UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2019

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from ______ to _______

Commission File Number: 000-55467

APOTHECA BIOSCIENCES, INC.

(Exact name of Registrant as specified in its charter)

10901 Roosevelt Blvd N Bldg. C 1000
Saint Petersburg, FL 33716

(Address of principal executive offices)

(727) 228-3994

 (Registrant's telephone number, including area code)

Cannabis Leaf, Inc.
4500 9^th Ave NE, Seattle WA  98105

(Former name or former address, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

[X]Yes     [_]No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [X]Yes     [_]No (Not required)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer [_] Accelerated Filer [_] Emerging Growth Company [_]

Non-Accelerated Filer [_] Smaller Reporting Company [X]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the exchange act. [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [X]No 

As of June 19, 2019, there were 179,611,976 shares of the Registrant’s $0.001 par value common stock issued and outstanding.

Special Note Regarding Forward-Looking Statements

Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Apotheca Biosciences, Inc. (formerly Cannabis Leaf, Inc.) (the “Company”), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

*Please note that throughout this Quarterly Report, and unless otherwise noted, the words "we," "our," "us," the "Company," or "Cannabis" refers to Apotheca Biosciences, Inc.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Unaudited Condensed Consolidated Financial Statements

Apotheca Biosciences, Inc.

APOTHECA BIOSCIENCES, INC.

CONSOLIDATED BALANCE SHEETS

 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

APOTHECA BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

APOTHECA BIOSCIENCES, INC.

STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

APOTHECA BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

The accompanying notes are an integral part of these unaudited condensed financial statements

APOTHECA BIOSCIENCES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED APRIL 30, 2019

NOTE 1 -ORGANIZATION AND BASIS OF PRESENTATION

Apotheca Biosciences is a medical device company developing engineering and device solutions for cannabinoid medical technologies. The company is incorporated in Nevada as a Corporation with principal business in Saint Petersburg, FL. The company develops, license and market cannabinoid technologies to various market sectors.

Apotheca Biosciences is developing cutting-edge medical products, nutraceuticals, formulation and delivery technologies for the healthcare and consumer care industry. Our pipeline of products includes, transdermal, sublingual, and nasal delivery technologies for precise and controlled dosing of cannabinoids. We believe that we can deliver meaningful benefits using our technologies to the world’s aging population.

The last two decades of research have brought a tremendous improvement in knowledge of the endocannabinoid system (eCB system) components and functions under physiological and pathological conditions. The eCB is a neuromodulatory system consists of two subtypes of cannabinoid receptors, CB1 and CB2

Vision

Apotheca Biosciences is positioning to be global leader in discovering new cannabinoid medical technologies to make life better and healthier

Mission

To contribute to human welfare through innovative biomedical engineering solutions; to deliver cannabinoid actives that relieve pain, restore health, and longevity of millions of patients around the world.

Core values:

Apotheca Biosciences, Inc. (the "Company") was originally incorporated in the State of Nevada on October 6, 2014, under the name Pacificorp Holdings, Ltd. On June 2, 2017 the Company entered into a short form Merger Agreement with the Company’s wholly owned subsidiary in order to effect the change of their corporate name. The name change was effected through a parent/subsidiary short-form merger of the Company and its wholly-owned subsidiary, Cannabis Leaf Incorporated., a Nevada Corporation (the “Subsidiary”), under Section 92A.180 of the Nevada Revised Statutes (“NRS”). Pursuant to an Agreement of Merger, dated June 2, 2017, between the Company and the Subsidiary, effective June 7, 2017, the Subsidiary merged with and into the Company and ceased to exist (the “Merger”). Pacificorp Holdings, Ltd was the surviving entity and adopted the name of the subsidiary, Cannabis Leaf Incorporated.

On March 6, 2018 an Agreement and Plan of Merger (the "Agreement") was made and entered into as of March 6, 2018 by and among Cannabis Leaf Incorporated (“CLI”) and Apotheca. The respective Boards of Directors of CLI and Apotheca determined that it was in the best interest of each company and its respective stockholders to consummate the business combination transaction provided for in the agreement in which Apotheca would merge with and into CLI (the "Merger"), with Apotheca as the surviving entity post-Merger, the respective Boards of Directors of CLI and the Apotheca approved the Agreement, the Merger, and the other transactions contemplated by the Agreement, upon the terms and subject to the conditions set forth in the Agreement in accordance with the Nevada Revised Statutes regarding business combinations or merger ("NRS"), and their respective corporate documents.

APOTHECA BIOSCIENCES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED APRIL 30, 2019

On August 2, 2018, Articles of Merger and the Merger Agreement were filed with the Nevada Secretary of State, giving Effect to the Merger and the change of name of our company to Apotheca Biosciences Incorporated.

These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States and are expressed in United States (US) dollars. The Company has not produced any revenue from its principal business and is a development stage company. The Company has changed it business from a license holder with Affordable Green LLC of Tacoma WA to a cannabis bioscience company. Additionally, the Company has changed its name as a result of a merger with the Company’s wholly owned subsidiary Apotheca Biosciences, Inc. as a result of this merger Cannabis Leaf adopted the name of the subsidiary. The comparative balance sheet is the balance sheet audited as of April 30, 2018 for Apotheca Private.

 NOTE 2 -SIGNIFICANT ACCOUNTING POLICIES 

Basis of Presentation

The Financial Statements and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The Financial Statements have been prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and presented in US dollars. The fiscal year end is January 31.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ from these good faith estimates and judgments.

