ITEM
1. BUSINESS
Corporate
History and Background
Our
business activity is comprised of developing Israeli technologies and solutions and bringing them to global markets. We believe
in the health, wellness, food-tech, botanicals, and medical cannabis industries that demonstrate high growth potential and focus
on these markets.
Our
headquarters, directors, and executive officers are all based in Israel, where we operate via our wholly-owned subsidiary, CTGL
- Citrine Global Israel Ltd. (“Citrine Global Israel”).
We
have developed a unique platform of operational innovation centers (each, an “Operational Innovation Center”) that
create eco-systems for the health, wellness, botanicals, and medical cannabis industries. Our first Operational Innovation Center
will be the Cannovation Center Israel (the “Cannovation Center in Israel”), focusing on Israeli health, wellness,
botanicals, and medical cannabis Industries: supported in part by Israeli government grants and benefits.
We
have an experienced team and a network of partners that include leading experts with a proven track record in technology, high-tech,
biotech, investment, entrepreneurship, real estate, finance, and strategic business development in Israel and worldwide. We plan
to operate worldwide through domestic subsidiaries, local teams, partners, and industry experts in each area.
Our
vision is to become a global leader in developing Israeli technologies and solutions that improve people’s health and quality
of life worldwide.
We
created a 5-element approach of multi-strategy solutions to realize our vision:
|
1.
|
The
1st Element - Focus on the Israeli Technology Market: Israel, the Startup Nation, is
uniquely positioned to be a leading source of technology innovation for global markets.
Israel is considered a leader in many high-tech and biotech industries and has a vast
and innovative life sciences sector and a cutting-edge medical technology industry. The
Israeli technology sector is backed by the Israeli Government, which views technology
and innovation as important growth engines for the Israeli economy.
|
|
2.
|
The
2nd Element - Operational Innovation Center Platform for the Health, Wellness, Botanicals
and Medical Cannabis Industries: We have developed a unique platform for Operational
Innovation Centers to create ecosystems that promote operational scale-up and business
growth for the high-growth health, wellness, botanicals, and medical cannabis industries.
Our first Operational Innovation Center will be built by Cannovation Center Israel Ltd.
(“Cannovation Center Israel Ltd.”), which is 60%-owned by Citrine Global
Israel and is backed by Israeli government grants and other benefits. Cannovation Center
Israel will focus on building an eco-system for Israeli health, wellness, botanicals
& medical cannabis industries. Cannovation Center Israel will include laboratories
for botanicals and cannabis research, pharmacological research, product development,
preclinical and clinical trials, certified factories for cannabis, health and wellness
products, storage, packaging, distribution, import, export, consultancy services, strategy
and business development, real estate, asset management solutions and more.
|
|
3.
|
The
3rd Element - Focusing on the Health, Wellness, Botanicals and Medical Cannabis Industries:
We believe in the health, wellness, botanicals, and medical cannabis industries which
demonstrate high growth potential, and we are primarily focused on these industries.
|
|
4.
|
The 4th Element - Acquiring technologies
and developing scientific, research, and commercial collaborations. Develop a unique line of
products and cooperation initiatives for joint innovation, research, development, and production under the Cannovation brand in the fields
of botanicals, medical cannabis, cannabinoid-based pharmaceutical products, cosmetics, and beverages to bring new products and new technologies
to market that will leverage our Company value and create an intellectual property using various
business models.
|
|
5.
|
The
5th Element - Creating a Global Network of Offices, Subsidiaries, and Operational Innovation
Centers: Our global growth strategy is to create an international network that operates
through subsidiary companies, local teams, partners, and Cannovation Operational Innovation
Centers.
|
On
January 6, 2020, our predecessor company, TechCare Corp., a Delaware corporation (“TechCare”), and Citrine S A L Investment
& Holdings Ltd., an Israeli corporation and a major shareholder of the Company (“Citrine S A L”), and a group
of related persons and entities (the “Citrine S A L Group”) entered into a Common Stock Purchase Agreement (the “Citrine
S A L Group Agreement”), which was later amended and restated on February 23, 2020 (the “AR Citrine S A L Group Agreement”).
Pursuant to the AR Citrine Agreement, TechCare agreed to sell Citrine S A L Group and its group of business partners, up to an
aggregate of 893,699,276 shares of TechCare’s common stock, representing approximately 95% of TechCare’s fully diluted
capital, in two tranches, with the initial tranche of up to 452,063,196 shares of the TechCare’s common stock to be sold
conditioned upon (i) the resignation of the Company’s existing members of its board of directors (the “Board”),
consisting of Oren Traistman and Yossef De-Levy, (ii) the appointment of each of Ora Elharar Soffer (formerly Ora Meir Soffer),
Ilan Ben Ishay and Ilanit Halperin as members of the Board, and (iii) the transfer of the TechCare’s signatory rights to
all Company bank accounts in the name of Citrine S A L Group’s nominee. In addition, the AR Citrine S A L Group Agreement
provides for the second tranche of up to the remaining number of shares of common stock that will result in Citrine S A L Group,
owning 95% of the TechCare’s fully diluted capital stock, to be sold conditioned upon the filing of the Company’s
previously approved amendment to its First Amended and Restated Certificate of Incorporation to increase the Company’s authorized
capital.
On
January 6, 2020, definitive agreements were executed for the sale of 90% of the shares in Novomic Ltd. (“Novomic”)
to Traistman Radziejewski Fundacja Ltd, which was completed on May 14, 2020 (the “Novomic Divestment”), and for the
issuance and sale of a number of shares equal after the issuance to 95% of the fully diluted capital stock of the Company to Citrine
S A L Group, which was amended on February 23, 2020, to provide for the issuance and sale of the shares in stages (the “Citrine
Global Transaction”). Shares of the Company were issued and sold in accordance with this amended agreement to Citrine S
A L Group on February 27, 2020, March 5, 2020, and, after the Company amended its Certificate of Incorporation to increase its
authorized share capital, on November 11, 2020.
On
February 27, 2020, the resignations of all then serving directors became effective, and the appointments of Ora Elharar Soffer,
Ilan Ben-Ishay, and Ilanit Halperin as new directors became effective. Zviel Gedalihou was appointed as Chief Financial Officer
of the Company on March 17, 2020, and was replaced in that role by Ilanit Halperin on May 27, 2020, and Ora Elharar Soffer was
appointed Chief Executive Officer of the Company on May 7, 2020. Doron Birger was appointed as a fourth director on September
3, 2020.
On
April 1, 2020, we entered into a Convertible Note Purchase Agreement (the “CL Agreement”) with Citrine S A L, WealthStone
Private Equity Ltd, WealthStone Holdings Ltd, Golden Holdings Neto Ltd, Beezz Home Technologies Ltd, Citrine Biotech 5 LP, Citrine
High Tech 6 LP, Citrine High Tech 7 LP, Citrine 8 LP, Citrine 9 LP and Citrine Biotech 10 LP (together, the “Buyer”),
all of which are affiliated with the Company. Under the CL Agreement, the Buyer agreed to purchase, and the Company agreed to
issue and sell, for up to an aggregate principal amount of up to $1,800 thousand, notes convertible into shares of common stock
of the Company (the “Notes”), with a drawdown period starting on April 1, 2020, and ending upon the earlier of (i)
6 months thereafter and (ii) the consummation of a public offering by the Company. The CL Agreement provides that the Notes will
bear an annual interest rate of six percent (6%) and that the conversion price per share of common stock shall equal 85% multiplied
by the market price (as defined in the Notes), representing a discount of 15%, and that each Note will mature 18 months following
the payment date. On April 19, 2020 and June 12, 2020, the Company provided draw-down notices under the CL Agreement for amounts
of $170 thousand and $1 million, respectively, which were received in cash by the Company. On June 12, 2020, the CL Agreement
(hereafter “CL Agreement Amendment”) was amended to provide that for each draw down made by the Company under the
CL Agreement, the Buyer shall be entitled to receive two types of warrants: A Warrants and B Warrants, with the A Warrants exercisable
at any time between 6 and 12 months after issuance for an exercise price per share equal to 1.25 times the average of the closing
prices of the 3 trading days preceding the draw down, and the B Warrants exercisable at any time between 6 and 24 months after
issuance for an exercise price per share equal to 1.5 times the average of the closing prices of the 3 trading days preceding
the draw down, and that the number of each of the A Warrants and the B Warrants issued will be equal to the draw down amount divided
by the average of the closing prices of the 3 trading days preceding the draw down, and that these amended terms will apply in
respect of all draw downs, including drawdowns made prior to the date of the amendment. On April 12, 2021, the parties to the
CL Agreement amended the agreement, so that (i) the annual interest on the Notes should be changed to nine percent (9%) applicable
from January 1, 2021, (ii) the Company shall repay the loans at the time it consummates an investment of at least $5 million in
the Company’s securities, and (iii) the exercise prices of each of the A Warrants and B Warrants be modified to $0.10 per
share, and the term of the warrants be extended by one (1) year for the A Warrants and B Warrants.
On
May 31, 2020, we entered into a strategic partnership with Intelicanna Ltd., an Israeli medical cannabis company listed on the
Tel Aviv Stock Exchange with ticker symbol INTL (“Intelicanna”), via a share exchange agreement and an agreement for
future issuance of shares. The share exchange agreement provides that (i) the number of shares each party issues to the other
will be calculated by dividing $500 thousand by the volume-weighted average price (VWAP) of the issuing party’s shares in
the three trading days preceding the signing of the agreement, (ii) the issuance by Intelicanna will take place upon, and subject
to, receipt of approval from the Tel Aviv Stock Exchange and the issuance by the Company will follow immediately thereafter, and
(iii) the parties may not sell the shares within the first six months after issuance, and thereafter the parties may sell the
shares issued to them if the shares become registered through a prospectus approved by the relevant securities authority, or under
an exemption provided by applicable securities law, subject to a limit on the number of shares either party may sell per day.
The agreement for future issuance of shares provides that a fall in a share price of a party, not exceeding 20%, measured six
months after issuance of shares by both parties pursuant to the share exchange agreement, will be offset by the issuance of additional
shares to the other party to bring up to $500 thousand the total value of the shares issued to the other party.
