PHOENIX LIFE SCIENCES INTERNATIONAL LIMITED
Consolidated Balance Sheets
|
|
February 28,
2019
$
|
February 28,
2018
$
|
ASSETS
|
|
|
|
|
|
|
|
Cash
|
|
201,988
|
697
|
Notes receivable, related party
|
|
-
|
235,752
|
Prepayments
|
|
2,169,269
|
-
|
|
|
|
|
Total Current Assets
|
|
2,371,257
|
236,449
|
|
|
|
|
Intellectual Property
|
|
8,766,356
|
-
|
Land deposit
|
|
299,000
|
-
|
|
|
|
|
Total Assets
|
|
11,436,613
|
236,449
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
385,011
|
518,310
|
Pending cash settlements
|
|
500,000
|
-
|
Loan payable to Gauntlet
|
|
100,000
|
-
|
Other loans
|
|
36,172
|
-
|
Due to related parties
|
|
327,042
|
277,219
|
|
|
|
|
Current Liabilities
|
|
1,348,225
|
795,529
|
|
|
|
|
Convertible notes payable, net
|
|
-
|
415,581
|
Derivative liability, Typenex note
|
|
-
|
390,009
|
|
|
|
|
Total Liabilities
|
|
1,348,225
|
1,601,119
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
|
STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
Preferred Stock
|
|
|
|
Issued and outstanding preferred shares
|
|
|
|
Series B - 0 and 2,000,000 preferred shares respectively
|
|
-
|
200
|
Series C – 0 and 995,600 preferred shares respectively
|
|
-
|
100
|
Common Stock
Authorized: 990,000,000 common shares, par value of $0.001 per share
Issued and outstanding: 10,084,582* and 34,171 common shares, respectively
|
|
|
|
|
|
|
|
10,085
|
34
|
Additional paid-in capital
|
|
34,100,397
|
17,785,335
|
Accumulated deficit during the development stage
|
|
(24,022,094)
|
(19,150,339)
|
|
|
|
|
Total Stockholders’ Equity (Deficit)
|
|
10,088,388
|
(1,364,670)
|
|
|
|
|
Total Liabilities and Stockholders’ Equity
|
|
11,436,613
|
236,449
|
|
|
|
|
* Following the Company’s determination that 22,500,000 shares issued to GHI Trustees Pty Ltd ATF The Global Health Trust were fraudulently issued and subsequently cancelled by the Board of Directors on August 23, 2019, it has been determined by the Board of Directors that, as these shares were erroneously issued in October 2018, they should be removed from stated results as at February 28, 2019, notwithstanding that the actual cancellation was effected on August 23, 2019.
(The accompanying notes are an integral part of these financial statements)
F-2
PHOENIX LIFE SCIENCES INTERNATIONAL LIMITED
Consolidated Statements of Operations
|
For the years ended
|
|
February 28,
|
February 28,
|
|
2019
|
2018
|
|
$
|
$
|
Revenues
|
-
|
-
|
Cost of sales
|
-
|
-
|
Gross Profit
|
-
|
-
|
|
|
|
Operating expenses
|
|
|
Sales and marketing expenses
|
124,258
|
-
|
Operations expense
|
501,108
|
-
|
General and administrative
|
4,980
|
458
|
Consulting fees (includes non-cash consulting fees of $2,050,508)
|
2,196,341
|
-
|
Professional fees
|
207,348
|
-
|
Lease operating expenses
|
28,357
|
-
|
|
|
|
Total operating expenses
|
3,062,392
|
458
|
|
|
|
Loss before other expenses
|
(3,062,392)
|
(458)
|
|
|
|
Other income (expense)
|
|
|
Interest income
|
3
|
-
|
Miscellaneous income
|
974
|
-
|
Interest Expense
|
(49,442)
|
(83,064)
|
(Loss) on currency conversion
|
(6,335)
|
-
|
Gain on derivative liability
|
-
|
6,932
|
|
|
|
Total other expense
|
(54,800)
|
(76,132)
|
|
|
|
Net loss
|
(3,117,192)
|
(76,590)
|
|
|
|
Basic and diluted loss per common share
|
|
|
Income (loss) from continuing operations
|
(0.27)
|
(2.46)
|
Basic and diluted loss per common share
|
(0.27)
|
(2.46)
|
|
|
|
Weighted average shares outstanding – basic and diluted
|
11,630,774
|
31,118
|
(The accompanying notes are an integral part of these financial statements)
F-3
PHOENIX LIFE SCIENCES INTERNATIONAL LIMITED
Consolidated Statements of Changes in Stockholders’ Deficiency
|
Stock
|
Stock
subscriptions
receivable
|
Additional
paid-in
capital
|
Accumulated
deficit during
the
development
stage
|
Total
|
|
Shares
|
Par value
|
|
#
|
$
|
$
|
$
|
$
|
$
|
|
|
|
|
|
|
|
Balance – February 28, 2017
|
|
331
|
-
|
17,710,842
|
(19,073,749)
|
(1,362,576)
|
Common Stock
|
|
|
|
|
|
|
Issuance of common stock for warrant conversion
|
3,104
|
3
|
-
|
74,493
|
-
|
74,496
|
Net loss for year
|
-
|
-
|
-
|
-
|
(76,590)
|
(76,590)
|
Balance Common Stock – February 28, 2018
|
34,171
|
34
|
-
|
17,785,637
|
(19,150,339)
|
(1,364,668)
|
Balance Preferred Stock – February 28, 2018
|
2,995,600
|
300
|
-
|
(302)
|
-
|
(2)
|
