CNBX Pharmaceuticals Inc. - Quarter Report: 2015 May (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________

FORM 10-Q

_______________

x  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 31^st, 2015

OR

o  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______.

Commission File Number: 333-192759

___________________________________________________

CANNABICS PHARMACEUTICALS INC.

 (Exact name of registrant as specified in its charter)

___________________________________________________

(877) 424-2429

 (Registrant’s telephone number, including area code)

_____________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

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). Yes x No o

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:

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes o No x

As of July 15, 2015, the registrant had 100,913,333 shares of its Common Stock, $0.0001 par value, outstanding.

CANNABICS PHARMACEUTICALS INC.

FORM 10-Q

MAY 31, 2015

INDEX

PART I – FINANCIAL INFORMATION

Item 1.  Financial Statements

CANNABICS PHARMACEUTICALS INC.

Consolidated Balance Sheets

See accompanying notes to consolidated financial statements.

CANNABICS PHARMACEUTICALS INC.

Consolidated Statements of Operations and Comprehensive Loss

(unaudited)

See accompanying notes to consolidated financial statements.

CANNABICS PHARMACEUTICALS INC.

Consolidated Statements of Cash Flows

(Unaudited)

See accompanying notes to consolidated financial statements.

CANNABICS PHARMACEUTICALS INC.

Notes to Consolidated Financial Statements
May 31st, 2015

(Unaudited)

Note 1 – Nature of Business, Presentation and Going Concern

Organization

Cannabics Pharmaceuticals Inc. (the "Company"), was incorporated in the State of Nevada, on September 15, 2004, under the name of Thrust Energy Corp. The Company was originally engaged in the exploration, exploitation, development and production of oil and gas projects within North America, but was unable to operate profitably.

In May 2011, the Company changed its name to American Mining Corporation, suspending its oil and gas operations and changing its business to toll milling and refining, mineral exploration and mine development.

On April 25, 2014, the Company experienced a change in control. Cannabics, Inc. (“Cannabics”) acquired a majority of the issued and outstanding common stock of the Company in accordance with stock purchase agreements by and between Cannabics and Thomas Mills (“Mills”).  On the closing date, April 25, 2014, pursuant to the terms of the Stock Purchase Agreement, Cannabics purchased from Mills 20,500,000 shares for $198,000, representing 51% of the Company’s outstanding restricted common stock

On May 21, 2014, the Company changed its name, via merger in the state of Nevada, to Cannabics Pharmaceuticals Inc. As of May 21, 2014, the Company has changed its course of business to laboratory research and development.

On August 25, 2014, the Company organized G.R.I.N. Ultra Ltd. (“GRIN”), an Israeli corporation, as a wholly-owned subsidiary. GRIN provides research and development activities for the Company’s products in Israel.

On May 27^th, 2015 the Company filed a Patent with the USPTO entitled “A Method of in Vitro High Throughput Screening of Cancer Biopsies with Cannabinoid Extracts”. In essence this patent takes the next step from the cancer cell knowledge already obtained from cell lines in the Technion Laboratory and extends it to a system of analyzing cancer cells taken from patient biopsies, and then testing them against a multitude of cannabinoid combinations for anti-tumor activity via the High Throughput Screening process. This patent formally begins the next phase of the Company, which is Personalized Medicine (PM). We have developed an automated high-throughput method for the screening of different types of cancer cells or biopsies treated with a multitude of cannabis extracts. These natural extracts could also be tested in conjunction with already approved and common synthetic drugs for patients that undergo chemotherapy for the most personally tailored therapy. This multilayer method is producing a large-scale database that will capture the knowledge gained as to the unique effects of different combinations of cannabinoid compounds on diverse malignancies. Coextensive with the development of the automated high-throughputsystem, we are also developing proprietary and novel compounds targeting diverse and specific types of tumors.

