total Liabilities
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2,335,877
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2,046,342
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STOCKHOLDERS’ DEFICIT
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Common Stock
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Authorized: 1,000,000,000 common shares, par value of $0.001 per share
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Issued and outstanding: 50,171 and 361,322,812 common shares, respectively
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50
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361,323
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|
|
|
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|
|
|
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Additional paid-in capital
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17,705,254
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17,247,631
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|
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Accumulated deficit during the development stage
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(18,594,466
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)
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(18,031,220
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)
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Total Stockholders’ Equity (Deficit)
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(889,162
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)
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(422,266
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)
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Total Liabilities and Stockholders’ Equity
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|
1,446,715
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|
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1,624,076
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(The accompanying notes are an integral
part of these financial statements)
PHOENIX LIFE SCIENCES INTERNATIONAL LIMITED
Consolidated Statements of Operations - Unaudited
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Three Months Ended
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Nine Months Ended
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Nov. 30, 2015
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Nov. 30, 2014
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Nov. 30, 2015
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Nov. 30, 2014
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Income Statement
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Revenues
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$
|
—
|
|
|
$
|
17,936
|
|
|
$
|
18,410
|
|
|
$
|
20,716
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|
Cost of Sales
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|
|
—
|
|
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|
9,144
|
|
|
|
5,933
|
|
|
|
10,694
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Gross Profit
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—
|
|
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8,792
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12,477
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10,022
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Operating expenses
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Amortization expense
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—
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650,250
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—
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650,250
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Product development expense
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—
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|
65,356
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|
100,000
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|
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|
80,356
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Sales and marketing expenses
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|
200
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|
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51,788
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|
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|
14,953
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199,710
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Operations expense
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|
1,304
|
|
|
|
46,162
|
|
|
|
3,049
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|
146,399
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General and administrative
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1,147
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|
|
|
109,419
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31,615
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168,450
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Professional fees
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93,508
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266,216
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311,220
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437,945
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Lease operating expenses
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—
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|
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|
11,685
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|
|
|
7,500
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|
|
|
26,685
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Total operating expenses
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|
96,159
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|
|
|
1,200,876
|
|
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|
468,337
|
|
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|
1,709,795
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|
Loss before other expenses
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(96,159
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)
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|
(1,192,084
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)
|
|
|
(455,860
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)
|
|
|
(1,699,773
|
)
|
|
|
|
|
|
|
|
|
|
|
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Other income (expense)
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|
|
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Interest Income
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|
|
969
|
|
|
|
1,264
|
|
|
|
3,062
|
|
|
|
1,264
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|
Interest Expense
|
|
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(45,868
|
)
|
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|
(4,466
|
)
|
|
|
(132,008
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)
|
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(7,756
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)
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Debt issue costs
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|
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—
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|
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—
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(7,830
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)
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|
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—
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Discount Amortization
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|
|
(10,804
|
)
|
|
|
(2,610
|
)
|
|
|
(56,953
|
)
|
|
|
(557,023
|
)
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Gain (loss) on derivative liability
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(8,194
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)
|
|
|
—
|
|
|
|
86,343
|
|
|
|
—
|
|
Gain (loss) on discontinued operations
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
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|
722
|
|
Total other expense
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|
|
(63,897
|
)
|
|
|
(5,812
|
)
|
|
|
(107,286
|
)
|
|
|
(562,793
|
)
|
Net loss
|
|
|
(160,056
|
)
|
|
|
(1,197,896
|
)
|
|
|
(563,246
|
)
|
|
|
(2,262,566
|
)
|
|
|
|
|
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Basic and diluted loss per common share:
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|
|
|
|
|
|
|
|
|
|
|
|
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Income (loss) from continuing operations
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(0.00
|
)
|
|
|
(0.01
|
)
|
|
|
(0.00
|
)
|
|
|
(0.03
|
)
|
Income (loss) from discontinued operations
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|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Basic and diluted loss per common share
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|
$
|
(0.00
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.03
|
)
|
Weighted average shares outstanding - basic and diluted
|
|
|
258,030,222
|
|
|
|
89,410,000
|
|
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|
364,290,048
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|
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|
77,650,803
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|
(The accompanying notes are an integral
part of these financial statements)
PHOENIX LIFE SCIENCES INTERNATIONAL LIMITED
Consolidated Statements of Cash Flows
(Unaudited)
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Nine Months Ended
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Nov. 30, 2015
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Nov. 30, 2014
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CASH FLOWS FROM OPERATING ACTIVITIES:
|
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|
|
|
|
|
|
|
|
|
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Net loss
|
$
|
(563,246
|
)
|
$
|
(2,262,566
|
)
|
Loss from discontinued operations
|
|
—
|
|
|
(722
|
)
|
|
|
|
|
|
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Adjustments to reconcile net loss to net cash used in operating activities:
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|
|
|
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Amortization
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|
—
|
|
|
650,250
|
|
Non-cash amortization of discount on convertible notes payable
|
|
54,000
|
|
|
557,022
|
|
Non-cash interest expense on convertible notes payable
|
|
—
|
|
|
7,725
|
|
Non-cash stock option compensation
|
|
—
|
|
|
112,914
|
|
Debt issuance costs
|
|
10,828
|
|
|
20,000
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
Accounts receivable
|
|
2,300
|
|
|
(3,180
|
)
|
Deposit
|
|
1,250
|
|
|
—
|
|
Inventory
|
|
—
|
|
|
(13,611
|
)
|
Prepaid expense and deposits
|
|
141,664
|
|
|
(209,110
|
)
|
Accounts payable and accruals
|
|
169,538
|
|
|
147,223
|
|
Net changes in operating assets and liabilities - discontinued operations
|
|
—
|
|
|
—
|
|
Net Cash provided by (used for) operating activities - current operations
|
|
(183,666
|
)
|
|
(994,055
|
)
|
Net Cash provided by (used for) operating activities - discontinued operations
|
|
—
|
|
|
302
|
|
Net Cash provided by (used for) operating activities
|
|
(183,666
|
)
|
|
(993,753
|
)
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related party notes receivable
|
|
8,770
|
|
|
(80,244
|
)
|
Net Cash Used in Investing Activities - continuing operations
|
|
8,770
|
|
|
(80,244
|
)
|
Net Cash Used in Investing Activities - discontinued operations
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Proceeds from notes payable
|
|
42,350
|
|
|
135,000
|
|
Due to related parties
|
|
125,571
|
|
|
—
|
|
Proceeds from issuance of common shares
|
|
—
|
|
|
975,925
|
|
Net changes in financing activities - discontinued operations
|
|
—
|
|
|
—
|
|
Net Cash Provided By Financing Activities - continuing operations
|
|
167,921
|
|
|
1,110,925
|
|
Net Cash Provided By Financing Activities - discontinued operations
|
|
—
|
|
|
—
|
|
Increase (Decrease) in Cash - continuing operations
|
|
(6,975
|
)
|
|
36,928
|
|
Increase (Decrease) in Cash - discontinued operations
|
|
—
|
|
|
—
|
|
Cash - Beginning of Period - continuing operations
|
|
9,400
|
|
|
6,104
|
|
Cash - Beginning of Period - discontinued operations
|
|
—
|
|
|
—
|
|
Cash - End of Period - continuing operations
|
|
2,425
|
|
|
43,032
|
|
Cash - End of Period - discontinued operations
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
Supplemental disclosures
|
|
|
|
|
|
|
Interest paid
|
|
—
|
|
|
—
|
|
Income tax paid
|
|
—
|
|
|
—
|
|
Non-cash issuance of stock for consulting agreements
|
|
—
|
|
|
200,000
|
|
Non-cash issuance of stock for license agreement, related party
|
|
—
|
|
|
13,000,000
|
|
Non-cash issuance of stock for distribution agreement
|
|
—
|
|
|
172,000
|
|
Non-cash issuance of stock for conversion of debt
|
|
54,000
|
|
|
—
|
|
(The accompanying notes are an integral part
of these financial statements)
|
1.
|
Nature of Operations and Continuance of Business
|
The company was incorporated in the State
of Nevada on April 21, 2009 under the name Mokita Exploration, Ltd. (the “Company”). On February 27, 2014, there was
a change of control of the Company. On February 28, 2014, our board of directors and a majority of holders of the Company’s
voting securities approved a change of name of the Company to MediJane Holdings Inc. A Certificate of Amendment to effect the change
of name was filed and became effective with the Nevada Secretary of State on March 4, 2014. A Certificate of Correction was subsequently
filed with the Nevada Secretary of State on March 6, 2014 to correct a spelling error in the Company’s new name. These amendments
have been reviewed by FINRA and were approved for filing with an effective date of March 12, 2014. The name change became effective
with the Over-the-Counter Bulletin Board at the opening of trading on March 12, 2014 under our new ticker symbol “MJMD”.