TOTAL – February 28, 2018
|
|
334
|
-
|
17,785,335
|
(19,150,339)
|
(1,364,670)
|
Issuance of common stock from note payable
|
900
|
1
|
-
|
5,282
|
-
|
5,283
|
Issuance of common stock for true up of shares
|
12,500
|
13
|
-
|
131,237
|
-
|
131,250
|
Issuance of common stock from merger
|
29,992,192
|
29,992
|
-
|
10,828,529
|
(1,754,563)
|
9,103,958
|
Issuance of common stock for services
|
195,000
|
195
|
-
|
487,500
|
-
|
487,695
|
Issuance of common stock for services and settlement
|
575,583
|
576
|
-
|
721,924
|
-
|
722,500
|
Issuance of common stock for services and settlement
|
229,600
|
229
|
-
|
457,470
|
-
|
457,699
|
Issuance of common stock for services and settlement
|
675,028
|
675
|
-
|
1,944,025
|
-
|
1,944,700
|
Issuance of common stock for settlement and in exchange of Series C Preferred Shares
|
500,600
|
501
|
-
|
500,099
|
-
|
500,600
|
Issuance of common stock for services and settlement
|
53,080
|
53
|
-
|
88,547
|
-
|
88,600
|
Issuance of common stock for services and settlement
|
315,928
|
316
|
-
|
1,150,147
|
-
|
1,150,463
|
Cancellation of erroneously issued shares
|
(22,500,000)
|
(22,500)
|
-
|
-
|
-
|
(22,500)
|
Net loss for year
|
-
|
-
|
-
|
-
|
(3,117,192)
|
(3,117,192)
|
Balance Common Stock – February 28, 2019
|
10,084,582
|
10,085
|
-
|
34,100,397
|
(24,022,094)
|
10,088,388
|
Preferred Stock
|
|
|
|
|
|
|
Cancellation of Series B
|
(2,000,000)
|
(200)
|
-
|
200
|
-
|
-
|
Cancellation of Series C
|
(995,600)
|
(100)
|
-
|
102
|
-
|
2
|
Balance Preferred Stock – February 28, 2019
|
-
|
-
|
-
|
-
|
-
|
-
|
TOTAL – February 28, 2019
|
10,084,582
|
10,085
|
-
|
34,100,397
|
(24,022,094)
|
10,088,388
|
(The accompanying notes are an integral part of these financial statements)
F-4
PHOENIX LIFE SCIENCES INTERNATIONAL LIMITED
Consolidated Statements of Cash Flows
|
For the years ended
|
|
February 28,
|
|
2019
|
2018
|
|
$
|
$
|
Operating Activities
|
|
|
Net loss
|
(3,117,192)
|
(76,590)
|
|
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
Non-cash interest expense on convertible notes payable
|
49,442
|
83,064
|
Non-cash (gain) on derivative liability
|
-
|
(81,428)
|
Debt conversion
|
5,283
|
74,496
|
Non-cash expenses of services & settlements
|
4,008,403
|
-
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
Deposit on Land
|
(299,000)
|
-
|
Prepaid expense
|
(1,975,519)
|
-
|
Accounts payable and accruals
|
468,552
|
-
|
Net Cash (used for) operating activities - current operations
|
(860,030)
|
(458)
|
|
|
|
Investing Activities
|
|
|
|
-
|
-
|
Net Cash provided by (used for) Investing Activities - continuing operations
|
-
|
-
|
|
|
|
Financing Activities
|
|
|
Other loans
|
41,730
|
-
|
Proceeds from issuance of common shares
|
1,019,591
|
-
|
Net Cash provided by Financing Activities - continuing operations
|
1,061,321
|
-
|
Increase (Decrease) in Cash - continuing operations
|
201,291
|
(458)
|
Cash – Beginning of Period - continuing operations
|
697
|
1,155
|
Cash – End of Period – continuing operations
|
201,988
|
697
|
|
|
|
Supplemental disclosures
|
|
|
Interest paid
|
-
|
-
|
Income tax paid
|
-
|
-
|
Non-cash issuance of stock for consulting agreement
|
2,196,341
|
-
|
Non-cash issuance of stock for prepaid expenses
|
500,000
|
-
|
(The accompanying notes are an integral part of these financial statements)
F-5
PHOENIX LIFE SCIENCES INTERNATIONAL LIMITED
(A Development Stage Company)
Financial Statements
For the Year Ended February 28, 2019
1. Nature of Operations and Continuance of Business
The company was incorporated in the State of Nevada on April 21, 2009 under the name Mokita Exploration, Ltd. (the “Company”). On February 27, 2014, there was a change of control of the Company. On February 28, 2014, 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 were approved by FINRA with an effective date of March 12, 2014. The name change became effective with the OTC Markets 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 become 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 OTC Markets Board on November 2, 2018 with the trading symbol “PLSI”.
