Phoenix
Life Sciences International Limited
Consolidated
Balance Sheets
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May 31,
2016
$
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February 29,
2016
$
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Unaudited
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Audited
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ASSETS
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Cash
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5,392
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7,591
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Notes receivable, related party
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239,852
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249,352
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Total Current Assets
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245,244
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256,943
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Total Assets
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245,244
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256,943
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LIABILITIES
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Current Liabilities
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Accounts payable and accrued liabilities
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503,253
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512,642
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Due to related parties
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267,219
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267,219
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Current Liabilities
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770,472
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779,861
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Convertible notes payable, net
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281,437
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193,306
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Derivative liability
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422,155
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397,512
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Total Liabilities
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1,474,064
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1,370,679
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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: 28,245 and 25,845 common shares, respectively
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28
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26
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Issued and outstanding Preferred shares
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Series B – 2,000,000
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200
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200
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Series C – 995,600 and 998,000, respectively
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100
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100
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Additional paid-in capital
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17,704,975
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17,704,977
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Accumulated deficit during the development stage
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(18,934,123
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)
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(18,819,039
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)
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Total Stockholders’ Equity (Deficit)
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(1,228,820
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)
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(1,113,736
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)
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Total Liabilities and Stockholders’ Equity
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245,244
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256,943
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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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May 31, 2016
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May 31, 2015
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Income Statement
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restated
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Revenues
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$
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—
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$
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2,435
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Cost of Sales
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—
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898
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Gross Profit
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—
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1,537
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Operating expenses
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Product development expense
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—
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30,000
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Sales and marketing expenses
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—
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8,447
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Operations expense
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—
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1,745
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General and administrative
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1,980
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15,388
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Professional fees
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330
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138,275
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Lease operating expenses
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—
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7,500
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Total operating expenses
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2,310
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201,355
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Loss before other expenses
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(2,310
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(199,818
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)
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Other income (expense)
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Interest Income
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1,113
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Interest Expense
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(85,696
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)
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(41,181
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)
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Discount Amortization
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(2,435
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)
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(46,049
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)
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Gain (loss) on derivative liability
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(24,643
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)
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66,515
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Total other expense
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(112,774
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(19,602
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Net loss
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(115,084
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(219,420
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)
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Basic and diluted loss per common share:
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Income (loss) from continuing operations
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(4.09
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(0.00
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)
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Basic and diluted loss per common share
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$
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(4.09
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$
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(0.00
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Weighted average shares outstanding - basic and diluted
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28,167
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391,408,944
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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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Three Months Ended
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May 31, 2016
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May 31, 2015
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net loss
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$
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(115,084
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)
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$
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(219,420
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)
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Adjustments to reconcile net loss to net cash used in operating activities:
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Amortization
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2,435
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—
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Non-cash amortization of discount on convertible notes payable
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—
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46,049
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Non-cash interest expense on convertible notes payable
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85,696
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41,181
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Non-cash stock option compensation
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—
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—
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Non-cash (gain) on derivative liability
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24,643
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(66,515
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)
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Changes
in operating assets and liabilities:
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Accounts receivable
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—
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2,187
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Inventory
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—
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5,821
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Accounts payable and accruals
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(9,389
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)
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117,835
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Net Cash provided by (used for) operating activities
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(11,699
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)
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(72,862
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)
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CASH
FLOWS FROM INVESTING ACTIVITIES:
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Related party notes receivable
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9,500
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8,907
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Net Cash Used in Investing Activities
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9,500
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8,907
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CASH FLOWS FROM FINANCING ACTIVITIES:
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Proceeds from notes payable
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—
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Due to related parties
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—
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60,000
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Net Cash Provided By Financing Activities
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—
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60,000
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Increase (Decrease) in Cash - continuing operations
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(2,199
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)
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(3,955
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)
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Cash - Beginning of Period - continuing operations
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7,591
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9,400
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Cash - End of Period - continuing operations
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$
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5,392
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$
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5,445
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Supplemental
disclosures
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Interest paid
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—
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—
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Income tax paid
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9,389
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—
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Non-cash issuance of stock for consulting agreements
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—
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—
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Non-cash issuance of stock for distribution agreement
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—
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—
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Non-cash issuance of stock for conversion of debt
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—
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29,000
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(The
accompanying notes are an integral part of these financial statements)
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1.
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Nature
of Operations and Continuance of Business
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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 29, 2016 included in the Company’s annual report on Form 10-K filed with the Securities
and Exchange Commission on March 13, 2019. The interim unaudited financial statements presented herein should be read in conjunction
with those financial statements included in the Form 10-K. 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 three months ended May 31, 2016 are not necessarily indicative results that may be expected for the year
ended February 28, 2017.
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.
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2.
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Summary
of Significant Accounting Policies
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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 and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
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. These companies have not traded and are inactive.
