Item 1.
Financial Statements
CANNABICS PHARMACEUTICALS INC.
Consolidated Balance Sheets
|
|
November 30 ,
|
|
|
August 31 ,
|
|
|
|
2016
|
|
|
2016
|
|
ASSETS
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
278,151
|
|
|
$
|
19,127
|
|
Prepaid expenses and other receivables
|
|
|
3,453
|
|
|
|
2,966
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
281,604
|
|
|
|
22,093
|
|
|
|
|
|
|
|
|
|
|
Equipment, net
|
|
|
1,355
|
|
|
|
1,623
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
282,959
|
|
|
$
|
23,716
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
226,225
|
|
|
$
|
265,325
|
|
Derivative liability
|
|
|
40,682
|
|
|
|
1,356
|
|
Due to a related party
|
|
|
246,535
|
|
|
|
224,483
|
|
Total current liabilities
|
|
|
513,442
|
|
|
|
491,164
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity (deficit):
|
|
|
|
|
|
|
|
|
Preferred stock, $.0001 par value, 5,000,000 shares
authorized, no shares issued and outstanding
|
|
|
–
|
|
|
|
–
|
|
Common stock, $.0001 par value, 900,000,000 shares authorized,114,077,234
and 107,221,903 shares issued and outstanding at November 30, 2016 and August 31, 2016, respectively
|
|
|
11,408
|
|
|
|
10,722
|
|
Additional paid-in capital
|
|
|
1,616,443
|
|
|
|
1,108,148
|
|
Subscriptions receivables
|
|
|
(125,000
|
)
|
|
|
–
|
|
Accumulated deficit
|
|
|
(1,733,333
|
)
|
|
|
(1,586,319
|
)
|
Total stockholders' equity (deficit)
|
|
|
(230,483
|
)
|
|
|
(467,448
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity
|
|
$
|
282,959
|
|
|
$
|
23,716
|
|
See accompanying notes to consolidated financial
statements.
CANNABICS PHARMACEUTICALS INC.
Consolidated Statements of Operations and
Comprehensive Loss
(Unaudited)
|
|
For the Three Months Ended
|
|
|
|
November 30,
|
|
|
November 30,
|
|
|
|
2016
|
|
|
2015
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Research and development expenses
|
|
$
|
22,133
|
|
|
$
|
8,397
|
|
Sales and marketing expenses
|
|
|
–
|
|
|
|
491
|
|
General and administrative expenses
|
|
|
80,743
|
|
|
|
44,049
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
102,876
|
|
|
|
52,937
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(102,876
|
)
|
|
|
(52,937
|
)
|
|
|
|
|
|
|
|
|
|
Other expenses
|
|
|
|
|
|
|
|
|
Financial Expenses
|
|
|
(44,138
|
)
|
|
|
(2,319
|
)
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
$
|
(147,014
|
)
|
|
$
|
(55,256
|
)
|
|
|
|
|
|
|
|
|
|
Net loss per share - basic and diluted:
|
|
$
|
(0.001
|
)
|
|
$
|
(0.001
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding - Basic and Diluted
|
|
|
108,385,480
|
|
|
|
100,618,327
|
|
See accompanying notes to consolidated financial
statements.
CANNABICS PHARMACEUTICALS INC.
Consolidated Statements of Cash Flows
( Unaudited )
|
|
For the Three month ended
|
|
|
|
November 30,
|
|
|
November 30,
|
|
|
|
2016
|
|
|
2015
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net (Loss) Profit
|
|
$
|
(147,014
|
)
|
|
$
|
(55,256
|
)
|
Adjustments required to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
269
|
|
|
|
415
|
|
Interest on loans
|
|
|
51
|
|
|
|
–
|
|
Stock issued for services
|
|
|
–
|
|
|
|
26,000
|
|
Change in fair value of derivative liability
|
|
|
39,326
|
|
|
|
–
|
|
Amortization of discount
|
|
|
–
|
|
|
|
2,414
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts Receivable and pre paid expenses
|
|
|
(487
|
)
|
|
|
(10,013
|
)
|
Accounts payable and accrued liabilities
|
|
|
(39,101
|
)
|
|
|
771
|
|
Net cash used in operating activities
|
|
|
(146,956
|
)
|
|
|
(35,669
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from Promissory note
|
|
|
22,000
|
|
|
|
20,000
|
|
Proceeds from sale of common stock
|
|
|
383,980
|
|
|
|
–
|
|
Net cash provided by financing activities
|
|
|
405,980
|
|
|
|
20,000
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
259,024
|
|
|
|
(15,669
|
)
|
Cash and cash equivalents at beginning of Period
|
|
|
19,127
|
|
|
|
25,229
|
|
Cash and cash equivalents at end of the Period
|
|
$
|
278,151
|
|
|
$
|
9,560
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
–
|
|
|
$
|
–
|
|
Cash paid for taxes
|
|
$
|
–
|
|
|
$
|
–
|
|
See accompanying notes to consolidated financial
statements.
