Phoenix Life Sciences International Limited
Consolidated Balance Sheets
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August 31,
2017
$
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February 28,
2017
$
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Unaudited
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Audited
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ASSETS
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Cash
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779
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1,155
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Notes receivable, related party
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235,752
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235,752
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Total Current Assets
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236,531
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236,907
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Total Assets
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236,531
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236,907
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LIABILITIES
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Current Liabilities
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Accounts payable and accrued liabilities
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518,310
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518,310
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Due to related parties
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277,219
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277,219
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Current Liabilities
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795,529
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795,529
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Convertible notes payable, net
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372,077
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332,517
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Derivative liability
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244,058
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471,437
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Total Liabilities
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1,411,664
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1,599,483
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STOCKHOLDERS’ DEFICIT
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Common Stock
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Authorized: 990,000,000 common shares, par value of $0.001 per share
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Issued and outstanding: 31,067 and 31,067 common shares, respectively
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31
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31
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Issued and outstanding Preferred shares
Series B – 2,000,000
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200
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200
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Series C – 995,600
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100
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100
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Additional paid-in capital
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17,710,842
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17,710,842
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Accumulated deficit during the development stage
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(18,886,306
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)
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(19,073,749
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)
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Total Stockholders’ Equity (Deficit)
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(1,175,133
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)
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(1,362,576
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)
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Total Liabilities and Stockholders’ Equity
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236,531
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236,907
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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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Six Months Ended
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August 31, 2017
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August 31, 2016
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August 31, 2017
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August 31, 2016
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Income Statement
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Revenues
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$
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—
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$
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—
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$
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—
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$
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—
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Cost of Sales
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—
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—
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—
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—
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Gross Profit
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—
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—
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—
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—
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Operating expenses
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Product development expense
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—
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—
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—
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—
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Sales and marketing expenses
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—
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—
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—
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—
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Operations expense
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—
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—
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—
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—
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General and administrative
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109
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1,273
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376
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3,253
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Professional fees
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—
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—
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—
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330
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Lease operating expenses
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—
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—
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—
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—
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Total operating expenses
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109
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1,273
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|
376
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3,583
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Loss before other expenses
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(109
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)
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(1,273
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)
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(376
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)
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(3,583
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)
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Other income (expense)
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Interest Income
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—
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—
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—
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—
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Interest Expense
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(20,336
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)
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(16,271
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)
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(39,560
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)
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(101,967
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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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Discount Amortization
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—
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—
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—
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(2,435
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)
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Gain (loss) on derivative liability
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23,579
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178,576
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227,379
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153,933
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Total other income (expense)
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3,243
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162,305
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187,819
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49,531
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Net profit (loss)
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3,134
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161,031
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187,443
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45,948
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Basic and diluted loss per common share:
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Income (loss) from continuing operations
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0.10
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5.70
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6.03
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1.63
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Basic and diluted loss per common share
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$
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0.10
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$
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5.70
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$
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6.03
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$
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1.63
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Weighted average shares outstanding - basic and diluted
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31,067
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28,245
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31,067
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28,206
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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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Six Months Ended
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August 31, 2017
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August 31, 2016
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net profit (loss)
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$
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187,443
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$
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45,948
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Adjustments to reconcile net loss to net cash used in operating activities:
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Non-cash amortization of discount on convertible notes payable
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—
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2,435
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Non-cash interest expense on convertible notes payable
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39,560
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101,967
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Non-cash stock option compensation
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—
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—
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Non-cash loss (gain) on derivative liability
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(227,379
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)
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(153,933
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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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—
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Deposit
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Inventory
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—
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—
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Accounts payable and accruals
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—
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(12,589
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)
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Net Cash provided by (used for) operating activities
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(376
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)
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(16,172
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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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—
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11,100
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Net Cash provided by (used in) Investing Activities
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—
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11,100
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CASH FLOWS FROM FINANCING ACTIVITIES:
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Proceeds from notes payable
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Due to related parties
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—
|
|
|
|
—
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|
Net Cash Provided By Financing Activities
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|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) in Cash - continuing operations
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|
|
(376
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)
|
|
|
(5,072
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)
|
|
|
|
|
|
|
|
|
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Cash - Beginning of Period - continuing operations
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|
1,155
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|
|
|
7,591
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|
Cash - End of Period - continuing operations
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|
$
|
779
|
|
|
$
|
2,519
|
|
|
|
|
|
|
|
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Supplemental disclosures
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Interest paid
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|
|
—
|
|
|
|
—
|
|
Income tax paid
|
|
|
—
|
|
|
|
12,589
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|
Non-cash issuance of stock for consulting agreements
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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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—
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|
(The accompanying notes are an integral part
of these financial statements)
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1.
|
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
28, 2017 included in the Company’s annual report on Form 10-K filed with the Securities and Exchange Commission on April
9, 2019. The interim unaudited financial statements presented herein are condensed and should be read in conjunction with those
financial statements included in the Form 10-K. The interim disclosures generally do not repeat those in the annual statements.
