Form 8-K/A Amended Current Report

0001078782-18-001109.txt : 20181002 0001078782-18-001109.hdr.sgml : 20181002 20181002171757 ACCESSION NUMBER: 0001078782-18-001109 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20180725 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20181002 DATE AS OF CHANGE: 20181002 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TYG Solutions Corp. CENTRAL INDEX KEY: 0001615999 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 462645343 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-55657 FILM NUMBER: 181102535 BUSINESS ADDRESS: STREET 1: 550 WEST C STREET STREET 2: SUITE 2040 CITY: SAN DIEGO STATE: CA ZIP: 92101 BUSINESS PHONE: 760-607-8268 MAIL ADDRESS: STREET 1: 550 WEST C STREET STREET 2: SUITE 2040 CITY: SAN DIEGO STATE: CA ZIP: 92101 FORMER COMPANY: FORMER CONFORMED NAME: TYG Solutions Inc. DATE OF NAME CHANGE: 20140806 8-K/A 1 f8ka092818_8kz.htm FORM 8-K/A AMENDED CURRENT REPORT Form 8-K/A Amended Current Report

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of Earliest Event Reported): July 25, 2018

TYG SOLUTIONS CORP.

(Exact name of registrant as specified in its charter)

Delaware		000-55657		46-2645343
(State or other jurisdiction of incorporation)		(Commission File Number)		(I.R.S. Employer Identification No.)

550 West C Street, Suite 2040

San Diego, CA

92101

(Address of principal executive offices)

(Zip Code)

(760) 607-8268

(Registrant’s telephone number, including area code)

(Former name if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01Entry into a Material Definitive Agreement.

On July 31, 2018, TYG Solutions Corp., a Delaware corporation (the “Company”), filed a Current Report on Form 8-K (the “Prior Form 8-K”) with the Securities and Exchange Commission (the “Commission”) regarding the closing of a Share Exchange Agreement with Kannalife Sciences, Inc., a Delaware corporation (“Kannalife”), and certain stockholders of Kannalife (the “Kannalife Stockholders”) (the “Share Exchange”).

This Current Report on Form 8-K/A (“Amendment No. 1”) amends and supplements the Prior Form 8-K to provide certain financial statements and pro forma financial information as required by Items 9.01(a) and (b) of Form 8-K. No other amendments are being made to the prior Form 8-K by this Amendment No. 1. This Amendment No. 1 should be read in connection with the Prior Form 8-K, which provides a more complete description of the Share Exchange.

Item 9.01Financial Statements and Exhibits.

(a) Financial Statements of Business Acquired.

(i)The audited financial statements of Kannalife as of December 31, 2017 and 2016, and the independent registered public accounting firm’s report related thereto, are attached hereto as Exhibit 99.1.

(ii)The unaudited financial statements of Kannalife as of June 30, 2018 are attached hereto as Exhibit 99.2.

(b) Pro Forma Financial Information.

(i)The unaudited pro forma combined consolidated statements of operations for the years ended December 31, 2017 and 2016, and the six months ended June 30, 2018, which give effect to the acquisition of Kannalife, are attached hereto as Exhibit 99.3.

(d)Exhibits

Exhibit No.	Description
99.1	The audited financial statements of Kannalife as of December 31, 2017 and 2016, and the independent registered public accounting firm’s report related thereto.
99.2	The unaudited financial statements of Kannalife as of June 30, 2018.
99.3	The unaudited pro forma combined consolidated statements of operations for the years ended December 31, 2017 and 2016, and the six months ended June 30, 2018, which give effect to the acquisition of Kannalife.

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This Current Report on Form 8-K may contain forward-looking statements that are made pursuant to the safe harbor provisions of Section 21E of the Exchange Act. The forward-looking statements in this Current Report on Form 8-K are not historical facts, do not constitute guarantees of future performance, and are based on numerous assumptions which, while believed to be reasonable, may not prove to be accurate. Any forward-looking statements in this Current Report on Form 8-K do not constitute guarantees of future performance and involve a number of factors that could cause actual results to differ materially, including risks more fully described in the Company’s most recently filed Quarterly Report on Form 10-Q and Annual Report on Form 10-K. The Company assumes no obligation to update any forward-looking information contained in this Current Report on Form 8-K.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	TYG SOLUTIONS CORP.

Dated: October 2, 2018	By:	/s/ Dean Petkanas
		Name: Dean Petkanas
		Chief Executive Officer

EX-99.1 2 f8ka092818_ex99z1.htm EXHIBIT 99.1 THE AUDITED FINANCIAL STATEMENTS OF KANNALIFE AS OF DECEMBER 31, 2017 AND 2016, AND THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S REPORT RELATED THERETO. Exhibit 99.1 The audited financial statements of Kannalife as of December 31, 2017 and 2016, and the independent registered public accounting firm’s report related thereto.

KANNALIFE SCIENCES, INC.

INDEX TO FINANCIAL STATEMENTS

Annual Report for Fiscal Year Ended December 31, 2017 and 2016	Page
Report of Independent Registered Public Accounting Firm	2
Balance Sheets	3
Statements of Operations	4
Statements of Stockholders’ Equity	5
Statements of Cash Flows	6
Notes to Financial Statements	7

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Kannalife Sciences, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Kannalife Sciences, Inc. (the “Company”) as of December 31, 2017 and 2016, the related statements of operations and comprehensive loss, stockholders’ deficiency, and cash flows, for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has suffered recurring losses from operations and has not generated revenues from its intended operations, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ dbbmckennon

We have served as the Company's auditor since 2017.

San Diego, California

October 2, 2018

KANNALIFE SCIENCES, INC.

BALANCE SHEETS

AS OF DECEMBER 31, 2017 AND 2016



		2017		2016
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	4,326	$	33,014
Other receivables		400		400
Total Current Assets		4,726		33,414

Investment		256,359		256,359
Security deposits		15,000		15,000
Deferred tax asset		772,000		1,122,000
TOTAL ASSETS	$	1,048,085	$	1,426,773

LIABILITIES AND STOCKHOLDERS' DEFICIENCY

CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	453,632	$	535,113
Notes payable		367,500		-
Payroll and related liabilities		239,924		195,051
Total Current Liabilities		1,061,056		730,164

LONG TERM LIABILITIES:
Payroll and related liabilities - long term		2,812,810		1,893,815
Convertible notes payable - long term		185,000		320,690
Convertible notes payable, related party - long term		288,981		142,809
Total Long Term Liabilities		3,286,791		2,357,314

TOTAL LIABILITIES		4,347,847		3,087,478

STOCKHOLDERS' DEFICIENCY:
Series A preferred stock, par value $0.001, 20,000,000 authorized, 12,250,000 and 12,250,000 issued and outstanding, respectively		12,250		12,250
Common stock, par value $0.001, 180,000,000 authorized, 121,421,482 and 121,421,482 issued; and 121,131,482 and 121,131,482 outstanding, respectively		121,421		121,421
Additional paid-in capital		2,555,723		2,551,525
Treasury stock, at cost (290,000 shares of common stock)		(290)		(290)
Accumulated deficit		(5,988,866)		(4,345,611)
TOTAL STOCKHOLDERS' DEFICIENCY		(3,299,762)		(1,660,705)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY	$	1,048,085	$	1,426,773

The accompanying notes are an integral part of these financial statements

KANNALIFE SCIENCES, INC.
STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

	2017		2016

NET REVENUES:
Grant Revenue	$	-	$	-
TOTAL NET REVENUES		-		-

OPERATING EXPENSES:
Research and development expenses		4,000		88,780
General and administrative expenses		1,190,362		1,298,222
TOTAL OPERATING EXPENSES		1,194,362		1,387,002

LOSS FROM OPERATIONS		(1,194,362)		(1,387,002)

OTHER (EXPENSE) INCOME:
Interest income (expense), net		(98,893)		(65,897)
Other (expense) income, net		-		478
Realized gain on investments		-		232,510
TOTAL OTHER (EXPENSE) INCOME		(98,893)		167,091

NET LOSS BEFORE INCOME TAX		(1,293,255)		(1,219,911)

Income tax expense (benefit)		350,000		-

NET LOSS	$	(1,643,255)	$	(1,219,911)

OTHER COMPREHENSIVE LOSS:
Change in unrealized gain on marketable securities		-		(196,387)

TOTAL COMPREHENSIVE LOSS	$	(1,643,255)	$	(1,416,298)

Loss per common share - basic and diluted	$	(0.01)	$	(0.01)

Weighted average common shares outstanding - basic and diluted		121,421,482		121,316,018


The accompanying notes are an integral part of these financial statements

KANNALIFE SCIENCES, INC.
STATEMENT OF STOCKHOLDERS' DEFICIENCY
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

	Series A Preferred Stock			Common Stock				Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Treasury Stock		Accumulated Deficit		Total Stockholders Deficiency
	Shares		Amount	Shares		Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Treasury Stock		Accumulated Deficit		Total Stockholders Deficiency

Balance December 31, 2015	12,250,000	$	12,250	121,221,482	$	121,221	$	2,543,725	$	196,387	$	(290)	$	(3,125,700)	$	(252,407)

Issuance of common stock for services rendered	-		-	200,000		200		7,800		-		-		-		8,000
Unrealized gain on marketable securities	-		-	-		-		-		(196,387)		-		-		(196,387)
Net loss	-		-	-		-		-		-		-		(1,219,911)		(1,219,911)
Balance December 31, 2016	12,250,000		12,250	121,421,482		121,421		2,551,525		-		(290)		(4,345,611)		(1,660,705)

Issuance of stock options for services	-		-	-		-		4,198		-		-		-		4,198
Net loss	-		-	-		-		-		-		-		(1,643,255)		(1,643,255)
Balance December 31, 2017	12,250,000	$	12,250	121,421,482	$	121,421	$	2,555,723	$	-	$	(290)	$	(5,988,866)	$	(3,299,762)


The accompanying notes are an integral part of these financial statements

KANNALIFE SCIENCES, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

	2017		2016

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,643,255)	$	(1,219,911)
Adjustment to reconcile change in net loss to net cash and cash equivalents
used in operating activities:
Issuance of common stock for services		-		8,000
Amortization of debt discount		14,310		19,942
Issuance of options for services		4,198		-
Realized gain on marketable securities		-		(232,510)
Deferred tax asset		350,000		-
Changes in operating assets and liabilities:
Other receivables		-		38,740
Accounts payable and accrued expenses		(81,481)		222,133
Payroll and related liabilities		963,868		879,112

