Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended August 31, 2020
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______.
Commission File Number: 000-52403
___________________________________________________
CANNABICS PHARMACEUTICALS
INC.
(Exact name of registrant as specified in its charter)
___________________________________________________
|
Nevada |
|
20-3373669 |
| (State
of Incorporation) |
|
(IRS
Employer Identification No.) |
| |
|
|
|
#3 Bethesda Metro Center, Suite 700
Bethesda, MD
|
|
20814 |
| (Address
of principal executive offices) |
|
(Zip
Code) |
Registrant's telephone number, including area code: 877
424-2429
___________________________________________________
Securities registered under Section 12(b) of the Act:
| Title
of each class |
Name
of each exchange on which registered |
| N/A |
N/A |
Securities registered under Section 12(g) of the Act:
Common Stock, $.0001 Par Value
(Title of class)
___________________________________________________
Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒
No
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☒
No
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files). ☒ Yes ☐ No
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not
contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. ☒
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 ☐ |
Accelerated
filer ☐ |
| |
Non-accelerated
filer ☐ |
Smaller
reporting company ☒ |
| |
Emerging
growth company ☐ |
|
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 pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant has filed a report on
and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section
404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the
registered public accounting firm that prepared or issued its audit
report. ☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No
On August 31st, 2020, the last business day of the registrant’s
most recently completed fourth quarter, the aggregate market value
of the Common Stock held by non-affiliates of the registrant was
$3,170,292, based upon the closing price on that date of the Common
Stock of the registrant on the OTC Bulletin Board system of $1.02.
For purposes of this response, the registrant has assumed that its
directors, executive officers and beneficial owners of 5% or more
of its Common Stock are deemed affiliates of the registrant.
As of November 4, 2020, the registrant had 135,080,441 shares of
its Common Stock, $0.0001 par value, outstanding.
Table of Contents
FORWARD LOOKING
STATEMENTS
Certain statements made in this Annual Report are “forward-looking
statements” (within the meaning of the Private Securities
Litigation Reform Act of 1995) regarding the plans and objectives
of management for future operations. Such statements involve known
and unknown risks, uncertainties and other factors that may cause
actual results, performance or achievements of the Company to be
materially different from any future results, performance or
achievements expressed or implied by such forward-looking
statements. The forward-looking statements made in this Report are
based on current expectations that involve numerous risks and
uncertainties. The Company’s plans and objectives are based, in
part, on assumptions involving the growth and expansion of
business. Assumptions relating to the foregoing involve judgments
with respect to, among other things, future economic, competitive
and market conditions and future business decisions, all of which
are difficult or impossible to predict accurately and many of which
are beyond the control of the Company. Although the Company
believes that its assumptions underlying the forward-looking
statements are reasonable, any of the assumptions could prove
inaccurate and, therefore, there can be no assurance that the
forward-looking statements made in this Report will prove to be
accurate. In light of the significant uncertainties inherent in the
forward-looking statements made in this Report, the inclusion of
such information should not be regarded as a representation by the
Company or any other person that the objectives and plans of the
Company will be achieved.
As used in this Annual Report, the terms “we”, “us”, “our”,
“Company”, and “CNBX” means Cannabics Pharmaceuticals Inc., unless
otherwise indicated.
PART I
Item 1. Description of
Business
Historically we were previously an exploration stage mining company
which transitioned into a bio-tech company in 2014.
Our corporate address is #3 Bethesda Metro Center, Suite 700,
Bethesda, Maryland, 20814; Telephone (877) 424-2429.
The company was previously engaged in the oil and gas exploration
business. On April 29th, 2014, the company began a new direction
and the majority of the Shareholders of the company elected the
current Board of Directors and renamed the Company Cannabics
Pharmaceuticals Inc. The Directors formed a US based company
founded in 2012 by a group of renowned researchers from the fields
of molecular biology, cancer research and pharmacology. R&D is
conducted in Government licensed labs in Israel with the focus of
development of personalized cannabinoid-based therapies,
medications and administration routes for cancer.
History
Cannabics Pharmaceuticals Inc. was incorporated on September 15,
2004, under the laws of the State of Nevada, as Thrust Energy
Corp., for the purpose of acquiring undivided working interests in
small oil and gas exploration properties and non-operating
interests in both producing and exploration projects throughout the
United States and Canada.
On September 30, 2010, we increased our authorized capital to 900
million shares of common stock (par value $0.0001) and 100 million
shares of preferred stock (par value $0.0001), and effected a
20-for-1 reverse split of our issued and outstanding common stock.
As a result of the reverse split, our issued and outstanding common
stock was reduced from 13,604,000 shares to 680,202 shares and
5,000,000 preferred shares.
Due to our inability to earn any meaningful revenue from oil and
gas exploration, our management determined in April 2011 that we
should change our business plan to include toll milling and
refining.
On May 5, 2011, we effected a change of name to American Mining
Corp. by completing a short form merger with a wholly-owned
subsidiary.
On April 25, 2014, Cannabics Inc., a Delaware Corporation,
purchased 20,500,000 shares of restricted stock of the Company,
thus acquiring control of the company.
On June 3, 2014, the Company's Board of Directors declared a
two-to-one forward stock split of all outstanding shares of common
stock. The stock split was approved by FINRA on June 19th, 2014.
The effect of the stock split increased the number of shares of
common stock outstanding from 40,880,203 to 81,760,406. All common
share and per common share data in these financial statements and
related notes hereto have been retroactively adjusted to account
for the effect of the stock split for all periods presented prior
to June 3rd, 2014. The total number of authorized common shares and
the par value thereof was not changed by the split.
On June 19, 2014, FINRA granted final approval of Change of
Name & Ticker Symbol of the Corporation from American Mining
Corporation to CANNABICS PHARMACEUTICALS INC., with the new Ticker
Symbol of “CNBX”. Said approval was predicated upon Cannabics
Pharmaceuticals Inc.’s filing of Articles of Merger with American
Mining Corporation with the Nevada Secretary of State on May 21st,
2014. Under the laws of the State of Nevada, Cannabics
Pharmaceuticals Inc. was merged with and into the Registrant, with
the Registrant being the surviving entity. The Merger was completed
under Section 92A.180 of the Nevada Revised Statutes, Chapter 92A,
as amended, and as such, does not require the approval of the
stockholders of either the Registrant or Cannabics Pharmaceuticals
Inc.