On March 8, 2017 the Company filed an Amendment
to its Articles of Incorporation (the “Amendment”) with the Secretary of State of Nevada. As a result of the Amendment,
the Company changed its name with the State of Nevada from MediJane Holdings, Inc. to Stem Bioscience, Inc.
In May 2018 the Company again changed its
name to Phoenix Life Sciences International Limited. A Certificate of Amendment to effect the change of name was filed and became
effective with the Nevada Secretary of State on May 31, 2018. The name change was accepted by FINRA and became effective with the
Over-the- Counter Bulletin Board on November 2, 2018 with the trading symbol “PLSI”.
On February 27, 2014, after the change of
control, the Company became a sales and distribution company focused on cannabinoid infused products for the treatment of medical
conditions.
On January 5, 2015, the Company underwent
a change in control following the issuance of 276,000,000 common shares to Phoenix Bio Pharmaceuticals Corporation pursuant to
a license agreement. On November 4, 2015, these shares were exchanged for 2,000,000 Series B Preferred Shares.
The business was then changed to only focus
on Cannabidiol (CBD) products. CBD is a non-psychotropic cannabinoid that is not restricted as part of the U.S. Controlled Substances
Act (CSA), as defined under the 2014 U.S Farming Bill to be derivatives of the Industrial Hemp plant that contains less than 0.3%
tetrahydrocannabinol (THC). The company will contract out the manufacturing of the products. Phoenix Bio Pharmaceuticals Corporation
and other groups may manufacture our products under our license agreement.
The Company follows the accounting guidance
outlines in the Financial Accounting Standards Board Codification guidelines. The accompanying unaudited interim consolidated financial
statements have been prepared in accordance with generally accepted principles for interim financial information and with the items
under Regulation S-K required by the instructions to Form 10-Q. They may not include all information and footnotes required by
United States generally accepted accounting principles for complete financial statements. However, except as disclosed here in,
there have been no material change in the information disclosed in the notes to the financial statements for the year ended February
28, 2015 included in the Company’s annual report on Form 10-K|A filed with the Securities and Exchange Commission on March
4, 2019. The interim unaudited financial statements presented herein should be read in conjunction with those financial statements
included in the Form 10-K|A. In the opinion of Management, all adjustments considered necessary for a fair presentation, which
unless otherwise disclosed herein, consistent with normal re-occurring adjustments, have been made. Operating results for nine
months ended November 30, 2015 are not necessarily indicative results that may be expected for the year ended February 29, 2016.
Going Concern
These financial statements have been prepared
on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the
normal course of business. The Company’s total operating expenditure plan for the following twelve months will require significant
cash resources to meet the goals of its business plan. The continuation of the Company as a going concern is dependent upon the
continued financial support from its management, and its ability to identify future investment opportunities and obtain the necessary
debt or equity financing, and generating profitable operations from the Company’s future operations. These factors raise
substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include
any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might
be necessary should the Company be unable to continue as a going concern.
|
2.
|
Summary of Significant Accounting Policies
|
Basis of Presentation –
The financial
statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“US
GAAP”) and are expressed in U.S. dollars. The Company’s fiscal year end is February 28 or 29.
Basis of Consolidation
– The
consolidated financial statements include the accounts of Phoenix Life Sciences International Limited. All significant intercompany
balances and transactions have been eliminated in consolidation.
Stock Split
– on October
21, 2015 the Company’s Board of Directors declared a 1 for 10,000 reverse stock split on its common stock as of a
record date of October 22, 2015. The effect of the stock split decreased the number of shares of common stock outstanding
from 501,242,594 to 50,125. All common share and per common share data in these financial statements and related notes here
to have been retroactively adjusted to account for the effect of the stock split for all periods presented. The total number
of authorized common shares on the par value thereof was not changed by the split.
Use of Estimates –
The preparation
of financial statements in conformity with US GAAP requires management to make 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 and
the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions
related to the deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts,
historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that
are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely
from the Company’s estimates. To the extent there are material differences between the estimates and the actual results,
future results of operations will be affected.
A significant item that requires management’s
estimates and assumptions is the valuation of intangible assets, valuation allowances for income tax, valuation of derivatives
instruments and accrued liabilities, among others. Although management believes these estimates are reasonable, actual results
could differ from these estimates.
Cash and cash equivalents –
The Company
considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.
At November 30, 2015 and February 28, 2015, the Company did not hold any cash equivalents.
Accounts receivable
–
Accounts receivable consists of trade accounts arising in the normal course of business. No interest is charged on past due
accounts. Accounts receivable are carried at the original invoice amount less a reserve for doubtful receivables based on a
review of all outstanding amounts on a monthly basis.
Basic and Diluted Net Loss per Share –
The Company computes net loss per share in accordance with ASC 260,
Earnings per Share
. ASC 260 requires presentation
of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by
dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator)
during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury
stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for
the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants.
Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. At February 28, 2015 and November 30, 2015,
the Company had outstanding stock options outstanding, the Company does not deem these options to be dilutive as the exercise price
exceeds the current fair market value of the Company’s common stock. At November 30, 2015 and 2014, the Company had did not
have potentially dilutive shares outstanding.
Financial Instruments –
Pursuant to
ASC 820,
Fair Value Measurements and Disclosures
, an entity is required to maximize the use of observable inputs and minimize
the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent,
objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the
fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes
the inputs into three levels that may be used to measure fair value:
Level 1 –
Level 1 applies to assets
or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2 –
Level 2 applies to assets
or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted
prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient
volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable
or can be derived principally from, or corroborated by, observable market data.
Level 3 –
Level 3 applies to assets
or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of
the fair value of the assets or liabilities.
The Company’s financial instruments
consist principally of cash, accounts receivable, accounts payable and accrued liabilities, amounts due to related parties, and
convertible debenture.
Pursuant to ASC 820, the fair value of our financial instruments are determined based on “Level 1”
inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all of our
other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
Derivative Financial Instruments –
The
Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks.
The Company reviews the terms of the common
stock, warrants and convertible debt it issues to determine whether there are embedded derivative instruments, including embedded
conversion options, which are required to be bifurcated and accounted for separately as derivative financial instruments. In circumstances
where the host instrument contains more than one embedded derivative instrument, including the conversion option, that is required
to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.
Bifurcated embedded derivatives are initially
recorded at fair value and are then revalued at each reporting date with changes in the fair value reported as non-operating income
or expense. The Company uses a Black-Scholes model for valuation of the derivative. When the equity or convertible debt instruments
contain embedded derivative instruments that are to be bifurcated and accounted for as liabilities, the total proceeds received
are first allocated to the fair value of all the bifurcated derivative instruments. The remaining proceeds, if any, are then allocated
to the host instruments themselves, usually resulting in those instruments being recorded at a discount from their face value.
The discount from the face value of the convertible
debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges
to interest expense, using the effective interest method.
Derivative instrument liabilities are classified
in the balance sheet as current or non-current based on whether net cash settlement of the derivative instrument could be required
within the 12 months of the balance sheet date.
Comprehensive Loss –-
ASC 220,
Comprehensive
Income
, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements.
As at November 30, 2014 and 2013, the Company has no items that represent a comprehensive loss and, therefore, has not included
a schedule of comprehensive loss in the financial statements.
Stock-based Compensation –
The Company
records stock-based compensation in accordance with ASC 718,
Compensation – Stock Based Compensation
and ASC 505-50
-
Equity-Based Payments to Non-Employees
. All transactions in which goods or services are the consideration received for
the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of
the equity instrument issued, whichever is more reliably measurable.
The fair value of each share based payment
is estimated on the measurement date using the Black-Scholes model with the following assumptions, which are determined at the
beginning of each year and utilized in all calculations for that year:
Risk-Free Interest Rate.
We utilized
the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected term of our awards.
Expected Volatility.
We calculate the
expected volatility based on a volatility index of peer companies as we did not have sufficient historical market information to
estimate the volatility of our own stock.
Dividend Yield.
We have not declared
a dividend on its common stock since its inception and have no intentions of declaring a dividend in the foreseeable future and
therefore used a dividend yield of zero.
Expected Term.
The expected term of
options granted represents the period of time that options are expected to be outstanding. We estimated the expected term of stock
options by using the simplified method. For warrants, the expected term represents the actual term of the warrant.
Forfeitures.
Estimates of option forfeitures
are based on our experience. We will adjust our estimate of forfeitures over the requisite service period based on the extent to
which actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized
through a cumulative catch-up adjustment in the period of change and will also impact the amount of compensation expense to be
recognized in future periods.