NET CASH USED IN OPERATING ACTIVITIES		(392,360)		(284,494)

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of marketable securities		-		250,158

NET CASH PROVIDED BY INVESTING ACTIVITIES		-		250,158

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable		367,500		-
Proceeds from convertible notes payable related party		20,000		25,000
Repayments on convertible notes payable related party		(23,828)		(7,191)
Advances to related party		-		(11,080)

NET CASH PROVIDED BY FINANCING ACTIVITIES		363,672		6,729

Net decrease in cash		(28,688)		(27,607)

Cash and cash equivalents, beginning of year		33,014		60,621

Cash and cash equivalents, end of year	$	4,326	$	33,014

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	-	$	-
Cash paid for taxes	$	-	$	-

NON-CASH INVESTING AND FINANCING ACTIVITIES:
Change in unrealized gain on marketable securities	$	-	$	196,387

The accompanying notes are an integral part of these financial statements

KANNALIFE SCIENCES, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2017 AND 2016

NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS

KannaLife Sciences, Inc. (“KannaLife”, or the “Company”), is a Delaware corporation formed on August 11, 2010. KannaLife is a phytomedical/pharmaceutical company that specializes in the research and development of synthetic molecules and therapeutic products derived from botanical sources, including the cannabis taxa.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies used in the preparation of the financial statements are as follows:

Basis of Presentation

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP.

Development Stage Company

The Company is a development stage company as defined by section 915-10-20 of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification. Although the Company has recognized some nominal amount of revenue since inception, the Company is still devoting substantially all of its efforts on establishing the business and, therefore, still qualifies as a development stage company. All losses accumulated since inception have been considered as part of the Company’s development stage activities.

Use of Estimates

The preparation of financial statements and accompanying notes in conformity with U.S. GAAP 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 dates of the financial statements, and the reported amounts of revenues and expenses during the periods. Actual results could differ from those estimates. Significant matters requiring the use of estimates and assumptions include, but are not necessarily limited to, valuation of investments, fair value of the Company’s stock, stock based compensation, and valuation allowance relating to the Company’s deferred tax assets. Management believes that its estimates and assumptions are reasonable, based on information that is available at the time they are made.

Cash and Cash Equivalents

Our cash and cash equivalents include short-term, highly liquid investments with original maturities of three months or less when purchased. At times throughout the year, the Company may maintain bank balances that could exceed Federal Deposit Insurance Corporation insured limits. The Company maintains its cash deposit accounts with high credit quality financial institutions, and therefore believes that its loss exposure is minimal.

Marketable Securities

The Company reports its investments in marketable securities as available for sale securities under the requirements of ASC 320, Investments - Debt and Equity Securities (“ASC 320”). Market values of all the Company’s marketable securities are readily determinable and the Company’s intention upon obtaining the securities was neither to sell them in the short term nor to hold them to maturity. Pursuant to ASC 320, securities which are classified as available for sale are recorded on the Company’s balance sheet at fair value, with the resulting unrealized holding gains and losses excluded from earnings and reported as other comprehensive income or loss until realized.

KANNALIFE SCIENCES, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2017 AND 2016

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The Company evaluates securities for other-than-temporary impairment at each balance sheet date, or more frequently when economic or market conditions indicate that the carrying amount of such investments could exceed their net realizable values. Consideration is given to the length of time and amount of the loss relative to cost, the nature and financial condition of the issuer and the ability and intent of the Company to hold the investment for a time sufficient to allow any anticipated recovery in fair value. Pursuant to ASC 320, other than temporary impairment losses are recorded as impairment expense in the statement of operations during the period in which the impairment is determined.

Accumulated Other Comprehensive Income

Comprehensive income includes net income as currently reported under U.S. GAAP and other comprehensive loss. Other comprehensive income considers the effects of additional economic events, such as unrealized gains on investments, which are not required to be recorded in determining net income, but rather are reported as a separate component of stockholders’ deficiency.

Income Taxes

The Company accounts for income taxes under FASB ASC Topic 740, Income Taxes (“ASC 740”). Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.

Preferred Stock

The Company applies the guidance enumerated in FASB ASC Topic 480, Distinguishing Liabilities from Equity (“ASC 480”), when determining the classification and measurement of preferred stock. Preferred shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. The Company classifies conditionally redeemable preferred shares (if any), which includes preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control, as temporary equity. At all other times, the Company classifies its preferred shares in stockholders’ deficiency. The Company’s preferred shares do not feature any redemption rights within the holders’ control or conditional redemption features not within the Company’s sole control as of December 31, 2016 and 2017. Accordingly, all issuances of preferred stock are presented as a component of stockholders’ deficiency.

Convertible Instruments

The Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC Topic 815, Derivatives and Hedging Activities (“ASC 815”).

Applicable U.S. GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria includes circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

The Company accounts for convertible instruments (when the Company has determined that the embedded conversion options should not be bifurcated from their host instruments) as follows. The Company records, when necessary, deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the transaction and the effective conversion price embedded in the preferred shares.

KANNALIFE SCIENCES, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2017 AND 2016

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Stock Based Compensation

The Company accounts for share-based compensation in accordance with the fair value recognition provision of FASB ASC 718, Compensation – Stock Compensation (“ASC 718”), prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on the estimated grant date fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505, Equity–based Payments to Non-Employees (“ASC 505”). Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.

Net Loss per Share

Basic net loss per share is calculated by dividing the net loss for the period by the weighted-average number of common shares outstanding during the period. Diluted net income per share is calculated by dividing income for the period by the weighted-average number of common shares outstanding during the period, increased by potentially dilutive common shares ("dilutive securities") that were outstanding during the period. Dilutive securities include stock options and warrants granted, convertible debt, and convertible preferred stock. The potentially dilutive securities listed below were not included in the calculation of net loss per common share for the years ended December 31, 2017 and 2016 because their effect would be anti-dilutive.

	December 31,
	2017	2016
Series A preferred stock	12,250,000	12,250,000
Options	100,000	-
Warrants	-	92,500
Convertible notes payable	592,438	554,828
Total diluted shares	12,942,438	12,897,328

Revenue Recognition

The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, codified as ASC 606: Revenue from Contracts with Customers, which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The adoption of ASU 2014-09 is not expected to have any material impact on the Company’s financial statements.

Revenue consists of research funding from the Company’s National Institute of Health (“NIH”) Grant. Grant revenue is recognized when qualifying costs are incurred and there is reasonable assurance that the conditions of the award have been met for collection. Proceeds received prior to the costs being incurred or the conditions of the award being met are recognized as deferred revenue until the services are performed and the conditions of the award are met.

Research and Development

In accordance with FASB ASC 730, Research and Development (“ASC 730”) research and development (“R&D”) costs are expensed when incurred. R&D costs include supplies, clinical trial and related clinical manufacturing costs, contract and other outside service and facilities and overhead costs. Total R&D costs for the years ended December 31, 2017 and 2016 were $4,000 and $88,780, respectively.

KANNALIFE SCIENCES, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2017 AND 2016

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recently Issued Authoritative Guidance

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“Topic 606”), which is a new comprehensive revenue recognition model that will supersede all existing revenue recognition guidance under U.S. GAAP. The standard requires a company to recognize revenue when it transfers goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. This standard is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, with early adoption permitted for interim and annual periods beginning after December 15, 2016. Entities will have the option of using either a full retrospective approach or a modified approach to adopt the guidance in the ASU. The Company is currently evaluating the impact of adopting this guidance, but expects the adoption will not have a material impact on the financial statements.

In November 2015, the FASB issued Accounting Standards Update (ASU) 2015-17, Balance Sheet Classification of Deferred Taxes, intended to improve how deferred taxes are classified on organizations' balance sheets. The ASU eliminates the current requirement for organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, organizations will now be required to classify all deferred tax assets and liabilities as noncurrent. The pronouncement is effective for reporting periods beginning after December 15, 2016. Early adoption is permitted as of the beginning of an interim or annual period. The adoption of ASU 2015-17 did not have any material impact on the Company's financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09). Under ASU 2016-09, the tax effects of stock compensation will be recognized as income tax expense or benefit to the Company’s income statement and the tax effects of exercised or vested awards will be treated as discrete items in the reporting period in which they occur. Along with other income tax cash flows, excess tax benefits will be classified as operating activities, and cash paid by the Company when directly withholding shares for tax withholding purposes will be classified as financing activities. The Company has elected to continue to account for forfeitures when they occur. The adoption of ASU 2016-09 on January 1, 2017, did not have a material impact to the Company’s financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), requiring lessees to recognize for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and (2) a right-of-use (“ROU”) asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The update is effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. The Company currently anticipates that upon adoption of the new standard, ROU assets and lease liabilities will be recognized in amounts that will be immaterial to the balance sheets.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40), which requires management to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern for each annual and interim reporting period. If substantial doubt exists, additional disclosure is required. This new standard was effective for the Company for annual and interim periods beginning after December 15, 2016. The Company has elected early adoption effective January 1, 2017, and continues to assess the impact of the adoption on its financial statements. See the related disclosures in note 3.

NOTE 3 – GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS

The Company’s financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in our accompanying financial statements, the Company has had a net loss from operations of $1,194,362 and $1,387,002 for the years ended December 31, 2017 and 2016, respectively. The net cash used in operations were $392,360 and $284,494 for the years ended December 31, 2017 and 2016, respectively. Additionally, the Company had an accumulated deficit of $5,988,866 and $4,345,611, at December 31, 2017 and 2016, respectively, had stockholders’ deficit of $3,299,762 at December 31, 2017, and has not yet established an adequate ongoing source of revenues sufficient to cover its operating costs and to allow it to continue as a going concern.

Management plans to raise additional capital through potential debt financing transactions and sale of common shares until such time that its products are ready for commercialization. However, management cannot provide assurance that the Company will ultimately achieve profitable operations, become cash flow positive, or raise additional debt and/or equity capital.