On July 24, 2014, the Company executed a Collaboration Agreement
with Cannabics, Inc. (“Cannabics”), a Delaware corporation and
largest shareholder of the Company. Per the terms of the Agreement,
the Company issued 18,239,594 shares of its common stock to acquire
the entire institutional knowledge of Cannabics, Inc., which
primarily consists of in-process Research & Development
technology, the cumulative result of its years of scientific
institutional knowledge in the fields of Molecular Biology, Cancer
and Pharmacology research. Additionally, Cannabics tendered
$150,000 to the Company specifically earmarked as working funds
towards prospective projects of the Company. Per the Agreement,
from that day forth they have carried forward their research and
development as part of, and for the exclusive benefit of the
Company, which initial findings have now branched out into new and
divergent discoveries.
On August 25, 2014, Cannabics Pharmaceuticals Inc. incorporated a
wholly owned subsidiary in Israel, named “G.R.I.N Ultra Ltd”,
dedicated to advanced research and development.
On July 3, 2018, the Company announced the conclusion of its
Clinical Trial of Cannabics SR 5mg drug for Cancer Anorexia
Cachexia Syndrome, as noted on the press release of that date.
On June 10th, 2020, the Company announced its
collaboration agreement with Cannomed, a public company on the
Israeli stock exchange, for the development of 17 specific
cultivars rich in known anti-tumor properties to target various
human cancer cells.
On June 16th, 2020, the Company announced its
appointment of Dr. Erez Scapa, MD, to its Scientific Board of
Advisors. Dr. Scapa is an Expert in Invasive Gastroenterology in
the Sourasky Medical Center in Tel-Aviv, Israel, where he is head
of the Endoscopic Submucosal Dissection (ESD) program.
On August 5th, 2020, the Company announced its
appointment of Dr. Dana Ben-Ami Shor to its Scientific Board of
Advisors, where she will help lead the design and implementation of
the company's clinical validation plan of its novel drug
candidates for the treatment of colorectal cancer.
On August 20th, 2020, the Company announced the creation
of a new Division for its Anti-Tumor drug candidate RCC-33, for the
treatment of colorectal cancer. The emanates from the Company’s
focus on a clinical validation path, including in-vivo
experiments, collaborations with key medical centers, and the
preparation of a product dossier with which the company plans to
schedule a Pre IND-Meeting with the US FDA.
Our Business
We are a biopharmaceutical company specializing in the discovery,
development and commercialization of novel cannabinoid-based
products and innovative technologies for the treatment of
cancer.
Management Experience
Cannabics Pharmaceuticals Inc.’s management team is highly
experienced in various aspects of biotech and pharmaceutical
management. The scientific team has a long cumulative track record
in cancer and CNS research, pharmaceutical development, clinical
studies and a deep hands-on understanding of the medical cannabis
industry.
Dr. Eyal Ballan, 45, is a co-founder of Cannabics Inc.
and is its CTO. Dr. Ballan holds a Ph.D. in Neurophysiology, EEG,
Brain Wave Analysis and Cortical Connectivity. After obtaining his
Ph.D. he was an entrepreneur in the field of Biofeedback Studies
and developed a Resonating Neuro-Feedback system. Dr. Ballan holds
a M.Sc. from Tel-Aviv University - Magna Cum Laude - in
anticancer drug development. Dr. Ballan was part of the renowned
research team which developed Salirasib (Treatment for Non-Small
Cell Lung Cancer). He is an expert in molecular biology, cell
cultures and genomics with a focus towards identification of
anticancer compounds and delivery systems to tumors and is a member
of the American Academy of Neurology. Eyal is committed full time
to the Company.
Eyal Barad, 55, is a co-founder of Cannabics Inc. He was
named Director & CEO on November 13 th, 2017, as
noted in the 8K of that date. Mr. Barad brings over 20 years of
executive managerial experience in successful technology ventures.
He has a BA in Economics & International Relations from the
Hebrew University in Jerusalem, and an MBA with Honors from Haifa
University. Eyal is committed full time to the Company.
Gabriel Yariv, Mr. Yariv, 43, was named Director and Chief
Operations Officer on November 6th, 2019. Mr. Yariv
brings over 20 years of successful executive experience in the
medical industry. Mr. Yariv was part of the founding group
of BreathID, an Oridion Medical business unit (now
Medtronic) and its
subsequent spinoff company, Exalenz Bioscience,
which develops and manufactures advanced non-invasive diagnostic
medical devices for gastrointestinal and liver conditions. Mr.
Yariv also co-founded SimuTec, a medical simulation and training
company in Brazil that develops and commercializes advanced
personalized Virtual Reality training programs for physicians. Mr.
Yariv is actively engaged in non-profit and philanthropic
activities including ongoing business mentoring of
entrepreneurs, founder of the Yariv Foundation for
Leadership, and current member of the Friends of the Israel
Museum society. Mr. Yariv holds a BA (Cum Laude) in History,
Philosophy & Political science from Boston University, and a
Certificate Course in Cyberlaw from Harvard
University.
Advisory Board –
Dr. Sigalit Ariely-Portnoy - Senior Advisor in the field of
Regulation, Validation and Quality. Dr. Sigalit Ariely-Portnoy has
over 17 years’ experience in the pharmaceutical industry. During
this time, she has managed pharmaceutical and chemical plants at
Taro pharmaceutical industries Ltd as Operation Group Vice
president and in Teva Pharmaceutical industries Ltd as Kfar-Saba
OSD plant manager. Dr. Ariely-Portnoy managed Teva's largest plant
worldwide (9 billion tablets per annum and more than $2B revenues).
