Item 1. Financial Statements.
Cannabis Kinetics Corp.
(formerly Lingas Ventures, Inc.)
Condensed Financial Statements
(Expressed in US dollars)
For the period ended May 31, 2014
Condensed Balance Sheets (unaudited)
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4
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Condensed Statements of Operations (unaudited)
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5
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Condensed Statements of Cash Flows (unaudited)
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6
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Notes to the Condensed Financial Statements (unaudited)
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7
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Cannabis Kinetics Corp.
(formerly Lingas Ventures, Inc.)
Condensed Balance Sheets
(Expressed in US dollars)
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May 31,
2014
$
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November 30,
2013
$
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(unaudited)
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ASSETS
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Cash
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105,819
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19,449
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Total Assets
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105,819
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19,449
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LIABILITIES
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Current Liabilities
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Accounts payable and accrued liabilities
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8,500
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2,615
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Due to related party
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91,000
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57,569
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Total Liabilities
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99,500
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60,184
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STOCKHOLDERS’ EQUITY (DEFICIT)
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Preferred Stock
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Authorized: 10,000,000 shares, par value of $0.001 per share
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Series A Preferred Stock, 5,500,000 shares authorized No shares issued and outstanding
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–
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–
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Series B Preferred Stock, 750,000 shares authorized 8,958 shares issued and outstanding (November 30, 2013 – no shares)
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9
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–
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Common Stock
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Authorized: 261,000,000 shares, par value of $0.001 per share
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Issued and outstanding: 29,020,701 shares (November 30, 2013 – 29,000,001 shares)
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29,021
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29,000
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Additional paid-in capital
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244,247
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21,000
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Accumulated deficit
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(266,958
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)
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(90,735
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)
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Total Stockholders’ Equity (Deficit)
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6,319
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(40,735
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)
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Total Liabilities and Stockholders’ Equity (Deficit)
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105,819
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19,449
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(The accompanying notes are an integral part of these condensed unaudited financial statements)
Cannabis Kinetics Corp.
(formerly Lingas Ventures, Inc.)
Condensed Statements of Operations
(Expressed in US dollars)
(unaudited)
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Three months ended
May 31, 2014
$
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Three months ended
May 31, 2013
$
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Six months
ended
May 31, 2014
$
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Six months
ended
May 31, 2013
$
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Operating Expenses
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General and administrative
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162,130
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4,441
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176,223
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23,757
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Net Loss
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(162,130
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)
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(4,441
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)
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(176,223
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)
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(23,757
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)
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Net Earnings per Share – Basic and Diluted
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(0.01
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)
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(0.00
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)
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(0.01
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)
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(0.00
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)
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Weighted Average Shares Outstanding – Basic and Diluted
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29,003,780
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29,000,001
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29,001,910
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29,000,001
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(The accompanying notes are an integral part of these condensed unaudited financial statements)
Cannabis Kinetics Corp.
(formerly Lingas Ventures, Inc.)
Condensed Statements of Cash Flows
(Expressed in US dollars)
(unaudited)
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Six months
ended
May 31, 2014
$
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Six months
ended
May 31, 2013
$
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Operating Activities
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Net loss
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(176,223
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)
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(23,757
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)
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Adjustments to reconcile net loss to net cash used in operating activities:
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Shares issued for services
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47,100
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–
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Changes in operating assets and liabilities:
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Prepaid expenses
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–
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1,250
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Accounts payable and accrued liabilities
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5,885
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(3,474
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)
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Due to related parties
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102,108
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–
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Net Cash Used In Operating Activities
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(21,130
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)
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(25,981
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)
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Financing Activities
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Proceeds from related party
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-
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2,269
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Repayments to related party
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–
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(17,500
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Proceeds from issuance of preferred stock
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107,500
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–
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Net Cash Provided by (Used in) Financing Activities
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107,500
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(15,231
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Increase (Decrease) in Cash
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86,370
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(41,212
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Cash – Beginning of Period
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19,449
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41,878
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Cash – End of Period
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105,819
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666
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Supplemental Disclosures:
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Interest paid
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–
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–
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Income tax paid
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–
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–
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Non-Cash Transactions
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Forgiveness of related party debt
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68,677
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-
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(The accompanying notes are an integral part of these condensed unaudited financial statements)
Cannabis Kinetics Corp.
(formerly Lingas Ventures, Inc.)
