UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
S-1
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
Commission
file number: 333-_____
CANNAPOWDER,
INC.
(Exact
Name Of Registrant As Specified In Its Charter)
Nevada
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|
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20-3353835
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(State
of Incorporation)
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(Primary
Standard Industrial
Classification
Code Number)
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(I.R.S.
Employer
Identification No.)
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Liron
Carmel, Chief Executive Officer
20
Raoul Wallenberg Street, Tel Aviv, 6971916 Israel
Tel:
+972-3-613-0421
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(Address,
including zip code, and telephone number, including area code, of registrant’s
principal executive offices)
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Corporate
Creations Network Inc.
8275
South Eastern Avenue, Suite 200, Las Vegas, NV 89123
Tel:
(702) 951-9324
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(Name,
address, including zip code, and telephone number, including area code, of agent for
service)
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Copies
of communications to:
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The
Lonergan Law Firm LLC
Lawrence
R. Lonergan, Esq.
96
Park Street
Montclair,
NJ 07042
(973)
641-4012
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Approximate
date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration
statement.
If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933 check the following box.
[ ]
If
this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration statement number of the earlier effective registration statement
for the same offering.
[ ]
If
this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering.
[ ]
If
this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering.
[ ]
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer
[ ]
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Accelerated
filer
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Non-Accelerated
filer
[ ]
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Smaller
reporting company [X]
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(Do
not check if a smaller reporting company)
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Emerging
growth company [X]
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If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. [X]
CALCULATION
OF REGISTRATION FEE
Title
of Each
Class of Securities
to be Registered
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Amount
to be Registered (1)
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Proposed
Maximum
Offering
Price
per Share (2)
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Estimated
Proposed
Maximum Aggregate
Offering Price
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Amount
of
Registration
Fee
(3)
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Common
Stock, Par Value $0.0001
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2,343,291
Shares
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$
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1.60
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$
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3,749,265.60
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$
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454.41
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(1)
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This
Registration Statement covers the resale by our Selling Shareholders of up to 2,343.292 shares of Common Stock previously
issued to such Selling Shareholders.
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(2)
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The
Offering price has been estimated solely for the purpose of calculating the registration
fee in accordance with Rule 457(c) of the Securities Act and is based upon a $1.60
per share the share price on the OTC Market on December 10, 2018, the most
recent day that the Registrant’s shares traded on the OTC Markets.
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(3)
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Calculated
pursuant to Rule 457(a) based on an estimate of the proposed maximum aggregate offering price.
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The
Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until
the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective
on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The
information in this Prospectus is not complete and may be changed. We may not sell these securities until the Registration Statement
filed with the Securities and Exchange Commission becomes effective. This Prospectus is not an offer to sell these securities
and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.
PRELIMINARY
PROSPECTUS
SUBJECT
TO COMPLETION ON DECEMBER __, 2018
CANNAPOWDER,
INC.
2,343,291
SHARES OF COMMON STOCK
The
selling shareholders (the “Selling Shareholders”) named in this prospectus (the “Prospectus”) are offering
shares of common stock, par value $0.00001 per share (the “Common Stock”) of CannaPowder, Inc., a Delaware corporation
f/k/a Smart Energy Solutions, Inc., a Nevada corporation, offered through this Prospectus. We are filing this registration statement
(the “Registration Statement”), of which this Prospectus forms a part, in order to permit the Selling Shareholders
to sell a portion of their restricted shares of Common Stock that they acquired in a series of transactions exempt from registration
under the Securities Act of 1933, as amended (the “Act”) pursuant to the provisions of Regulation D and Regulation
S promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Act. The shares of Common
Stock to be offered and sold by the Selling Shareholders, as disclosed in the section under the caption “Selling Shareholders”
of this Prospectus, have already been issued and are currently issued and outstanding Common Stock of the Company. We will not
receive any proceeds from the sale of the Common Stock by the Selling Shareholders covered by this Prospectus in connection with
the offering (the “Offering”).
Our
Common Stock is subject to quotation on OTC Market under the symbol CAPD. On December 10, 2018, the last reported sale
price for our Common Stock was $1.60 per share. We urge prospective purchasers of our Common Stock to obtain current information
about the market prices of our Common Stock. The prices at which the Selling Shareholders may sell the shares of Common Stock
in this Offering will be determined by the prevailing market price for the shares of Common Stock on the date(s) of their respective
sales and/or in negotiated transactions from time-to-time.
Our
independent registered public accounting firm has expressed substantial doubt as to our ability to continue as a going concern.
Investing
in our Common Stock involves a high degree of risk. See “Risk Factors” beginning on page 5 to read about factors you
should consider before buying shares of our Common Stock.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The
Date of This Prospectus is: December __, 2018
TABLE
OF CONTENTS
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus, including the sections entitled “Prospectus Summary,” “Risk Factors” and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements within the
meaning of the federal securities laws. These statements relate to anticipated future events, future results of operations or
future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,”
“might,” “will,” “should,” “intends,” “expects,” “plans,”
“goals,” “projects,” “anticipates,” “believes,” “estimates,” “predicts,”
“potential,” or “continue” or the negative of these terms or other comparable terminology. These forward-looking
statements include, but are not limited to:
●
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our
ability to manage our product development working with our collaboration partners in Israel;
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our
ability to generate market acceptance for our products in development;
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●
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our
ability to attract and retain key officers and employees, including key personnel at our wholly-owned Israeli subsidiary,
Canna Powder Ltd;
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●
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our
ability to raise capital and obtain financing on acceptable terms;
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●
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our
ability to compete with other companies developing products and selling services competitive with ours, and who may have greater
resources and name recognition than we have;
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●
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our
ability to keep pace with a changing industry and its rapidly evolving technology demands and regulatory environment; and
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our
ability to protect and enforce intellectual property rights.
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These
forward-looking statements are only predictions, are uncertain and involve substantial known and unknown risks, uncertainties
and other factors which may cause our (or our industry’s) actual results, levels of activity or performance to be materially
different from any future results, levels of activity or performance expressed or implied by these forward-looking statements.
The “Risk Factors” section of this prospectus sets forth detailed risks, uncertainties and cautionary statements regarding
our business and these forward-looking statements. Moreover, we operate in a very competitive and rapidly changing regulatory
environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all of the risks and
uncertainties that could have an impact on the forward-looking statements contained in this prospectus.
We
cannot guarantee future results, levels of activity or performance. You should not place undue reliance on these forward-looking
statements, which speak only as of the date of this prospectus. These cautionary statements should be considered with any written
or oral forward-looking statements that we may issue in the future. Except as required by applicable law, including the securities
laws of the U.S., we do not intend to update any of the forward-looking statements to conform these statements to reflect actual
results, later events or circumstances or to reflect the occurrence of unanticipated events. Our forward-looking statements do
not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or other investments or strategic
transactions we may engage in.
The
Offering
Common
Stock offered by Selling Shareholders
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2,343,291
shares of Common
Stock representing approximately 22.3% of our current 10,518,226 outstanding
shares of Common Stock. (1)
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Common
Stock outstanding before and after the Offering
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10,518,226
shares.
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Terms
of the Offering
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The
Selling Shareholders will determine when and how they will sell the Common Stock offered
in this Prospectus. The prices at which the Selling Shareholders may sell the shares
of Common Stock in this Offering will be determined by the prevailing market price for
the shares of Common Stock or in negotiated transactions.
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Termination
of the Offering
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The
Offering will conclude upon such time as all of the Common Stock has been sold pursuant
to the Registration Statement.
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Trading
Market
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Our
Common Stock is subject to quotation on the OTC Market under the symbol CAPD.
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Use
of proceeds
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The
Company is not selling any shares of the Common Stock covered by this Prospectus. As such, we will not receive any of the
Offering proceeds from the registration of the shares of Common Stock covered by this Prospectus.
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Risk
Factors
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The
Common Stock offered hereby involves a high degree of risk and should not be purchased by investors who cannot afford the
loss of his/her/its entire investment. See “Risk Factors”.
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(1) Based
on 10,518,226 shares of Common Stock outstanding as of December 10, 2018.
PROSPECTUS
SUMMARY
This
summary highlights selected information contained elsewhere in this Prospectus. This summary does not contain all the information
that you should consider before investing in the Common Stock. You should carefully read the entire Prospectus, including “Risk
Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and
the Financial Statements, before making an investment decision. In this Prospectus, the terms “CannaPowder” “Company,”
“Registrant,” “we,” “us” and “our” refer to CannaPowder, Inc., a Nevada corporation.
Please
read this Prospectus carefully and in its entirety. This Prospectus contains disclosure regarding our business, our financial
condition and results of operations and risk factors related to our business and our Common Stock, among other material disclosure
items. We have prepared this Prospectus so that you will have the information necessary to make an informed investment decision.
You
should rely only on information contained in this Prospectus. We have not authorized any other person to provide you with different
information. This Prospectus is not an offer to sell, nor is it seeking an offer to buy, these securities in any state where the
offer or sale is not permitted. The information in this Prospectus is complete and accurate as of the date on the front cover,
but the information may have changed since that date.
The
Registration Statement containing this Prospectus, including the exhibits to the Registration Statement, provides additional information
about our Company and the Common Stock offered under this Prospectus. The Registration Statement, including the exhibits and the
documents incorporated herein by reference, can be read on the Securities and Exchange Commission website or at the Securities
and Exchange Commission offices mentioned under the heading “Where You Can Find More Information.”
Reference
is made to the disclosure contained under “Description of Business,” below.
Business
Plan
CannaPowder,
Inc., f/k/a Smart Energy Solutions, Inc. (the “Company” or “Registrant”) was incorporated in 1999 in the
State of Utah under the name Datigen.com, Inc. On August 25, 2005, the Registrant was redomiciled from Utah to Nevada pursuant
to a merger with and into its wholly-owned subsidiary, Smart Energy Solutions, Inc., a Nevada corporation and, in connection therewith,
its name was changed to Smart Energy Solutions, Inc.
Prior
to the merger into its wholly-owned subsidiary, the Company was engaged in activities including development and marketing of various
internet and internet related products and services, investment in real property related instruments, and providing concrete cutting
and finishing services to construction sites seeking to comply with certain provisions of the American Disability Act of 1991.
In November 2004, the Company had a change in control as a result of the purchase of a majority of the Company’s outstanding
common stock by unaffiliated individuals.
In
connection with the change in control, the Company determined to pursue other business opportunities and, as a result, on March
23, 2005, the Company entered into an asset purchase agreement with Purisys, Inc., a New Jersey corporation, and acquired the
intellectual property rights and certain other assets relating to a product known as the “Battery Brain,” a device
attached to a motor vehicle battery for the purpose of protecting the vehicle from battery failure and theft.
Following
the purchase of the Battery Brain assets, the Company devoted its resources and entered into agreements with third parties for
the manufacture and distribution of products using the Battery Brain technology. During the period from March 2005, the date of
the asset purchase agreement, through the end of 2009, the Company devoted its efforts to marketing activities directed at the
automotive industry, including automotive retail, dealers, OEMs, and automotive specialty such as fleets, military, heavy trucks
and equipment, motor home/RV and marine.
The
Company continued to generate losses from operations and, as of its fiscal year-ended December 31, 2008, the Company had an accumulated
deficit of in excess of $22 million. While the Company continued to file reports under the Securities Exchange Act of 1934 (the
“Exchange Act”) through its quarterly report on Form 10-Q for the period ended September 30, 2009, the Company lacked
sufficient capital resources to continue to fund the expenses including professional fees associated with being a current, reporting
company under the Exchange Act.
As
a result, from and after the filing of its 10-Q for the period ended September 30, 2009, the Company ceased active business operations
and determined to devote its limited and depleting cash resources to seek operations that would generate revenues and positive
cash flow compared to its prior operations seeking to exploit its Battery Brain technology. The Company became delinquent in its
reporting obligations under the Exchange Act, failing to file its annual report on Form 10-K for the year ended December 31, 2009
and continued to be a delinquent filer until it filed a Form 15, terminating its registration under Section 12(g) of the Exchange
Act on July 24, 2013.
Prior
to filing the Form 15, the Company’s assets became subject to a proceeding before the Superior Court of the State of New
Jersey, which resulted in the appointment of a receiver in early 2013. The principal creditor in that proceeding was Aharon Levinas,
who had sold the Battery Brain assets formerly owned by Purysis in March 2005. On June 7, 2013, in connection with the order of
the Superior Court of the State of New Jersey, the Court authorized and approved the sale, transfer and assignment of all of the
Company’s assets to Aharon Levinas, free and clear of any liens, claims or encumbrances and granting Mr. Levinas effective
control of the Company.
During
November 2014 and March 2015, third-party investors acquired control of the Company by purchasing a control block of shares each
holding 137,500 shares representing 88% of the Company’s issued and outstanding shares of common stock. Reference is made
to the disclosure under “Security Ownership of Certain Beneficial Owners and Management,” below.
Recent
Corporate Developments
On
August 30, 2017, a new wholly-owned subsidiary was registered in Israel under the name of Canna Powder Ltd. (“CannaPowder
Israel” or the “Subsidiary”), with 100 common shares outstanding (the “Subsidiary Shares”), all
of which were held in escrow on behalf of the Company by Israel attorney, Alon Nave. On September 27, 2017, pursuant to board
resolution, the 100 Subsidiary Shares held in escrow were transferred to the Company.
The
Subsidiary’s management includes Lavi Krasney, its CEO, and Rafi Ezra, its CTO. Reference is made to the disclosure under
the subcaption
“Key Employees”
included in “Item 5. Directors and Executive Officers” below.
Development
is being conducted at the Hebrew University under the supervision of the inventor of the technology, Professor Shlomo Magdassi,
pursuant to the term of the Feasibility Study and Option Agreement dated September 14, 2017 (the “Feasibility Study”),
a fully-executed copy of which is attached as Exhibit 10.1.2 to this Form 10 amendment, as more fully discussed below.
On
December 27, 2017, a board resolution was adopted to issue an additional: (i) 800 Subsidiary Shares to the Company; and an additional
100 Subsidiary Shares to Rafi Ezra and, as a result, effective December 27, 2017, Canna Powder Ltd became a 90% owned subsidiary
of the Company and a minority interest of 10% owned by Rafi Ezra.
Our
Filing Status as a “Smaller Reporting Company
We
are a “smaller reporting company,” meaning that we are not an investment company, an asset-backed issuer, or a majority-owned
subsidiary of a parent company that is not a smaller reporting company and have a public float of less than $75 million and annual
revenues of less than $50 million during the most recently completed fiscal year. As a “smaller reporting company,”
the disclosure we will be required to provide in our SEC filings are less than it would be if we were not considered a “smaller
reporting company.” Specifically, “smaller reporting companies” are able to provide simplified executive compensation
disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act of 2002 requiring that
independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial
reporting; are not required to conduct say-on-pay and frequency votes until annual meetings occurring on or after January 21,
2013; and have certain other decreased disclosure obligations in their SEC filings, including, among other things, being permitted
to provide two years of audited financial statements in annual reports rather than three years. Decreased disclosures in our SEC
filings due to our status as a “smaller reporting company” may make it harder for investors to analyze the Company’s
results of operations and financial prospects.
Before
you invest in our Common Stock, you should carefully consider all the information in this prospectus, including matters set forth
under the heading “Risk Factors.”
Where
You Can Find Us
We
presently maintain our principal offices at 20 Raoul Wallenberg Street, Tel Aviv, 6971916 Israel, Phone: +(972) 54-222-9702
RISK
FACTORS
Risks
Relating to Our Business
Risks
Relating to Our Lack of Operating History and Industry.
Any
investment in our shares of common stock involves a high degree of risk. You should carefully consider the following information
about these risks, together with the other information contained in this annual report before you decide to invest in our common
stock. Each of the following risks may materially and adversely affect our business objective, plan of operation and financial
condition. These risks may cause the market price of our common stock to decline, which may cause you to lose all or a part of
the money you invested in our common stock. We provide the following cautionary discussion of risks, uncertainties and possible
inaccurate assumptions relevant to our business plan. In addition to other information included in this annual report, the following
factors should be considered in evaluating the Company’s business and future prospects.
The
Company has a limited operating history and very limited resources.
The
Company’s recent operations have been limited and has had no revenues from operations. Investors will have no basis upon
which to evaluate the Company’s ability to achieve the Company’s plan of operation.
The
Company’s officers and sole director may allocate their time to other businesses thereby causing conflicts of interest in
his determination as to how much time to devote to the Company’s affairs. This could have a negative impact on the Company’s
ability to implement its plan of operation.
The
Company’s two executive officers, Oded Gilboa, our CFO, and Liron Carmel, our CEO and sole director, are not required nor
are they expected to commit their full time to the Company’s affairs, which may result in a conflict in allocating their
time between the Company’s business and other businesses. Management of the Company is engaged in several other business
endeavors and while none of which are involved in the medical cannabis business, they are not precluded by employment or non-competition
agreements or otherwise from becoming involved in cannabis related businesses that may compete with the Company, either directly
or indirectly. Members of our Management are not obligated to contribute any specific number of hours per week to the Company’s
affairs. If Management’s other business affairs require them to devote a substantial amount of time to such other business
affairs, it could limit their ability to devote time to the Company’s affairs and could have a negative impact on the Company’s
ability to implement its plan of operation.
Mr.
Gilboa’s other business endeavors include providing financial statement preparation, book and record keeping and financial
consulting for a number of small to medium sized businesses in addition to Canna Powder Inc. During the past five years, Mr. Gilboa
has provided services to private Israeli companies including: (i) Bootnest Ltd, an Internet service provider with headquarters
located in
Ra’anana, Israel that identifies, develops and utilizes business opportunities
in various fields of interest, with emphasis on business initiatives in the field of sports, among other fields, and provides
business consulting and relates services in raising capital; and (ii) Professional Patent Solutions Ltd, engaged in developing
technology based and industry-based IP strategies for leading start-ups and established companies in the fields of communication,
semiconductors and computing principally in Israel.
Mr. Carmel’s other business endeavors include providing management
and strategic consulting services to a number of small to medium sized businesses and organization including: (i) Board member
and consultant to Virtual Crypto Technologies Ltd. a company engaged in technology development to allow fast and accurate cryptocurrencies
trade executions (ii) Active chairman of the Israeli Table Tennis Association. (iii) From 2013 – 2017 vice president of
the Givatayim city Economic Company.
The
Company may be unable to obtain additional financing, if required, to complete its plan of operation or to fund the operations
and growth of it business, which could compel the Company to abandon its business.
If
we require funds, we will be required to seek additional financing. We cannot assure you that such financing would be available
on acceptable terms, if at all. To the extent that additional financing proves to be unavailable when needed, we would be compelled
to abandon our business plan. In addition, we may require additional financing to fund the operations or growth of our business.
The failure to secure additional financing could have a material adverse effect on the continued development or growth of our
business. The Company’s officers, director or stockholders are not required to provide any financing to us.
Broad
discretion of Management
Any
person who invests in the Company’s common stock will do so without an opportunity to evaluate the specific merits or risks
our business. As a result, investors will be entirely dependent on the broad discretion and judgment of Management. There can
be no assurance that determinations made by the Company’s Management will permit us to achieve the Company’s business
plan.
General
Economic Risks.
The
Company’s current and future business objectives and plan of operation are likely dependent, in large part, on the state
of the general economy. Adverse changes in economic conditions may adversely affect the Company’s business objective and
plan of operation. These conditions and other factors beyond the Company’s control include also but are not limited to regulatory
changes.
Our
control shareholders have significant voting power and may take actions that may be different than actions sought by our other
stockholders.
Our
control shareholders own approximately 40.2% of the outstanding shares of our common stock. These stockholders will be able to
exercise significant influence over all matters requiring stockholder approval. This influence over our affairs might be adverse
to the interest of our other stockholders. In addition, this concentration of ownership could delay or prevent a change in control
and might have an adverse effect on the market price of our common stock.
Our
officers and sole director are located in Israel and our assets may also be held from time to time outside of the United States.
Since
all of our officers and sole director are currently located in and/or are residents of Israel, any attempt to enforce liabilities
upon such individuals under the U.S. federal securities and bankruptcy laws may be difficult. In accordance with the Israeli Law
on Enforcement of Foreign Judgments, 5718-1958, and subject to certain time limitations (the application to enforce the judgment
must be made within five years of the date of judgment or such other period as might be agreed between Israel and the United States),
an Israeli court may declare a foreign civil judgment enforceable if it finds that:
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the judgment was rendered by a court which was, according to the laws of the State in which the court is located, competent to
render the judgment;
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the judgment may no longer be appealed;
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the obligation imposed by the judgment is enforceable according to the rules relating to the enforceability of judgments in Israel
and the substance of the judgment is not contrary to public policy; and
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the judgment is executory in the State in which it was given.
An
Israeli court will not declare a foreign judgment enforceable if:
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the judgment was obtained by fraud;
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there is a finding of lack of due process;
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the judgment was rendered by a court not competent to render it according to the laws of private international law in Israel;
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the judgment is in conflict with another judgment that was given in the same matter between the same parties and that is still
valid; or
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the time the action was instituted in the foreign court, a suit in the same matter and between the same parties was pending before
a court or tribunal in Israel.
Furthermore,
Israeli courts may not adjudicate a claim based on a violation of U.S. securities laws if the court determines that Israel is
not the most appropriate forum in which to bring such a claim. Even if an Israeli court agrees to hear such a claim, it may determine
that Israeli law, 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 proven as a fact, which can be a time-consuming and costly process.
Our
assets may also be held from time to time outside of the United States. Since our director and executive officers are foreign
citizens and do not reside in the United States, it may be difficult for courts in the United States to obtain jurisdiction over
our foreign assets or persons, and as a result, it may be difficult or impossible for you to enforce judgments rendered against
us or our sole director or executive officers in United States courts. Thus, investing in us may pose a greater risk because should
any situation arise in the future in which you would have a cause of action against these persons or against us, you may face
potential difficulties in bringing lawsuits or, if successful, in collecting judgments against these persons or against the Company.
Regulatory
Risks
We
face risks related to compliance with corporate governance laws and financial reporting standards.
The
Sarbanes-Oxley Act of 2002, as well as related new rules and regulations implemented by the Securities and Exchange Commission
and the Public Company Accounting Oversight Board, require changes in the corporate governance practices and financial reporting
standards for public companies. These new laws, rules and regulations, including compliance with Section 404 of the Sarbanes-Oxley
Act of 2002 relating to internal control over financial reporting, have materially increased the legal and financial compliance
costs of small companies and have made some activities more time-consuming and more burdensome.
We
face risks associated with laws and regulations applicable to controlled substances; difficulties of complying with laws that
differ from jurisdiction to jurisdiction.
Our
planned cannabis powder-based products will contain controlled substances and are subject laws of the U.S. and many foreign countries
as well as a myriad of rules and regulations. Controlled substance laws differ, often radically, between countries and from state
to state in the United States and legislation in certain countries and states are subject to change, perhaps to our detriment,
and, as a result, may restrict or even severely limit our ability to distribute cannabis-based powders, if and when we complete
development, of which there can be no assurance. Furthermore, there can be no assurance that we will be able to successfully address
the difficulties we expect to confront in efforts to comply with the laws and regulations applicable to cannabis-related medical
products in different jurisdictions in which we will seek to operate. These differences, from jurisdiction to jurisdiction and
from state to state may be expected to restrict or limit in a material manner our ability to commercially exploit and distribute
our products in one or more jurisdictions/states where the regulations or laws are in conflict or are mutually exclusive.