Stock Split

On June 3, 2014, the Company's Board of Directors declared a two-to-one forward stock split of all outstanding shares of common stock. The stock split was approved by FINRA on June 25, 2014. The effect of the stock split increased the number of shares of common stock outstanding from 40,880,203 to 81,760,406. All common share and per common share data in these financial statements and related notes hereto have been retroactively adjusted to account for the effect of the stock split for all periods presented prior to June 3, 2014. The total number of authorized common shares and the par value thereof was not changed by the split.

Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”)for interim financial statement presentation and in accordance with Form 10-Q. Accordingly, they do not include all of the information and footnotes required in annual financial statements. In the opinion of management, the unaudited financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position and results of operations and cash flows. The results of operations presented are not necessarily indicative of the results to be expected for any other interim period or for the entire year.

These unaudited financial statements should be read in conjunction with our 2014 annual financial statements included in our Form 10-K, filed with the U.S. Securities and Exchange Commission (“SEC”) on December 15, 2014.

CANNABICS PHARMACEUTICALS INC.

Notes to Consolidated Financial Statements
May 31st, 2015

(Unaudited)

Principles of Consolidation

The consolidated financial statements include the accounts of Cannabics Pharmaceuticals Inc. and its wholly-owned subsidiary, G.R.I.N. Ultra Ltd. All significant inter-company balances and transactions have been eliminated in consolidation.

Going Concern

The accompanying unaudited financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has not yet generated revenues from its operations, has incurred a net loss of $336,467 for the nine months ended May 31, 2015 and has incurred cumulative losses since inception of $1,074,218. These conditions raise substantial doubt about the ability of the Company to continue as a going concern.

The ability of the Company to continue as a going concern is dependent upon its abilities to generate revenues, to continue to raise investment capital, and develop and implement its business plan. No assurance can be given that the Company will be successful in these efforts.

The unaudited financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern. No assurance can be given that the Company will be successful in these efforts.

Reclassifications

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported losses, total assets, or stockholders’ equity as previously reported.

Note 2 – Intangible Assets

On July 24, 2014, the Company executed a Collaboration & Exclusivity Agreement with Cannabics, Inc. (“Cannabics”), a Delaware corporation and largest shareholder of the Company. Per the terms of the Agreement, the Company issued 18,239,594 shares of its common stock to acquire the entire institutional knowledge of Cannabics, Inc., which primarily consisted of in-process Research & Development technology, the cumulative result of its years of institutional scientific knowledge in the fields of Molecular Biology, Cancer and Pharmacology research. Cannabics executed an Exclusivity clause whereby from that day forth they have carried forward their research and development as part of, and for the exclusive benefit of the Company. Additionally Cannabics tendered $150,000 to the Company specifically earmarked as working funds towards prospective projects of the Company.

The shares were valued at $0.25 per share based on an August 2014 Private Placement Memorandum (“PPM”) issued by the Company for 1,000,000 shares of common stock at $0.25 per share. The total value of the shares of $4,559,899 was reduced by the cash received from Cannabics of $150,000, for a net value of the intangible assets of $4,409,899.

Management has determined that the intangible assets have indefinite lives, and as such, are not amortized on a period basis. The value of the intangible assets will be tested for impairment of their value on an as needed basis, no less than annually. There was no impairment recorded for the three and nine months ended May 31, 2015 and the year ended August 31, 2014. Note the method by which we have calculated the carrying value of the subsidiary's holdings and rights to the use of the intangible assets originally held by a common non-consolidated parent is currently under review, and should our methodology change moving forward, this could result in significant changes concerning the reported value.

Note 3 – Related Party Transactions

During the year ended August 31, 2014, Cannabics advanced $48,800 to the Company for working capital purposes resulting in a balance outstanding at August 31, 2014 of $48,800. During the nine months ended May 31, 2015, Cannabics advanced an additional $135,684 resulting in a balance of $184,483 at May 31, 2015. The advance is due on demand and bears no interest.

