PLSI Phoenix Life Sciences International Ltd (CE)

Item 8. Financial Statements and Supplementary Data

PHOENIX LIFE SCIENCES INTERNATIONAL LIMITED  

(A Development Stage Company)

AUDIT REPORT

(The accompanying notes are an integral part of these financial statements)

(The accompanying notes are an integral part of these financial statements)

(The accompanying notes are an integral part of these financial statements)

(The accompanying notes are an integral part of these financial statements)

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, the 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 may contract out the manufacturing of the products..

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.

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.

Basis of Presentation - The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) and are expressed in U.S. dollars. The Company’s fiscal year end is February 28 or 29.

Basis of Consolidation – The consolidated financial statements include the accounts of Phoenix Life Sciences International Limited. All significant intercompany balances and transactions have been eliminated in consolidation.

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.

Other items subject to estimates and assumptions include the carrying amount of 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 February 28, 2017 and February 28, 2015, the Company did not hold any cash equivalents.

Accounts receivable - Accounts receivable consists of trade accounts arising in the normal course of business. No interest is charged on past due accounts. Accounts receivable are carried at the original invoice amount less a reserve for doubtful receivables based on a review of all outstanding amounts on a monthly basis.

Basic and Diluted Net Loss per Share - The Company computes net loss per share in accordance with ASC 260, Earnings per Share . ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. At February 28, 2017 the Company had no outstanding stock options. At February 28, 2017 and February 29, 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 financial assets are determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

Derivative Financial Instruments - The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks.

The Company reviews the terms of the common stock, warrants and convertible debt it issues to determine whether there are embedded derivative instruments, including embedded conversion options, which are required to be bifurcated and accounted for separately as derivative financial instruments. In circumstances where the host instrument contains more than one embedded derivative instrument, including the conversion option, that is required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.

Bifurcated embedded derivatives are initially recorded at fair value and are then revalued at each reporting date with changes in the fair value reported as non-operating income or expense. The Company uses a Black-Scholes model for valuation of the derivative. When the equity or convertible debt instruments contain embedded derivative instruments that are to be bifurcated and accounted for as liabilities, the total proceeds received are first allocated to the fair value of all the bifurcated derivative instruments. The remaining proceeds, if any, are then allocated to the host instruments themselves, usually resulting in those instruments being recorded at a discount from their face value.

The discount from the face value of the convertible debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to interest expense, using the effective interest method.

Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether net cash settlement of the derivative instrument could be required within the 12 months of the balance sheet date.

Comprehensive Loss - ASC 220, Comprehensive Income , establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at February 28, 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.

The fair value of each share based payment is estimated on the measurement date using the Black-Scholes model with the following assumptions, which are determined at the beginning of each year and utilized in all calculations for that year:

Risk-Free Interest Rate. We utilized the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected term of our awards.

Expected Volatility. We calculate the expected volatility based on a volatility index of peer companies as we did not have sufficient historical market information to estimate the volatility of our own stock.

Dividend Yield. We have not declared a dividend on its common stock since its inception and have no intentions of declaring a dividend in the foreseeable future and therefore used a dividend yield of zero.

Expected Term. The expected term of options granted represents the period of time that options are expected to be outstanding. We estimated the expected term of stock options by using the simplified method. For warrants, the expected term represents the actual term of the warrant.

Forfeitures. Estimates of option forfeitures are based on our experience. We will adjust our estimate of forfeitures over the requisite service period based on the extent to which actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of compensation expense to be recognized in future periods.

Revenue Recognition – The Company recognizes revenue in accordance with SEC Staff Accounting Bulletin Topic 13 when persuasive evidence of an arrangement exists and delivery has occurred, provided the sale is fixed or determinable and collection is probable. The Company assesses whether the sale is fixed and determinable based on the payment terms associated with the transaction. If a sale is based upon a variable such as acceptance by the customer, the Company accounts for the sale as not being fixed and determinable. In these cases, the Company defers revenue and recognizes it when it becomes due and payable.

The Company assesses the probability of collection based on a number of factors, including past transaction history with the customer and the current financial condition of the customer. If the Company determines that collection of a sale 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.

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:

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 February 28, 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 $19,100,000 which expire in the years 2030 through 2037. The net operating loss results in a deferred tax asset of $2,865,000. 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 and 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 28, 2017 and February 29, 2016.