Notes to Consolidated Financial Statements
(unaudited)
Note 1– Nature of Business, Presentation and Going
Concern
Organization
Cannabics Pharmaceuticals Inc. (the "Company"),
was incorporated in the State of Nevada, on September 15, 2004, under the name of Thrust Energy Corp. On May 21, 2014, the Company
changed its name, via merger in the state of Nevada, to Cannabics Pharmaceuticals Inc. At this time the Company has changed its
course of business to pharmaceutical development.
On July 31, 2014, Cannabics Pharmaceuticals
Inc. filed its exclusive Patent Application with the US Patent & Trademark Office (USPTO), which covers the proprietary technology
developed by its team of experts in the field of cannabinoid long acting lipid based formulations. This patent is the basis for
the company’s “CANNABICS SR” technology, which consists of the IP for standardized and long acting medical cannabis
capsules, designed for patients suffering from diverse indications. Simultaneously this Patent was filed with the PCT division
of the Israeli Patent Office (ILPO) in order to provide International IP protection. On February 24, 2016 Cannabics pharmaceuticals
filed a new patent application for the company’s slow release capsules
On August 25, 2014, the Company organized G.R.I.N.
Ultra Ltd. (“GRIN”), an Israeli corporation, as a wholly-owned subsidiary. GRIN provides research and development activities
in Israel.
On February 24, 2016, the Company filed a new
patent application for the company’s slow release medical capsules with the US Patent & Trademark Office, as noted in
their Press Release of that date.
On March 22, 2016, the Company announced the
start of a regulated Clinical Study for Cancer Patients in Israel under the auspices of the Rambam Medical Center and the Ministry
of Health. This clinical study involves patients with advanced cancer and cancer anorexia cachexia syndrome (CACS), endpoints examined
are weight gain appetite, quality of life and a marker for anti-cancer activity. Quality of life in patients with CACS is directly
related to loss of appetite and loss of weight. This study examines the influence of Cannabics Pharmaceuticals SR capsules on both
of these common effects of cancer and cancer treatment. Secondary outcome measures are improvement in appetite, reduction in TNF-alpha
level, safety assessment for early psychiatric side-effects, quality of life and evaluation of muscle strength. While this study
is taking place in Israel, it is fully registered with the US NIH under
"Cannabics Capsules as Treatment to Improve Cancer
Related CACS in Advanced Cancer Patients",
Identifier NCT02359123, and may be found at https://clinicaltrials.gov/ct2/show/NCT02359123
Basis of Presentation
The accompanying unaudited financial statements
have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for
interim financial statement presentation and in accordance with Form 10-Q. Accordingly, they do not include all of the information
and footnotes required in annual financial statements. In the opinion of management, the unaudited financial statements contain
all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position and results of
operations and cash flows. The results of operations presented are not necessarily indicative of the results to be expected for
any other interim period or for the entire year.
These unaudited financial statements should
be read in conjunction with our 2016 annual financial statements included in our Form 10-K, filed with the U.S. Securities and
Exchange Commission (“SEC”) on December 13, 2016.
Principles of Consolidation
The consolidated financial statements include
the accounts of Cannabics Pharmaceuticals Inc. and its wholly-owned subsidiary, G.R.I.N. Ultra Ltd. All significant inter-company
balances and transactions have been eliminated in consolidation.
Going Concern
The accompanying unaudited financial statements
have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. The Company has incurred a net loss of $147,014 for the three months ended November 30, 2016 and
has incurred cumulative losses since inception of $1,733,333. These conditions raise substantial doubt about the ability of the
Company to continue as a going concern.
The ability of the Company to continue as a
going concern is dependent upon its abilities to generate revenues, to continue to raise investment capital, and develop and implement
its business plan. No assurance can be given that the Company will be successful in these efforts.
The unaudited financial statements do not include
any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of
liabilities that might be necessary should the Company be unable to continue as a going concern. Management believes that actions
presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to
continue as a going concern. No assurance can be given that the Company will be successful in these efforts.