KANNALIFE SCIENCES, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2017 AND 2016

NOTE 3 – GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS (CONTINUED)

The Company’s history of recurring losses, and uncertainties as to whether its operations will become profitable and generate operating cash flows raise substantial doubt about its ability to continue as a going concern. The accompanying financial statements do not include any adjustments related 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.

NOTE 4 – FAIR VALUE MEASUREMENTS

The Company follows FASB ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) to measure and disclosure the fair value of its financial instruments. ASC 820 establishes a framework for measuring fair value in U.S. GAAP and expands disclosures about fair value measurements and establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The three levels of fair value hierarchy defined by ASC 820 are described below:

Level 1Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

Level 2Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

Level 3Pricing inputs that are generally unobservable inputs and not corroborated by market data.

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

The carrying amounts reported in the Company’s financial statements for cash, accounts payable and accrued expenses approximate their fair value because of the immediate or short-term nature of these financial instruments.

Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.

Axim Biotechnologies, Inc. (“AXI”), which is a publicly traded company, entered into an agreement to purchase common stock with the Company. The shares of AXIM’s common stock recorded as marketable securities in the accompanying balance sheet and are considered as a Level 1 financial asset, as the AXIM shares are quoted on an active market and readily available as of December 31, 2015. During the year ended December 31, 2016, the Company sold all the remaining shares of AXI and recognized a realized gain on marketable securities of $232,510.

On March 7, 2014, Kannalife Sciences, Inc. (“Kannalife”) entered into an agreement with General Hemp LLC (“General Hemp”) through its wholly owned subsidiary Kannaway LLC (“Kannaway”) for certain rights and agreements to where each company would exchange 4.99% of each Company’s equity, by way of a stock swap. As such, Kannalife would receive a 4.99% equity stake in Kannaway and Kannaway would receive 6,408,980 shares of restricted common stock of Kannalife.

On or about April 2014, Kannalife delivered 6,408,980 of the aforementioned Kannalife restricted common stock to General Hemp on behalf of Kannaway and such shares were made to Kannaway as the beneficiary. The Company recorded the fair market value of the common stock at $256,359 or $0.04. The Company valued the shares based upon other transactions of the Company's common stock around the same time frame. The Company accounted for the transaction as a cost investment.

On or about December 2015, Medical Marijuana, Inc. (“MJNA”) purchased Kannaway from General Hemp for which due to a dispute between the Company and General Hemp, the Company wasn't provided any of the consideration. On June 1, 2018, the Company received 41,583,333 shares of MJNA common stock pursuant to a settlement agreement effective July 15, 2017. MJNA is a significant shareholder of the Company and their Chief Executive Officer is also on the Company's Board of Directors.

KANNALIFE SCIENCES, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2017 AND 2016

NOTE 5 – ACCRUED PAYROLL AND PAYROLL TAXES

Accrued payroll and payroll taxes at December 31, 2017 and 2016 consisted of the following:

		2017		2016
Payroll	$	2,812,810	$	1,893,815
Payroll taxes		239,924		195,051
Totals	$	3,052,734	$	2,088,866

As of December 31, 2017 and 2016, the Company has accrued payroll taxes in connection to salaries accrued to four officers of the Company.

The accrued payroll has been reflected as long-term liabilities on the accompanying balance sheet as the amounts were converted to common stock subsequent to year end, see Note 13 for additional information.

In connection with the TYYG term sheet discussed in Note 10, the Company's four officers ceased accruing salaries until the closing of the transactions which happened in July 2018. Subsequent to closing, the officers have begun accruing salaries.

NOTE 6 – NOTES PAYABLE

During the year ended December 31, 2017, the Company borrowed $367,500 and issued a promissory note with a maturity date of October 18, 2017. This note was later amended to extend the maturity to April 18, 2019. The proceeds from this note were used to fund operating activities. The loan incurs 3% interest per annum. Accrued interest related to this note is $3,565 as of December 31, 2017. The promissory note holder was a significant shareholder of TYYG prior to the acquisition of the Company.

NOTE 7 – CONVERTIBLE NOTES PAYABLE

On May 15, 2015, the Company borrowed $35,000 and issued a convertible promissory note with a maturity date of April 30, 2016. The loan incurs 10% interest per annum. This note is convertible to the Company’s common stock at a price of $1.00 per share. In addition, the Company issued 17,500 warrants to purchase common stock with an exercise price of $1.50 per share and a term of two years. These warrants were valued at $7,525 and were recorded as a debt discount to be amortized over the term. Accrued interest related to this note is $9,196 and $5,696 as of December 31, 2017 and 2016, respectively.

On August 13, 2015, the Company borrowed $50,000 and issued a convertible promissory note with a maturity date of August 12, 2016. The loan incurs 10% interest per annum and increasing to 17% per annum in the event of a default. This note is convertible to the Company’s common stock at a price of $1.00 per share. In addition, the Company issued 25,000 warrants to purchase common stock with an exercise price of $1.50 per share and a term of two years. These warrants were valued at $10,751 and were recorded as a debt discount to be amortized over the term. This note is in default and is accruing interest at the default rate of 17% per annum. Accrued interest related to this note is $16,659 and $8,205 as of December 31, 2017 and 2016, respectively.

On November 25, 2015, the Company borrowed $100,000 and issued a convertible promissory note with a maturity date of November 24, 2016. The loan incurs 10% interest per annum and increasing to 14% per annum in the event of a default. This note is convertible to the Company’s common stock at a price of $1.00 per share. In addition, the Company issued 50,000 warrants to purchase common stock with an exercise price of $1.50 per share and a term of two years. These warrants were valued at $21,500 and were recorded as a debt discount to be amortized over the term. This note is in default and is accruing interest at the default rate of 14% per annum. Accrued interest related to this note is $25,249 and $11,326 as of December 31, 2017 and 2016, respectively.

Total interest expense on convertible notes payable, inclusive of amortization of debt discount of $14,310 and $19,942, amounted to $40,187 and $38,442 for the years ended December 31, 2017 and 2016, respectively. The remaining unamortized balance of debt discount as of December 31, 2017 and 2016, was $-0- and $14,310, respectively.

As of December 31, 2017 and 2016, the convertible notes payable have been reflected as long-term liabilities as subsequent to year end they were converted to common stock, see Note 13 for additional information.

KANNALIFE SCIENCES, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2017 AND 2016

NOTE 8 – CONVERTIBLE NOTES PAYABLE RELATED PARTY

On December 27, 2014, the Company borrowed $150,000 from General Hemp and issued a convertible promissory note with a maturity date of December 31, 2015. The proceeds were used to fund operations. The loan incurs 10% interest per annum and increasing to 17% per annum in the event of a default. This note is convertible to the Company’s common stock at a price of $1.00 per share. This note is in default and is accruing interest at the default rate of 17% per annum. Accrued interest related to this note is $67,195 and $41,695 as of December 31, 2017 and 2016, respectively.

During the year ended December 31, 2015, the Company borrowed $120,000 from the Chief Executive Officer and issued convertible promissory notes that are due on demand. The proceeds were used to fund operations. The loans incur 10% interest per annum. These notes are convertible to the Company’s common stock at a price of $1.00 per share.

On November 20, 2015, the Company borrowed $5,000 from the Chief Executive Officer and issued a convertible promissory note that is due on demand. The proceeds were used to fund operations. The loan incurs 10% interest per annum. This note is convertible to the Company’s common stock at a price of $0.40 per share.

During the year ended December 31, 2016, the Company borrowed $15,000 from the Chief Executive Officer and issued convertible promissory notes that are due on demand. The proceeds were used to fund operations. The loans incur 10% interest per annum. These notes are convertible to the Company’s common stock at a price of $0.40 per share.

During the year ended December 31, 2016, the Company borrowed $10,000 from the Chief Executive Officer and issued convertible promissory notes with a maturity date of December 31, 2016. The loans incur 10% interest per annum and increasing to 17% per annum in the event of a default. The proceeds were used to fund operations. These notes are in default and are accruing interest at the default rate of 17% per annum. These notes are convertible to the Company’s common stock at a price of $0.40 per share.

During the year ended December 31, 2016, the Company repaid $7,191 of principal and $21,252 of accrued interest towards the outstanding notes payable due to the Chief Executive Officer.

During the year ended December 31, 2017, the Company borrowed $20,000 from the Chief Executive Officer and issued convertible promissory notes with a maturity date of December 31, 2017. The proceeds were used to fund operations. The loans incur 10% interest per annum and increasing to 17% per annum in the event of a default. These notes are convertible to the Company’s common stock at a price of $0.40 per share.

During the year ended December 31, 2017, the Company repaid $23,828 of principal and $16,522 of accrued interest towards the outstanding notes payable due to the Chief Executive Officer.

As of December 31, 2017 and 2016, there was no unpaid accrued interest. Total interest expense on these convertible notes payable amounted to $16,537 and $13,618 for the years ended December 31, 2017 and 2016, respectively.

As of December 31, 2017 and 2016, the related party notes payable have been reflected as long-term liabilities as subsequent to year end they were converted to common stock, see Note 13 for additional information.

KANNALIFE SCIENCES, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2017 AND 2016

NOTE 9 – COMMITMENTS AND CONTINGENCIES

Legal Proceedings

From time to time the Company may get involved in legal proceedings arising in the ordinary course of business. The Company believes there is no litigation pending that could have, individually or in the aggregate, a material adverse effect on its results of operations or financial condition.

Occupancy Leases

On April 1, 2014, the Company entered into a one year lease arrangement for office space, with the option to renew the lease annually. The monthly rent payment is $5,000 and a security deposit of $15,000.

On September 15, 2015, the Company entered into a one year lease arrangement for office space. The Company has amended this lease to extend the term through September 30, 2018. The monthly rent payment is $229 and a security deposit of $183.

Royalty Agreements

On June 12, 2012, the Company entered into a Patent License Agreement with agencies of the United States Public Health Services within the Department of Health and Human Services (“PHS”). Under the License Agreement, PHS granted the Company an exclusive right to use and develop certain patents relating to Cannabinoids as Antioxidants and Neuroprotectants. In exchange for the License, the Company has agreed to the following payments:

a $30,000 license issue royalty within 90 days of the execution of the agreement

a minimum annual royalty in the amount of $10,000

3% royalty on net sales from any sales of licensed products or practice of licensed processes

milestone payment of $40,000 upon initiation of first Phase I clinical trial

milestone payment of $100,000 upon initiation of first Phase II clinical trial

milestone payment of $250,000 upon completion of first Phase III clinical trial

milestone payment of $500,000 upon first marketing approval by FDA

a sublicensing royalty of 12% on the fair market value of any consideration received for granting each sublicense

As of December 31, 2017 and 2016 there were no outstanding royalties due.