Revenue Recognition
–
The Company recognizes revenue in accordance with SEC Staff Accounting Bulletin Topic 13 when persuasive evidence of
an arrangement exists and delivery has occurred, provided the sale is fixed or determinable and collection is probable. The Company
assesses whether the sale is fixed and determinable based on the payment terms associated with the transaction. If a sale is based
upon a variable such as acceptance by the customer, the Company accounts for the sale as not being fixed and determinable. In these
cases, the Company defers revenue and recognizes it when it becomes due and payable.
The Company assesses
the probability of collection based on a number of factors, including past transaction history with the customer and the current
financial condition of the customer. If the Company determines that collection of a fee is not reasonably assured, revenue is deferred
until the time collection becomes reasonably assured. Significant management judgment and estimates must be made and used in connection
with the revenue recognized in any accounting period. Material differences may result in the amount and timing of our revenue for
any period if our management made different judgments or utilized different estimates.
Shipping and Handling costs
– shipping and handling costs are included in cost of sales in the Statements of Operations.
Recent Accounting Pronouncements –
The
recent accounting pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the
Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material
impact on its financial position or results of operations.
Reclassifications –
Certain amounts
in the prior period financial statements have been reclassified to conform with the current period presentation. These reclassifications
had no effect on previously reported losses, total assets or stockholders equity.
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3.
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Variable Interest Entity
|
The Company follows the guidelines in FASB
Codification of ASC 810 “
Consolidation”
which indicates “a legal entity that is deemed to be a business
need not be evaluated by a reporting entity to determine if the legal entity is a Variable Interest Entity (“VIE”)”
unless any one of four conditions exist:
–
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The reporting entity, its related parties, or both participated significantly in the design or redesign of the legal entity;
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–
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The legal entity is designed so that substantially all of its activities involve or are conducted on behalf of the reporting entity and its related parties;
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–
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The reporting entity and its related parties provide more than half of the total of the equity, subordinated debt, and other forms of subordinated financial support to the legal entity; or
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–
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The activities of the legal entity are primarily related to the securitizations or other forms of asset-backed financings or single-lessee leasing arrangements.
|
A VIE is an entity that either (a) has insufficient
equity to permit the entity to finance its activities without additional subordinated financial support or (b) has equity investors
who lack the characteristics of a controlling financial interest. A VIE is consolidated by its primary beneficiary. The primary
beneficiary has both the power to direct the activities that most significantly impact the entity’s economic performance
and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the
VIE. If we determine that we have operating power and the obligation to absorb losses or receive benefits, we consolidate the VIE
as the primary beneficiary, and if not, we do not consolidate. The Company has not identified any VIEs as of November 30, 2015.
Effective September 1, 2014, the Company changed
its method of computing amortization from a sales percentage method to the straight-line method for the intangible assets. An assessment
of useful life and / or discounted cash flow of the intangible asset is made and where the value is overstated the value is impaired.
The deferred tax assets or liabilities represent
the future tax benefits or cost of those differences. The Company’s principal deferred tax items arise from net operating
losses. Net operating losses approximate $18,600,000 which expire in the years 2030 through 2036. The net operating loss results
in a deferred tax asset of $2,790,000. As future earnings are uncertain, the Company has provided a valuation allowance for the
entire amount of the deferred tax asset.
The Company is required to evaluate the tax
positions taken in the course of preparing its tax returns to determine whether tax positions are “more likely than not”
of being sustained by the applicable tax authority “More likely than not” is defined as greater than a 50% chance.
The Company is delinquent on nearly all of its tax filings. As a result, there are presently no uncertain tax position and no reserves
for uncertain tax positions.
The Company has no unrecognized tax benefits
at February 28, 2015. The Company’s income tax returns are subject to examination by federal and state tax authorities. Due
to the failure to file its tax returns, all prior tax years are open to examination. The Company recognizes interest and penalties
associated with uncertain tax positions as part of the income tax provision and would include accrued interest and penalties with
the related tax liability in the balance sheet. There were no interest and penalties paid or accrued during the years ended February
28, 2015.
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6.
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License Agreement - Phoenix Bio Pharmaceuticals, Inc.
|
On March 14, 2014, the Company entered into
a License Agreement with Phoenix Bio Pharmaceuticals Corporation (“Phoenix Bio Pharm”) where Phoenix Bio Pharm has
granted exclusive rights to the Company for North America to exploit all presently owned and after-acquired intellectual property
rights and know-how of Phoenix Bio Pharm for certain medical cannabinoid products and delivery systems for the treatment and management
of illnesses. The term of the License Agreement is Ten (10) years. In consideration of the acquired license, the Company issued
26,000,000 shares of common stock to Phoenix Bio Pharm, valued at $13,000,000 based on the fair value of the assets acquired in
the license agreement.
On January 5, 2015, the Company entered into
an additional license agreement with Phoenix Bio Pharmaceuticals Corporation to expand the territories covered under its original
license agreement dated March 14, 2014. Under the terms of the additional license agreement, the Company acquired the marketing
rights to distribute products developed by Phoenix Bio Pharmaceuticals Corporation in Australia and New Zealand for ten years.
In exchange for the license, the Company has issued 250,000,000 restricted common shares at $0.016 per common share, for an aggregate
value of $4,000,000. This amount represents 33% over the market value on the date of execution of the license agreement being $3,000,000.
On July 8, 2015, the Company agreed to enter
into a new licensing agreement with Phoenix Bio Pharmaceuticals Corporation. This new agreement shall replace the previous licensing
agreements. The new licensing agreement shall be non-exclusive, CBD only licensing agreement with Phoenix Bio Pharmaceuticals Corporation.
This license agreement operates for a twenty (20) year period. Phoenix Bio Pharm has granted to the Company a license for the territory
of North America, Australia and New Zealand to exploit all presently owned and after-acquired intellectual property rights and
know-how of Phoenix Bio Pharm related to CBD based cannabinoid products and delivery systems for the treatment and management of
illnesses. Products falling under the license will include the following CBD products: transdermal patches, orally administered
extracts, concentrated extracts of vaporizers and inhalers, sublingual and buccal dispensing products and extraction technology,
suppository delivery systems, salves, creams, gels, lotions, and liquid extracts, and any product or active ingredients sourced
through Phoenix Bio Pharm or third party suppliers or licensors. The Company will also have the right to sublicense the rights
acquired pursuant to the license agreement and to use and develop copyrighted materials of Phoenix Bio Pharm for marketing and
distribution purposes.
In addition to the new licensing agreement,
on July 8, 2015 the Company has entered into an exchange agreement with Phoenix Bio Pharm where all existing common shares held
by Phoenix Bio Pharm (276,000,000) are exchanged for 2,000,000 Series B Preferred Shares, par value $0.0001. These preferred shares
are entitled to 100 votes for each share held, and convertible into 100 common shares per preferred share at any time at the discretion
of the holder.
As the Company has failed to meet projected
cash flows which underpin the valuation model of the License Agreement, the Company determined that the balance of License Agreement
should be impaired at February 29, 2015, and accordingly a total of $14,014,1899 was expensed as an impairment to the License Agreement
and paid in capital was reduced by $2,282,132 at year ended February 28, 2015.
On December 23, 2014, the Company entered
into a convertible promissory note for $1,200,000 with CannaVest Corp. The note represents $1,200,000 worth of raw material inventory
to be obtained from CannaVest Corp. to use in the Company’s cannabidiol product formulations. The note accrues simple interest
at a rate of 10% per annum and is due and payable in six months from the date of issue. The note cannot be prepaid. At any time,
the outstanding principal amount of this note and all accrued but unpaid interest under this note can be converted into common
shares at a price equal to the lesser of $0.02 per common share, the closing sale price, or the average of the lowest closing sale
prices of the Company’s common shares during the five trading day period immediately preceding the date of such determination.
Should the Company default on this convertible
promissory note, all outstanding obligations payable by the Company are immediately due and payable. In addition, CannaVest Corp.
may exercise any other right, power or remedy permitted by law. Further, upon even of default, all unpaid obligations under this
note shall bear interest at the rate of 12% per annum.
Warrant Agreement
In connection with the convertible promissory
note dated December 23, 2014, the Company subsequently issued warrants to purchase 20,000,000 common shares at an exercise price
of $0.02 per common share to Kisha Spendthrift Trust, an affiliate of CannaVest Corp. These warrants were issued on January 6,
2015. In exchange for these warrants, the Company shall have access to the technical and management staff of CannaVest Corp. for
the development of products to be manufactured from cannabidiol sourced from CannaVest Corp.
On March 17, 2014, MediHoldings, Inc. (“MediHoldings”),
a Colorado corporation, was formed as a wholly-owned subsidiary of the Company.
On June 27, 2014, MediSales (CA), Inc. (“MediSales”),
a California corporation, was formed as a wholly-owned subsidiary of the Company.
Both these subsidiaries as at November 30,
2015 had not traded and were inactive.
|
9.