Furthermore,
on June 25, 2020, Citrine Global Israel has entered into a services agreement with Intelicanna to provide business development
and consulting services to Intelicanna, including assistance with raising financing (the “Services Agreement”) (references
in this paragraph to the Company include the Israeli Subsidiary). The terms of the Services Agreement include: (1) the Company
will, for a period of 18 months, assist Intelicanna to raise up to NIS 15 million for Intelicanna’s working capital purposes,
whether through issuance of convertible securities or any other means; all sums raised must be approved in advance by the Company,
and in accordance with a business plan presented to the Company from time to time; the Company will have no obligation under the
Services Agreement to invest in Intelicanna, and no liability if its efforts to source financing for Intelicanna are unsuccessful;
(2) in the event Intelicanna raises funds through assistance from the Company, the Company will be entitled to (i) cash consideration
equal to 5% of any amount raised, whether directly from the Company, or from any of its affiliates or any unrelated third party,
and (ii) options to acquire a number of shares of Intelicanna equal to 5% of the amount raised divided by the Exercise Price;
the “Exercise Price” will be the price per share at which the amount was raised, or if it was not raised through issuance
of shares, the price per share at which Intelicanna last raised funds through issuance of shares; and (3) for one or more periods
of at least 90 days, each time at Intelicanna’s request which the Company may accept or decline at its discretion, the Company
will provide business development and strategy-building services, including: consulting on strategy and business plan; assistance
defining financing needs; helping identify ways to develop potential sources of finance; and ongoing consulting support to Intelicanna’s
management team and board. Intelicanna will pay the Company a fee of NIS 2,500 per day for such services.
Also
on June 25, 2020, to assist Intelicanna to raise the first NIS 1 million, the Company and the Israeli Subsidiary entered into
an agreement to grant Intelicanna NIS 1 million in cash (approximately USD 290 thousand) in direct financing for working capital
purposes. The financing will bear 6% annual interest and Intelicanna will make additional payments equalling 6% of its gross revenues
between the date the financing is received and the date Intelicanna’s aggregate gross revenues thereafter equal NIS 2 million.
If the total of the 6% interest plus the additional payments would result in a return of less than 12% in the year to the Company,
the interest will be increased to bring the total return to 12%. Every three months Intelicanna must pay the interest, and after
12 months, it must repay the capital, plus the total of the additional payments due, plus any outstanding interest, and it must
pay interest of 2% per month on any late payments, provided however that until the foregoing obligations are paid in full Intelicanna
must pay 50% of its gross revenues to the Company upon receipt. If Intelicanna does not pay all amounts due within 18 months,
it shall, at the Company’s option, issue to the Company a number of its shares equal to NIS 1.5 million divided by the lower
of (i) the volume-weighted average price (“VWAP”) of the three trading days prior to the lapse of the 18 months, and
(ii) VWAP of the three trading days prior to the signing of the financing agreement. The financing must be paid by the Company
to Intelicanna within 30 days of signing the financing agreement, subject to completion of due diligence to the Company’s
satisfaction and to Intelicanna receiving a commercial growing license.
On
July 9, 2020, we transferred to Intelicanna NIS 500 thousand (approximately $145 thousand) on account of the above loan. On March
31, 2021, Intelicanna repaid the loan with the 12% interest.
On
August 4, 2020, the Board of the Company approved for the Company and Citrine Global Israel to proceed with preparations for investing
in iBOT Israel Botanicals Ltd., an Israeli botanical nutraceutical company (“iBOT”). iBOT has a manufacturing facility for
a wide range of botanical formulations, and part of its strategy is to combine this with hemp and cannabidiol (“CBD”). The
Board gave its approval, subject to agreement of definitive terms and receipt of all necessary corporate and other approvals, for a proposed
transaction in which (1) the Company would have an option to make one or more investments during a period of 12 months in an aggregate
amount of up to $1 million; (2) the investments may be through loans, direct equity purchases, or other means, and would be based on
milestones; and (3) iBOT would grant the Company a 25% discount in its next fundraising. In addition, the Board approved for the Company
to proceed with preparations for entering a services agreement with iBOT pursuant to which the Company would provide consulting and other
services to iBOT. iBOT is controlled by an affiliate of the Company. The Company is still in the process of examining the cooperation
with iBOT.
On
September 17, 2020 we issued to Intelicanna 2,143,470 shares of common stock in exchange for 619,589 of Intelicanna’s ordinary
shares. Ilanit Halperin, a director and the Chief Financial Officer of the Company, is also the Chief Financial Officer of Intelicanna,
and Doron Birger, a director of ours, is the chairman of the board of directors of Intelicanna effective April 2021. The lock-up
period under the share exchange agreement with respect to the 619,589 Intelicanna’s ordinary shares held by the Company
has lapsed in March 2021.
On
June 22, 2020, we entered into a share purchase agreement with Nanomedic Technologies Ltd., an Israeli private company and a related
party as further described below (“Nanomedic”) as part of A-1 funding round open only to existing Nanomedic shareholders
and their affiliates. Nanomedic developed SpinCare, a system that integrates electrospinning technology into a portable bedside
device, offering immediate wound and burn care treatment. We paid $450 thousand for A-1 preferred shares of Nanomedic and also
received warrants to purchase A-1 preferred shares. Such investment represents a holding of approximately 3.3% in Nanomedic. The
round raised approximately $2.2 million in total. Citrine S A L and certain of its partnerships, all affiliates of the Company,
were already beneficial shareholders of Nanomedic immediately prior to the A-1 funding round. Ilan Ben-Ishay, a director of the
Company, was already a beneficial shareholder of Nanomedic immediately prior to the A-1 funding round. Ora Elharar Soffer, our
chairperson and CEO, was already a director of both Nanomedic and its Israeli parent company, Nicast Ltd., immediately prior to
the A-1 funding round, and she was also already a beneficial shareholder of Nanomedic immediately prior to the A-1 funding round.
On
July 21, 2020, Citrine Global Israel began to work with certain Company shareholders, Beezz Home Technologies Ltd., in which Ora
Elharar Soffer, our chairperson and CEO holds shares, and Golden Holdings Neto Ltd., in which Ilan Ben-Ishai, a director of the
Company, holds shares, have been working towards establishing an Operational Innovation Center focuses on the medical cannabis
industry, CBD, hemp, botanical, food supplements and cosmetics products. Our Board approved Citrine Global Israel to proceed with
preparations for entering into an agreement to incorporate a new company, named Cannovation Center Israel Ltd., with Beezz Home
Technologies Ltd.and Golden Holdings Neto Ltd., and to accept limitations on Citrine Global Israel’s rights in the Cannovation
Center if and as mandated under Israeli regulations on the involvement of foreign entities.
On
August 20, 2020, Citrine Global Israel, Beezz Home Technologies Ltd., and Golden Holdings Neto Ltd. incorporated Cannovation Center
Israel Ltd. Citrine Global Israel holds 60% of Cannovation Center Israel Ltd.’s shares, while each of Beezz Home Technologies
Ltd.and Golden Holdings Neto Ltd. holds 20% of its shares.
On
December 30, 2020, the Ministry of the Economy of the Israeli government approved the grant of 10,000 square meters of industrial
land in the Yeruham Biopharma Park to Cannovation Center Israel for building the Cannovation Center, that will include factories,
laboratories, logistics and a distribution center for the medical cannabis, CBD, hemp and botanicals industries.
On
November 22, 2020, certain of the Company’s stockholders representing more than 50% of the Company’s outstanding share
capital (the “Majority Consenting Stockholders”) approved an amendment to the Company’s Certificate of Incorporation
(the “Reverse Stock Split Certificate of Amendment”) in order to effect a reverse stock split of the Company’s
common stock pursuant to a range of between 40-to-1 and 100-to-1 (the “Reverse Stock Split”). Pursuant to the Reverse
Stock Split, each forty or one hundred shares of common stock, as shall be determined by the Board at a later time, will be automatically
converted, without any further action by the stockholders, into one share of common stock. No fractional shares of common stock
will be issued as the result of the Reverse Stock Split. Instead, each stockholder of the Company will be entitled to receive
one share of common stock in lieu of the fractional share that would have resulted from the Reverse Stock Split. In addition,
the Majority Consenting Stockholders also approved the elimination of the Company’s entire authorized class of fifty million
(50,000,000) undesignated preferred stock, thereby reducing the total number of shares of capital stock that the Company may issue
from one billion five hundred fifty-thousand (1,550,000,000) shares to one billion five hundred thousand (1,500,000,000) shares,
all of which are designated as common stock (the “Certificate of Elimination”). The Certificate of Elimination will
be effective upon the filing with the Secretary of the State of Delaware, which was not completed as of the date of this annual
report’s filing. The Reverse Stock Split Certificate of Amendment will be effective upon receipt of approval from the Financial
Industry Regulatory Authority (“FINRA”) and the filing with the Secretary of the State of Delaware, which both were
not completed as of the date of the filing of this annual report.
As
of March 31, 2021, the Company has one wholly-owned subsidiary, Citrine Global Israel, a company incorporated in Israel with registration
number 516201159, which holds 60% of the share capital of Cannovation Center Israel Ltd., a company incorporated in Israel with
registration number 516241270.
*See
above detailed description of the Share Purchase Agreements with Intelicanna and Nanomedic.
**
See above detailed description about Novomic deal.
Our
registered office address in the State of Delaware is c/o Business Filings Incorporated, 108 West 13th St., City of
Wilmington, County of Newcastle, Delaware 19801, and the address of our primary executive office is 2 Jabotinsky St., Atrium Tower,
Ramat Gan, Tel Aviv District, Israel. Our website address is www.citrine-global.com.
To
better align our name with our new business, we changed the name of the Company to Citrine Global, Corp. and the ticker symbol
to “CTGL.” These changes became effective on August 26, 2020. Our common stock is traded in the United States on the
OTCQB market under the ticker symbol “CTGL.We have applied to list our common stock on the Nasdaq Capital Market. No assurance
can be given that our application will be approved or that a trading market will develop.
Description
of Business
Our
business activity is comprised of developing Israeli technologies and solutions and bringing them to global markets. We believe
in the health, wellness, food-tech, botanicals, and medical cannabis industries that demonstrate high growth potential and focus
on these markets.
Our
headquarters, directors, and executive officers are all based in Israel, where we operate via our wholly-owned subsidiary, Citrine
Global Israel.
We
have developed a unique Operational Innovation Centers platform that creates eco-systems for the health, wellness, botanicals,
and medical cannabis industries. Our first Operational Innovation Center will be the Cannovation Center in Israel, which will
focus on Israeli health, wellness, botanicals, and medical cannabis technologies and is supported in part by Israeli government
grants and benefits.
We
have an experienced team and a network of partners that include leading experts with a proven track record in technology, high-tech,
biotech, investment, entrepreneurship, real estate, finance, and strategic business development in Israel and worldwide. We plan
to operate worldwide through domestic subsidiaries, local teams, partners, and industry experts in each area.
Our
vision is to become a global leader in developing Israeli technologies and solutions that improve
people’s
health and quality of life worldwide.
We
created a 5 element approach of multi-strategy solutions to realize our vision.
The
1st Element: Focus on the Israeli Technology Market
Israeli
headquarters, top executives and partners
Our
headquarters, top executives and partners are based in Israel, where we operate our 100%-owned-subsidiary, Citrine Global Israel.