Research and Development Costs
The Company accounts for research and development
costs in accordance with ASC 730 “Research and Development”. ASC 730 requires that research and development costs be
charged to expense when incurred. Research and development costs charged to expense were $22,133 and $8,397 for the three months
ended November 30, 2016 and 2015, respectively.
Revenues
Revenue is recognized when all of the following
criteria are met: there is persuasive evidence of an arrangement; the product has been delivered or services have been rendered;
the fee is fixed and determinable; and collectability is probable.
Reclassifications
Certain amounts in the prior period financial
statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported
losses, total assets, or stockholders’ equity as previously reported.
Note 2 – Related Party Transactions
On September 22, 2016, the
Company entered into a debt agreement with Cannabics, Inc. a related party, for $11,000. the Company issued a convertible
Promissory Note with a fixed maturity date of December 31, 2016 (the “Convertible Note”). The Convertible Note,
accrued simple interest at the rate of Libor +1% per annum from September 22, 2016. On November 6, 2016, the Company entered
into a second debt agreement for $11,000 with the same terms as the first agreement, the total debt resulted from the two
agreements is $22,000. Both notes are past due and are convertible into common shares of the Company at the holder’s
option at a 50% discount to the trading market average of the last seven trading days.
During the three months ending November 30, 2016, the Company paid
a total of $18,100 consulting fees and salary to one of its directors.
The Company had a balance outstanding at November
30, 2016 of $224,483 payable to Cannabics, Inc. The advance is due on demand and bears no interest.
Note 3 –Stockholders’ Equity
(Deficit)
Authorized Shares
The Company is authorized to issue up to 900,000,000
shares of common stock, par value $0.0001 per share. Each outstanding share of common stock entitles the holder to one vote per
share on all matters submitted to a stockholder vote. All shares of common stock are non-assessable and non-cumulative, with no
pre-emptive rights.
Common Stock
Pursuant to subscription agreements
entered into during the three months ended November 30, 2016, on January 5, 2017, the Company issued 5,055,334 shares to 13
investors at $.09 per share for a total of $449,573. Also on January 5, 2017, the Company issued 1,800,000 shares to 7
individuals who exercised their previous Warrant Rights at $.03 per share for a total of $54,000.
Note 4 – Subsequent Events
On December 13, 2016, the Company
tendered 23,441 shares to its Former CFO as part of the Separation Agreement between them.
On December 22, 2016, the Company issued 20,000
restricted shares as payment in full to a Consultant pursuant to the Agreement between them.
On January 4th, 2017, the Company’s
subsidiary Grin Ultra Ltd. entered into a six-month lease for office and laboratory space in Hod HaSharon, Israel. The monthly
rental is approximately $1,386 (5,300 Israeli Shekels). The Company has an option to extend the lease for another six months on
the same terms.
Item 2. Management’s Discussion
and Analysis of Financial Condition and Results of Operations.
SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS
We believe that it is important to communicate
our future expectations to our security holders and to the public. This report, therefore, contains statements about future events
and expectations which are “forward-looking statements” within the meaning of Sections 27A of the Securities Act of
1933 and 21E of the Securities Exchange Act of 1934, including the statements about our plans, objectives, expectations and prospects
under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” You
can expect to identify these statements by forward-looking words such as “may,” “might,” “could,”
“would,” ”will,” “anticipate,” “believe,” “plan,” “estimate,”
“project,” “expect,” “intend,” “seek” and other similar expressions. Any
statement contained in this report that is not a statement of historical fact may be deemed to be a forward-looking statement.
Although we believe that the plans, objectives, expectations and prospects reflected in or suggested by our forward-looking statements
are reasonable, those statements involve risks, uncertainties and other factors that may cause our actual results, performance
or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking
statements, and we can give no assurance that our plans, objectives, expectations and prospects will be achieved.
Important factors that might cause our actual
results to differ materially from the results contemplated by the forward-looking statements are contained in the “Risk Factors”
section of and elsewhere in our Annual Report on Form 10-K for the fiscal year ended August 31, 2016 and in our subsequent filings
with the Securities and Exchange Commission. The following discussion of our results of operations should be read together
with our financial statements and related notes included elsewhere in this report.
Company Overview
Cannabics Pharmaceuticals Inc. (the "Company",
“CNBX”, “we”, “us” or “our”) was incorporated in Nevada on September 15, 2004,
under the name of Thrust Energy Corp. The Company was originally engaged in the exploration, exploitation, development and production
of oil and gas projects within North America, but was unable to operate profitably.