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Related Party Transactions
|
Martin Tindall
Mr. Martin Tindall, assists the Company with
business development activities through the Advisory Services Agreement with Kronos as discussed below. Mr. Tindal serves as the
CEO of Kronos. Additionally, Mr. Tindal has provided new product development services through a New Product Development Agreement
with Phoenix Pharms Capital Corporation, as discussed below. Mr. Tindall services as CFO and a Director of Phoenix Pharms Capital
Corporation. Mr. Tindall also serves as a director of Phoenix Bio Pharmaceuticals Inc.
Kronos International Investments Ltd. (“Kronos”)
Sublease Agreement:
Effective March
1, 2014, the Company entered into a Sublease Agreement with Kronos for a four (4) year term. Kronos’s CEO, Martin Tindall
also provides advisory services to the Company. The monthly sublease rent is $2,500 per month. During the year ended February 29,
2016, the Company paid Kronos $7,500 in rent expense, and had previously paid security deposit of $1,250. In June 2015, the sublease
was cancelled and the security deposit of $1,250 was offset against amounts owed to Kronos for advisory service fees.
Advisory Services
:
Effective March 1, 2014, the Company engaged Kronos to provide Advisory Services for a monthly retainer fee of $10,000 per month.
The advisory services include and are not limited to accounting and corporate compliance, business development and strategic planning
services, corporate advisory and operational oversight. Between March 1, 2014 and February 28, 2015, expenses related to the Advisory
Services totaled $120,000. For the year March 1, 2015 and November 30, 2015, expenses related to the Advisory Services, provided
by the CEO of Kronos, Martin Tindall with respect to business development of cannabidiol products that the Company intends to market,
were $62,500.
Phoenix Pharms Capital Corporation (“Phoenix
Pharms”)
Related Party Loan:
On September 18,
2014, the Company advanced Phoenix Pharms a total of $85,000 as a short term loan. As of November 30, 2015, the outstanding balance
due the Company on this related party loan is $54,324
Russell Stone: Mr. Russell Stone, the Company’s
Chief Executive Officer, holds approximately 14% of the outstanding common shares of Phoenix Pharms Capital Corporation indirectly
through a trust.
Lewis “Spike” Humer
:
Mr. Humer, a director of the Company, serves
as CEO and a director of Phoenix Bio Pharmaceuticals and CEO and a director of Phoenix Pharms Capital Corporation. As of August
2014, the Company began paying Mr. Humer a consulting fee of $1,500 per week. As of November 30, 2015, the Company has accrued
a related party payable to Mr. Humer of $75,260.
On September 22, 2015, the Company amended
and restated its Articles of Incorporation to create and authorize four (4) classes of preferred stock. The Company has authorized
Series A, Series B, Series C and Series D Preferred Stock (the “Preferred Stock”).
Series A Preferred Stock:
Series A preferred shares have a par value
of $0.0001, and are convertible into common shares at $1.00 per common share. Series A preferred shares rank senior to common stock
with respect to the right to participate in distributions or payments in the event of liquidation, dissolution, or winding up of
the Company. Holders of Series A preferred shares are entitled to a preferred return equal to the purchase price paid for such
Series A preferred shares. Series A preferred shares do not have any voting rights.
Holders of Series A preferred shares are not
entitled to preemptive rights to purchase stock in future stock offerings of the Company. Holders of Series A preferred shares
have the right to register their unregistered stock when either the Company or another investor initiates a registration of the
Company’s securities, and they have the right of co-sale. Holders of Series A preferred shareholders are not required to
sell all of their Series A preferred shares on the same terms or conditions of a co-sale by a majority shareholder. There is no
right of first refusal for Series A preferred shares.
Series B Preferred Stock:
Series B preferred shares have a par value
of $0.0001, and are convertible into common shares at a rate of 100 common shares per preferred share. Series B preferred shares
are entitled to cast 500 votes for each preferred share owned. Series B preferred shares are senior to common shares with respect
to the right to participate in distributions or payments in the event of any liquidation, dissolution, or winding up of the Company,
and holders of Series B preferred shares are entitled to receive a preferred return equal to the purchase price paid for such Series
B preferred stock.
Holders of Series B preferred shares are entitled
to preemptive rights to purchase stock in future offerings, and have the right to register their unregistered stock when either
the Company or another investor initiates a registration of the Company’s securities. Holders do not have the right of co-sale,
and are not required to sell all of their Series B preferred shares on the same terms or conditions of a co-sale by a majority
shareholder. If any Series B preferred shareholder wishes to sell, transfer or otherwise dispose of any or all of their Series
B preferred shares, the other Series B preferred shareholders shall not have a prior right to buy such Series B preferred shares.
Series C Preferred Stock:
Series C preferred shares have a par value
of $0.0001, and are convertible into common shares at a rate of $1.00 per common share. Series C preferred shares are not entitled
to any voting rights, unless such vote is to modify rights, preferences, privileges and restrictions granted to and imposed on
Series C preferred shares. Series C preferred shares are senior to common shares and Series B preferred shares with respect to
the right to participate in distributions or payments in the event of any liquidation, dissolution, or winding up of the Company,
and holders of Series C preferred shares are entitled to receive a preferred return equal to the purchase price paid for such Series
C preferred, which is deemed to be $600,000. If the closing price per share of the Company’s common shares is less than $1.00
for a period of five consecutive trading days, the YP Holdings will have the one-time right, exercisable at its discretion, to
require that the conversion price of the shares become equal to 75% of the average closing bid price per shares for the five consecutive
trading days immediately preceding the date that YP Holdings notifies the Company that it wishes to convert some or all of its
Series C preferred shares into common shares. The reset shall not be available if the proceeds of the sale of converted common
shares equals or exceeds $750,000. Should proceeds of the sale of converted common shares equal or exceed $1,000,000, any unconverted
Series C preferred shares shall be returned to the Company for retirement. Converted common shares are subject to a leak-out agreement,
and no more than 50,000 common shares may be sold by YP Holdings in any one month.
Holders of Series C preferred shares are entitled
to receive a preferred return equal to 10% of the gross cash sales income received in the ordinary course of business. Holders
are not entitled to preemptive rights to purchase shares in future offerings of the Company.
Holders of Series C preferred shares have
the right to register their unregistered shares when either the Company or another investor initiates a registration of the Company’s
securities. Holders have the rights of co-sale, and are not required to sell all of their Series C preferred shares on the same
terms or conditions of a co-sale by a majority shareholder. If any Series C preferred shareholder wishes to sell, transfer, or
otherwise dispose of any or all of their Series C preferred shares, other Series C preferred shareholders shall not have a prior
right to buy such shares.
Series D Preferred Stock
Series D preferred shares have a par value
of $0.0001, and are convertible into common shares at a conversion rate of $1.00 per common share. Series D preferred shares rank
senior to common shares and the Series B preferred shares. In the event of any liquidation, dissolution, or winding up of the Company,
holders of Series D preferred shares shall be entitled to receive a preferred return equal to the purchase price paid for such
Series D preferred shares after payment of the preferred returns relating to the Series A and C preferred shares. Series D preferred
shares are not entitled to voting rights.
Holders of Series D preferred shares shall
be entitled to receive a preferred return equal to 10% of the Gross Cash Sales Income received in the ordinary course of business.
Upon issue of the dividend, the value of such shares shall be deemed to be retired. Holders of Series D preferred shares are not
entitled to preemptive rights to purchase stock in future offerings of the Company. Holders of Series D preferred shares have the
right to register their unregistered stock when either the Company or another investor initiates a registration of the Company’s
securities. Holders of Series D preferred shares have the right of co-sale, but they are not required to sell all of their Series
D preferred shares on the same terms or conditions of a co-sale by a majority shareholder.
The Company has authorized 990,000,000 shares
of its common stock, $0.001 par value. On November 30, 2015, following the reverse share split, there were 24,512 shares of common
stock issued and outstanding and 31,154 (311,540,534 pre-split) shares of common stock reserved for issuance.
Effective August 23, 2013, the Company filed
a Certificate of Change with the Nevada Secretary of State to give effect to a forward split of our authorized, issued and outstanding
shares of common stock on a 10 new for 1 old basis and, consequently, an increase to our authorized share capital from 99,000,000
to 990,000,000 common shares, with a par value of $0.001 per share.
On October 21, 2015, the Company effectuated
a 1 for 10,000 reverse split on its common stock as of a record date of October 22, 2015. As a result, the 458,892,294 outstanding
shares as of the record date were reversed to 45,935 shares. 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.
The total number of authorized common shares and par value was not changed for the split.
On February 27, 2014, the Company issued 500
(5,000,000 pre-split) shares to its Chief Executive Officer, who agreed to retire the 500 common shares and return them to the
unissued, authorized common shares of the Company in exchange for a stock option.
On March 13, 2014, the Company issued 20 (200,000
pre-split) shares of its restricted common stock to GoKush, Inc. as described above. On July 1, 2014, these restricted shares were
issued.