CANNABICS PHARMACEUTICALS INC.

Notes to Consolidated Financial Statements
May 31st, 2015

(Unaudited)

Note 4 – Stockholders’ Equity (Deficit)

Authorized Shares

The Company is authorized to issue up to 900,000,000 shares of common stock, par value $0.0001 per share. Each outstanding share of common stock entitles the holder to one vote per share on all matters submitted to a stockholder vote. All shares of common stock are non-assessable and non-cumulative, with no pre-emptive rights.

During the quarter ended May 31, 2015, the following transactions took place.

On April 8^th, 2015, pursuant to a Consulting Agreement with our CFO Dov Weinberg, the Company issued 90,000 common shares to Mr. Weinberg valued at $.20 per share.

On May 1^st, 2015, pursuant to a Consulting Agreement with a strategic industry consultant, the Company made a resolution to issue 50,000 common shares, valued at $.20 per share, to the Consultant.

Note 5 – Commitments and Contingencies

Effective December 1, 2014, the Company leased office space for its research and development activities in Caesarea, Israel under a multiple year non-cancelable operating lease that expired November 30, 2016. The lease agreement had certain escalation clauses and renewal options.

On March 1^st 2015 the company terminated this lease agreement and as of May 31, 2015, the total amount due is $4,000.

On May 1^st, 2015, the Company entered into a Consulting Agreement with a strategic industry consultant, under which the Company shall issue 50,000 common shares to the Consultant as recompense for their services.

Rent expense for the nine months ended May 28, 2015 was $11,438.

As required by the lease, the Company had provided an unconditional bank guarantee in the amount of $5,100 to ensure the Company’s obligations are met under the lease. This guarantee was terminated simultaneously with the termination of the lease agreement.

Note 6 – Subsequent Events

On June 2^nd, 2015, pursuant to the Consulting Agreements with two members of the Advisory Board, the Company issued a total of 160,000

Common shares to the Advisors.

Also on June 2^nd, 2015, pursuant to the Consulting Agreement with a strategic advisor, the Company issued 30,000 common shares to the Consultant.

The Company has evaluated subsequent events through the date the financial statements were issued and filed with the Securities and Exchange Commission. The Company has determined that there are no other such events that warrant disclosure or recognition in the financial statements.

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS

We believe that it is important to communicate our future expectations to our security holders and to the public. This report, therefore, contains statements about future events and expectations which are “forward-looking statements” within the meaning of Sections 27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934, including the statements about our plans, objectives, expectations and prospects under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” You can expect to identify these statements by forward-looking words such as “may,” “might,” “could,” “would,” ”will,” “anticipate,” “believe,” “plan,” “estimate,” “project,” “expect,” “intend,” “seek” and other similar expressions. Any statement contained in this report that is not a statement of historical fact may be deemed to be a forward-looking statement.  Although we believe that the plans, objectives, expectations and prospects reflected in or suggested by our forward-looking statements are reasonable, those statements involve risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements, and we can give no assurance that our plans, objectives, expectations and prospects will be achieved.

Important factors that might cause our actual results to differ materially from the results contemplated by the forward-looking statements are contained in the “Risk Factors” section of and elsewhere in our Annual Report on Form 10-K for the fiscal year ended August 31, 2014 and in our subsequent filings with the Securities and Exchange Commission. The following discussion of our results of operations should be read together with our financial statements and related notes included elsewhere in this report.

Company Overview

Cannabics Pharmaceuticals Inc. (the "Company", “CNBX”, “we”, “us” or “our”) was incorporated in Nevada on September 15, 2004, under the name of Thrust Energy Corp. The Company was originally engaged in the exploration, exploitation, development and production of oil and gas projects within North America, but was unable to operate profitably.

In May 2011, the Company changed its name to American Mining Corporation, suspending its oil and gas operations and changing its business to toll milling and refining, mineral exploration and mine development.