During her career, she led more than 50 inspections by the US FDA,
EMEA, Israeli MOH, and others. Dr. Ariely-Portnoy spearheaded the
construction of a 200,000 sq ft pharmaceutical plant, several
chemical plants and bio-warehouses, as well as many significant
plant expansions for manufacturers of semisolids, liquids and oral
solid dosage forms. Between the years 2003-2006, Dr. Ariely-Portnoy
was the president of the Israel chapter of the PDA (Parenteral Drug
Association). For the last 5 years, Dr. Ariely-Portnoy manages
Gsap, a company which consults pharmaceutical, medical device and
biotechnology companies in several major fields, including
innovative product development, regulation, establishing quality
systems and validation services. Dr. Ariely-Portnoy received her
B.Sc., M.Sc., and D.Sc. from the Technion Institute of Technology
in Haifa, Israel, in the fields of Chemical Engineering and
Biomedical Engineering.
Dr. Danna Ben-Ami Shor, MD – Dr. Ben-Ami Shor is a
recognized expert in invasive endoscopy and gastroenterology in the
Sourasky Medical Center in Tel-Aviv, Israel. Dr. Ben-Ami Shor
earned her M.D in 2009, graduating cum laude from the Sackler
Faculty of Medicine, Tel Aviv University. She specialized in
internal medicine and gastroenterology at the Sheba Medical Center,
Israel. She also successfully completed an advanced endoscopy
(ASGE) accredited fellowship within the Center for Interventional
Endoscopy at AdventHealth, in Florida. Additionally, Dr. Ben-Ami
Shor is proficient in both diagnostic and therapeutic endoscopic
ultrasound (EUS), and endoscopic retrograde
cholangiopancreatography (ERCP).
Prof. Zamir Halpern - Medical Advisor. Prof. Halpern, is a
senior physician at the Gastroenterology Institute of the Sourasky
Medical Center in Tel-Aviv, Israel, and current Chairman of the
National Gastro Nutrition and Liver Diseases Council at the Israeli
Ministry of Health. He has also served as Chairman of the Israeli
Association of the Study of Liver, Chairman of the Israeli
Gastroenterology Association and Chairman of the National Council
for Food and Agriculture.
Dr. Erez Scapa, MD - Medical Advisor. Dr. Scapa earned his
M.D. in 2000 at the Technion Institute of Technology in Haifa,
Israel, cum laude. He later held a Research Fellowship in
Hepatology at the Brigham and Women's Hospital, Harvard University,
Boston, Massachusetts, as well as a fellowship in Endoscopic
Submucosal Dissection at the NTT Medical Center in Tokyo, Japan. He
is an expert in invasive endoscopy and has extensive experience in
preforming colonoscopies and gastroscopies. He is proficient in
both diagnostic as well as invasive endoscopic ultrasound and has
served as the head of the Endoscopic Submucosal Dissection program
in Tel-Aviv Sourasky Medical Center since 2019.
Dr. Gil Feiler - Head of Advisory Board and Business
Development Advisor, Dr. Feiler served as Board Member of Advanced
Vision Technology, traded on the Frankfurt Stock Exchange (VSJ),
served on the Board of Safra Bank Mutual Fund Division; and has
served as Administrative advisor for the Government of Ras Al
Khaimah, UAE. Dr. Feiler has published extensively on business
opportunities and strategies and was a frequent speaker in world
events including the World Economic Forum in Davos.
Prof. Amos Toren, MD - Medical Advisor Prof. Amos Toren is
the Director of Pediatric Hemato-Oncology and BMT Department at the
Sheba Medical Center since 2001 and a Professor in the division of
Hematology, Sackler School of Medicine Tel-Aviv University. Prof.
Toren is a specialist in Pediatrics, General Hematology and
Pediatric Hemato-Oncology. He also has a PhD degree in genetics and
qualified as a Master of Health Administration (MHA) at the
Recannati Business School, Tel-Aviv University. Professor Toren
runs numerous clinical studies, investigator initiated, company
initiated, unicenter as well as multicenter.
Dr. Tal Mofkadi - Financial Advisor, Dr. Mofkadi holds a
Ph.D. in Financial Economics from Tel Aviv University. He is a
lecturer at Tel Aviv University, the Interdisciplinary Center in
Herzliya and universities abroad. He is the author of ‘The Handbook
of Corporate Valuation’. Dr. Mofkadi provides expert opinions in
financing, economic, and legal proceedings, writing valuations and
optimal pricing policies as well as economic analysis of
competition and regulatory aspects, risk assessment and more.
Company Overview –
CANNABICS PHARMACEUTICALS, INC. is based in Bethesda, Maryland, and
is dedicated to the development and licensing of personalized
cannabinoid-based treatments and therapies. The Company’s main
focus is development and marketing innovative bioinformatic
delivery systems for cannabinoids, personalized medicine therapies
and procedures based on cannabis originated compounds and
bioinformatics tools. The parent Company Cannabics Inc was founded
by a group of Israeli researchers from the fields of cancer
research, pharmacology and molecular biology.
Nature of the Company
The Company is a biopharmaceutical corporation specializing in the
discovery, development and commercialization of novel effective
cannabinoid-based products and innovative technologies for the
treatment of cancer. Cannabics is a pioneer in the constellation of
cannabis cancer and diagnostics. Our vision is to reveal and
personalize the potential of cannabis medicine to treat cancer
itself, as well as side effects. We develop cancer diagnostics in
conjunction with cannabinoid medicine, utilizing novel
bio-technological tools, striving to prevent cancer onset in
healthy adults and progression in patients. Personalization of
cannabinoid-based treatments is the main scope of the company. We
combine the power of our proprietary technologies with the
expertise of our leading scientists to unlock the medicinal
properties of cannabis and its diversity of bioactive compounds. We
have conducted thousands of tests on biopsies and cell lines in
order to identify the physiologic impact of cannabinoids on cell
cycle and cell death. This scientific workflow has generated an
ongoing stream of biological data through which we have accumulated
in-depth knowledge of the various therapeutic effects of
cannabinoids and identified cannabinoid ratios demonstrating
anti-tumor potential. We believe that our cannabinoid research
coupled with our proprietary technologies and intellectual property
positions the Company to play an important role in the rapidly
growing medical cannabis marketplace.