On March 14, 2014, the Company issued 2,600
(26,000,000 pre-split) shares of its restricted common stock to Phoenix Bio Pharm as described above. On July 1, 2014, these restricted
shares were issued.
On January 23, 2015, the Company issued 25,000
(250,000,000 pre-split) shares of its restricted common stock to Phoenix Bio Pharm as described in above.
On December 9, 2014, the Company issued 500
(5,000,000 pre-split) shares of its common stock as compensation under two consulting agreements, each for one-year of marketing
services. The Company values the issuance of shares at $119,666, which will be amortized over the twelve months beginning November
2014 to October 2015.
On December 16, 2014, the Company issued 667
(6,666,667 pre-split) shares of its common stock to YP Holdings for $600,000 under a Securities Purchase Agreement as discussed
below.
During the year ended February 28, 2015, the
Company issued 1,002 (10,020,000 pre-split) shares of common stock to Typenex from the conversion of a total principal amount of
$38,500 under a Convertible Notes Agreement as discussed in Note 13 below.
Between March 1, 2015 and August 31, 2015,
the Company issued 9,756 (97,560,000 pre-split) shares of common stock to Typenex from the conversion of a total principal amount
of $54,000 under a Convertible Notes Agreement and 3,157 (31,575,175 pre-split) shares of Common Stock to Typenex related to true-up
notices received from the noteholder, as discussed in Note 13 below.
On August 14, 2015, Phoenix Bio Pharm returned
27,600 (276,000,000 pre-split) shares of common stock to the Company to hold in safe keeping for an exchange into 2,000,000 shares
of preferred stock.
As at November 30, 2015 there were 50,171
common shares on issue.
2014 Stock Awards Plan:
Effective June
4, 2014, the Board of Directors adopted the 2014 Stock Awards Plan (the “Plan”) under which the Company is authorized
to grant employees, directors, and consultants (“Participant”) incentive and non-qualified stock options. Pursuant
to the Plan, the Company is authorized to grant an aggregate of 1,000 (10,000,000 pre-split) stock options to purchase common stock
of the Company. The stock option price and vesting terms are determined by the Board of Directors or Compensation Committee (the
“Committee”), and evidenced by a stock option agreement extended to the Participant. The options granted generally
terminate five years from the date of issuance.
Effective February 27, 2014, the Company’s
former CEO and Director was granted incentive stock options to purchase 500 (5,000,000 pre-split) common shares of the Company
at $3,400 ($0.34 pre-split) per common share valued at $551,363. Immediately upon the grant of the option, options to purchase
250 (2,500,000 pre-split) common shares vested. The option to purchase the remaining 2,500,000 common shares shall vest in equal
amounts over the next three years ending February 27, 2017. As of February 18, 2015, the unvested options totaling 2,500,000 were
cancelled upon resignation by the holder. The remaining 250 (2,500,000 pre-split) vested options are exercisable until February
17, 2016.
The following table describes stock options
outstanding and exercisable at November 30, 2015:
Options Outstanding and Exercisable
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Options Outstanding
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Options Exercisable
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Range of Exercise Prices
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Number
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Price
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Life
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Number
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Price
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Life
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|
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$
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3,400
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250
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$
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3,400
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.25
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250
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$
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3,400
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.25
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250
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250
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13.
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Convertible Promissory Note
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On June 24, 2014, the Company entered into
a securities purchase agreement with Typenex Co-Investment, LLC, a Utah limited liability company. Under this agreement, the Company
has issued a secured convertible promissory note in the original principal amount of $1,105,000, deliverable in eleven tranches
(the “Typenex Note”). On the closing date, Typenex delivered the initial cash purchase price of $150,000, plus any
interest, costs, fees or charges accrued under the Typenex Note, including the original issue discount of $20,000. The outstanding
principal and accrued and unpaid interest on the Typenex Note is convertible at any time into shares of common stock at a conversion
price of $1.00, subject to adjustment as described below (the “Lender Conversion Price”). As of June 24, 2014, the
Company evaluated the Beneficial Conversion Feature under this note and determined as of June 24, 2014, there was no beneficial
conversion feature as the Lender Conversion Price exceeded the fair market value of the Company’s common stock.
As of November 30, 2014, the company has received
net proceeds of $135,000 related to this convertible promissory note, representing $150,000 less financing costs of $15,000.
Each subsequent tranche will be in the amount
of $85,000, plus any interest, costs, fees or charges accrued thereon under the terms of the Typenex Note, including the original
issuer discount of $8,500. Each tranche will be accompanied by its own secured investor note (the “Investor Notes”).
The Company has agreed to pay $5,000 to cover Typenex’s legal fees, accounting costs, due diligence, monitoring and other
transaction costs in connection with the purchase and sale of the Typenex Note. All loans received bear an interest rate of 10%
per annum. The loan is due 23 months after the initial cash purchase price is delivered to the Company. Typenex has pledged a 40%
membership interest in Typenex Medical, LLC to secure its obligations under all of the Typenex Notes.
A warrant to purchase shares of the Company
has been issued to Typenex as of June 24, 2014. This warrant grants Typenex the ability to purchase a number of fully paid and
non-assessable shares of the Company’s stock, par value $0.001, equal to $552,500 divided by the market price. This warrant
is issued pursuant to the terms of the securities purchase agreement as described above.
Provided there is an outstanding balance,
the Company will pay an installment amount equal to $61,388.89 plus any accrued and unpaid interest on the installment due date,
which is six months after the initial loan disbursement. This installment amount is the maximum that must be paid on any given
installment due date, and is limited by the amounts owed. This amount can be converted at the lesser of either the lender conversion
price or at 70% of the average of the three lowest closing bid prices in the 20 trading days immediately preceding the applicable
conversion. Should the average trading price be less than $0.35 during any such period, then the conversion factor will be reduced
to 65% for all future conversion, additionally the conversion price will be reduced by 5% if the Company’s common stock is
not available for DWAC. Should the Company decide to prepay this amount, there is a prepayment premium equal to 125% of the outstanding
balance of the Typenex Note. Should the prepayment premium not be paid within 2 days of the prepayment notice, the Company forfeits
its right to prepay the Typenex Note.
Under this agreement, Typenex has the right
at any time after the purchase price date until the outstanding balance has been paid in full to convert any or all of the outstanding
balance into shares of the Company’s common stock under the following formula: the number of shares issued equals the amount
being converted divided by $1. These shares must be delivered to Typenex within three trading days of the conversion notice being
given to the Company. Should any shares be sold to Typenex or any third party at a value that is less than the effective lender
conversion price, then the lender conversion price will be reduced to equal such lower issuance price. The effective lender conversion
price will also be adjusted as needed upon any forward or reverse split of the Company’s shares. Should the Company fail
to deliver the shares in a timely manner, a late fee of the greater of $500 per day and 2% of the applicable lender conversion
share value rounded to the nearest multiple of $100 will be assed for each day after the third that the Company is late (though
not exceeding 200% of the applicable lender conversion share value.
In the event of a default, the Typenex Note
may be accelerated by Typenex by providing written notice to the Company. The outstanding balance is immediately due and payable
at the greater of the outstanding balance divided by the installment conversion price, or the default effect, which is calculated
by multiplying the conversion eligible outstanding balance by 15% for each major default or 5% for each minor default and then
adding the resulting product to the outstanding balance as of the date of default. In addition, an interest rate of the lesser
of 22% per annum (or the maximum rate permitted under law) will be applied to the outstanding balance. Typenex is prohibited from
owning more than 4.99% of the Company’s outstanding shares, unless the market capitalization of the Company’s common
stock is less than $10,000,000, in which case Typenex is prohibited from owning more than 9.99% of the Company’s outstanding
shares.
On a date that is 23 trading days from each
date that the Company delivers conversion shares to Typenex, there is a true-up date in which the Company will deliver additional
shares if the installment conversion price on that date is less than the installment conversion price used in the applicable installment
notice. These additional shares will be equal to the difference between the number of shares that would be delivered to Typenex
at the time of the true-up date and the amount originally delivered.
Notice of Default – on January 9, 2015,
the Company received a Notice of Default from Typenex under the Convertible Promissory Note described in Note 12 above. In the
letter, the noteholder described two major defaults where the Company failed to meet its obligations under the Typenex Note. The
first default was triggered on December 16, 2014 related to a request from the noteholder to increase the number of shares reserved
for issuance under the Typenex Note on the books of the Company’s transfer agent. The second default was triggered on December
27, 2014, when the Company failed to make its first installment payment of $61,888.89 according to the terms of the Typenex Note.
Each default triggered a penalty of 115% of the then outstanding principal and accrued and unpaid interest and triggers the interest
rate to 22%. As of January 9, 2015, the outstanding principal, accrued interest and accrued penalties on the Typenex Note was $239,483.61.