On April 25, 2014, the Company experienced a change in control. Cannabics, Inc. (“Cannabics”) acquired a majority of the issued and outstanding common stock of the Company in accordance with stock purchase agreements by and between Cannabics and Thomas Mills (“Mills”). On the closing date, April 25, 2014, pursuant to the terms of the Stock Purchase Agreement, Cannabics purchased from Mills 20,500,000 shares of the Company’s outstanding restricted common stock for $198,000, representing 51%.The purchase price for the Mills Shares was held in escrow subject to a condition subsequent as to certain representations and warranties by Mr. Mills which were not satisfied by Mr. Mills until June 20, 2014, at which time Escrow was released.

Cannabics is a US based company founded in 2012 by a group of researchers from the fields of molecular biology, cancer research and pharmacology.

On May 21, 2014, the Company changed its name, via merger in the state of Nevada, to Cannabics Pharmaceuticals Inc. The Company’s principle offices are in Bethesda, Maryland. As of May 21, 2014, the Company has changed its course of business to laboratory research and development.

On June 3rd, 2014, the Company's Board of Directors declared a two-to-one forward stock split of all outstanding shares of common stock. The stock split was approved by FINRA on June 19^th, 2014. The effect of the stock split increased the number of shares of common stock outstanding from 40,880,203 to 81,760,406. All common share and per common share data in these financial statements and related notes hereto have been retroactively adjusted to account for the effect of the stock split for all periods presented prior to June 3^rd, 2014. The total number of authorized common shares and the par value thereof was not changed by the split.

On June 19^th, 2014, FINRA granted final approval of Change of Name & Ticker Symbol of the Corporation from American Mining Corporation to CANNABICS PHARMACEUTICALS INC., with the new Ticker Symbol of “CNBX”. Said approval was predicated upon Cannabics Pharmaceuticals Inc.’s filing of Articles of Merger with American Mining Corporation with the Nevada Secretary of State on May 21^st, 2014. Under the laws of the State of Nevada, Cannabics Pharmaceuticals Inc. was merged with and into the Registrant, with the Registrant Being the surviving entity. The Merger was completed under Section 92A.180 of the Nevada Revised Statutes, Chapter 92A, as amended, and as such, does not require the approval of the stockholders of either the Registrant or Cannabics Pharmaceuticals Inc.

On July 24, 2014, the Company executed a Collaboration & Exclusivity Agreement with Cannabics, Inc. (“Cannabics”), a Delaware corporation and largest shareholder of the Company. Per the terms of the Agreement, the Company issued 18,239,594 shares of its common stock to acquire the entire institutional knowledge of Cannabics, Inc., which primarily consists of in-process Research & Development technology, the cumulative result of its years of scientific institutional knowledge in the fields of Molecular Biology, Cancer and Pharmacology research. Additionally Cannabics tendered $150,000 to the Company specifically earmarked as working funds towards prospective projects of the Company. Cannabics executed an Exclusivity clause whereby from that day forth they have carried forward their research and development as part of, and for the exclusive benefit of the Company, which initial findings have now branched out into new and divergent discoveries.

On July 31^st, 2014, Cannabics Pharmaceuticals Inc. filed its exclusive Patent Application with the US Patent & Trademark Office (USPTO), which covers the proprietary technology developed by its team of experts in the field of cannabinoid long acting lipid based formulations. This Technology is the basis for the company’s IP of “CANNABICS SR”, which is a standardized and long acting medical cannabis capsule. Simultaneously this Patent was filed with the PCT division of the Israeli Patent Office (ILPO) in order to provide International IP protection.

On August 25^th, 2014, Cannabics Pharmaceuticals Inc. incorporated a wholly owned subsidiary in Israel, named “G.R.I.N Ultra Ltd”, dedicated to the advanced research and development in the company’s research and development in Israel.