Cash and Cash Equivalents

For the purpose of the statement of cash flows, cash equivalents include time deposits, certificate of deposits, and all highly-liquid debt instruments with original maturities of three months or less.

Inventory 

Inventory is valued at the lower of the inventory’s cost or the current market price of the inventory. Management compares the cost of inventory with its market value and an allowance is made to write down inventory to market value, if lower. At April 30, 2019 and January 31, 2019, the balance of inventory was $103,687 and $7,640, respectively.

Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of accounts payable and accrued liabilities and loans payable – related parties. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments.

Basic and Diluted Earnings Per Share

Net loss per share is calculated in accordance with FASB ASC 260, Earnings Per Share, for the period presented. ASC 260 requires presentation of basic earnings per share and diluted earnings per share. Basic income (loss) per share (“Basic EPS”) is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share (“Diluted EPS”) is similarly calculated. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. These potentially dilutive securities were not included in the calculation of loss per common share for the period ended April 30, 2019 and January 31, 2019 because their effect would be anti-dilutive.

 The outstanding securities consist of the following:

APOTHECA BIOSCIENCES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED APRIL 30, 2019

New Accounting Pronouncements

In June 2018, the FASB issued Accounting Standards Update (“ASU”) ASU 2018-07, Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments granted to nonemployees for goods and services and aligns most of the guidance on such payments to nonemployees with the requirements for share-based payments granted to employees. ASU 2018-07 is effective on January 1, 2019. Early adoption is permitted. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory, which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. ASU 2016-16 is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize lease assets and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted. The Company adopted this standard on February 1, 2019.

The Company reviews new accounting standards as issued. No new standards had any material effect on these financial statements. The accounting pronouncements issued subsequent to the date of these financial statements that were considered significant by management were evaluated for the potential effect on these consolidated financial statements. Management does not believe any of the subsequent pronouncements will have a material effect on these consolidated financial statements as presented and does not anticipate the need for any future restatement of these consolidated financial statements because of the retro-active application of any accounting pronouncements issued subsequent to April 30, 2018 through the date these financial statements were issued.

NOTE 3 – MERGER

On March 6, 2018 an Agreement and Plan of Merger was made and entered into as of March 6, 2018 by and among Cannabis Leaf (CLI) and Apotheca. The respective Boards of Directors of CLI and Apotheca have determined that it is in the best interest of each company and its respective stockholders to consummate the business combination transaction provided for in the agreement in which Apotheca would merge with and into CLI , with Apotheca (post name change from cannabis Leaf) as the surviving entity post-Merger, upon the terms and subject to the conditions set forth herein; the respective Boards of Directors of CLI and the Apotheca have approved the Agreement, the Merger, and the other transactions contemplated by the Agreement, upon the terms and subject to the conditions set forth in the Agreement in accordance with the Nevada Revised Statutes regarding business combinations or merger ("NRS"), and their respective corporate documents.

At the Effective Time, by virtue of the Merger and without any action on the part of CLI or Apotheca or any holder of capital stock of CLI or Apotheca:

(a) Capital Stock of CLI.  Each issued and outstanding share of capital stock of shall by virtue of the Merger and without any action on the part of any holder thereof, be converted into and shall be existing as one share of CLI's common stock without need of re-issuance.  Such shares shall thereafter constitute all of the issued and outstanding capital stock of the Surviving Corporation being Apotheca.

APOTHECA BIOSCIENCES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED APRIL 30, 2019

(b) Conversion of CLI Stock:(i) Each share of CLI Common Stock issued and outstanding immediately prior to the Effective Time (individually a "Share" and collectively the "Shares"), shall be considered shares of Apotheca as the surviving entity as set forth below (the "Merger Consideration").

(ii) At the Effective Time, each Share held by CLI as treasury stock or held by CLI, or any Subsidiary of CLI, immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of CLI continue to exist as shares of Apotheca as the surviving entity without further consideration with respect thereto.

(iii) At the Effective Time, each Share of the Treasury Stock as Authorized Shares but unissued Shares of CLI shall become Treasury Shares but unissued Shares of Apotheca, with no change the authorized shares which were in effect immediately prior to the Effective Time.

(iv) At the Effective Time, Apotheca as the surviving entity and in exchange for the acquisition of Apotheca shall be issued as such exchange for control and merger the amount of sixty million (60,000,000) shares of Apotheca as the surviving Company in the form of common shares to be distributed as set forth by Apotheca at its direction on a schedule set forth for issuance. Such shares shall be considered the Merger Control Shares and shall represent approximately sixty percent of the then post-issuance control of CLI post-merger. (v) At the time of exchange in such transaction, there is as certified by CLI, its board of directors and management, exist no convertible or other debt with claims or rights superior for the issuance of any shares of common stock in CLI, and no such claims need be recognized by Apotheca as debt of the surviving entity. Any such debt must have been and was not disclosed to Apotheca before this transaction, and the existing of such debt or claims is a liability of the prior management of CLI and not of Apotheca as the surviving entity.

Closing. Upon the terms and subject to the conditions set forth herein and unless this Agreement has been terminated pursuant to its terms, the closing of the Merger on May 15, 2018 at which time the conditions to Closing set forth in this Agreement shall have been satisfied or, to the extent permitted hereunder, waived by the appropriate party (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or, to the extent permitted hereunder, waiver of all such conditions) or at such other time, date or location as the parties hereto agree. The date on which the Closing actually occurs, and the transactions contemplated hereby become effective is hereinafter referred to as the Closing Date CLI and Apotheca shall deliver the certificates and other documents and instruments required to be delivered hereunder.