In September 2018, the Company completed a merger and consolidation with Phoenix Life Sciences International Limited (Canada). As part of the consolidation, the Series B Preferred Shares owned by Phoenix Bio Pharmaceuticals that were previously authorized to be cancelled were finally cancelled. Phoenix Life Sciences International Limited (Canada) had entered into asset purchase agreements with Phoenix Life Sciences Inc, Phoenix Bio Pharmaceuticals Corporation, Phoenix Pharms Capital Corporation and Phoenix Pharms Inc to consolidate all assets, liabilities, trade secrets, knowhow, diagrams and business plans, as well as all government relationships and pending contracts. Other than as specifically negotiated with former employees, contractors and officers, all shareholders were provided with a share exchange whereby they received one share of the Company for one share previously owned in one of these Companies.
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, subsequently on November 2, 2018 this changed to PLSI.
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 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 common stock shares. 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. This agreement is currently under negotiation to extend the timeframe
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.
On September 22, 2018, the Company’s Board of Directors accepted the resignation of Russell Stone from his position as a Director.
F-6
PHOENIX LIFE SCIENCES INTERNATIONAL LIMITED
(A Development Stage Company)
Financial Statements
For the Year Ended February 28, 2019
1. Nature of Operations and Continuance of Business (Continued)
On October 3, 2018, the following persons were appointed to the Board of Directors 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 July 11, 2019, the Board of Directors confirmed that Martin Tindall had been placed on indefinite, unpaid suspension from his position as Chief Executive Officer and removed any and all authorities given to him by the Company. Concurrently, the Company’s Board of Directors appointed Janelle Marsden, to the role of Interim Chief Executive Officer.
On August 27, 2019, the Board of Directors permanently removed Martin Tindall from his role as Chief Executive Officer.
Going Concern
These financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company’s total operating expenditure plan for the following twelve months will require significant cash resources to meet the goals of its business plan. The continuation of the Company as a going concern is dependent upon the continued financial support from its management, and its ability to identify future investment opportunities and obtain the necessary debt or equity financing, and generating profitable operations from the Company’s future operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
2. Summary of Significant Accounting Policies
Basis of Presentation - The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) and are expressed in U.S. dollars. The Company’s fiscal year end is February 28 or 29.
Basis of Consolidation – The consolidated financial statements include the accounts of Phoenix Life Sciences International Limited. All significant intercompany balances and transactions have been eliminated in consolidation.
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 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, 2019 and February 28, 2018, 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.
F-7
PHOENIX LIFE SCIENCES INTERNATIONAL LIMITED
(A Development Stage Company)
Financial Statements
For the Year Ended February 28, 2019
2. Summary of Significant Accounting Policies (Continued)
Intellectual Property – Intellectual Property consists of trade secrets, know how, concepts to be patented for the creation of a series of formulations, specific genetic plant selection, delivery systems designed by botanists, biologists, chemical and industrial engineers for the purposes of maximizing the efficacy of medical cannabis for the targeted treatment of specific diseases, including diabetes, cancers, neurological and phycological disorders, autoimmune diseases, as well as a series of generic medical cannabis products for doctor prescription
Prepaid Assets – Prepayments are composed of share payments given to contractors and consultants for the provision of services over an agreed period that extends beyond February 28, 2019. Share payments are expensed over the term of the contract on a straight line basis.