Notes to the Financial Statements
(Expressed in US dollars)
(unaudited)
1.
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Nature of Operations and Continuance of Business
Cannabis Kinetics Corp. (formerly Lingas Resources Inc.) (the “Company”) was incorporated in the state of Nevada on September 14, 2010. The Company was formerly a mineral exploration company with the purpose of acquiring and developing mineral properties. The Company will now be focusing on various opportunities in the recreational and medical marijuana industry.
Going Concern
These financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. As of May 31, 2014, the Company has not recognized any revenue, has working capital of $6,319, and has an accumulated deficit of $266,958. The continuation of the Company as a going concern is dependent upon the continued financial support from its management, and its ability to identify future investment opportunities and obtain the necessary debt or equity financing, and generating profitable operations from the Company’s future operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
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2.
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Summary of Significant Accounting Policies
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a)
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Basis of Presentation
The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) and are expressed in U.S. dollars. The Company’s fiscal year end is November 30.
The accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at May 31, 2014, and for all periods presented herein, have been made.
It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Company's November 30, 2013 audited financial statements. The results of operations for the periods ended May 31, 2014 and 2013 are not necessarily indicative of the operating results for the full years.
The company has limited operations and is considered to be in the development stage. In the six months ended May 31, 2014, the Company has elected to early adopt Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. The adoption of this ASU allows the company to remove the inception to date information and all references to development stage.
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b)
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Use of Estimates
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The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
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Cannabis Kinetics Corp.
(formerly Lingas Ventures, Inc.)
Notes to the Financial Statements
(Expressed in US dollars)
(unaudited)
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c)
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Cash and cash equivalents
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The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.
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d)
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Basic and Diluted Net Loss per Share
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The Company computes net loss per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive.
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e)
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Financial Instruments
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Pursuant to ASC 820,
Fair Value Measurements and Disclosures
, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
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Level 1
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Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
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Level 2
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Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
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Level 3
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Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
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Cannabis Kinetics Corp.
(formerly Lingas Ventures, Inc.)
Notes to the Financial Statements
(Expressed in US dollars)
(unaudited)
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The Company’s financial instruments consist principally of cash, accounts payable and accrued liabilities, and amounts due to related parties. Pursuant to ASC 820, the fair value of our cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
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f)
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Comprehensive Loss
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ASC 220,
Comprehensive Income
, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As of May 31, 2014 and November 30, 2013, the Company has no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.
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g)
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Impairment of Long-Lived Assets
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The Company evaluates the recoverability of long-lived assets and the related estimated remaining lives at each balance sheet date. The Company records an impairment or change in useful life whenever events or changes in circumstances indicate that the carrying amount may not be recoverable or the useful life has changed.
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h)
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Foreign Currency Translation
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The Company’s functional and reporting currency is the United States dollar. Monetary assets and liabilities denominated in foreign currencies are translated in accordance with ASC 830
Foreign Currency Translation Matters,
using the exchange rate prevailing at the balance sheet date. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income. The Company has not, to the date of these financials statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.
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i)
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Recent Accounting Pronouncements
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The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
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Cannabis Kinetics Corp.
(formerly Lingas Ventures, Inc.)
Notes to the Financial Statements
(Expressed in US dollars)
(unaudited)
3.
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Related Party Transactions
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a)
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At May 31, 2014, the Company owed $0 (November 30, 2013 - $57,569) to the former President and Director of the Company. On March 19, 2014, the former President and Director of the Company forgave $57,569 of amounts owed to him in addition to assuming responsibility of all outstanding accounts payable and accrued liabilities of $11,108 pursuant to a Stock Exchange Agreement. The total liabilities forgiven and assigned of $68,677 have been recorded as additional paid in capital.
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b)
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At May 31, 2014, the Company owed $91,000 (November 30, 2013 - $57,569) to directors and officers of the Company for management fees and loans to fund operations. The amounts are unsecured, non-interest bearing and due on demand.
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c)
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On May 1, 2014, directors and officers of the Company were issued 5,700 shares of common stock with a fair value of $17,100 in consideration for services performed
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d)
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On May 8, 2014, directors and officers of the Company were issued 15,000 shares of common stock with a fair value of $30,000 in consideration for services performed.
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e)
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During the six months ended May 31, 2014, the Company paid or accrued management fees of $137,100 to directors and officers of the Company, of which $47,100 was paid through the issuance of 20,700 shares of common stock (Note 5).