Effective Time of the Merger. Subject to the provisions of this Agreement, at the Closing, the parties hereto shall (a) cause a certificate of merger in substantially the form required by the Secretary of State of Nevada to be executed and filed with the Secretary of State of the State of Nevada, and (b) take all such other and further actions as may be required by the NRS or other applicable Law to make the Merger effective. The Merger shall become effective as of the date and time of the filing of the Nevada Certificate of Merger or at such later date or time as may be agreed by CLI and CLI in writing and specified in the Nevada Certificate of Merger in accordance with relevant provisions of the NRS. The date and time of such effectiveness are referred to herein as the Effective Time.

APOTHECA BIOSCIENCES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED APRIL 30, 2019

On August 2, 2018, Articles of Merger and the Merger Agreement were filed with the Nevada Secretary of State, giving Effect to the Merger and the change of name of our company to Apotheca Biosciences Incorporated.

The unaudited pro forma combined condensed financial statements were prepared using the acquisition method of accounting as outlined in Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 805, Business Combinations, with the Company considered the acquiring company. Based on the acquisition method of accounting, the consideration transferred by the Company is based on number or equity interests (e.g., shares) the Company issued to give the shareholders of the CLI the same percentage of equity interest in the combined entity that resulted from the reverse merger. Consolidated statements immediately following the reverse merger are a continuation of the financial statements of the Company (“accounting acquirer”) retroactively adjusted to reflect the CLI (“accounting acquiree”) legal capital.

The acquisition of a private operating company by a nonoperating public shell corporation typically results in the owners and management of the private company having actual or effective voting and operating control of the combined company. A public shell reverse acquisition is viewed as a capital transaction in substance, rather than a business combination. As a result, it should be accounted for as a reverse recapitalization equivalent to the issuance of stock by the private company for the net monetary assets of the shell corporation accompanied by a recapitalization. This accounting treatment is similar to that resulting from a reverse acquisition, except that no goodwill or other intangible assets should be recorded.

NOTE 4 – GOING CONCERN

The Company's financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. At April 30, 2019 and January 31, 2019, the Company had $250,478 and $2,942 in cash and $818,908 and $822,994 in negative working capital, respectively.  For the three months ended April 30, 2019 and from inception (February 26, 2018) through April 30, 2018, the Company had a net loss of $171 and $38,242, respectively. Continued losses may adversely affect the liquidity of the Company in the future. Therefore, the factors noted above raise substantial doubt about our ability to continue as a going concern. The recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company's ability to raise additional capital, obtain financing and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s existence is dependent upon management’s ability to develop profitable operations and resolve its liquidity problems.

NOTE 5 – INVENTORY

As of April 30, 2019 and January 31, 2019, the balance in inventory is $103,687 and $7,640, respectively. The inventory consists of $7,640 in the raw material CBD Isolate, which is a pure, crystalline powder that contains 99% pure CBD and $96,047 of finished CBD products ((i.e. oils, drops, - gel caps, and sleep caps).

APOTHECA BIOSCIENCES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED APRIL 30, 2019

NOTE 6 – PREPAID ASSETS

As of April 30, 2019 and January 31, 2019, the Company has the following in prepaid assets:

Note:

At January 31, 2019, the prepaid inventory balance of $88,602 consisted of a down payment for 50% of a finished CBD products (i.e. oils, drops, - gel caps, and sleep caps). That inventory has since been received.

NOTE 7 – PROPERTY AND EQUIPMENT

Property and equipment, net, consisted of the following at April 30, 2019 and January 31, 2019:

The Company purchased nine cubicles and nine office chairs amounting to $2,508 from Nuvus Gro Corp, which is a related party. This is classified in furniture and fixtures. Depreciation expense related to these assets for the three months ended April 30, 2019 amounted to $327.

APOTHECA BIOSCIENCES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED APRIL 30, 2019

NOTE 8 – INTANGIBLE ASSETS

Intangible assets, net, consisted of the following at April 30, 2019 and January 31, 2019:

Amortization expense related to these assets for the three months ended April 30, 2019 amounted to $5.

NOTE 9 – ACCRUED LIABILITIES

As of April 30, 2019 and January 31, 2019, the Company has the following accrued liabilities:

 As of April 30, 2019 and January 31, 2019, the Company has the following accrued liabilities to related parties:

NOTE 10 – NOTES PAYABLE

As of April 30, 2019, the Company had outstanding notes payable totaling $18,600. The notes bear an interest rate of 5% per annum and are due upon demand giving 30 days written notice to the borrower. For the three months ended April 30, 2019, the Company recorded $232 in interest expense on the notes.

NOTE 11 – CONVERTIBLE NOTE PAYABLE

October 3, 2018 Note – Firstfire Global Opportunities Fund, LLC

On October 3, 2018, the Company entered into a Securities Purchase Agreement with Firstfire Global Opportunities Fund, LLC, an accredited investor “Firstfire” pursuant to which the Company issued to Firstfire a Senior Convertible Promissory Note (“Note 1”) in the aggregate principal amount of $300,000. The Company received net proceeds of $243,900 after a $24,000 original note discount and $32,100 of financing costs. The Note has a maturity date of October 3, 2019 and the Company has agreed to pay interest on the unpaid principal balance of the Note at the rate of five percent (5%) per annum from the date on which the Note is issued until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Note, provided it makes a payment to Firstfire as set forth in the Note.