Stock
Split
– on October 21, 2015 the Company’s Board of Directors declared a One 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 May 31, 2016 and February 28, 2016, 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, 2016 and May 31, 2016, the Company had no outstanding stock options. At May 31, 2016 and 2015, 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 cash is 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 May 31, 2016 and 2015, 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.
We
account for share-based payments granted to non-employees in accordance with ASC Topic 505, “Equity Based Payments to Non-Employees.”
The Company determines the fair value of the stock-based payment as either the fair value of the consideration received or the
fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of the equity
instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either
(1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date
at which the counterparty’s performance is complete.
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 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.
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
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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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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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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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The
activities of the legal entity are primarily related to the securitizations or other forms of asset-backed financings or single-lessee
leasing arrangements.
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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 May 31, 2016.
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 $18,947,000 which expire in the years 2030
through 2037. The net operating loss results in a deferred tax asset of $2,842,000. 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 29, 2016. 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 29, 2016.
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6.
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CV
Sciences, Inc. FKA CannaVest Corp.
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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
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. As of February 28, 2017 all remaining product had been returned to CVS, as the inventory did not meet
quality standards and was returned for a reduction of the note balance.
It
was determined that the remaining inventory should be written off as at February 29, 2016.
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 May 31, 2016 had not traded and were inactive.
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8.
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Related
Party Transactions
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Martin
Tindall
Mr.
Martin Tindall, assists the Company with business development activities through the Advisory Services Agreement with Kronos as
discussed below. Mr. Tindall serves as the CEO of Kronos. Additionally, Mr. Tindall 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. No payments were made to Kronos for the period March 1, 2016 and May 31, 2016.
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. For the year March 1, 2015 and February 29, 2016, expenses
related to the Advisory Services were $120,000. There were no payments made for the period March 1, 2016 and May 31, 2016.
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. The loan bears
a simple interest rate of 8% and was due and payable on May 31, 2014. As of February 28, 2016, the Company has received principal
payments totaling $26,425 including cash payment of $15,900, and expense offset $10,525. As of February 28, 2016, accrued interest
on this loan is $2,687. As of May 31, 2016, the outstanding balance due the Company on this related party loan is $43,992.
Russell
Stone: Mr. Russell Stone, the Company’s Chief Operating Officer, holds approximately 14% of the outstanding common shares
of Phoenix Pharms Capital Corporation indirectly through a trust.
Lewis
“Spike” Humer
:
Mr.
Humer, the interim Chief Executive officer and 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 February 28, 2015, the Company has paid Mr. Humer $19,000 and has accrued a related party payable
to Mr. Humer of $27,000. During the year from March 1, 2015 to February 29, 2016, a further $81,000 was accrued to Mr. Humer.
There were no further accruals from March 1, 2016 to May 31, 2016.
The
Company has authorized 990,000,000 shares of its common stock, $0.001 par value. On February 29, 2016 there were 25,845 shares
of common stock on issue.
On
March 4, 2016, YP Holdings LLC converted 2,400 series C preferred stock to 2,400 shares of common stock.
As
at May 31, 2016, there were 28,245 shares of common stock issued and outstanding.
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.
As
at February 28, 2016, Phoenix Bio Pharmaceuticals Corporation had been issued 2,000,000 Series B Preferred Shares. YP Holdings,
LLC had been issued 1,000,000 Series C Preferred Shares. but had converted 2,000 into common shares and therefore owned 998,000
Series C Preferred Shares.
On
March 4, 2016, YP Holdings, LLC converted 2,400 series C preferred stock to 2,400 shares of common stock.
As
at May 31, 2016, Phoenix Bio Pharmaceuticals Corporation held 2,000,000 Series B Preferred Shares. YP Holdings, LLC had been issued
1,000,000 Series C Preferred Shares. but had converted 4,400 into common shares and therefore held 995,600 Series C Preferred
Shares.
As
at May 31, 2016 and February 29, 2016 there were no common stock options on issue.
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12.
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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. During the nine months ended November 30, 2014 the Company has recorded interest expense
of $7,725, and amortization expense of $554,413 related to the amortization of the original issue discount and the full-value
of the warrant discussed below ($552,500).
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 50,925,000 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.
As of December 16, 2014, the Company has re-evaluated the beneficial conversion feature under the Typenex Note and has recorded
a liability for the beneficial conversion feature totaling $230,392. This discount will be amortized over the remaining life of
the Typenex Note.
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 February 28, 2016 and May 31, 2016, the Company has received no further 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.
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13.
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Securities
Purchase Agreement
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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 issued 667 (6,666,667 pre-split) common shares and 1,333 (13,333,333 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
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 May 31, 2014.
On
September 15, 2016, Typenex Co-Investment, LLC exercised part of their warrant and were issued 2,822 shares of common stock.