Other Loans – Other Loans refer to a shareholder loan made to the company who is not a related party.
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, 2019 the Company had no outstanding stock options. At February 28, 2019 and 2018, the Company had 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.
F-8
PHOENIX LIFE SCIENCES INTERNATIONAL LIMITED
(A Development Stage Company)
Financial Statements
For the Year Ended February 28, 2019
2. Summary of Significant Accounting Policies (Continued)
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.
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. Restricted shares issued are discounted to determine fair value.
The fair value of each Options 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 adopted ASC 606 using the modified retrospective method applied to all contracts not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606 while prior period amounts continue to be reported in accordance with legacy GAAP. The adoption of ASC 606 did not result in a change to the accounting for any of the in-scope revenue streams; as such, no cumulative effect adjustment was recorded.
Leases – ASC 842, Leases, was required to be adopted for all financial years beginning after December 15, 2018 and requires long term leases (longer than 12 month) to be capitalized with a corresponding liability for the term of the lease and expensed over that term. However currently the Company has no long-term leases.
Shipping and Handling costs— shipping and handling costs are included in cost of sales in the Statements of Operations.
F-9
PHOENIX LIFE SCIENCES INTERNATIONAL LIMITED
(A Development Stage Company)
Financial Statements
For the Year Ended February 28, 2019
2. Summary of Significant Accounting Policies (Continued)
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.
3. Intangible Assets
In September 2018, the Company with the merger of Phoenix Life Sciences International Limited (Canada), a related party due to common management, acquired all of the assets and liabilities of Phoenix Life Sciences International Limited (Canada) including intellectual property totaling $8,766,356, which consisted of trade secrets, know how, concepts to be patented for the creation of a series of formulations, specific genetic plant selection, delivery systems designed by botanists, biologists, chemical and industrial engineers for the purposes of maximizing the efficacy of medical cannabis for the targeted treatment of specific diseases, including diabetes, cancers, neurological and phycological disorders, autoimmune diseases, as well as a series of generic medical cannabis products for doctor prescription. All products are designed to be produced to pharmaceutical (cGMP) standards and to be regulated as a controlled substance. The intangibles asset will amortized on a straight basis over the expected useful period of 10 years. As of February 29, 2019, amortization has not commenced. In addition, the intangible assets are tested for impairments annually. There were no impairments for the year ended February 29, 2019.
Proprietary formulations for the treatment of diabetes, various cancers, neurological and phycological disorders and autoimmune diseases
|
$
|
7,500,000
|
Professionally developed delivery systems maximizing the efficacy of medical cannabis treatments
|
$
|
1,000,000
|
Other trade secrets
|
$
|
266,356
|
Total
|
$
|
8,766,356
|
4. Deferred Tax Asset
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 $24,174,826 which expire in the years 2030 through 2039. The net operating loss results in a deferred tax asset of $3,626,000. 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, 2019 and February 28, 2018. 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, 2019 and February 28, 2018.
The Company expects no significant effects from the tax Cuts and Jobs Act for the current reporting period.
5. Subsidiary Companies
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.
F-10
PHOENIX LIFE SCIENCES INTERNATIONAL LIMITED
(A Development Stage Company)
Financial Statements
For the Year Ended February 28, 2019
5. Subsidiary Companies (Continued)
Both these subsidiaries as at February 28, 2019 had not traded and were inactive.
On September 18, 2018, with the merger with Phoenix Life Sciences International Limited (Canada), the Company gained an Australian Incorporated subsidiary, Phoenix Life Sciences (Australia) Pty Ltd.
6. Related Party Transactions
Russell Stone
Mr. Russell Stone, the Company’s former Chief Operating Officer, entered into a settlement agreement with the Company for unpaid services where he would be paid $125,000 over a maximum of 24 months. As at February 28, 2019, Mr. Stone was still owed $70,000.
Mr. Stone prior held approximately 14% of the outstanding common shares of Phoenix Pharms Capital Corporation (PPCC) indirectly through a trust, prior to PPCC being sold into 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.
Martin Tindall
Mr. Martin Tindall joined the Board as Chief Executive Officer on October 3, 2018. Previously Mr. Tindall had assisted Company with business development activities through the Advisory Services Agreement. Mr. Tindall serviced as CFO and a Director of Phoenix Pharms Capital Corporation, a director of Phoenix Bio Pharmaceuticals Inc. and a director and shareholder of Phoenix Life Sciences International Limited (a Canadian Corporation); which were all vended into the Company on September 18, 2018 as a result of the Company’s Merger with Phoenix Life Sciences International Limited (Canada).