On December 31, 2014, the Company executed five exclusive pharmaceutical license agreements with the Company’s CEO, the Company’s CMO, three advisory board members of the Company, and an unrelated third party. These agreements provide the Company the worldwide exclusive rights to certain drug technologies and methods (and systems) for collection, processing and use of data for the dispensing of phyto-medical and botanically derived materials for consumption. The license agreements grant to the Company from the inventors the rights to develop, market, make, use, and sell certain drug formulations, which are applied to humans through the use of certain drug technology. In return for these exclusive rights from the inventors, the Company has agreed to compensate the inventors under the agreements with royalties ranging from 1.5% to 2.5% on all net sales by the Company of licensed products covered by a valid claim of a patent or patent application of the inventor patent rights. Additionally, the Company retains the rights to sublicense the drug formulations, and upon such sublicense shall pay the inventors from 1.5% up to 5% of all royalties and sublicense fees paid to the Company on account of sublicenses under the inventor patent rights and inventor technology rights, less all appropriate expenses associated with such sublicenses incurred by the Company. However, if the inventor supplies licensed products to sublicensees of the Company pursuant to such sublicenses, the inventor shall supply such licensed products at its cost.

As of December 31, 2017 and 2016, there were no outstanding royalties due.

KANNALIFE SCIENCES, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2017 AND 2016

NOTE 9 – COMMITMENTS AND CONTINGENCIES (CONTINUED)

Term Sheet

On December 15, 2017, the Company entered into a binding term sheet with TYG Solutions Corp. (“TYYG”), for the anticipation of a share exchange to occur in July 2018. Under this agreement the Company will become a subsidiary of TYYG and TYYG will issues shares to the shareholders of the Company. In addition, in connection with the binding term sheet, the Company's officers ceased accruing salaries until the TYYG deal was closed. See Note 13 for additional information.

NOTE 10 – RELATED PARTY TRANSACTIONS

The Company’s Chief Executive Officer shares the use of the leased office space for personal living quarters. The CEO reimburses the Company for 50% of the monthly rent, or $2,500 per month.

See Note 8 for additional related party transactions.

NOTE 11 – INCOME TAXES

We file income tax returns in the United States federal jurisdiction and in various state and local jurisdictions. In the normal course of business, we are subject to examination by taxing authorities. The tax years ending 2014 through 2017 remain subject to examination for federal tax purposes and remain subject to examination in significant state tax jurisdictions. The Company has yet to file their income tax returns for the years ended December 31, 2016 and 2017.

On December 22, 2017, the United States enacted significant changes to the U.S. tax law following the passage and signing of H.R.1, "An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018" (the "Tax Act") (previously known as "The Tax Cuts and Jobs Act"). The Tax Act significantly revised the U.S. corporate income tax regime by, among other things, lowering the corporate tax rate from 35% to 21%. The Tax Act reduced the U.S. corporate income tax rate reduction to 21% becomes effective January 1, 2018. The Company re-measured its deferred tax assets and liabilities as of December 31, 2017, applying the reduced corporate income tax rate and recorded a provisional decrease to the deferred tax assets of $787,700, with a corresponding adjustment to the valuation allowance.

As of December 31, 2017, the Company had federal and state net operating loss carry forwards of $3,425,000 that may be offset against future taxable income which will begin to expire in 2032 through 2035.

The reconciliation of income tax expense computed at the U.S. federal statutory rate to the income tax provision for the years ended December 31, 2017 and 2016 is as follows:

		For the year ended		For the year ended
		December 31, 2017		December 31, 2016

Income (loss) before income taxes	$	(1,293,255)	$	(1,219,911)

Income tax expense (benefit) at statutory rates		(439,700)		(414,800)
State income taxes, net of federal benefit		(60,500)		(57,100)
Permanent Differences		3,300		4,400
Change in Federal Rates		788,100		-
Change in Valuation Allowance		58,800		467,500
Income tax expense (benefit)	$	350,000	$	-

KANNALIFE SCIENCES, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2017 AND 2016

NOTE 11 – INCOME TAXES (CONTINUED)

Deferred income taxes reflect the net tax effects of: (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes; and (b) operating loss and tax credit carry-forwards. We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. Significant components of deferred tax assets as of December 31, 2017 and 2016 were as follows:

	For the year ended		For the year ended
	December 31, 2017		December 31, 2016
Deferred Tax Assets:
Federal net operating loss carryforwards	$	719,400	$	1,077,500
Capital Losses over Capital Gains		(16,700)		(24,200)
Non-cash interest		53,200		39,000
Non-cash accrued compensation		788,200		786,600
State taxes		192,100		148,500
Net deferred tax assets before valuation allowance		1,736,200		2,027,400
Valuation Allowance		(964,200)		(905,400)
Net Deferred Tax Assets	$	772,000	$	1,122,000

Reconciliation of the statutory federal income tax to the Company's effective tax:

	December 31, 2017	December 31, 2016


Statutory federal tax rate	34%	34%
State taxes, net of federal benefit	4.68%	4.68%
Change in Federal Rates	(60.94)%	-%
Valuation allowance	(4.55)%	(38.32)%
Other, net	(0.26)%	(0.36)%

Provision for income taxes	(27.06)%	-%

Utilization of the net operating losses (NOL) carryforwards may be subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code (IRC) of 1986, as amended (the Code), as well as similar state provisions. These ownership changes may limit the amount of NOL carryforwards that can be utilized annually to offset future taxable income. In general, an “ownership change” as defined by Section 382 of the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders. At the time of closing the books, the Company had not yet completed a study to determine the extent of the limitation.

NOTE 12 – STOCKHOLDERS’ DEFICIENCY

Series A Preferred Stock

As of December 31, 2017 and 2016, the Company had a total of 20,000,000 shares of Series A Preferred Stock, $0.001 par value authorized for issuance. Each share of Series A Preferred Stock is convertible into one share of common stock without any additional consideration by the holder, at any time after the date of issuance. The holders of shares of Series A Preferred Stock are entitled to receive dividends, if and when declared by the Board of Directors, at the rate of 8% per annum of the original price of Series A Preferred Stock. In the event of the liquidation the holders of the Series A Preferred Stock are entitled to receive an amount equal to the original Series A price for each share of Series A then held by such holder. Each holder of shares of Series A Preferred Stock is entitled to the number of votes equal to the number of shares of common stock into which such holder’s shares of Series A could be converted on the record date for the vote or written consent of the stockholders. The Series A Preferred Stock is nonredeemable.

As of December 31, 2017 and 2016, there were 12,250,000 shares of Series A Preferred Stock issued and outstanding, respectively.

KANNALIFE SCIENCES, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2017 AND 2016

NOTE 12 – STOCKHOLDERS’ DEFICIENCY (CONTINUED)

Common Stock

As of December 31, 2017 and 2016, there were 121,421,482 shares of common stock issued and outstanding for both periods.

During the year ended December 31, 2016, the Company issued 200,000 shares of common stock at $0.04 per share, or $8,000, to one consultant for services rendered. The estimated fair value of these shares was recorded as general and administrative expense.

The Company determined fair value of its shares of common and preferred stock based on the price at which the Company was selling its shares of common and preferred stock to third party investors.

Stock Options

On September 1, 2017, the Company entered into an agreement for consulting services. As compensation the Company issued a stock options to purchase 100,000 shares of common stock at a price of $2.00 per share and are exercisable for five years. The stock option vests in equal monthly installments of 24 months. These options were valued at $20,154 using a Black-Scholes Options Pricing Model. For the year ended December 31, 2017, the Company recorded $4,199 as general and administrative expense in the statement of operations.

The fair value of the options is estimated using a Black-Scholes Options Pricing Model with the following assumptions:

Market value of common stock on issuance date	$	0.40
Exercise price	$	2.00
Expected volatility		100%
Expected term (in years)		5
Risk-free interest rate		1.73%
Expected dividend yields		-

Warrants

The following is a summary of outstanding and exercisable warrants:

	Number of Shares	Weighted Average Exercise Price	Year of Expiration

Balance at December 31, 2015	92,500	1.5	2017
Issued	-	-	-
Expired	-	-	-

Balance at December 31, 2016	92,500	1.5	2017
Issued	-	-	-
Expired	(92,500)	1.5	2017
Balance at December 31, 2017	-	-	-

The Company did not issue any warrants for the years ended December 31, 2017 and 2016.

KANNALIFE SCIENCES, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2017 AND 2016

NOTE 13 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date these financial statements were issued.

On July 25, 2018, Kannalife and certain stockholders of Kannalife (the “Kannalife Stockholders”), entered into a Share Exchange Agreement (the “Share Exchange Agreement”) with TYG Solutions Corp., a Delaware corporation (“TYYG”). Pursuant to the terms of the Share Exchange Agreement, TYYG acquired approximately 99.7% of the issued and outstanding shares of Kannalife by means of a share exchange with the Kannalife Stockholders in exchange for 60,324,141 newly issued shares of the common stock of TYYG, resulting in a 86% ownership (the “Share Exchange”). As a result of the Share Exchange, Kannalife became a 99.7% owned subsidiary of TYYG, which on a going forward basis will result in financial reporting by TYYG to include the results of Kannalife and will be accounted for as a reverse acquisition.

During 2018, the Company borrowed $708,000 and issued a promissory note with a maturity date of April 18, 2019. The loan incurs 3% interest per annum.

Subsequent to year end, the Company received 41,583,333 shares in Medical Marijuana, Inc. (“MJNA”) as proceeds from a settlement agreement in exchange for the 4.99% equity stake the Company held in Kannaway LLC. See Note 4 for additional information.

On January 3, 2018, the Company issued 3,847,619 shares of common stock for the conversion of $505,000 convertible notes payable and related accrued interest.

On January 3, 2018, the Company issued 13,781,251 shares of common stock for the conversion of $2,812,810 accrued compensation.