Our team and partners have a proven track record and expertise in technology, high-tech, biotech, investment, entrepreneurship,
real-estate, finance, and strategic business development. We have been operating for many years in the Israeli market and are
experienced in creating supportive technology eco-systems having an extensive network of relationships with top scientists, researchers,
and industry leaders.
Cannovation
Center Israel Supported in part by the Israeli Government
The
Israeli government promotes and provides grants to support various technology fields, among them: healthcare, biotech, botanicals,
food tech and the medical cannabis industries. The Israeli Government also promotes Multinational Corporations’ R&D
centers and a multitude of joint programs and incubators in cooperation with academic institutes and universities. Cannovation
Center Israel Ltd. will build our first innovation and operation center focused on health, wellness, botanicals, and medical cannabis
industries supported in part by the Israeli government. Cannovation Center Israel Ltd. submitted a detailed plan for building
and operating the Cannovation Center Israel. Following a lengthy examination process, it was awarded grants by the Israeli Economic
and Industry Ministry in December 2020.
Yeruham
is considered a national priority area for investments by the Israeli government. The mayor of Yeruham is leading an initiative
to make Yeruham into a Medical Cannabis capital on a global scale. Government support includes allocation of land by auction at
a subsidy, building permits, and an “Approved Factory” status entailing subsidies and benefits, reduced long term
lease payments for the establishment and expansion of factories, reduced corporate tax.
Israel,
dubbed “the Startup Nation”
Israel,
dubbed the Startup Nation, is uniquely positioned to be a leading source of technology innovation for global markets. Israel is
considered a leader in many areas in the high tech and biotech industries and has a vast and innovative life sciences sector and
a cutting-edge medical technology industry. The Israeli technology sector is backed by the Israeli Government, which views technology
and innovation as important growth engines of the Israeli economy.
Positioned
at the forefront of global innovation, Israel is widely regarded as a leader in developing unique technologies that offer solutions
to challenging issues across the world. The presence of multinational corporations in Israel demonstrates the importance of Israeli
innovation worldwide. Israel has been considered a global innovation powerhouse for decades with strong scientific research and
R&D capabilities.
Israeli
companies’ exits demonstrate consistent growth in the past decade, with 1,210 deals totaling $111.29 billion. Israel has
a local presence and innovation centers of the world’s leading multinational companies: Microsoft, Motorola, Google, Apple
(with three R&D centers), Facebook, Berkshire-Hathaway, Intel, HP, Siemens, GE, IBM, Philips, Lucent, AOL, Cisco, Applied
Materials, IBM, J&J, EMC, and Toshiba, Tata, Kodak, Citi bank, and more.
Israel
has an advantage in the Life Sciences industry with growth in the number of companies developing technologies for the health and
medical cannabis industries. There are currently hundreds of companies researching medical pharma-grade cannabinoid drugs for
treating diseases, such as cancer, epilepsy, autism, as well as companies developing solutions for using big data and artificial
intelligence (AI) in healthcare, digital health solutions, food tech engineering, and supplements, agritech, and more.
Experts
involved in Israel’s booming cannabis industry estimate that Israel has the potential to be a global cannabis hub thanks
to a critical mass of scientists and clinicians familiar with and open to medical uses of cannabis, strong biotech industry, and
researchers in leading medical institutes and universities and a positive government approach to the medical cannabis industry.
The world’s major companies have already begun to express interest in Israeli research in this field.
The
2nd element: caNnovation center israel - Operational Innovation Center
We
have developed a unique Operational Innovation Centers platform to promote innovation, operational scale-up, and business growth.
Our first Operational Innovation Center will be built in Israel by Cannovation Center Israel Ltd. It will focus on building an
ecosystem for Israeli health, wellness, botanicals, and medical cannabis industries.
The
innovation and operation center will include laboratories for botanical and cannabis research, plant genetics, pharmacological
research, product development and facilities for preclinical and clinical trials, certified factories for cannabis, health and
wellness products, storage, packaging, distribution, and consultancy services for strategy and business development.
External
and Internal Views of the Plans of Cannovation Center Israel – all images rights reserved to the company. All images
are for illustration purposes only and do not bind the company.
Cannovation
Center Israel, an Eco-System for Health, Wellness, Botanicals and Medical Cannabis Innovation on a Global Scale
We
believe in collaborations and synergies to promote innovation. Cannovation Center Israel was designed and will be built to create
an eco-system that will attract partners, market leaders, companies and technologies in the fields of health, wellness, botanicals,
and medical cannabis industries from Israel and around the world to become a global center in these fields.
Cannovation
Center Israel Divisions and Internal Design
Cannovation
Center Israel is designed to be a knowledge hub for cannabis and botanical innovation and a center of attraction for visitors
and world-renowned experts from all around the world. Cannovation Center Israel includes 10,000 square meters of land, out of
which 5,000 are built factories, laboratories, logistics, distribution, offices, visitor center, training center and more.
The
Architect chosen to design Cannovation Center Israel is Mr. Avner Sher, one of Israel’s most respected architects who is
also a famous international artist. When designing Cannovation Center Israel, we wanted to create a spectacular unique design.
The roof was shaped like a leaf being the recognized brand symbol of Cannovation Center buildings in Israel & worldwide. Cannovation
Center Israel will be built in accordance with ecological green principles of saving energy, including solar panels, which are
specifically adapted to the environment and weather conditions in Yeruham, Israel. We own the property, which we believe will
only grow in value.
Cannovation
Center Israel is divided into 3 main areas:
|
●
|
Medical
cannabis area that is dedicated and adapted to the medical cannabis industry requirements
and regulations and includes production, research and development, testing, distribution,
and other facilities for medical cannabis products and solutions.
|
|
●
|
Botanical
products and solutions area that is dedicated and adapted to the botanical industry’s
requirements and regulations and includes production, research and development, testing,
distribution, and other facilities for food supplements, cosmetics, beverages and more.
|
|
●
|
Business
and offices area , including meeting rooms, consultant’s offices, training
center, visitor center, museum, and coffee shops.
|
Cannovation
Center Israel is designed by professionals that specialize in the construction of cannabis, pharma and botanical factories and
includes clean rooms and certified factories and laboratories that are compliant with all the required regulations and certifications
of the State of Israel and the countries to which export is planned, such as within the EU.
Cannovation
Center Israel Manufacturing Plants:
I.
Manufacturing Plant for cannabis inflorescence: IMC-GMP licensed medical cannabis automated production lines for packaging
inflorescences of different types and origins.
II.
Manufacturing Plant for cannabis oil: IMC-GMP licensed medical cannabis automated production lines equipped for extraction,
distillation filling & bottling of Cannabis oil.
III.
Manufacturing Plant for botanical products: GMP licensed to produce food supplements & botanical formulas composed
of plant extracts, minerals, medicinal mushrooms, and other components.
IV.
Boutique cosmetics Manufacturing Plant: production lines equipped and
GMP licensed to produce selected quantities of natural cosmetic products, including extracts from the cannabis plant, hemp and
other botanical components.
V.
Boutique beverages Manufacturing Plant: production lines equipped and
GMP licensed to produce selected quantities of beverages, including water-soluble extracts from the cannabis plant, hemp, and
other botanical components.
VI.
Boutique pharmaceutical Manufacturing Plant: production lines equipped
and GMP licensed to produce selected quantities of pharma grade medications for pilot and small-scale production of dry granulated
and liquid production.
Cannovation
Center Israel Laboratories Area:
I.
Quality control lab: equipped laboratory for quality control (QC) of raw materials, in-process products, and finished products.
The laboratory will also provide regulatory testing and professional consultancy services.
II.
Research and development lab: equipped and licensed laboratory for research, product development and testing, including
chemical synthesis and application of analytical and bio-analytical methods; research of raw materials and finished products and
stability tests; examination of cannabis strains with high genetic quality to ensure high quality and high yield; collaborations
with other laboratories and researchers from Israel and worldwide.
III.
Preclinical and clinical trial lab: equipped and licensed clinical and preclinical clinical trials performed at the highest
medical and pharmacological standards in cooperation with physicians and hospitals.
Cannovation
Center Israel Distribution Area:
Licensed
distribution area for local and global distribution of medical cannabis and botanical products, including import and export services
with all needed approvals and licenses required locally and globally.
The
plan is to have import and export to and from Europe, Canada, Japan, Africa, Australia, and any country that will have the relevant
regulatory approvals.
Important
note: the company does not, and will not, undertake any business activities in the U.S. that are illegal under applicable U.S.
federal and state laws or any business activities in any other jurisdiction that are illegal under the laws of such jurisdiction.
Cannovation
Center Israel Logistics & Storage Area
Cannovation
logistics & storage area will include licensed, controlled, and protected warehouses for storing cannabis raw materials, in-process
and finished products and botanical products.
Cannovation
Center Israel Management & Consultants Area
The
Cannovation management area will include:
|
●
|
Consultants’
area; which include :
|
|
○
|
Legal,
regulatory and insurance advisors.
|
|
○
|
Experts
in aggrotech, health, medical cannabis, pharma and more;
|
|
○
|
Business
consultants providing strategic business planning, marketing, international sales, operations
expertise and more;
|
|
●
|
Meeting
rooms at the service of the managing teams, companies, and partners.
|
The
consultancy services range from assistance with strategic business planning to operational execution and financing and cover professional
fields related to health, wellness, botanicals, and medical cannabis industries.
Business
development consulting services to Cannovation Center companies and partners:
|
●
|
Assisting
in building strategic analysis, business modeling, sales strategies, brand positioning,
process development and milestones for global success;
|
|
●
|
Optimizing
product strategies;
|
|
●
|
Assisting
in further sales ramp-up;
|
|
●
|
Assisting
in building strategy and milestones for global success;
|
|
●
|
Supporting
with financial valuations, preliminary negotiations for investment, mergers, IPOs and
more;
|
|
●
|
Networking
to support access to global markets;
|
|
●
|
Improving
operations; and
|
|
●
|
Providing
real-estate and asset-management solutions for local and global expansion.
|
Cannovation
Center Israel International Visitor Complex
The
Cannovation Center Israel International Visitor Complex will be dedicated to promoting awareness and publicity for the center
and will include:
|
●
|
A
Visitor Center: for hosting groups of visitors, students, tourists. The visitor center
will include audio visual presentations of the Cannovation Center, its purpose, mission,
and updates.
|
|
●
|
A
Training Center: about cannabis and botanicals to novices as well as experts, students,
researchers, and more.
|
|
●
|
Coffee
Shops and a Museum.
|
Government
Support:
In
December 2020, the Israeli Economic and Industry Ministry approved support for establishing the Cannovation Center Israel, the
first of its kind, located in Yeruham. The cannabis production facility will be built on an area of 10,000 square meters and will
include an approved investment status factory for the production of cannabis products, R&D laboratories, quality assurance,
a plant for the production of nutritional supplements and cosmetics combined with CBD and hemp, and storage, packaging, and distribution
centers.