The outstanding principal amount of the Note is convertible into common stock at the lender’s option at $0.20 per share. The agreements contain down-round protection in the event the Company issues common stock at a lower price. In connection with the agreement, the Company issued detachable warrants to purchase 480,000 shares of the company’s common stock. The warrants have a strike price of $0.3125 and an expiration date of October 3, 2021. The warrants contain down-round protection in the event the Company issues common stock at a lower price.

APOTHECA BIOSCIENCES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED APRIL 30, 2019

Accounting Considerations

The Company has accounted for the Note as a financing transaction, wherein the net proceeds that were received were allocated to the financial instrument issued. Prior to making the accounting allocation, the Company evaluated the agreement under ASC 815 Derivatives and Hedging (“ASC 815”). ASC 815 generally requires the analysis embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks of the host contract. The material embedded derivative features consisted of the embedded conversion option and default puts. The conversion option and default puts bear risks of equity which were not clearly and closely related to the host debt agreement and required bifurcation. Current accounting principles that are also provided in ASC 815 do not permit an issuer to account separately for individual derivative terms and features that require bifurcation and liability classification. Rather, such terms and features must be and were bundled together and fair valued as a single, compound embedded derivative. Additionally the warrants required classification as derivative liabilities.

Based on the previous conclusions, the Company allocated the cash proceeds first to the derivative components at its fair value with the residual allocated to the host debt contract, as follows:

The net proceeds of $243,900 were allocated to the compound embedded derivative and derivative warrants. This resulted in a day-one derivative loss of $260,917. Due to the 100% discount of the note, the net carrying value on the balance sheet was zero upon inception. The Note will be amortized up to its face value of $300,000 over the life of Note based on an effective interest rate. Amortization expense for the period amounted to $36,674. During the three months ended April 30, 2019, the holder converted $35,000 in principal into 481,310 shares of common stock. The carrying value of the Note as of April 30, 2019 and January 31, 2019 amounted to $51,921 and $22,104, respectively. The remaining principal balance as of April 30, 2019 is $265,000. The note will be amortized up to the face value over the remaining life of the note.

January 18, 2019 Note – Firstfire Global Opportunities Fund, LLC

On January 18, 2019, the Company entered into a Securities Purchase Agreement with Firstfire Global Opportunities Fund, LLC, an accredited investor “Firstfire” pursuant to which the Company issued to Firstfire a Senior Convertible Promissory Note (“Note 2”) in the aggregate principal amount of $150,000. The Company received net proceeds of $124,200 after a $12,000 original note discount and $13,800 of financing costs. The Note has a maturity date of January 18, 2020 and the Company has agreed to pay interest on the unpaid principal balance of the Note at the rate of five percent (5%) per annum from the date on which the Note is issued until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Note, provided it makes a payment to Firstfire as set forth in the Note.

The outstanding principal amount of the Note is convertible into common stock at the lender’s option at $0.20 per share. The agreements contain down-round protection in the event the Company issues common stock at a lower price. In connection with the agreement, the Company issued detachable warrants to purchase 240,000 shares of the company’s common stock. The warrants have a strike price of $0.3125 and an expiration date of January 18, 2022. The warrants contain down-round protection in the event the Company issues common stock at a lower price.

APOTHECA BIOSCIENCES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED APRIL 30, 2019

Accounting Considerations

The Company has accounted for the Note as a financing transaction, wherein the net proceeds that were received were allocated to the financial instrument issued. Prior to making the accounting allocation, the Company evaluated the agreement under ASC 815 Derivatives and Hedging (“ASC 815”). ASC 815 generally requires the analysis embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks of the host contract. The material embedded derivative features consisted of the embedded conversion option and default puts. The conversion option and default puts bear risks of equity which were not clearly and closely related to the host debt agreement and required bifurcation. Current accounting principles that are also provided in ASC 815 do not permit an issuer to account separately for individual derivative terms and features that require bifurcation and liability classification. Rather, such terms and features must be and were bundled together and fair valued as a single, compound embedded derivative. Additionally, the warrants required classification as derivative liabilities.

Based on the previous conclusions, the Company allocated the cash proceeds first to the derivative components at its fair value with the residual allocated to the host debt contract, as follows:

The net proceeds of $124,200 were allocated to the compound embedded derivative and derivative warrants. This resulted in a day-one derivative loss of $268,814. Due to the 100% discount of the note, the net carrying value on the balance sheet was zero upon inception. The Note will be amortized up to its face value of $150,000 over the life of Note based on an effective interest rate. Amortization expense for the period amounted to $6,896. The carrying value of the Note as of April 30, 2019 amounted to $11,052.

APOTHECA BIOSCIENCES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED APRIL 30, 2019

Accounting Considerations

The Company has accounted for the Note as a financing transaction, wherein the net proceeds that were received were allocated to the financial instrument issued. Prior to making the accounting allocation, the Company evaluated the agreement under ASC 815 Derivatives and Hedging (“ASC 815”). ASC 815 generally requires the analysis embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks of the host contract. The material embedded derivative feature consists of the embedded default puts. Because the conversion option is fixed and the agreements do not contain down-round protection, the debt met the definition of conventional convertible. However, the default put bears risks of equity which were not clearly and closely related to the host debt agreement and required bifurcation. Additionally, the warrants required classification as derivative liabilities due to the fundamental transaction provision.

Based on the previous conclusions, the Company allocated the cash proceeds first to the derivative components at its fair value with the residual allocated to the host debt contract, as follows:

The net proceeds of $150,000 were allocated to the default put derivative, derivative warrants and the residual allocated to the debt. The Note will be amortized up to its face value of $165,000 over the life of Note based on an effective interest rate. Amortization expense for the period amounted to $10,995. The carrying value of the Note as of April 30, 2019 amounted to $60,233.