In July 2018, the Company issued 12,250,000 shares of common stock for the conversion of 12,250,000 shares of Series A preferred stock.

EX-99.2 3 f8ka092818_ex99z2.htm EXHIBIT 99.2 THE UNAUDITED FINANCIAL STATEMENTS OF KANNALIFE AS OF JUNE 30, 2018. Exhibit 99.2 The unaudited financial statements of Kannalife as of June 30, 2018.

KannaLife Sciences, Inc.

FINANCIAL STATEMENTS (UNAUDITED)

JUNE 30, 2018

KannaLife Sciences, Inc.

TABLE OF CONTENTS

Financial Statements (Unaudited)

Balance Sheets - as of June 30, 2018 and December 31, 2017	3
Statements of Operations - for the six months ended June 30, 2018 and 2017	4
Statements of Cash Flows - for the six months ended June 30, 2018 and 2017	5
Notes to Financial Statements	6

KANNALIFE SCIENCES, INC.

BALANCE SHEETS

AS OF JUNE 30, 2018 AND DECEMBER 31, 2017

(UNAUDITED)


		June 30, 2018		December 31, 2017
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	48,696	$	4,326
Marketable security (available for sale)		4,158,333		-
Other receivables		400		400
Total Current Assets		4,207,429		4,726

Investment		-		256,359
Security deposits		17,121		15,000
Deferred tax asset		-		772,000
TOTAL ASSETS	$	4,224,550	$	1,048,085

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	184,076	$	453,632
Notes payable		712,500		367,500
Payroll and related liabilities		243,809		239,924
Total Current Liabilities		1,140,385		1,061,056

LONG TERM LIABILITIES
Payroll and related liabilities - long term		-		2,812,810
Convertible notes payable - long term		-		185,000
Convertible notes payable, related party - long term		-		288,981
Total Long Term Liabilities		-		3,286,791

TOTAL LIABILITIES		1,140,385		4,347,847

STOCKHOLDERS' EQUITY (DEFICIENCY):
Series A preferred stock, par value $0.001, 20,000,000 authorized, 12,250,000 and 12,250,000 issued and outstanding, respectively		12,250		12,250
Common stock, par value $0.001, 180,000,000 authorized, 139,050,352 and 121,421,482 issued: and 138,760,352 and 121,131,482 outstanding, respectively		139,051		121,421
Additional paid-in capital		6,010,036		2,555,723
Treasury stock, at cost (290,000 shares of common stock)		(290)		(290)
Accumulated deficit		(3,076,882)		(5,988,866)
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY)		3,084,165		(3,299,762)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)	$	4,224,550	$	1,048,085

The accompanying notes are an integral part of these financial statements

KANNALIFE SCIENCES, INC.

STATEMENTS OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(UNAUDITED)


		June 30, 2018		June 30, 2017

NET REVENUES:
Grant Revenue	$	66,864	$	-
TOTAL NET REVENUES		66,864		-

OPERATING EXPENSES:
Research and development expenses		58,637		2,000
General and administrative expenses		187,435		609,738
TOTAL OPERATING EXPENSES		246,072		611,738

LOSS FROM OPERATIONS		(179,208)		(611,738)

OTHER (EXPENSE) INCOME:
Interest income (expense), net		(8,150)		(43,414)
Other (expense) income, net		31,183		1,044
Loss on conversion		(61,815)		-
Realized gain on investment		3,901,974		-
TOTAL OTHER (EXPENSE) INCOME		3,863,192		(42,370)

NET INCOME (LOSS) BEFORE INCOME TAX		3,683,984		(654,108)

Income tax expense (benefit)		772,000		-

NET INCOME (LOSS)	$	2,911,984	$	(654,108)

Income (Loss) per common share - basic	$	0.02	$	(0.01)
Income (Loss) per common share - diluted	$	0.02	$	(0.01)

Weighted average common shares outstanding - basic		138,758,161		121,421,482
Weighted average common shares outstanding - diluted		151,008,161		121,421,482

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

KANNALIFE SCIENCES, INC.

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(UNAUDITED)


		June 30, 2018		June 30, 2017

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	2,911,984	$	(654,108)
Adjustment to reconcile change in net income (loss) to net cash and cash equivalents
used in operating activities:
Loss on issuance of stock for conversion of notes payable and accrued salaries		61,815		-
Realized gain on investment		(3,901,974)		-
Amortization of debt discount		-		9,379
Issuance of options for services		5,037		-
Deferred tax asset		772,000		-
Changes in operating assets and liabilities:
Security deposits		(2,121)		-
Accounts payable and accrued expenses		(151,257)		15,821
Payroll and related liabilities		3,885		492,694

NET CASH USED IN OPERATING ACTIVITIES		(300,630)		(136,214)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable		345,000		90,000
Proceeds from convertible notes payable related party		-		20,000

NET CASH PROVIDED BY FINANCING ACTIVITIES		345,000		110,000

Net increase (decrease) in cash		44,370		(26,214)

Cash and cash equivalents, beginning of period		4,326		33,014

Cash and cash equivalents, end of period	$	48,696	$	6,800

NON-CASH ACTIVITIES:
Issuance of common stock for conversion of notes payable and accrued interest	$	592,280	$	-
Issuance of common stock for conversion of accrued salaries	$	2,812,810	$	-

The accompanying notes are an integral part of these financial statements

KANNALIFE SCIENCES, INC.

NOTES TO FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

UNAUDITED

NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS

Unaudited Interim Financial Information

We have prepared the accompanying financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. These financial statements are unaudited and, in our opinion, include all adjustments, consisting of normal recurring adjustments and accruals necessary for a fair presentation of our balance sheets, operating results, and cash flows for the periods presented. Operating results for the periods presented are not necessarily indicative of the results that may be expected for 2018 due to seasonal and other factors. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been omitted in accordance with the rules and regulations of the SEC. These financial statements should be read in conjunction with the audited financial statements and accompanying notes.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies used in the preparation of the financial statements are as follows:

Basis of Presentation

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP.

Development Stage Company

Use of Estimates

The preparation of financial statements and accompanying notes in conformity with U.S. GAAP 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 dates of the financial statements, and the reported amounts of revenues and expenses during the periods. Actual results could differ from those estimates. Significant matters requiring the use of estimates and assumptions include, but are not necessarily limited to, establishing the fair value of marketable securities and periodically evaluating marketable securities for potential impairment, fair value of the Company’s stock, stock based compensation, and valuation allowance relating to the Company’s deferred tax assets. Management believes that its estimates and assumptions are reasonable, based on information that is available at the time they are made.

Cash and Cash Equivalents

KANNALIFE SCIENCES, INC.

NOTES TO FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

UNAUDITED

Revenue Recognition

The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, codified as ASC 606: Revenue from Contracts with Customers, which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The Company adopted ASC 606 effective January 1, 2018 using modified retrospective basis and the cumulative effect was immaterial to the financial statements.

Equity Investments

Effective January 1, 2018 with the adoption of ASU 2016-01, our accounting treatment for equity investments differs for those with and without readily determinable fair values. Equity investments with readily determinable fair values are recorded at fair value with changes in fair value recorded in “Unrealized Gain/Loss On Investments.” For equity investments without readily determinable fair values we have elected the “measurement alternative,” and therefore carry these investments at cost, less impairment (if any), plus or minus changes in observable prices. On a quarterly basis, we review our equity investments without readily determinable fair values for impairment. We consider a number of qualitative factors such as whether there is a significant deterioration in earnings performance, credit rating, asset quality, or business prospects of the investee in determining if impairment exists. If the investment is considered impaired, an impairment loss equal to the amount by which the carrying value exceeds its fair value is recorded through a charge to earnings. The impairment loss may be reversed in a subsequent period if there are observable transactions for the identical or similar investment of the same issuer at a higher amount than the carrying amount that was established when the impairment was recognized. Impairment as well as upward or downward adjustments resulting from observable price changes in orderly transactions for identical or similar investments are included in “Income - other.”

Realized gains or losses resulting from the sale of equity investments are calculated using the specific identification method and are included in “Other (expense) Income, net."

Income Taxes

The Company accounts for income taxes under FASB ASC Topic 740, Income Taxes (“ASC 740”). Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.

Preferred Stock

The Company applies the guidance enumerated in FASB ASC Topic 480, Distinguishing Liabilities from Equity (“ASC 480”), when determining the classification and measurement of preferred stock. Preferred shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. The Company classifies conditionally redeemable preferred shares (if any), which includes preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control, as temporary equity. At all other times, the Company classifies its preferred shares in stockholders’ equity. The Company’s preferred shares do not feature any redemption rights within the holders’ control or conditional redemption features not within the Company’s sole control as of June 30, 2018 and December 31, 2017. Accordingly, all issuances of preferred stock are presented as a component of stockholders’ equity.

KANNALIFE SCIENCES, INC.

NOTES TO FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

UNAUDITED

Convertible Instruments

The Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC Topic 815, Derivatives and Hedging Activities (“ASC 815”).

Stock Based Compensation

The Company accounts for share-based compensation in accordance with the fair value recognition provision of FASB ASC 718, Compensation – Stock Compensation (“ASC 718”), prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on the estimated grant date fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505, Equity–based Payments to Non-Employees (“ASC 505”). Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.

Net Income (Loss) per Share

Basic net loss per share is calculated by dividing the net loss for the period by the weighted-average number of common shares outstanding during the period. Diluted net income per share is calculated by dividing income for the period by the weighted-average number of common shares outstanding during the period, increased by potentially dilutive common shares ("dilutive securities") that were outstanding during the period. Dilutive securities include stock options and warrants granted, convertible debt, and convertible preferred stock. In accordance with ASC 260, “Earnings Per Share”, the following table reconciles basic shares outstanding to fully diluted shares outstanding.

		June 30, 2018
Weighted average number of common shares outstanding - Basic		138,758,161
Potentially dilutive common stock equivalents		12,250,000
Weighted average number of common and equivalent shares outstanding-Diluted		151,008,161

Common stock equivalents are included in the diluted income per share calculation only when option exercise prices are lower than the average market price of the common shares for the period presented.

The weighted average number of common stock equivalents not included in diluted income per share, because the effects are anti-dilutive, was 12,494,746 for June 30, 2017.