Cannovation
Center Israel Real-Estate:
The
Cannovation Center Israel is a property that includes 10,000 sqm, out of which 5,000 sqm are built and include factories, laboratories,
offices, etc. It is owned, built, and managed by Cannovation Center Israel Ltd. Cannovation Center Real Estate Division includes
a management company responsible for providing services for the industrial and manufacturing areas, labs, warehouses, offices,
commercial areas, and more. The services include rental, sale, maintenance, infrastructure, facilities, regulatory compliance,
licensing, and surveillance 24/7 services as required in the botanical and cannabis industries.
Business
Model of Cannovation Center Israel:
Cannovation
Center Israel’s vision is to bring together the entire cannabis and botanical industry from Israel and worldwide and create
a supportive eco-system and a leading operation and research center that promotes scientific research and commercial collaborations
between technologies, partners, companies, and academics institutions.
As
a global center for botanical and cannabis innovation, it has laboratories and R&D at the highest medical and pharmaceutical
standards for research on plant genetics and pharmacological effects, cultivation methods, preclinical & clinical trials,
and health and wellness product development.
We
intend to do significant research and development activities and to develop a unique line of products under the Cannovation brand in
the fields of botanicals, medical cannabis, cannabinoid-based pharmaceutical products, cosmetics and beverages, and more.
Each
division of the Israel Cannovation Center will be managed together with selected partners who are experts in their field.
The
selection of partners is completed after successful due diligence, covering legal, financial, technological, business, and intellectual
property aspects. We are currently in advanced processes with several companies and technologies to take part in Cannovation Center
Israel, the details of which will be disclosed when finalized. Expected revenues from Cannovation Center Israel include ownership
in center companies, rental of work and research spaces, management fees, consulting fees, and more.
The
3rd element: focus on the health, wellness, botanicals, and medical cannabis industries.
HEALTH
& WELLNESS INDUSTRY OVERVIEW AND POTENTIAL
We
believe in the health, wellness, botanicals, and medical cannabis industries which demonstrate high growth potential, and we are
primarily focused on these industries.
The
health and wellness industries are growing consistently creating addressable target markets of trillions of dollars:
|
●
|
Botanical ingredients
market is expected to reach $225 billion in 2027
|
|
|
|
|
●
|
CBD products market
is expected to reach $89 billion in 2026, an annual growth of 52.7%
|
|
|
|
|
●
|
Natural cosmetics
market is expected to reach $54 billion in 2027
|
|
|
|
|
●
|
Medical cannabis
market is expected to reach $104 billion in 2024
|
|
|
|
|
●
|
Digital health and
Biotech are expected to reach $1,028 billion by 2027
|
The
awareness of health and wellness is growing, with an emphasis on preventive medicine and wellbeing solutions and the use of botanicals,
food supplements and edibles, and cosmetics infused with CBD and hemp (non-addictive cannabis components), which are beneficial
for a variety of health problems, is expanding. In addition, changing consumer behavior and disruptive technologies are enabling
the rapid consumerization and personalization of healthcare. There is an evolution from prescription drugs, doctor-administered
diagnostics, and medical treatments to a new marketplace centered around people’s well-being as individuals, not patients,
enabling and improving ‘quality of life’ in ways that can be seamlessly integrated into their daily routines.
The
COVID-19 pandemic has brought attention and budgets to developing solutions to answer market needs for treatment, prevention,
and everyday life solutions in this new situation. The fields of health and wellness have been the focus of global attention and
even more so since the outbreak of the COVID-19 pandemic.
For
these reasons, we decided to focus on health and wellness and particularly on the growing industries of botanicals, medical cannabis,
and CBD/hemp industries, and we intend to do so in accordance with current rules and regulations applicable in every country.
Botanicals
Industry Overview and Potential
The
global botanical ingredients market size was estimated at $131.5 billion in 2019 and is expected to grow at a compound annual
growth rate (CAGR) of 7.0% from 2020 to 2027 and reach $225 billion in 2027. The global botanical ingredients market growth is
driven by growing awareness towards health and safety in the pharmaceutical, food and beverage industries. Authentic consumption
has become a significant food and beverage trend, and people seek non-artificial and natural ingredients. Products such as ginseng,
echinacea, Ginkgo Biloba, and garlic are considered as the major selling botanical products and are considered natural remedies
for inflammation and infections.
The
growth of the market for botanical ingredients is further driven by the ongoing pandemic COVID-19. People looking for strengthening
the natural immune system also with vitamins and minerals and moving towards natural colorant-based plant juice products since
they provide better and long-lasting protection from virus and bacteria. In addition, botanicals are widely used by people who
suffer from diseases related to weight management, clinical nutrition, digestive health (gut health problems), immunity, diabetes,
and cardio fitness, either as treatment or prevention.
The
cosmetic and personal care segment is also on the rise with companies constantly discovering novel herbal ingredients as people
are inclining more towards natural ingredients-based products.
The
main applications of botanicals are in the following market segments: Food & Beverages, Dietary Supplements, Cosmetic &
Personal Care, and Pharmaceuticals.
Biotech/Healthcare
Industry Overview and Potential – Specific Areas
BIOTECH:
The
global Biotechnology Market is expected to reach USD 833.34 Billion by 2027 and includes areas such as Nano-biotechnology, DNA
Sequencing, Fermentation, PCR Technology, Cell-based Assay, Chromatography, Tissue engineering and Regeneration, and others. The
solutions are applied in Agriculture, Industrial Processing, Pharmacy, Bioinformatics, Environment, Bio services and more.
DIGITAL
HEALTH:
The
emergence and growth of healthcare IT and remote patient monitoring services, coupled with the increasing penetration of smart
devices and mobile platforms, apart from favorable government policies, has spurred the growth of this market and it is attracting
a lot of investments. Market size would touch $379 billion by 2024, growing at an astounding CAGR of more than 25.9%.
BIG
DATA FOR THE HEALTHCARE INDUSTRY
The
global big data analytics in the healthcare market is predicted to reach $148.34 billion by 2028, up from $22.43 billion in 2019.
Amid the uncertainty of the Covid-19 pandemic, 166 healthcare AI startups globally raised over $2.1 billion in the first half
of 2020.
Healthcare
and specifically the biopharma industry face significant challenges such as high R&D costs, harsh regulatory compliance demands,
increase in the cost needed to bring products to market, the threat of patent expirations, and more. A significant change is needed
to the current pharma R&D model to increase productivity and profitability. The technology that can bring forward this change
is big data analysis based on artificial intelligence (“AI”) and machine learning (“ML”), which can introduce
greater efficiency, productivity, economy, and quality.
Most
big pharma companies (such as Novartis, Roche, Pfizer, Merck, AstraZeneca, GlaxoSmithKline, Sanofi, AbbVie, Bristol-Myers Squibb
and Johnson & Johnson, etc.) are already starting to take advantage of AI innovation.
Big
Data-based AI/ML technologies can be implemented in all stages of drug development, from early discovery to commercialization,
as they are involved in collecting and using very large datasets.
Healthcare
big data is too vast and complex to be available and meaningful by traditional means. The development of AI algorithms, incorporating
ML and deep learning, has enabled the automatic and efficient collection, management, and analysis of big biomedical data in all
its forms, including medical records, DNA and RNA sequencing, and medical images. Health maintenance organizations, health insurers
and pharmaceutical companies are all looking for tools based on artificial intelligence and big data, in order to gain a significant
advantage over their competitors in the market by improving their products, services, and results. Artificial intelligence systems
are beginning to be assimilated as tools in clinical and research environments. Today, only 4% of the clinical and biological
data is being utilized.
Medical
Cannabis and CBD Industry Overview and Potential
Global
trends explaining exponential growth of cannabis market and recent emergence of pharma-level certified cannabis drugs:
The
Impact of COVID-19. The COVID-19 pandemic has had a profound impact on the global economy. Countries seeking to recover financially
in the aftermath of the pandemic will seek new sources of taxable revenue, which medical and adult-use cannabis could offer. CBD
consumption increased because many consumers with increased awareness of their health sought to treat COVID-19 induced anxieties.
The
Impact of The New US administration. The US presidential election in November 2020 was a momentous event for the cannabis
industry not only did all cannabis legalization ballots pass in all five states (Mississippi, South Dakota, New Jersey, Arizona,
and Montana), but also democratic leaders Joe Biden and Senator Kamala Harris were elected into the White House. Both the president
and vice president-elect have indicated an interest in tackling federal cannabis reform in the country during their term in office.
We have taken a conservative approach regarding the US. We decided that since the legal landscape for medical cannabis is not
finalized and varies from state to state, we will not operate in the US in the cannabis industry. We plan to establish innovation
centers in the US in industries such as health, wellness, botanicals, food-tech, and other areas that we are exploring with local
partners.
EU
Trade implications. Following the European Court of Justice verdict on CBD, we’ve already seen the European Commission
take action to realign its position on the substance. This has resulted in the EU recommencing the frozen CBD Novel Food marketing
authorization applications.
The
Global Medical Cannabis Export Arms Race. The race to supply the growing demand of the European medical cannabis market is
on. Once dominated by Canadian and Dutch exports, in the past year or so, we have seen Portugal become a major supplier and smaller
export successes from the likes of Spain, Australia, and Israel.
Pharma
Approved CBD. The European dronabinol industry (a drug approved by the FDA as safe and effective for HIV/AIDS-induced anorexia
and chemotherapy-induced nausea and vomiting) attracts major players in global cannabis as Breath of Life Pharma, Cantourage,
Tilray, and Echo Pharmaceuticals. In the same year, the UK’s Food Standards Agency classified CBD as a novel food granting
UK CBD companies a head start compared to their European competitors. Despite the considerable uncertainties which will arise
from the new trade relations with Europe; the UK also has an opportunity to develop their line on the regulation of cannabis and
CBD. Latin American cannabis and hemp markets are going to be in the spotlight in 2021. While Brazil is expecting Congress to
vote on law PL399 in early 2021, which, if approved, would represent a new major cultivation player, Mexico voted for the law
and potentially is to become the largest adult-use market this decade.
MEDCIAL
CANNABIS:
Medical
cannabis solutions have been approved for medical use in many countries. They have been shown to benefit more than 40 serious
medical conditions, including cancer, multiple sclerosis, Parkinson, epilepsy, chronic pain, post-trauma, Chronic digestive problems,
Crohn’s Disease, anxiety and sleep disorders, Concentration and memory problems, Tourette Syndrome, and more.
The
global legal cannabis market is forecast to be worth up to $103.9 billion by the year 2024, driven, in the most part, by the burgeoning
international medicinal cannabis market, worth a potential $62.7 billion by the same year.
Propelled
onwards by the increasing number of countries considering cannabis reform and the penetration of cannabis products into new consumer
product markets, the first-of-its-kind global report expects the worldwide cannabis market to reach new heights by 2024.