In May 2011, the Company changed its name to
American Mining Corporation, suspending its oil and gas operations and changing its business to toll milling and refining, mineral
exploration and mine development.
On April 25, 2014, the Company
experienced a change in control. Cannabics, Inc. (“Cannabics”) acquired a majority of the issued and outstanding
common stock of the Company in accordance with stock purchase agreements by and between Cannabics and Thomas Mills
(“Mills”). On the closing date, April 25, 2014, pursuant to the terms of the Stock Purchase Agreement, Cannabics
purchased from Mills 20,500,000 shares of the Company’s outstanding restricted common stock for $198,000, representing
51%.
Cannabics, Inc. is a US based company founded
in 2012 by a group of researchers from the fields of molecular biology, cancer research and pharmacology.
On May 21, 2014, the Company changed its name,
via merger in the state of Nevada, to Cannabics Pharmaceuticals Inc. The Company’s principle offices are in Bethesda, Maryland.
At the same time the Company has changed its course of business to pharmaceutical research and development.
On June 3, 2014, the Company's Board of Directors
declared a two-to-one forward stock split of all outstanding shares of common stock. The stock split was approved by FINRA on June
19
th
, 2014. The effect of the stock split increased the number of shares of common stock outstanding from 40,880,203
to 81,760,406. All common share and per common share data in these financial statements and related notes hereto have been retroactively
adjusted to account for the effect of the stock split for all periods presented prior to June 3
rd
, 2014. The total number
of authorized common shares and the par value thereof was not changed by the split.
On June 19, 2014, FINRA granted final approval
of Change of Name & Ticker Symbol of the Corporation from American Mining Corporation to Cannabics Pharmaceuticals Inc., with
the new Ticker Symbol of “CNBX”. Said approval was predicated upon Cannabics Pharmaceuticals Inc.’s filing of
Articles of Merger with American Mining Corporation with the Nevada Secretary of State on May 21
st
, 2014. Under the
laws of the State of Nevada, Cannabics Pharmaceuticals Inc. was merged with and into the Registrant, with the Registrant being
the surviving entity. The Merger was completed under Section 92A.180 of the Nevada Revised Statutes, Chapter 92A, as amended, and
as such, does not require the approval of the stockholders of either the Registrant or Cannabics Pharmaceuticals Inc.
On July 24, 2014, the Company executed a Collaboration
& Exclusivity Agreement with Cannabics, Inc. (“Cannabics”), a Delaware corporation and largest shareholder of the
Company. Per the terms of the Agreement, the Company issued 18,239,594 shares of its common stock to Cannabics, Inc. for $150,000
cash received.
On July 31, 2014, Cannabics Pharmaceuticals
Inc. filed its exclusive Patent Application with the US Patent & Trademark Office (USPTO), which covers the proprietary technology
developed by its team of experts in the field of cannabinoid long acting lipid based formulations. This patent is the basis for
the company’s “CANNABICS SR” technology, which consists of the IP for standardized and long acting medical cannabis
capsules, designed for patients suffering from diverse indications. Simultaneously this Patent was filed with the PCT division
of the Israeli Patent Office (ILPO) in order to provide International IP protection. On February 24, 2016 Cannabics pharmaceuticals
filed a new and comprehensive patent application for the company’s slow release capsules
On August 25, 2014, Cannabics Pharmaceuticals
Inc. incorporated a wholly owned subsidiary in Israel, named “G.R.I.N Ultra Ltd”, dedicated to the advanced research
and development in the company’s research laboratory in Caesarea, Israel.
On October 20, 2014, Cannabics Pharmaceuticals
Inc. received Government Certification from the Ministry of Health in Israel for the establishment of an advanced R&D laboratory
dedicated to medical research and development of cannabinoid-based therapies. R&D is conducted to date in Israel and has resulted
in an IP portfolio that includes proprietary formulation methods of cannabinoid extracts that enable a sustained release PK profile
of the active ingredients upon oral administration. Our first technology is “Cannabics SR” - a standardized, high bioavailability,
sustained release medical cannabis capsule that is based on cannabinoid extracts from selected strains of medical cannabis.
The Cannabics SR proprietary formulation was shown to provide a steady state level of beneficial therapeutic effects within the
therapeutic window for 10-12 hours. In Israel, numerous patients (most of them oncology patients) have already been treated with
Cannabics SR capsules; with both patients and doctors reporting high levels of satisfaction from the uniformity and long lasting
therapeutic effects of this unique medical technology.