On January 23, 2015, the Company satisfied its first default by instructing its transfer agent to reserve a total of 5,092 (50,925,000
pre-split) shares of common stock covering the potential conversion of the original principal value of the Typenex Note ($1,100,000)
plus common shares issuable upon the exercise of warrants underlying the Typenex Note. On February 12, 2015, the Company received
a notice from Typenex waiving the penalties on the December 16, 2014 default and waived $26,755.16 of penalties imposed on December
16, 2014. Under the terms of the Typenex Note, the Lenders Conversion Price will reset to 60% of the average of the three lowest
closing bid prices of the Company’s common stock in the 20 days prior to conversion. During the quarter ended August 31,
2015, the Company re-evaluated the Notice of Default and determined that it had previously recorded a beneficial conversion feature
incorrectly. The Company has computed a Derivative liability effective December 2014 and has corrected its statements as of February
28, 2015 to reflect this accounting treatment. As of February 28, 2015 and November 30, 2015, the Derivative Liability on the
Typenex Note was $169,868 and $143,335, respectively.
On February 3, 2015, the Company exercised
its borrower offset right under the Typenex Note. Through this offset right, the Company is entitled to deduct and offset any amount
owing by Typenex under the initial securities purchase agreement dated June 24, 2014 from any amount owed by the Company under
the note. The combined balance of the secured investor notes and the investor notes as of the January 28, 2015 offset date was
$890,800. In addition, the note balance prior to the offset included $85,000 of unearned original issue discounts.
In conjunction with the Company’s exercise
of its offset right, the Company and Typenex each hereby acknowledge that the secured investor notes and the investor notes were
offset against the Company balances owed under the note as of the offset date, and as a result thereof, each of the secured investor
notes and the investor notes is deemed to have been paid in full and are now cancelled and terminated and the Company balance owed
under the note has been reduced to $218,028.47 as of the offset date. Additionally, the Company specifically acknowledges that
Typenex has no further obligations under any of the secured investor notes and investor notes.
Further, the Company acknowledges that the
investor pledge agreement, dated June 24, 2014, and all security interests granted thereunder with respect to the collateral (as
defined in the investor pledge agreement have terminated and all such security interests shall be deemed released.
Notice of Conversion
– Between
March 1, 2015 and August 31, 2015 the Company has received conversion notices from its noteholder on the Typenex Note to convert
principal on the Typenex Note into shares of the Company’s Common Stock at a market price as defined by the Typenex Note.
The table below lists the conversion activity and the shares of common stock issued pursuant to each conversion:
Date of Notice
|
|
|
Principal
|
|
|
Market Price*
|
|
|
Conversion Shares
|
|
|
True Up Shares
|
|
|
Total Shares Issued
|
|
March 2, 2015
|
|
|
$
|
14,000
|
|
|
$
|
0.071788
|
|
|
|
1,005
|
|
|
|
—
|
|
|
|
1,005
|
|
March 31, 2015
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,204
|
|
|
|
2,204
|
|
May 14, 2015
|
|
|
$
|
15,000
|
|
|
$
|
0.203395
|
|
|
|
2,098
|
|
|
|
953
|
|
|
|
3,051
|
|
August 10, 2015
|
|
|
$
|
25,000
|
|
|
$
|
0.139860
|
|
|
|
3,496
|
|
|
|
—
|
|
|
|
3,496
|
|
Total
|
|
|
$
|
54,000
|
|
|
|
|
|
|
|
6,599
|
|
|
|
3,157
|
|
|
|
9,756
|
|
*Market Price as defined by the
Typenex Note.
All shares and Market Price in
the above table are stated to reflect the 10,000 to 1 reverse stock split.
At August 31, 2015 and February
28, 2015, convertible notes payable included the following:
|
|
November 30, 2015
|
|
|
February 28, 2015
|
|
Outstanding principal balance on Typenex Note:
|
|
$
|
77,500
|
|
|
$
|
131,500
|
|
Unamortized original issue discount
|
|
|
(7,650
|
)
|
|
|
(12,870
|
)
|
Accrued interest
|
|
|
97,687
|
|
|
|
76,118
|
|
Net Convertible Notes Payable
|
|
$
|
167,537
|
|
|
$
|
194,748
|
|
On August 29, 2014, the company entered into
a Promissory Note with YP Holdings, LLC for gross proceeds $100,000 as an advance towards the Securities Purchase Agreement dated
September 17, 2014 described in Note 13 (the “YP Note”). The YP Note matures in 60-days and bears interest of 12% per
annum. During the nine months ended November 30, 2014, the Company recorded $18,000 in financing fees related to the YP Note. On
September 17, 2014, the YP Note converted to equity in connection with the Securities Purchase Agreement dated September 17, 2014
as discussed below. The Company has no further obligation under the YP Note.
|
15.
|
Securities Purchase Agreement
|
On September 17, 2014, the Company entered
into a securities purchase agreement with YP Holdings, LLC. YP Holdings, LLC has no material relationship with the Company other
than with respect to this agreement.
Under this agreement, the purchasers will
be purchasing units of one common share and two warrants to purchase common shares for $0.09 per unit, for a total of $600,000.
The common shares have a par value of $0.001 per share. The warrants are exercisable for five years from the date of issuance and
shall have an initial exercise price equal to $0.20. As a result of this agreement, the Company will issue 667 (6,666,667 pre-split)
common shares and 1,333 (13,333,334 pre-split) warrants to the purchasers. On August 29, 2014 and September 17, 2014, the Company
received gross proceeds of $100,000 and $500,000, respectively and has recorded financing fees of $18,000 and $52,000, related
to this agreement. The Company has valued these warrants using the Black Scholes option pricing model and has recorded expense
related to the issuance of these warrants totaling $552,500 during the year ended February 28, 2015.
The warrants can be exercised by paying the
price for shares as stipulated by the warrant, or through cashless exercise, through which the purchaser will be issued a number
of shares equal to the number of warrant shares applied to the subject exercise multiplied by the current market price on the date
of conversion minus the exercise price on that date. This total is then divided by the current market price on the date of conversion.
The cashless exercise may only be exercised after six months have passed from the original issuance of the warrants.
The purchaser has waived the clause prohibiting
conversion of warrants into common shares if that would result in the purchaser owning in excess of 4.99% of the outstanding shares.
A second clause prohibits the conversion of warrants if the purchaser owns in excess of 9.99% of the outstanding common shares.
This clause can be waived by the purchaser providing notice of waiver.
The Company has agreed to pay a flat $20,000
to YP Holdings, LLC to reimburse them for the fees and expenses incurred by it in connection with its due diligence review of the
Company and the preparation, negotiation, executive, delivery and performance of the agreement.
The two parties also entered into a registration
rights agreement. Under this agreement, the Company will prepare and file a registration statement on Form S-1 in order to register
all shares issued under the securities purchase agreement. The Company will keep the registration statement continuously effective
for a period of two years following the effective date of the registration statement. The Company will pay all reasonable fees
and expenses incurred with respect to this agreement. Unless previously agreed to in writing, the Company may not register any
shares other than those intended to be sold under this agreement.
Should the Company fail to comply with the
registration rights agreement, the Company agrees to pay liquidated damages to YP Holdings, LLC equal to 3% of the purchase price
of the common shares paid by the purchaser for the first 30 day period, and 2% of such purchase price for each subsequent 30 day
period. These payments are payable upon demand in cash.
Pursuant to the registration rights agreement,
the Company agreed to several lock-up agreements between itself and four shareholders of the Company: Phoenix Bio Pharmaceuticals
Corporation, Ronald Lusk, Lewis Humer, and Caduceus Industries LLC. Under these agreements, each shareholder has agreed that they
will not offer, pledge, sell, contract to sell, grant any options for sale or transfer, distribute or dispose of, directly or indirectly,
any shares of the Company for a 90 day period following the date that the registration statement is declared effective.
Additionally, on September 16, 2014, the Company
issued warrants to purchase 53 (533,333 pre-split) common shares to consultants for services rendered. The warrants expire five
years from the date of issuance and are exercisable for $0.20 per share. The Company has valued these warrants using the Black
Scholes option pricing model and has recorded expense related to the issuance of these warrants totaling $104,578 during the quarter
ended November 30, 2014.
|
16.
|
Corrections to Prior Financials As Filed
|
Due to a change in auditors and a subsequent
review of the accounting treatment surrounding the Typenex Notes, there were corrections of expenses related to the Derivative
Liability and Beneficial Conversion Feature recorded on the Typenex Notes for the year ended February 28, 2015 and the three months
ended May 31, 2015. The table below for the shows the effects on Net loss, earnings per share, and accumulated deficit for each
of the periods.
