This Annual Report on Form 10-K, or this Annual Report, may contain “forward-looking statements” within the meaning of the federal securities laws made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors. Except as required by law, we assume no obligation to update these forward-looking statements, whether as a result of new information, future events or otherwise. These statements, which represent our current expectations or beliefs concerning various future events, may contain words such as “may,” “will,” “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate” or other words indicating future results, though not all forward-looking statements necessarily contain these identifying words. Such statements may include, but are not limited to, statements concerning the following:
As a result of these factors, we cannot assure you that the forward-looking statements in this Annual Report will prove to be accurate. Furthermore, if the forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market, and other data from reports, research surveys, studies, and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data, and similar sources.
Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.
In this annual report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares of our capital stock.
As used in this current report and unless otherwise indicated, the terms “we”, “us” and “our” mean Artelo Biosciences, Inc., and our wholly owned subsidiary Trinity Reliant Ventures Limited, an Ireland corporation and Trinity Research & Development Limited, an England and Wales corporation, unless otherwise indicated.
Item 1. Business
General Overview
We are an ethical development-stage biopharmaceutical company focused on discovering, licensing, developing and commercializing treatments that modulate the endocannabinoid system. We intend to pursue technologies and programs that offer promising and proprietary approaches to cannabinoid-based therapies, including those derived from the cannabis plant and synthetic cannabinoids, as well as new chemical entities and compounds that promote the effectiveness of the endocannabinoid system. We are currently evaluating programs in each of the following areas: phytocannabinoids, synthetics, and new chemical entities. Our flagship program is designed to be a patent-protected cannabinoid drug combination treatment for a rare and orphan disease with vital unmet medical needs. We believe our programs have the potential to dramatically improve patient care in major markets, including the United States and Europe.
Our board and management have experience developing and commercializing ethical pharmaceutical products, including several first-in-class drugs in multiple therapeutic areas. As we build our pipeline and advance programs through the research and development process, we expect to evaluate partnerships with large pharmaceutical and biopharmaceutical companies to collaborate on research, support clinical development, and enter into commercial licensing agreements. We intend to preserve our development and commercialization rights while embracing collaborations without hesitation in certain situations and territories where we believe there is a strong driver for maximum value creation.
To date, none of our product candidates have completed clinical development, been submitted for regulatory review or received marketing authorization from any regulatory agency. Therefore, we have not yet received revenue from the sale of any of our product candidates.
Corporate History
We were incorporated under the laws of the State of Nevada on May 2, 2011 under the name Knight Knox Development Corp. Our principal address is 888 Prospect Street, Suite 210, La Jolla, California, USA and our European office is located at 29 Fitzwilliam Street, Upper, Dublin 2 Ireland. Our telephone number in North America is 760-943-1689 and our European office number is +353 (1) 443 4604.
From inception to January 2017 our business plan was that of a development stage e-commerce company with the intention of operating a fully functional auction site where customers would register for an account and sell and purchase goods and services. Beginning in April 2017, we changed our business plan and we are now focused on becoming a specialty biopharmaceutical company that intends to license, develop and commercialize novel cannabinoid therapeutic treatments, although we have licensed one provisional patent pertaining to a novel cannabinoid-based drug combination to date, we are not yet developing any such treatments.
On January 19, 2017, a majority of our stockholders and our board of directors approved a name change from Knight Knox Development Corp. to Reactive Medical Inc., to better reflect a change of direction of our business. In addition, the majority stockholder and our board of directors approved an increase to our authorized capital from 75,000,000 shares of common stock, par value $0.001 to 150,000,000 shares of common stock, par value $0.001 and 50,000,000 shares of preferred stock, par value $0.001. The change of name became effective with the OTC Markets at the opening of trading on February 10, 2017 under the symbol “RMED”.