We
may not have effective internal controls.
The
rules and regulations of the SEC require a public company to prepare and file periodic reports under the Exchange Act, which will
require that the Company engage legal, accounting, auditing and other professional service providers. The engagement of such services
is costly and continuing. Additionally, the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) requires, among
other things, that we design, implement and maintain adequate internal controls and procedures over financial reporting. The costs
of complying with the Sarbanes-Oxley Act and the limited technically qualified personnel we have may make it difficult for us
to design, implement and maintain adequate internal controls over financial reporting. We expect these costs to be increased as
our operations increase in scope and magnitude. In the event that we fail to maintain an effective system of internal controls
or discover material weaknesses in our internal controls, we may not be able to produce reliable financial reports and/or discover
and report fraud, which may harm our overall financial condition and result in loss of investor confidence and a decline in our
share price.
As
a public company and the effective date of the Company’s registration statement on Form 10 on June 29, 2018, we became subject
to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act of 2010 and other applicable securities
rules and regulations. Our legal and financial compliance costs related to these rules and regulations may increase, make some
activities more difficult, time-consuming or costly and increase demand on our systems and resources. The Exchange Act requires,
among other things, that we file annual and quarterly, and, from time-to-time, current reports with respect to our business and
operating results.
We
are working with our legal, independent accounting and financial advisors to identify those areas in which changes should or could
be made to improve our financial and management control systems in order to manage our growth and our legal obligations as a public
company. These areas include corporate governance, corporate control, disclosure controls and procedures and financial reporting
and accounting systems. We have made, and will continue to make, changes in these and other areas, if and when any perceived deficiencies
are discovered. However, we anticipate that the expenses associated with being a reporting public company are expected to be both
material and continuing. We estimate that the aggregate cost of legal services; accounting and audit functions; personnel, such
as a chief financial officer familiar with the obligations of public company reporting; and consultants to design and implement
internal controls could be material. In addition, if and when we retain independent directors and/or additional members of senior
management, we may incur additional expenses related to director compensation and/or premiums for directors’ and officers’
liability insurance (“D&O Insurance”), the costs of which we cannot estimate at this time. We may also incur additional
expenses associated with investor relations and similar functions, the cost of which we also cannot estimate at this time. However,
these additional expenses individually, or in the aggregate, may also be expected to be material. In addition, being a public
company could make it more difficult or more-costly for us to obtain certain types of insurance, including D&O Insurance,
and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar
coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve
on our board of directors, our board committees or as executive officers.
Risks
Relating to Operating in Israel.
We
conduct our operations in Israel and therefore our results may be adversely affected by political, economic and military instability
in Israel or the Middle East.
Our
subsidiary offices and our officers and sole director are located in Israel. Accordingly, political, economic and military conditions
in Israel and the Middle East may directly affect our business. Since the establishment of the State of Israel in 1948, a number
of armed conflicts have taken place between Israel and its Arab neighbors. 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 could
make it more difficult for us to raise capital. Since September 2000, terrorist violence in Israel has increased significantly
and negotiations between Israel and Palestinian representatives have not achieved a peaceful resolution of the conflict. The establishment
in 2006 of a government in Gaza by representatives of the Hamas militant group has created additional unrest and uncertainty in
the region.
Further,
Israel is currently engaged in an armed conflict with Hamas, which until Operation Cast Lead in January 2009 had involved thousands
of missile-strikes and had disrupted most day-to-day civilian activity in southern Israel. The missile attacks by Hamas did not
target Tel Aviv, the location of our principal executive offices; however, any armed conflict, terrorist activity or political
instability in the region may negatively affect business conditions and could significantly harm our results of operations.
Risks
Related to Our Common Stock
Our
historic stock price has been volatile and the future market price for our common stock is likely to continue to be volatile.
Further, the limited market for our shares will make our price more volatile. This may make it difficult for you to sell our common
stock.
The
public market for our common stock has been very volatile. Over the past three fiscal years and subsequent quarterly periods,
the market price for our common stock has ranged from $0.35 to $2.70 (See “Market for Common Equity and Related Stockholder
Matters” in this annual report). Any future market price for our shares is likely to continue to be very volatile. This
price volatility may make it more difficult for you to sell shares when you want at a price you find attractive. Further, the
market for our common stock is limited and we cannot assure you that a larger market will ever be developed or maintained. Market
fluctuations and volatility, as well as general economic, market and political conditions, could reduce our market price. As a
result, this may make it difficult or impossible for you to sell our common stock.
The
Company’s shares of common stock are quoted on the OTC Pink Sheet market, which limits the liquidity and price of the Company’s
common stock.
The
Company’s shares of common stock are traded on the OTC Pink Sheet market. Quotation of the Company’s securities on
the OTC Pink Sheet market limits the liquidity and price of the Company’s common stock more than if the Company’s
shares of common stock were listed on The Nasdaq Stock Market or a national exchange. There is currently no active trading market
in the Company’s common stock. There can be no assurance that there will be an active trading market for the Company’s
common stock following a business combination. In the event that an active trading market commences, there can be no assurance
as to the market price of the Company’s shares of common stock, whether any trading market will provide liquidity to investors,
or whether any trading market will be sustained.
Our
common stock is subject to the Penny Stock Rules of the SEC and the trading market in our common stock is limited, which makes
transactions in our stock cumbersome and may reduce the value of an investment in our common stock.
The
Securities and Exchange Commission has adopted Rule 3a51-1 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, Rule
15g-9 require:
-
that a broker or dealer approve a person’s account for transactions in penny stocks; and
-
the broker or dealer receive 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.
State
blue sky registration; potential limitations on resale of the Company’s common stock
The
holders of the Company’s shares of common stock registered under the Exchange Act and those persons who desire to purchase
them in any trading market that may develop in the future, should be aware that there may be state blue-sky law restrictions upon
the ability of investors to resell the Company’s securities. Accordingly, investors should consider the secondary market
for the Registrant’s securities to be a limited one.
It
is the intention of the Registrant’s Management following the consummation of a business combination to seek coverage and
publication of information regarding the Registrant in an accepted publication manual which permits a manual exemption. The manual
exemption permits a security to be distributed in a particular state without being registered if the Registrant issuing the security
has a listing for that security in a securities manual recognized by the state. However, it is not enough for the security to
be listed in a recognized manual. The listing entry must contain (1) the names of issuers, officers, and directors, (2) an issuer’s
balance sheet, and (3) a profit and loss statement for either the fiscal year preceding the balance sheet or for the most recent
fiscal year of operations. Furthermore, the manual exemption is a non-issuer exemption restricted to secondary trading transactions,
making it unavailable for issuers selling newly issued securities.
Most
of the accepted manuals are those published by Standard and Poor’s, Moody’s Investor Service, Fitch’s Investment
Service, and Best’s Insurance Reports, and many states expressly recognize these manuals. A smaller number of states declare
that they “recognize securities manuals” but do not specify the recognized manuals. The following states do not have
any provisions and therefore do not expressly recognize the manual exemption: Alabama, Georgia, Illinois, Kentucky, Louisiana,
Montana, South Dakota, Tennessee, Vermont and Wisconsin.
Dividends
unlikely
The
Company does not expect to pay dividends for the foreseeable future because it has no revenues or cash resources. The payment
of dividends will be contingent upon the Company’s future revenues and earnings, if any, capital requirements and overall
financial conditions. The payment of any future dividends will be within the discretion of the Company’s board of directors
as then constituted. It is the Company’s expectation that future management, following a business combination, will determine
to retain any earnings for use in its business operations and accordingly, the Company does not anticipate declaring any dividends
in the foreseeable future.
In
anticipation of the formation of CannaPowder Ltd, the Company’s newly organized Israeli subsidiary, the Company began to
raise capital through the private sale of its equity securities primarily pursuant to the exemptions provided under Regulation
S promulgated by the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the
“Act”) and, to a lesser extent, pursuant to Regulation D promulgated by the SEC under the Act (collectively, the “Equity
Raise”). To date, the Company has raised approximately $1,643,979 in the Equity Raise. Reference is made to the disclosure
“Note 8 Subsequent Events” in the Notes to Consolidated Financial Statements for the nine-month period ended
September 30, 2018, below.
USE
OF PROCEEDS
We
will not receive any proceeds from the sale of Common Stock by the Selling Shareholders. All proceeds from the sale of our Common
Stock by Selling Shareholders will go to the Selling Shareholders as described more fully below in the sections entitled “Selling
Shareholders” and “Plan of Distribution.” We have agreed to bear the expenses relating to the registration of
the Common Stock for the Selling Shareholders.
TABLE
OF
SELLING SHAREHOLDERS
The
shares of Common Stock being offered for resale by the Selling Shareholders consist of 2,343,291 shares of our Common Stock
held by 48 shareholders. Such Selling Shareholders include the holders of shares that we sold at offering prices ranging
from $0.01 to $1.20 per share or per unit, as the case may be, from October 17, 2017 through November
20, 2018. These private offerings were made in reliance on and pursuant to the provisions Regulation S and, to a lesser extent,
Regulation D, both promulgated by the SEC under the Act. The following table sets forth the names of the Selling Shareholders
and the number of shares of Common Stock beneficially owned by them as of the date of our Registration Statement, of which this
Prospectus is a part, and the number of shares of Common Stock being offered by the Selling Shareholders. The shares being offered
hereby are being registered to permit public secondary trading. The Selling Shareholders may offer all or part of the shares for
resale from time to time. However, the Selling Shareholders are under no obligation to sell all or any portion of their shares
subject to this Registration Statement, nor are the Selling Shareholders obligated to sell any shares immediately upon effectiveness
of this Registration Statement.
Last
Name
|
|
First
Name
|
|
Shares
Beneficially
Owned
Prior to
Offering
|
|
|
Shares
to Be Offered
|
|
|
Shares
Beneficially Owned After Offering
|
|
|
Percentage
Beneficially Owned after Offering
|
|
Uziel
|
|
Amir
|
|
|
650,000
|
|
|
|
162,500
|
|
|
|
487,500
|
|
|
|
6.0
|
%
|
Atribute
Ltd (1)
|
|
|
|
|
650,000
|
|
|
|
162,500
|
|
|
|
487,500
|
|
|
|
6.0
|
%
|
Krasney
|
|
Lavi
|
|
|
650,000
|
|
|
|
162,500
|
|
|
|
487,500
|
|
|
|
6.0
|
%
|
Silberman
|
|
Kfir
|
|
|
650,000
|
|
|
|
162,500
|
|
|
|
487,500
|
|
|
|
6.0
|
%
|
Uziel
|
|
Doron
|
|
|
425,000
|
|
|
|
106,250
|
|
|
|
318,750
|
|
|
|
3.9
|
%
|
Mediouni
|
|
Asher
Gil
|
|
|
425,000
|
|
|
|
106,250
|
|
|
|
318,750
|
|
|
|
3.9
|
%
|
Aharonson
|
|
Orly
|
|
|
425,000
|
|
|
|
106,250
|
|
|
|
318,750
|
|
|
|
3.9
|
%
|
Shrem
|
|
David
|
|
|
425,000
|
|
|
|
106,250
|
|
|
|
318,750
|
|
|
|
3.9
|
%
|
Garbi
|
|
Rafael
|
|
|
425,000
|
|
|
|
106,250
|
|
|
|
318,750
|
|
|
|
3.9
|
%
|
Fatal
|
|
Ronen
|
|
|
425,000
|
|
|
|
106,250
|
|
|
|
318,750
|
|
|
|
3.9
|
%
|
Liberman
|
|
Frida
|
|
|
450,000
|
|
|
|
112,500
|
|
|
|
337,500
|
|
|
|
4.1
|
%
|
Liberman
|
|
Eliezer
|
|
|
400,000
|
|
|
|
100,000
|
|
|
|
300,000
|
|
|
|
3.7
|
%
|
Carmel
|
|
Liron
|
|
|
300,000
|
|
|
|
75,000
|
|
|
|
225,000
|
|
|
|
2.8
|
%
|
Gilboa
|
|
Oded
|
|
|
50,000
|
|
|
|
12,500
|
|
|
|
37,500
|
|
|
|
0.5
|
%
|
Reinhold
|
|
Nir
|
|
|
666,667
|
|
|
|
166,667
|
|
|
|
500,000
|
|
|
|
6.1
|
%
|
F1
One of a kind Investment, LLC (2)
|
|
|
|
|
250,000
|
|
|
|
62,500
|
|
|
|
187,500
|
|
|
|
2.3
|
%
|
Heller
|
|
Uri
|
|
|
83,333
|
|
|
|
20,833
|
|
|
|
62,500
|
|
|
|
0.8
|
%
|
Aharonson
|
|
Tzvi
|
|
|
83,333
|
|
|
|
20,833
|
|
|
|
62,500
|
|
|
|
0.8
|
%
|
Avdinco
Ltd. (3)
|
|
|
|
|
250,000
|
|
|
|
62,500
|
|
|
|
187,500
|
|
|
|
2.3
|
%
|
Tamarid
Ltd (4)
|
|
|
|
|
250,000
|
|
|
|
62,500
|
|
|
|
187,500
|
|
|
|
2.3
|
%
|
Sasson
|
|
Moshe
|
|
|
83,333
|
|
|
|
20,833
|
|
|
|
62,500
|
|
|
|
0.8
|
%
|
Cohen
|
|
Cohen
|
|
|
50,000
|
|
|
|
12,500
|
|
|
|
37,500
|
|
|
|
0.5
|
%
|
Manoah
|
|
Ron
|
|
|
35,000
|
|
|
|
8,750
|
|
|
|
26,250
|
|
|
|
0.3
|
%
|
Barzilai
|
|
Guy
|
|
|
47,000
|
|
|
|
11,750
|
|
|
|
35,250
|
|
|
|
0.4
|
%
|
Maor
|
|
Maor
|
|
|
41,000
|
|
|
|
10,250
|
|
|
|
30,750
|
|
|
|
0.4
|
%
|
Cafri
|
|
Cafri
|
|
|
33,000
|
|
|
|
8,250
|
|
|
|
24,750
|
|
|
|
0.3
|
%
|
Eliezer
|
|
Keren
|
|
|
28,000
|
|
|
|
7,000
|
|
|
|
21,000
|
|
|
|
0.3
|
%
|
Naki
|
|
Tamar
|
|
|
28,000
|
|
|
|
7,000
|
|
|
|
21,000
|
|
|
|
0.3
|
%
|
Fayer
|
|
Dror
|
|
|
47,000
|
|
|
|
11,750
|
|
|
|
35,250
|
|
|
|
0.4
|
%
|
Zehavi
|
|
Michal
Rivka
|
|
|
28,000
|
|
|
|
7,000
|
|
|
|
21,000
|
|
|
|
0.3
|
%
|
Shimon
|
|
Gilad
|
|
|
28,000
|
|
|
|
7,000
|
|
|
|
21,000
|
|
|
|
0.3
|
%
|
David
|
|
Netanel
|
|
|
30,000
|
|
|
|
7,500
|
|
|
|
22,500
|
|
|
|
0.3
|
%
|
Mahlav
|
|
Amos
|
|
|
28,000
|
|
|
|
7,000
|
|
|
|
21,000
|
|
|
|
0.3
|
%
|
Levy
|
|
Arie
Mordehay
|
|
|
28,000
|
|
|
|
7,000
|
|
|
|
21,000
|
|
|
|
0.3
|
%
|
Ravia
|
|
Avi
|
|
|
33,000
|
|
|
|
8,250
|
|
|
|
24,750
|
|
|
|
0.3
|
%
|
Eliav
|
|
Eliyahu
|
|
|
28,000
|
|
|
|
7,000
|
|
|
|
21,000
|
|
|
|
0.3
|
%
|
Lantz
|
|
Teddy
|
|
|
110,000
|
|
|
|
27,500
|
|
|
|
82,500
|
|
|
|
1.0
|
%
|
Hoyda
|
|
Kobi
|
|
|
28,000
|
|
|
|
7,000
|
|
|
|
21,000
|
|
|
|
0.3
|
%
|
Tentzer
|
|
Inbar
Avraham
|
|
|
28,000
|
|
|
|
7,000
|
|
|
|
21,000
|
|
|
|
0.3
|
%
|
Pasternak
|
|
Eyal
|
|
|
28,000
|
|
|
|
7,000
|
|
|
|
21,000
|
|
|
|
0.3
|
%
|
Navon
|
|
Hovav
Naon
|
|
|
52,000
|
|
|
|
13,000
|
|
|
|
39,000
|
|
|
|
0.5
|
%
|
Meshek
Zon Banegev
|
|
|
|
|
35,000
|
|
|
|
8,750
|
|
|
|
26,250
|
|
|
|
0.3
|
%
|
Or
|
|
Yinon
Shimon
|
|
|
28,000
|
|
|
|
7,000
|
|
|
|
21,000
|
|
|
|
0.3
|
%
|
Goldberg
|
|
Shafrir
|
|
|
28,000
|
|
|
|
7,000
|
|
|
|
21,000
|
|
|
|
0.3
|
%
|
David
|
|
Hagai
|
|
|
28,000
|
|
|
|
7,000
|
|
|
|
21,000
|
|
|
|
0.3
|
%
|
Frenkel
|
|
Lior
|
|
|
28,000
|
|
|
|
7,000
|
|
|
|
21,000
|
|
|
|
0.3
|
%
|
Goldberg
|
|
Michael
|
|
|
410,000
|
|
|
|
102,500
|
|
|
|
307,500
|
|
|
|
3.8
|
%
|
Ben
Shachar
|
|
Amnon
|
|
|
41,500
|
|
|
|
10,375
|
|
|
|
31,125
|
|
|
|
0.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
9,373,166
|
|
|
|
2,343,291
|
|
|
|
7,029,875
|
|
|
|
86
|
%
|
(1)
Attribute Ltd is organized under the laws of Israel with offices in Tel Aviv, Israel. The control person is Mr. Itschak Shrem,
a resident of Israel.
(2)
F1 One of a Kind Investment, LLC is organized under the laws of the State of Texas with offices in Texas. Its control person
is Mr. Shai Cohen, a resident of Texas.
(3)
Avdinco Ltd is organized under the laws of Israel with offices in Tel Aviv, Israel. The control person of Avdinco Ltd is Mr.
Avner Cohen, a resident of Israel.
(4)
Tamarid Ltd is organized under the laws of Israel with offices in Tel Aviv, Israel. The control person of Tamarid Ltd is Mr.
Haim Cohen, a resident of Israel.
PLAN
OF DISTRIBUTION
This
Prospectus relates to the resale of up to 2,343,291 shares of our Common Stock by the Selling Shareholders.
The
Selling Shareholders and any of its pledgees, donees, assignees and other successors-in-interest may, from time to time sell any
or all of their shares of Common Stock on any market or trading facility on which the shares are traded or in private transactions.
These sales may be at fixed or negotiated prices. The Selling Shareholders may use any one or more of the following methods when
selling shares:
|
Ÿ
|
ordinary
brokerage transactions and transactions in which the broker-dealer solicits the purchaser;
|
|
Ÿ
|
block
trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block
as principal;
|
|
Ÿ
|
facilitate
the transaction;
|
|
Ÿ
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for its account;
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an
exchange distribution in accordance with the rules of the applicable exchange;
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privately
negotiated transactions;
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broker-dealers
may agree with the Selling Shareholders to sell a specified number of such shares at a stipulated price per share;
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through
the writing of options on the shares
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a
combination of any such methods of sale; and
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any
other method permitted pursuant to applicable law.
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The
Selling Shareholders shall have the sole and absolute discretion not to accept any purchase offer or make any sale of shares if
it deems the purchase price to be unsatisfactory at any particular time.
The
Selling Shareholders may also sell the shares directly to market makers acting as principals and/or broker-dealers acting as agents
for themselves or their customers. Such broker-dealers may receive compensation in the form of discounts, concessions or commissions
from the Selling Shareholders and/or the purchasers of shares for whom such broker-dealers may act as agents or to whom they sell
as principal or both, which compensation as to a particular broker-dealer might be in excess of customary commissions. Market
makers and block purchasers purchasing the shares will do so for their own account and at their own risk. It is possible that
the Selling Shareholders will attempt to sell shares of Common Stock in block transactions to market makers or other purchasers
at a price per share which may be below the then existing market price. We cannot assure that all or any of the shares offered
in this Prospectus will be issued to, or sold by, the Selling Shareholders. The Selling Shareholders and any broker-dealers or
agents, upon completing the sale of any of the shares offered in this Prospectus, may be deemed to be “underwriters”
as that term is defined under the Act, the Exchange Act and the rules and regulations of such acts. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Act.
The
Selling Shareholders, alternatively, may sell all or any part of the shares offered in this Prospectus through an underwriter.
The Selling Shareholders have not entered into any agreement with a prospective underwriter and there is no assurance that any
such agreement will be entered into.
We
know of no existing arrangements between the Selling Shareholders and any other shareholder, broker, dealer or agent relating
to the sale or distribution of the shares. We will not receive any proceeds from the sale of the shares of the Selling Shareholders
pursuant to this Prospectus. We have agreed to bear the expenses of the registration of the shares, including legal and accounting
fees, and such expenses are estimated to be approximately $35,000.
A
Selling Shareholder may pledge his/her/its shares to their respective brokers under the margin provisions of customer agreements.
If a Selling Shareholder defaults on a margin loan, the broker may, from time to time, offer and sell the pledged shares of Common
Stock. The Selling Shareholders and any other persons participating in the sale or distribution of the shares will be subject
to applicable provisions of the Exchange Act, and the rules and regulations under such act, including, without limitation, Regulation
M. These provisions may restrict certain activities of and limit the timing of purchases and sales of any of the shares by, the
Selling Shareholders or any other such person. The Selling Shareholders is not permitted to engage in short sales of Common Stock.
Furthermore, under Regulation M, persons engaged in a distribution of securities are prohibited from simultaneously engaging in
market making and certain other activities with respect to such securities for a specified period of time prior to the commencement
of such distributions, subject to specified exceptions or exemptions. All of these limitations may affect the marketability of
the shares.
DESCRIPTION
OF SECURITIES TO BE REGISTERED
General
We
are authorized to issue an aggregate number of 520,000,000 shares of capital stock, $0.00001 par value per share, consisting of
20,000,000 shares of Preferred Stock and 500,000,000 shares of Common Stock.
Preferred
Stock
We
are authorized to issue 20,000,000 shares of Preferred Stock, $0.00001 par value per share. As of December 10, 2018,
no preferred shares were issued and outstanding. The Board of Directors has the authority to establish one or more series of Preferred
Stock and fix relative rights and preferences of any series of Preferred Stock, without any further action or approval of our
shareholders.
Common
Stock
We
are authorized to issue 500,000,000 shares of Common Stock, $0.00001 par value per share. As of December 10, 2018,
we had 10,518,226 shares of Common Stock issued and outstanding, owned by 227 shareholders of record.
Each
share of Common Stock shall have one (1) vote per share for all purpose. Our Common Stock does not provide a preemptive, subscription
or conversion rights and there are no redemption or sinking fund provisions or rights. Our Common Stock holders are not entitled
to cumulative voting for election of Board of Directors.
Dividends
We
have not paid any cash dividends to our shareholders. The declaration of any future cash dividends is at the discretion of our
board of directors and depends upon our earnings, if any, our capital requirements and financial position, our general economic
conditions, and other pertinent conditions. It is our present intention not to pay any cash dividends in the foreseeable future,
but rather to reinvest earnings, if any, in our business operations.