On March 14, 2014, the Company entered into a License Agreement with Phoenix Bio Pharmaceuticals Corporation (“Phoenix Bio Pharm”) where Phoenix Bio Pharm has granted exclusive rights to the Company for North America to exploit all presently owned and after-acquired intellectual property rights and know-how of Phoenix Bio Pharm for certain medical cannabinoid products and delivery systems for the treatment and management of illnesses. The term of the License Agreement is Ten (10) years. In consideration of the acquired license, the Company issued 26,000,000 shares of common stock to Phoenix Bio Pharm, valued at $13,000,000 based on a discounted cash flow model and the fair value of the assets acquired in the license agreement. The Company will amortize the cost of the License Agreement over the ten year life.

On January 5, 2015, the Company entered into an additional license agreement with Phoenix Bio Pharmaceuticals Corporation to expand the territories covered under its original license agreement dated March 14, 2014. Under the terms of the additional license agreement, the Company acquired the marketing rights to distribute products developed by Phoenix Bio Pharmaceuticals Corporation in Australia and New Zealand for ten years. In exchange for the license, the Company issued 250,000,000 restricted common shares at $0.016 per common share, for an aggregate value of $4,000,000. This amount represents 33% over the market value on the date of execution of the license agreement is $3,000,000.

On July 8, 2015, the Company agreed to enter into a new licensing agreement with Phoenix Bio Pharmaceuticals Corporation. This new agreement shall replace the previous licensing agreements. The new licensing agreement shall be non-exclusive, CBD only licensing agreement with Phoenix Bio Pharmaceuticals Corporation. This license agreement operates for a twenty (20) year period. Phoenix Bio Pharm has granted to the Company a license for the territory of North America, Australia and New Zealand to exploit all presently owned and after-acquired intellectual property rights and know-how of Phoenix Bio Pharm related to CBD based cannabinoid products and delivery systems for the treatment and management of illnesses. Products falling under the license will include the following CBD products: transdermal patches, orally administered extracts, concentrated extracts of vaporizers and inhalers, sublingual and buccal dispensing products and extraction technology, suppository delivery systems, salves, creams, gels, lotions, and liquid extracts, and any product or active ingredients sourced through Phoenix Bio Pharm or third party suppliers or licensors. The Company will also have the right to sublicense the rights acquired pursuant to the license agreement and to use and develop copyrighted materials of Phoenix Bio Pharm for marketing and distribution purposes.

In addition to the new licensing agreement, on July 8, 2015 the Company has entered into an exchange agreement with Phoenix Bio Pharm where all existing common shares held by Phoenix Bio Pharm (276,000,000) are exchanged for 2,000,000 Series B Preferred Shares, par value $0.0001. These preferred shares were entitled to 100 votes for each share held, and convertible into 100 common shares per preferred share at any time at the discretion of the holder. These preferred shares were cancelled on September 22, 2018.

Subsequently as the Company has failed to meet projected cash flows which underpin the valuation model of the License Agreement, the Company determined that the balance of License Agreement should be impaired. Accordingly a total of $14,014,189 was expensed as an impairment to the License Agreement and paid in capital was reduced by $2,282,132 at year ended February 28, 2015.

On May 13, 2014, the Company entered into a distribution agreement with GoKush.com (www.gokush.com) that is part of a not-for-profit California Cooperative Corporation that is dedicated to providing safe and legal access to medical marijuana for patients throughout California. Pursuant to the Agreement, amongst other things, GoKush agreed to become the online ordering platform for the ordering and re-stock of the Company’s products in California for a ten (10) year term and the Company has issued GoKush 200,000 shares of the Company’s restricted common stock valued at $172,000. The Company planned to amortize the cost of the Distribution Agreement over the ten year life beginning October 2014 when on-line sales of product commenced.

However the Company was not paid for any sales and as such the Company determined that there is no value in the distribution agreement. Accordingly an impairment of $141,800 of the distribution agreement was made and paid-in capital was reduced by $13,000 at year ended February 28, 2015.

On December 23, 2014, the Company entered into a convertible promissory note for $1,200,000 with CannaVest Corp. The note represents $1,200,000 worth of raw material inventory to be obtained from CannaVest Corp. to use in the Company’s cannabidiol product formulations. The note accrues simple interest at a rate of 10% per annum and is due and payable in six months from the date of issue. The note cannot be prepaid. At any time, the outstanding principal amount of this note and all accrued but unpaid interest under this note can be converted into common shares at a price equal to the lesser of $0.02 per common share, the closing sale price, or the average of the lowest closing sale prices of the Company’s common shares during the five trading day period immediately preceding the date of such determination.