Accounting Considerations

The Company has accounted for the Note as a financing transaction, wherein the net proceeds that were received were allocated to the financial instrument issued. Prior to making the accounting allocation, the Company evaluated the agreement under ASC 815 Derivatives and Hedging (“ASC 815”). ASC 815 generally requires the analysis embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks of the host contract. The material embedded derivative feature consists of the embedded default puts. Because the conversion option is fixed and the agreements do not contain down-round protection, the debt met the definition of conventional convertible. However, the default put bears risks of equity which were not clearly and closely related to the host debt agreement and required bifurcation.

APOTHECA BIOSCIENCES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED APRIL 30, 2019

Based on the previous conclusions, the Company allocated the cash proceeds first to the derivative components at its fair value with the residual allocated to the host debt contract, as follows:

The net proceeds of $105,000 were allocated to the default put derivative, beneficial conversion feature and the residual allocated to the debt. The Note will be amortized up to its face value of $105,000 over the life of Note based on an effective interest rate. Amortization expense for the period amounted to $7,609. The carrying value of the Note as of April 30, 2019 amounted to $38,899.

April 22, 2019 Note – JSJ Investments

On April 22, 2019, the Company entered into a Convertible Promissory Note Agreement with JSJ Investments in the aggregate principal amount of $113,000. The Company received net proceeds of $100,000 after a $10,000 in finders’ fees and $3,000 in legal expenses. The Note has a maturity date of April 22, 2020 and the Company has agreed to pay interest on the unpaid principal balance of the Note at the rate of five percent (5%) per annum from the date on which the Note is issued until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Note, provided it makes a payment to JSJ Investments as set forth in the Note.

The outstanding principal amount of the Note is convertible at the lender’s option after the 180th day after the Issuance date a 50% discount to the lowest trading price during the previous ten (10) trading days to the date of a Conversion Notice.

Accounting Considerations

The Company has accounted for the Note as a financing transaction, wherein the net proceeds that were received were allocated to the financial instrument issued. Prior to making the accounting allocation, the Company evaluated the agreement under ASC 815 Derivatives and Hedging (“ASC 815”). ASC 815 generally requires the analysis embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks of the host contract. The material embedded derivative feature consists of the embedded conversion feature. The conversion option bears risks of equity which were not clearly and closely related to the host debt agreement and required bifurcation.

Based on the previous conclusions, the Company allocated the cash proceeds first to the derivative components at its fair value with the residual allocated to the host debt contract, as follows:

The net proceeds of $113,000 were allocated to the embedded conversion feature. This resulted in a day-one derivative loss of $128,764. Due to the 100% discount of the note, the net carrying value on the balance sheet was zero upon inception. The Note will be amortized up to its face value of $113,000 over the life of Note based on an effective interest rate. Amortization expense for the period amounted to $3,054. The carrying value of the Note as of April 30, 2019 amounted to $3,054.

APOTHECA BIOSCIENCES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED APRIL 30, 2019

NOTE 12 –DERIVATIVE FINANCIAL INSTRUMENTS

The following tables summarize the components of the Company’s derivative liabilities and linked common shares as of April 30, 2019 and January 31, 2019 and the amounts that were reflected in income related to derivatives for the period ended:

The following table summarizes the effects on the Company’s gain (loss) associated with changes in the fair values of the derivative financial instruments by type of financing for the three months ended April 30, 2019:

The Company’s Secured Convertible Promissory Notes and Detachable Warrants issued on October 3, 2018, January 18, 2019, March 19, 2019, April 22, 2019 and April 26, 2019 gave rise to derivative financial instruments. The Notes embodied certain terms and conditions that were not clearly and closely related to the host debt agreement in terms of economic risks and characteristics. These terms and features consist of the embedded conversion option. Additionally the detachable warrants contained terms and features that gave rise to derivative liability classification.

Current accounting principles that are provided in ASC 815 - Derivatives and Hedging require derivative financial instruments to be classified in liabilities and carried at fair value with changes recorded in income. In addition, the standards do not permit an issuer to account separately for individual derivative terms and features embedded in hybrid financial instruments that require bifurcation and liability classification as derivative financial instruments. Rather, such terms and features must be bundled together and fair valued as a single, compound embedded derivative. The Company has selected the Monte Carlo Simulations valuation technique to fair value the compound embedded derivative because it believes that this technique is reflective of all significant assumption types, and ranges of assumption inputs, that market participants would likely consider in transactions involving compound embedded derivatives. Such assumptions include, among other inputs, interest risk assumptions, credit risk assumptions and redemption behaviors in addition to traditional inputs for option models such as market trading volatility and risk-free rates. The Monte Carlo Simulations technique is a level three valuation technique because it requires the development of significant internal assumptions in addition to observable market indicators.

Significant inputs and results arising from the Monte Carlo Simulations process are as follows for the embedded derivatives that have been bifurcated from the Convertible Notes and classified in liabilities:

APOTHECA BIOSCIENCES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED APRIL 30, 2019

APOTHECA BIOSCIENCES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED APRIL 30, 2019

The Company has selected the Black Scholes Merton valuation technique to fair value the detachable warrants because it believes that this technique is reflective of all significant assumption types, and ranges of assumption inputs, that market participants would likely consider in transactions involving compound embedded derivatives.

Significant inputs and results arising from the Black Scholes Merton process are as follows for the detachable warrants classified in liabilities:

The following table reflects the issuances of compound embedded derivatives and detachable warrants and changes in fair value inputs and assumptions related to the compound embedded derivatives during the period ended April 30, 2019.