Warrants
Between
November 15, 2017 and December 7, 2017, the Company sold a total of 1,000,000 units for cash consideration of $300,000 at price
of $.30 (the “Units”), each unit comprised of one share of common stock and one class A warrant exercisable at $0.50
per share with a term of 24 months. The relative fair value of the stock with embedded warrants was $132,458 for the common stock
and $167,542 for the class A warrants. The warrants were valued using the Black-Scholes model with volatility of approximately
163% and discount rates ranging from 1.68% to 1.8%.
Between
March 20, 2018 and March 29, 2018, the Company sold a total of 206,000 units for cash consideration of $123,600 at price of $.60
(the “Units”), each unit comprised of one share of common stock and one class B warrant exercisable at $1.20 per share
with a term of 24 months. The relative fair value of the stock with embedded warrants was $44,454 for the common stock and $
79,146
for the class B Warrants.
Between
April 3, 2018 and May 14, 2018, the Company sold a total of 1,150,500 units for cash consideration of $690,300 at price of $.60
(the “Units”), each unit comprised of one share of common stock and one class B warrant exercisable at $1.20 per share
with a term of 24 months. The relative fair value of the stock with embedded warrants was $290,996 for the common stock and $399,304
for the class B Warrants.
The
above-referenced issuances and sales of the Company’s securities was made in reliance upon the exemption provided by Regulation
S and, to a lesser extent, Regulation D, promulgated by the United States Securities and Exchange Commission (the “SEC “)
under the Act.
Options
The
Company has no options issued and outstanding.
Transfer
Agent and Registrar
The
transfer agent of our Common Stock is Transfer Online, Inc., 512 SE Salmon Street, Portland, OR 97214, Phone: (503) 227-2950
INTEREST
OF NAMED EXPERTS AND COUNSEL
No
expert or counsel named in this Prospectus as having prepared or certified any part of this Prospectus or having given an opinion
upon the validity of the securities being registered or upon other legal matters in connection with the registration or Offering
of the Common Stock was employed on a contingency basis, or had, or is to receive, in connection with the Offering, a substantial
interest, direct or indirect, in the registrant. Nor was any such person connected with the registrant as a promoter, managing
or principal underwriter, voting trustee, director, officer, or employee.
The
Lonergan Law Firm, Lawrence R. Lonergan, Esq., 96 Park Street, Montclair, NJ 07042, will pass on the validity of the Common Stock
being offered pursuant to this Registration Statement.
The
audited financial statements for the years ended December 31, 2017 and 2016 included in this Prospectus and the Registration Statement
have been audited by M&K CPAS, PLLC, an independent registered public accounting firm, to the extent and for the periods set
forth in their report appearing elsewhere herein and in the Registration Statement, and are included in reliance upon such report
given upon the authority of said firm as experts in auditing and accounting.
WHERE
YOU CAN FIND MORE INFORMATION
We
filed this Registration Statement on Form S-1 with the SEC under the Act with respect to the Common Stock offered by Selling Shareholders
in this Prospectus. This Prospectus, which constitutes a part of the Registration Statement, does not contain all of the information
set forth in the Registration Statement or the exhibits and schedules filed therewith. For further information with respect to
us and our Common Stock, please see the Registration Statement and the exhibits and schedules filed with the Registration Statement.
Statements contained in this Prospectus regarding the contents of any contract or any other document that is filed as an exhibit
to the Registration Statement are not necessarily complete, and each such statement is qualified in all respects by reference
to the full text of such contract or other document filed as an exhibit to the Registration Statement. The Registration Statement,
including its exhibits and schedules, may be inspected without charge at the public reference room maintained by the SEC, located
at 100 F Street, N.E., Room 1580, Washington, D.C. 20549, and copies of all or any part of the Registration Statement may be obtained
from such offices upon the payment of the fees prescribed by the SEC. Please call the SEC at 1-800-SEC-0330 for further information
about the public reference room. The SEC also maintains an Internet website that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the SEC. The address of the site is
www.sec.gov
.
We
also maintain a website at http://www.http://canna-powder.com. Upon completion of this Offering, you may access these materials
on our website free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the
SEC. Information contained on our website is not a part of this Prospectus and the inclusion of our website address in this Prospectus
is an inactive textual reference only.
DESCRIPTION
OF BUSINESS
Business
Plan
CannaPowder,
Inc., f/k/a Smart Energy Solutions, Inc. (the “Company” or “Registrant”) was incorporated in 1999 in the
State of Utah under the name Datigen.com, Inc. On August 25, 2005, the Registrant was redomiciled from Utah to Nevada pursuant
to a merger with and into its wholly-owned subsidiary, Smart Energy Solutions, Inc., a Nevada corporation and, in connection therewith,
its name was changed to Smart Energy Solutions, Inc.
Prior
to the merger into its wholly-owned subsidiary, the Company was engaged in activities including development and marketing of various
internet and internet related products and services, investment in real property related instruments, and providing concrete cutting
and finishing services to construction sites seeking to comply with certain provisions of the American Disability Act of 1991.
In November 2004, the Company had a change in control as a result of the purchase of a majority of the Company’s outstanding
common stock by unaffiliated individuals.
In
connection with the change in control, the Company determined to pursue other business opportunities and, as a result, on March
23, 2005, the Company entered into an asset purchase agreement with Purisys, Inc., a New Jersey corporation, and acquired the
intellectual property rights and certain other assets relating to a product known as the “Battery Brain,” a device
attached to a motor vehicle battery for the purpose of protecting the vehicle from battery failure and theft.
Following
the purchase of the Battery Brain assets, the Company devoted its resources and entered into agreements with third parties for
the manufacture and distribution of products using the Battery Brain technology. During the period from March 2005, the date of
the asset purchase agreement, through the end of 2009, the Company devoted its efforts to marketing activities directed at the
automotive industry, including automotive retail, dealers, OEMs, and automotive specialty such as fleets, military, heavy trucks
and equipment, motor home/RV and marine.
The
Company continued to generate losses from operations and, as of its fiscal year-ended December 31, 2008, the Company had an accumulated
deficit of in excess of $22 million. While the Company continued to file reports under the Securities Exchange Act of 1934 (the
“Exchange Act”) through its quarterly report on Form 10-Q for the period ended September 30, 2009, the Company lacked
sufficient capital resources to continue to fund the expenses including professional fees associated with being a current, reporting
company under the Exchange Act.
As
a result, from and after the filing of its 10-Q for the period ended September 30, 2009, the Company ceased active business operations
and determined to devote its limited and depleting cash resources to seek operations that would generate revenues and positive
cash flow compared to its prior operations seeking to exploit its Battery Brain technology. The Company became delinquent in its
reporting obligations under the Exchange Act, failing to file its annual report on Form 10-K for the year ended December 31, 2009
and continued to be a delinquent filer until it filed a Form 15, terminating its registration under Section 12(g) of the Exchange
Act on July 24, 2013.
Prior
to filing the Form 15, the Company’s assets became subject to a proceeding before the Superior Court of the State of New
Jersey, which resulted in the appointment of a receiver in early 2013. The principal creditor in that proceeding was Aharon Levinas,
who had sold the Battery Brain assets formerly owned by Purysis in March 2005. On June 7, 2013, in connection with the order of
the Superior Court of the State of New Jersey, the Court authorized and approved the sale, transfer and assignment of all of the
Company’s assets to Aharon Levinas, free and clear of any liens, claims or encumbrances and granting Mr. Levinas effective
control of the Company.
During
November 2014 and March 2015, third-party investors acquired control of the Company by purchasing a control block of shares each
holding 137,500 shares representing 88% of the Company’s issued and outstanding shares of common stock. Reference is made
to the disclosure under “Security Ownership of Certain Beneficial Owners and Management,” below.
Recent
Corporate Developments
On
August 30, 2017, a new wholly-owned subsidiary was registered in Israel under the name of Canna Powder Ltd. (“CannaPowder
Israel” or the “Subsidiary”), with 100 common shares outstanding (the “Subsidiary Shares”), all
of which were held in escrow on behalf of the Company by Israel attorney, Alon Nave. On September 27, 2017, pursuant to board
resolution, the 100 Subsidiary Shares held in escrow were transferred to the Company.
The
Subsidiary’s management includes Lavi Krasney, its CEO, and Rafi Ezra, its CTO. Reference is made to the disclosure under
the subcaption
“Key Employees”
included in “Item 5. Directors and Executive Officers” below.
Development
is being conducted at the Hebrew University under the supervision of the inventor of the technology, Professor Shlomo Magdassi,
pursuant to the term of the Feasibility Study and Option Agreement dated September 14, 2017 (the “Feasibility Study”),
a fully-executed copy of which was filed as Exhibit 10.1.2 to the Company’s Registration Statement on Form 10-12G/A on July
3, 2018, as more fully discussed below.
On
December 27, 2017, a board resolution was adopted to issue an additional: (i) 800 Subsidiary Shares to the Company; and an additional
100 Subsidiary Shares to Rafi Ezra and, as a result, effective December 27, 2017, Canna Powder Ltd became a 90% owned subsidiary
of the Company and a minority interest of 10% owned by Rafi Ezra.
The
Equity Raise by the Company was and continues to be for the purpose of funding the Company’s business involving its development
program to establish cannabis powder production facilities utilizing the proprietary, licensed technology as more fully-described
under “Intellectual Property” below (the “Development Program”). Pursuant to the Company’s Development
Program, we expect to have product formulation and testing completed in 2020, pre-clinical studies commencing in 2021, first human
and safety trials in 2022 and efficacy trials in 2023. Reference is made to the disclosure under the “
The FDA Approval
Process
”
below. As a result, unless we are able to expedite the above timetable, of which there can be no assurance,
the earliest that we can expect to begin commercial sales will be 2023. In fact, there can be no assurance that the Development
Program will be successfully implemented within our expected timeline notwithstanding the Company’s success in its Equity
Raise to date, nor can there be assurance that the Company may not require additional capital to fully implement its business
plan and complete production of commercially viable products based on its technology which is the subject of the Feasibility Study
discussed below under “
Planned Research and Development and Current Trends
.” Reference is also made to Appendix
B-1 attached to the License Agreement filed as an exhibit to our Form 8-K filed with the SEC on May 25, 2018. Reference is also
made to the fully-executed copy of the License Agreement, attached at exhibit 10.2.2 hereto.
If
and when we reach the commercial stage, of which there can be no assurance, the Company’s plan is to establish and operate
several production facilities to be located in countries/territories determined by the Company according to their size and provided
that the applicable regulatory environment that permits studies applicable to other activities prerequisite to commercial exploitation
of medical cannabis generally and the Company’s plan to develop cannabis-based powders for medical uses. The Company believes
that it will be able to produce cannabis powders for medical uses at a cost advantage. Notwithstanding our belief in our ability
to produce cannabis powders for medical uses at a cost advantage, in fact, to date we have not produced and cannabis powders for
medical or any other uses and there can be no assurance that: (i) we will ever be able to produce commercially viable cannabis
powders for medical uses; (ii) any cannabis we produce, either alone or in collaboration with third parties, will be accepted
by the medical community, either in Israel or anywhere else in the world; (iii) any cannabis powders will be produced at a cost
advantage; or (iv) we will be able to successfully compete with established companies in the medical cannabis industry, virtually
all of which have far longer operating histories and far greater capital resources.
Planned
Research and Development and Current Trends
We
believe that there has been an increasing recognition amongst medical professionals conducting research in hospitals, including
leading hospitals in Israel such as Hebrew University, Jerusalem, Israel and Sheba Academic Medical Center located in Tel Hashomer,
Israel, among others, that the therapeutic effect of medical cannabis is due to the total number of cannabinoids working together.
There is a scientific effort currently being conducted in Israel, as well as other countries, to analyze and understand how the
various components within cannabis work, including ongoing scientific studies to develop separate medical components for use in
treatment of different medical conditions using various components or combinations for each cannabinoid. Nevertheless, the laws
of the United States presently do not permit studies to be conducted in hospitals in the U.S. notwithstanding approval of medical
and recreation cannabis in 29 of the 50 states.
The
aim of CannaPowder Israel is to identify the active pharmaceutical ingredient (API) and to endeavor to understand the cannabidiol
(CBD) and tetrahydrocannabinol (THC) content of each product. Researchers, principally in Israel, have discovered approximately
in excess of 100 cannabinoids, chemical compounds unique to the cannabis plant. The most common are CBD, cannabinol (CBN) and
THC. CBN and THC interact with CB1 and CB2 receptors, which are located throughout the human body. CB1 receptors are primarily
located in the brain and central nervous system. CB2 receptors are located throughout the body including the gastrointestinal
and urinary tracts that are responsible for regulating neurotransmission. The CB1 and CB2 receptors help control bodily reactions
such as inflammation and pain, which are areas are of great therapeutic interest with respect to drug development. Identifying
cannabinoid receptors and the compounds that interact with them has helped accelerate clinical investigations of cannabinoid-based
drugs. To date, due to the challenges of researching plant-derived cannabinoids in the United States, most U.S. research has been
conducted utilizing synthetically produced cannabinoids, which as chemical compounds, are chemically identical to plant-derived
cannabinoids.
The
FDA Approval Process
We
believe cannabinoid-based drugs using the powders we plan on developing may be able to provide a treatment model for patients
suffering from certain diseases, disorders and medical conditions. However, at present, because of U.S. Food and Drug Administration
(“FDA”) and Drug Enforcement Administration (“DEA”) restrictions, most companies involved in research
and development of cannabinoid therapeutic applications, especially in the United States, currently use synthetics. Furthermore,
our subsidiary, Canna Powder Israel, has not yet even commenced any of the following:
(i)
New Drug Application known as an NDA
: The regulation and control of new drugs in the United States has been based on the
New Drug Application (NDA). Since 1938, every new drug has been the subject of an approved NDA before U.S. commercialization.
The NDA application is the vehicle through which drug sponsors formally propose that the FDA approve a new pharmaceutical for
sale and marketing in the U.S. The data gathered during the animal studies and human clinical trials of an Investigational New
Drug (IND
)
become part of the NDA. The goals of the NDA are to provide enough information to permit the FDA staff to reach
the following key decisions:
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Whether
the drug is safe and effective in its proposed use(s), and whether the benefits of the drug outweigh the risks;
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Whether
the drug’s proposed labeling (package insert) is appropriate, and what it should contain; and
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Whether
the methods used in manufacturing the drug and the controls used to maintain the drug’s quality are adequate to preserve
the drug’s identity, strength, quality, and purity.
|
The
documentation required in an NDA is supposed to tell the drug’s whole story, including what happened during the clinical
tests, what the ingredients of the drug are, the results of the animal studies, how the drug behaves in the body, and how it is
manufactured, processed and packaged.
(ii)
Investigational New Drug Application (IND)
: An Investigational New Drug Application (IND) is a request for FDA authorization
to administer an investigational drug to humans. Such authorization must be secured prior to interstate shipment and administration
of any new drug that is not the subject of an approved new drug application. Drug developers, or sponsors, must submit an Investigational
New Drug (IND) application to FDA before beginning clinical research. In the IND application, developers must include:
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Animal
study data and toxicity (side effects that cause great harm) data;
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Manufacturing
information;
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Clinical
protocols (study plans) for studies to be conducted;
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Data
from any prior human research; and
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Information
about the investigator.
|
The
initial IND submission and each subsequent submission to the IND should be accompanied by a variety of information and
attachments sent by the Sponsor-Investigator [in this
case either by the Company or its Chief Medical Officer] to FDA, which information can be supplied in the form of curriculum vitae,
rather than entering that information directly onto the form. The Food and Drug Administration Amendments Act of 2007, enacted
on September 27, 2007, added new Section 402(j) to the Public Health Service Act and expanded the current database known as ClinicalTrials.gov
to include mandatory registration and reporting of results for applicable clinical trials of human drugs (including biological
products) and devices.
FDA
regulations further require that, at the time of submission of an application, including an Investigational New Drug application
(IND), the application must be accompanied by a certification that all applicable requirements have been met. Where available,
such certification must include the appropriate National Clinical Trial (NCT) to comply with the certification requirement to
determine whether the requirements of that subsection apply to any clinical trial(s) referenced in an IND application.
Upon
receipt of the IND by FDA, an IND number will be assigned, and the application will be forwarded to the appropriate reviewing
division. The reviewing division will send a letter to the Sponsor-Investigator providing notification of the IND number assigned,
date of receipt of the original application, address where future submissions to the IND should be sent, and the name and telephone
number of the FDA person to whom questions about the application should be directed. Studies shall not be initiated until 30 days
after the date of receipt of the IND by FDA unless you receive earlier notification by FDA that studies may begin.
(iii)
Phase I, II and III Trials/Studies
: Clinical trials follow a typical series from early, small-scale, Phase 1 studies to
late-stage, large scale, Phase 3 studies. While preclinical research answers basic questions about a drug’s safety, it is
not a substitute for studies of ways the drug will interact with the human body. “Clinical research” refers to studies,
or trials, that are done in people. As the developers design the clinical study, they will consider what they want to accomplish
for each of the different Clinical Research Phases and begin the Investigational New Drug Process (IND), a process they must go
through before clinical research begins.
Designing
Clinical Trials: Researchers design clinical trials to answer specific research questions related to a medical product (such as
the Company’s planned cannabis-based powders for medical treatments. These trials follow a specific study plan, called a
protocol, that is developed by the researcher or manufacturer. Before a clinical trial begins, researchers review prior information
about the drug to develop research questions and objectives. Then, they decide:
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Who
qualifies to participate (selection criteria);
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How
many people will be part of the study;
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How
long the study will last;
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Whether
there will be a control group and other ways to limit research bias;
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How
the drug will be given to patients and at what dosage;
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What
assessments will be conducted, when, and what data will be collected; and
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How
the data will be reviewed and analyzed.
|
Clinical
trials follow a typical series from early, small-scale, Phase 1 studies to late-stage, large scale, Phase 3 studies.
Phase
I
:
Phase
1 Study Participants: 20 to 100 healthy volunteers or people with the disease/condition. The length of the Phase I Study can last
several months, and the purpose is to determine safety and dosage. according to the FDA publications referenced below, approximately
70% of drugs move to Phase II.
https://www.fda.gov/forpatients/approvals/drugs/ucm405622.htm#collapse
1
Phase
II: Phase II involves study participants of up to several hundred people with the disease/condition and the length of Phase II
Study can range from several months to 2 years. The purpose of the Phase II Study is to determine efficacy and side effects. Depending
upon the results of the efficacy and side effects studies, approximately 33% of drugs move to the next phase which is Phase III
according to the FDA publication cited below.
https://www.fda.gov/forpatients/approvals/drugs/ucm405622.htm#collapse1
Phase
III
: Phase III typically involves study participants of 300 to up to 3000 volunteers and this Phase III can last from 1 to
4 years. The purpose of Phase III studies is to further determine efficacy and monitoring adverse reactions.
As
discussed more fully above, we have not yet prepared an NDA or IND for submission to the FDA nor conducted any activities in contemplation
for Phase I, Phase II or Phase III Studies/Trials. All of the foregoing are prerequisite to any approvals by the FDA, of which
there can be no assurance. In fact, we are still in the research and development stage and do not have any cannabis powder-based
products ready for preclinical development, filing of an IND or for any phase I trials, phase II trials or phase III trials. As
a result, we have no actual basis for our belief that powders can provide a suitable much less a potentially more advantageous
treatment or means of administration of medical cannabis for patients.
While
we believe that there may be a rising demand for cannabinoid-derived drugs that may be driven by favorable changes in legislation
and demographic factors, among other factors in more states within the U.S., over which we have no control and upon which we will
remain wholly-dependent, there can be no assurance that demand will rise or that the U.S. federal government may not become more
hostile to the actions of individual states that have approved or are contemplating approval of medical or recreation cannabis.
Controlled
substance laws differ between countries and legislation in certain countries may restrict or limit our ability to distribute our
cannabis-based powders, if and when developed, for use and sale as commercially viable and efficacious medical treatments. Nevertheless,
we believe that the U.S. can potentially represent a major market for cannabis-based drug candidates, if the regulatory conditions
remain favorable in an increasing number of states, provided that the U.S. federal government does not take enforcement action
to restrict or halt use of medical cannabis in those states where it is presently legal. There can be no assurance that action
by the U.S. government at the federal level may not occur or if the Company’s ability to achieve commercial success, if
any, in one or more states where medical cannabis is currently legal will not be adversely impacted. Furthermore, as a pre-development
stage company, there can be no assurance that our cannabis-based medical powders, if and when developed, will prove to be commercially
viable and/or efficacious.
Within
the European Community (EU), medical cannabis program regulatory frameworks currently exist in countries, including the Netherlands,
Italy, Germany, Finland, Norway, Ukraine, Estonia, Switzerland and the Czech Republic. It is also anticipated that there may well
be positive policy changes in many member countries of the European Union regarding the medical use of cannabis and cannabinoid-derived
drugs. However, there can be no assurance that a positive regulatory environment will continue or expand within the EU. In addition,
medical cannabis has been decriminalized in Russia, Mexico, Columbia, Uruguay, Paraguay and Colombia.
The
objective of our subsidiary, Canna Powder Israel, is to develop nano-cannabis powder, standardized from cannabis oil in a known
Cannanoid composition. Canna Powder Israel is in the process of licensing what it believes will represent a breakthrough platform
technology in drug administration and with the view to applying it to enable the commercial production of cannabis powder.
The
technology has been developed by scientists at the Hebrew University, Jerusalem, which technology has been licensed to the Company’s
Israeli Subsidiary. On September 14, 2017, Canna Powder Israel entered into the above-referenced Feasibility Study with Yissum
Research Development Company of the Hebrew University of Jerusalem (“Yissum”), under the supervision of the inventor
of the technology, Professor Shlomo Magdassi. A copy of the Feasibility Study is attached as Exhibit 10.1.2 hereto. The Company
believes that this technology involves a new technique that should enable the preparation of nanoparticles from micro emulsions
of active ingredients that can be stored as powders and then dissolved in water when required.
The
management team of Canna Powder Israel, consisting of Lavi Krasney and Rafi Ezra, the CEO and CTO, respectively. Reference is
made to the disclosure under “Item 5. Directors and Executive Officers; Key Employees” below. Our Subsidiary’s
management, working in collaboration with the scientists at Hebrew University under the supervision of Professor Shlomo Magdassi,
believe this technology may be adapted for many different insoluble drugs to provide enhanced dissolution properties and to improve
solubility, bioavailability and storage properties and solutions. We base our belief that nanoparticles offer improved bioavailability
in found in the attached published medical articles:
“Biocompatible
nanoemulsions based on hemp oil and less surfactants for oral delivery of baicalein with enhanced bioavailability” by
Yin
J
1
,
Xiang C
1
,
Wang P
1
,
Yin Y
2
, Hou Y
3
; Link:
https://www.ncbi.nlm.nih.gov/pubmed/28435268,
and “Surface-modified solid lipid nanoparticles for oral delivery of docetaxel: enhanced intestinal absorption and lymphatic
uptake” by Cho HJ
1
, Park JW
2
, Yoon IS
2
, Kim DD
3
Link:
https://www.ncbi.nlm.nih.gov/pubmed/24531717
However,
potential investors should be aware that there can be no assurance that the beliefs and expectations of our subsidiary’s
management and the scientists as Hebrew University will be achieved, that cannabis powder-based drugs will be proven to be efficacious,
that nanoparticles offer improved bioavailability and/or that any cannabis powder-based drugs will be commercially accepted or
have any competitive or other advantages compared to other cannabis-based drugs and treatments currently in the market.