On October 20^th, 2014, Cannabics Pharmaceuticals Inc. received Government Certification from the Ministry of Health in Israel for the establishment of an advanced R&D laboratory dedicated to biology and cancer research and development of cannabinoid-based therapies. R&D is conducted to date in Israel and has resulted in an IP portfolio that includes proprietary formulation methods of cannabinoid extracts that enable a sustained release PK profile of the active ingredients upon oral administration. Their first technology is labeled as “Cannabics SR” - a standardized, high bioavailability, sustained release medical cannabis capsule that is based on cannabinoid extracts from selected strains of medical cannabis.  The Cannabics SR proprietary formulation was shown to provide a steady and elongated state level of beneficial therapeutic effects. In Israel, numerous patients (most of them oncology patients) have already been treated utilizing the technology of this unique delivery system; with both patients and doctors reporting high levels of satisfaction from the uniformity and long lasting therapeutic effects of this new method.

On November 4^th, 2014, Cannabics Pharmaceuticals Inc. executed an IP Licensing and Collaboration Agreement with Kalapa Holdings (Spain) for the licensing of the Company’s CANNABICS SR technology. The IP Licensing Agreement allows for the Company’s advanced cannabinoid administration technology to be manufactured and distributed in Spain, exclusively through Kalapa Holdings and its subsidiaries in strict compliance with Spanish law and regulations to certified patients.

On December 18^th, 2014, Cannabics Pharmaceuticals Inc. executed a letter of engagement with Mountain High Products in Colorado, for the latter’s exclusive manufacturing of a capsule based upon the Company’s proprietary formula via an IP License. Mountain High Products will manufacture their capsule in strict compliance under its license in Colorado as a registered “Medical Marijuana-Infused Products Manufacturer”.

On December 31^st, 2014, Cannabics Pharmaceuticals Inc. executed an IP Licensing and Collaboration Agreement with Barak Security Ltd (Israel) for the production and distribution of the Company’s CANNABICS SR line of medical cannabis products. The IP Licensing Agreement allows for the Company’s advanced cannabinoid administration technology to be manufactured and distributed in Israel and the Czech Republic, exclusively through Barak Security’s affiliates and subsidiaries in strict compliance with all local laws and regulations.

On January 23, 2015, the shareholders of the Company elected Shay Avraham Sarid to the join the Board of Directors. On the same date, Dr. Zohar Koren stepped down as Director and CEO of the Company. Director Itamar Borochov assumed the title of CEO. Shay Avraham Sarid, 43, is a co-founder of Cannabics Inc., founded in 2012, and is the founder of Seach, one of the oldest and largest medical Cannabis farms in Israel. Seach is an official supplier of medical grade Cannabis to the Israeli Ministry of Health and specifically licensed to grow and distribute medical cannabis to authorized patients. Shay is the recent Chairman of the Israeli Medical Cannabis Growers Council. Under Shay’s direction Seach has set the industry standard for genetic bio-engineering, winning coveted partnerships with such companies as Hlavin, Kanaboseed (Partnership with BreedIt (BRDT), Tecto, Canabolabs, CannaXLRT, Cannabogene, Livni Hydrophonics, Eybna and other international leaders in the medical cannabis field. Related Party - Sarid is a shareholder and Board Member of Cannabics Inc., a Delaware corporation and majority shareholder of the Company. Further the Company has a previously existing exclusive contract with Seach for its supply of medical grade cannabinoid extracts within the state of Israel.