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4.
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Preferred Stock
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a)
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On May 23, 2014, the Company received proceeds of $7,500 for the subscription of 625 shares of Series B preferred stock.
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b)
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On May 28, 2014, the Company received proceeds of $100,000 for the subscription of 8,333 shares of Series B preferred stock.
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5.
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Common Stock
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On May 1, 2014, directors and officers of the Company were issued 5,700 shares of common stock with a fair value of $17,100 in consideration for services performed.
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On May 8, 2014, directors and officers of the Company were issued 15,000 shares of common stock with a fair value of $30,000 in consideration for services performed.
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Cannabis Kinetics Corp.
(formerly Lingas Ventures, Inc.)
Notes to the Financial Statements
(Expressed in US dollars)
(unaudited)
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We have evaluated subsequent events through the date of issuance of the financial statements, and did not have any material recognizable subsequent events with the exception of the following:
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a)
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On June 4, 2014, The Company entered into an asset purchase agreement pursuant to which the Company agreed to purchase substantially all of the assets of REM International LLC, a Colorado limited liability company, in consideration for $118,500 in cash and 1,500,000 shares of common stock.
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b)
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On June 10, 2014, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock (“Series B Stock”) designating 750,000 shares of the Company’s authorized preferred stock as Series B Stock, par value $0.001 per share. The Series B Preferred Stock is convertible at any time at the option of the holder into shares of common stock at a conversion ratio of 6 shares of common stock for each share of Series B Stock. Dividends accrue on each share of Series B Stock, at the rate of 4% per annum of the price paid for each share or $12 per share. Until November 30, 2016, the Company has the right to pay the dividend in additional shares of Series B Stock. A holder of Series B Stock shall be entitled to the number of votes per share equal to the number of shares of common stock into which such Series B Stock is convertible.
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c)
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On June 20, 2014, the Company entered into an exchange agreement pursuant to which directors and officers of the Company agreed to convert an aggregate of $8,250 owed by the Company into 274,998 shares of Series A Convertible Preferred Stock of the Company.
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d)
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On June 20, 2014, the Company issued 112,500 to the directors and officers of the Company in consideration for monthly management compensation.
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e)
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On June 23, 2014, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock (“Series A Stock”) designating 5,500,000 shares of the Company’s authorized preferred stock as Series A Stock, par value $0.001 per share. The Series A Preferred Stock is convertible at any time at the option of the holder into shares of common stock at a conversion ratio of 200 shares of common stock for each share of Series A Stock. A holder of Series A Stock shall be entitled to the number of votes per share equal to the number of shares of common stock into which such Series A Stock is convertible.
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Item 2. Management’s Discussion and Analysis or Plan of Operations.
As used in this Quarterly Report on Form 10-Q, references to the “Company,”, “we,” “our” or “us” refer to Cannabis Kinetics, Corp. unless the context otherwise indicates.
Forward-Looking Statements
The following discussion should be read in conjunction with the financial statements of the Company which are included elsewhere in this Form 10-Q. Certain statements contained in this report, including statements regarding the anticipated development and expansion of our business, our intent, belief or current expectations, primarily with respect to the future operating performance of the Company and other statements contained herein regarding matters that are not historical facts, are "forward-looking" statements. Future filings with the Securities and Exchange Commission, future press releases and future oral or written statements made by us or with our approval, which are not statements of historical fact, may contain forward-looking statements. Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. All forward-looking statements speak only as of the date on which they are made. We undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made, except as required by federal securities and any other applicable law.
Plan of Operation
As a result of a change of control of the Company pursuant to a stock purchase agreement entered into on March 19, 2014 whereby the former principals shareholders of the Company sold an aggregate of 145,000,000 shares of common stock of the Company to Eric Hagen (49,000,000 shares); Jonathan Hunt (48,000,000 shares) and Steven Brandt (48,000,000 shares) which represented 50% of the issued and outstanding share capital of the Company on a fully-diluted basis, for $21,750, and resigned as officers and directors of the Company and Messrs. Hagen, Hunt and Brandt were appointed officers and directors, management intends to focus on various opportunities in the recreational and medical marijuana industry.
On May 1, 2014, the Company filed an Amendment to its Articles of Incorporation to change its name from Lingas Ventures, Inc. to Cannabis Kinetics Corp., to provide for a 1 for 10 reverse stock split and to authorize the issuance of 10,000,000 shares of blank check preferred stock. On June 4, 2014, the Company’s new trading symbol, CANK became effective.