Our
development program plan is to produce a platform technology for preparing dispersible powders or aqueous dispersions of nanoparticles
of water-insoluble organic compounds by converting micro emulsions or nano-emulsions containing the active chemicals into powders.
There can be no assurance that we will be successful or have the necessary capital, personnel and other resources to implement
our development program.
The
key features, we believe, will include:
|
●
|
Preparation
of the nano-emulsions with relatively simple and reproducible technologies, without the use of any special equipment.
|
|
●
|
Can
dilute the powders in water to obtain required concentration of active ingredient.
|
|
●
|
Reduces
dose of drug needed.
|
|
●
|
Nanoparticles
offer improved bioavailability and improved efficacy.
|
|
●
|
Simple,
cost effective technique.
|
|
●
|
Powders
have relatively long shelf life.
|
Although
there can be no assurance as our technology has not been previously used to develop commercially-viable, cannabis powder-based
drugs, we believe that our new technology should be well-suited to medical cannabis because it is based upon and deals specifically
with oily/lipophilic materials which is exactly the form in which cannabis exists. Our plan is to be able to produce a micronized
powder containing cannabinoids in a particle size of 100 nanometers, which we hope can be easily incorporated in a commercial
product, such as a capsule, based upon our belief that this product will be the result of a pharmaceutical not a chemical process.
Notwithstanding our belief, there can be no assurance that our development program will be successful in being able to produce
a micronized powder containing cannabinoids in a particle size of 100 nanometers, or any other size, for that matter, and that
any cannabis-based powders we produce will be commercially viable.
The
process of producing the cannabis-based powders under our development program is intended to utilize high pressure emulsifying
agents that we hope will vaporize water to particles, which evaporation process is expected to take only hours as opposed to days
or weeks. If successful, of which there can be no assurance, this should be permit and facilitate a quicker and less expensive
production process than existing processes for producing medical cannabis with consistent dosages. Furthermore, the production
process should not be labor intensive or require a large and therefore costly facility, thereby providing the economic advantage
of being able to produce commercial quantities of cannabis powder at costs far less than existing methods currently in use by
other manufacturers of medical cannabis drugs and treatments. There can be no assurance that our expectations will reach fruition
or that we will have sufficient capital or other resources to complete our development program in a timely manner, if at all.
If and when we achieve the commercial stage, of which there can be no assurance.
Our
plan is for Canna Powder Israel to establish and operate several production facilities, each located in countries and territories
selected according to their size and favorable regulatory environment for medical cannabis. We have completed the basic formulation
of the powder and the basic production process required to produce nano-powder out of Cannabis oil. The necessary steps for us
to reach are to achieve a reproducible process which would result in a consistent yield and a stable powder with a practical shelf
life. We currently plan to initially develop two products: (i) sublingual tablet; and (ii) dry powder for inhalation. Nevertheless,
we have not yet reached a conclusion regarding the indications which these products would address. The expected costs are projected
to be approximately $385,000 to $565,000 during the next 18 months. However, there can be no assurance that we will be successful
in developing our new products within the projected time-frame and/or within the projected budget estimate. If we experience significant
delays or cost overruns, our operations and plans could be materially adversely affected.
Our
business plan is to establish the first production facility in Israel, which will be the Company’s pilot site for all our
planned product development. We have identified a production site in Israel and we are currently in what we believe to be advanced
negotiations with a third-party regarding the collaboration agreement which will also provide us with the use of facilities for
production. If the negotiations are successfully concluded in a timely manner, we believe the site should be fully operational
by the end of Q1 2019 and our subsidiary’s production line should be ready 2-3 months afterwards. At present, we estimate
that the costs of designing and readying the site to production capability should be approximately US$300,000 to $400,000. This
is in addition to the expected product development costs that are projected to be approximately $385,000 to $565,000 during the
next 18 months.
However,
there can be no assurance that our negotiations with the third-party, or any other party for that matter, in a timely manner or
otherwise, or that we will not experience costs in excess of our budget estimate. In addition, we will continue to be dependent
upon the availability of capital resources and the regulatory environment in Israel, which is expected to be maintained at least
at the present levels.
We
contemplate that in the future, without any fixed timeframe, and subject to applicable regulatory conditions, to follow our Israeli
site with one or more sites in the U.S., but only in those states where cannabis-based medical products are authorized for medicinal
use and/or recreational use. However, at the date of this amended registration statement, we have not yet determined the specific
states where we contemplate establishing production facilities, because the regulatory environment of Cannabis in the U.S. is
continuing to evolve. Furthermore, to date we have not contacted any third-parties in the U.S. or commenced any negotiations with
respect to any production sites in the U.S. nor have we established a budget estimate or any time table for commencing any such
negotiations.
The
Company also has very preliminary plans to establish one or more production sites in Canada and in Germany, both countries where
medical cannabis is regulated but not subject to prohibition. Nevertheless, to date we have not contacted any third-parties in
either Canada or Germany nor have we commenced any negotiations with respect to any production sites in either country. As a result,
we have not established any budget estimates timetables for commencing any such negotiations in Canada or Germany. There can be
no assurance that the existing regulatory environment in Canada or Germany will not change, which could adversely impact our plans.
The
Medical Cannabis Market
Cannabis
has been used for medicinal purposes for thousands of years and there is anecdotal evidence that cannabis may be an effective
treatment for pain relief, inflammation and a number of other medical disorders. According to an
IBIS World
report, new
medical research and changing public opinion have boosted industry growth. Nevertheless, there can be no assurance that any historical
anecdotal evidence of the efficacy of medical cannabis, which the United States government has expressly rejected to date, will
in fact boost industry growth generally or benefit the Company and is prospects specifically. Furthermore, conclusions regarding
efficacy are within the sole authority of the FDA or similar foreign government entity, none of which have established or otherwise
approved the efficacy of cannabis in the treatment of, among other conditions, severe or chronic pain, inflammation, nausea and
vomiting, neurologic symptoms (including muscle spasticity), glaucoma, cancer, multiple sclerosis, post-traumatic stress disorder,
anorexia, arthritis, Alzheimer’s, Crohn’s disease, fibromyalgia, ADD, ADHD, Tourette’s syndrome, spinal cord
injury and numerous other conditions.
The
global medical cannabis market is expected to grow significantly from $8,280.6 million in 2017 to $28,070.0 million in 2024, at
a CAGR of 19.1%
1
.
We
believe that public awareness regarding the perceived medical benefits of cannabis by segments of the medical community as well
as by a growing number of persons publicly, we believe, has led to a growing market in several countries and in those states in
the U.S. where it is currently legal. There can be no assurance that this apparent growing perception will continue and/or result
in greater acceptance of cannabis-based drugs generally or the Company’s planned cannabis powder-based drugs and therapies,
if successfully developed.
Those
manufacturers currently producing medical cannabis typically remove THC, the principal psychoactive compound which causes the
well-known and recognized euphoria related hallucinations or even, what some define, as psychotic episodes on the negative spectrum
of THC’s potential side effects. As a result, the cannabis-based medical products presently in the market then only contain
various formulations of cannabidiol (CBD), a chemical compound which many believe provides health benefits, notwithstanding the
contrary positions of the U.S. federal government and its agencies, the FDA and DEA. At present, many countries and 29 of 50 states
in the U.S. permit the prescription and sale of medical cannabis to adults and although there appears to be a trend in the U.S.
that additional states will approve medical cannabis, laws at the federal level in the U.S. still treat cannabis, whether for
medical or recreational use, as a Class 1 Controlled Substance and illegal.
At
present, cannabis is used widely in health foods and pet medicines. Health foods comprise juices, cannabis edibles, and drinkable
medicines. For instance, Simply Pure, a U.S. based company, offers cannabis edibles and Auntie Dolores, another U.S. based company,
manufactures CBD pet treats to relieve pets of anxiety and pain. Cannabis edibles are offered in the form of lozenges, breath
strips, and gummies. In an attempt to propel market growth, Microsoft Azure has offered its Cloud services to industry participants
for the sale of cannabis.
The
global medical cannabis market is segmented according to applications and regions. Market applications comprise cancer, chronic
pain, arthritis, migraine, and others. Chronic pain is the largest application segment due to a huge patient base. In 2017 it
accounted for nearly 40% of global revenues
2
. We believe that this is the result of an increasing number of clinical
trials related to the use of medical cannabis in pain management. The use of cannabis to treat symptoms and side effects of cancer
treatment is expected to grow at an 18.2% CAGR
3
thru to 2025. Although, medical use of cannabis is considered illegal,
many states I the U.S. are passing legislation to legalize it.
However,
it is the well-known position of the U.S. government that cannabis in any formation has not yet received FDA approval for use
in cancer or any other treatment, nor is any approval anticipated for the foreseeable future. This has adversely impacted and
is expected to continue to limit any potential the growth of medical cannabis for the cancer application or any other segment,
absent any positive results from clinical trials, of which we have no information and therefore cannot make any affirmative assertions
and have no scientific evidence or support.
North
America led the medical cannabis market with nearly 49% shares in 2015
4
. The region is supported by the legalization
of cannabis in 29 of the 50 states of the U.S. as well as in Canada. However, prohibition of medical cannabis in most of Latin
America and Asia has limited the growth of this market to Europe, North America, and other countries world-wide.
Prominent
companies presently engaged in this field include: Cannabis Sativa, Inc.; United Cannabis Corporation; Growblox Sciences, Inc.;
and GW Pharmaceuticals plc which is a UK pharmaceuticals manufacturer that has recently gained FDA approval of GW’s Epidiolex
®
,
a cannabidiol oral solution for the treatment of seizures associated with rare forms of epilepsy.
The
forecast level of retail sales in the US of medical cannabis for the years 2013 to 2021 is shown in the table:
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
|
2021
|
|
|
|
$b
|
|
|
$b
|
|
|
$b
|
|
|
$b
|
|
|
$b
|
|
|
$b
|
|
|
$b
|
|
|
$b
|
|
|
$b
|
|
Minimum
|
|
|
1.6
|
|
|
|
1.6
|
|
|
|
2.0
|
|
|
|
2.2
|
|
|
|
2.5
|
|
|
|
2.9
|
|
|
|
3.1
|
|
|
|
3.7
|
|
|
|
4.8
|
|
Maximum
|
|
|
1.6
|
|
|
|
2.0
|
|
|
|
2.4
|
|
|
|
2.7
|
|
|
|
3.2
|
|
|
|
3.8
|
|
|
|
4.3
|
|
|
|
5.1
|
|
|
|
6.8
|
|
Source:
Medical Marijuana in the US, Statista, 2018
Competition
We
will face competition from larger companies that are or may be in the process of offering similar products to ours. Many of our
current and potential future competitors have far longer operating histories, significantly greater financial, marketing and other
resources than we may be expected to have for the foreseeable future and beyond.
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 and, as a likely result, dominate 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 any perceived competitive advantage from our cannabis-based powder formulations
in the marketplace if, indeed, we are successful in producing cannabis powder-based drugs and therapies.
Our
success, of which there can be no assurance, will also depend on our ability to respond quickly to, among other things, changes
in the economy, market conditions, and competitive pressures, as well as the availability of adequate capital resources to fund
our development plan. Any failure to anticipate or respond adequately to such changes, or any insufficiency of capital resources
as they are needed to implement our development plan would have a material effect on our financial condition, operating results,
liquidity, cash flow and our operational performance.
Intellectual
Property
At
present, all of our research and development is conducted in Israel and is the subject of the feasibility study being conducted
at Hebrew University, pursuant to the terms of a Feasibility Study between Canna Powder Israel and Yissum. To date, the Company
has paid Yissum $30,000 in 3 monthly installments of $10,000 under the Feasibility Study.
The
technology involves the use of a Nanometric powder formulation (solid) comprising of a cannabinoid oil and other materials which
is dispersed in water controlled by several repeatable parameters. The oil concentration can be increased or decreased in the
process and can include permeation enhancers for increasing bioavailability. In addition, it can be formulated in various pharmaceutical
delivery systems such as capsules, tablets, creams and aqueous dispersions.
The
cannabinoid-based medicinal powders intended to be developed in conjunction with Yissum contain controlled substance (cannabis)
as defined in the Israeli Dangerous Drugs Ordinance [New Version], 5733 - 1973. In Israel, licenses to cultivate, possess and
to use cannabis for medical research are granted by the Ministry of Health, IMCU - Israel Medical Cannabis Unit, on an ad-hoc
basis. On May 2, 2018, Canna Powder Israel also entered into a License Agreement and a Research Agreement with Yissum, copies
of which were filed as Exhibits 10.2 and 10.3 to the Form 8-K filed with the SEC on May 25, 2018, as discussed below. Fully-executed
copies of the License Agreement and Research Agreement are attached hereto as exhibits 10.2.2 and 10.3.3, respectively.
Pursuant
to the License Agreement, our subsidiary was granted an exclusive license to make commercial use of the Licensed Technology (as
defined in the License Agreement attached as exhibit 10.2.2 hereto) developed by Prof. Shlomo Magdassi and Dr. Liraz Larush from
Casali Center, Institute of Chemistry, The Hebrew University of Jerusalem working in collaboration with Rafi Ezra, CTO of Canna
Powder Israel. The License Agreement further provides that Yissum shall retain the right: (i) to make, use and practice the Licensed
Technology for the University’s own research and educational purposes; (ii) to license or otherwise convey to other academic
and not-for-profit research organizations, the Licensed Technology for use in non-commercial research; and (iii) to license or
otherwise convey the Licensed Technology to any third party for research or commercial applications, subject to the terms of the
License Agreement, which shall expire, upon the later of: (i) the date of expiration in such country of the last to expire Licensed
Patent (as defined in the License Agreement) included in the Licensed Technology; (ii) the date of expiration of any exclusivity
on the product granted by a regulatory or government body in such country; or (iii) the end of a period of 20 years from the date
of the first commercial sale in such country.
The
License Agreement further provides as follows:
(a)
Upon the expiration of the later of the periods set forth above, the Subsidiary shall have a fully-paid non-exclusive license
to the know-how, and shall have an irrevocable option to obtain an exclusive license to the know-how by paying Yissum 50% of the
net sales and any sublicense consideration (as defined in the License Agreement);
(b)
The License which shall continue for a period of 2 years after termination of the later of the periods as referred to above and
shall be renewed automatically for additional successive 2-year periods, unless our Subsidiary or Yissum notifies the other that
it does not wish the License to be renewed;
(c)
The Subsidiary shall only be entitled to grant a Sublicense after obtaining Yissum’s written approval regarding the identity
of the Sublicensee and all material terms and conditions of the Sublicense; and
(d)
In consideration for the grant of the License, the Subsidiary shall pay Yissum the royalties at a rate of 4% of net sales; (ii)
Sublicense fees at a rate of 20% of sublicense consideration.
Pursuant
to the terms of the Research Agreement, the following material provisions apply:
(a)
The Research shall commence following the actual written receipt by Yissum of an applicable permit to perform the Research issued
by the Israeli Ministry of Health, with prompt notice to the Subsidiary;
(b)
The Research will be performed by or under the control and supervision of Professor Shlomo Magdassi;
(c)
The Subsidiary shall pay Yissum ten thousand US$10,000 per month, inclusive of overhead in consideration for the performance of
the Research.
Government
Regulation - United States
The
legal cannabis industry in the U.S. has evolved considerably during the past five years and many observers believe that the industry
may have reached or may soon reach the point where further legalization in additional states will follow. We believe that this
will be as the result of likely growing pressure from citizens’ groups in individual states in the U.S. for the legalization
of medical cannabis. At the United States federal level, cannabis is still classified as an illegal substance under the Controlled
Substances Act. This classification makes cannabis illegal under federal law to cultivate, manufacture, distribute or possess
cannabis, and has created a discrepancy between state’s rights and federal law. It also means that production must be local
to consumption as it cannot cross state lines.
Public
support has resulted in the passing of new cannabis laws and regulations in a number of countries and 29 states in the U.S.
Countries
world-wide, except perhaps in Latin American and Asia, are already responding to the state-by-state dismantling of prohibition
in America by moving to allow medical use (as in Australia, Germany, and Colombia) or to outright legalization (as in Uruguay).
We
believe cannabinoid-based drugs using the powders we plan on developing may be able to provide a treatment model for patients
suffering from certain diseases, disorders and medical conditions. Nevertheless, at present, because of U.S. FDA and DEA restrictions,
most companies involved in research and development of cannabinoid therapeutic applications currently use synthetics and we cannot
state when or if this will change. Furthermore, the Company has not yet commenced any preclinical development, filing of an IND,
phase I trials, phase II trials, phase III trials, and submission of an NDA, all of which is required by the FDA for drug approval.
To
the extent that in the future, we shall seek to be able to conduct some of our research and development relating to our cannabis
powders in the United States, we will become subject to the United States’ Federal Controlled Substances Act of 1970 and
regulations promulgated thereunder. While cannabis is a Schedule I controlled substance, drugs approved for medical use in the
United States that contain cannabis or cannabis extracts must be placed in Schedules II-V, since approval by the FDA satisfies
the “accepted medical use” requirement. If any of our drug candidates, if and when developed, of which there can be
no assurance, will receive approval by the FDA, such drugs under present regulations and laws must be listed by the Drug Enforcement
Agency or DEA as a Schedule II or III controlled substance to be allowed for commercialization. Consequently, the manufacture,
importation, exportation, domestic distribution, storage, sale and legitimate use of our future drugs will be subject to a significant
degree of regulation by the DEA. In addition, individual states in the United States have also established controlled substance
laws and regulations. Though state-controlled substances laws often mirror federal law because the states are separate jurisdictions,
they may separately schedule our drugs.
To
the extent that we plan in the future to sell nanometric cannabis powder to product development companies and the creation of
our own final cannabis products, we will become subject to applicable Good Manufacturing Practice (“GMP”) regulations
on our business and the FDA approval process related to planned final cannabis products. The impact of a GMP certificate on our
planned business is very limited as there are many states in the U.S. where a GMP certificate for a Cannabis product is not required
and the Company does not limit itself where to operate. The Company has not performed any pre-industrial meeting with the FDA
and has not begun to design a clinical trial for its planned products. As a result, the Company cannot determine at present with
any certainty the FDA requirements necessary for approval of our planned products if, in fact, we will be in position to seek
FDA approval. We understand that prior to scheduling any pre-industrial meeting(s) with the FDA, we will have to have completed
product development and designated a candidate clinical indication. At present, it is uncertain if and when this information will
be available, if ever.
Government
Regulation - The European Community
Even
though we do not currently intend to conduct research and development in the European Community, we may seek to do so in the future.
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 THC - the principal psychoactive cannabinoid of cannabis - as a 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 drugs in those countries. These countries may not be willing or able to amend
or otherwise modify their laws and regulations to permit our drug candidates to be manufactured and/or marketed or achieving such
amendments to the laws and regulations may take a prolonged period. In the European Community, medical cannabis program regulatory
frameworks exist in countries, including the Netherlands, Italy, Germany, Finland, Norway, Ukraine, Estonia, Switzerland and the
Czech Republic. It is also anticipated that there will be policy changes in many member countries of the European Union regarding
the medical use of cannabis and cannabinoid-derived drugs.
Government
Regulation - Israel
Because
of our intention to develop drugs containing cannabis plant-derived cannabinoids, we will be required to conduct our research
and development activities in Israel. The cannabinoid-based drugs we hope and intend to develop, contain controlled substance
(cannabis) as defined in the Israeli Dangerous Drugs Ordinance [New Version], 5733 - 1973. In Israel, licenses to cultivate, possess
and to use cannabis for medical research are granted by the Ministry of Health, IMCU - Israel Medical Cannabis Unit, on an ad-hoc
basis. If we proceed in Israel, we intend to obtain necessary IMCU licenses to carry out our drug development projects. This will
require our acquiring the cannabis needed for our research activities from an Israeli government-licensed medical cannabis grower.
Because we do not have a license to possess cannabis, the cannabis that will be required for our studies must be transported from
the licensed grower directly to our research facilities or those of a contract research organization, in compliance with a license
to use cannabis for medical research. If we proceed with research in Israel, we will apply for all necessary licenses needed to
conduct our drug development projects. There can be given no assurance that we will obtain all necessary licenses and approvals.
We
believe that there will be rising demand for cannabinoid-derived drugs and that future growth is likely to be driven by favorable
changes in legislation and demographic factors. Controlled substance laws differ between countries and legislation in certain
countries may restrict or limit our ability to distribute our cannabis-based powders, once developed, for us if drugs. Nevertheless,
we believe that the U.S. can potentially represent a major market for CannaPowder-based drug candidates.
DESCRIPTION
OF PROPERTY
Our
office facilities are located at 20 Raoul Wallenberg Street, Tel Aviv, Israel, consisting of 1200 square feet at a base monthly
rent of $500. These offices are leased from an entity related to Attribute Ltd, a Selling Shareholder, which rent represents the
fair market value of the facilities. The Company believes that its facilities are sufficient for the foreseeable future and until
we actively commence our sales and marketing efforts. At such time, we believe that adequate facilities will be available for
our Subsidiary’s operations at terms satisfactory to the Company.
LEGAL
PROCEEDINGS
We
know of no material, active or pending legal proceedings against our Company, nor of any proceedings that a governmental authority
is contemplating against us. We know of no material proceedings to which any of our directors, officers, affiliates, owner of
record or beneficially of more than 5 percent of our voting securities or security holders is an adverse party or has a material
interest adverse to our interest.
MARKET
FOR REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDER MATTER
Market
Information
Our
common stock is quoted on the OTC Pink Sheets Market under the symbol SMGY, an inter-dealer automated quotation system for equity
securities not included on The Nasdaq Stock Market. Quotation of the Company’s securities on the OTC Pink Sheets Market
limits the liquidity and price of the Company’s common stock more than if the Company’s shares of common stock were
listed on The Nasdaq Stock Market or a national exchange. For the periods indicated, the following table sets forth the high and
low bid prices per share of common stock. The below prices represent inter-dealer quotations without retail markup, markdown,
or commission and may not necessarily represent actual transactions.
|
|
Price
Range
|
|
Period
|
|
High
|
|
|
Low
|
|
Year
Ended December 31, 2015:
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
2.70
|
|
|
$
|
1.01
|
|
Second
Quarter
|
|
$
|
2.69
|
|
|
$
|
0.99
|
|
Third
Quarter
|
|
$
|
0.99
|
|
|
$
|
0.86
|
|
Fourth
Quarter
|
|
$
|
0.75
|
|
|
$
|
0.60
|
|
Year
Ended December 31, 2016:
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
0.48
|
|
|
$
|
0.35
|
|
Second
Quarter
|
|
$
|
0.35
|
|
|
$
|
0.35
|
|
Third
Quarter
|
|
$
|
0.35
|
|
|
$
|
0.35
|
|
Fourth
Quarter
|
|
$
|
0.35
|
|
|
$
|
0.35
|
|
Year
Ending December 31, 2017:
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
1.00
|
|
|
$
|
0.35
|
|
Second
Quarter
|
|
$
|
0.51
|
|
|
$
|
0.51
|
|
Third
Quarter
|
|
$
|
1.00
|
|
|
$
|
0.51
|
|
Fourth
Quarter
|
|
$
|
0.62
|
|
|
$
|
0.51
|
|
Year
Ending December 31, 2018:
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
1.50
|
|
|
$
|
0.52
|
|
Second
Quarter
|
|
$
|
1.00
|
|
|
$
|
0.05
|
|
Third
Quarter
|
|
$
|
1.90
|
|
|
$
|
1.90
|
|
Our
stock transfer agent is Transfer Online, Inc., with offices located at 512 SE Salmon Street, Portland, OR 97214. Their phone number
is (503) 227-2950 and email address is: info@transferonline.com.