KANNALIFE SCIENCES, INC.

NOTES TO FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

UNAUDITED

Research and Development

In accordance with FASB ASC 730, Research and Development (“ASC 730”) research and development (“R&D”) costs are expensed when incurred. R&D costs include supplies, clinical trial and related clinical manufacturing costs, contract and other outside service and facilities and overhead costs. Total R&D costs for the six months ended June 30, 2018 and 2017 were $58,637 and $2,000 respectively.

Recently Issued Authoritative Guidance

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“Topic 606”), which is a new comprehensive revenue recognition model that will supersede all existing revenue recognition guidance under U.S. GAAP. The standard requires a company to recognize revenue when it transfers goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. This standard is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, with early adoption permitted for interim and annual periods beginning after December 15, 2016. Entities will have the option of using either a full retrospective approach or a modified approach to adopt the guidance in the ASU. We adopted this ASU in Q1 2018 with no material impact to our financial statements.

NOTE 3 – GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS

The Company’s financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in our accompanying financial statements, the Company has had a net loss from operations of $179,208 and $611,738 for the six months ended June 30, 2018 and 2017, respectively. The net cash used in operations were $300,630 and $136,214 for the six months ended June 30, 2018 and 2017, respectively. Additionally, the Company had an accumulated deficit of $3,076,882 at June 30, 2018, and has not yet established an adequate ongoing source of revenues sufficient to cover its operating costs and to allow it to continue as a going concern. These factors raise substantial doubt regarding the Company to continue as a going concern.

KANNALIFE SCIENCES, INC.

NOTES TO FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

UNAUDITED

NOTE 4 – FAIR VALUE MEASUREMENTS

The Company follows FASB ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) to measure and disclosure the fair value of its financial instruments. ASC 820 establishes a framework for measuring fair value in U.S. GAAP and expands disclosures about fair value measurements and establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The three levels of fair value hierarchy defined by ASC 820 are described below:

Level 1Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

Level 2Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

Level 3Pricing inputs that are generally unobservable inputs and not corroborated by market data.

The following tables presents assets that are measured and recognized at fair value as of June 30, 2018, on a recurring basis:

		June 30, 2018
		Level 1	Level 2	Level 3		Total Carrying Value
Marketable securities – Medical Marijuana, Inc.	$	4,158,333	-	-	$	4,158,333

NOTE 5 – ACCRUED PAYROLL AND PAYROLL TAXES

Accrued payroll and payroll taxes at June 30, 2018 and December 31, 2017 consisted of the following:

		2018		2017
Payroll	$	3,159	$	2,812,810
Payroll taxes		240,650		239,924
Totals	$	243,809	$	3,052,734

As of June 30, 2018 and December 31, 2017, the Company has accrued payroll taxes in connection salaries paid and accrued to four officers of the Company.

See Note 12 for discussion of accrued payroll converted into common stock.

In connection with the TYYG term sheet discussed in Note 9, the Company's four officers ceased accruing salaries until the closing of the transactions which happened in July 2018. Thus, no payroll was accrued for these officers during the six months ended June 30, 2018. Subsequent to closing, the officers have begun accruing salaries.

KANNALIFE SCIENCES, INC.

NOTES TO FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

UNAUDITED

NOTE 6 – NOTES PAYABLE

During the six months ended June 30, 2018, the Company borrowed an additional $345,000 and issued a promissory note with a maturity date of April 18, 2019. The loan incurs 3% interest per annum. Accrued interest related to this note is $11,715 as of June 30, 2018.

Total interest expense on notes payable, amounted to $8,150 and $476 for the six months ended June 30, 2018 and 2017, respectively.

Subsequent to June 30, 2018, additional borrowings were $363,000. In addition, the note holder is a significant shareholder of TYG Solutions Inc., see Note 9.

NOTE 7 – CONVERTIBLE NOTES PAYABLE

On May 15, 2015, the Company borrowed $35,000 and issued a convertible promissory note with a maturity date of April 30, 2016. The loan incurs 10% interest per annum. This note is convertible to the Company’s common stock at a price of $1.00 per share. In addition, the Company issued 17,500 warrants to purchase common stock with an exercise price of $1.50 per share and a term of two years. These warrants were valued at $7,525 and were recorded as a debt discount to be amortized over the term. Accrued interest related to this note is $0 and $9,196 as of June 30, 2018 and December 31, 2017, respectively.

On August 13, 2015, the Company borrowed $50,000 and issued a convertible promissory note with a maturity date of August 12, 2016. The loan incurs 10% interest per annum and increasing to 17% per annum in the event of a default. This note is convertible to the Company’s common stock at a price of $1.00 per share. In addition, the Company issued 25,000 warrants to purchase common stock with an exercise price of $1.50 per share and a term of two years. These warrants were valued at $10,751 and were recorded as a debt discount to be amortized over the term. Accrued interest related to this note is $0 and $16,659 as of June 30, 2018 and December 31, 2017, respectively.

On November 25, 2015, the Company borrowed $100,000 and issued a convertible promissory note with a maturity date of November 24, 2016. The loan incurs 10% interest per annum and increasing to 14% per annum in the event of a default. This note is convertible to the Company’s common stock at a price of $1.00 per share. In addition, the Company issued 50,000 warrants to purchase common stock with an exercise price of $1.50 per share and a term of two years. These warrants were valued at $21,500 and were recorded as a debt discount to be amortized over the term. Accrued interest related to this note is $0 and $25,249 as of June 30, 2018 and December 31, 2017, respectively.

Total interest expense on convertible notes payable, inclusive of amortization of debt discount of $0 and $9,378, amounted to $0 and $25,538 for the six months ended June 30, 2018 and 2017, respectively.

On January 3, 2018, the Company issued 1,409,524 shares of common stock for the conversion of $236,104 convertible notes payable and related accrued interest. The Company recorded a loss of $3,515 on conversion based upon the difference between the fair market value of the Company's common stock and the liabilities relieved.

NOTE 8 – CONVERTIBLE NOTES PAYABLE RELATED PARTY

On December 27, 2014, the Company borrowed $150,000 from General Hemp and issued a convertible promissory note with a maturity date of December 31, 2015. The loan incurs 10% interest per annum and increasing to 17% per annum in the event of a default. This note is convertible to the Company’s common stock at a price of $1.00 per share. Accrued interest related to this note is $0 and $67,195 as of June 30, 2018 and December 31, 2017, respectively.

During the year ended December 31, 2015, the Company borrowed $120,000 from the Chief Executive Officer and issued convertible promissory notes that are due on demand. The loans incur 10% interest per annum. These notes are convertible to the Company’s common stock at a price of $1.00 per share.

KANNALIFE SCIENCES, INC.

NOTES TO FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

UNAUDITED

NOTE 8 – CONVERTIBLE NOTES PAYABLE RELATED PARTY (CONTINUED)

On November 20, 2015, the Company borrowed $5,000 from the Chief Executive Officer and issued a convertible promissory note that is due on demand. The loan incurs 10% interest per annum. This note is convertible to the Company’s common stock at a price of $0.40 per share.

During the year ended December 31, 2016, the Company borrowed $15,000 from the Chief Executive Officer and issued convertible promissory notes that are due on demand. The loans incur 10% interest per annum. These notes are convertible to the Company’s common stock at a price of $0.40 per share.

During the year ended December 31, 2016, the Company borrowed $10,000 from the Chief Executive Officer and issued convertible promissory notes with a maturity date of December 31, 2016. The loans incur 10% interest per annum and increasing to 17% per annum in the event of a default. These notes are convertible to the Company’s common stock at a price of $0.40 per share.

During the year ended December 31, 2016, the Company repaid $7,191 of principal and $21,252 of accrued interest towards the outstanding notes payable.

During the year ended December 31, 2017, the Company borrowed $20,000 from the Chief Executive Officer and issued convertible promissory notes with a maturity date of December 31, 2017. The loans incur 10% interest per annum and increasing to 17% per annum in the event of a default. These notes are convertible to the Company’s common stock at a price of $0.40 per share.

During the year ended December 31, 2017, the Company repaid $23,828 of principal and $16,522 of accrued interest towards the outstanding notes payable.

On January 3, 2018, the Company converted these notes into 2,438,095 shares of common stock valued at $414,476. The difference of the $58,300 balance of the notes and the fair value of the shares issued was recorded as a loss on conversion of debt.

As of June 30, 2018 and December 31, 2017, there was no unpaid accrued interest. Total interest expense on these convertible notes payable amounted to $0 and $8,021 for the six months ended June 30, 2018 and 2017, respectively.

NOTE 9 – COMMITMENTS AND CONTINGENCIES

Legal Proceedings

Occupancy Leases

On April 1, 2014, the Company entered into a one year lease arrangement for office space, with the option to renew the lease annually. Themonthly rent payment is $5,000 and a security deposit of $15,000.

On September 15, 2015, the Company entered into a one year lease arrangement for office space. The Company has amended this lease to extend the term through September 30, 2018. Themonthly rent payment is $229 and a security deposit of $183.

KANNALIFE SCIENCES, INC.

NOTES TO FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

UNAUDITED

NOTE 9 – COMMITMENTS AND CONTINGENCIES (CONTINUED)

Royalty Agreements

a $30,000 license issue royalty within 90 days of the execution of the agreement

a minimum annual royalty in the amount of $10,000

3% royalty on net sales from any sales of licensed products or practice of licensed processes

milestone payment of $40,000 upon initiation of first Phase I clinical trial

milestone payment of $100,000 upon initiation of first Phase II clinical trial

milestone payment of $250,000 upon completion of first Phase III clinical trial

milestone payment of $500,000 upon first marketing approval by FDA

a sublicensing royalty of 12% on the fair market value of any consideration received for granting each sublicense

Term Sheet

The Company’s Chief Executive Officer shares the use of the leased office space for personal living quarters. The CEO reimburses the Company for 50% of the monthly rent, or $2,500 per month.

See Note 8 for additional related party transactions.

KANNALIFE SCIENCES, INC.