NOTE 13 - OPERATING LEASE AND RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES

Operating lease right-of-use assets and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value is our incremental borrowing rate, estimated to be 6%, as the interest rate implicit in most of our leases is not readily determinable. Operating lease expense is recognized on a straight-line basis over the lease term. During the three months ended April 30, 2019, the Company recorded $27,768, respectively as operating lease expense which is included in rent expenses on the statements of operations.

We currently sublease approximately 7,500 square feet of office space at 10901 Roosevelt Blvd, bldg. C, Suite 1000, Saint Petersburg, FL 33716, at $9,612 per month on a three-year lease from a related party, Nuvus Gro Corp. The agreement provides for monthly rent payments in the amount of $6,408. The lease period is 24 months. Upon execution of the agreement, the Company was required to pay the last month’s rent deposit in the amount of $6,000. As of January 31, 2019, the Company recorded $38,448 in rent expense related to this agreement. As of April 1, 2019, the agreement was modified to increase the monthly rent to $9,612. 

In adopting ASC Topic 842, Leases (Topic 842), the Company has elected the ‘package of practical expedients’, which permit it not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter is not applicable to the Company. In addition, the Company elected not to apply ASC Topic 842 to arrangements with lease terms of 12 month or less. On February 1, 2019, upon adoption of ASC Topic 842, the Company recorded right-of-use assets and lease liabilities of $158,704.

Right-of- use assets are summarized below:

Amortization on the right -of -use asset is included in rent expense on the statements of operations.

Operating Lease liabilities are summarized below:

Maturity of lease liabilities are as follows:

APOTHECA BIOSCIENCES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED APRIL 30, 2019

 NOTE 14 –COMMON SHARES TO BE ISSUED

From inception through April 30, 2019, the Company received cash totaling $73,700 in exchange for 184,250 shares of common stock at $0.40 per share. As of April 30, 2019 the shares had not been issued. As such, the value of $73,700 was recorded in equity under shares to be issued, common shares.

On April 30, 2019, the Company received a conversion notice of $20,000 convertible into 304,515 shares. The shares were not issued into May 6, 2019. The amount recorded into common shares to be issued for this transaction was $16,844.

NOTE 15 – OPTIONS

In connection with Employment Agreements executed on November 6, 2018, 1,000,000 options have been granted to the Company’s three current officers. The aggregate amount of options granted amounted to 3,000,000. The options have an exercise price of $0.31 per share and vest over three years. The Company calculated a grant date fair value of $560,953. From the period of inception (February 26, 2019) to April 30, 2019, the Company recorded $79,060 related the portion vested.

NOTE 16 –EQUITY   

Common Stock

The Company has authorized 600,000,000 common shares with a par value of $0.001 per share. Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought.

On November 19, 2018, the company issued 300,000 shares as a stock bonus to the Company’s CEO valued at $0.7080 per share, resulting in stock compensation expense of $212,400.

On December 20, 2018, the company issued 4,000,000 shares as a stock bonus to the Company’s executives valued at $0.38 per share, resulting in stock compensation expense of $1,520,000.

On April 4, 2019, the Company issued 200,000 shares to the Company’s COO as compensation.

On April 4, 2019, the Company issued 200,000 shares to the Company’s CTO as compensation.

On April 4, 2019, the Company issued 50,000 shares to a related party (a relative of the CEO), in lieu of payment of $7,980 owed for marketing and design services.

On April 25, 2019 the Company issued 176,795 shares to FirstFire Global for conversion of $15,000 of principal.

NOTE 17 – RELATED PARTIES

Related parties are natural persons or other entities that have the ability, directly or indirectly, to control another party or exercise significant influence over the party in making financial and operating decisions. Related parties include other parties that are subject to common control or that are subject to common significant influences.

Fixed Assets

The Company purchased nine cubicles and nine office chairs amounting to $2,508 from Nuvus Gro Corp, which is a related party. This is classified in furniture and fixtures.

APOTHECA BIOSCIENCES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED APRIL 30, 2019

Lease Agreement

On August 1, 2018, the Company entered into a lease agreement with Nuvus Gro Corp, a related party. The agreement provides for monthly rent payments in the amount of $6,408. The lease period is 24 months. Upon execution of the agreement, the Company was required to pay the last month’s rent deposit in the amount of $6,000. As of April 1, 2019, the agreement was modified to increase the monthly rent to $9,612. See Note 13.

Accounts Payable

As of April 30, 2019 and January 31, 2019, the Company had $16,020 and $8,225 in outstanding accounts payable to related parties, respectively. The company had a balance of $8,000 owed to the CEO’s wife, for product design and marketing services, of which $7,980 was converted into 50,000 shares of common stock. Additionally, the Company has a balance of $225 owed to Nuvus Gro Corp, a related party for the purchase of office furniture.

Related Party Advances -24,050

The Company received advances from related parties during the three months ended April 30, 2019. As of April 30, 2019, the Company had a balance due to Blockscience Corp, a related party, in the amount of $4,784. As of April 30, the Company had a balance due to Sam Talari, a related party, in the amount of $19,266. The company imputed interest on these advances in the amount of $218.

NOTE 18 – CONTINGENCIES

None.

NOTE 19 - SUBSEQUENT EVENTS

Management has evaluated events that occurred subsequent to the end of the reporting period shown herein:

Share issuances

On May 6, 2019 the Company issued 304,515 shares to FirstFire Global for conversion of $20,000 of principal.