On March 30, 2017, Mr. Peter O'Brien resigned his positions as President, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer of the company and was appointed Senior Vice President of European Operations. On April 3, 2017, Mr. Gregory Gorgas was appointed President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and a member of our board of directors. On that date, the Company entered into an employment contract with Mr. Gorgas, which commits the Company and Mr. Gorgas to specific rights and responsibilities, customary to industry standards. For example, upon fulfilling certain obligations, including raising capital in excess of $5,000,000. Mr. Gorgas will then be paid an annual salary of $250,000 and be eligible for additional compensation in the form of bonus, equity, and benefits, commensurate with industry standards. Per the terms of the employment agreement, that any investment in, or appointment to or continuing service on a board of directors or similar body of, any corporation or entity, must be approved in writing by the Company. The agreement includes non-competition terms. The employment agreement can only be terminated in accordance with the Term of Employment specified in the agreement.
Simultaneously, on April 3, 2017, Mr. Gorgas entered into a stock purchase agreement to purchase 1,760,000 common shares for a purchase price of $1,760.
On April 14, 2017, with the approval of its board of directors and shareholders owning a majority of our company’s issued and outstanding shares by written consent in lieu of a meeting, we filed a Certificate of Change with the Secretary of State of Nevada, changing our name to Artelo Biosciences, Inc., effective as of April 28, 2017. The change of name became effective on the OTC Markets on May 2, 2017 under the symbol “ARTL”.
On May 2, 2017, we entered into an Exclusive Patent License Agreement with Analog Biosciences, Inc. pursuant to which we obtained an exclusive license to a provisional patent application, and any patent issued on such patent application, related to a combination product strategy to produce a synergy with cannabidiol (the “
Invention
”), which was previously assigned to Analog. Pursuant to the terms of the License Agreement, our company will have the exclusive right to use and sublicense the Invention, for which it will pay Analog a percentage of any sales, an earned royalty and certain other payments. The License Agreement will remain in effect through the life of the Invention and may be terminated by either party as set forth in the License Agreement.
On May 2, 2017, we entered into an Indemnification Agreement with its newly elected directors, Ms. Connie Matsui and Mr. Steven Kelly, who were appointed to our Board of Directors on the same date.
Pursuant to the Indemnification Agreement, our company agreed to indemnify Ms. Matsui and Mr. Kelly against all expenses, liability and loss, subject to certain limitations, arising out of their respective duties with our company. The indemnification agreement provides indemnification in addition to the indemnification provided by our company’s certificate of incorporation and by-laws and by applicable law. Among other things, the Indemnification Agreement expressly provides indemnification for Ms. Matsui and Mr. Kelly for expenses, liability and loss (actually or reasonably) incurred by each of them in connection with the investigation, defense, settlement or appeal of any proceeding relating to their respective duties with our company. In addition, we have agreed to advance expenses, subject to certain limitations, incurred by Ms. Matsui and Mr. Kelly in connection with the investigation, defense, settlement or appeal of any proceeding to which they are a party or are threatened to be made a party as a result of their respective duties with our company.
On May 4, 2017, we entered into a Note Repayment Agreement with Malibu Investments Limited, pursuant to which our company agreed to repay $31,500, representing all of the principal and accrued interest our company owed Malibu under a Senior Promissory Note dated November 18, 2016, in the principal amount of $30,000. The note was fully repaid during the year ended August 31, 2017.
On July 31, 2017, we entered into a license agreement with Analog Biosciences, Inc., a Nevada corporation pursuant to which our company has among other things, licensed certain patent rights pertaining to manufacturing methodologies for compositions containing cannabinoids. Under the terms of the license agreement, we agreed to pay to Analog twenty-five percent (25%) of any cash consideration, and of the cash equivalent of all other consideration, which is due to our company for the grant of rights under a sublicense, excluding payments due to our company as a royalty based on Sales (as defined in the license agreement) by the sublicensee. Our company also will pay to Analog earned royalties at the rate of one percent (1%) of the Net Sales of all Licensed Products and Licensed Services, as those terms are defined in the Manufacturing License.
As part of the consideration under the license agreement, we have agreed to pay to Analog, for each Licensed Product, the following milestone payments:
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(a)
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$100,000.00 upon enrolling the first patient in a Phase III Clinical Trial or foreign equivalent using the Licensed Product; and
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(b)
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$200,000.00 upon obtaining marketing authorization from the FDA or foreign equivalent for each Licensed Product.