Should the Company default on this convertible promissory note, all outstanding obligations payable by the Company are immediately due and payable. In addition, CannaVest Corp. may exercise any other right, power or remedy permitted by law. Further, upon even of default, all unpaid obligations under this note shall bear interest at the rate of 12% per annum.

Warrant Agreement

In connection with the convertible promissory note dated December 23, 2014, the Company subsequently issued warrants to purchase 20,000,000 common shares at an exercise price of $0.02 per common share to Kisha Spendthrift Trust, an affiliate of CannaVest Corp. These warrants were issued on January 6, 2015. In exchange for these warrants, the Company shall have access to the technical and management staff of CannaVest Corp. for the development of products to be manufactured from cannabidiol sourced from CannaVest Corp. The Company has valued these warrants using the black scholes option pricing model at $197,663 and will record the expense related to the warrants in its fourth fiscal quarter of 2014.

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 February 28, 2017 had not traded and were inactive.

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 year March 1, 2016 and February 28, 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 during the year March 1, 2016 to February 28, 2017.

Phoenix Bio Pharmaceuticals, Inc. (“Phoenix Bio Pharm”)

Inventory Procurement : Between March 1, 2014 and February 28, 2015, the Company has advanced Phoenix Bio Pharm $195,860 for the purchase of inventory. There were no further advancements to Phoenix Bio Pharm in the two years from March 1, 2015 to February 28, 2017.

Product Development - Between March 1, 2014 and February 28, 2015, the Company has recorded product development expenses paid to Phoenix Bio Pharm totaling $15,000. There were no development expenses paid to Phoenix Bio Pharm in the two years from March 1, 2015 to February 28, 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 November 30, 2014. As of February 28, 2015, the Company has received principal payments totaling $26,425 including cash payment of $15,900, and expense offset $10,525. As of February 28, 2015, accrued interest on this loan is $2,687. As of February 28, 2015, the outstanding balance due the Company on this related party loan is $61,262. As at February 29, 2016 the outstanding balance due to the Company on this related party loan was $52,492. As at February 28, 2017 the outstanding balance due to the Company on this related party loan was $39,892.

Russell Stone: Mr. Russell Stone, a Director of the Company, holds approximately 14% of the outstanding common shares of Phoenix Pharms Capital Corporation indirectly through a trust.

Lewis “Spike” Humer :

Mr. Humer, a director of the Company, serves as CEO and a director of Phoenix Bio Pharmaceuticals and CEO and a director of Phoenix Pharms Capital Corporation. As of August 2014, the Company began paying Mr. Humer a consulting fee of $1,500 per week. As of 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. On February 29, 2016, there were 24,845 shares of common stock issued and outstanding.

On March 4, 2016, YP Holdings LLC converted 2,400 of the preferred shares to common shares which were issued by the Company.

On September 15, 2016, the Company issued 2,822 shares of common stock to Typenex from the conversion of a total principal amount of $5,173 under a Warrant.

As at February 28, 2017 there were 31,067 common shares on issue.

On July 8, 2015, the Company approved the creation of four classes of preferred stock.

On July 8, 2015, the Company approved the creation of four classes of preferred stock.

On November 4, 2015, Phoenix Bio Pharmaceuticals Corporation were issued 2,000,000 Series B Preferred Shares in exchange for 27,600 common shares (27,600,000 pre-split).

On February 18, 2016, YP Holdings, LLC was issued 1,000,000 Series B Preferred Shares in exchange for 667 common shares (6,666,667 pre-split). On February 28, 2016 YP Holdings, LLC converted 2,000 preferred shares into 2,000 common shares and on March 4, 2016, a further 2,400 preferred shares into common shares

As at February 28, 2017, Phoenix Bio Pharmaceuticals Corporation owned 2,000,000 Series B Preferred Shares. YP Holdings, LLC owned 995,600 Series C Preferred Shares.

There were no common stock options on issue as at February 28, 2017.

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 March 1, 2016 and February 28, 2017, the Company has received conversion notices from its noteholder on the Typenex Note to convert some of the Typenex Warrant into shares of the Company’s Common Stock as defined by the Typenex Agreement. The table below lists the conversion activity and the shares of common stock issued pursuant to each conversion:

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 3, 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.