Lewis “Spike” Humer:
Mr. Lewis “Spike” Humer was previously the interim Chief Executive Officer and a director of the Company. After the merger he stepped down from an executive role but remains on the Board and has been appointed Non-executive Chairman. He also previously served as CEO and a director of Phoenix Bio Pharmaceuticals and CEO and a director of Phoenix Pharms Capital Corporation, which were part of the merger. A settlement agreement has been reached with Mr. Humer for unpaid services, prior to the merger where he would pay $125,000 plus $5,000 in unpaid expenses with the money to be paid over a maximum of 24 months and issued 100,000 common shares in the Company. Mr. Humer was owed $85,000 as at February 28, 2019.
7. Common Stock
The Company has authorized 990,000,000 shares of its common stock, $0.001 par value. On February 28, 2018, there were 34,171 shares of common stock issued and outstanding.
On September 24, 2018, the Company issued 29,992,192 shares of common stock bearing the restricted legend without registration (the “Issued Shares”). Of these, 29,292,192 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.
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. A further 147,000 shares were issued as compensation for services rendered in reliance of Section 4(a)(2) of the Securities Act for services post those dates.
On October 18, 2018, the Company issued 575,583 common shares as part of settlement agreements.
F-11
PHOENIX LIFE SCIENCES INTERNATIONAL LIMITED
(A Development Stage Company)
Financial Statements
For the Year Ended February 28, 2019
7. Common Stock (Continued)
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 and conversion of Series C preferred shares.
On January 15, 2019 the Company issued 53,080 common shares which included 52,000 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 26, 2019 the Company issued 315,928 common shares 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.
In August it was determined, after inquiries of solicitors in Vanuatu and Australia, that 22,500,000 common shares had been issued fraudulently, consequently the Board of Directors cancelled these 22,500,000 common shares.
As at February 28, 2019 the adjusted shares on issue, excluding the fraudulently issued shares, were 10,084,582 common shares on issue.
8. Preferred Stock
On July 8, 2015, the Company approved the creation of four classes of preferred stock.
Series A preferred stock, par value $0.0001 par value, shall have 2,000,000 authorized shares. These preferred shares are not entitled to any voting rights and are convertible into common shares at the rate of $1.00 per common share at any time at the discretion of the holder Series A preferred shares rank senior to common shares and Series B preferred shares with respect to the right to receive dividends.
Series B preferred stock, par value $0.0001 par value, shall have 2,000,000 authorized shares. These preferred shares are entitled to 100 votes for each share held, and are convertible into 100 common shares at any time at the discretion of the holder. Series B preferred shares are senior to common shares.
Series C preferred shares, par value $0.0001 par value, shall have 2,000,000 authorized shares. These preferred shares are not entitled to any voting rights, and convertible into common shares at the rate of $1.00 per common share at any time at the discretion of the holder. 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. Upon issue of the dividend, the value of such shares shall be deemed to be retired. Series C preferred shares rank senior to the common shares and Series B preferred shares with respect to the right to receive dividends
Series D preferred stock, par value $0.0001 par value, shall have 2,000,000 authorized shares. These preferred shares are not entitled to any voting rights, and can be converted into common shares at a rate of $1.00 per common share. Series D preferred shares are seen you two common shares and Series B preferred shares, and holders of Series D 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. Upon issue of the dividend, the value of such Series D preferred shares shall be deemed to be retired.
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).
F-12
PHOENIX LIFE SCIENCES INTERNATIONAL LIMITED
(A Development Stage Company)
Financial Statements
For the Year Ended February 28, 2019
8. Preferred Stock (Continued)
As at February 28, 2018, Phoenix Bio Pharmaceuticals Corporation held 2,000,000 Series B Preferred Shares. On September 21, 2018, the Company announced it had obtained consent from the holder, Phoenix Bio Pharmaceuticals Corporation for the cancellation of 2,000,000 Preferred Series B shares in the Company in connection with the restructure of the Company and merger with Phoenix Life Sciences International Limited, a Canadian Corporation therefore there were no Series B Preferred Shares on issue at February 28, 2019.
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).