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If our company is unable to meet any of its diligence obligations set forth in Paragraphs 5.1, 5.2 and 5.3 of the license agreement, then Analog will so notify our company of failure to perform. We will have the right and option to extend the target date of any such diligence obligation for a period of six (6) months upon the payment of Five Thousand dollars ($5,000) within the thirty (30)-day period prior to the date to be extended, for each such extension option exercised by our company. We may further extend the target date of any diligence obligation for an additional six (6) months upon payment of an additional Five Thousand dollars ($5,000). Additional extensions may be granted only by written agreement of the parties. These payments are in addition to any other payments owed under the license agreement. Should our company opt not to extend the obligation or fail to meet the obligation by the extended target date, then Analog will have the right and option either to terminate the license agreement or to reduce our company's exclusive license to a non-exclusive license.
On July 31, 2017, we entered into an indemnification agreement with Douglas Blayney, MD, who was appointed to our Board of Directors on the same date.
Pursuant to the indemnification agreement, we agreed to indemnify Dr. Blayney against all expenses, liability and loss, subject to certain limitations, arising out of his respective duties with our company. The indemnification agreement provides indemnification in addition to the indemnification provided by our company’s certificate of incorporation and by-laws and by applicable law. Among other things, the indemnification agreement expressly provides indemnification for Dr. Blayney for expenses, liability and loss (actually or reasonably incurred by each of them in connection with the investigation, defense, settlement or appeal of any proceeding relating to their respective duties with our company. In addition, we have agreed to advance expenses, subject to certain limitations, incurred by Dr. Blayney in connection with the investigation, defense, settlement or appeal of any proceeding to which he is a party or are threatened to be made a party as a result of his respective duties with our company.
On August 1, 2017, Mr. Peter O’Brien, a member of our Board of Directors and our Senior Vice President – European Operations and our company entered into a stock purchase agreement with ALII Capital LLC, a Washington limited liability corporation pursuant to which Mr. O’Brien sold 300,000 shares of our stock owned by him for $300. Pursuant to the terms of the agreement, we granted ALII Capital demand registration rights for the shares purchased.
On September 20, 2017, we entered into indemnification agreements with each of Ms. Georgia Erbez and R. Martin Emanuele, PhD, who were appointed to our Board of Directors on the same date.
Pursuant to the indemnification agreements, we agreed to indemnify Ms. Erbez and Dr. Emanuele against all expenses, liability and loss, subject to certain limitations, arising out of their respective duties with our company. The indemnification agreements provide indemnification in addition to the indemnification provided by our company’s certificate of incorporation and by-laws and by applicable law. Among other things, the indemnification agreements expressly provides indemnification for Ms. Erbez and Dr. Emanuele for expenses, liability and loss (actually or reasonably incurred by each of them in connection with the investigation, defense, settlement or appeal of any proceeding relating to their respective duties with our company. In addition, we have agreed to advance expenses, subject to certain limitations, incurred by Ms. Erbez and Dr. Emanuele in connection with the investigation, defense, settlement or appeal of any proceeding to which they are a party or are threatened to be made a party as a result of their respective duties with our company.
We are a discovery research and development stage company and have commenced only minimal business operations and have not generated any revenues. We have been issued a "going concern" opinion by our auditor, based upon our reliance on the sale of our common stock as the sole source of funds for our current operations.
We have two wholly owned subsidiaries, Trinity Reliant Ventures Limited, in Ireland, and Trinity Research & Development Limited, in England and Wales.
We have never declared bankruptcy, been in receivership, or involved in any kind of legal proceeding.
Competition
The development and commercialization of cannabinoid-based therapies is highly competitive. We face potential competition from larger companies that are or may be in the process of offering similar products to ours. Many of our current and potential competitors have longer operating histories, significantly greater financial, marketing and other resources than we may be expected to have.
Competitors may include major pharmaceutical and biotechnology companies and public and private research institutions. Management cannot be certain that we will be able to compete against current or future competitors or that competitive pressure will not seriously harm our business prospects. These competitors may be able to react to market changes, respond more rapidly to new regulations or allocate greater resources to the development and promotion of their products than we can.