PHARMA
GRADE CANNABIS DRUGS
Earlier
this year, Jazz Pharmaceuticals purchased GW Pharmaceuticals in a $7.2 billion cash-and-stock deal. The target of the deal was
to promote its neuroscience business by adding cannabis-based epilepsy treatment in 2020 third-quarter sales, contributing a sizeable
chunk to the overall sales of about $600 million. The acquisition will allow Jazz to expand its offerings beyond sleep disorders
and cancer by adding GW Pharma’s Epidiolex. The cannabis-based drug was approved in the United States in June 2018.
CANNABIS
CAPITAL MARKET
S&P
Global reported that U.S. and Canadian cannabis and cannabis-related companies completed 124 deals in 2020, worth a combined $615.1
million. In the past few months, some big deals have taken place in the cannabis industry. In December 2020, news of a near-$4
billion merger, including Canadian cannabis giants Aphria (NASDAQ:APHA) and Tilray (NASDAQ:TLRY), will create the largest cannabis
company in the world in terms of revenue. In February 2021, Jazz Pharmaceuticals (NASDAQ:JAZZ) also announced it would be acquiring
GW Pharmaceuticals (NASDAQ:GWPH). and with more states in the U.S. legalizing cannabis and slightly more friendly U.S.presidential
administration, there is currently a lot of excitement in the industry.
MARKET
DRIVERS AND GROWTH ENGINES FOR CANNABIS EXPONENTIAL GROWTH
|
●
|
Cannabis is moving
mainstream;
|
|
|
|
|
●
|
Advanced regulation
in many countries;
|
|
|
|
|
●
|
Growing positive public
opinion;
|
|
|
|
|
●
|
Big players are entering
the field;
|
|
|
|
|
●
|
Medical research proving
efficacy of cannabis;
|
|
|
|
|
●
|
Technological development;
and
|
|
|
|
|
●
|
Positive attitudes
of medical experts.
|
THE
CBD INDUSTRY
The
CBD market size is set to grow at around 52.7% CAGR between 2020 and 2026. CBD is a compound found in the hemp plant utilized
due to its therapeutic properties in humans. The growing trend among individuals to treat a variety of ailments such as anxiety,
nausea, stress, chronic pain, neurological conditions, and seizures is booming. This is due to the antibiotic and analgesic effects
and properties present in CBD.
Market
and industry data were taken from third-party sources, industry reports and publications, websites, and other publicly available
information. There can be no assurance as to the accuracy or completeness thereof. Actual outcomes may vary materially from those
forecasts. Market and economic data are subject to variations and cannot be verified due to limits on the availability and reliability
of data inputs, the data gathering process and other limitations and uncertainties the are part of the market research process.
The
4th element: acquiring technologies and developing scientific, research, and commercial collaborations to LEVERAGE COMPANY VALUE
AND intellectual property (“IP”).
We
plan to leverage our IP and value by acquiring technologies and companies and building commercial, scientific, and research collaborations
using various business models. This will include acquiring technologies and companies in various business models, promoting scientific,
research, and commercial collaborations in our target markets, creating synergies between technologies, partners, companies, and
academic institutions, and providing consulting services for building winning strategies.
We
intend to do significant research and development activities to bring new products and new technologies to market. We also plan to develop
a unique line of products and cooperation initiatives for joint innovation, research, development, and production under the Cannovation
brand in the fields of botanicals, medical cannabis, cannabinoid-based pharmaceutical products, cosmetics, and beverages.
We
are already in process with several technology companies in the industry for joint research and development projects in the fields of
botanicals, medical cannabis, cannabinoid-based pharmaceutical products, big data, AI, machine learning solutions, and more.
The
5th element: creating a global network of offices, domestic subsidiaries, and Operational Innovation Centers worldwide.
Overview
Our
global growth strategy is to create a network that operates worldwide through subsidiaries, local teams, partners, and Cannovation
Operational Innovation Centers. We have developed a unique Operational Innovation Centers platform for building eco-systems for
the health, wellness, botanicals & medical cannabis industries to promote innovation, operational scale-up, and business growth.
Our
first innovation and operation center is being built by Cannovation Center Israel Ltd. (our 60%-owned-subsidiary), for the Israeli
health, wellness, botanicals, and medical cannabis industries and is backed by the Israeli government grants and benefits. Cannovation
center Israel includes laboratories for botanicals & cannabis research, pharmacological research, product development, preclinical
& clinical trials, certified factories for cannabis, health and wellness products, storage, packaging, distribution, import,
export, consultancy services, strategy & business development, real estate, asset management solutions, and more.
We
plan to build Cannovation Centers in other countries worldwide, focusing on Europe’s first stage and several countries that
we are already examining. We intend to prioritize countries with local government support and locally trained staff with know-how
in the medical cannabis industry.
We
have taken a conservative approach regarding the US. We decided that since the legal landscape for medical cannabis is not finalized
and varies from state to state, we will not operate in the US in the cannabis industry. We plan to establish innovation centers
in the US in industries such as health, wellness, botanicals, food tech, and other areas that we are exploring with local partners.
The
Need for Cannovation Operational Innovation Center:
|
●
|
The
health, wellness, botanicals, and medical cannabis industries are highly regulated industries
that require professional expertise in various fields: medicine, biotech, agritech, and
more.
|
|
●
|
Specifically,
the cannabis industry is regulated in every part of the supply chain: growing, production,
commercialization, and more. The certifications change from time to time and vary according
to the territory.
|
|
●
|
Innovative
companies in the health, wellness, botanicals, and medical cannabis industries encounter
challenges in:
|
|
●
|
Obtaining
permits for the establishment of a factory,
|
|
●
|
Closing
financing rounds,
|
|
●
|
Supporting
costly research and development, laboratories for testing and product development, and
more.
|
|
●
|
Owning
real estate properties, infrastructure, and machinery suitable for product development
and commercialization in the health, wellness, botanicals, and medical cannabis industries
|
|
●
|
Meeting
industry-required standards such as security services for 24/7 surveillance.
|
The
Solution:
Cannovation
Operational Innovation Centers will create eco-systems that are win-win environments for entrepreneurs, startups, growth-stage
companies, research and academia institutes, laboratories, regulatory service providers, and more. It is a complete solution covering
research and development, production, operation, distribution, as well as business strategy and professional consulting.
Utilizing
our experience, we understand the global need for supplying an ecosystem tailored to the needs of the health, wellness, botanicals,
and medical cannabis industries.
Our
Vision: Global Coverage of Innovation Centers
As
promoting innovation is our strategic focal point, we envision having a global network of Operational Innovation Centers, where
each center in every territory provides a comprehensive solution tailored to the needs of the industry and the regulation in the
territory. Each innovation center will focus on specific growing technology industries and tailor products and services in accordance
with the needs of the industry and territory. This business model will allow companies to manufacture and sell products all over
the world without import and export restrictions. Citrine Global Operational Innovation Centers will be built with local partners
and local government support.
Advisory
Board
We
maintain an Advisory Board consisting of internationally recognized scientists who advise us on our strategy’s scientific
and business aspects. The Advisory Board meets periodically to review specific projects and to assess the value of new technologies
and developments to us. In addition, individual members of the Advisory Board meet with us periodically to provide advice in their
particular areas of expertise. The Advisory Board and management consist of the following members, information concerning who
is set forth below:
Edan
Moshe Katz - CEO of Neto Financial Planning, Owner of Golden Holdings Neto Ltd., and chairman of the board of directors
of WealthStone Holdings Group. As Neto Financial Planning CEO, he led the company to consistent growth with thousands of loyal
customers, providing financial advisory services in respect of products with a market worth of over $4.5 billion. Edan has over
20 years of managerial and financial experience, and he is a licensed pension insurance consultant and a Certified Financial Planner
in holistic financial planning.
David
Kretzmer - an experienced international commercial lawyer and litigator with the ability to advise clients as to multi-jurisdictional,
multi-language and multi-cultural transactions and disputes. David has more than 35 years of experience in international litigation
and transactions and has concentrated on commercial law, property development and syndication, real estate law, corporate law,
contracts, international trade, securities brokerage, investment banking, corporate restructuring, and corporate development.
He also has extensive experience in structuring trusts for high net worth families and individuals and establishing and managing
development stage companies. David began his legal career with Edward Nathan Friedland Mansel and Lewis’s premier law firm
in Johannesburg, South Africa. He has since had a wide-ranging legal career in New York, Israel, and South Africa, with extensive
legal and corporate experience in Europe and Great Britain. David has represented foreign investors in complex investment transactions
and various forms of international dispute resolution. David also has served as arbitrator or mediator in such disputes. From
1995 through 2000, David served as a consultant to a New York-based brokerage firm structuring private placements and initial
public offerings in the technology and life science industry, involving Israeli, American, European, and South African companies.
From 2012 through 2014, David was a United Nations representative of the NGO, the International Association of Jewish Lawyers
and Jurists, in New York and Geneva. David was licensed to practice law in New York in 2004, he was admitted to practice as an
Advocate in Israel in 1981 and has been licensed to practice in South Africa since 1977. He has practiced law in New York, South
Africa, and Israel and was most recently a senior partner in the law firm of Kretzmer and Associates PLLC in New York and the
senior partner in the law firm Kretzmer and Associates in Tel Aviv.
Dr.
Oded Sagee, Ph.D. founded and managed AquaAgro Lab Ltd., an investment subsidiary of the AquaAgro Fund that invested in
agro-high-tech companies in the clean-tech industry. Prior to that, Dr. Sagee held management, sales, and R&D positions at
Gaon Agro Industries Ltd, Phytech Ltd, and AminoLab Ltd. Dr. Sagee has in-depth knowledge in the fields of agriculture, biotechnology,
life sciences, chemistry, and pharmaceuticals. He completed his Ph.D. in Plant Physiology at the Hebrew University of Jerusalem
and served as a senior researcher and head of the department at the Agricultural Research Organization, Volcani Center, Israel.
Dr. Sagee has published several papers, has extensive experience, and a proven track record in finance, venture capital, international
business, consulting, and management.
Gil
Shapira - an engineer with over 30 years of experience in planning, managing, and implementing complex engineering projects
worldwide. Mr. Shapira is founder and CEO of a multidisciplinary design, construction and consultancy company specializing in
the regulatory and construction needs of pharmaceutical, biotechnology and life sciences technology companies. Mr. Shapira’s
company is one of the first companies to be involved in the design and establishment of GMP standard-compliant cannabis facilities.
He is an expert in the design and installation of medical cannabis facilities in Israel worldwide. The company has built thousands
of square meters of production facilities, clean rooms, laboratories, and production equipment, all certified by the relevant
authorities, such as the FDA, European Medicines Agency, and the Israeli Ministry of Health.
Ron
Avishur - attorney at law, Member of the Israeli Bar since 2005, L.L.B TLV University, L.L.M TLV University, Legal and
strategic counseling for real estate and private equity funds, as well as in the cannabis industry.