On January 29, 2015 the Company executed an Agreement with Rambam Medical Center (Israel) to undertake a controlled pilot study utilizing Cannabics SR Capsules as palliative treatment to improve cancer related Cachexia and Anorexia Syndrome in advanced stage cancer patients. Rambam is a world renowned academic hospital acknowledged for their cutting-edge research projects and integration of innovative new therapies and treatments to over 2 million residents of Northern Israel. You can view the details of this study from the NIH website at http://www.cancer.gov/clinicaltrials/search/view?cdrid=769090&version=HealthProfessional&protocolsearchid=12509449

On February 15, 2015 the Company executed of a Research Agreement with the Technion Research & Development Foundation Ltd (Israel) to undertake a Research Project entitled "The Assessment of the Antitumor Activity of the Whole Cannabis Plant Extract, Components and Derivatives Thereof". The Research Project is scheduled to last one calendar year. Under the terms of the Agreement, Cannabics Pharmaceuticals will collaborate under the supervision of the Head of Technion’s Laboratory of Cancer Biology and Cannabinoid Research. The purpose of this Research is to develop a diagnostic and therapeutic system to harness the anti-cancer properties of active cannabis-based ingredients. The study will screen and evaluate different types of human cancer cells treated with a multitude of cannabinoid combinations and observe and catalogue the effects thereof. Technion is consistently ranked among the world’s top science and Technology Research Universities. The Faculty of Biology is comprised of 23 independent research groups, focusing on a variety of aspects of Cellular, Molecular and Developmental Biology. The faculty has extensive collaborations with the pharmaceutical and biotechnology industries.

Plan of Operation

We are dedicated to the scientific development of advanced and sophisticated cannabinoid-based therapies. The Company’s main focus is development of various new and innovative biotechnological tools aimed at better understanding the anti-tumor properties that respond to active ingredients sourced from the cannabis plant. These advanced tools include personalized medicine therapies, innovative delivery systems for cannabinoids, and procedures based on cannabis originated compounds and personal bioinformatics tools. The initial results from our joint research with the Technion Institute have already been publicly released and are deemed quite positive. The company intends to monetize our proprietary laboratory knowledge in several ways, including to license to other Pharmaceutical companies through various joint research arrangements.

Results of Operations

For the Three Months Ended May 31st, 2015 and 2014

Revenues

We had no revenue for the three months ended May 31st, 2015 and 2014.

Operating Expenses

For the three months ended May 31st, 2015 our total operating expenses were $153,842 compared to $4,814 for the three months ended May 31st, 2014 resulting in an increase of $149,028. The increase is attributable to increases in research and development expenses of $71,189; sales and marketing expenses of $19,836 and depreciation of $367; offset by a decrease in General and administration expenses of $7,636. Further, during the quarter ended May 31, 2014, there were discontinued operations of $50,000

The net loss was $153,842 for the three months ended May 31st, 2015 compared to $55,854 for the three months ended May 31st, 2014.

For the Nine Months Ended May 31st, 2015 and 2014

Revenues

We had no revenue for the nine months ended May 31st, 2015 and 2014.

Operating Expenses

For the nine months ended May 31st, 2015 our total operating expenses were $336,467 compared to $98,376 for the nine months ended May 31st, 2014 resulting in an increase of $238,091. The increase is attributable to increases in general and administrative expenses of $30,578; professional and consulting fees of $37,706; legal fees of $33,575; sales and marketing expenses of $50,836; research and development expenses of $84,293; and depreciation of $1,103.

As a result the net loss was $336,467 for the nine months ended May 31st, 2015 compared to $101,385 for the nine months ended May 31st, 2014.

Liquidity and Capital Resources

Overview

As of May 31st, 2015, the Company had $21,551 in cash and a negative working capital of $177,387. We do not have sufficient resources to effectuate our business. We expect to incur a minimum of $1,000,000 in expenses during the next twelve months of operations. We estimate that these expenses will be comprised primarily of general expenses including overhead, legal and accounting fees, sales and marketing expenses, research and development expenses, and fees payable to outside medical centers for clinical studies.

Liquidity and Capital Resources during the Nine Months Ended May 31st, 2015 compared to the Nine Months ended May 31st, 2014

We used cash in operations of $151,080, for the nine months ended May 31st, 2015 compared to cash used in operations of $145,735, for the nine months ended May 31st, 2014. The negative cash flow from operating activities for the nine months ended May 31st, 2015 is primarily attributable to the Company's net loss from operations of $336,467, offset by depreciation of $1,103, transfers from related party of $135,684, and stock issued (or to be issued) of $45,500. Cash used in operations for the nine months ended May 31st, 2014 is primarily attributable to the Company's net loss from operations of $101,385 and by the net changes in operating assets and liabilities of $74,350.