Furthermore, some of these competitors may make acquisitions or establish collaborative relationships among themselves to increase their ability to rapidly gain market share. Large pharmaceutical companies may eventually enter the market.
Given the rapid changes affecting the global, national, and regional economies in general and cannabis-related medical research and development in particular, we may not be able to create and maintain a competitive advantage in the marketplace. Time-to-Market is an important factor and our success will depend on our ability to develop innovative products that will be accepted by patients.
Our success will also depend on our ability to respond quickly to, among other things, changes in the economy, market conditions, and competitive pressures. Any failure to anticipate or respond adequately to such changes could have a material effect on our financial condition, operating results, liquidity, cash flow and our operational performance.
There can be given no assurance that any of our on cannabis-based medical products will obtain regulatory approval in the US, Europe or in any other markets that we intend to market such products.
Compliance with Government Regulation
Regulations Related to the Drug Regulatory Process
We operate in a highly controlled regulatory environment. Stringent regulations establish requirements relating to analytical, toxicological and clinical standards and protocols in respect of the testing of pharmaceuticals. Regulations also cover research, development, manufacturing and reporting procedures, both pre- and post-approval. Failure to comply with regulations can result in stringent sanctions, including product recalls, withdrawal of approvals, seizure of products and criminal prosecution. Further, many countries have stringent regulations relating to the possession and use of cannabis and related synthetic compounds.
Before obtaining regulatory approvals for the commercial sale of our future product candidates, we must demonstrate through preclinical studies and clinical trials that our product candidates are safe and effective. Historically, the results from preclinical studies and early clinical trials often have not accurately predicted results of later clinical trials. In addition, a number of pharmaceutical products have shown promising results in clinical trials, but subsequently failed to establish sufficient safety and efficacy results to obtain necessary regulatory approvals. We expect to incur substantial expense for, and devote a significant amount of time to, preclinical studies and clinical trials. Many factors can delay the commencement and rate of completion of clinical trials, including the inability to recruit patients at the expected rate, the inability to follow patients adequately after treatment, the failure to manufacture sufficient quantities of materials used for clinical trials, and the emergence of unforeseen safety issues and governmental and regulatory delays. If a product candidate fails to demonstrate safety and efficacy in clinical trials, this failure may delay development of other product candidates and hinder our ability to conduct related preclinical studies and clinical trials. Additionally, as a result of these failures, we may also be unable to obtain additional financing.
Governmental authorities in all major markets require that a new ethical pharmaceutical product be approved or exempted from approval before it is marketed, and have established high standards for technical appraisal, which can result in an expensive and lengthy approval process. The time to obtain approval varies by country and some products are never approved. The lengthy process of conducting clinical trials, seeking approval and the subsequent compliance with applicable statutes and regulations, if approval is obtained, are very costly and require the expenditure of substantial resources.
To date, none of our product candidates have completed clinical development, been submitted for regulatory review or received marketing authorization from any regulatory agency, and therefore we have not received revenue from the sale of any of our product candidates.
Drug Approval Process by the U.S. Food & Drug Administration
The FDA is the main regulatory body that controls pharmaceutical and biologic drugs in the United States and the Food, Drug, and Cosmetic Act (FDC Act) governs most of the requirements for the development and marketing of our products. Pharmaceutical products are also subject to other federal, state and local statutes. A failure to comply explicitly with any requirements during the product development, approval, or post-approval periods, may lead to administrative or judicial sanctions. These sanctions could include the imposition by the FDA or an institutional review board (IRB), of a hold on clinical trials, refusal to approve pending marketing applications or supplements, withdrawal of approval, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, or even civil penalties or criminal prosecution. The FDA also inspects manufacturing facilities periodically in order to ensure adequate compliance with Good Manufacturing Practices (“GMP”), which may require substantial record keeping requirements and equipment maintenance.