NOTES TO FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

UNAUDITED

NOTE 11 – MARKETABLE SECURITY

On June 1, 2018, the Company received 41,583,333 shares of Medical Marijuana, Inc. (“MJNA”) common stock pursuant to a settlement agreement. In 2014, the Company entered into a revenue sharing agreement with Kannaway LLC, whereas, among the considerations and obligations the parties agreed to a share exchange, whereby the Company issued 6,408,980 shares of its common stock in exchange of 4.99% ownership of Kannaway. General Hemp, Inc., a significant shareholder of the Company, owned the remaining ownership of Kannaway LLC. Subsequently, Kannaway was sold, by its parent company, to MJNA for 833,333,333 shares of MJNA common stock. The settlement agreement called for the release of all obligations in exchange for the issuance of 41,583,333 shares of common stock in MJNA to the Company.

The investment in MJNA has been recorded as an investment in non-consolidated entities and is revalued every quarter with fluctuations in fair value recorded to earnings. The fair value of the investment is based on the closing price of the shares reported on the principal stock exchange on which they are traded. At June 30, 2018 the Company held 41,583,330 shares of MJNA which traded at a closing price of $0.10, or value of $4,158,333. For the six months ended June 30, 2018, the Company recorded a realized gain of $3,901,974 related to the investment in MJNA. The gain was netted against the Company's cost basis investment in Kannaway LLC.

NOTE 12 – STOCKHOLDERS’ DEFICIENCY

Series A Preferred Stock

As of December 31, 2017 the Company had a total of 20,000,000 shares of Series A Preferred Stock, $0.001 par value authorized for issuance. Each share of Series A Preferred Stock is convertible into one share of common stock without any additional consideration by the holder, at any time after the date of issuance. The holders of shares of Series A Preferred Stock are entitled to receive dividends, if and when declared by the Board of Directors, at the rate of 8% per annum of the original price of Series A Preferred Stock. In the event of the liquidation the holders of the Series A Preferred Stock are entitled to receive an amount equal to the original Series A price for each share of Series A then held by such holder. Each holder of shares of Series A Preferred Stock is entitled to the number of votes equal to the number of shares of common stock into which such holder’s shares of Series A could be converted on the record date for the vote or written consent of the stockholders. The Series A Preferred Stock is nonredeemable.

As of June 30, 2018 and December 31, 2017, there were 12,250,000 shares of Series A Preferred Stock issued and outstanding, respectively.

Common Stock

As of June 30, 2018 and December 31, 2017, there were 139,050,352 and 121,421,482 shares of common stock issued and 138,760,352 and 121,133,000 outstanding, respectively.

On January 3, 2018, the Company issued 13,781,251 shares of common stock to four officers, valued at $2,342,813, for the conversion of accrued salaries. The difference of $469,997 between the balance of accrued salaries and the fair value of the shares issued was recorded as a capital contribution recorded within additional paid-in capital. The transaction was viewed as being on behalf of the Company in connection with the pending TYYG transaction.

See Note 7 and 8 for discussion of the conversion of notes payable and accrued interest into commons stock.

The Company determined fair value of its shares of common and preferred stock based on the price at which the Company was selling its shares of common and preferred stock to third party investors.

KANNALIFE SCIENCES, INC.

NOTES TO FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

UNAUDITED

NOTE 12 – STOCKHOLDERS’ DEFICIENCY (CONTINUED)

Stock Options

On September 1, 2017, the Company entered into an agreement for consulting services. As compensation the Company issued a stock options to purchase 100,000 shares of common stock at a price of $2.00 per share and are exercisable for five years. The stock option vests in equal monthly installments of 24 months. These options were valued at $20,154 using a Black-Scholes Options Pricing Model. For the six months ended June 30, 2018, the Company recorded $5,038 as stock based compensation in the statement of operations.

The fair value of the options is estimated using a Black-Scholes Options Pricing Model with the following assumptions:


Market value of common stock on issuance date	$	0.40
Exercise price	$	2.00
Expected volatility		100%
Expected term (in years)		5
Risk-free interest rate		1.73%
Expected dividend yields		-

Warrants

The following is a summary of outstanding and exercisable warrants:

	Number of Shares	Weighted Average Exercise Price	Year of Expiration

Balance at December 31, 2016	92,500	1.5	2017
Issued	-	-	-
Expired	(92,500)	1.5	2017

Balance at December 31, 2017	-	-	-
Issued	-	-	-
Expired	-	-	-
Balance at June 30, 2018	-	-	-

The Company did not issue any warrants for the six months ended June 30, 2018 and 2017.

KANNALIFE SCIENCES, INC.

NOTES TO FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

UNAUDITED

NOTE 13 – INCOME TAXES

As of June 30, 2018 and December 31, 2017, the Company had federal and state net operating loss carry forwards of $0 and $3,425,000, respectively that may be offset against future taxable income which will begin to expire in 2032 through 2038.

The reconciliation of income tax expense computed at the U.S. federal statutory rate to the income tax provision for the period ended June 30, 2018 and the year ended December 31, 2017 is as follows:

		For the period ended June 30, 2018		For the year ended December 31, 2017
		For the period ended June 30, 2018		For the year ended December 31, 2017

Income (loss) before income taxes	$	3,683,984	$	(1,293,255)

Income tax expense (benefit) at statutory rates		773,600		(439,700)
State income taxes, net of federal benefit		206,600		(60,500)
Permanent Differences		1,300		3,300
Change in Federal Rates		-		788,100
Change in Valuation Allowance		(209,500)		58,800
Income tax expense (benefit)	$	772,000	$	350,000

The change in the Company's net decrease in the valuation allowance was caused by reduced statutory corporate tax rates of the Tax Act and the recognition for tax purposes the stock conversion of accrued salaries recognized for tax purposes.

		For the period ended June 30, 2018		For the year ended December 31, 2017
		For the period ended June 30, 2018		For the year ended December 31, 2017
Deferred Tax Assets:
Federal net operating loss carryforwards	$	(15,700)	$	719,400
Capital Losses over Capital Gains		(16,700)		(16,700)
Non-cash interest		3,100		53,200
Non-cash accrued compensation		788,200		788,200
State taxes		(4,200)		192,100
Net deferred tax assets before valuation allowance		754,700		1,736,200
Valuation Allowance		(754,700)		(964,200)
Net Deferred Tax Assets	$	-	$	772,000

KANNALIFE SCIENCES, INC.

NOTES TO FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

UNAUDITED

NOTE 13 – INCOME TAXES (CONTINUED)

Reconciliation of the statutory federal income tax to the Company's effective tax:

	June 30, 2018	December 31, 2017


Statutory federal tax rate	21.00%	34.00%
State taxes, net of federal benefit	5.61%	4.68%
Change in Federal Rates	0.00%	(60.94)%
Valuation allowance	(5.69)%	(4.55)%
Other, net	0.04%	(0.26)%

Provision for income taxes	20.96%	(27.06)%

NOTE 14 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date these financial statements were issued.

On July 1, 2018, the Company entered into a one year lease arrangement for office space. Themonthly rent payment is $2,121 and a security deposit of $2,121.

In July 2018, the Company issued 12,250,000 shares of common stock for the conversion of 12,250,000 shares of Series A preferred stock.

See Notes 6 and 9 for additional subsequent events.

EX-99.3 4 f8ka092818_ex99z3.htm EXHIBIT 99.3 THE UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016, AND THE SIX MONTHS ENDED JUNE 30, 2018, WHICH GIVE EFFECT TO THE ACQUISITION OF KANNALIFE. Exhibit 99.3 The unaudited pro forma combined consolidated statements of operations for the years ended December 31, 2017 and 2016, and the six months ended June 30, 2018, which give effect to the acquisition of Kannalife.

Unaudited Pro Forma Financial Statements

On July 25, 2018, Kannalife Sciences, Inc. (the "Company") entered into a Share Exchange Agreement with TYG Solutions Corp. ("TYYG"), a publicly traded entity (the “Share Exchange”). The transaction was accounted for as a reverse recapitalization whereby the Company is the accounting acquirer and TYYG is the accounting acquire.

The following unaudited pro forma condensed combined financial statements have been prepared to give effect to the Share Exchange. These unaudited pro forma condensed combined financial statements are derived from the historical consolidated financial statements of the Company and TYYG. These financial statements have been adjusted as described in the notes to the unaudited pro forma condensed combined financial statements.

The unaudited pro forma condensed combined balance sheet combines the historical consolidated balance sheets of the Company and TYYG, has been prepared assuming the Share Exchange closed on June 30, 2018, and includes preliminary adjustments to reflect the events that are directly attributable to the Share Exchange and factually supportable. In addition, the unaudited pro forma condensed combined statement of operations combines the historical consolidated statements of operations of the Company and TYYG and has also been adjusted to give effect to pro forma events that are directly attributable to the Share Exchange, factually supportable and expected to have a continuing impact on the combined results. The unaudited pro forma combined consolidated statements of operations for the years ended December 31, 2017 and 2016, and the six months ended June 30, 2018 are presented as if the Share Exchange had occurred on January 1, 2016. The Share Exchange will be accounted for as a capital transaction, or reverse recapitalization.

The Company has prepared the unaudited pro forma combined condensed financial statements based on available information using assumptions that it believes are reasonable. These pro forma financial statements are being provided for informational purposes only and do not claim to represent the Company's actual financial position or results of operations had the Share Exchange occurred on that date specified nor do they project the Company's results of operations or financial position for any future period or date. The actual results reported by the combined company in periods following the Share Exchange may differ significantly from these unaudited pro forma combined condensed financial statements for a number of reasons. The pro forma financial statements do not account for the cost of any restructuring activities or synergies resulting from the Share Exchange or other costs relating to the integration of the two companies, or other historical acquisitions that were undertaken by the Company.

These unaudited pro forma combined condensed financial statements should be read in conjunction with the Company's historical financial statements and accompanying notes included in the Company's Financial Statements for the years ended December 31, 2017 and 2016, and June 30, 2018 contained in this Form 8-K.