As at February 28, 2018 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. However subsequently agreement was reached to cancel all outstanding Series C Preferred Shares. On January 11, 2019, the Company issued 500,600 common shares to YP Holdings LLC as part of a settlement agreement which included the return and cancellation of 995,600 Series C Preferred Shares
There was no outstanding preferred stock on issue as at February 28, 2019
9. Convertible Promissory Note
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 outstanding Warrants issued to Typenex under the Note. This also meant that the derivative liability carried on the balance sheet was retired.
10. Securities Purchase Agreement
On September 17, 2014, the Company entered into a securities purchase agreement with YP Holdings, LLC. YP Holdings, LLC has no material relationship with the Company other than with respect to this agreement.
Under this agreement, the purchasers will be purchasing units of one common share and two warrants to purchase common shares for $0.09 per unit, for a total of $600,000. The common shares have a par value of $0.001 per share. The warrants are exercisable for five years from the date of issuance and shall have an initial exercise price equal to $0.20. As a result of this agreement, the Company issued 6,666,667 common shares and 13,333,334 warrants to the purchasers. On August 29, 2014 and September 17, 2014, the Company received gross proceeds of $100,000 and $500,000, respectively and has recorded financing fees of $18,000 and $52,000, related to this agreement.
The warrants can be exercised by paying the price for shares as stipulated by the warrant, or through cashless exercise, through which the purchaser will be issued a number of shares equal to the number of warrant shares applied to the subject exercise multiplied by the current market price on the date of conversion minus the exercise price on that date. This total is then divided by the current market price on the date of conversion. The cashless exercise may only be exercised after six months have passed from the original issuance of the warrants.
The purchaser has waived the clause prohibiting conversion of warrants into common shares if that would result in the purchaser owning in excess of 4.99% of the outstanding shares. A second clause prohibits the conversion of warrants if the purchaser owns in excess of 9.99% of the outstanding common shares. This clause can be waived by the purchaser providing notice of waiver.
F-13
PHOENIX LIFE SCIENCES INTERNATIONAL LIMITED
(A Development Stage Company)
Financial Statements
For the Year Ended February 28, 2019
10. Securities Purchase Agreement (Continued)
The Company has agreed to pay a flat $20,000 to YP Holdings, LLC to reimburse them for the fees and expenses incurred by it in connection with its due diligence review of the Company and the preparation, negotiation, executive, delivery and performance of the agreement.
The two parties also entered into a registration rights agreement. Under this agreement, the Company will prepare and file a registration statement on Form S-1 in order to register all shares issued under the securities purchase agreement. The Company will keep the registration statement continuously effective for a period of two years following the effective date of the registration statement. The Company will pay all reasonable fees and expenses incurred with respect to this agreement. Unless previously agreed to in writing, the Company may not register any shares other than those intended to be sold under this agreement.
Should the Company fail to comply with the registration rights agreement, the Company agrees to pay liquidated damages to YP Holdings, LLC equal to 3% of the purchase price of the common shares paid by the purchaser for the first 30 day period, and 2% of such purchase price for each subsequent 30 day period. These payments are payable upon demand in cash.
Pursuant to the registration rights agreement, the Company agreed to several lock-up agreements between itself and four shareholders of the Company: Phoenix Bio Pharmaceuticals Corporation, Ronald Lusk, Lewis Humer, and Caduceus Industries LLC. Under these agreements, each shareholder has agreed that they will not offer, pledge, sell, contract to sell, grant any options for sale or transfer, distribute or dispose of, directly or indirectly, any shares of the Company for a 90 day period following the date that the registration statement is declared effective.
On February 18, 2016, YP Holdings, LLC was issued 1,000,000 Series B Preferred Shares in exchange for 667 common shares. 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.
A settlement has been reached in respect of this liability. In exchange for 500,600 common shares, 995,600 Series C Preferred Shares were return to us for cancellation and both parties agreed that there were no further obligations.
11. Subsequent Events
On April 2, 2019, we issued 151,216 common stock shares for cash consideration.
On April 25, 2019, we issued 100,000 common stock shares for cash consideration.
On May 1, 2019, we signed a Memorandum of Understanding with the Ministry of Health on behalf of The Republic of Vanuatu for the purposes of establishing a public-private partnership for the health and well-being of Ni-Vanuatu people, further the Memorandum of Understanding provides for Phoenix Life to have a 25 year exclusive contract for the supply of diabetes management and the supply of Phoenix Metabolic to the countries estimated 50,000 diabetics. Based solely upon a charge rate of $25 per patient per month, this agreement would provide Phoenix Life with the potential of $300 million US dollars in revenue and reduction in excise duty. Due to the material risks disclosed herein and whether we have sufficient funding to accomplish our operational goals, there are absolutely no assurances that we will attain that level of revenues. The agreement further provides for the issuance of production and distribution licensing for Phoenix Life to produce in Vanuatu and distribute around the world both generic medical cannabis products for doctors’ prescription and for Phoenix Life’s products that are approved for specifically treating specific diseases. Lastly the agreement provides a fast track clinical development program, including building a national network of community clinics and dispensing pharmacies throughout the Republic of Vanuatu.