On November 4, 2014, Cannabics Pharmaceuticals
Inc. executed an IP Licensing and Collaboration Agreement with Kalapa Holdings (Spain) for the production and distribution of the
Company’s CANNABICS SR medical capsules. The IP Licensing Agreement allows for the Company’s advanced cannabinoid administration
technology to be manufactured and distributed in Spain, exclusively through Kalapa Holdings and its subsidiaries in strict compliance
with Spanish law and regulations to certified patients.
On December 18, 2014, Cannabics Pharmaceuticals
Inc. executed a letter of engagement with Mountain High Products in Colorado, for the manufacturing and distribution of Cannabics
SR technology in the Colorado market. Cannabics SR medical cannabis technology will be utilized by Mountain High Products in strict
compliance with Colorado laws and regulations of "Cannabis Infused Edible Products" and distributed to certified dispensaries
through Mountain High's existing distribution channels.
On December 30, 2014, Cannabics Pharmaceuticals
Inc. executed an IP Licensing and Collaboration Agreement with Barak Security Ltd (Israel) for the production and distribution
of the Company’s CANNABICS SR line of medical cannabis products. The IP Licensing Agreement allows for the Company’s
advanced cannabinoid administration technology to be manufactured and distributed in Israel and the Czech Republic, exclusively
through Barak Security’s affiliates and subsidiaries in strict compliance with all local laws and regulations.
On January 29, 2015, the Company executed an
Agreement with Rambam Medical Center (Israel) to undertake a controlled pilot study utilizing Cannabics SR Capsules as palliative
treatment to improve cancer related Cachexia and Anorexia Syndrome in advanced stage cancer patients. Rambam is a world renowned
academic hospital acknowledged for their cutting-edge research projects and integration of innovative new therapies and treatments
to over 2 million residents of Northern Israel. You can view the details of this ongoing study from the NIH website at http://www.cancer.gov/clinicaltrials/search/view?cdrid=769090&version=HealthProfessional&protocolsearchid=12509449.
On February 15, 2015, the Company executed
of a Research Agreement with the Technion Research & Development Foundation Ltd (Israel) to undertake a Research Project entitled
"
The Assessment of the Antitumor Activity of the Whole Cannabis Plant Extract, Components and Derivatives Thereof".
Under the terms of the Agreement, Cannabics Pharmaceuticals will collaborate with the Technion’s Laboratory of Cancer Biology
and Cannabinoid Research. The purpose of this Research is to develop a diagnostic and therapeutic system to harness the anti-cancer
properties of active cannabis-based ingredients. The study will screen and evaluate different types of human cancer cells treated
with a multitude of cannabinoid combinations and observe and catalogue the effects thereof. Technion is consistently ranked among
the world’s top science and Technology Research Universities. The Faculty of Biology is comprised of 23 independent research
groups, focusing on a variety of aspects of Cellular, Molecular and Developmental Biology. The faculty has extensive collaborations
with the pharmaceutical and biotechnology industries.
On May 27, 2015, the Company filed a Patent
with the USPTO entitled “
A Method of in Vitro High Throughput Screening of Cancer Biopsies with Cannabinoid Extracts
”.
In essence this patent takes the next step from the cancer cell knowledge already obtained from cell lines in the Technion Laboratory
and extends it to a system of analyzing cancer cells taken from patient biopsies, and then testing them against a multitude of
cannabinoid combinations for anti-tumor activity via the High Throughput Screening process. This patent formally begins the next
phase of the Company, which is Personalized Medicine (PM). We have developed an automated high-throughput method for the screening
of different types of cancer cells or biopsies treated with a multitude of cannabis extracts. These natural extracts could also
be tested in conjunction with already approved and common synthetic drugs for patients that undergo chemotherapy for the most personally
tailored therapy. This multilayer method is producing a large-scale database that will capture the knowledge gained as to the unique
effects of different combinations of cannabinoid compounds on diverse malignancies. Coextensive with the development of the automated
high-throughput system, we are also developing proprietary and novel compounds targeting diverse and specific types of tumors.
On January 25, 2016, the Company executed an exclusive IP Licensing Agreement with Mountain High Products LLC and the Cima Group LLC for
the production and distribution of the Company’s CANNABICS SR technology of medical cannabis capsules in Colorado. And
with, Cima Group LLC which is a related party to Mountain High Products LLC and is charged with their operations in states
outside of Colorado.
On February 24, 2016, the Company filed a new
patent application for the company’s slow release medical capsules with the US Patent & Trademark Office, as noted in
their Press Release of that date.