The steps required before a new drug may be marketed in the United States generally include: completion of preclinical studies of drug safety and efficacy, as well as chemistry, manufacturing, and controls studies to characterize the production of the drug; submission to the FDA of an Investigational New Drug (“IND”) to support human clinical testing in the United States; approval by an independent research panel before each clinical trial may be initiated; performance of well-controlled clinical trials to establish the safety and efficacy of the drug for each proposed clinical use; submission of an New Drug Application (“NDA”) to the FDA; satisfaction of any periodic reviews or inspections; and FDA review and approval of the NDA. After regulatory approval of a drug is obtained, a company is required to comply with a number of post-approval requirements, which may include ongoing testing, additional clinical trials, and surveillance of the drug’s clinical use in order to continue assess tis overall safety and efficacy profile. In addition, companies with marketed drugs are required to report adverse reactions and manufacturing issues to the FDA, and to comply with requirements concerning advertising and promotional labeling for any of its products.
The FDA and other federal agencies closely regulate the marketing and promotion of drugs through, among other things, standards and regulations for direct-to-consumer advertising, communications regarding unapproved uses, industry-sponsored scientific and educational activities, and promotional activities conducted online. A pharmaceutical product cannot be commercially marketed before it is approved by the FDA. After approval, product promotion can include only those claims relating to its safety and effectiveness that are consistent with the product labeling approved in advance by the FDA. Physicians and other healthcare providers are permitted to prescribe drugs for “off-label” uses, which deviate from the specific use described on the product labeling, because the FDA does not regulate the practice of medicine. However, FDA regulations impose stringent restrictions on drug manufacturers regarding the ability to market or promote such off-label use.
Additional special programs are available through acts of the FDA, including use of patent term extensions, which can extend the life of a patent as compensation for lost time during the FDA review and approval process, as well as alternative regulatory paths. This includes the Orphan Drug Act of 1983 and the FDA Safety and Innovation Act of 2012, which for example provides for a Breakthrough Therapy Designation. Through obtaining a Breakthrough Therapy Designation, a Company may be able to obtain accelerated approval for one or more drugs if they meet the qualifying criteria, which includes treatment of a serious or life threatening disease or condition, and having preliminary clinical evidence that the treatment will provide a substantial improvement over existing therapies.
Drug Approval Process by the European Medicines Agency (EMA)
Drug approval, or marketing authorization (a license), in the European Union follows a similar set of regulatory standards and requirements as regulated by the FDA. It differs from the US in that there are two systems within the EMA biopharmaceutical companies use to obtain approval for their biologic or drug development candidates.
The first is called the ‘centralized system’, which typically relates to therapeutics for serious and life threatening illnesses and diseases, such as cancer, neuro-degenerative conditions, or diabetes. The EMA’s Committee for Medicinal Products for Human Use (CHMP) reviews drugs for human use by evaluating the sponsor company’s application and recommends whether or not a drug or biologic should have ‘marketing authorization’.
The other is the ‘decentralized (or mutual recognition) system’. One member state assesses the application (this is the Medicines and Healthcare products Regulatory Agency in the UK, or MHRA). If they recommend approval of the drug candidate, the other member states either agree ('mutually recognize' the drug license) or not. If the members agree, the medicine is granted marketing approval. If a state objects, the CHMP will intervene and make a recommendation to the EMA for or against a license of the drug.
Once a drug has EU marketing authorization, it is 'licensed', 'registered' or 'approved' - all these terms interchangeable. ‘Licensed’ means the sponsor company has been granted permission to market the drug in any of the member states of the EU . When a drug has marketing authorization from the EMA, it will be available in each of the member states when the sponsor company reaches agreement with each country’s health authority on the price. In the UK, the biopharmaceutical company will apply to the MHRA. When this last step is completed, the product may be ‘launched’ - promoted and made available to physicians by the sponsor company.
Controlled Substance Regulations
United States
We intend to develop and perform research on compounds that have been classified as “controlled substances” within the Controlled Substances Act, and that are monitored in the United States by the Drug Enforcement Administration (“DEA”). The DEA actively monitors and helps establish procedures that are in accordance with the Controlled Substances Act, and this involves a company having to register itself, and to adhere to certain reporting and security practices in order to prevent and mitigate any loss or mishandling of controlled substances used on the premises. The State of California has similar requirements, and we must maintain registration with a panel with disclosure of planned studies and our practices in order to conduct our operations.