On May 9, 2019, we issued 155,452 common stock shares, which included 17,929 common stock shares issued for cash consideration and 137,523 common stock shares as compensation for services rendered in reliance of Section 4(a)(2) of the Securities Act.
On May 24, 2019, we issued 126,990 common stock shares which included 112,590 common stock shares for cash consideration and 14,400 common stock shares as compensation for services rendered in reliance of Section 4(a)(2) of the Securities Act.
F-14
PHOENIX LIFE SCIENCES INTERNATIONAL LIMITED
(A Development Stage Company)
Financial Statements
For the Year Ended February 28, 2019
11. Subsequent Events (Continued)
On May 30, 2019, we signed a Memorandum of Understanding with the Ministry of Agriculture on behalf of The Republic of Vanuatu for the purposes of establishing a public-private partnership to establish the terms and conditions under which the Republic of Vanuatu shall provide at least 5,000 acres of land on the Island of Espiritu Santo for the exclusive use of the Company for large scale cultivation of medical cannabis over a seventy-five (75) year period. We will be granted a license by the Government for the cultivation, processing, extraction and pharmaceutical production of medical cannabis and in exchange we will pay the Republic of Vanuatu ten (10) percent of net revenue earned through the use of this land and license.
On May 30, 2019, we signed a Memorandum of Understanding with the Ministry of Agriculture on behalf of The Republic of Vanuatu for the purposes to establish the terms and conditions under which the Company will be permitted (1) to establish and operate a plant quarantine facility on the site of the Vanuatu Agricultural Research and Technical Centre (VARTC); (2) to perform medical cannabis research at the VARTC facility; and (3) to present a medical cannabis training curriculum for the Vanuatu Agricultural College.
On June 17, 2019 we entered into a 10% Convertible Promissory Note (the “Note”) for the Principal Sum of $220,000 by and between the Company and Harbor Gates Capital, LLC (the “Holder”). For value received, the Company hereby promises to pay to the order of Harbor Gates Capital, LLC or its registered assigns or successors-in-interest (the “Holder”) the Principal Sum of $220,000 (the “Principal Sum”) and to pay “guaranteed” interest on the principal balance hereof at an amount equivalent to 10% of the Principal Sum, to the extent such Principal Sum and “guaranteed” interest and any other interest, fees, liquidated damages and/or items due to Holder herein have not been repaid or converted into the Company's common stock (the “Common Stock”), in accordance with the terms of the Note.
As an investment incentive, the Company will issue to the Holder 5,000 common stock shares as restricted Incentive Shares (the “Origination Shares”), which shares shall be issued in the Holder’s name within 10 Trading Days of the Date of Execution. “Conversion Price” of the Note shall be equal to 70% of the lowest trading price of the Company’s Common Stock during the 20 consecutive Trading Days prior to the date on which Holder elects to convert all or part of the Note.
Repayment
(a)The Company may pay this Note, in whole or in part, in cash or in other good funds, according to the following schedule:
Days Since Effective Date
|
Payment Amount
|
Under 90
|
120% of Principal Amount so paid
|
91-180
|
130% of Principal Amount so paid
|
(b)After 180 days from the Effective Date, the Company may not pay this Note, in whole or in part, in cash or in other good funds, without prior written consent from Holder, which consent may be withheld, delayed, denied, or conditioned in Holder’s sole and absolute discretion.
On June 24, 2019, we issued 28,500 common stock shares which included 13,500 common stock shares for cash consideration and 15,000 common stock shares as compensation for services rendered in reliance of Section 4(a)(2) of the Securities Act.
On June 24, 2019, the Board of Directors granted Martin Tindall a temporary leave of absence from his position as Chief Executive Officer and Director of the Company to address certain unforeseen personal issues. Concurrently, the Company’s Board of Directors appointed Janelle Marsden, the Company’s Managing Director, to the role of Interim Chief Executive Officer until such time as Mr. Tindall is able to resume his position, or the Board of Directors appoints an alternate Chief Executive Officer.