Management’s opinion that all adjustments necessary for a fair statement of the results for the interim periods have been
made, and a statement that all adjustments are of a normal recurring nature or a description of the nature and amount of any adjustments
other than normal recurring adjustments. Operating results for six months ended August 31, 2017 are not necessarily indicative
results that may be expected for the year ended February 28, 2018.
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 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 August 31, 2017 and February 28, 2017, 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, 2017 and August 31, 2017,
the Company had no outstanding stock options. At August 31, 2017 and 2016, 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 August 31, 2017 and 2016, 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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–
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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.
|
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 August 31,
2017.
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 $18,900,000 which expire in the years 2030 through 2038. The net operating loss results
in a deferred tax asset of $2,835,000. 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, 2017. 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, 2017.
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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 August 31, 2017
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 August 31, 2017.
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 August 31, 2017.
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 August 31, 2017, the outstanding balance due the Company on this related party loan is $38,892.
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 February 28, 2017.
The Company has authorized 990,000,000 shares
of its common stock, $0.001 par value. As at August 31, 2017 and February 28, 2017 there were 31,067 shares of common stock on
issue.
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 August 31, 2017 and February 28, 2017,
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 August 31, 2017 and February 28, 2017
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, 2017 and August 31, 2017, 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.
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
The results of the business as a medical cannabis
sales and distribution company for the three months and six months ended August 31, 2017.
Revenue for the three months ended August
31, 2017 and 2016 was $0. Revenues for the six months ended August 31, 2017 and 2016 were $0.
Cost of Sales for the three months ended August
31, 2017 and 2016 were $0. Cost of Sales for the six months ended August 31, 2017 and 2016 were $0.
Product development expense for the three
months ended August 31, 2017 and 2016 was $0. Product development expense for the six months ended August 31, 2017 and 2016 was
$0.
Sales and marketing expenses for the three
months ended August 31, 2017 and 2016 were $0. Sales and marketing expenses have been curtailed due to the lack of funds.
Operations expenses for the three months ended
August 31, 2017 and 2016 were $0. Operations expenses for the six months ended August 31, 2017 and 2016 were $0.
General and administrative expenses for the
three months ended August 31, 2017 and 2016 were $109 and $1,273 respectively. General and administrative expenses for the six
months ended August 31, 2017 and 2016 were $376 and $3,253, respectively. General and administrative expenses generally include
costs for running the company’s administrative office. The decrease this year has been due to limited funds.
Professional fees for the three months ended
August 31, 2017 and 2016 were $0. Professional fees for the six months ended August 31, 2017 and 2016 were $0 and $330, respectively.
Professional fees consist of cost of financing, legal, accounting, consulting and advisory services.
Lease operating expenses for the three months
ended August 31, 2017 and 2016 were $0. Lease operating expenses for the six months ended August 31, 2017 and 2016 were $0.
Other income and expenses for the three months
ended August 31, 2017 and 2016 were net income of $3,243 and $162,305 for expenses of interest, amortization of a convertible note
and offset by gain on a derivative liability. Other income and expense for the six months ended August 31, 2017 and 2016 were net
income of $187,819 and $49,531, respectively.
Net profit for the three months ended August
31, 2017 and 2016 was $3,134 and $161,031, respectively. Net profit for the six months ended August 31, 2017 and 2016 was $187,443
and $45,948 respectively.
Liquidity and Capital Resources
At August 31, 2017, the Company had a cash
balance of $779 compared with $1,155 at February 28, 2017. The decrease in cash was cash used for administration expenses as described
above.
Cash flow from Operating Activities
.
During the six months ended August 31, 2017, the Company used $376 in cash for operating activities for its current operations.
During the six months ended August 31, 2016, the Company used $16,172 for operating activities.
Cash flow from Investing Activities
.
During the six months ended August 31, 2017 and August 31, 2016, the Company received $0 and $11,100, respectively, for investing
activities. Cash Flows from investing activities in the period ended August 31, 2016 represents partial repayment of the Company’s
loan with its affiliate Phoenix Pharms Capital Corporation.
Cash flow from Financing Activities
.
During the six months ended August 31, 2017 and 2016, the Company received proceeds of $0.
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.