Holders.
As of December 10, 2018, there 227 registered stockholders holding 10,518.226 shares of Common Stock.
Dividends.
We have never declared or paid any cash dividends on our common stock nor do we anticipate paying any in the foreseeable future.
We expect to retain any future earnings to finance our operations and expansion. The payment of cash dividends in the future will
be at the discretion of our Board of Directors and will depend upon our earnings levels, capital requirements, any restrictive
loan covenants and other factors the Board considers relevant.
Equity
Compensation Plans.
We do not have any equity compensation plans.
INDEX
TO FINANCIAL STATEMENTS
CANNA
POWDER, INC.
CONSOLIDATED
BALANCE SHEETS
AS
OF SEPTEMBER 30, 2018 AND DECEMBER 31, 2017
(unaudited)
|
|
September
30, 2018
|
|
|
December
31, 2017
|
|
|
|
(unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
721,414
|
|
|
$
|
326,730
|
|
Prepaid
expenses
|
|
|
14,517
|
|
|
|
4,196
|
|
Total
current assets
|
|
|
735,931
|
|
|
|
330,926
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
735,931
|
|
|
$
|
330,926
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
-
|
|
|
$
|
800
|
|
Total
current liabilities
|
|
|
-
|
|
|
|
800
|
|
|
|
|
|
|
|
|
|
|
Notes
payable
|
|
$
|
-
|
|
|
$
|
2,687
|
|
Total
long-term liabilities
|
|
|
-
|
|
|
|
2,687
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
$
|
-
|
|
|
$
|
3,487
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock, par value $0.00001 per share, 495,000,000 common shares authorized, 5,000,000 preferred shares authorized; 9,948,077
and 8,591,577 shares issued and outstanding at September 30, 2018 and December 31, 2017 respectively.
|
|
$
|
99
|
|
|
$
|
86
|
|
Accumulated
other comprehensive income
|
|
|
(4,670
|
)
|
|
|
3,353
|
|
Non-controlling
interest
|
|
|
(21,872
|
)
|
|
|
-
|
|
Additional
paid in capital
|
|
|
1,261,051
|
|
|
|
447,164
|
|
Accumulated
deficit
|
|
|
(498,677
|
)
|
|
|
(123,164
|
)
|
|
|
|
|
|
|
|
|
|
Total
stockholders’ equity
|
|
|
735,931
|
|
|
|
327,439
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
735,931
|
|
|
$
|
330,926
|
|
The
accompanying notes are an integral part of these financial statements
CANNA
POWDER, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR
THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017
(unaudited)
|
|
For
the three months ended
|
|
|
For
the nine months ended
|
|
|
|
September
30, 2018
|
|
|
September
30, 2017
|
|
|
September
30, 2018
|
|
|
September
30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and Development expenses
|
|
|
(45,321
|
)
|
|
|
-
|
|
|
|
(102,202
|
)
|
|
|
-
|
|
G&A
Expenses
|
|
|
(57,300
|
)
|
|
|
(10,774
|
)
|
|
|
(295,183
|
)
|
|
|
(14,724
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
(102,621
|
)
|
|
|
(10,774
|
)
|
|
|
(397,385
|
)
|
|
|
(14,724
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)
from operations
|
|
|
(102,621
|
)
|
|
|
(10,774
|
)
|
|
|
(397,385
|
)
|
|
|
(14,724
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain
(loss) from debt settlement
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
50
|
|
Interest
expense
|
|
|
-
|
|
|
|
(362
|
)
|
|
|
-
|
|
|
|
(534
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense)
|
|
|
-
|
|
|
|
(362
|
)
|
|
|
-
|
|
|
|
(484
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss)
|
|
|
(102,621
|
)
|
|
|
(11,136
|
)
|
|
|
(397,385
|
)
|
|
|
(15,208
|
)
|
Less:
loss (income) attributable to non-controlling Interest
|
|
|
6,685
|
|
|
|
-
|
|
|
|
21,872
|
|
|
|
-
|
|
Net
(loss) attributable to CannaPowder, Inc.
|
|
|
(95,936
|
)
|
|
$
|
(11,136
|
)
|
|
$
|
(375,513
|
)
|
|
$
|
(15,208
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share
|
|
|
(0.01
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(0.02
|
)
|
Weighted average
shares outstanding Basic and diluted
|
|
|
9,948,077
|
|
|
|
624,910
|
|
|
|
9,372,940
|
|
|
|
624,910
|
|
The
accompanying notes are an integral part of these financial statements.
CANNA
POWDER, INC.
STATEMENTS
OF COMPREHENSIVE LOSS
FOR
THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017
(unaudited)
|
|
For
the three months ended
|
|
|
For
the Nine months ended
|
|
|
|
September30,
2018
|
|
|
September
30, 2017
|
|
|
September
30, 2018
|
|
|
September
30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(95,936
|
)
|
|
$
|
(11,136
|
)
|
|
$
|
(375,813
|
)
|
|
$
|
(15,208
|
)
|
Change
in unrealized foreign currency translation gain (loss)
|
|
|
(874
|
)
|
|
|
-
|
|
|
|
(8,023
|
)
|
|
|
-
|
|
Total
comprehensive loss
|
|
|
(96,810
|
)
|
|
|
(11,136
|
)
|
|
|
(383,536
|
)
|
|
|
(15,208
|
)
|
Less:
comprehensive loss attributable to non-controlling interest
|
|
|
6,685
|
|
|
|
-
|
|
|
|
21,872
|
|
|
|
-
|
|
Comprehensive
loss attributable to CannaPowder, Inc.
|
|
|
(90,125
|
)
|
|
$
|
(11,136
|
)
|
|
$
|
(361,664
|
)
|
|
$
|
(15,208
|
)
|
The
accompanying notes are an integral part of these financial statements.
CANNA
POWDER, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2018 and 2017
(unaudited)
|
|
For
the nine months
|
|
|
For
the nine months
|
|
|
|
ended
|
|
|
ended
|
|
|
|
September
30, 2018
|
|
|
September
30, 2017
|
|
|
|
|
|
|
|
|
Operating
Activities:
|
|
|
|
|
|
|
|
|
Net
(loss) attributable to CannaPowder, Inc.
|
|
$
|
(375,513
|
)
|
|
$
|
(15,208
|
)
|
Non
–controlling interest in loss of consolidated subsidiary
|
|
|
(21,872
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net (loss) to net cash (used in) operating activities:
|
|
|
|
|
|
|
|
|
Changes
in net assets and liabilities:
|
|
|
|
|
|
|
|
|
Decrease
(increase) in prepaid expenses
|
|
|
(10,321
|
)
|
|
|
-
|
|
Decrease
(increase) in gain on settlement of notes payable
|
|
|
-
|
|
|
|
(50
|
)
|
(Decrease)
increase in accounts payable
|
|
|
(800
|
)
|
|
|
(495
|
)
|
(Decrease)
increase in accrued expenses
|
|
|
-
|
|
|
|
(750
|
)
|
|
|
|
|
|
|
|
|
|
Net
Cash used in operating activities
|
|
|
(408,506
|
)
|
|
|
(16,503
|
|
|
|
|
|
|
|
|
|
|
Financing
Activities:
|
|
|
|
|
|
|
|
|
Debt
and principal payments on debt
|
|
|
(2,687
|
)
|
|
|
-
|
|
Issuance
of non -convertible notes
|
|
|
-
|
|
|
|
16,503
|
|
Proceeds
from sale of common stock (net of issuance expenses)
|
|
|
813,900
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net
Cash provided by financing activities
|
|
|
811,213
|
|
|
|
16,503
|
|
FX
Adjustment
|
|
|
(8,023
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash
|
|
|
394,684
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents - beginning of period
|
|
$
|
326,730
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents - end of period
|
|
$
|
721,414
|
|
|
|
-
|
|
The
accompanying notes are an integral part of these financial statements.
CANNA
POWDER, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
(1) Summary of Significant Accounting Policies
Basis
of Presentation and Organization
The
Company was incorporated in 1999 in the state of Utah under the name Datigen.com, Inc. On August 25, 2005, the Company changed
its state of incorporation from Utah to Nevada by the merger of the Company with and into its wholly-owned subsidiary, CannaPowder, Inc., a Nevada corporation. As a result of such merger, the Company’s name was changed to CannaPowder, Inc.
in order to better reflect the Company’s business operations.
On
August 30, 2017, a new wholly-owned subsidiary was registered in Israel under the name of Canna Powder Ltd. (“CannaPowder
Israel” or the “Subsidiary”), with 100 common shares outstanding, 0.01 NIS par value (the “Subsidiary
Shares”), all of which were held in escrow on behalf of the Company by Israel attorney, Alon Nave. On September 27, 2017,
pursuant to board resolution, the 100 Subsidiary Shares held in escrow were transferred to the Company.
On
December 27, 2017, a board-resolution was adopted to issue an additional: (i) 800 Subsidiary Shares to the Company; and an additional
100 Subsidiary Shares to Rafi Ezra and, as a result, effective December 27, 2017, Canna Powder Ltd became a 90% owned subsidiary
of the Company and a minority interest of 10% owned by Rafi Ezra.
The
Subsidiary’s management includes Lavi Krasney, its CEO, and Rafi Ezra, its CTO. Mr. Krasney has over 20 years of international
experience in corporate finance, venture capital and investment banking. He has served as CEO and director of several private
companies. Mr. Ezra is a highly experienced pharmacist with extensive knowledge of the cannabis sector and active experience of
leading early-stage pharma companies from early-stage development through commercial launch.
Development
is being conducted at the Hebrew University pursuant to the term of the Feasibility Study and Option Agreement under the supervision
of the inventor of the technology, Professor Shlomo Magdassi.
The
Company reasonably expects that the Development Program will be completed within three years, with commercial sales starting in
2021, however there can be no assurance that the Development Program will, in fact, be successful. Notwithstanding the Company’s
success in its Equity Raise to date, nor can there be assurance that the Company may not require additional capital to fully implement
its business plan and complete production of commercially viable products based on its technology which is the subject of the
Feasibility Study discussed below under “Planned Research and Development and Current Trends.”
In
the commercial stage, the Company’s plan is to establish and operate several production facilities, each located in separate
territories determined by the Company according to their size and regulatory environment that permits studies applicable to other
activities prerequisite to commercial exploitation of medical cannabis generally and the Company’s plan to develop cannabis-based
powders for medical uses. While there can be no assurance, at present the Company believes that it will be able to produce cannabis
powders for medical uses at a significant cost advantage.
The
accompanying unaudited financial statements of the Company are presented in accordance with the requirements of Form 10-Q and
Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared
in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) have been
condensed or omitted pursuant to such SEC rules and regulations. In the opinion of management, all adjustments (consisting of
normal recurring adjustments) considered necessary for an air presentation have been made. The results for these interim periods
are not necessarily indicative of the results for the entire year. The accompanying financial statements should be read in conjunction
with the Company’s audited financial statements for the year ended December 31, 2017 and the notes thereto included in the
Company’s Report on Form 10-K12G filed with the SEC on April 30, 2018.
Cash
and Cash Equivalents
For
purposes of reporting within the statement of cash flows, the Company considers all cash on hand, cash accounts not subject
to withdrawal restrictions or penalties, and all highly liquid debt instruments purchased with a maturity of three months or
less to be cash and cash equivalents. As of September 30, 2018, and December 31, 2017, we had cash and cash
equivalents of $815,058 and $326,730 respectively.
Reclassifications
Certain
prior year amounts have been reclassified to conform to the current period presentation. These reclassifications had no impact
on net earnings, financial position or cash flows.
Discontinued
Operations
The
Company follows the policy of segregating the assets and liabilities of subsidiaries or lines of business on its Balance Sheet
from the assets liabilities of continuing subsidiaries or lines of businesses when it is decided to close or dispose of a subsidiary
or line of business. The Company also, follows the policy of separately disclosing the assets and liabilities and the net operations
of a subsidiary or line of business in its financial statements when it is decided to close or dispose of a subsidiary or line
of business.
Revenue
Recognition
The
Company recognizes revenue ratably over the term of the contract in accordance with ASC 606. In 2018, we are implementing new
internal controls as part of our efforts to adopt the new revenue recognition standard. These internal controls include providing
global training to our finance team and holding regular meetings with management and the Audit Committee to review and approve
key decisions. Upon adoption, we expect to implement new internal controls related to our accounting policies and procedures.
We will require new internal controls to address risks associated with applying the five-step model, specifically related to judgments
made in connection to variable consideration and applying the constraint. Additionally, we will establish monitoring controls
to identify new sales arrangements and changes in our business environment that could impact our current accounting assessment.
During the second half of 2018, we expect to finalize our impact assessment and redesign impacted processes, policies and controls.
Loss
per Common Share
Basic
loss per share is computed by dividing the net loss attributable to the common stockholders by the weighted average number of
shares of common stock outstanding during the period. Fully diluted loss per share is computed similar to basic loss per share
except that the denominator is increased to include the number of additional common shares that would have been outstanding if
the potential common shares had been issued and if the additional common shares were dilutive.
Income
Taxes
Income
taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are determined based on temporary
differences between the bases of certain assets and liabilities for income tax and financial reporting purposes. The deferred
tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating
the differences.
The
Company maintains a valuation allowance with respect to deferred tax assets. The Company establishes a valuation allowance based
upon the potential likelihood of realizing the deferred tax asset and taking into consideration the Company’s financial
position and results of operations for the current period. Future realization of the deferred tax benefit depends on the existence
of sufficient taxable income within the carryforward period under the Federal tax laws.
Changes
in circumstances, such as the Company generating taxable income, could cause a change in judgment about the realizability of the
related deferred tax asset. Any change in the valuation allowance will be included in income in the year of the change in estimate.
Fair
Value of Financial Instruments
The
Company estimates the fair value of financial instruments using the available market information and valuation
methods. Considerable judgment is required in estimating fair value. Accordingly, the estimates of fair value may not be
indicative of the amounts the Company could realize in a current market exchange. As of September 30, 2018 and
December 31 2017, the carrying value of accounts payable and accrued liabilities approximated fair value due to the
short-term nature and maturity of these instruments.
Deferred
Offering Costs
The
Company defers as other assets the direct incremental costs of raising capital until such time as the offering is completed. At
the time of the completion of the offering, the costs are charged against the capital raised. Should the offering be terminated,
deferred offering costs are charged to operations during the period in which the offering is terminated.
Impairment
of Long-Lived Assets
The
Company evaluates the recoverability of long-lived assets and the related estimated remaining lives when events or circumstances
lead management to believe that the carrying value of an asset may not be recoverable. As of December 31, 2017, no events or circumstances
occurred for which an evaluation of the recoverability of long-lived assets was required.
Estimates
The
financial statements are prepared on the basis of accounting principles generally accepted in the United States. The preparation
of financial statements in conformity with generally accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities as of September 30, 2018 and December 31, 2017,
and expenses for the nine months ended September 30, 2018 and 2017. Actual results could differ from those estimates
made by management.
Impact
of Recently Issued Accounting Standards
In
June 2018, the FASB issued Accounting Standards Update, or ASU 2018-07, Compensation - Stock Compensation (Topic 718), which simplifies
the accounting for non-employee share-based payment transactions. The new standard expands the scope of Topic 718 to include share-based
payment transactions for acquiring goods and services from non-employees. ASU 2018-07 is effective for fiscal years beginning
after December 15, 2018 (including interim periods within that fiscal year), with early adoption permitted. The Company adopted
the new standard in the second quarter of 2018 and determined that the application of the new standard did not have a material
impact on the Company’s unaudited condensed consolidated financial statements as of and for the three and nine months
ended September 30, 2018.
In
January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. Public
business entities should apply the amendments in this Update to annual periods beginning after December 15, 2017, including interim
periods within those periods. All other entities should apply the amendments to annual periods beginning after December 15, 2018,
and interim periods within annual periods beginning after December 15, 2019.
In
March 2017, the FASB issued Update 2017-08—Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20):
Premium Amortization on Purchased Callable Debt Securities. For public business entities, the amendments in this Update are
effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other
entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal
years beginning after December 15, 2020. Early adoption is permitted, including adoption in an interim period. If an entity
early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year
that includes that interim period.
In
March 2017, the FASB issued Update 2017-07—Compensation—Retirement Benefits (Topic 715): Improving the Presentation
of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. Effective for public business entities for annual periods
beginning after December 15, 2017, including interim periods within those annual periods. For other entities, the amendments in
this Update are effective for annual periods beginning after December 15, 2018, and interim periods within annual periods beginning
after December 15, 2019. Early adoption is permitted as of the beginning of an annual period for which financial statements (interim
or annual) have not been issued or made available for issuance. That is, early adoption should be within the first interim period
if an employer issues interim financial statement. Disclosures of the nature of and reason for the change in accounting principle
are required in the first interim and annual periods of adoption.
Goodwill
and Intangible Assets
Goodwill
is tested for impairment at a minimum on an annual basis. Goodwill is tested for impairment at the reporting unit level by first
performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit
is less than its carrying value. If the reporting unit does not pass the qualitative assessment, then the reporting unit’s
carrying value is compared to its fair value. The fair values of the reporting units are estimated using market and discounted
cash flow approaches. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. The
discounted cash flow approach uses expected future operating results. Failure to achieve these expected results may cause a future
impairment of goodwill at the reporting unit.
Intangible
assets consist of patents and trademarks, purchased customer contracts, purchased customer and merchant relationships, purchased
trade names, purchased technology, and non-compete agreements. Intangible assets are amortized over the period of estimated benefit
using the straight-line method and estimated useful lives ranging from two to twenty years. No significant residual value is estimated
for intangible assets.
Note
(2) Going Concern
The
Company has limited operations. The Company was previously engaged in activities including efforts to develop and market its Battery
Brain technology, which efforts ceased during the quarter ended September 30, 2009. On August 30, 2017, the Company formed a subsidiary
in Israel under the name of Canna Powder Ltd (“Canna Israel” or the “Subsidiary”) which is 90% owned by
the Company and the remaining 10% is owned by Rafi Ezra, co-founder and CTO of Canna Powder Ltd. The Subsidiary commenced efforts
to develop the formulation and process to produce medical products using new technology involving nano-powder derived from cannabis
oil. The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the
United States of America, which contemplate continuation of the Company as a going concern. The Company has not yet generated
any revenue to cover its operating costs, and as such, has incurred an operating loss since inception. These and other factors
raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements
do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the
amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern
.
Note
(3) Prepaid expenses
Prepaid
expenses repaid expenses of $14,517 at September 30, 2018 and $4,196 at December 31, 2017, consist of VAT paid to be refunded
from the Israel VAT authority.
Note
(4) Common Stock
On
October 17, 2017, the Company sold a total of 6,300,000 shares to 13 shareholders at $0.01 per share for a total cash consideration
of $63,000. Four of the shareholders are related parties.
On
October 24, 2017 the Company issued 666,667 shares to 1 shareholder at $0.075 per share for cash consideration of $50,000.
Between
November 15, 2017 and December 7, 2017, the Company sold a total of 1,000,000 units for cash consideration of $300,000 at price
of $.30 (the “Units”), each unit comprised of one share of common stock and one class A warrant exercisable at $0.50
per share with a term of 24 months. The relative fair value of the stock with embedded warrants was $132,458 for the common stock
and $167,542 for the class A warrants. The warrants were valued using the Black-Scholes model with volatility of approximately
163% and discount rates ranging from 1.68% to 1.8%.
Between
March 20, 2018 and March 29, 2018, the Company sold a total of 206,000 units for cash consideration of $123,600 at price of $.60
(the “Units”), each unit comprised of one share of common stock and one class B warrant exercisable at $1.20 per share
with a term of 24 months. The relative fair value of the stock with embedded warrants was $44,454 for the common stock and $
79,146
for the class B Warrants.
Between
April 3, 2018 and May 14, 2018, the Company sold a total of 1,150,500 units for cash consideration of $690,300 at price of $.60
(the “Units”), each unit comprised of one share of common stock and one class B warrant exercisable at $1.20 per share
with a term of 24 months. The relative fair value of the stock with embedded warrants was $290,996 for the common stock and $399,304
for the class B Warrants.
The
above-referenced issuances and sales of the Company’s securities was made in reliance upon the exemption provided by Regulation
S and, to a lesser extent, Regulation D, promulgated by the SEC under the Act.
On
September 30, 2018 and December 31, 2017 there were approximately 217 and 189 holders of record and 9,948,077 and 8,591,577 of
the Company’s common stock authorized with $0.00001 par value, respectively. All common shares are entitled to one vote
per share in all matters submitted to the shareholders. No preferred shares are issued and outstanding at September 30, 2018 and
December 31, 2017.
Dividends
The
Company has not declared or paid any cash dividends on its common stock nor does it anticipate paying any in the foreseeable future.
Furthermore, the Company expects to retain any future earnings to finance its operations and expansion. The payment of cash dividends
in the future will be at the discretion of its Board of Directors and will depend upon its earnings levels, capital requirements,
any restrictive loan covenants and other factors the Board considers relevant.
Securities
Authorized for Issuance under Equity Compensation Plans – None.
Following
is a table of warrant and options still outstanding and exercisable along with exercise price and range of remaining term.
Type
|
|
Quantity
|
|
|
Exercise
Price
|
|
|
Remaining
Term
|
Warrants
Class A
|
|
|
1,000,000
|
|
|
$
|
0.50
|
|
|
18
Months
|
Warrants
Class B
|
|
|
1,356,500
|
|
|
$
|
1.20
|
|
|
18-24
Months
|
Total
|
|
|
2,356,500
|
|
|
|
|
|
|
|
Note
(5) Income Taxes
The
Company had deferred income tax assets as of September 30, 2018 and December 31, 2017 as follows:
|
|
September
30, 2018
|
|
|
2017
|
|
Loss
carryforwards
|
|
$
|
104,722
|
|
|
$
|
43,107
|
|
Less-
Valuation allowance
|
|
|
(104,722
|
)
|
|
|
(43,107
|
)
|
Total
net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
The
Company provided a valuation allowance equal to the deferred income tax assets for the period ended September 30, 2018 and December
31, 2017, because it is not presently known whether future taxable income will be sufficient to utilize the loss carryforwards.
As
of September 30, 2018, and December 31, 2017, the Company had approximately $498,677 and $123,164, respectively, in tax loss carryforwards
that can be utilized in future periods to reduce taxable income, and expire by the year 2030.
The
Company did not identify any material uncertain tax positions that will be filed. The Company did not recognize any interest or
penalties for unrecognized tax benefits during the year ended September 30, 2018 and December 31, 2017.
The
Company intends to file income tax returns in the United States. All tax years are closed by expiration of the statute of limitations.
Note
(6) Related Party Transactions
On
October 17, 2017 the issuer’s control persons, Amir Uziel, Attribute Ltd, Lavi Krasney and Kfir Silberman (controlling shareholder
of L.I.A. Pure Capital Ltd) purchased 650,000 additional shares each, or 2,600,000 total shares at $0.01 per share for a total
cash consideration of $26,000.