Item
|
Period
|
Net Loss
|
Earnings Per Share
|
Accumulated Deficit
|
Typenex Note
|
Year Ended February 28, 2015
|
205,522
|
(0.00)
|
205,522
|
Phoenix Bio Pharma
|
Year Ended February 28, 2015
|
5,514,189
|
(0.05)
|
7,166,667
|
Go Kush, Inc
|
Year Ended February 28, 2015
|
141,800
|
(0.00)
|
154,800
|
Accounts Payable
|
Year Ended February 28, 2015
|
157,167
|
(0.00)
|
165,000
|
Amendment to Amortisation
|
Year Ended February 28, 2015
|
(642,654)
|
|
|
Total
|
Year Ended February 28, 2015
|
5,376,024
|
(0.06)
|
7,691,989
|
|
|
|
|
|
Change in Derivative value
|
Three months ended May 31, 2015
|
(66,515)
|
(0.00)
|
(66,515)
|
Common Share Cancellation and Preferred
Share Issue:
On November 4, 2015, Phoenix Bio Pharmaceuticals Corporation’s offer to exchange 27,600 common shares for
2,000,000 Series B Preferred shares was accepted and 27,600 common shares were cancelled.
Common Share Issue
: On November 5,
2015 Cede & Co were issued 1,941 common shares to rectify a mistake that had been made when the share split was performed.
Common Share Cancellation and Preferred
Share Issue:
On February 18, 2016, 667 common shares issued to YP Holdings, LLC pursuant to a securities purchase agreement
were cancelled in exchange for 1,000,000 Series C Preferred shares. YP Holdings LLC then converted 2,000 of the preferred shares
to common shares which were issued by the Company.
Convertible Note Agreement
: On or about
January 25, 2016, the Company entered into an Amendment No. 1 to the Convertible Promissory Note executed by and between the Company
and CV Sciences, Inc (FKA Cannavest Corp. and referred to herein as “CVS”) dated December 23, 2014 (the “Note”),
whereby the company and CVS agreed to terminate the Note upon the Company’s return of five containers of raw hemp oil to
CVS. On or about June 1, 2016, the Company returned the entirety of the raw hemp oil to CVS, and the Note and all rights and obligations
thereunder would deemed fully satisfied.
Change of Auditor
: On September 21,
2016, the registrant dismissed Fruci & Associates II, PLLC as their registered independent public accountant. On September
21, 2016, the Company’s Board of Directors approved the engagement of BMKR, LLP to provide auditing services on a prospective
basis, and to perform a full audit of the Company’s books and records for the years ended February 29, 2016, February 28,
2017 and February 28, 2018.
Change of Name
: On March 8, 2017, the
Company filed an Amendment to its Articles of Incorporation (the “Amendment”) with the Secretary of State of Nevada.
As a result of the Amendment, the Company has changed its name with the State of Nevada from MediJane Holdings, Inc. to Stem Bioscience,
Inc.
Change of Name
: On May 31, 2018, the
Company filed an Amendment to its Articles of Incorporation (the “Amendment”) with the Secretary of State of Nevada.
As a result of the Amendment, the Company has changed its name with the State of Nevada from Stem Bioscience, Inc. to Phoenix
Life Science International Limited. On November 2, 2018 the symbol changed from MJMD to PLSI.
Merger
: Pursuant to the Agreement and
Plan of Merger, dated as of September 18, 2018 as (The “Merger Plan” by and between Phoenix Life Sciences International
Limited, a Nevada Corporation (the “Company”) and Phoenix Life Sciences International Limited, a Canadian Corporation
(“PLSI CA”), the Company completed its merger with PLSI CA, with the Company as the surviving entity.
Consolidation of Activities
: On September
18, 2018, the Company’s Board of Directors announced the finalized consolidation activities of Phoenix Life Sciences International
Limited with Stem Biosciences, Inc., Blue Dragon Ventures, and the MediJane Brand, and that the Company’s common stock would
trade publicly under the symbol MJMD, subsequently on November 2, 2018 this changed to PLSI.
Cancellation of Pref B Shares
: On September
21, 2018, the Company announced it had obtained consent from the holder, Phoenix Bio Pharmaceuticals Corporation for the cancellation
of 2,000,000 Preferred Series B shares in the Company in connection with the restructure of the Company and merger with Phoenix
Life Sciences International Limited, a Canadian Corporation.
Resignation of Director
: On September
22, 2018, the Company’s Board of Directors accepted the resignation of Russell Stone from his position as a Director.
Convertible Note retired
: On or about
June 24, 2014, the Company entered into a Convertible Promissory Note with a face value of $1,105,000 (the “Note”)
by and between the Company and Typenex Co-Investment, LLC (“Typenex”). On or about April 19, 2018, the Phoenix Life
Sciences International Ltd, a Canadian Corporation (“PLSI CA”) acquired the entirety of the Notes outstanding principal
and interest balance from Typenex. Upon the completion of the merger, that Note was conveyed to the Company.
Cancellation of Warrants
: On September
22, 2018, the Company’s Board of Directors resolved to deem the acquired Notes principal balance satisfied, and to terminate
the Note and any and all rights and obligations arising thereunder, including without limitation the cancellation of all Warrants
issued to Typenex under the Note.
Issuance of Common Stock
: On September
24, 2018, the Company issued 30,502,375 shares of common stock bearing the restricted legend without registration (the “Issued
Shares”). Of these, 29,802,375 shares were issued in reliance on Rule 802 under the Securities Act in a 1:1 share exchange
related to the merger of PLSI CA and the company as described above, and 700,000 shares were issued as compensation for services
rendered in reliance of Section 4(a)(2) of the Securities Act. All of the Issued Shares were issued in private transactions, and
the company received no proceeds from the Issued Shares.
Appointment of Directors
: On October
3, 2018, the following persons were appointed to the Board of the Company, Stephen Cornford, Martin Tindall as Chief Executive
Officer, Janelle Marsden as Managing Director and Geoffrey Boynton as Chief Financial Officer. Lewis “Spike” Humer
stepped down from his executive role but remains a Director.
Issuance of Stock for Services
: On
October 03, 2018, the Company agreed to issue 48,000 shares of restricted common stock to KHAOS Media Group as compensation for
services rendered in reliance of Section 4(a)(2) of the Securities Act for services previously rendered and invoiced between March
and December 2014.
Change of Symbol
: On November 2, 2018,
FINRA confirmed the name change and change of symbol to “PLSI”
Retirement of Preferred Stock
: On
November 9, 2018, the Company announced that 2,000,000 Series C Preferred Stock had been cancelled and all convertible debt had
been retired. There was no outstanding preferred stock on issue as at this day.
Issuance of Common Stock
: On December
4, 2018, the Company issued 229,600 common shares as part of settlement agreements.
Issuance of Common Stock
: On December
17, 2018, the Company issued 675,028 common shares which included 191,668 common shares as part of settlement agreements and 483,360
common shares issued as compensation for services rendered in reliance of Section 4(a)(2) of the Securities Act.
Issuance of Common Stock
: On January
11, 2019, the Company issued 500,600 common shares to YP Holding, LLC. as part of a settlement agreement.
Issuance of Common Stock
: On January
15, 2019 the Company issued 54,580 common shares which included 53,500 common shares as part of settlement agreements and 1,080
common shares issued as compensation for services rendered in reliance of Section 4(a)(2) of the Securities Act
Appointment of a Director
: On February
20, 2019 the Board of the Company appointed Michael Gobel, who has long and distinguished career in corporate finance in Australia,
as a non-executive Director.
Issuance of Common Stock
: On February
26, 2019 the Company issued 315,928 common share which included 5,460 common shares as part of settlement agreements, 126,750 common
shares issued as compensation for services rendered in reliance of Section 4(a)(2) of the Securities Act and 183,718 for cash consideration.
Item 2. Management’s Discussion and
Analysis of Financial Condition and Results of Operations
The Company was incorporated in the State
of Nevada on April 21, 2009, under the name Mokita Exploration, Ltd. On February 5, 2010, the Company filed a Certificate of Amendment
to the Articles of Incorporation changing our name to Mokita, Inc. On February 27, 2014, there was a change of control of the
Company. On February 28, 2014, our board of directors and a majority of holders of the Company’s voting securities approved
a change of name of the Company to MediJane Holdings Inc. A Certificate of Amendment to effect the change of name was filed and
became effective with the Nevada Secretary of State on March 4, 2014. A Certificate of Correction was subsequently filed with
the Nevada Secretary of State on March 6, 2014 to correct a spelling error in the Company’s new name. These amendments have
been reviewed by FINRA and were approved for filing with an effective date of March 10, 2014. The name change became effective
with the Over-the-Counter Bulletin Board at the opening of trading on March 10, 2014 under our new ticker symbol “MJMD”.