Our core technology is a
continuously evolving bioinformatics platform that utilizes
high-throughput screening technology, advanced data analytics,
and proprietary methodologies
to rapidly examine the physiologic effect of multiple
cannabinoid compounds on tumor cells. This technology enables us to
screen thousands of cannabinoid combinations weekly, generating
multiple datasets on the anti-tumor properties of different
cannabinoid formulations and ratios. We conduct a broad range of
preclinical research on cannabinoids through our bioinformatics
platform, which informs the development of our product
candidates.
Our lead product candidate is RCC-33, an oral capsule for the
treatment of colorectal cancer (“CRC”). RCC-33 contains high
concentrations of the cannabinoids CBDV and CBGA, which have
demonstrated complex synergistic anti-tumor activity in our
in vitro studies, with minimal psychoactive effects. We
are currently in the early planning stage of a clinical development
pathway for RCC-33. We plan to conduct further preclinical studies
to establish the safety and efficacy of RCC-33 in an in vivo
murine model of colorectal cancer. Subject to the results of our
preclinical studies, we intend to proceed to phase 1/2a clinical
study in the second half of 2022.
Cannabics SR is a
lipid-based capsule containing a standardized formulation of
cannabinoids that we are developing as a product candidate for the
treatment of cancer anorexia-cachexia syndrome
(“CACS”). With a rapid onset
of action and sustained effects for up to 6-8 hours, we believe
that the convenience of once or twice daily oral dosing of
Cannabics SR may improve quality of life and increase patient
compliance with treatment regimens, leading to better health
outcomes. A two-year pilot study of Cannabics SR led by Dr.
Gil Bar-Sela of the Rambam Hospital Health Care Campus, Division of
Oncology, in Haifa, Israel, demonstrated a clinically significant
weight increase in CACS patients treated with Cannabics SR
capsules (Source:
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6785913/).
In the second half of 2021, we intend to commence an additional
pilot study in Israel to assess the pharmacokinetics and
pharmacodynamics of Cannabics SR in humans. Data from the study
will inform our clinical development plan for Cannabics SR. In
the meantime, we anticipate that the results of these studies may
enable us to obtain a permit from the Israeli Ministry of Health to
commercialize Cannabics SR in Israel.
Another product candidate we
are developing is Cannabics CDx, a drug sensitivity
test designed to provide innovative decision support to healthcare
providers interested in personalizing cannabinoid-based cancer
therapies. Cannabics CDx applies data analytics and
high-content drug sensitivity screening integrated with our
proprietary database to measure the effectiveness of cannabinoid
compounds on a patient’s biopsy, suggest preferred alternatives,
and alert healthcare providers to cannabinoids that may be
contraindicated. We believe that Cannabics CDx will meet a
significant unmet need of the growing population of cancer patients
being treated with cannabis by enabling healthcare providers to
more precisely tailor cannabinoid treatments to a patient’s cancer
and clinical profile. We are currently seeking strategic partners
for a clinical validation study expected to commence in 2022 to
assess the sensitivity and specificity of Cannabics CDx with a view
towards commercializing Cannabics CDx in Europe, the United
States, and other territories.
Cancer and Cannabinoids
Cancer is a general term used to describe a group of more than 100
related diseases characterized by uncontrolled growth and spread of
abnormal cells, leading to the development of a mass commonly known
as a tumor, followed by invasion of the surrounding tissues and
subsequent spread, or metastasis, to other parts of the body.
Despite enormous investment in research and the introduction of new
treatments, cancer remains a critical area of unmet medical need.
According to the World Health Organization, cancer is the second
leading cause of mortality worldwide, responsible for an estimated
9.6 million deaths in 2018. As of January 1, 2019, there were more
than 16.9 million people with a history of cancer living in the
United States, with 1.8 million new cases and 606,520 cancer deaths
expected in 2020 (Source: American Cancer Society. Cancer Facts
& Figures 2020).
Over the past decade, there has been growing interest in the
therapeutic value of cannabinoid compounds in oncology. Cannabis
has long been suggested as a well-tolerated, safe, and effective
option to help patients cope with cancer related symptoms by
reducing nausea and vomiting, alleviating cancer pain, stimulating
appetite, and improving quality of life. Beyond their palliative
benefits, however, cannabinoids have also been receiving increased
attention for their anti-cancer potential, which we believe may one
day revolutionize cancer therapy.
Cannabinoids are a diverse class of chemical compounds that occur
naturally within cannabis plants and are pharmacologically similar
to cannabinoids produced by the human body, known as
endocannabinoids. Endocannabinoids form part of the human
endocannabinoid system (ECS), a complex biological network that
also includes cannabinoid receptors and enzymes involved in
cannabinoid formation, transport, and degradation. The ECS is
regarded as an important endogenous system implicated in regulation
of the most vital biological processes to maintain homeostasis,
assisting the body to remain stable and balanced despite external,
or environmental, fluctuations (Source: Current Pharmaceutical
Design, 2016;22(12):1756-1766).
Dysregulation of the ECS owing to variation in the expression and
function of cannabinoid receptors or enzymes or the concentration
of endocannabinoids has been associated with several diseases,
including cancer (Source: International Journal of Molecular
Sciences, 2020;21(3):747). Indeed, the mechanisms involved in
the regulation of the ECS as well as the processes that it
regulates include practically every pathway important in cancer
biology. Expression of the ECS is altered in numerous types of
tumors, compared to healthy tissue, and this aberrant expression
has been related to cancer prognosis and disease outcome, depending
on the origin of the cancer (Source: British Journal of
Pharmacology, 2018;175(13):2566-2580). Recent studies suggest
that endocannabinoids contribute to maintaining balance in cell
proliferation and that targeting the ECS can affect cancer growth
(Source: Canadian Urological Association Journal,
2017;11(3-4):E138-E142).