Ronit
Pasternak, M. Sc., owns over 20 years of experience in senior marketing management positions in start-ups and high-tech
companies. Ronit brings to the table her expertise in international strategy, marketing, investor & public relations, branding,
digital marketing, and market research. Previously, Ronit worked as a Human Factors’ Specialist designing User Interface
for input devices and software applications for an avionics information system, including writing design requirements for FAA
regulation. Ronit has an M.Sc. in Industrial Engineering and Management from the Technion - Israel Institute of Technology and
B.A. cum laude in Psychology and English Linguistics and Literature from the Hebrew University of Jerusalem.
Primary
Shareholders:
Citrine
S A L investment & Holdings ltd & Citrine SAL Biotech & High tech funds - an Israeli privet investment funds various
fields of technology, high-tech, and biotech.
Citrine
S A L Biotech fuds - specialize in healthcare, wellness solutions, digital health, medical devices, food tech, botanical nutraceuticals,
medical cannabis, and more,
Citrine
S A L High-Tech funds - specialize in high-tech, cyber, IoT, hardware and software.
WealthStone
Holdings Group is a long-standing investment body with extensive financial knowledge and experience. WealthStone specializes
in alternative investments, real estate, technology, and hedge funds.
Neto
Financial Planning has been operating for over 27 years and is one of the largest companies in the Israeli private and business
financial planning and insurance industry. Neto has thousands of loyal customers, which it has been accompanying for many years,
providing financial advisory services in respect of products with a market worth of over $4.5 billion.
Revenues
We
plan on generating revenues from technology acquisitions and collaborations, professional and business consulting fees, brokering
fees, leasing, and management services for real-estate assets we own, taking advantage of favorable market conditions to sell
real-estate assets, company value appreciation, interest income, investments, and more.
Competition
The
technological innovation and business strategy consulting landscape is very crowded and competitive. Many models for promoting
innovation exist worldwide, from technology incubators and accelerators to joint ventures between industries, governments, and
universities, to REITs and more. Our business model is unique in two aspects: (i) it provides a complete solution covering various
fields, from research, development, to production, operations, strategy, and business consulting, and (ii) most solutions for
promoting innovation address the initial stages of seed companies and startups. Our solutions cover these stages as well but are
primarily focused on growth-stage industries and global expansion needs relating to sales and operations.
Among
the competition, we can list other more established consulting firms, investment bankers, brokers, real-estate funds, investment
firms, online lending sites, tech incubators, and more. Our business competes primarily in Israel, Europe, and North America.
We mainly target clients with whom we have existing relationships, either directly or via our partners. We believe that our shareholders,
directors, and officers’ experience and contacts and the fact that we offer a wide range of services under one roof will
contribute to our competitiveness. Specifically relating to Cannovation Center in Israel, the medical cannabis industry is, and
is expected to remain, very competitive.
The
medical cannabis competition is primarily on a regional basis and could vary significantly pending on location and time, as regulations
constantly change. The medical cannabis market is in a high growth phase. We are working to achieve a prominent position by taking
advantage of the Israeli medical cannabis recognition and technological lead and our years of experience in the field.
Regulatory
Environment
We
need to obtain various regulatory approvals and licenses for the medical cannabis activities, botanicals, clinical and preclinical
trials, real-estate assets we acquire and other businesses that require certain approvals and licenses for the premises in which
they operate (such as laboratories).
According
to current Israeli law regarding medical cannabis, IMC-GMP-certified manufacturers can sell to pharmacies or export.
The
various components of the medical cannabis supply chain in Israel are currently obliged to meet Good Practices Procedures for
Israel Medical Cannabis (‘‘IMC’’) as set forth by the Israeli Ministry of Health’s Medical Cannabis
Unit (‘‘MCU’’). These standards are based on international standards and guarantee the high quality of
Israeli medical cannabis products.
|
●
|
IMC-GSP certifies
security practices of all parts of the value chain,
|
|
|
|
|
●
|
IMC-GAP certifies
agricultural practices for growing and cultivation,
|
|
|
|
|
●
|
IMC-GMP certifies
manufacturing processes and production lines,
|
|
|
|
|
●
|
IMC-GCP includes practice
for pharmacies and pharmaceutical companies conducting clinical trials.
|
Employees
We
currently engage 18 employees and service providers (some on a full-time basis, and others on a part-time basis) working in various
fields of management, research and development, product management, marketing and regulatory advice.
We
are subject to Israeli labor laws and regulations with respect to our employees located in Israel. These laws and regulations
principally concern matters such as pensions, paid annual vacation, paid sick days, length of the workday and workweek, minimum
wages, overtime pay, insurance for work-related accidents, severance pay and other conditions of employment. Our employees are
not represented by a labor union. We consider our relationship with our employees to be good. To date, we have not experienced
any work stoppages.
ITEM
1A. RISK FACTORS
You
should consider carefully the risks and uncertainties described below, together with all of the other information in this Annual
Report on Form 10-K. If any of the following risks are realized, our business, financial condition, results of operations and
prospects could be materially and adversely affected. The risks described below are not the only risks facing the Company. Risks
and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our
business, financial condition, results of operations and prospects.
Risks
Associated with Our Business
Our
limited operating history does not afford investors a sufficient history on which to base an investment decision.
We
have a limited operating history. Our operations will be subject to all the risks inherent in the establishment of a developing
enterprise and the uncertainties arising from the absence of a significant operating history. We have not generated positive earnings
and there can be no assurance that we will achieve profitable operations. If our business plan is not successful, and we are not
able to operate profitably, investors may lose some or all of their investment in our company.
Failure
in our information technology systems, including by cybersecurity attacks or other data security incidents, could significantly
disrupt our operations.
Our
operations depend, in part, on the continued performance of our information technology systems. Our information technology systems
are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptions. Failure of our information
technology systems could adversely affect our business, profitability and financial condition. Although we have information technology
security systems, a successful cybersecurity attack or other data security incident could result in the misappropriation and/or
loss of confidential or personal information, create system interruptions, or deploy malicious software that attacks our systems.
It is possible that a cybersecurity attack might not be noticed for some period of time. The occurrence of a cybersecurity attack
or incident could result in business interruptions from the disruption of our information technology systems, or negative publicity
resulting in reputational damage with our shareholders and other stakeholders and/or increased costs to prevent, respond to or
mitigate cybersecurity events. In addition, the unauthorized dissemination of sensitive personal information or proprietary or
confidential information could expose us or other third-parties to regulatory fines or penalties, litigation and potential liability,
or otherwise harm our business.
We
may need to hire industry professionals with experience in the production and sale of our products and proposed products.
At
present, we are a small company. We expect to hire industry professionals with experience in the medical device and beauty industries.
Our future financial performance and our ability to compete effectively will depend, in part, on our ability to manage any future
growth effectively.
Foreign
Expansion Efforts and Operations
The
Company’s expansion into jurisdictions abroad is subject to additional business risks, including new or unexpected risks
including economic instability, changes in laws and regulations, and the effects of competition, as well as operational, regulatory,
compliance and reputational and foreign exchange rate risk. In addition, future global expansion may require up-front expenses,
including those associated with obtaining regulatory approvals, as well as additional ongoing expenses, including those associated
with infrastructure, staff, and regulatory compliance. Failure to support operational expansions could result in operational failures
and regulatory fines or sanctions. There is no guarantee that the Company will be able to realize any of the anticipated benefits
of any transactions related to the Company’s expansion strategy.
The
COVID-19 pandemic, or any other pandemic, epidemic or outbreak of an infectious disease, may materially and adversely affect our
business and operations.
The
outbreak of COVID-19, which originated in Wuhan, China, in late 2019, has since spread across the globe, including the United
States, Israel and many European countries in which we operate. On March 11, 2020, the World Health Organization declared the
outbreak a pandemic. While COVID-19 is still spreading and the final implications of the pandemic are difficult to estimate at
this stage, it is clear that it has affected the lives of a large portion of the global population. At this time, the pandemic
has caused states of emergency to be declared in various countries, travel restrictions imposed globally, quarantines established
in certain jurisdictions and various institutions and companies being closed. We are actively monitoring the pandemic and we are
taking all necessary measures to respond to the situation in cooperation with the various stakeholders.
A
COVID-19 infection outbreak among our workforce could result in a temporary or long-term disruption in our business activities,
including manufacturing and other functions.
Based
on guidelines provided by the Israeli Government, employers (including us) are required to prepare and increase as much as possible
the capacity and arrangement for employees to work remotely. In that regard, and in compliance with all applicable Israeli rules
and guidelines, our offices have remained closed since the middle of March 2020, and all of our employees currently work remotely.
Future
deterioration or prolonged difficulty in economic conditions could have a material adverse impact on our business, financial position,
and liquidity.
Future
deterioration or prolonged difficulty in economic conditions, because of COVID-19 or otherwise, could have a material adverse
impact on our business, financial position and liquidity. For example, it could adversely affect our ability to access the liquidity
that is necessary to fund operations on terms that are acceptable to us or at all, and could reduce our ability to finance future
projects. Financial or other difficulties at our affiliates and partners could negatively affect availability of credit to us
in the future.
The
Company’s bylaws provide for indemnification of its directors and officers and the purchase of directors and officers insurance
at the Company’s expense. This will limit the potential liability of the Company’s directors and officers at a major
cost to the Company and hurt the interests of its stockholders.
The
Company’s bylaws include provisions that fully eliminate the personal liability of the directors and officers of the Company
for monetary damages possible under the laws of the State of Delaware or other applicable law. These provisions eliminate the
liability of directors and officers to the Company and its stockholders for monetary damages arising out of any violation of a
director or officer of his fiduciary duty of due care. Under Delaware law, however, such provisions do not eliminate the personal
liability of a director or officer for (i) breach of the director’s or officer’s duty of loyalty, (ii) acts or omissions
not in good faith or involving intentional misconduct or knowing violation of law, (iii) payment of dividends or repurchases of
stock other than from lawfully available funds, or (iv) any transaction from which the director or officer derived an improper
benefit. These provisions do not affect a director’s and officer’s liabilities under the federal securities laws or
the recovery of damages by third parties.
A
certain group of the Company’s stockholders may exert significant influence over its affairs, including the outcome of matters
requiring stockholder approval.
As
of the date of this Annual Report, a certain group of stockholders, including Ora Elharar Soffer, our CEO and Chairperson of the
Board, directly and through Beezz Home Technologies Ltd and Citrine S A L, and others, collectively own a majority of the issued
and outstanding shares of the Company. As a result, such individuals will have the ability, acting together, to control the election
of the Company’s directors and the outcome of corporate actions requiring stockholder approval, such as: (i) a merger or
a sale of the Company, (ii) a sale of all or substantially all of its assets, and (iii) amendments to its certificate of incorporation
and bylaws. This concentration of voting power and control could have a significant effect in delaying, deferring or preventing
an action that might otherwise be beneficial to the Company’s other stockholders and be disadvantageous to the Company’s
stockholders with interests different from those individuals. Certain of these individuals also have significant control over
the Company’s business, policies and affairs as officers or directors of the Company. Therefore, you should not invest in
reliance on your ability to have any control over the Company.