On March 22, 2016, the Company announced the
start of a regulated Clinical Study for Cancer Patients in Israel under the auspices of the Rambam Medical Center and the Ministry
of Health. This clinical study involves patients with advanced cancer and cancer anorexia cachexia syndrome (CACS), endpoints examined
are weight gain appetite, quality of life and a marker for anti-cancer activity. Quality of life in patients with CACS is directly
related to loss of appetite and loss of weight. This study examines the influence of Cannabics Pharmaceuticals SR capsules on both
of these common effects of cancer and cancer treatment. Secondary outcome measures are improvement in appetite, reduction in TNF-alpha
level, safety assessment for early psychiatric side-effects, quality of life and evaluation of muscle strength. While this study
is taking place in Israel, it is fully registered with the US NIH under
"Cannabics Capsules as Treatment to Improve Cancer
Related CACS in Advanced Cancer Patients",
Identifier NCT02359123, and may be found at https://clinicaltrials.gov/ct2/show/NCT02359123.
On June 6, 2016, the Company filed a PCT Application
with the US Patent & Trademark Office (USPTO) entitled a "System and Method for High Throughput Screening of Cancer Cells".
Cannabics Pharmaceuticals has developed a proprietary high throughput screening process which is designed to generate mega-data
of specific cannabinoids and cannabinoid formulations with antitumor properties. In this proprietary process biopsies and live
cancer cells lines are treated, In vitro, with innumerous combinations of cannabinoids and the resulting antitumor effects are
screened, categorized and actually visually displayed.
On December 1, 2016, the Company announced
the results from its Cancer HTS research which indicate that specific ratios of Cannabinoids led to Apoptosis in MDA-MB-231 Breast
Cancer cell viability.
On January 3, 2017, the Company announced development
of its 5mg THC Capsule intended for naïve patients who have not tried cannabis in the past. The Cannabics 5mg THC capsule
is currently being evaluated by the company in its clinical study of palliative treatment, which is conducted by the Oncology Department
at the prestigious Rambam Medical Center in northern Israel and under strict regulations of the Ministry of Health, by whom Cannabics
Pharmaceuticals has been licensed since 2014.
Plan of Operation
Cannabics Pharmaceuticals Inc. is dedicated
to the development cannabinoid medicine for cancer patients. The Company’s R&D is focused on the three aspects of cancer
treatment – palliative medicine, diagnostics, and antitumor medicine. Cannabics’ vision is to create personalized natural
medicine tailored to specific types of cancers and genetics of patients utilizing novel biotechnological tools. The Company’s
Intellectual Property surpasses proprietary capsulated formulations designated for specific cancer related indications, diagnostic
procedures and data.
The parent Company Cannabics, Inc was founded
by a group of Israeli researchers from the fields of cancer research, pharmacology and molecular biology in 2012. The company’s
Research is located in Israel, which has allowed for the use of medical cannabis since the 1990s, and has a favorable regulatory
attitude towards the conducting of Cannabis based clinical studies in Israeli hospitals, in marked contrast to the legal situation
in the United States where clinical research on medical cannabis is still illegal. This structure is an extraordinary corporate
advantage, and markedly separates the company from similarly minded companies.
The number of people licensed to receive medical
cannabis treatment in Israel numbers around 20,000 - in comparison to over 1,000,000 in the whole of the United States. Therefore,
while the Israeli market potential is regarded as limited, the ability to perform standardized clinical studies and use the Israeli
regulation to prove the effectiveness of the company’s products is proving to be highly advantageous.
Most importantly, while the U.S. FDA has barely
approved even basic private research relating to cannabis, the regulatory environment is quite different in Israel. Within the
Israeli Ministry of Health, there is a stand-alone agency, the Israeli Medical Cannabis Agency, (IMCA), which on October 26th,
2014, granted Cannabics Pharmaceuticals an exclusive government License to launch our scientific program.
Through the large body of research that has
been conducted by its scientists and affiliated partners, the Company has been able to gain in-depth knowledge of the various therapeutic
effects of cannabinoids and identify patterns of cannabinoid ratios that bear the potential of treating various types of cancers.
The Company is currently in the midst of several collaborative programs with several leading academic research and medical centers
in Israel in order to further establish the beneficial therapeutic effects of its proprietary compounds, and to refine its development
of personalized anticancer medicine.
CANNABICS 5MG capsules for Palliative care
While the medicinal effects of certain cannabinoids
are well known to physicians, it is common knowledge that smoking is hazardous to health. Many physicians are perfectly aware of
the palliative properties of cannabis (i.e antiemetic and analgesic), however they refrain from recommending or prescribing it
to patients knowing that smoking the raw flowers is still the most common and available administration route. Hence the availability
of an oral, standardized, reliable and clinically tested administration route of medical cannabis – no different from the
administration route of most medications consumed by patients today - would dramatically improve the availability of medical cannabis
therapy to patients in need.