The DEA regulates controlled substances using different schedules, where Schedule I substances by definition have high potential for abuse, no currently accepted medical use in the United States and lack accepted safety for use under medical supervision. Schedule I and Schedule II substances are considered to present the highest risk of abuse, and Schedule V substances the lowest risk. Tetrahydrocannabinol, cannabidiol, and purified synthetic forms are listed by the DEA as Schedule I substances, although some FDA-approved pharmaceutical versions of these products are now listed as Schedule III substances.
A quota system controls and limits the availability and production of controlled substances in Schedule I or II. This includes manufacturing of pharmaceutical products. The DEA establishes annually an aggregate quota for how much product may be produced in the United States based on the DEA’s estimate of the quantity needed to meet legitimate scientific and medicinal needs. This limited aggregate amount is allocated among individual companies, who must submit applications annually to the DEA for individual manufacturing and procurement quotas.
DEA registration is required for any facility that performs research, manufactures, distributes, dispenses, imports or exports any controlled substance. The registration is specific to the particular location, activity and controlled substance schedule. The DEA typically inspects facilities to review the premises in advance of issuing a formal registration, in order to assess the adequacy of their security and internal controls. Security measures differ based on the specific type of application and controlled substance, but generally include physical control of inventory, surveillance cameras, and ensuring there is no diversion or loss of material through record-keeping and inventory monitoring. Reports must be provided to the DEA on the use of materials, as well as immediate reports of theft, loss, or suspicious activity.
Europe
To date, approximately 250 substances, including cannabis, are listed in the Schedules annexed to the United Nations Single Convention on Narcotic Drugs (New York, 1961, amended 1972), the Convention on Psychotropic Substances (Vienna, 1971) and the Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (introducing control on precursors) (Vienna, 1988). The purpose of these listings is to control and limit the use of these drugs according to a classification of their therapeutic value, risk of abuse and health dangers, and to minimize the diversion of precursor chemicals to illegal drug manufacturers. The 1961 UN Single Convention on Narcotic Drugs, as amended in 1972 classifies cannabis as Schedule I (“substances with addictive properties, presenting a serious risk of abuse”) and as Schedule IV (“the most dangerous substances, already listed in Schedule I, which are particularly harmful and of extremely limited medical or therapeutic value”) narcotic drug. The 1971 UN Convention on Psychotropic Substances classifies tetrahydrocannabinol (THC) - the principal psychoactive cannabinoid of cannabis - as schedule I psychotropic substance (Substances presenting a high risk of abuse, posing a particularly, serious threat to public health which are of very little or no therapeutic value).
Most countries in Europe are parties to these conventions, which govern international trade and domestic control of these substances, including cannabis. They may interpret and implement their obligations in a way that creates a legal obstacle to our obtaining manufacturing and/or marketing approval for our products in those countries or to providing consulting services in those countries. These countries may not be willing or able to amend or otherwise modify their laws and regulations to permit our products to be manufactured and/or marketed, or for us to provide consulting services, or achieving such amendments to the laws and regulations may take a prolonged period. While some countries in Europe such as the United Kingdom, Germany, the Czech Republic, France, Romania, and Finland have decriminalized cannabis or permit its use for medical purposes, to date no European country has completely legalized it.
Environmental Matters
Our research and development and manufacturing activities and our third-party manufacturers’ and suppliers’ activities may involve the controlled storage, use and disposal of hazardous materials owned by us, including, small quantities of solvents, and other hazardous compounds. We and our manufacturers and suppliers are subject to laws and regulations governing the use, manufacture, storage, handling and disposal of these hazardous materials. In some cases, these hazardous materials and various wastes resulting from their use are stored at our and our manufacturers’ facilities pending their use and disposal. We seek to comply with applicable laws regarding the handling and disposal of such materials. Given the small volume of such materials used or generated at our facilities, we do not expect our compliance efforts to have a material effect on our capital expenditures, earnings, and competitive position. However, we cannot eliminate the risk of accidental contamination or discharge and any resultant injury from these materials. We do not currently maintain separate environmental liability coverage and any such contamination or discharge could result in significant cost to us in penalties, damages, and suspension of our operations.