On May 28, 2019 the Company issued 466,666 shares to FirstFire Global for conversion of $20,000 of principal.

On June 3, 2019, the Company issued 60,000,000 shares to Apotheca Biosciences LLC in connection with the Stock Purchase Agreement discussed in Note 6.

 
FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.

Unless otherwise specified in this quarterly report, all dollar amounts are expressed in United States dollars and all references to “common stock” refer to shares of our common stock.

As used in this quarterly report, the terms “we”, “us”, “our company”, mean Cannabis Leaf Incorporated, a Nevada corporation, unless otherwise indicated.

Corporate Overview 

Apotheca is a developer of cutting-edge medical products, nutraceuticals, formulation and delivery technologies for the healthcare and consumer care industry. Its pipeline of products includes, transdermal, sublingual, and nasal delivery technologies for precise and controlled dosing of cannabinoids. Apotheca believes that it can deliver meaningful benefits using its technologies to the world's aging population.

The Company originally was incorporated in Nevada on October 6, 2014 under the name Pacificorp Holdings Ltd. Until 2017, we were a mineral exploration company with mining claims known as the Delcer Buttes (1-12) in Elko County, Nevada. On August 31, 2017, we elected to not renew the Delcer Buttes claims and subsequently, the claims reverted back to the Bureau of Land Management.

On March 29, 2017, we entered into a Letter of Intent with Affordable Green Washington LLC of Tacoma WA to obtain an exclusive license to market and distribute Affordable Green’s Products in the State of Washington.

On May 4, 2017, we entered into an exclusive License Agreement with Affordable Green Washington LLC. The License Agreement was amended on June 1, 2017.

On June 2, 2017, our company entered into a short form Merger Agreement with our wholly owned subsidiary, Cannabis Leaf Incorporated, in order to effect a change of name of our company. Pursuant to the Merger Agreement, our company will be the surviving entity and will adopt the name of our subsidiary. Our subsidiary was incorporated solely for the purpose of the merger. Effective June 7, 2017, Articles of Merger and the Merger Agreement were filed with the Nevada Secretary of State, giving effect to the merger and the change of name of our company to Cannabis Leaf Incorporated. The Merger was approved by our board of directors and our subsidiary on June 2, 2017. In accordance with Nevada Revised Statutes (NRS) Section 92A.180, stockholder approval was not required.

On April 26, 2018 our company provided a Notice of Termination to Green Venture with respect to the Letter of Intent entered into by our company and Green Venture on October 24, 2017. No Consideration has been paid to date.

On March 6, 2018, an Agreement for Plan of Merger (the “Agreement”) was entered into by our company and Apotheca Biosciences, Inc. (“Apotheca Biosciences”), a Nevada corporation. Such Agreement will result in the merger of Apotheca Biosciences into our company with our company to be the surviving entity under the name "Apotheca Biosciences, Inc.".

Pursuant to the Agreement, our company agreed to issue to Apotheca Biosciences sixty million (60,000,000) shares of our common stock in exchange for all of the shares of Apotheca Biosciences. This issuance will result in a change in control of our company. Upon execution of the Agreement, Apotheca Biosciences will receive the immediate right to the appointment of the directors and officers to our company, with our current officer resigning his officer positions. On April 24, 2018 our company issued 60,000,000 restricted common shares as the consideration under the Agreement.

On March 20, 2018 our company issued 831,330 and 142,670 restricted common shares in settlement of debt in the amounts of $166, 266 and $28,534 respectively.

On May 3, 2018 our company executed a Settlement and Release Agreement with Affordable Green Washington LLC (aka AGH WA, LLC) (the "Settlement Agreement") in order to terminate an Amended License Agreement dated June 1, 2017, cease the business relationship between the parties and remedy any defaults of the terms and conditions of the License Agreement. The compensation and settlement pertaining to Settlement Agreement is an aggregate total of 2,600,000 restricted common shares.

Effective August 2, 2018, Articles of Merger and the Merger Agreement were filed with the Nevada Secretary of State, giving effect to the merger and the change of name of our company to Apotheca Biosciences Incorporated. The Merger was approved by our board of directors and our subsidiary on March 31, 2018. In accordance with Nevada Revised Statutes (NRS) Section 92A.180, stockholder approval was not required.

We have not ever declared bankruptcy, been in receivership, or involved in any kind of legal proceeding. We have minimal revenues and limited cash on hand. We have sustained losses since inception and have relied solely upon the sale of our securities for funding.

Business of the Company

Upon the completion of the Agreement with Apotheca Biosciences, we are now a company that develops cutting-edge medical products and nutraceuticals and formulates and delivers technologies for the healthcare and consumer care industry. Our pipeline of products includes, transdermal, sublingual, and nasal delivery technologies for precise and controlled dosing of cannabinoids.

Results of Operations

The following information represents our results of operations for three months ended April 30, 2019 compared to February 26, 2018 (Inception) through April 30, 2018.

Three Months Ended April 30, 2019 Compared to February 26, 2018 (Inception) through April 30, 2018

Revenue

During the three months ended April 30, 2019 and from February 26, 2018 (Inception) through April 30, 2018 the Company had no revenues.

Operating Expenses

Personnel expenses

Personnel expenses include expenses for payroll. We incurred personnel expenses of $112,672 for the three months ended April 30, 2019. From February 26, 2018 (Inception) through April 30, 2018 we incurred personnel expenses of $30,000. The increase of $82,672 was due to the hiring of new personnel in the period.