Our
failure to manage growth effectively could impair our business.
Our
ability to effectively manage growth may require us to expand the capabilities of our operational and management systems and to
attract and retain qualified personnel. There can be no assurance that we will be able to do so. If we are unable to successfully
manage growth, our business, prospects, financial condition, and results of operations could be adversely affected.
Our
plans are dependent upon key individuals and the ability to attract qualified personnel.
In
order to execute our business plan, we will be dependent on Ora Elharar Soffer, our Chief Executive Officer and Chairperson. The
loss of Ms. Meir Soffer could have a material adverse effect upon our business prospects. Moreover, our success also depends on
our ability to identify, attract and retain qualified personnel, including officers, directors, advisors, consultants, third party
contractors and other partners, to assist with the execution of our business plans. Competition for such personnel is intense,
and there can be no assurance that we will be successful in identifying, attracting and retaining such personnel in the future.
The failure to succeed in these endeavors would have a material adverse effect on our ability to consummate our business plans.
We
rely on knowledge and experience of our primary shareholders.
We
rely on our access to knowledge and experience of our primary shareholders, including Citrine S A L Investment & Holdings
Ltd, the Wealthstone Group and the Neto Group. If such access is reduced or lost, we may not be able to successfully execute our
growth strategies, which could adversely affect our results of operations.
Risks
relating to our exposure to equity securities of other companies in which we invest.
We
are not primarily engaged in the business of investing, reinvesting, or trading in securities, and we do not hold ourselves out
as being engaged in those activities; however, the Company has acquired or is in the process of acquiring securities of certain
publicly traded and privately held companies. These investments carry risk of partial or total loss, as with any such investment
of this kind. We generally monitor the Company’s investments to keep abreast of the investments and positions, but do not
portend to actively trade in these securities and we do not have broker-dealers daily monitoring our investments to take positions
in the event of market swings or fluctuations, whether on the upside or downside; hence, these investments bear certain risks
of loss or failure to attain maximum gain.
We
may be classified as an inadvertent investment company.
We
are not primarily engaged in the business of investing, reinvesting, or trading in securities, and we do not hold ourselves out
as being engaged in those activities. Under the Investment Company Act of 1940, as amended (the “1940 Act”), however,
a company may be deemed an investment company under section 3(a)(1)(C) of the 1940 Act if the value of its investment securities
is more than 40% of its total assets (exclusive of government securities and cash items) on a consolidated basis. An inadvertent
investment company can avoid being classified as an investment company if it can rely on one of the exclusions under the 1940
Act. One such exclusion, Rule 3a-2 under the 1940 Act, allows an inadvertent investment company a grace period of one year from
the earlier of (a) the date on which an issuer owns securities and/or cash having a value exceeding 50% of the issuer’s
total assets on either a consolidated or unconsolidated basis and (b) the date on which an issuer owns or proposes to acquire
investment securities having a value exceeding 40% of the value of such issuer’s total assets (exclusive of government securities
and cash items) on an unconsolidated basis. Classification as an investment company under the 1940 Act requires registration with
the SEC. If an investment company fails to register, it would have to stop doing almost all business, and its contracts would
become voidable. Registration is time consuming and restrictive and would require a restructuring of our operations, and we would
be very constrained in the kind of business we could do as a registered investment company. Further, we would become subject to
substantial regulation concerning management, operations, transactions with affiliated persons and portfolio composition, and
would need to file reports under the 1940 Act regime. The cost of such compliance would result in the Company incurring substantial
additional expenses and could result in the complete cessation of our operations, and the failure to register if required would
have a materially adverse impact to conduct our operations.
Risks
Related to Our Common Stock
Our
common stock may suffer from reduced liquidity or illiquidity and as such sale of your holding may take a considerable amount
of time.
The
shares of our common stock are thinly-traded on the OTCQB Market, meaning that the number of persons interested in purchasing
our common stock at or near bid prices at any given time may be relatively small or non-existent. As a consequence, there may
be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer
which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect
on share price. We cannot give you any assurance that a broader or more active public trading market for our common stock will
develop or be sustained, or that current trading levels will be sustained. Due to these conditions, we can give you no assurance
that you will be able to sell your shares at or near bid prices or at all if you need money or otherwise desire to liquidate your
shares.
Shares
eligible for future sale may adversely affect the market.
From
time to time, certain of the Company’s stockholders may be eligible to sell all or some of their shares of common stock
by means of ordinary brokerage transactions in the open market pursuant to Rule 144 promulgated under the Securities Act, subject
to certain limitations. In general, pursuant to Rule 144, non-affiliate stockholders may sell freely after six months subject
only to the current public information requirement. Affiliates may sell after six months subject to the Rule 144 volume, manner
of sale (for equity securities), and current public information and notice requirements. Any substantial sales of the Company’s
common stock pursuant to Rule 144 may have a material adverse effect on the market price of its common stock.
We
are subject to compliance with securities laws, which exposes us to potential liabilities, including potential rescission rights.
We
have offered and sold our common stock to investors pursuant to certain exemptions from the registration requirements of the Act,
as well as those of various state securities laws. The basis for relying on such exemptions is factual; that is, the applicability
of such exemptions depends upon our conduct and that of those persons contacting prospective investors and making the offering.
We have relied upon the operative facts as the basis for such exemptions, including information provided by investors themselves.
If
any prior offering did not qualify for such exemption, an investor would have the right to rescind its purchase of the securities
if it so desired. It is possible that if an investor should seek rescission, such investor would succeed. A similar situation
prevails under state law in those states where the securities may be offered without registration in reliance on the partial preemption
from the registration or qualification provisions of such state statutes. If investors were successful in seeking rescission,
we would face severe financial demands that could adversely affect our business and operations. Additionally, if we did not in
fact qualify for the exemptions upon which we have relied, we may become subject to significant fines and penalties imposed by
the SEC and state securities agencies.
We
have never paid cash dividends and do not anticipate doing so in the foreseeable future.
We
have never declared or paid cash dividends on our shares of common stock. We currently plan to retain any earnings to finance
the growth of our business rather than to pay cash dividends. Payments of any cash dividends in the future will depend on our
financial condition, results of operations and capital requirements, as well as other factors deemed relevant by our board of
directors.
Our
Common Stock is subject to the “Penny Stock” rules of the SEC and the trading market in our stock is limited, which
makes transactions in our stock cumbersome and may reduce the value of an investment.
The
SEC has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to us, as
any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share,
subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require that a broker or
dealer approve a person’s account for transactions in penny stocks, and the broker or dealer receives from the investor
a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
In
order to approve a person’s account for transactions in penny stocks, the broker or dealer must obtain financial information
and investment experience objectives of the person, and make a reasonable determination that the transactions in penny stocks
are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating
the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock,
a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form sets forth the basis
on which the broker or dealer made the suitability determination and that the broker or dealer received a signed, written agreement
from the investor prior to the transaction.
Generally,
brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make
it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock. Disclosure
also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the
commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the
rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to
be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny
stocks.
Financial
Industry Regulatory Authority, Inc. (“FINRA”) sales practice requirements may limit a stockholder’s ability
to buy and sell our common stock.
In
addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an
investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that
customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other
information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced
securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend
that their customers buy our Common Stock, which may limit your ability to buy and sell our stock and have an adverse effect on
the market for our shares.
Our
share price could be volatile and our trading volume may fluctuate substantially.
The
price of our common stock has been and may in the future continue to be extremely volatile, with the sale price fluctuating from
a low of $0.03 to a high of $0.29 during the year commencing as of January 1, 2020. Many factors could have a significant impact
on the future price of our common stock, including:
|
●
|
our
inability to raise additional capital to fund our operations, whether through the issuance
of equity securities or debt;
|
|
●
|
our
failure to successfully implement our business objectives and strategic growth plans;
|
|
●
|
compliance
with ongoing regulatory requirements;
|
|
●
|
market
acceptance of our products;
|
|
●
|
changes
in government regulations;
|
|
●
|
general
economic conditions and other external factors;
|
|
●
|
actual
or anticipated fluctuations in our quarterly financial and operating results; and
|
|
●
|
the
degree of trading liquidity in our common stock.
|
Our
annual and quarterly results may fluctuate greatly, which may cause substantial fluctuations in our common stock price.
Our
annual and quarterly operating results may in the future fluctuate significantly depending on factors including the timing of
purchase orders, new product releases by us and other companies, gain or loss of significant customers, price discounting of our
product, the timing of expenditures, product delivery requirements and economic conditions. Revenues related to our product are
required to be recognized upon satisfaction of all applicable revenue recognition criteria. The recognition of revenues from our
product is dependent on a number of factors, including, but not limited to, the terms of any license agreement.
Any
unfavorable change in these or other factors could have a material adverse effect on our operating results for a particular quarter
or year, which may cause downward pressure on our common stock price. We expect quarterly and annual fluctuations to continue
for the foreseeable future.
Delaware
law contains provisions that could discourage, delay, or prevent a change in control of the Company, prevent attempts to replace
or remove current management and reduce the market price of its common stock.
Provisions
in the Company’s certificate of incorporation and bylaws may discourage, delay or prevent a merger or acquisition involving
the Company that its stockholders may consider favorable. For example, the Company is subject to the anti-takeover provisions
of the Delaware General Corporation Law (“DGCL”). Under these provisions, if anyone becomes an “interested stockholder,”
the Company may not enter into a “business combination” with that person for three years without special approval,
which could discourage a third party from making a takeover offer and could delay or prevent a change in control of the Company.
An “interested stockholder” is, generally, a stockholder who owns 15% or more of the Company’s outstanding voting
stock or an affiliate of the Company who has owned 15% or more of the Company’s outstanding voting stock during the past
three years, subject to certain exceptions as described in the DGCL.
Risks
Related to our Operations in Israel
We
conduct our operations in Israel and therefore our results may be adversely affected by political, economic and military instability
in Israel and the region.
Our
principal offices are located in central Israel and some of our officers, employees and directors are residents of Israel. Accordingly,
political, economic and military conditions in Israel and the surrounding region may directly affect our business. Any hostilities
involving Israel or the interruption or curtailment of trade within Israel or between Israel and its trading partners could adversely
affect our operations and results of operations and could make it more difficult for us to raise capital. During November 2012
and from July through August 2014, Israel was engaged in an armed conflict with a militia group and political party who controls
the Gaza Strip, and during the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite
militia group and political party. In December 2008 and January 2009 there was an escalation in violence among Israel, Hamas,
the Palestinian Authority and other groups, as well as extensive hostilities along Israel’s border with the Gaza Strip,
which resulted in missiles being fired from the Gaza Strip into Southern Israel. Similar hostilities accompanied by missiles being
fired from the Gaza Strip into Southern Israel, as well at areas more centrally located near Tel Aviv and at areas surrounding
Jerusalem, occurred during November 2012 and July through August 2014. These conflicts involved missile strikes against civilian
targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively
affected business conditions in Israel.