On
May 1, 2018 a services agreement for was signed with an entity controlled by a related party, no warrants or shares have been
issued as a result of this agreement.
Between
January 8, 2017 and August 25, 2017 three shareholders loaned the Company amounts totaling $16,403 in loans bearing 8% interest
which have no maturity dates. The loans which accrued interest of $879 were repaid on December 20, 2017. The three debt holders
confirmed they were owed no principal or interest as of December 31, 2017.
Note
(7) Notes Payable
During
the year ended December 31, 2017, the Company borrowed $100 and $800, respectively, which the loans bear an interest rate of 8%
and has no maturity date. The loans were repaid in the amount of $850 on May 5, 2017 and the Company recorded a gain on debt extinguishment
of $50.
On
May 12, 2016 a shareholder loaned the Company the sum of $5,000 to settle a vendor debt. The shareholder has subsequently forgiven
the debt resulting from this payment and has confirmed he is owed no principal or interest as of December 31, 2016 and December
31, 2017. As of December 31, 2016, the amount paid by the shareholder to the vendor was forgiven, as the shareholder is a related
party the forgiven debt resulted in an increase to additional paid in capital.
Between
January 8, 2017 and August 25, 2017 three shareholders loaned the Company amounts totaling $16,403 in loans bearing 8% interest
which have no maturity dates. The loans which accrued interest of $879 were repaid on December 20, 2017. The three debt holders
confirmed they were owed no principal or interest as of December 31, 2017.
On
December 22, 2017 a loan was made in the amount $2,687 the loan bears no interest and has no maturity date. The loan which accrued
interest of $0 was repaid in full on January 8, 2018
Note
(8) Subsequent Events
Between
October 22, 2018 and October 23, 2018, the Company sold a total of 201,666 units for cash consideration of $121,000 at price of
$.60 (the “Units”), each unit comprised of one share of common stock and one class B warrant exercisable at $1.20
per share with a term of 24 months.
Between
October 22, 2018 and November 20, 2018, the Company sold a total of 318,483 units for cash consideration of $296,080 at price
of $1.20 (the “Units”), each unit comprised of one share of common stock and one class D warrant exercisable at $2.40
per share with a term of 24 months.
As
defined in FASB ASC 855-10, “Subsequent Events”, subsequent events are events or transactions that occur after the
balance sheet date but before financial statements are issued or available to be issued.
The
Company evaluated all transactions and events that occurred subsequent to the balance sheet date and prior to the date on which
the financial statements contained in this report were issued and determined that no other such events or transactions
necessitated disclosure.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and
Stockholders
of Smart Energy Solutions, Inc.
Opinion
on the Financial Statements
We
have audited the accompanying balance sheets of Smart Energy Solutions, Inc. (the Company) as of December 31, 2017 and 2016, and
the related statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the
two-year period ended December 31, 2017 and 2016, and the related notes and schedules (collectively referred to as the financial
statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the
Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the years in the two-year
period ended December 31, 2017 and 2016, in conformity with accounting principles generally accepted in the United States of America.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but
not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audits provide a reasonable basis for our opinion.
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed
in Note 2 to the financial statements, the Company suffered a net loss from operations and has a net capital deficiency, which
raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are
also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/
M&K CPAS, PLLC
|
|
We
have served as the Company’s auditor since 2013.
|
|
Houston,
TX
|
|
|
|
March
5, 2018
|
|
SMART
ENERGY SOLUTIONS, INC.
BALANCE
SHEETS
AS
OF DECEMBER 31, 2017 AND DECEMBER 31, 2016
|
|
December
31, 2017
|
|
|
December
31, 2016
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
326,730
|
|
|
$
|
-
|
|
Prepaid
expenses
|
|
|
4,196
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
330,926
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
330,926
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
800
|
|
|
$
|
2,144
|
|
Total
current liabilities
|
|
|
800
|
|
|
|
2,144
|
|
|
|
|
|
|
|
|
|
|
Notes
payable
|
|
|
2,687
|
|
|
|
800
|
|
Total
long-term liabilities
|
|
|
2,687
|
|
|
|
800
|
|
Total
liabilities
|
|
|
3,487
|
|
|
|
2,944
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity (deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock, par value $0.00001 per share, 495,000,000 common shares authorized, 5,000,000 preferred shares authorized; 8,591,577
and 624,910 common stock issued and outstanding at December 31, 2017 and December 31, 2016 respectively.
|
|
|
86
|
|
|
|
6
|
|
Additional
paid in capital
|
|
|
447,164
|
|
|
|
34,244
|
|
Accumulated
other comprehensive income
|
|
|
3,353
|
|
|
|
-
|
|
Accumulated
deficit
|
|
|
(123,164
|
)
|
|
|
(37,194
|
)
|
Total
stockholders’ equity (deficit)
|
|
|
327,439
|
|
|
|
(2,944
|
)
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity (deficit)
|
|
$
|
330,926
|
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these financial statements
SMART
ENERGY SOLUTIONS, INC.
STATEMENTS
OF OPERATIONS
FOR
THE TWELVE MONTHS ENDED DECEMBER 31, 2017 AND 2016
|
|
For
the twelve months ended
December 31, 2017
|
|
|
For
the twelve months ended
December 31, 2016
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
(75,177
|
)
|
|
|
(2,601
|
)
|
Research
and development expense
|
|
|
(10,007
|
)
|
|
|
-
|
|
Total
operating expenses
|
|
|
(85,184
|
)
|
|
|
(2,601
|
)
|
|
|
|
|
|
|
|
|
|
(Loss)
from operations
|
|
|
(85,184
|
)
|
|
|
(2,601
|
)
|
Gain
(loss) from debt settlement
|
|
|
50
|
|
|
|
-
|
|
Interest
expense
|
|
|
(836
|
)
|
|
|
(43
|
)
|
Other
income (expense)
|
|
|
(786
|
)
|
|
|
(43
|
)
|
Provision
for income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net
(loss)
|
|
$
|
(85,970
|
)
|
|
$
|
(2,644
|
)
|
|
|
|
|
|
|
|
|
|
Net
loss per common share
|
|
$
|
(0.01
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding
|
|
|
8,591,577
|
|
|
|
624,910
|
|
The
accompanying notes are an integral part of these financial statements.
SMART
ENERGY SOLUTIONS, INC.
STATEMENTS
OF COMPREHENSIVE INCOME (LOSS)
FOR
THE YEARS ENDED DECEMBER 31, 2017 AND 2016
|
|
For
the twelve months ended
|
|
|
|
December
31, 2017
|
|
|
December
31, 2016
|
|
Net
loss from continuing operations
|
|
|
(85,970
|
)
|
|
|
(2,644
|
)
|
Change
in unrealized foreign currency translation gain (loss)
|
|
|
3,353
|
|
|
|
-
|
|
Total
comprehensive loss
|
|
|
(82,617
|
)
|
|
|
(2,644
|
)
|
Comprehensive
loss attributable to Smart Energy Solutions, Inc
|
|
|
(82,617
|
)
|
|
|
(2,644
|
)
|
The
accompanying notes are an integral part of these financial statements.
SMART
ENERGY SOLUTIONS, INC.
STATEMENTS
OF CHANGES IN STOCKHOLDERS’ (DEFICIT)
FOR
THE YEARS DECEMBER 31, 2017 AND 2016
|
|
Common
stock
|
|
|
Additional
Paid-In
|
|
|
Other
Comprehensive
|
|
|
Accumulated
|
|
|
Totals
Equity
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Income
|
|
|
Deficit
|
|
|
(Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of December 31, 2015
|
|
|
624,910
|
|
|
$
|
6
|
|
|
$
|
34,244
|
|
|
$
|
-
|
|
|
$
|
(34,550
|
)
|
|
$
|
(300
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year ended December 31, 2016
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,644
|
)
|
|
|
(2,644
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of December 31, 2016
|
|
|
624,910
|
|
|
|
6
|
|
|
|
34,244
|
|
|
|
-
|
|
|
|
(37,194
|
)
|
|
|
(2,944
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
Issued for Cash
|
|
|
7,966,667
|
|
|
|
80
|
|
|
|
412,920
|
|
|
|
-
|
|
|
|
-
|
|
|
|
413,000
|
|
Translation
adjustments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,353
|
|
|
|
-
|
|
|
|
3,353
|
|
Net
loss for the year ended December 31, 2017
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(85,970
|
)
|
|
|
(85,970
|
)
|
Balance
as of December 31, 2017
|
|
|
8,591,577
|
|
|
$
|
86
|
|
|
$
|
447,164
|
|
|
$
|
3,353
|
|
|
$
|
(123,164
|
)
|
|
$
|
327,439
|
|
The
accompanying notes are an integral part of these financial statements.
SMART
ENERGY SOLUTIONS, INC.
STATEMENTS
OF CASH FLOWS
FOR
THE TWELVE MONTHS ENDED DECEMBER 31, 2017 and 2016
|
|
For
the twelve months ended
December 31, 2017
|
|
|
For
the twelve months ended
December 31, 2016
|
|
|
|
|
|
|
|
|
Operating
Activities:
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(85,970
|
)
|
|
$
|
(2,644
|
)
|
Adjustments
to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Gain
on settlement
|
|
|
(50
|
)
|
|
|
-
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Increase
(decrease) in accounts payable and accrued expenses
|
|
|
(1,344
|
)
|
|
|
1,844
|
|
Decrease
(decrease) in prepaid expenses
|
|
|
(4,196
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(91,560
|
)
|
|
|
(800
|
)
|
|
|
|
|
|
|
|
|
|
Investing
Activities:
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
-
|
|
|
|
-
|
|
Net
Cash provided by (used in) investing activities
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Financing
Activities:
|
|
|
|
|
|
|
|
|
Shares
issued for cash
|
|
|
413,000
|
|
|
|
-
|
|
Borrowings
on debt
|
|
|
19,190
|
|
|
|
800
|
|
Principal
payments on debt
|
|
|
(17,253
|
)
|
|
|
-
|
|
Net
cash provided by financing activities
|
|
|
414,937
|
|
|
|
800
|
|
Foreign
currency adjustment
|
|
|
3,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash
|
|
|
326,730
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents - beginning of period
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents - end of period
|
|
$
|
326,730
|
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these financial statements.
SMART
ENERGY SOLUTIONS, INC.
Notes
to Financial Statements
FOR
THE YEARS ENDED DECEMBER 31, 2017 and 2016
Note
(1) Summary of Significant Accounting Policies
Basis
of Presentation and Organization
The
Company was incorporated in 1999 in the state of Utah under the name Datigen.com, Inc. On August 25, 2005, the Company changed
its state of incorporation from Utah to Nevada by the merger of the Company with and into its wholly-owned subsidiary, CannaPowder, Inc., a Nevada corporation. As a result of such merger, the Company’s name was changed to CannaPowder, Inc.
in order to better reflect the Company’s business operations.
On
August 30, 2017, a new wholly-owned subsidiary was registered in Israel under the name of Canna Powder Ltd. (“CannaPowder
Israel” or the “Subsidiary”), with 100 common shares outstanding, 0.01 NIS par value (the “Subsidiary
Shares”), all of which were held in escrow on behalf of the Company by Israel attorney, Alon Nave. On September 27, 2017,
pursuant to board resolution, the 100 Subsidiary Shares held in escrow were transferred to the Company.
On
December 27, 2017, a board-resolution was adopted to issue an additional: (i) 800 Subsidiary Shares to the Company; and an additional
100 Subsidiary Shares to Rafi Ezra and, as a result, effective December 27, 2017, Canna Powder Ltd became a 90% owned subsidiary
of the Company and a minority interest of 10% owned by Rafi Ezra.
The
Subsidiary’s management includes Lavi Krasney, its CEO, and Rafi Ezra, its CTO. Mr. Krasney has over 20 years of international
experience in corporate finance, venture capital and investment banking. He has served as CEO and director of several private
companies. Mr. Ezra is a highly experienced pharmacist with extensive knowledge of the cannabis sector and active experience of
leading early-stage pharma companies from early-stage development through commercial launch.
Development
is being conducted at the Hebrew University pursuant to the term of the Feasibility Study and Option Agreement under the supervision
of the inventor of the technology, Professor Shlomo Magdassi.
The
Company reasonably expects that the Development Program will be completed within three years, with commercial sales starting in
2021, however there can be no assurance that the Development Program will, in fact, be successful. Notwithstanding the Company’s
success in its Equity Raise to date, nor can there be assurance that the Company may not require additional capital to fully implement
its business plan and complete production of commercially viable products based on its technology which is the subject of the
Feasibility Study discussed below under “Planned Research and Development and Current Trends.”
The
accompanying financials statement of the Company were prepared from the account of the Company under the accrual basis of accounting.
Cash
and Cash Equivalents
For
purposes of reporting within the statement of cash flows, the Company considers all cash on hand, cash accounts not subject to
withdrawal restrictions or penalties, and all highly liquid debt instruments purchased with a maturity of three months or less
to be cash and cash equivalents. As of December 31, 2017 and 2016, we had cash and cash equivalents of $326,730 and $0, respectively.
Reclassifications
Certain
prior year amounts have been reclassified to conform to the current period presentation. These reclassifications had no impact
on net earnings, financial position or cash flows.
Discontinued
Operations
The
Company follows the policy of segregating the assets and liabilities of subsidiaries or lines of business on its Balance Sheet
from the assets liabilities of continuing subsidiaries or lines of businesses when it is decided to close or dispose of a subsidiary
or line of business. The Company also, follows the policy of separately disclosing the assets and liabilities and the net operations
of a subsidiary or line of business in its financial statements when it is decided to close or dispose of a subsidiary or line
of business.
Revenue
Recognition
The
Company recognizes revenue from licensing its software to customers for contractually defined periods of time. The Company recognizes
revenue ratably over the term of the contract in accordance with ASC 605 (1) when the price is fixed and determinable, (2) persuasive
evidence of an arrangement exists, (3) delivery has occurred or services have been provided, and (4) collectability is assured.
Loss
per Common Share
Basic
loss per share is computed by dividing the net loss attributable to the common stockholders by the weighted average number of
shares of common stock outstanding during the period. Fully diluted loss per share is computed similar to basic loss per share
except that the denominator is increased to include the number of additional common shares that would have been outstanding if
the potential common shares had been issued and if the additional common shares were dilutive.
Income
Taxes
Income
taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are determined based on temporary
differences between the bases of certain assets and liabilities for income tax and financial reporting purposes. The deferred
tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating
the differences.
The
Company maintains a valuation allowance with respect to deferred tax assets. The Company establishes a valuation allowance based
upon the potential likelihood of realizing the deferred tax asset and taking into consideration the Company’s financial
position and results of operations for the current period. Future realization of the deferred tax benefit depends on the existence
of sufficient taxable income within the carryforward period under the Federal tax laws.
Changes
in circumstances, such as the Company generating taxable income, could cause a change in judgment about the realizability of the
related deferred tax asset. Any change in the valuation allowance will be included in income in the year of the change in estimate.
Fair
Value of Financial Instruments
The
Company estimates the fair value of financial instruments using the available market information and valuation methods. Considerable
judgment is required in estimating fair value. Accordingly, the estimates of fair value may not be indicative of the amounts the
Company could realize in a current market exchange. As of December 31, 2017, and 2016, the carrying value of accounts payable
and accrued liabilities approximated fair value due to the short-term nature and maturity of these instruments.
Deferred
Offering Costs
The
Company defers as other assets the direct incremental costs of raising capital until such time as the offering is completed. At
the time of the completion of the offering, the costs are charged against the capital raised. Should the offering be terminated,
deferred offering costs are charged to operations during the period in which the offering is terminated.
Impairment
of Long-Lived Assets
The
Company evaluates the recoverability of long-lived assets and the related estimated remaining lives when events or circumstances
lead management to believe that the carrying value of an asset may not be recoverable. As of December 31, 2017, no events or circumstances
occurred for which an evaluation of the recoverability of long-lived assets was required.
Estimates
The
financial statements are prepared on the basis of accounting principles generally accepted in the United States. The preparation
of financial statements in conformity with generally accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities as of December 31, 2017 and 2016, and expenses for the
years ended December 31, 2017 and 2016. Actual results could differ from those estimates made by management.
Impact
of Recently Issued Accounting Standards
In
January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. Public
business entities should apply the amendments in this Update to annual periods beginning after December 15, 2017, including interim
periods within those periods. All other entities should apply the amendments to annual periods beginning after December 15, 2018,
and interim periods within annual periods beginning after December 15, 2019.
In
March 2017, the FASB issued Update 2017-08—Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium
Amortization on Purchased Callable Debt Securities.For public business entities, the amendments in this Update are effective for
fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments
are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December
15, 2020. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an
interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period.
In
March 2017, the FASB issued Update 2017-07—Compensation—Retirement Benefits (Topic 715): Improving the Presentation
of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. Effective for public business entities for annual periods
beginning after December 15, 2017, including interim periods within those annual periods. For other entities, the amendments in
this Update are effective for annual periods beginning after December 15, 2018, and interim periods within annual periods beginning
after December 15, 2019. Early adoption is permitted as of the beginning of an annual period for which financial statements (interim
or annual) have not been issued or made available for issuance. That is, early adoption should be within the first interim period
if an employer issues interim financial statement. Disclosures of the nature of and reason for the change in accounting
principle are required in the first interim and annual periods of adoption.
In
August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and
Cash Payments. The amendment in this ASU defers the effective date of ASU No. 2014-09 for all entities for one year. Public business
entities should apply the guidance in ASU 2016-15 to annual reporting periods beginning on December 15, 2017. For all other entities,
the guidance in ASU 2016-15 should be applied to annual reporting periods beginning December 15, 2018 and interim periods within
fiscal years beginning after December 15, 2019. Earlier application is permitted including interim reporting periods.
Goodwill
and Intangible Assets
Goodwill
is tested for impairment at a minimum on an annual basis. Goodwill is tested for impairment at the reporting unit level by first
performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit
is less than its carrying value. If the reporting unit does not pass the qualitative assessment, then the reporting unit’s
carrying value is compared to its fair value. The fair values of the reporting units are estimated using market and discounted
cash flow approaches. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. The
discounted cash flow approach uses expected future operating results. Failure to achieve these expected results may cause a future
impairment of goodwill at the reporting unit.
Intangible
assets consist of patents and trademarks, purchased customer contracts, purchased customer and merchant relationships, purchased
trade names, purchased technology, and non-compete agreements. Intangible assets are amortized over the period of estimated benefit
using the straight-line method and estimated useful lives ranging from two to twenty years. No significant residual value is estimated
for intangible assets.
Note
(2) Going Concern
The
Company was incorporated in 1999 in the state of Utah under the name Datigen.com, Inc. On August 25, 2005, the Company changed
its state of incorporation from Utah to Nevada by the merger of the Company with and into its wholly-owned subsidiary, Smart Energy
Solutions, Inc., a Nevada corporation. As a result of such merger, the Company’s name was changed to Smart Energy Solutions,
Inc. in order to better reflect the Company’s business operations at that time, which involved efforts to develop and market
its Battery Brain technology, which efforts ceased during the quarter ended September 30, 2009.
On
August 30, 2017, the Company formed a subsidiary in Israel under the name of Canna Powder Ltd, which is 90% owned by CannaPowder, Inc. with the remaining 10% held by Rafi Ezra, co-founder and CTO of Canna Powder Ltd, and commenced efforts to develop
the formulation and the production process to produce medical products using new technology involving nano-powder derived from
cannabis oil.
The
accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United
States of America, which contemplate continuation of the Company as a going concern. The Company has not yet generated any revenue
to cover its operating costs, and as such, has incurred an operating loss since inception. These and other factors raise substantial
doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification
of liabilities that may result from the possible inability of the Company to continue as a going concern.
The
Company has been raising equity capital to finance its development program in order to establish cannabis powder production facilities
utilizing the licensed technology from Yissum under the License Agreement. Pursuant to the Company’s Development Program,
we expect to have product formulation and testing completed in 2020, pre-clinical studies commencing in 2021, first human and
safety trials in 2022 and efficacy trials in 2023. As a result, unless we are able to expedite the above timetable, of which there
can be no assurance, the earliest that we can expect to begin commercial sales will be 2023. In fact, there can be no assurance
that the Development Program will be successfully implemented within our expected timeline notwithstanding the Company’s
success in its Equity Raise to date, nor can there be assurance that the Company may not require additional capital to fully implement
its business plan and complete production of commercially viable products based on its technology which is the subject of the
Feasibility Study discussed below under “Planned Research and Development and Current Trends.” Reference is also made
to Appendix B-1 attached to the License Agreement filed as an exhibit to our Form 8-K filed with the SEC on May 25, 2018.
If
and when we reach the commercial stage, of which there can be no assurance, we intend to establish and operate several production
facilities, each located in individual territories selected according to their size and favorable regulation for medical cannabis.
The Company believes that with its new facilities it will be able to produce cannabis powders at a significant cost advantage.
Products
will be supplied to producers of medical cannabis products. The ability to produce a more effective, consistent product in terms
of quality and composition will provide an important advantage when targeting the medical market. The Company has limited operations.
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United
States of America, which contemplate continuation of the Company as a going concern. The Company has not established any source
of revenue to cover its operating costs, and as such, has incurred an operating loss since inception. These and other factors
raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements
do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the
amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.
Note
(3) Common Stock
On
October 17, 2017, the Company sold a total of 6,300,000 shares to thirteen accredited investors at $0.01 per share for a total
cash consideration of $63,000.
On
October 24, 2017 the Company issued 666,667 shares to one shareholder, an accredited investor, at $0.075 per share or cash consideration
of $50,000.
Between
November 15, 2017 and December 7, 2017, the Company sold a total of 1,000,000 units for cash consideration of $300,000 at price
of $.30 (the “$0.30 Units”), each unit comprised of one share of common stock and one class A warrant exercisable
at $0.50 per share with a term of 24 months. The relative fair value of the stock with embedded warrants was $132,458 for the
common stock and $167,542 for the class A warrants. The warrants were valued using the Black-Scholes model with volatility of
approximately 163% and discount rates ranging from 1.68% to 1.8%.
At
December 31, 2017 and December 31, 2016, there were approximately 189 and 168 holders of record and 8,591,577 and 624,910 shares
of common stock issued and outstanding, respectively. All shares of common stock are entitled to one vote per share in all matters
submitted to the shareholders. No preferred shares are issued and outstanding at December 31, 2017 and 2016.
Dividends
The
Company has not declared or paid any cash dividends on its common stock nor does it anticipate paying any in the foreseeable future.
Furthermore, the Company expects to retain any future earnings to finance its operations and expansion. The payment of cash dividends
in the future will be at the discretion of its Board of Directors and will depend upon its earnings levels, capital requirements,
any restrictive loan covenants and other factors the Board considers relevant.
Securities
Authorized for Issuance under Equity Compensation Plans
None
Following
is a table of warrant and options still outstanding and exercisable along with exercise price and range of remaining term.