Cannabinoids can interact with the cannabinoid receptors in the
ECS, sometimes with a higher affinity than endocannabinoids. As a
consequence, all the processes regulated by endocannabinoids are
susceptible to interference by cannabinoids. The ability to use
cannabinoids to modulate the ECS encompasses several attractive
pharmacotherapeutic targets for systemic anti-cancer treatment and
has sparked considerable research examining cannabinoid action on
cancer cells (Source: Pharmacological Reviews,
2006;58(3):389-462).
Cannabinoids have demonstrated selective anti-tumor properties in
preclinical studies, exerting anti-proliferative, proapoptotic,
anti-angiogenic, and anti-metastatic and anti-inflammatory effects
depending on tumor type and specific setting (Source: Cancer
Medicine, 2018:7(3):765-775). These effects appear to be more
pronounced when cannabinoids are used together versus being
administered separately, a mechanism known as the entourage
effect. We believe, therefore, that cannabinoid combinations
may hold promise for an improved anti-proliferative strategy for
cancer management.
In addition to their potential role as anti-cancer agents,
cannabinoids have been observed to act synergistically with some
conventional antineoplastic drugs, such as chemotherapeutic agents,
enhancing their effectiveness (Source: Cancer Medicine,
2018;7(3)765-775). This raises the potential for combinational
therapies that may increase the range of chemotherapeutic options
available to patients and enable targeting of tumor progression at
different levels while also permitting dosages of cytotoxic drugs
to be dramatically reduced without compromising efficacy.
Figure 1: Synergistic effects of cannabis extracts
and chemotherapies on cancer biopsy after treatment with the same
extract and three different chemotherapy combinations
As of the date of this filing, we are not aware of any
cannabinoid-based therapies approved for the treatment of
cancer.
Our Bioinformatics Platform
We have developed a continuously evolving preclinical
bioinformatics platform that enables us to evaluate and classify
the physiological impact of multiple cannabinoid compounds on
various cancer cells. Utilizing state-of-the-art high-throughput
screening and flow cytometry, our platform is capable of testing
thousands of compounds weekly, allowing us to rapidly and
effectively examine their interactions with a growing library of
human cancer cell lines and biopsies. Through the large body of
data generated by our platform, we are accumulating in-depth
knowledge of the various therapeutic effects of cannabinoids and
patterns of cannabinoid ratios that demonstrate meaningful
physiologic impact on cancer.
Our bioinformatics platform includes the following:
|
Ø |
high-throughput
screening, high content screening, flow cytometry, machine
learning, robotics, and proprietary methodologies; |
|
Ø |
a library of human
cancer cell lines and thousands of different combinations and
ratios of cannabinoid compounds in a costumed matrix; |
|
Ø |
a growing database of
biological response data; |
|
Ø |
in-house extraction,
processing methodologies, and analytical techniques that yield
well-characterized and standardized extracts; |
|
Ø |
collaborations with
regulated cannabis producers that may expand our cannabinoid
compound library and provide us with access for future proprietary
cultivars; |
|
Ø |
fully integrated
in-house research and development; and |
Once a series of potentially active cannabinoids is identified for
a specific cancer type, we then test and confirm their activity
through in vitro and ex-vivo evaluation studies
to determine their potential activity. Through this process, we are
able to assess their therapeutic potential. The results of our
pre-clinical experiments provide starting points for our clinical
development programs.
Biopharmaceutical Collaboration
As medical cannabis becomes increasingly recognized for its
therapeutic potential in the age of personalized medicine and
genomics, we believe that there is a growing global demand by
biopharmaceutical companies for research and diagnostic tools that
both facilitate and accelerate the generation of biological
information for the development of cannabinoid drugs and
formulations. We believe that our bioinformatics platform will be
of benefit to such companies and may therefore represent
collaborative opportunities, market potential and downstream
value-creation for the Company.
Finding novel ways to treat and cure diseases is a fundamental
challenge in biomedical research. Unsuccessful clinical trials are
the most expensive obstacle for drug development because of the
immense costs and the low success rate. Only 1 out of 10 drugs
successfully pass through clinical development, with 80% of drugs
excluded before Phase 3 clinical trials (Source: Biotechnology
Innovation Organization, “Clinical Development Success Rates,
2006-2015). The low clinical target validation success rate
reflects a lack of reliable drug target prediction methods. This is
particularly true in the case of research on cancer, which is
increasingly being understood as not just many but thousands of
different diseases, requiring more well-defined targets and
biomarkers. A 2018 study by MIT found that trials using biomarkers
for patient stratification have higher success rates, especially in
the area of oncology, where clinical trials using biomarkers
exhibited almost twice the overall probability of success compared
to trials without biomarkers (Source: Biostatistics,
2019;20(2):273-286).
We believe that our bioinformatics platform could make the
development of cannabinoid-based drugs more successful by providing
a more accurate and reliable drug target prediction method. Our
proprietary analytics may benefit biopharmaceutical companies
across a range of applications, including patient selection and
recruitment for clinical trials and identification of new targets
for drug development.
Development Pipeline
We are currently developing a portfolio of proprietary technologies
and formulations with a variety of research, analytic, and
therapeutic applications. Our most advanced development programs
include the following:
|
Product
Candidate |
Indication/Description |
Current
Development Status |
Expected
Next Steps |
Partner(s) |
|
RCC-33 |
Colorectal
Cancer |
Pre-clinical |
Pre-IND meeting with FDA in the second half of 2021.
Phase 1/2a clinical trial expected to commence in the second half
of 2022
|
None |
|
Cannabics SR |
Cancer
Anorexia-Cachexia Syndrome |
Phase
0 |
Additional
pilot studies expected to commence in the second half of
2021 |
None |
|
Cannabics CDx |
Drug
sensitivity test for cannabinoid-based cancer
therapies. |
Pre-clinical |
Clinical
validation study to commence in 2022 |
To be
determined |
We continue to conduct research and seek collaborations for new
advances in biotechnology that may lead to the development of
additional product candidates.