On March 8, 2017, the Company filed an Amendment
to its Articles of Incorporation (the “Amendment”) with the Secretary of State of Nevada. As a result of the Amendment,
the Company has changed its name with the State of Nevada from Medijane Holdings, Inc. to Stem Bioscience, Inc.
Subsequently, on May 31, 2018, the Company
filed an Amendment to its Articles of Incorporation (the “Amendment”) with the Secretary of State of Nevada. As a result
of the Amendment, the Company has changed its name with the State of Nevada from Stem Bioscience, Inc. to Phoenix Life Science
International Limited. The name change became effective with the Over-the-Counter Bulletin Board on November 2, 2018 with the symbol
changing to “PLSI”.
After the change of control on February 27,
2014, the Company became a medical delivery systems company with a pharmaceutical approach to cannabinoid treatment of various
illnesses with medical marijuana.
Recent Developments
With the merger by and between Phoenix Life
Sciences International Limited, a Nevada Corporation (the “Company”) and Phoenix Life Sciences International Limited,
a Canadian Corporation (“PLSI CA”), whereby the Company completed its merger with PLSI CA on September 18, 2018, with
the Company as the surviving entity, the Company will continue to pursue a pharmaceutical approach to cannabinoid treatment of
various illnesses with medical marijuana.
On October 10, 2018, the Company announced
it had received approval from the Vanuatu Investment Promotion Authority (VIPA) to establish operations in the Republic of Vanuatu
and manufacture botanical pharmaceutical products.
Consolidated Results of Operations
On March 1, 2014, the Company discontinued
its previous operations as an oil and gas enterprise to pursue its new operations as a medical marijuana sales and distribution
company. The results of operations for the three and nine months ended November 30, 2014 represent results of the new business.
The results of operations for the comparable period have been recorded as discontinued operations.
Revenues for the three months ended November
30, 2015 and 2014 were $0 and $17,936, respectively. Cost of sales for the three months ended November 30, 2015 and 2014 were $0
and $9,144, respectively. Revenues for the nine months ended November 30, 2015 and 2014 were $18,410 and $20,716 respectively.
Cost of Sales for the nine months ended November 30, 2015 and 2014 were $5,933 and $10,694 respectively. Revenues and related expenses
were primarily from sale of CBD products.
Amortization expense for the three ended November
30, 2015 and 2014 were $0 and 650,250. Amortization expense for the nine months ended November 30, 2015 and 2014 were $0 and $650,250
respectively. Amortization expenses relates to a license agreement.
Product development expense for the three
ended November 30, 2015 and 2014 were $0 and 65,365. Product development expenses for the nine months ended November 30, 2015 and
2014 were $100,000 and $80,356 respectively. Product development expenses in the 2014 period represent payments to Phoenix Bio
Pharm for the product development of branded products of the Company.
Sales and marketing expenses for the three
months ended November 30, 2015 and 2014 were $200 and $51,788 respectively. Sales and marketing
expenses for the nine months ended November 30, 2015 and 2014 were $14,545 and $199,710, respectively. The decrease in sales
and marketing expenses in the 2015 period are due primarily to activity in the 2014 period to grow the Company’s sales organization.
During the 2015 period, sales and marketing expenses represent continued efforts to promote the Company’s products.
Operations expenses for the three months ended
November 30, 2015 and 2014 were $1,304 and $46,162, respectively Operations expenses for the nine months ended November 30, 2015
and 2014 were $3,049 and $146,399, respectively. The decrease in operating expenses during the 2015 period are due to reduced activities
due to limited funded. During the 2015 period, operations expenses represent continued efforts to support the Company’s selling
organization.
General and administrative expenses for the
three months ended November 30, 2015 and 2014 were $1,147 and $109,419, respectively. General and administrative expenses for the
nine months ended November 30, 2015 and 2014 were $31,615 and $168,450. General and administrative expenses generally include costs
for running the Company’s administrative office.
Professional fees for the three months ended
November 30, 2015 and 2014 were $93,503 and $266,216, respectively. Professional fees for the nine months ended November 30, 2015
and 2014 were $311,220 and $437,945, respectively. Professional fees consist of cost of financing, legal, accounting, consulting
and advisory services. Included in professional fees during the nine months ended November 30, 2015 are $100,000 of non-cash expenses
related to consulting fees paid in stock.
Lease operating expenses for the three months
ended November 30, 2015 and 2014 were $0 and $11,685. Lease operating expenses for the nine months ended November 30, 2015 and
2014 were $7,500 and $26,685, respectively.
Other income and expenses for the three months
ended November 30, 2015 and 2014 were net expense of $63,897 and $5,812, respectively. Other income and expense for the nine ended
November 30, 2015 and 2014 were net expense of $107,386 and $562,793, respectively. The decrease in other income and expenses in
the 2015 periods from the 2014 periods are due to non-cash expenses related to the issuance of warrants on convertible securities
during the 2014 periods totaling $554,413.
Net loss for the three months ended November
30, 2015 and 2014 were $160,056 and $1,197,896, respectively. Net loss for the nine ended November 30, 2015 and 2014 were $563,246
and $2,262,566, respectively.
Net gain from discontinued operations for
the nine months ended November 30, 2014 was $722.
Liquidity and Capital Resources
At November 30, 2015, the Company had a cash
balance of $2,425 compared with $9,400 at February 28, 2015. The decrease in cash was cash used for operating expenses as described
above.
Cash flow from Operating Activities
.
During the nine months ended November 30, 2015, the Company used $183,666 in cash for operating activities for its current operations.
Cash flow from Investing Activities
.
During the nine months ended November 30, 2015, the Company received $8,770 for investing activities. Cash Flows from investing
activities in the period ended November 30, 2015 represents partial repayment of the Company’s loan to its affiliate Phoenix
Pharms Capital Corporation.
Cash flow from Financing Activities
.
During the nine months ended November 30, 2015, the Company received $42,350 from the issuance of convertible promissory notes
$125,571 from related parties. During the nine months ended November 30, 2014, the Company received proceeds of $375,925 from
the sale of its common stock, $135,000 from the issuance of convertible promissory notes payable, and $600,000 from a securities
purchase agreement.
Going Concern
We have not attained profitable operations
and are dependent upon the commencement of the sale of our products and obtaining financing
to increase the production and development of our products. For these reasons, our auditors
stated in their report on our audited financial statements that they have substantial
doubt that we will be able to continue as a going concern without further financing.
Future Financings
We will continue to rely on equity sales of
our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution
to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for
debt or other financing to fund planned acquisitions and exploration activities.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements
that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Critical Accounting Policies
Our financial
statements and accompanying notes have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis. The preparation of financial
statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses during the reporting periods.
We regularly evaluate the accounting policies
and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to
our financial statements. In general, management’s estimates are based on historical experience, on information from third
party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual
results could differ from those estimates made by management.
Use of Estimates
. The preparation
of financial statements in conformity with US GAAP requires management to make 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
and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions
related to the deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts,
historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses
that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely
from the Company’s estimates. To the extent there are material differences between the estimates and the actual results,
future results of operations will be affected.
Stock-based Compensation
. The Company
records stock-based compensation in accordance with ASC 718,
Compensation – Stock Based Compensation
and ASC 505-50
-
Equity-Based Payments to Non-Employees
. All transactions in which goods or services are the consideration received for
the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of
the equity instrument issued, whichever is more reliably measurable.
Revenue Recognition
. The Company recognizes
revenue in accordance with SEC Staff Accounting Bulletin Topic 13 when persuasive evidence of an arrangement exists and delivery
has occurred, provided the fee is fixed or determinable and collection is probable. The Company assesses whether the fee is fixed
and determinable based on the payment terms associated with the transaction. If a fee is based upon a variable such as acceptance
by the customer, the Company accounts for the fee as not being fixed and determinable. In these cases, the Company defers revenue
and recognizes it when it becomes due and payable. Up-front engagement fees are recorded as deferred revenue and amortized to
income on a straight-line basis over the term of the agreement, although the fee is due and payable at the time the agreement
is signed or upon annual renewal. Payments related to substantive, performance-based milestones in an agreement are recognized
as revenue upon the achievement of the milestones as specified in the underlying agreement when they represent the culmination
of the earnings process.
The Company assesses the probability of collection
based on a number of factors, including past transaction history with the customer and the current financial condition of the customer.
If the Company determines that collection of a fee is not reasonably assured, revenue is deferred until the time collection becomes
reasonably assured. Significant management judgment and estimates must be made and used in connection with the revenue recognized
in any accounting period. Material differences may result in the amount and timing of our revenue for any period if our management
made different judgments or utilized different estimates.
Recent Accounting Pronouncements
The recent accounting pronouncements did
not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there
are any other new accounting pronouncements that have been issued that might have a material impact on its financial position
or results of operations.
Contractual Obligations
As a
“smaller reporting company”, we are not required to provide tabular disclosure
obligations.