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.
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.
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.
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.
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.
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.
On
September 22, 2018, the Company’s Board of Directors accepted the resignation of Russell Stone from his position as a Director.
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.
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.
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. The Issued Shares, in conjunction with the 47,571 shares of common
stock previously issued by the Company, brings the current issued and outstanding share count to 30,549,946.
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.
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.
On
November 2, 2018, FINRA confirmed the name change and change of symbol to “PLSI”
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.
On
December 4, 2018, the Company issued 229,600 common shares as part of settlement agreements.
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
On
January 11, 2019, the Company issued 500,600 common shares to YP Holding, LLC. as part of a settlement agreement.
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
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
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.
On
April 2, 2019 the Company issued 151,216 common share for cash consideration.
Phoenix
Life Sciences International Limited (Canada) and Phoenix Life Sciences International Limited (Nevada) commenced the consolidation
of business in 2018. During that time, affiliates of the Company provided certain working capital and covering of costs related
to the consolidation. Subsequently the Company has entered into subscription agreements with certain affiliates and key non-affiliate
investors to provide a total of approximately USD $2.1million of financing. Shares of common stock issued for this total financing
represent approximately 800,000. The key non-affiliate investor who had previously entered into a subscription agreement to purchase
USD $20 million of shares at $10 per share with Phoenix Life Sciences International Limited Canada has entered into an agreement
to exchange the subscription for warrants to purchase Company common stock at a price of $10, with the purchases to be completed
by December 31, 2019.
Further,
as part of the merger and consolidation, Phoenix Life Sciences International Limited (Canada) and Phoenix Life Sciences International
Limited (Nevada) entered into settlement agreements with former investors, employees and contractors whereby their debt, shares
held in entities subject of the consolidation, or outstanding amounts were settled in exchange for a full release of claims and
the Company issuing approximately eight (8) million shares and the assumption of approximately $2 million of settlements payable.
The purpose of the consolidation, in addition to providing the deemed necessary relationships and contracts for the Company to
execute on its strategy, was to settle any potential claim or liability to ensure that the Company was not subject to any claims
by former investors, employees and contractors.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
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”.
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 cannabis, currently being launched in Colorado and California.
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 cannabis.
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 cannabis sales and distribution company. The results of operations for the three ended May 31, 2016 represent results
of the business.
Revenue
for the three months ended May 31, 2016 and 2015 was $0 and $2,435 respectively.
Decrease
due to reduced operations due to limited funds.
Cost
of Sales for the three months ended May 31, 2016 and 2015 was $0 and $898.
Product
development expense for the three months ended May 31, 2016 and 2015 was $0 and $30,000 respectively. Payment in 2015 was to a
consultant.
Sales
and marketing expenses for the three months ended May 31, 2016 and 2015 were $0 and $8,447. Sales and marketing expenses have
been curtailed due to the lack of funds.
Operations
expenses for the three months ended May 31, 2016 and 2015 were $0 and $1,745 respectively.
General
and administrative expenses for the three months ended May 31, 2016 and 2015 were $1,980 and $15,388 respectively. General and
administrative expenses generally include costs for running the company’s administrative office and have been reduced to
a minimum in current year.
Professional
fees for the three months ended May 31, 2016 and 2015 were $330 and $138,275 respectively. Professional fees consist of cost of
financing, legal, accounting, consulting and advisory services with expenditure on professional services cut to a minimum.
Lease
operating expenses for the three months ended May 31, 2016 and 2015 were $0 and $7,500 respectively. Property was vacated in 2015.
Other
income and expenses for the three ended May 31, 2016 and 2015 were net expenses of $112,773 and $19,602 respectively, for interest,
amortization of a convertible note and loss on a derivative liability.
Net
loss for the three ended May 31, 2016 were $115,084 compared to $219,420 for three months to May 31, 2015 with the reduced loss
due to contract of operations.
Liquidity
and Capital Resources
At
May 31, 2016, the Company had a cash balance of $5,392 compared with $7,591 at February 28, 2016. The decrease in cash was cash
used for operating expenses as described above partially offset by repayment of some of a note payable by a related party.
Cash
flow from Operating Activities
. During the three months ended May 31, 2016, the Company used $11,699 in cash for operating
activities for its current operations. During the three months ended May 31, 2015, the Company used $72,862 for operating activities.
Cash
flow from Investing Activities
. During the three months ended May 31, 2016 and May 31, 2015, the Company received $9,500 and
$8,907 for investing activities. Cash Flows from investing activities in the period ended May 31, 2016 represents partial repayment
of the Company’s loan with its affiliate Phoenix Pharms Capital Corporation.
Cash
flow from Financing Activities
. During the three months ended May 31, 2016 and 2015 , the Company received proceeds of $0
and $60,000 respectively.
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.