RCC-33 for Colorectal Cancer
Overview
Our lead product candidate is RCC-33, which we are developing as a
treatment for CRC. RCC-33 is an oral capsule containing a
proprietary formulation of cannabinoids that have demonstrated
synergistic efficacy in reducing the viability of human colon
cancer cell lines in preclinical studies.
Colorectal Cancer
CRC is one of the more common forms of cancer worldwide,
representing a significant challenge to the global healthcare
system. According to the World Health Organization, CRC is the
third most diagnosed cancer in the world and the second-leading
cause of cancer-related mortality. In the United States, there were
approximately 1,348,087 people living with CRC in 2017 (Source:
National Cancer Institute. “Cancer Stat Facts: Colorectal
Cancer”). It is estimated that 147,950 Americans will be
diagnosed with CRC in 2020, representing 8.2% of all new cancer
cases, and 53,200 Americans will die from the disease (Source:
American Cancer Society. “Cancer Facts & Figures
2020”).
Most CRCs begin as a noncancerous growth called a polyp that
develops on the inner lining of the colon or rectum. The most
common kind of polyp is called an adenomatous polyp or adenoma.
According to the American Cancer Society, an estimated one-third to
one-half of all individuals will eventually develop one or more
adenomas. Although all adenomas have the capacity to become
cancerous, fewer than 10% are estimated to progress to invasive
cancer. The likelihood that an adenoma will evolve into cancer
increases as it becomes larger or when it acquires certain
histopathological characteristics. Adenomas that become cancerous,
called adenocarcinomas, comprise nearly 96% of all CRCs (Source:
American Cancer Society. “Colorectal Cancer Facts & Figures
2017-2019”). Adenocarcinomas may grow into blood vessels or
lymph vessels, increasing the chance of metastasis to other
anatomical sites.
CRC usually develops slowly, over a period of 10 to 20 years. The
complex sequence of events occurring during initiation, development
and propagation of adenocarcinomas is likely the result of a
lifelong accumulation of mutations caused by both genetic and
environmental factors known as the adenoma to carcinoma sequence.
While the specific cause of any particular case of CRC is often
unknown, more than one-half of all cases and deaths are
attributable to lifestyle and environmental factors, such as
smoking, unhealthy diet, high alcohol consumption, physical
inactivity, and excess body weight (Source: American Cancer
Society. “Cancer Facts & Figures 2020”).
CRC does not usually cause symptoms until the disease is advanced,
therefore early detection of adenomas by screening is vital. If not
treated or removed, an adenoma can become a potentially
life-threatening cancer.
Current Standard of Care
Treatment options for CRC patients depend on several factors,
including the type and stage of cancer, possible side effects, and
the patient’s preferences and overall health. Surgical removal of
the tumor is the most common form of treatment, particularly in the
early stages of malignancy. Patients with more advanced stages of
CRC may be given adjuvant chemotherapy to kill any cancer cells
remaining after surgery, though standard chemotherapy is associated
with severe side effects and provides marginal benefit to the
majority of patients. While radiation therapy is often used to
treat rectal cancer, it is not generally recommended for colon
cancer patients except in the later stages of the disease
(Source: American Cancer Society. “Treating Colorectal
Cancer”).
CRC is a heterogeneous disease with distinct clinical, molecular,
and pathophysiological characteristics. As a result, the response
to treatment is variable between patients, even when they are
diagnosed at the same clinical stage. Such heterogeneity remains an
obstacle to the optimization of treatment for each individual.
Researchers are continuing to investigate new treatment options,
such as immunotherapy and targeted therapy, that focus upon the
genes, proteins, and other factors in a particular tumor
(Source: American Cancer Society. “Advances in Colorectal
Research”).
Immunotherapy uses the body’s own immune system to kill cancer
cells. There are already several FDA-approved immunotherapy options
for CRC, such as pembrolizumab (Keytruda®), nivolumab (Opdivo®),
and ipilimumab (Yervoy®). Many immunotherapies that have shown
promise in addressing other types of cancer are also being tested
for CRC. While immunotherapy has had some encouraging results,
significant limitations remain. Its efficacy is often unpredictable
and the treatment can lead to the body becoming resistant or result
in off-target toxicities where the body’s immune system attacks
healthy tissue. Immunotherapy may take longer than other protocols
and it is substantially more expensive than classical treatments
(Source: Pharmacy & Therapeutics,
2017;42(8):514-521).
Targeted therapy uses drugs to target specific molecules inside
cancer cells or on their surface to slow the growth of cancer,
destroy cancer cells, and relieve cancer symptoms. There are
different types of targeted therapy drugs, each working differently
depending on what molecule the drug is targeting. A treatment is
chosen based on the types of molecules expressed on the patient’s
tumor cells, which allows doctors to tailor cancer treatment for
each person. Several targeted therapy drugs, such as bevacizumab
(Avasin®) and cetuximab (Erbitux®), are already used to treat
advanced CRC. Despite showing clinical promise, targeted therapy
has challenges, such as tumor heterogeneity, off-target toxicity,
and acquired resistance (Source: Medical Research Journal,
2019;4(2):99-105). The lack of biomarkers by which to identify
patients having a high probability of response is also a
particularly significant obstacle. As with immunotherapy, the cost
of targeted therapy is substantially higher than classical
treatments.
We believe that there is no “magic bullet” to cure cancer and that
a personalized combination of cancer treatments may be the best
course for long term survival benefits in each case. To that end,
the development of more prevention strategies and novel agents will
be essential.
Cannabinoids and Colorectal Cancer
One area of increasing interest in the treatment of CRC lies in the
development and use of cannabinoid therapeutics. The ECS is
regarded as an important regulatory system in the gastrointestinal
tract, being involved in several important functions such as
motility, secretion, sensation, inflammation, and carcinogenesis.