In
addition, recent political uprisings and conflicts in various countries in the Middle East, including Egypt and Syria, are affecting
the political stability of those countries. It is not clear how this instability will develop and how it will affect the political
and security situation in the Middle East. This instability has raised concerns regarding security in the region and the potential
for armed conflict. In addition, it is widely believed that Iran, which has previously threatened to attack Israel, has been stepping
up its efforts to achieve nuclear capability. Iran is also believed to have a strong influence among extremist groups in the region,
such as Hamas in Gaza and Hezbollah in Lebanon. Any armed conflicts, terrorist activities or political instability in the region
could adversely affect business conditions and could harm our results of operations. Parties with whom we do business have sometimes
declined to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when
necessary. In addition, the political and security situation in Israel may result in parties with whom we have agreements involving
performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force
majeure provisions in such agreements.
Our
commercial insurance does not cover losses that may occur as a result of events associated with war and terrorism. Although the
Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of
war, we cannot assure you that this government coverage will be maintained or that it will sufficiently cover our potential damages.
Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts or political instability
in the region would likely negatively affect business conditions and could harm our results of operations.
Further,
in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict
business with the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on
our operating results, financial conditions or the expansion of our business. A campaign of boycotts, divestment and sanctions
has been undertaken against Israel, which could also adversely impact our business.
In
addition, Israel is experiencing a level of unprecedented political instability. The Israeli government has been in a transitionary
phase since December 2018, when the Israeli Parliament, or the Knesset, first resolved to dissolve itself and call for new general
elections. Since then, Israel held general elections four times – in April and September of 2019, in March of 2020 and in
March of 2021. The Knesset has not passed a budget for the year 2021, and certain government ministries, which may be critical
to the operation of our business, are without necessary resources and may not receive sufficient funding moving forward. In the
event that the current political stalemate is not resolved during 2021, our ability to conduct our business effectively may be
adversely affected.
Finally,
many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year
until they reach the age of 40 (or older, for reservists who are military officers or who have certain occupations) and, in the
event of a military conflict, may be called to active duty. In response to increases in terrorist activity, there have been periods
of significant call-ups of military reservists. It is possible that there will be military reserve duty call-ups in the future.
Our operations could be disrupted by such call-ups, which may include the call-up of members of our management. Such disruption
could materially adversely affect our business, prospects, financial condition and results of operations.
Our
operations are subject to currency and interest rate fluctuations.
We
incur expenses in U.S. dollars and NIS, but our financial statements are denominated in U.S. dollars. The U.S. dollar is our functional
currency. However, as we also incur expenses in NIS, we are affected by foreign currency exchange fluctuations through both translation
risk and transaction risk. As a result, we are exposed to the risk that the NIS may appreciate relative to the dollar, or, if
the NIS instead devalues relative to the dollar, that the inflation rate in Israel may exceed such rate of devaluation of the
NIS, or that the timing of such devaluation may lag behind inflation in Israel. In any such event, the dollar cost of our operations
in Israel would increase and our dollar-denominated results of operations would be adversely affected.
It
may be difficult to enforce a judgment of a United States court against us and our officers and directors to assert United States
securities laws claims in Israel or to serve process on our officers and directors and these experts.
Our
executive office and corporate headquarters are located in Israel. In addition, all of our officers and directors are residents
of Israel. All of our assets and most of the assets of these persons are located in Israel. Service of process upon us or our
non-U.S. resident directors and officers and enforcement of judgments obtained in the United States against us or our non-U.S.
our directors and executive officers may be difficult to obtain within the United States. We have been informed by our legal counsel
in Israel that it may be difficult to assert claims under U.S. securities laws in original actions instituted in Israel, or obtain
a judgment based on the civil liability provisions of U.S. federal securities laws. Israeli courts may refuse to hear a claim
based on a violation of U.S. securities laws against us or our non-U.S. officers and directors because Israel may not be the most
appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli
law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must
be proved as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be governed by Israeli
law. There is little binding case law in Israel addressing the matters described above. Israeli courts might not enforce judgments
rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our non-U.S. officers and
directors.
Moreover,
an Israeli court will not enforce a non-Israeli judgment if it was given in a state whose laws do not provide for the enforcement
of judgments of Israeli courts (subject to exceptional cases), if its enforcement is likely to prejudice the sovereignty or security
of the State of Israel, if it was obtained by fraud or in the absence of due process, if it is at variance with another valid
judgment that was given in the same matter between the same parties, or if a suit in the same matter between the same parties
was pending before a court or tribunal in Israel at the time the foreign action was brought.
Our
operations may be disrupted as a result of the obligation of management or key personnel to perform military service.
Our
employees and consultants in Israel, including members of our senior management, may be obligated to perform one month, and in
some cases longer periods, of military reserve duty until they reach the age of 40 (or older, for citizens who hold certain positions
in the Israeli armed forces reserves) and, in the event of a military conflict, may be called to active duty. In response to increases
in terrorist activity, there have been periods of significant call-ups of military reservists. It is possible that there will
be similar large-scale military reserve duty call-ups in the future. Our operations could be disrupted by the absence of a significant
number of our officers, directors, employees and consultants. Such disruption could materially adversely affect our business and
operations.
Risks
Related to Cannabis
Our
failure to comply with controlled substance legislation could restrict or harm our ability to develop and commercialize our products.
Our
business is, and will be, subject to wide-ranging laws and regulations of Israel, the United States (federal and state), the European
Community and other governments in each of the countries where we may develop and market our products. We must comply with all
regulatory requirements in each jurisdiction if we expect to be successful. Most countries are parties to the Single Convention
on Narcotic Drugs of 1961 as amended by the 1972 Protocol, which governs international trade and domestic control of narcotic
substances, including cannabis extracts. Countries may interpret and implement their treaty obligations in a way that creates
a legal obstacle to us obtaining marketing approval in those countries for any cannabinoid-based products we develop. These countries
may not be willing or able to amend or otherwise modify their laws and regulations to permit our products to be marketed, or achieving
such amendments to the laws and regulations may take a prolonged period of time. In the case of countries with similar obstacles,
we would be unable to market our product candidates in countries in the near future or perhaps at all if the laws and regulations
in those countries do not change. Any cannabinoid-based product candidate that we may develop for use in the United States, will
be subject to U.S. controlled substance laws and regulations that will require us, along with our collaborators and licensees,
to expend time, money and effort in all areas of regulatory compliance, including, if applicable, manufacturing, production, quality
control and assurance and clinical trials. Any failure to comply with these laws and regulations, or the cost of compliance with
these laws and regulations, could adversely affect the results of our business operations and our financial condition. The Company
does not intend to operate in the U.S. with any activity related to medical cannabis or CBD for this time being.
Changes
in consumer preferences and acceptance of medical cannabis, or any negative trends, will adversely affect our business.
Our
business is substantially dependent on market acceptance of medical cannabis. Market perception of medical cannabis can be significantly
influenced by a number of social, political and economic factors that are beyond our control, including scientific research or
findings, regulatory investigations, litigation, media attention and other publicity regarding such products and treatments. There
can be no assurance that future scientific research, findings, regulatory proceedings, litigation, media attention or other research
findings or publicity will be favorable to the market for any of our current or future cannabinoid-based therapies. Future research
reports, findings, regulatory proceedings, litigation, media attention or other publicity that are perceived as less favorable
than, or that question, earlier research reports, findings or publicity could have a material adverse effect on the demand for
our products, as well as our business, results of operations, financial condition and cash flows.
General
Risk Factors
Failure
in our information technology systems, including by cybersecurity attacks or other data security incidents, could significantly
disrupt our operations.
Our
operations depend, in part, on the continued performance of our information technology systems. Our information technology systems
are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptions. Failure of our information
technology systems could adversely affect our business, profitability and financial condition. Although we have information technology
security systems, a successful cybersecurity attack or other data security incident could result in the misappropriation and/or
loss of confidential or personal information, create system interruptions, or deploy malicious software that attacks our systems.
It is possible that a cybersecurity attack might not be noticed for some period of time. The occurrence of a cybersecurity attack
or incident could result in business interruptions from the disruption of our information technology systems, or negative publicity
resulting in reputational damage with our shareholders and other stakeholders and/or increased costs to prevent, respond to or
mitigate cybersecurity events. In addition, the unauthorized dissemination of sensitive personal information or proprietary or
confidential information could expose us or other third-parties to regulatory fines or penalties, litigation and potential liability,
or otherwise harm our business.
Our
management team may not be able to successfully implement our business strategies.
If
our management team is unable to execute on its business strategies, then our development, including the establishment of revenues
and our sales and marketing activities would be materially and adversely affected. In addition, we may encounter difficulties
in effectively managing the budgeting, forecasting and other process control issues presented by any future growth. We may seek
to augment or replace members of our management team or we may lose key members of our management team, and we may not be able
to attract new management talent with sufficient skill and experience.
A
decline in the price of our common stock could affect our ability to raise working capital and adversely impact our ability to
continue operations.
A
prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction
in our ability to raise capital. A decline in the price of our common stock could be especially detrimental to our liquidity and
our operations. Such reductions may force us to reallocate funds from other planned uses and may have a significant negative effect
on our business plan and operations, including our ability to develop new services and continue our current operations. If our
common stock price declines, we can offer no assurance that we will be able to raise additional capital or generate funds from
operations sufficient to meet our obligations. If we are unable to raise sufficient capital in the future, we may not be able
to have the resources to continue our normal operations.
We
will need additional capital to fund our operations.
We
will require additional capital to fund our current operations and anticipated expansion of our business and to pursue targeted
revenue opportunities. We cannot assure you that we will be able to raise additional capital. If we are able to raise additional
capital, we do not know what the terms of any such capital raises would be, and whether they will be on terms acceptable to us.
In addition, any future sale of our equity securities would dilute the ownership and control of our current stockholders and could
be at prices substantially below prices at which our shares currently trade. Our inability to raise capital could require us to
significantly curtail or terminate our operations.
Future
changes in financial accounting standards or practices may cause adverse unexpected financial reporting fluctuations and affect
reported results of operations.
A
change in accounting standards or practices can have a significant effect on our reported results and may even affect our reporting
of transactions completed before the change is effective. New accounting pronouncements and varying interpretations of accounting
pronouncements have occurred and may occur in the future. Changes to existing rules or the questioning of current practices may
adversely affect our reported financial results or the way we conduct business.