Research and Development
We have incurred $16,123 and $Nil in research and development expenditures during the years ended August 31, 2017 and 2016, respectively.
Intellectual Property
We have entered into an exclusive license agreement dated May 2, 2017 with Analog Biosciences and a license agreement dated July 31, 2017 with Analog Biosciences, each as described above.
We intend to rely on know-how, continuing technological innovation and in-licensing opportunities to further develop our proprietary position. Our ability to obtain intellectual property protection for our technology and processes, and our ability to operate without infringing on the intellectual property rights of others and to prevent others from infringing on our intellectual property rights, will have a substantial impact on our ability to succeed in our business. Although we intend to seek to protect our proprietary position by, among other methods, filing patent applications, the patent position of companies like us is generally uncertain and involves complex legal and factual questions. Our ability to maintain and solidify a proprietary position for our technology will depend on our success in obtaining effective claims and enforcing those claims once granted. We do not know whether any part of our patent applications will result in the issuance of any patents.
Our Scientific Advisors
We have scientific advisors including experts in cannabinoids, drug discovery and medicine. The composition of an advisory board and scientific advisors is tailored specifically for the specific research interests of the company and are expected to change over time to meet the research and development demands of the company drug candidate pipeline. Our principal scientific advisors consist of two international experts in their fields:
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Saoirse Elizabeth O’Sullivan, PhD, received her doctorate from Trinity College Dublin in 2001 and moved to the University of Nottingham in 2002 as a Research Fellow where she began researching cannabinoid pharmacology. She was made Lecturer in 2007 and Associate Professor in 2011. She has over 26 original research articles, 6 reviews and 3 books chapters on the topic of cannabinoid pharmacology, with specific interests on the cardiovascular and gastrointestinal effects of cannabinoids and therapeutic potential of cannabis-based medicines. Her research methodologies span from cellular and animal models to human healthy volunteer studies and early phase clinical trials. In 2016 she was named the International Cannabinoid Research Society Young Investigator of the Year.
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Andrew Yates, PhD, has more than 15 years experience in the ethical pharmaceutical industry including 10 years as an executive at AstraZeneca. He held key roles within the medical affairs, commercial, business development and strategy functions for AstraZeneca’s in-line and development portfolio. Dr. Yates has been extensively involved in the life-cycle management of key multi-billion dollar products leading to the funding and initiation of significant development programs. Whilst in business development he led evaluations and transactions that resulted in multiple collaborative agreements with academia, biotechnology and peer pharma. Dr. Yates is a UK registered pharmacist who received his PhD in cannabinoid medicinal chemistry from the University of Nottingham.
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Our scientific advisors are not our employees and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability to us. In addition, our scientific advisors may have arrangements with other companies to assist those companies in developing products or technologies that may indirectly or directly compete with ours programs either now or in the future. We are not aware of any current conflicts of interest with any of our scientific advisors.
Employees
As of August 31, 2017, we had two full-time employees, Mr. Gregory Gorgas, President and CEO, and Mr. Peter O’Brien, Senior Vice President, European Operations. In addition, we have consultants, legal counsel and contractors who provide professional services on an as-needed basis. Together, the employees, counsel, contractors and consultants support day-to-day operations of the company including functional management, research oversight, and administration. We have no unionized employees and no retainer commitments.
WHERE YOU CAN FIND MORE INFORMATION
You are advised to read this Form 10-K in conjunction with other reports and documents that we file from time to time with the SEC. In particular, please read our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that we file from time to time. You may obtain copies of these reports directly from us or from the SEC at the SEC’s Public Reference Room at 100 F. Street, N.E. Washington, D.C. 20549, and you may obtain information about obtaining access to the Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains information for electronic filers at its website http://www.sec.gov.