Recent studies advocate that the ECS plays a critical role in the
development of CRC and should therefore be considered as an
appropriate target for CRC inhibition (Source: Frontiers in
Pharmacology, 2016;7:361). The expression of ECS components in
CRC has been found to be increased and associated with poorer
prognosis and advanced stages of disease (Source: Cannabis and
Cannabinoid Research, 2018, 3(1):272-281). For example,
cannabinoid receptors have been found to be overexpressed in tumor
cells of the colon and this up-regulation has been postulated to be
an indicator of cancer outcome (Source: British Journal of
Pharmacology, 2018; 175(13): 2566-2580).
Research on the effects of cannabinoid compounds on CRC has
demonstrated an ability to reduce the viability of CRC cell lines
in vitro (Source: Cancer Medicine,
2018;7(3):765-775), while there is also convincing scientific
evidence that cannabinoids are able to prevent or reduce
carcinogenesis in different animal models of colon cancer
(Source: Expert Review of Gastroenterology & Hepatology,
11:10, 871-873).
We believe that
cannabinoids are a promising therapeutic agent for the treatment of
CRC. We have conducted several in vitro unpublished
studies using our bioinformatics platform to confirm that
cannabinoids cause necrosis in colon cancer cells. While many
cannabinoids demonstrate levels of toxicity on cancer cells, we
have found that certain cannabinoid extracts and combinations show
increased levels of toxicity relative to other isolated or combined
cannabinoids. These findings have spurred the development of
RCC-33, our product candidate for the treatment of CRC.
Figure
2:
Synergistic effects of different cannabinoid combinations on
viability of a colon cancer cell line.
RCC-33
We are developing RCC-33 as an oral capsule containing high
concentrations of the cannabinoids CBDV and CBGA in a novel
formulation, which we believe may be effective in the treatment of
adenocarcinomas of the colon. The cannabinoids in RCC-33 have
demonstrated complex synergistic anti-tumor effects in combination,
with no psychoactive effect. In our preclinical
in vitro studies evaluating the influence of 15
different cannabinoids on human colon cancer cell lines
(RKO, HCT116), alone and in
combination, RCC-33 demonstrated clear efficacy in reducing
the viability of colon cancer cells versus alternative cannabinoid
combinations.
Development Plan
We are currently in the early
planning stage of a clinical development pathway for RCC-33. We
plan to conduct further preclinical studies to establish the safety
and efficacy of RCC-33 before proceeding with first-in-human
clinical testing.
Preclinical Studies
We intend to conduct a proof
of concept non-clinical study in a murine model for colon
adenocarcinoma to validate the results obtained in our cell-based
assays. In addition, we plan to conduct non-clinical safety studies
following Good Laboratory Practice (GLP) to evaluate the systemic
and local toxicity of escalating doses of RCC-33 and establish
dosing parameters. The results of these preclinical studies,
which are expected in the fourth quarter of 2020, will guide our
planned Phase 1/2a clinical trial. The non-clinical requirements to
support the development program will be verified with the FDA at a
pre-IND meeting expected to take place in the second half of 2021.
Such studies may include repeated dose toxicity studies, male and
female fertility studies, embryofetal development studies, animal
abuse related studies, pharmacokinetics studies, drug-drug
interaction studies, and others.
Clinical Trials
We plan to evaluate the safety, tolerability, and pharmacokinetic
properties of RCC-33 in a Phase 1/2A ascending dose clinical trial
in CRC patients, commencing in the second half of 2022. The
clinical trial will examine the tolerability, pharmacokinetics,
pharmacodynamics, and efficacy of multiple doses of RCC-33 in CRC
patients. We are currently identifying potential contract research
organizations and clinical trial centers to conduct the Phase 1/2a
human proof of concept study, which is estimated to cost
$1,000,000. We believe that the Company’s currently available funds
will be sufficient to obtain all regulatory approvals necessary to
conduct the Phase 1/2a trial. As at the date of this filing,
however, the Company does not have sufficient funds to complete the
Phase 1/2a study.
Subject to the results from our Phase 1 trials, we plan to submit
an IND to the FDA for RCC-33 with the clinical protocol for a Phase
2 double-blind placebo controlled clinical trial evaluating RCC-33
in patients with CRC at various dosing levels versus placebo. The
outcomes from the planned Phase 2 human proof of concept trial will
inform our decision regarding further steps in the clinical
development of RCC-33.
At this time, we do not expect to independently develop RCC-33 up
to regulatory approval. Instead, we plan to seek a pharmaceutical
partner or partners to continue our commercialization efforts.
However, we may also seek to further advance the RCC-33 program
with additional human clinical trials prior to finding a suitable
pharmaceutical partner or partners. We estimate that it will take
more than five years to bring RCC-33 to market, if at all, at a
cost of more than $10 million.
Cannabics SR for Cancer Anorexia-Cachexia Syndrome
Overview
We are developing Cannabics SR as a product candidate for the
treatment of CACS. Cannabics SR is a sustained-release oral
capsule containing a standardized compound of cannabinoids that has
demonstrated a clinically significant weight increase in CACS
patients in a peer-reviewed pilot study conducted by Dr. Gil
Bar-Sela of the Rambam Hospital Health Care Campus, Division of
Oncology, in Haifa, Israel. Our patent-pending technology provides
for a convenient, once or twice daily administration, with rapid
onset and a steady state of therapeutic effect for a 6 to 8-hour
duration.
Cancer Anorexia-Cachexia Syndrome
CACS is a common complication of cancer associated with high
morbidity and mortality. It is a complex metabolic syndrome in
which a persistently elevated basal metabolic rate is not
compensated for by adequate calorie or protein intake, causing
involuntary and progressive weight loss leading to increasing
functional impairment in cancer patients, especially in advanced
stages of the disease. Once established, CACS cannot presently be
reversed using available pharmacological or nutritional support
techniques.
Unlike starvation, body-weight loss in CACS patients arises mainly
from loss of muscle mass, characterized by increased catabolism of
skeletal muscle and decreased protein synthesis. This weight loss
is associated with important clinical outcomes such as increased
morbidity, diminished effectiveness of chemotherapy, muscle
wasting, inflammation, fatigue, and reduced survival expectations.