Marketing and design, related party

We incurred marketing and design expenses from related parties of $24,000 for the three months ended April 30, 2019 as compared to $0 for the period from February 26, 2018 (Inception) through April 30, 2018. The increase of $24,000 was due to payments made to a relative of the CEO for marketing services.

General and administrative expenses

General and administrative expenses include all costs associated with professional, legal fees, insurance, rent, dues, subscriptions, and other administrative expenses. We incurred general and administrative expenses of $63,540 for the three months ended April 30, 2019 as compared to $8,242 for the period from February 26, 2018 (Inception) through April 30, 2018. The increase of $55,298 was due to the expansion of operations.

General and administrative expenses – related parties

General and administrative expenses include all costs associated with professional, legal fees, insurance, rent, dues, subscriptions, and other administrative expenses paid to related parties. We incurred general and administrative expenses from related parties of $35,268 for the three months ended April 30, 2019 as compared to $0 for the period from February 26, 2018 (Inception) through April 30, 2018.

Stock based compensation

We incurred stock-based compensation expense of $63,600 for the three months ended April 30, 2019 for stock bonuses paid to the Company’s COO and CTO.   

Other Income (Expense)

Interest expense

We incurred interest expense of $71,818 for the three months ended April 30, 2019 as compared to $0 for the period from February 26, 2018 (Inception) through April 30, 2018. The increase in interest expense was related to the amortization of debt discount on convertible notes and accrued interest on the convertible notes.

Interest expense – related parties

We incurred interest expense from related parties in the amount of $3,092 for the three months ended April 30, 2019 as compared to $0 for the period from February 26, 2018 (Inception) through April 30, 2018. The increase in interest expense was related to the amortization of the lease liability due to a related party and imputed interest on related party advances.

Derivative income

We recorded derivative income in the amount of $371,349 for the three months ended April 30, 2019 as compared to $0 for the period from February 26, 2018 (Inception) through April 30, 2018.

Net Losses

We incurred a net loss of $171 for the three months ended April 30, 2019 as compared to $38,242 for the period from February 26, 2018 (Inception) through April 30, 2018. The decreased net loss was aided by the recording of derivative income.

Current Liquidity and Capital Resources for the Three Months Ended April 30, 2019 Compared to February 26, 2018 (Inception) through April 30, 2018

Operating Activities

Cash used in operations of $105,673 during the three months ended April 30, 2019 was primarily a result of our $2,671 net loss reconciled with our net non-cash expenses relating to depreciation expense, inventory, accounts payable and accrued liabilities.  Cash provided by operations of $296 for the period from February 26, 2018 (Inception) through April 30, 2018 was primarily a result of our $38,242 net loss reconciled with our net non-cash expenses relating to stock issued for services, accounts payable and accrued liabilities.  

Investing Activities

Net cash used in investing activities for the three months ended April 30, 2019 resulted from the acquisition of furniture equipment in the amount of $1,791.

Financing Activities

Net cash provided by financing activities was $355,000 for the three months ended April 30, 2019, which consisted completely of funds provided from convertible debt.

Future Capital Requirements

Our current available cash and cash equivalents are insufficient to satisfy our liquidity requirements. Our capital requirements for 2019 will depend on numerous factors, including management’s evaluation of the timing of projects to pursue. Subject to our ability to generate revenues and cash flow from operations and our ability to raise additional capital (including through possible joint ventures and/or partnerships), we expect to incur substantial expenditures to carry out our business plan, as well as costs associated with our capital raising efforts and being a public company.

Our plans to finance our operations include seeking equity and debt financing, alliances or other partnership agreements, or other business transactions, that would generate sufficient resources to ensure continuation of our operations.

The sale of additional equity or debt securities may result in additional dilution to our shareholders. If we raise additional funds through the issuance of debt securities or preferred stock, these securities could have rights senior to those of our common stock and could contain covenants that would restrict our operations. Any such required additional capital may not be available on reasonable terms, if at all. If we were unable to obtain additional financing, we may be required to reduce the scope of, delay or eliminate some or all of our planned activities and limit our operations which could have a material adverse effect on our business, financial condition and results of operations.

Inflation

The amounts presented in our consolidated financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.

 
As a “smaller reporting company”, we are not required to provide the information required by this Item.

Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

An evaluation was conducted under the supervision and with the participation of our management of the effectiveness of the design and operation of our disclosure controls and procedures as of July 31, 2018. Based on that evaluation, our management concluded that our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms as a result of the following material weaknesses:  

The specific material weakness identified by our management was ineffective controls over certain aspects of the financial reporting process because of a lack of a sufficient complement of personnel with a level of accounting expertise and an adequate supervisory review structure that is commensurate with our financial reporting requirements and inadequate segregation of duties. A "material weakness" is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements would not be prevented or detected on a timely basis.

We expect to be materially dependent upon a third party to provide us with accounting consulting services for the foreseeable future. Until such time as we have a chief financial officer with the requisite expertise in U.S. GAAP, there are no assurances that the material weaknesses in our disclosure controls and procedures and internal control over financial reporting will not result in errors in our financial statements which could lead to a restatement of those financial statements.

Changes in Internal Controls

There have been no changes in our internal controls over financial reporting identified in connection with the evaluation required by paragraph (d) of Securities Exchange Act Rule 13a-15 or Rule 15d-15 that occurred in the quarter ended Aril 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

We know of no material, existing or pending legal proceedings against our Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
 

As a “smaller reporting company”, we are not required to provide the information required by this Item.

None.

None.

Not Applicable.

 
None.

* Filed herewith.

** Furnished herewith

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.