Type
|
|
Quantity
|
|
|
Exercise
Price
|
|
|
Remaining
Term
|
Warrants
Class A
|
|
|
1,000,000
|
|
|
$
|
0.50
|
|
|
24
Months
|
Total
|
|
|
1,000,000
|
|
|
|
|
|
|
|
(4)
Income Taxes
The
provision (benefit) for income taxes for the year ended December 31, 2017 and 2016, was as follows (assuming a 35% effective tax
rate):
|
|
|
2017
|
|
|
|
2016
|
|
Current
tax provision:
|
|
|
|
|
|
|
|
|
Taxable
income
|
|
$
|
-
|
|
|
$
|
-
|
|
Total
current tax provision
|
|
$
|
-
|
|
|
$
|
-
|
|
The
Company had deferred income tax assets as of December 31, 2017 and 2016 as follows:
|
|
2017
|
|
|
2016
|
|
Loss
carryforwards
|
|
$
|
43,107
|
|
|
$
|
13,018
|
|
Less-
Valuation allowance
|
|
|
(43,107
|
)
|
|
|
(13,018
|
)
|
Total
net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
The
Company provided a valuation allowance equal to the deferred income tax assets for the year ended December 31, 2017 and 2016,
because it is not presently known whether future taxable income will be sufficient to utilize the loss carryforwards.
As
of December 31, 2017 and 2016, the Company had approximately $123,164 and $37,194, respectively, in tax loss carryforwards that
can be utilized in future periods to reduce taxable income, and expire by the year 2030.
The
Company did not identify any material uncertain tax positions that will be filed. The Company did not recognize any interest or
penalties for unrecognized tax benefits during the year ended December 31, 2017 and 2016.
The
Company intends to file income tax returns in the United States. All tax years are closed by expiration of the statute of limitations.
Note
(5) Related Party Transactions
On
October 17, 2017, the Company issued and sold a total of 2.6 million restricted shares of common stock to four accredited investors
(650,000 shares to each) at $0.01 per share for a total cash consideration of $26,000. Reference is made to Item 4. Security Ownership
of Certain Beneficial Owners and Management. As a result of these issuances, the four accredited investors became greater than
5% shareholders.
Note
(6) Notes Payable
During
the year ended December 31, 2017, the Company borrowed $100 and $800, respectively, which the loans bear an interest rate of 8%
and has no maturity date. The loans were repaid in the amount of $850 on May 5, 2017 and the Company recorded a gain on debt extinguishment
of $50.
On
May 12, 2016 a shareholder loaned the Company the sum of $5,000 to settle a vendor debt. The shareholder has subsequently forgiven
the debt resulting from this payment and has confirmed he is owed no principal or interest as of December 31, 2016 and December
31, 2017. As of December 31, 2016, the amount paid by the shareholder to the vendor was forgiven, as the shareholder is a related
party the forgiven debt resulted in an increase to additional paid in capital.
On
December 22, 2017 a loan was made in the amount $2,687 the loan bears no interest and has no maturity date.
Between
January 8, 2017 and August 25, 2017 three shareholders loaned the Company amounts totaling $16,403 in loans bearing 8% interest
which have no maturity dates. The loans which accrued interest of $879 were repaid on December 20, 2017. The three debt holders
confirmed they were owed no principal or interest as of December 31, 2017.
Note
(7) Subsequent Events
As
defined in FASB ASC 855-10, “Subsequent Events”, subsequent events are events or transactions that occur after the
balance sheet date but before financial statements are issued or available to be issued.
The
loan made to the Company on December 22, 2017 in the amount $2,687 was repaid on January 8, 2018.
During
the period from March 20, 2018 to April 17, 2018, the Company sold a total of 793,000 units to accredited investors for aggregate
cash consideration of $475,775 at a price of $0.60 per unit (the “$0.60 Units”), each consisting of: (i) one share
of Common Stock; (ii) one class A warrant exercisable at $0.60 per share with a term of 24 months (the “Class A Warrants”);
and (ii) one class B warrant exercisable at $1.20 per share with a term of 24 months (the “Class B Warrants”). In
connection with the sale of the $0.60 Units, a total of 234,000 shares of Common Stock have been issued to date and an additional
559,000 shares of Common Stock are pending issuance by the transfer agent but have not yet been issued.
The
Company evaluated all other events and transactions that occurred subsequent to the balance sheet date and prior to the date on
which the financial statements contained in this report were issued, and the Company determined that no such events or transactions
necessitated disclosure.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND PLAN OF OPERATION
The
following Management’s Discussion and Analysis of Financial Condition and Plan of Operations (“MD&A”) is
intended to help you understand our historical results of operations during the periods presented and our financial condition.
This MD&A should be read in conjunction with our consolidated financial statements and the accompanying notes to consolidated
financial statements and contains forward-looking statements that involve risks and uncertainties. See section entitled “Forward-Looking
Statements” above.
Plan
of Operation
At
present, we are a Company with only limited operations and no revenues from operations. There is substantial doubt that we can
continue as an on-going business for the next twelve months, notwithstanding our success in our Equity Raise discussed more fully
in this Prospectus.
On
August 30, 2017, a 90% owned subsidiary of the Company was registered in Israel under the name of Canna Powder Ltd. (“CannaPowder
Israel” or the “Subsidiary”).
Development
is being conducted at the Hebrew University pursuant to the term of the Feasibility Study and Option Agreement under the supervision
of the inventor of the technology, Professor Shlomo Magdassi.
The
Subsidiary’s management includes Lavi Krasney, its CEO, and Rafi Ezra, its CTO. Mr. Krasney has over 20 years of international
experience in corporate finance, venture capital and investment banking. He has served as CEO and director of several private
companies. Mr. Ezra is a highly experienced pharmacist with extensive knowledge of the cannabis sector and active experience of
leading early-stage pharma companies from early-stage development through commercial launch.
The
Company has raised $1,226,900 from the issuance and sale of equity securities to fund its development program to establish cannabis
powder production facilities utilizing the licensed technology. Reference is made to the disclosure in “Item 10. Recent
Sales of Unregistered Securities” below.
Pursuant
to the Company’s Development Program, we expect to have product formulation and testing completed in 2020, pre-clinical
studies commencing in 2021, first human and safety trials in 2022 and efficacy trials in 2023. As a result, unless we are able
to expedite the above timetable, of which there can be no assurance, the earliest that we can expect to begin commercial sales
will be 2023. In fact, there can be no assurance that the Development Program will be successfully implemented within our expected
timeline notwithstanding the Company’s success in its Equity Raise to date, nor can there be assurance that the Company
may not require additional capital to fully implement its business plan and complete production of commercially viable products
based on its technology which is the subject of the Feasibility Study discussed below under “Planned Research and Development
and Current Trends.” Reference is also made to Appendix B-1 attached to the License Agreement filed as an exhibit to our
Form 8-K filed with the SEC on May 25, 2018.
However,
there can be no assurance that our expectations will reach fruition or that we will have sufficient capital or other resources
to complete our development program in a timely manner, if at all. If and when we achieve the commercial stage, of which there
can be no assurance, our plan is for Canna Powder Israel to establish and operate several production facilities, each located
in countries and territories selected according to their size and favorable regulatory environment for medical cannabis. Our business
plan is to establish the first production facility in Israel. This site will be the Company’s pilot site for all its developments,
which is expected to be established before the end of 2019, of which there can be no assurance, and which plan is wholly-dependent
on the continued availability of capital resources. We plan is to follow our site with Israel with sites in the U.S. but only
in those states where cannabis-based medical products are authorized for medicinal use and/or recreational use. However, at the
date of this Prospectus, which is a part of the registration statement on Form S-1, we have not yet determined the actual states
where we hope to establish production facilities as the legal situation of Cannabis is continuing to evolve in the U.S. The Company
also plans to establish a site in Canada and in Germany. In both of these countries, medical cannabis is regulated. Our plan is
for our cannabis powder products to be supplied to producers of medical cannabis products. The ability to produce a more effective,
consistent product in terms of quality and composition, will hopefully provide us with a competitive advantage when targeting
the medical market. However, there can be no assurance that we will be successful in implementing our development program, establishing
sites in Israel, the U.S., Canada and/or Germany, or elsewhere, for that matter.
Results
of Operations during the three and nine months ended September 30, 2018 as compared to the three and nine months ended September
30, 2017
During
the three and nine months ended September 30, 2018 we generated revenues of $0 and $0 as compared three and nine months ended
September 30, 2017 in which we also generated revenues of $0 and $0, respectively.
Our
research and development expenses during the three and nine months ended September 30, 2018 were $45,321 and $102,202 as compared
to the three and nine months ended September 30, 2017 in which the research and development expenses were $0 and $0, respectively.
The significant increase was due to research and development activities of the new subsidiary.
Our
general and administrative expenses during the three and nine months ended September 30, 2018 were $57,300 and $295,183, respectively
as compared to the three months ended September 30, 2017 in which we had general and administrative expense of $10,774 and nine
months ended September 30, 2017 in which we had general and administrative expenses of $14,724. The significant increase was mostly
due to general and administrative expenses in the new subsidiary.
Other
expenses during the three and nine months ended September 30, 2018 were $0 and $0, respectively compared to $362 and $484, respectively,
for the three and nine months ended September 30, 2017.
Other
expenses of $484 for the nine months ended September 30, 2017 were comprised of $534 interest expenses offset by $50 gain from
debt settlement during the same period in the prior year, while other expenses of $362 for the three months ended September 30,
2017 were comprised of $362 interest expenses.
We
incurred a net loss attributable to the company of $95,936 and $375,513, respectively, during the three and nine months ended
September 30, 2018 compared to $11,136 and $15,208, respectively, during the same periods in the prior year.
The
loss attributable to non-controlling interest for the three and nine months ended September 30, 2018 was $6,685 and $21,872, respectively,
compared to $0 and $0, respectively, during the same periods in the prior year.
Liquidity
and Capital Resources
Our
balance sheet as of September 30, 2018 reflects $735,931 in total assets consisting of cash and cash equivalents of $721,414 and
prepaid assets of $14,517. As of December 31, 2017, our balance sheet reflects $330,926 in total assets consisting of cash and
cash equivalents of $326,730 and prepaid assets of $4,196.
As
of September 30, 2018, we had total current liabilities of $0. As of December 31, 2017, we had total current liabilities of $800
consisting of accounts payable and accrued liabilities of $800 and long-term liabilities of $2,687 consisting of notes payable.
We
had positive working capital of $735,931 as of September 30, 2018 compared to $330,126 at December 31, 2017. Such working capital
has been sufficient to sustain our operations to date. Our total liabilities as of September 30, 2018 were $0 compared to $3,487
at December 31, 2017.
During
the nine months ended September 30, 2018, we used $408,506 in our operating activities. This resulted from a net loss of
$375,513 attributable to CannaPowder, Inc. $21,872 loss attributable to non-controlling interest, decrease of $800 in
account payable and increase in prepaid expenses of $10,321.
During
the nine months ended September 30, 2017, we used $16,503 in our operating activities. This resulted from a net loss of $15,208,
increase in gain on settlement of notes payable of $50, decrease in account payable of $495 and decrease in accrued expense of
$750.
During
the nine months ended September 30, 2018, we financed our negative cash flow by financing activities through sale of common stock
in the amount of $813,900 offset by payments to notes payable of $2,687.
During
the nine months ended September 30, 2017, we financed our negative cash flow by financing activities through issuance of notes
payable of $16,503.
During
the nine months ended September 30, 2017 and nine months ended September 30, 2018 there were no investment activities.
Results
of Operations during the year ended December 31, 2017 as compared to the year ended December 31, 2016
During
2017 and 2016 we generated revenues of $0 and $0, respectively. Our general and administrative expense increased to $75,177 during
2017 compared to $2,601 during the same period in prior year and our research and development expenses increased to $10,007 during
2017 compared to $0 during the same period in the prior year both increases were due to costs incurred in relation to our new
subsidiary CannaPowder. We incurred a net loss of $85,970 during 2017 compared to a net loss of $2,644 in 2016.
Liquidity
and Capital Resources
Our
balance sheet as of September 30, 2018 reflects $735,931 in total assets consisting of cash and cash equivalents
of $721,414 and prepaid expenses of $14,517. As of December 31, 2017, our balance sheet reflects $330,926
in total assets consisting of cash and cash equivalents of $326,730 and prepaid assets of $4,196.
As of
September 30, 2018, we had total current liabilities of $0. As of December 31, 2017, we had total current liabilities
of $800 consisting of accounts payable and accrued liabilities of $800 and long-term liabilities of $2,687 consisting of notes
payable.
We
had positive working capital of $735,931 as of September 30, 2018 compared to $330,126 at December 31, 2017. Such
working capital has been sufficient to sustain our operations to date. Our total liabilities as of September 30, 2018 were
$800 compared to $3,487 at December 31, 2017.
During
the nine months ended September 30, 2018, we used $315,738 in our operating activities. This resulted from a
net loss of $279,577 attributable to Canna Powder, Inc. $15,187 loss attributable to non-controlling interest and increase in
prepaid expenses of $20,974.
During
the nine months ended September 30, 2017, we used $408,506 in our operating activities. This resulted from
a net loss of $375,513 attributable to Canna Powder Ltd
,
a loss of $21,872 attributable to non-controlling interest,
offset by a decrease of $800 in accounts payable and an increase in prepaid expenses of $10, 321.
During the nine months ended September
30, 2017, we used $16,503 in our operating activities. This resulted from a net loss of $15,208, increase in gain on settlement
of notes payable of $50, decrease in account payable of $495 and decrease in accrued expense of $750.
During the nine months ended September
30, 2018, we financed our negative cash flow by financing activities through sale of common stock in the amount of $813,900 offset
by payments to notes payable of $2,687.
During the nine months ended September
30, 2017, we financed our negative cash flow by financing activities through issuance of notes payable of $16,503.
During the nine months ended September
30, 2017 and nine months ended September 30, 2018 there were no investment activities.
Our
balance sheet as of December 31, 2017 reflects $330,926 in total assets consisting of cash and cash equivalents of $326,730 and
prepaid assets of $4,196. As of December 31, 2016, our balance sheet reflects assets of $0.
As
of December 31, 2017, we had total current liabilities of $800 consisting of accounts payable and accrued liabilities and $2,687
of long-term liabilities consisting of notes payable. As of December 31, 2016, we had total current liabilities of $2,144 consisting
of accounts payable and $800 of long-term liabilities consisting of notes payable.
We
had positive working capital of $330,126 as of December 31, 2017 compared to negative working capital of $2,144 at December 31,
2016. Such working capital has been sufficient to sustain our operations to date. Our total liabilities as of December 31, 2017
were $3,487 compared to $2,944 at December 31, 2016.
During
2017, we used $91,560 in our operating activities. This resulted from a net loss of $85,970, decrease to accounts payable and
accrued expenses of $1,344 decrease in prepaid expenses of $4,196 and gain on settlement of $50.
During
2016, we used $800 in our operating activities. This resulted from a net loss of $2,644 offset by an increase to accounts payable
and accrued expenses of $1,844.
During
the year ended December 31, 2017, we financed our negative cash flow from sale of common stock in the amount of $413,000, borrowings
on debt of $19,190 which were offset by principal payment on debt of $17,253.
During
the year ended December 31, 2016, we financed our negative cash flow from borrowings on debt of $800.
While
management of the Company believes that the Company will be successful in its current and planned operating activities, there
can be no assurance that the Company will be successful in the achievement of sales of its products that will generate sufficient
revenues to earn a profit and sustain the operations of the Company.
Our
ability to create sufficient working capital to sustain us over the next twelve-month period, and beyond, is dependent on our
entering into additional licensing agreement and on our success in issuing additional debt or equity or entering into strategic
arrangement with a third party. There can be no assurance that sufficient capital will be available to us. We currently have no
agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources.
Going
Concern Consideration
There
is substantial doubt about our ability to continue as a going concern. Our financial statements contain additional note disclosures
with respect to this matter.
The
Company currently plans to satisfy its cash requirements for the next 12 months through the issuance of equity and borrowings
from its controlling shareholders and believes it can satisfy its cash requirements so long as it is able to obtain financing
from its controlling shareholders. The Company expects that money borrowed will be used during the next 12 months to satisfy the
Company’s operating costs, professional fees and for general corporate purposes.
The
Company has only limited capital. Additional financing is necessary for the Company to continue as a going concern. Our independent
auditor has issued an unqualified audit opinion for the years ended December 31, 2017 and 2016 with an explanatory paragraph on
going concern.
Off-Balance
Sheet Arrangements
As
of December 31, 2017, and 2016, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation
S-K promulgated under the Securities Act of 1934.
Contractual
Obligations and Commitments
As
of December 31, 2017, and 2016, we did not have any contractual obligations.
Critical
Accounting Policies
Our
significant accounting policies are described in the notes to our financial statements for the years ended December 31, 2017 and
2016 and are included elsewhere in this annual report.
CHANGES
IN AND DISAGREEMENTS WITH CCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There
have been no changes in or disagreements with accountants on accounting or financial disclosure matters.
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Our
sole director hold office until the next annual general meeting of the stockholders or until his/their successors are elected
and qualified. Our officers are appointed by our Board of Directors and hold office until the earlier of their death, retirement,
resignation, or removal.
The
following table sets forth the names and ages of the members of our Board of Directors and our executive officers and the positions
held by each.
Name
|
|
Age
|
|
Title
|
Liron
Carmel
|
|
34
|
|
CEO
and sole director
|
Oded
Gilboa
|
|
45
|
|
CFO
|
Liron
Carmel, 34. Chief Executive Officer and Sole Director:
Mr. Carmel has been the Company’s CEO and sole director since
December 2014 and served as its CFO from December. From December 2014 to August 2015, Mr. Carmel was the CEO and CFO of Zaxis
International Inc., now known as Virtual Crypto Technologies, Inc. (OTCQB: VRCP). From 2010 through December 2014, Mr. Carmel
served as a senior analyst in the Investment Division of Excellence Group, a leading investment firm in Israel. In such capacity,
Mr. Carmel specialized in risk management and special debt financing including participation in and leading negotiations with
major institutional investors in Israel. From 2009 to 2010, Mr. Carmel was an analytical consultant for Precise Group, an Israeli
financial institution.
Oded
Gilboa, 45, Chief Financial Officer:
was appointed to be the Company’s CFO on January 1, 2018. He is a licensed CPA
in the United States and Israel. He was the CFO of TechCare Corp. (OTCQB: TECR) from December 2013 to October 2016. Prior to his
appointment as CFO of TechCare Corp., Mr. Gilboa served as TechCare’s finance and accounting consultant. Mr. Gilboa has
over 16 years of experience in finance and public accounting, having served as a senior finance executive in the technology and
biotech industries with responsibilities in corporate finance, accounting, strategic planning and operational and financial management.
From 2010 through 2012, Mr. Gilboa served as the Revenue Accounting and Finance Manager of Mylan Specialty, a subsidiary of Mylan
Inc. (NASDAQ: MYL), a global company focused on the development, manufacturing and marketing of prescription drug products. From
2007 through 2009, Mr. Gilboa was the Executive director of Finance and US Controller of Taro Pharmaceuticals (NASDAQ: TAROF),
a global pharmaceutical company. From 1998 through 2007 Mr. Gilboa held various financial positions with IDT Corporation (NYSE:
IDT), a world-wide provider of telecommunications and media services, where in his most recent role he served as director of Finance.
Mr. Gilboa began his career in public accounting, auditing both public and private companies and holds a B.A in Economics and
Accounting from Tel-Aviv University and an M.B.A. from Recanati Business School at Tel-Aviv University.
Key
Employees
Rafi
Ezra, age 47, Chief Technology Officer, Canna Powder Ltd:
Mr. Ezra was appointed as CTO of the Company’s Israeli subsidiary,
Canna Powder Ltd in December 2017, has over 20 years’ experience in the bio-med industry and as a clinical pharmacist with
broad knowledge of pharmacology, from science to production. Since 2003, Mr. Ezra has been the CEO of Annette Ezra Ltd, an Israeli
pharmaceutical consulting firm that has been actively involved in research of Medical Cannabis. From 2016 to 2018, he was CEO
and Chief Pharmacist at Lipicare Pharmaceuticals, a subsidiary of Bio-Light
Israeli Life
Sciences Investments Ltd., a public company listed on the Tel Aviv Stock Exchange (BOLT: TASE), engaged in
R&D of Nano-technology
ophthalmology products and the management of outsourced development teams. From 2007 to 2014, Mr. Ezra served as CEO and Chief
Pharmacist at More Biofix Ltd, an Israeli company engaged in the development of dermato-technology to remove skin lesions and
tissue preservation, during which he was responsible for clinical trials, regulatory approvals and locating partners and investors.
Since 2000, Mr. Ezra has been a member of the board of The Pharmaceutical Association of Israel, served as Head of Strategic Planning.
He also served as a director of Sharam Pharm, a pharmacy with over 100 branches in Israel.
Rafi
Ezra holds an M.Sc. in Clinical Pharmacy from Hebrew University of Jerusalem and B.Sc. in Pharmacy from Brighton University in
England.
Lavi
Krasney, age 51, CEO of Canna Powder Ltd:
Mr. Krasney has over 20 years of international experience in corporate finance,
venture capital and investment banking. He has served as CEO and director of several private companies and since February 2018,
Mr. Krasney has been a member of the Board of Directors of Pimi Agro Ltd., an Israeli subsidiary of Save Foods, Inc. (OTCPK: SAFO),
a public company in the process of becoming a reporting company under the OTC and thereafter under the Exchange Act. Since 1998
he has been CEO and principal of CapitaLink Ltd, an Israeli economic consulting firm and has been a portfolio manager with approximately
US$450 million under his management. He started his career at Bank Hapoalim and served in the Intelligence Corp. of the Israeli
Army. Mr. Krasney holds a BA in Economics from the University of Haifa and an MBA in Finance from Tel Aviv University.
Committees
of the Board of Directors
We
do not presently have a separately constituted audit committee, compensation committee, nominating committee, executive committee
or any other committees of our Board of directors. As such, our entire Board of directors acts as our audit committee.
Involvement
in Legal Proceedings
None
of our directors, nominees for directors, or officers has appeared as a party during the past ten years in any legal proceedings
that may bear on his ability or integrity to serve as a director or officer of the Company.
Code
of Ethics
The
Company has adopted a code of ethics applicable to our principal, executive and financial officers.
Potential
Conflict of Interest
Since
we do not have an audit or compensation committee comprised of independent directors, the functions that would have been performed
by such committees are performed by our Board of directors. Thus, there is a potential conflict of interest in that our directors
have the authority to determine issues concerning management compensation, in essence their own, and audit issues that may affect
management decisions. We are not aware of any other conflicts of interest with any of our executives or directors.
Board’s
Role in Risk Oversight
The
Board assesses on an ongoing basis the risks faced by the Company. These risks include financial, technological, competitive,
and operational risks. The Board dedicates time at each of its meetings to review and consider the relevant risks faced by the
Company at that time. In addition, since the Company does not have an Audit Committee, the Board is also responsible for the assessment
and oversight of the Company’s financial risk exposures.
EXECUTIVE
COMPENSATION
The
following table sets forth information concerning the total compensation that we have paid or that has accrued on behalf of our
chief executive officer and other executive officers with annual compensation exceeding $100,000 during the fiscal years ending
December 31, 2017, 2016 and 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
|
|
|
|
|
|
|
|
|
|
Annual
Compensation
|
|
|
Compensation
Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
Restricted
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual
|
|
|
Stock
|
|
|
Underlying
|
|
|
All
Other
|
|
|
|
|
|
|
Salary
|
|
|
Bonus
|
|
|
Compensation
|
|
|
Award(s)
|
|
|
Options
|
|
|
Compensation
|
|
Name
and Principal Position
|
|
Year
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liron
Carmel, CEO, and Director (1)
|
|
|
2017
|
|
|
|
15,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
2016
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
2015
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oded
Gilboa, CFO (1)
|
|
|
2017
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
2016
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
2015
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
We
do not currently have a stock option plan. No individual grants of stock options, whether or not in tandem with stock appreciation
rights known as SARs or freestanding SARs have been made to any executive officer or any director since our inception; accordingly,
no stock options have been granted or exercised by any of the officers or directors since we were founded.