Subsequently on July 11, 2019, the Board of Directors confirmed that Martin Tindall had been arrested and charged with securities fraud in the State of Colorado. Following research by counsel, the Company determined that the charges predated Mr. Tindall’s activities with the Company, and that none of charges were directly related to his activities with the Company. However, due to the nature of the charges, the Board of Directors publicly confirmed that Martin Tindall was placed on indefinite, unpaid suspension from his position as Chief Executive Officer and removed any and all authorities given to him by the Company. Concurrently, the Company’s Board of Directors appointed Janelle Marsden, to the role of Chief Executive Officer.
F-15
PHOENIX LIFE SCIENCES INTERNATIONAL LIMITED
(A Development Stage Company)
Financial Statements
For the Year Ended February 28, 2019
11. Subsequent Events (Continued)
On July 23, 2019, we issued 92,690 common shares which included 40,690 for cash consideration and 52,000 common shares as compensation for services rendered in reliance of Section 4(a)(2) of the Securities Act.
On August 5, 2019, Michael Gobel resigned as Director of the Company, due to other work commitments.
In August it was determined, after inquiries of solicitors in Vanuatu and Australia, that 22,500,000 common shares had been issued erroneously, consequently the Board of Directors cancelled these 22,500,000 common shares.
On August 22, 2019, we issued 40,000 Series B Preferred Shares (the “Preferred Shares”) to entities associated with each of the five members of a Special Committee composed of our Board Members and Stacey Jenkins, and not including Martin Tindall, that are convertible into a total of 20,000,000 common stock shares. The 20,000,000 common stock shares that may be converted from the Preferred Shares constitutes 65.06% of our 30,739,730 outstanding shares upon conversion, which shares are subject to a 12 months lockup and resale restriction of shares per financial quarter.
On August 27, 2019, pursuant to provision 4.5 of our bylaws and a Board meeting of that same date, our Board permanently removed Martin Tindall as our Chief Executive Officer and/or any other of our officer positions or that of our subsidiaries.
On August 27, 2019, our Board of Directors adopted the following:
a)Audit Committee Charter
b)Nominating Committee Charter
c)Compensation Committee Charter
d)Code of Ethics
e)Insider Trading Policy
On August 27, 2019, our Board of Directors appointed the following Board Members to our Audit Committee, Compensation Committee, and Nominating Committee:
Audit Committee
Lewis Humer
Geoff Boynton
Compensation Committee
Lewis Humer
Stephen Cornford
Nominating Committee
Lewis Humer
Janelle Marsden
On August 27, 2019, we issued 22,667 common shares which included 7,667 for settlement consideration and 15,000 common shares as compensation for services rendered in reliance of Section 4(a)(2) of the Securities Act.
On November 11, 2019, Constantine and Suzanne Makris were granted a default judgement against the Company for $165,000 plus $6,957.76 in costs against the Company. As at February 28, 2019 had a recorded liability of $365,000 and subsequently $200,000 was paid.
F-16
PHOENIX LIFE SCIENCES INTERNATIONAL LIMITED
(A Development Stage Company)
Financial Statements
For the Year Ended February 28, 2019
12. Commitments and Contingencies
Pursuant to Chief Executive Officer Marsden’s investigation, she learned that on October 29, 2018, Gauntlet Holdings, LLC (“Gauntlet”) and NMS Capital Advisors, LLC (“NMS”) filed a lawsuit against us and our then Chief Executive Officer, Martin Tindall, for breach of contract and fraudulent misrepresentation in connection with an alleged default upon a Secured Promissory Note (Gauntlet Holdings, LLC et al vs. Kronos International, Phoenix Life Sciences International Limited, Medijane Holdings, Martin Tindall, Vincent Coviello, Superior Court of California, Los Angeles-Central District) (the “Gauntlet Litigation”). Then Chief Executive Officer Martin Tindall failed to disclose the Gauntlet litigation to our Board of Directors or our management. As at February 28, 2019, the Company had a recorded liability of $100,000 to Gauntlet Holdings.
Pursuant to Chief Executive Officer Marsden’s investigation, she discovered that on January 30, 2019, Terrence Roderick Hannam filed a lawsuit against us for breach of contract in connection with an agreement that we would acquire all shares of Silver Holdings, Ltd. (Terrence Roderick Hannam v. Phoenix Life Sciences International, Limited, Civil Case No. A7 of 2019, Supreme Court of Republic of Vanuatu. ”). Then Chief Executive Officer Martin Tindall failed to disclose the Hannam Litigation to our Board or our management. We have filed a Motion to Dismiss regarding this litigation.
F-17