Standardization and reproducibility
Most practicing physicians are aware of the
increasing market availability of cannabis edible products such as cannabis cookies, chocolates and chewing gums. However, these
products have so far totally failed in gaining credibility in the eyes of the medical community due to a severe lack in standardization
and reproducibility. Laboratory tests of cannabinoid concentrations in currently available edible products have demonstrated severe
variability in the potency of those products, due to non-uniformity of manufacturing procedures in the kitchens that produce them.
In addition, the bioavailability levels (the amount of active ingredients that ultimately reach the blood stream after ingestion)
of these products is also highly variable due to the lack of a standardized and efficient formulation. As a result, it is very
common to either over-dose or under-dose when using such cannabis edibles as a therapeutic means, a fact which rightly prevents
most physicians from recommending these medically un-tested products. Therefore, a substantial unmet need of the medical cannabis
market is a standardized and reproducible product, which is based on clinically tested formulations.
The efficacy of our Cannabics 5mg capsules
is currently being evaluated in a study that is taking place in the Rambam Medical Center in Haifa, Israel, and it is fully
registered with the US NIH under "Cannabics Capsules as Treatment to Improve Cancer Related CACS in Advanced Cancer Patients",
Identifier NCT02359123, and may be found at https://clinicaltrials.gov/ct2/show/NCT02359123
Diagnostics and Personalized medicine
Cannabinoids include phytocannabinoids, endogenous
endocannabinoids, and synthetic cannabinoids. More than 60 phytocannabinoids have been identified within the Cannabis plant. Cannabinoids
elicit their pharmacological activities through cannabinoid receptor type 1 (CB1) and type 2 (CB2), two G-protein coupled receptors
(GPCR) in the endocannabinoid signaling pathway. Cancer is a disease in which alterations in the cannabinoid pathway have been
demonstrated. Since this disease is found to be multifactorial, variations in expression of cannabinoid receptors could be harnessed
to elicit a therapeutic effect. Therefore, a defined botanical extract may better achieve this therapeutic goal than a single synthetic
compound, as the multiple components elicit a synergistic effect. Cannabinoids are not yet approved for the treatment of cancer,
although their anti-tumor effects have been known for over 30 years. Scientific evidence exists which strongly suggest that cannabinoids
may have anti-cancer activity. The exact mechanism by which this anti-tumor effect occurs may involve suppression of proliferative
cell signaling pathways, inhibition of angiogenesis and cell migration and induction of apoptosis and/or induction of autophagy.
Personalized Medicine (PM) is a novel approach that proposes the customization of therapy being tailored to the individual patient.
There are over 200 different known cancers and the genetic divergence among humans makes it nearly impossible to find one remedy
for a group of people. In view of the above, Cannabics utilizes High-throughput technologies to screen antitumor effects, mainly
Apoptosis and Proliferation, on cell lines and biopsies treated with matrix of plant extracts differentiated in their ratios of
active compounds. This diagnostic procedure can now offer doctors data on the potential antitumor activity of available cannabis
products. The data unraveled in this procedure is also recruited in the creation of proprietary antitumor compounds.
Anti Tumor Medicine
To date Cannabics has gained valuable data
on the anti-proliferative properties of cannabinoids on specific types of cancers and is currently engaging in preclinical studies
which will translate into clinical studies that will evaluate proprietary cannabinoid compounds as anti-cancer treatments. All
Cannabics formulations are pre-designed to fit the currently existing medical cannabis regulations in Israel, Europe and certain
US States which are licensed as a “Medical Marijuana Infused Products Manufacturer” (i.e. §12-43.3-404 CRS). The
ingredients used in the proprietary formulations are all certified food grade ingredients (recognized by the FDA as “G.R.A.S.”
– Generally Regarded as Safe) and the formulation are free of any artificial additives or chemical substances. Thus, Cannabics
medicines are fully compliant with the current cannabis infused edible product regulatory definition, which is in fact very similar
to a regular food supplement regulatory definition.