	Unaudited Pro Forma Combined Balance Sheet
	As of June 30, 2018

			Kannalife Sciences, Inc.		TYG Solutions Corp.		Pro Forma Adjustments			Pro Forma Combined
ASSETS

CURRENT ASSETS:
Cash and cash equivalents		$	48,696	$	297,646	$	353,000	C,D	$	699,342
Marketable security (available for sale)			4,158,333		-		-			4,158,333
Other receivables			400		-		-			400
Due from related party			-		142,500		-			142,500
Total Current Assets			4,207,429		440,146		353,000			5,000,575

Security deposits			17,121		-		-			17,121
TOTAL ASSETS		$	4,224,550	$	440,146	$	353,000		$	5,017,696

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

CURRENT LIABILITIES:
Accounts payable and accrued expenses		$	184,076	$	495	$	-		$	184,571
Notes payable			712,500		-		-			712,500
Note payable - related party			-		500,000		-			500,000
Payroll and related liabilities			243,809		-		-			243,809
Loan payable - related party			-		25,822		-			25,822
Due to related parties			-		27,305		-			27,305
Other current liabilities			-		5,000		-			5,000
Interest payable- related party			-		5,559		-			5,559
Total Current Liabilities			1,140,385		564,181		-			1,704,566

TOTAL LIABILITIES			1,140,385		564,181		-			1,704,566

STOCKHOLDERS' EQUITY (DEFICIENCY):
Series A preferred stock			12,250		-		(12,250)	B,D		-
Series B preferred stock			-		-		-	D		-
Common stock			139,051		953		(133,972)	A		6,032
Additional paid-in capital			6,010,036		34,797		(26,103)			6,383,980
							12,250
							203,000
							150,000
Treasury stock			(290)		-		290	A		-
Accumulated deficit			(3,076,882)		(159,785)		159,785	A		(3,076,882)
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY)			3,084,165		(124,035)		353,000			3,313,130
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)		$	4,224,550	$	440,146	$	353,000		$	5,017,696

	See accompanying notes to the Unaudited Pro Forma Combined Financial Information

	Unaudited Pro Forma Combined Statements of Operations
	For the six months ended March 31, 2018

			Kannalife Sciences, Inc.		TYG Solutions Corp.		Pro Forma Adjustments			Pro Forma Combined

NET REVENUES:
Grant Revenue		$	66,864	$	-	$	-		$	66,864
TOTAL NET REVENUES			66,864		-		-			66,864

GROSS PROFIT			66,864		-		-			66,864

OPERATING EXPENSES:
Research and development expenses			58,637		-		-			58,637
General and administrative expenses			187,435		69,508		-			256,943
TOTAL OPERATING EXPENSES			246,072		69,508		-			315,580

LOSS FROM OPERATIONS			(179,208)		(69,508)		-			(248,716)

OTHER (EXPENSE) INCOME:
Interest income (expense), net			(8,150)		(5,708)		-			(13,858)
Other (expense) income, net			31,183		-		-			31,183
Loss on conversion			(61,815)		-		-			(61,815)
Realized gain on investments			3,901,974		-		-			3,901,974
TOTAL OTHER (EXPENSE) INCOME			3,863,192		(5,708)		-			3,857,484

NET INCOME (LOSS) BEFORE INCOME TAX		$	3,683,984	$	(75,216)	$	-		$	3,608,768

Income tax expense (benefit)			772,000		-		-			772,000

NET INCOME (LOSS)		$	2,911,984	$	(75,216)	$	-		$	2,836,768

Income (Loss) per common share - basic		$	0.02	$	(0.01)				$	0.04
Income (Loss) per common share - diluted		$	0.02	$	(0.01)				$	0.04

Weighted average common shares outstanding - basic			138,758,161		9,530,000			A		69,854,141
Weighted average common shares outstanding - diluted			151,008,161		9,530,000			A		69,854,141

	See accompanying notes to the Unaudited Pro Forma Combined Financial Information

	Unaudited Pro Forma Combined Statements of Operations
	For the year ended December 31, 2017

			Kannalife Sciences, Inc.		TYG Solutions Corp.		Pro Forma Adjustments			Pro Forma Combined

NET REVENUES:
Grant Revenue		$	-	$	-	$	-		$	-
Revenue			-		1,154		-			1,154
TOTAL NET REVENUES			-		1,154		-			1,154

COST OF SALES:
Cost of sales			-		-		-			-
TOTAL COST OF SALES			-		-		-			-

GROSS PROFIT			-		1,154		-			1,154

OPERATING EXPENSES:
Research and development expenses			4,000		-		-			4,000
General and administrative expenses			1,190,362		23,597		-			1,213,959
TOTAL OPERATING EXPENSES			1,194,362		23,597		-			1,217,959

LOSS FROM OPERATIONS			(1,194,362)		(22,443)		-			(1,216,805)

OTHER (EXPENSE) INCOME:
Interest income (expense), net			(98,893)		-		-			(98,893)
TOTAL OTHER (EXPENSE) INCOME			(98,893)		-		-			(98,893)

NET INCOME (LOSS) BEFORE INCOME TAX		$	(1,293,255)	$	(22,443)	$	-		$	(1,315,698)

Income tax expense (benefit)			350,000		-		-			350,000

NET INCOME (LOSS)		$	(1,643,255)	$	(22,443)	$	-		$	(1,665,698)

Income (Loss) per common share - basic		$	(0.01)	$	(0.00)				$	(0.02)
Income (Loss) per common share - diluted		$	(0.01)	$	(0.00)				$	(0.02)

Weighted average common shares outstanding - basic			121,421,482		9,530,000			A		69,854,141
Weighted average common shares outstanding - diluted			121,421,482		9,530,000			A		69,854,141

	See accompanying notes to the Unaudited Pro Forma Combined Financial Information

	Unaudited Pro Forma Combined Statements of Operations
	For the year ended December 31, 2016

			Kannalife Sciences, Inc.		TYG Solutions Corp.		Pro Forma Adjustments			Pro Forma Combined

NET REVENUES:
Grant Revenue		$	-	$	-	$	-		$	-
Revenue			-		34,970		-			34,970
TOTAL NET REVENUES			-		34,970		-			34,970

COST OF SALES:
Cost of sales			-		21,000		-			21,000
TOTAL COST OF SALES			-		21,000		-			21,000

GROSS PROFIT			-		13,970		-			13,970

OPERATING EXPENSES:
Research and development expenses			88,780		-		-			88,780
General and administrative expenses			1,298,222		30,264		-			1,328,486
Sales and marketing expenses			-		15,730		-			15,730
TOTAL OPERATING EXPENSES			1,387,002		45,994		-			1,432,996

LOSS FROM OPERATIONS			(1,387,002)		(32,024)		-			(1,419,026)

OTHER (EXPENSE) INCOME:
Interest income (expense), net			(65,897)		-		-			(65,897)
Other (expense) income, net			478		-		-			478
Realized gain on investments			232,510		-		-			232,510
TOTAL OTHER (EXPENSE) INCOME			167,091		-		-			167,091

NET INCOME (LOSS) BEFORE INCOME TAX		$	(1,219,911)	$	(32,024)	$	-		$	(1,251,935)

Income tax expense (benefit)			-		-		-			-

NET INCOME (LOSS)		$	(1,219,911)	$	(32,024)	$	-		$	(1,251,935)

Income (Loss) per common share - basic		$	(0.01)	$	(0.00)				$	(0.02)
Income (Loss) per common share - diluted		$	(0.01)	$	(0.00)				$	(0.02)

Weighted average common shares outstanding - basic			121,316,018		9,530,000			A		69,854,141
Weighted average common shares outstanding - diluted			121,316,018		9,530,000			A		69,854,141

	See accompanying notes to the Unaudited Pro Forma Combined Financial Information

Notes to Unaudited Pro Forma Condensed Financial Information

NOTE 1 - BASIS OF PRESENTATION

The historical consolidated financial statements have been adjusted in the unaudited pro forma condensed financial statements to give effect to the pro forma events that are (i) directly attributable to the reverse recapitalization transaction between the Company ("accounting acquirer") and TYG Solutions Corp. ("accounting acquire"), (ii) factually supportable, and (iii) with respect to the unaudited pro forma condensed statement of operations, expected to have a continuing impact on the results following the reverse recapitalization. The Share Exchange will be accounted for as a capital transaction, or reverse recapitalization.

NOTE 2 - DESCRIPTION OF TRANSACTION

On July 25, 2018, TYG Solutions Corp., a Delaware corporation (“TYYG”), entered into a Share Exchange Agreement (the “Share Exchange Agreement”) with Kannalife Sciences, Inc., a Delaware corporation (“Kannalife”) and certain stockholders of Kannalife (the “Kannalife Stockholders”).

Pursuant to the terms of the Share Exchange Agreement, TYYG acquired approximately 99.7% of the issued and outstanding shares of Kannalife by means of a share exchange with the Kannalife Stockholders in exchange for 60,324,141 newly issued shares of the common stock of TYYG (the “Share Exchange”), which increased the Company's issued and outstanding shares of common stock to 69,854,141. As a result of the Share Exchange, Kannalife became a 99.7% owned subsidiary of TYYG, which on a going forward basis will result in consolidated financial reporting by TYYG to include the results of Kannalife. The initial closing of the Share Exchange occurred concurrently with entry into the Share Exchange Agreement (the “Initial Closing”). After the Initial Closing and for a period of no more than 120 days thereafter, unless extended in the sole discretion of TYYG, TYYG may issue, on the same terms and conditions as those contained in the Share Exchange Agreement, additional shares of the common stock of TYYG to Kannalife Stockholders that did not participate in the Initial Closing, provided that each additional Kannalife Stockholder becomes a party to the transaction documents (the “Additional Closing”).

NOTE 3 - PRO FORMA ADJUSTMENTS

The following adjustments have been reflected in the unaudited pro forma condensed financial information:

A.To adjustment common stock, additional paid-in capital and accumulated deficit to effect the reverse recapitalization.

B.On July 24, 2018, holders of Kannalife Series A Preferred stock converted 12,250,000 shares into common stock of Kannalife just prior to the Share Exchange on a 1-to-1 basis.

C.On July 24, 2018, TYYG entered into a stock purchase agreement with an accredited investor pursuant to which it sold 2,030,000 shares of TYYG common stock to the investor in exchange for aggregate gross proceeds of $203,000. Prior to the closing of the stock purchase agreement, 2,030,000 shares of TYYG common stock were surrendered to TYYG by certain stockholders.

D.On July 24, 2018, TYYG issued 75 shares of TYYG’s Series A Preferred Stock and 75 shares of TYYG’s Series B Preferred Stock to accredited investors in exchange for aggregate gross proceeds of $150,000.