Long-Term
Incentive Plans and Awards
We
do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance. No individual
grants or agreements regarding future payouts under non-stock price-based plans have been made to any executive officer or any
director or any employee or consultant since our inception; accordingly, no future payouts under non-stock price-based plans or
agreements have been granted or entered into or exercised by any of the officers or directors or employees or consultants since
we were founded.
Compensation
of Directors
There
are no current agreements pursuant to which directors are or will be compensated in the future for any services provided as a
director.
Employment
Contracts, Termination of Employment, Change-in-Control Arrangements
There
are no employment contracts in place, no employees were terminated and no change in control arrangements have been signed with
the Company.
SECURITY
OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The
following table sets forth information regarding the beneficial ownership of our common stock as of December 10, 2018. The information
in this table provides the ownership information for: each person known by us to be the beneficial owner of more than 5% of our
common stock; each of our directors; each of our executive officers; and our executive officers and directors as a group.
Name
of Beneficial Owner
|
|
Common
Stock Beneficially Owned (1)
|
|
|
Percentage
of Common Stock Owned (1)
|
|
Attribute
Ltd
(2)
|
|
|
787,500
|
|
|
|
7.5
|
%
|
20
Raoul Wallenberg Street
|
|
|
|
|
|
|
|
|
Tel
Aviv, Israel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kfir
Silberman and L.I.A. Pure Capital
(entity controlled by Kfir Silberman)
|
|
|
787,500
|
|
|
|
7.5
|
%
|
3
Ha’armonim St.,
|
|
|
|
|
|
|
|
|
Ramat
Gan, Israel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amir
Uziel
|
|
|
787,500
|
|
|
|
7.5
|
%
|
5
Shira St Street
|
|
|
|
|
|
|
|
|
Rishon
Lezion, Israel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lavi
Krasney, CEO of CannaPowder Ltd
|
|
|
787,500
|
|
|
|
7.5
|
%
|
8
Paamoni Street
|
|
|
|
|
|
|
|
|
Rishon
Lezion, Israel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liron
Carmel, CEO and Chairman
|
|
|
300,000
|
|
|
|
2.9
|
%
|
20
Raoul Wallenberg Street
|
|
|
|
|
|
|
|
|
Tel
Aviv, Israel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oded
Gilboa, CFO
|
|
|
50,000
|
|
|
|
0.5
|
|
20
Raoul Wallenberg Street
|
|
|
|
|
|
|
|
|
Tel
Aviv, Israel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Officers and Directors (2 people)
|
|
|
350
,000
|
|
|
|
3.4
9
|
%
|
(1)
Applicable percentage ownership is based on 10,518,226 shares of common stock issued as of December 10, 2018. Beneficial
ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of common stock that are currently exercisable or exercisable within 60 days
of December 10, 2018 are deemed to be beneficially owned by the person holding such securities for the purpose of computing
the percentage of ownership of such person but are not treated as outstanding for the purpose of computing the percentage ownership
of any other person.
(2)
Itschak Shrem, a resident of Israel, is the control person of and is the natural person with voting and dispositive power over
the shares held by Attribute Ltd.
TRANSACTIONS
WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL PERSONS
During
the years ended December 31, 2017 and 2016, the Company issued the following restricted securities to affiliated purchasers, including:
Itschak Shrem, through his entity, Attribute Ltd; Kfir Silberman and his entity, L.I.A. Pure Capital Ltd; Amir Uziel and Lavi
Krasney, who is also CEO of Canna Powder Israel.
On
October 17, 2017, the Company issued and sold a total of 2.6 million restricted shares of common stock to four accredited investors
(650,000 shares to each) at $0.01 per share for a total cash consideration of $26,000. Reference is made to Item 4. Security Ownership
of Certain Beneficial Owners and Management. As a result of these issuances, the four accredited investors became greater than
5% shareholders.
LEGAL
PROCEEDINGS
We
know of no material, active or pending legal proceedings against our Company, nor of any proceedings that a governmental authority
is contemplating against us. We know of no material proceedings to which any of our directors, officers, affiliates, owner of
record or beneficially of more than 5 percent of our voting securities or security holders is an adverse party or has a material
interest adverse to our interest.
DESCRIPTION
OF OUR CAPITAL STOCK
Common
Stock
We
are authorized to issue 495,000,000 shares of common stock with a par value of 0$.00001 per share (“Common Stock”).
As of December 10, 2018, 10,518,226 shares of our Common Stock were issued and on record with our transfer agent,
Transfer Online Inc.
Each
outstanding share of Common Stock that is on record with our transfer agent is entitled to one vote, either in person or by proxy,
on all matters that may be voted upon by the owners thereof at meetings of the stockholders.
Our
shareholders have no pre-emptive rights to acquire additional shares of Common Stock. The Common Stock is not subject to redemption
or any sinking fund provision, and it carries no subscription or conversion rights. In the event of our liquidation, the holders
of the Common Stock will be entitled to share equally in the corporate assets after satisfaction of all liabilities.
The
description contained in this section does not purport to be complete. Reference is made to our certificate of incorporation and
bylaws which are available for inspection upon proper notice at our offices, as well as to the Nevada Revised Statutes for a more
complete description covering the rights and liabilities of shareholders.
Holders
of our Common Stock
|
(i)
|
have
equal ratable rights to dividends from funds legally available therefore, if declared by our Board of Directors,
|
|
|
|
|
(ii)
|
are
entitled to share ratably in all our assets available for distribution to holders of Common Stock upon our liquidation, dissolution
or winding up;
|
|
|
|
|
(iii)
|
do
not have preemptive, subscription or conversion rights or redemption or sinking fund provisions; and
|
|
|
|
|
(iv)
|
are
entitled to one non-cumulative vote per share on all matters on which stockholders may vote at all meetings of our stockholders.
|
The
holders of shares of our Common Stock do not have cumulative voting rights, which means that the holders of more than fifty percent
(50%) of outstanding shares voting for the election of directors can elect all of our directors if they so choose and, in such
event, the holders of the remaining shares will not be able to elect any of our directors.
Preferred
Stock
The
Company’s Articles of Incorporation, as amended, authorize 5,000,000 shares of preferred stock, par value $0.00001 per share,
which may be issued by the Board of Directors from time to time in one or more series. Our Board of Directors, without further
approval of our stockholders, is authorized to fix the dividend rights and terms, conversion rights, voting rights, redemption
rights, liquidation preferences and other rights and restrictions relating to any series of preferred stock that may be issued
in the future. Issuances of shares of preferred stock, while providing flexibility in connection with possible financings, acquisitions
and other corporate purposes, could, among other things, adversely affect the voting power of the holders of our Common Stock
and prior series of preferred stock then outstanding.
Dividends
We
have no history of paying dividends, moreover, there is no assurance that we will pay dividends in the future.
Shares
Eligible for Future Sale
Our
shares are thinly traded on the OTC Market, and we cannot assure you that a significant public market for our Common Stock will
be developed. Sales of substantial amounts of Common Stock in the public market, or the possibility of substantial sales occurring,
could adversely affect prevailing market prices for our Common Stock or our future ability to raise capital through an offering
of equity securities.
As
of December 10, 2018, 10,480,530 shares of Common Stock of the total 10,518,228 issued and outstanding shares
of Common Stock are “restricted” shares as that term is defined under the Act. We have not entered into any agreement
to register any of our issued and outstanding shares, although such agreement may be entered into in the future, or such an agreement
may be made part of the terms of a future equity raise or other transactions.
PLAN
OF DISTRIBUTION
This
Prospectus relates to the resale of up to 2,343,291 shares of our Common Stock by our Selling Shareholders.
The
Selling Shareholders and any of its pledgees, donees, assignees and other successors-in-interest may, from time to time sell any
or all of their shares of Common Stock on any market or trading facility on which the shares are traded or in private transactions.
These sales may be at fixed or negotiated prices. The Selling Shareholders may use any one or more of the following methods when
selling shares:
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ordinary
brokerage transactions and transactions in which the broker-dealer solicits the purchaser;
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block
trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block
as principal;
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facilitate
the transaction;
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purchases
by a broker-dealer as principal and resale by the broker-dealer for its account;
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an
exchange distribution in accordance with the rules of the applicable exchange;
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privately
negotiated transactions;
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broker-dealers
may agree with the Selling Shareholders to sell a specified number of such shares at a stipulated price per share;
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through
the writing of options on the shares
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a
combination of any such methods of sale; and
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any
other method permitted pursuant to applicable law.
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The
Selling Shareholders shall have the sole and absolute discretion not to accept any purchase offer or make any sale of shares if
it deems the purchase price to be unsatisfactory at any particular time.
The
Selling Shareholders may also sell the shares directly to market makers acting as principals and/or broker-dealers acting as agents
for themselves or their customers. Such broker-dealers may receive compensation in the form of discounts, concessions or commissions
from the Selling Shareholders and/or the purchasers of shares for whom such broker-dealers may act as agents or to whom they sell
as principal or both, which compensation as to a particular broker-dealer might be in excess of customary commissions. Market
makers and block purchasers purchasing the shares will do so for their own account and at their own risk. It is possible that
the Selling Shareholders will attempt to sell shares of Common Stock in block transactions to market makers or other purchasers
at a price per share which may be below the then existing market price. We cannot assure that all or any of the shares offered
in this Prospectus will be issued to, or sold by, the Selling Shareholders. The Selling Shareholders and any broker-dealers or
agents, upon completing the sale of any of the shares offered in this Prospectus, may be deemed to be “underwriters”
as that term is defined under the Act, the Exchange Act and the rules and regulations of such acts. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Act.
The
Selling Shareholders, alternatively, may sell all or any part of the shares offered in this Prospectus through an underwriter.
The Selling Shareholders have not entered into any agreement with a prospective underwriter and there is no assurance that any
such agreement will be entered into.
We
know of no existing arrangements between the Selling Shareholders and any other stockholder, broker, dealer or agent relating
to the sale or distribution of the shares. We will not receive any proceeds from the sale of the shares of the Selling Shareholders
pursuant to this Prospectus. We have agreed to bear the expenses of the registration of the shares, including legal and accounting
fees, and such expenses are estimated to be approximately $30,000.
A
Selling Shareholder may pledge his/her/its shares to their respective brokers under the margin provisions of customer agreements.
If a Selling Shareholder defaults on a margin loan, the broker may, from time to time, offer and sell the pledged shares of Common
Stock. The Selling Shareholders and any other persons participating in the sale or distribution of the shares will be subject
to applicable provisions of the Exchange Act, and the rules and regulations under such act, including, without limitation, Regulation
M. These provisions may restrict certain activities of, and limit the timing of purchases and sales of any of the shares by, the
Selling Shareholders or any other such person. The Selling Shareholders is not permitted to engage in short sales of Common Stock.
Furthermore, under Regulation M, persons engaged in a distribution of securities are prohibited from simultaneously engaging in
market making and certain other activities with respect to such securities for a specified period of time prior to the commencement
of such distributions, subject to specified exceptions or exemptions. All of these limitations may affect the marketability of
the shares.
LEGAL
MATTERS
No
counsel named in this Prospectus as having prepared or certified any part of this Prospectus or having given an opinion upon the
validity of the securities being registered or upon other legal matters in connection with the registration or Offering of the
Series C Preferred Stock was employed on a contingency basis, or had, or is to receive, in connection with the Offering, a substantial
interest, direct or indirect, in the Registrant. Nor was any such person connected with the registrant as a promoter, managing
or principal underwriter, voting trustee, director, officer, or employee.
The
validity of the shares of Common Stock being offered by our Selling Shareholders and other certain legal matters will be passed
upon for us by Lawrence R. Lonergan, Esq.
EXPERTS
No
expert named in this Prospectus as having prepared or certified any part of this Prospectus or having given an opinion upon the
validity of the securities being registered or upon other legal matters in connection with the registration or Offering of the
Series C Preferred Stock was employed on a contingency basis, or had, or is to receive, in connection with the Offering, a substantial
interest, direct or indirect, in the registrant. Nor was any such person connected with the registrant as a promoter, managing
or principal underwriter, voting trustee, director, officer, or employee.
The
audited financial statements for the years ended December 31, 2017 and 2016 included in this Prospectus and the Registration Statement
have been audited by M&K CPAS, PLLC, an independent registered public accounting firm, to the extent and for the periods set
forth in their report appearing elsewhere herein and in the Registration Statement, and are included in reliance upon such report
given upon the authority of said firm as experts in auditing and accounting.
WHERE
YOU CAN FIND MORE INFORMATION
We
file annual reports, quarterly and current reports, proxy statements and other information with the SEC. The public may read and
copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington,
DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC0330. The SEC
maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers
that file electronically with the SEC at
www.sec.gov
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All
of our reports filed with the SEC (including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form
8-K and proxy statements) are accessible through the Investor Relations section of our website, free of charge, as soon as reasonably
practicable after electronic filing. The reference to our website in this prospectus is an inactive textual reference only and
is not a hyperlink. The contents of our website are not part of this prospectus, and you should not consider the contents of our
website in making an investment decision with respect to our securities.
We
have filed with the SEC a registration statement under the Securities Act of 1933, as amended (the “Securities Act”),
that registers the distribution of the securities offered hereby. The registration statement, including the attached exhibits
and schedules, contains additional relevant information about us and the securities being offered. This prospectus, which forms
part of the registration statement, omits certain of the information contained in the registration statement in accordance with
the rules and regulations of the SEC. Reference is hereby made to the registration statement and related exhibits for further
information with respect to us and the securities offered hereby. Statements contained in this prospectus concerning the provisions
of any document are not necessarily complete and, in each instance, reference is made to the copy of such document filed as an
exhibit to the registration statement or otherwise filed with the SEC. Each such statement is qualified in its entirety by such
reference.
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our
directors and officers are indemnified as provided by Nevada Revised Statutes and our amended and restated bylaws. We have agreed
to indemnify each of our directors and certain officers against certain liabilities, including liabilities under the Securities
Act. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and
controlling persons pursuant to the provisions described above, or otherwise, we have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such liabilities (other than our payment of expenses incurred
or paid by our director, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion
of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13.
Other Expenses of Issuance and Distribution.
The following table shows the
estimated costs and expenses, other than underwriting discounts and commissions, payable in connection with the 2,343.291
shares being registered for resale by the Selling Shareholders.
Securities and Exchange Commission registration fee
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$
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454.41
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Transfer agent and registrar fees and expenses
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$
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2,880.00
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Accounting fees and expenses
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$
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3,000.00
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Legal fees and expenses
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$
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25,000.00
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Miscellaneous
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$
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3,665.59
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Total
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$
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35,000.00
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All amounts are estimates other than the Commission’s
registration fee. We are paying all expenses of the registration listed above.
Item 14.
Indemnification of Directors
and Officers.
Our articles of incorporation, by-laws
and director indemnification agreements provide that each person who was or is made a party or is threatened to be made a party
to or is otherwise involved (including, without limitation, as a witness) in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he or she is or was a director or an officer of Brenham or, in the
case of a director, is or was serving at our request as a director, officer, or trustee of another corporation, or of a partnership,
joint venture, trust or other enterprise, including service with respect to an employee benefit plan, whether the basis of such
proceeding is alleged action in an official capacity as a director, officer or trustee or in any other capacity while serving
as a director, officer or trustee, shall be indemnified and held harmless by us to the fullest extent authorized by the Nevada
General Corporation Law against all expense, liability and loss reasonably incurred or suffered by such.
Section 145 of the Nevada General Corporation
Law permits a corporation to indemnify any director or officer of the corporation against expenses (including attorney’s
fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with any action, suit or
proceeding brought by reason of the fact that such person is or was a director or officer of the corporation, if such person acted
in good faith and in a manner that he or she reasonably believed to be in, or not opposed to, the best interests of the corporation,
and, with respect to any criminal action or proceeding, if he or she had no reason to believe his or her conduct was unlawful.
In a derivative action, ( i.e ., one brought by or on behalf of the corporation), indemnification may be provided only for expenses
actually and reasonably incurred by any director or officer in connection with the defense or settlement of such an action or
suit if such person acted in good faith and in a manner that he or she reasonably believed to be in, or not opposed to, the best
interests of the corporation, except that no indemnification shall be provided if such person shall have been adjudged to be liable
to the corporation, unless and only to the extent that the court in which the action or suit was brought shall determine that
the defendant is fairly and reasonably entitled to indemnity for such expenses despite such adjudication of liability.
Pursuant to Section 102(b)(7) of the Nevada
General Corporation Law, Article Seven of our articles of incorporation eliminates the liability of a director to us for monetary
damages for such a breach of fiduciary duty as a director, except for liabilities arising:
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from any breach of the director’s duty of loyalty to us;
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from acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law;
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under Section 174 of the Nevada General Corporation Law; and
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from any transaction from which the director derived an improper personal benefit.
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Item 15.
Recent Sales of Unregistered
Securities.
During the last three fiscal years, the
Registrant issued and/or sold the following restricted securities. During the years ended December 31, 2016 and 2015, the Registrant
did not sell any unregistered securities.
Sales of Unregistered Securities in 2017:
On October 17, 2017, the Company sold 6,300,000
shares to 13 shareholders, each an “accredited investor” as that term is defined in Rule 501 of Regulation D promulgated
by the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Act”),
for $0.01 a share for a total cash consideration of $63,000.
On October 24, 2017, the Company issued
666,667 shares to one shareholder at $0.075 per share for cash consideration of $50,000.
Between November 15, 2017 and December
7, 2017, the Company sold a total of 1,000,000 units for cash consideration of $300,000 at price of $.30 (the “Units”),
each unit comprised of one share of common stock and one class A warrant exercisable at $0.50 per share with a term of 24 months.
The relative fair value of the stock with embedded warrants was $132,458 for the common stock and $167,542 for the class A warrants.
The warrants were valued using the Black-Scholes model with volatility of approximately 163% and discount rates ranging from 1.68%
to 1.8%.
Sales of unregistered securities in 2018:
Between March 20, 2018 and March 29, 2018,
the Company sold a total of 206,000 units for cash consideration of $123,600 at price of $.60 (the “Units”), each
unit comprised of one share of common stock and one class B warrant exercisable at $1.20 per share with a term of 24 months. The
relative fair value of the stock with embedded warrants was $44,454 for the common stock and $79,146 for the class B Warrants.
Between April 3, 2018 and May 14, 2018,
the Company sold a total of 1,150,500 units for cash consideration of $690,300 at price of $.60 (the “Units”), each
unit comprised of one share of common stock and one class B warrant exercisable at $1.20 per share with a term of 24 months. The
relative fair value of the stock with embedded warrants was $290,996 for the common stock and $399,304 for the class B Warrants.
Between October 22, 2018 and October 23,
2018, the Company sold a total of 201,666 units for cash consideration of $121,000 at price of $.60 (the “Units”),
each unit comprised of one share of common stock and one class B warrant exercisable at $1.20 per share with a term of 24 months.
Between October 22, 2018 and November 20,
2018, the Company sold a total of 318,483 units for cash consideration of $296,080 at price of $1.20 (the “Units”),
each unit comprised of one share of common stock and one class D warrant exercisable at $2.40 per share with a term of 24 months.
As discussed above, the Company is continuing
to raise capital through the private sale of its equity securities, primarily pursuant to the exemptions provided under Regulation
S and to a lesser extent pursuant to Regulation D, both promulgated by the SEC under the Act. To date, the Company has raised
approximately $1,643,979 in the Equity Raise.
The Company believes that the issuances
and sale of the restricted securities were exempt from registration pursuant to Section 4(2) of the Act and Regulation S and Regulation
D promulgated by the SEC under the Act, as privately negotiated, isolated, non-recurring transactions with accredited investors
not involving any public solicitation. The subscribers, in each case, represented to the Company their intention to acquire the
securities for investment only and not with a view to the distribution thereof. Appropriate restrictive legends are affixed to
the stock certificates issued in such transactions. All recipients of restricted securities represented by the shares of Common
Stock and the Units either received adequate information about the Company or had access, through employment, relation and/or
business relationships with the Company to such information and each of the subscribers is an accredited investor.
The Registrant issuance of the above restricted
Shares was in reliance upon the exemption from registration pursuant to Section 4(2) and Regulation S promulgated by the SEC under
the Act.
Item 16.
Exhibits and Financial Statement
Schedules.
Exhibit
No.
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Description
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3.1.1
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Articles of Incorporation of the Company filed as an exhibit to the Company’s Form 10-SB on May 11, 1999
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3.1.2
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Certificate
of Amendment for Name Change to CannaPowder, Inc dated December 11, 2017, filed with the Company’s Form 10-12G/A on
July 3, 2018
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3.1.3
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Certificate
of Organization of CannaPowder Ltd, organized in Israel dated August 20, 2017, filed with the Company’s Form 10-12G/A
on July 3, 2018
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5.1
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Opinion of Lawrence R. Lonergan, Esq., filed herewith
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10.1.2
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Feasibility
Study and Option Agreement dated September 14, 2017 [executed], filed with the Company’s Form 10-12G/A on September
24, 2018
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10.2.2
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License
Agreement with Yissum dated May 2, 2018 [executed], filed with the Company’s Form 10-12G/A on September 24, 2018
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10.3.2
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Research
Agreement with Yissum dated May 2, 2018 [executed], filed with the Company’s Form 10-12G/A on September 24, 2018
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21
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List of Subsidiaries, filed herewith
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23.1
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Consent of Independent Registered Public Accounting Firm, filed herewith
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Item 17.
Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which
offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required
by Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts
or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes
in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation
of Registration Fee” table in the effective registration statement.
(iii) To include any material information
with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining
any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means
of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining
liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration
statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in
reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used
after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus
that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede
or modify any statement that was made in the registration statement or prospectus that was part of the registration statement
or made in any such document immediately prior to such date of first use.
(b) Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to
the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is
against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication
of such issue.
(5) That, for the purpose of determining
liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:
The undersigned registrant undertakes that
in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting
method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of
the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or
sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus
of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424 (Section 230.424 of this chapter);
(ii) Any free writing prospectus relating
to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) The portion of any other free writing
prospectus relating to the offering containing material information about the undersigned registrant or its securities provided
by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an
offer in the offering made by the undersigned registrant to the purchaser.
SIGNATURES
Pursuant
to the requirement of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement on Form
S-1 to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Tel Aviv, Israel, on December 11,
2018.
CANNAPOWDER,
INC.
By:
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/s/
Liron Carmel
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Name:
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Liron
Carmel
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Title:
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Chief
Executive Officer (Principal Executive Officer)
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Pursuant
to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature
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Date
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/s/
Liron Carmel
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Chairman
of the Board
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December
11, 2018
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Liron
Carmel
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/s/
Liron Carmel
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Chief
Executive Officer (Principal Executive Officer)
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December
11, 2018
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Liron
Carmel
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/s/
Oded Gilboa
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Chief
Financial Officer (Principal Financial and
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December
11, 2018
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Oded
Gilboa
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Principal
Accounting Officer)
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