Cash used in investing activities for the nine months ended May 31st, 2015 was $3,711, consisting of the acquisition of equipment compared to 30,000 consisting of an acquisition of mineral property during the nine months ended May 31st, 2014.

Cash generated in our financing activities was $78,333 consisting of the sale of common stock for the nine months ended May 31st, 2015, compared to $102,980 cash generated from the sale of common stock during the comparable period in 2014.

We will have to raise funds to pay for our expenses. We may have to borrow money from shareholders or issue debt or equity or enter into a strategic arrangement with a third party. There can be no assurance that additional capital will be available to us. We currently have no arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources. Since we have no such arrangements or plans currently in effect, our inability to raise funds for our operations will have a severe negative impact on our ability to remain a viable company.

Going Concern

Due to the uncertainty of our ability to meet our current operating and capital expenses, our independent auditors included an explanatory paragraph in their report on the audited financial statements for the year ended August 31, 2014 regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.

Our unaudited financial statements have been prepared on a going concern basis, which assumes the realization of assets and settlement of liabilities in the normal course of business. Our ability to continue as a going concern is dependent upon our ability to generate profitable operations in the future and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they become due. The outcome of these matters cannot be predicted with any certainty at this time and raise substantial doubt that we will be able to continue as a going concern. Our unaudited financial statements do not include any adjustments to the amount and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.

There is no assurance that our operations will be profitable. Our continued existence and plans for future growth depend on our ability to obtain the additional capital necessary to operate either through the generation of revenue or the issuance of additional debt or equity.

Off-Balance Sheet Arrangements

We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make a number of 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. Such estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experiences and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions and conditions. We continue to monitor significant estimates made during the preparation of our financial statements. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates under different future conditions.

See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 2, “Summary of Significant Accounting Policies” in our audited consolidated financial statements for the year ended August 31, 2014, included in our Annual Report on Form10-K as filed on December 15, 2014, for a discussion of our critical accounting policies and estimates.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk.

The disclosure required under this item is not required to be reported by smaller reporting companies; as such term is defined by Item 503(e) of Regulation S-K.

Item 4.  Controls and Procedures.

In connection with the preparation of this Quarterly Report on Form 10-Q, an evaluation was carried out by the Company's management, with the participation of the principal executive officer and the principal financial officer, of the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act")) as of May 31st, 2015. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to management, including the chief executive officer and the chief financial officer, to allow timely decisions regarding required disclosures.

Based on that evaluation, the Company's management concluded, as of the end of the period covered by this report, that the Company's disclosure controls and procedures were not effective in recording, processing, summarizing, and reporting information required to be disclosed, within the time periods specified in the Commission's rules and forms, and that such information was accumulated and communicated to management, including the principal executive officer and the principal financial officer, to allow timely decisions regarding required disclosures.

On April 6, 2015 the Board of Directors appointed Mr. Dov Weinberg as Chief Financial Officer of the Corporation. Mr. Weinberg has over 30 years of broad experience as a CFO of international companies both private and publicly listed on the US and Israeli Stock Exchanges.

There were no other changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1.  Legal Proceedings

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations.  There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company, threatened against or affecting our company or our common stock in which an adverse decision could have a material adverse effect.

Item 1A.  Risk Factors

The disclosure required under this item is not required to be reported by smaller reporting companies; as such term is defined by Item 503(e) of Regulation S-K.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3.  Defaults upon Senior Securities.

None.

Item 4.  Mine Safety Disclosures

Not applicable.

Item 5.  Other Information.

None.

Item 6.  Exhibits

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.