On June 6, 2014, the Company, REM International, LLC, a Colorado limited liability company (“REM”), and Robert E. Matuszewki, the owner of all of the issued and outstanding equity interests in REM (the “Principal”), entered into an asset purchase agreement (the “Purchase Agreement”) pursuant to which the Company agreed to purchase substantially all of the assets of REM in consideration for $118,500 in cash and 1,500,000 shares of the Company’s common stock, par value $0.001, subject to the terms and conditions of the Purchase Agreement. The closing of the transactions contemplated by the Purchase Agreement is subject to the satisfaction or waiver of certain conditions provided for in the Purchase Agreement, including the receipt of REM’s audited financial statements which comply with the rules and regulations of the SEC and a consent from its independent auditors. Upon the closing of the transactions contemplated by the Purchase Agreement, it is intended that Robert E. Matuszewski will be appointed an officer and director of the Company.
On June 10, 2014, the Company filed with the Secretary of State of the State of Nevada a Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock designating 750,000 shares of the Company’s authorized preferred stock as Series B Convertible Preferred Stock, par value $0.001 per share (“Series B Stock”). A summary of the material provisions of the Certificate of Designation governing the Series B Stock is set forth in the Company’s Current Report on Form 8-K filed with the SEC on June 12, 2014.
On June 23, 2014, the Company filed with the Secretary of State of the State of Nevada a Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock designating 5,500,000 shares of the Company’s authorized preferred stock as Series A Convertible Preferred Stock, par value $0.001 per share (“Series A Stock”). A summary of the material provisions of the Certificate of Designation governing the Series A Stock is set forth in the Company’s Current Report on Form 8-K filed with the SEC on June 26, 2014.
Results of Operations
For the three months ended May 31, 2014 and May 31, 2013
Revenues
The Company is in its development stage and did not generate any revenues during the three months ended May 31, 2014 and May 31, 2013.
Total operating expenses
For the three months ended May 31, 2014, total operating expenses were $162,130, consisting of general and administrative expenses. For the three months ended May 31, 2013, total operating expenses were $4,441of general and administrative expenses. Operating expenses increased $157,689 primarily due to stock based compensation of $47,100 and other expenses related to the change in management during this period.
Net loss
For the three months ended May 31, 2014, the Company had a net loss of $162,130, as compared to a net loss for the three months ended May 31, 2013 of $4,441.
For the six months ended May 31, 2014 and May 31, 2013
Revenues
The Company is in its development stage and did not generate any revenues during the six months ended May 31, 2014 and May 31, 2013.
Total operating expenses
For the six months ended May 31, 2014, total operating expenses were $176,223, which consisted of general and administrative expenses. For the six months ended May 31, 2013, total operating expenses were $23,757 of general and administrative expenses. General and administrative expenses were higher during the six months ended May 31, 2014 compared to May 31, 2013 primarily due to stock based compensation of $47,100 and other expenses related to the change in management.
Net loss
For the six months ended May 31, 2014, the Company had a net loss of $176,223, as compared to a net loss for the six months ended May 31, 2013 of $23,757.
Liquidity and Capital Resources
As of May 31, 2014, the Company had a cash balance of $105,819. We estimate that within the next 12 months we will need approximately $1,000,000 to develop our business. We cannot be certain that the required additional financing will be available or available on terms favorable to us. If additional funds are raised by the issuance of our equity securities, such as through the issuance of additional shares and the issuance and exercise of warrants, then existing stockholders will experience dilution of their ownership interest. If adequate funds are not available or not available on acceptable terms, we may be unable to fund our operations. The Company currently has no agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources.
Going Concern
As of May 31, 2014, the Company has not recognized any revenue, has working capital of $6,319, and has an accumulated deficit of $266,958. Our auditors have issued a going concern opinion on our audited financial statements for the year ended November 30, 2013. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay for our expenses. This is because we have not generated any revenues and no sales are yet possible. There is no assurance we will ever reach this point. Accordingly, we must raise sufficient capital from sources. Our only other source for cash at this time is investments by others. We must raise cash to stay in business. In response to these problems, management intends to raise additional funds through public or private placement offerings.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Critical Accounting Policies
Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.
We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.
Recently Issued Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that may have a material impact on its financial position or results of operations.