The company’s business model is solely
based on technology development and IP out-licensing to licensed and certified producers. The Company’s technologies are
licensed to a strategic partner in compliance with each country’s and/or US state’s statutory regulations and exclusively
to licensed and authorized medical cannabis local licensees that have adequate production and marketing capabilities. Within the
US, Cannabics Pharmaceuticals Inc. itself
does not
manufacture, distribute, dispense or possess any controlled substances,
including cannabis or cannabis based preparations, it merely licenses its IP. Within Israel, Europe and other territories outside
the US, Cannabics Pharmaceuticals Inc. may employ a different business model through gaining adequate licenses under the appropriate
regulations in each territory, all in full compliance with local rules and regulations in each country. Cannabics Pharmaceuticals
Inc. is purely a Bio-Technology Pharmaceutical company which licenses use of its Intellectual Property, it does not itself produce
or provide any product in any location.
Results of Operations
For the Three Months Ended November 30,
2016 and 2015
Revenues
We had no revenue for the three months ended
November 30, 2016 and 2015.
Operating Expenses
For the three months ended November 30, 2016,
our total operating expenses were $102,876 compared to $52,937 for the three months ended November 30, 2015 resulting in an increase
of $49,938. The increase is attributable to increases in general and administrative expenses of $36,694; research and development
expenses of $13,736; and a decrease in sales and marketing expenses of $491.
For the three months ended November 30, 2016
we incurred financial expenses of $44,138 compared to 2,319 for the three months ended on November 30, 2015. As a result, the total
comprehensive loss was $147,014 for three months ended November 30, 2016 compared to $55,256 for the three months ended November
30, 2015.
Liquidity and Capital Resources
Overview
As of November 30, 2016, the Company had $278,151
in cash. We do not have sufficient resources to effectuate our business. We expect to incur a minimum of $1,000,000 in expenses
during the next twelve months of operations. We estimate that these expenses will be comprised primarily of general expenses including
overhead, legal and accounting fees, research and development expenses, and fees payable to outside medical centers for clinical
studies.
Liquidity and Capital Resources during
the Three Months Ended November 30, 2016 compared to the Three Months ended November 30, 2015
We used net cash in operations of $146,956
for the Three months ended November 30, 2016 compared to net cash used in operations of $35,669 for the Three months ended November
30, 2015.
During the Three Months Ended November 30,
2016 the Company received $22,000 in proceeds from promissory notes compared to $20,000 for the Three Months Ended November 30,
2015. The Company received $383,980 from the issuance of common stock for the Three Months Ended November 30,2016, compared to
$0 for the three Months Ended November 30, 2015.
We did not use any cash in investing activities
during the three months ended November 30, 2016 or for the Three Months Ended November 30, 2015.
We will have to raise funds to pay for our
expenses. We may have to borrow money from shareholders or issue debt or equity or enter into a strategic arrangement with a third
party. There can be no assurance that additional capital will be available to us. We currently have no arrangements or understandings
with any person to obtain funds through bank loans, lines of credit or any other sources. Since we have no such arrangements or
plans currently in effect, our inability to raise funds for our operations will have a severe negative impact on our ability to
remain a viable company.
Going Concern
Due to the uncertainty of our ability to meet
our current operating and capital expenses, our independent auditors included an explanatory paragraph in their report on the audited
financial statements for the year ended August 31, 2016 regarding concerns about our ability to continue as a going concern. Our
financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent
auditors.
Our unaudited financial statements have been
prepared on a going concern basis, which assumes the realization of assets and settlement of liabilities in the normal course of
business. Our ability to continue as a going concern is dependent upon our ability to generate profitable operations in the future
and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations
when they become due. The outcome of these matters cannot be predicted with any certainty at this time and raise substantial doubt
that we will be able to continue as a going concern. Our unaudited financial statements do not include any adjustments to the amount
and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.
There is no assurance that our operations will
be profitable. Our continued existence and plans for future growth depend on our ability to obtain the additional capital necessary
to operate either through the generation of revenue or the issuance of additional debt or equity.
Off-Balance Sheet Arrangements
We currently have no off-balance sheet arrangements
that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Policies
The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of America requires us to make a number of estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements. Such estimates and assumptions affect the reported amounts of revenues and expenses during
the reporting period. We base our estimates on historical experiences and on various other assumptions that we believe to be reasonable
under the circumstances. Actual results may differ materially from these estimates under different assumptions and conditions.
We continue to monitor significant estimates made during the preparation of our financial statements. On an ongoing basis, we evaluate
estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates
and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates under different future
conditions.
See Item 7, “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” and Note 2, “Summary of Significant Accounting Policies”
in our audited consolidated financial statements for the year ended August 31, 2016, included in our Annual Report on Form 10-K
as filed on December 13
th
, 2016, for a discussion of our critical accounting policies and estimates.