The impact of CACS on the patient is not, however, limited to the
effect of weight loss. Quality of life, functional abilities,
symptoms, psychological outcomes, and social aspects are all
affected by CACS.
According to the National Cancer Institute, nearly one-third of
cancer deaths can be attributed to the severe weight loss and
“metabolic mutiny” associated with CACS, and more than 50% of
patients with cancer die with cachexia being present. The overall
prevalence of CACS is currently estimated to range from 40% at
cancer diagnosis to 70-80% in advanced phases of the disease
(Source: Critical Reviews in Oncology/Hematology,
2013;88(3):625-636), while the overall prevalence of weight
loss in cancer patients may be as high as 86% in the last 1-2 weeks
of life (Source: Journal of Pain and Symptom Management
2007;34:94–104).
The cause and subsequent development of CACS is still poorly
understood, but several factors and biological pathways are known
to be involved, including inflammation, decreased secretion of
anabolic hormones, and altered metabolic response. While there have
been important advances in the study of CACS over the past decade,
including progress in understanding its mechanisms and the
development of promising pharmacologic and supportive care
interventions, there is presently no effective pharmacologic
therapy for CACS.
Current treatments for CACS are generally based on nutritional
support and CACS pathophysiology-modulating drugs, with the most
common being the progestogens, megestrol and medroxyprogesterone,
and corticosteroids. Progestogens appear to stimulate appetite and
improvements in body weight by increasing adipose tissue, but have
not been confirmed to augment lean body mass. Megestrol also
carries an increased risk of mortality and thromboembolism.
Nonetheless, megestrol is the only FDA approved treatment option
for CACS and no drug to date has been shown to be superior to it in
efficacy and tolerability. Corticosteroids are also considered
effective in stimulating appetite and reducing fatigue but should
only be used for short periods and in selected cases because of
side effects from longer term use, such as insulin resistance,
fluid retention, steroidal myopathy, skin fragility, adrenal
insufficiency, and sleep and cognitive disorders. Other drugs are
being investigated or are in development. Given the dearth of
approved therapies, we believe that CACS remains a significant area
of unmet medical need.
Cannabinoid Therapies for CACS
Cannabis has long been suggested as a well-tolerated, safe, and
effective option to help patients cope with cancer related symptoms
with fewer serious side effects than most prescription drugs
currently used as anti-emetics, analgesics, and the like. As such,
cannabinoids are finding application in palliative care for
reducing nausea and vomiting, alleviating cancer pain, and
stimulating appetite, as well as improving quality of life in
cancer patients. Dronabinol (Marinol®) and nabilone (Cesamet®), two
drugs based on synthetic cannabinoids, have each been approved by
the FDA for the treatment of chemotherapy-related nausea in
patients who do not respond to conventional antiemetic therapy.
Another drug, nabiximols (Sativex®), a specific cannabis extract,
is approved in Canada and the United Kingdom for symptomatic relief
of pain in advanced cancer patients.
Despite interest in cannabinoid-based therapies as a treatment for
CACS, their use has been limited by impediments beyond the legal
status of cannabis. The most significant obstacle is the lack of
clinical research demonstrating their efficacy. While there is
evidence that cannabinoids improve appetite, body weight, body fat
level, caloric intake, mood, and quality of life in cancer
patients, the few studies on these effects have yielded mixed and
inconclusive findings. In addition, some of these studies have
suffered from methodological constraints that limit any ability to
draw firm conclusions.
The therapeutic use of cannabinoids has also been inhibited by
limitations associated with traditional administration routes that
reduce their effectiveness. Smoking and ingestion of cannabis
suffer from wide variability in potency due to a lack of
standardized and reproducible formulations. The ingestion of
unformulated cannabis has also been associated with poor absorption
and low bioavailability versus other administration routes,
requiring higher doses and a greater risk of negative side effects.
Additionally, the lack of available information on cannabinoid
strains has made it difficult for healthcare providers to establish
dosing rates. In our experience, however, the principal concern of
patients with respect to medical cannabis lies in the undesirable
side effects, such as disorientation and dizziness, which result
from significant variability in peak blood levels of active
cannabinoids soon after administration. We further believe that
these side effects, which are common among immediate release
methods, are a significant factor in the failure of patients to
adhere to recommended treatment regimens and are therefore a
pervasive threat to their health and wellbeing.
Cannabics SR
Cannabics SR is an oral composition in the form of a
hydroxypropylmethylcellulose (HPMC) capsule containing a
patent-pending formulation of cannabinoid extracts suspended in a
lipid emulsion. It provides a relatively rapid onset of action,
typically within 30-40 minutes, followed by a gradual and sustained
release of active cannabinoids, resulting in a steady state level
of beneficial effects for up to 6 to 8 hours with each capsule.
Cannabics SR provides a consistent, predictable concentration
of cannabinoids with an absorption profile and bioavailability of
active ingredients that we believe to be superior to other oral
cannabinoid administrations. We believe that the multifactorial
benefits of the active pharmaceutical ingredients in
Cannabics SR address an unmet medical need for a safe and
effective treatment of CACS, leading to improved patient adherence
and better health outcomes.
Cannabics SR capsules contain only food grade materials
without any artificial additives. The active ingredients of each
capsule are standardized in composition, formulation, and dose, and
are comprised of only pure, natural extracts of active cannabinoids
from selected strains of medical cannabis. All excipients are
recognized by the FDA as Generally Regarded as Safe.
In addition to the therapeutic potential of Cannabics SR as a
treatment for CACS, we believe that our SR technology may be
formulated to serve the unique needs of patients suffering from
other indications for which a sustained release of a cannabinoid
formulation may be beneficial.
Clinical Development
In 2016, we commenced a two-year pilot study to evaluate the
influence of Cannabics SR capsules on CACS, and, in
particular, on weight loss in advanced cancer patients. The study
was led by Professor Gil Bar-Sela, the former Deputy Director of
the Division of Oncology at Rambam Health Care Campus, Head of the
Palliative and Supportive Oncology Unit, and Head of Service for
Melanoma and Sarcoma Patients.
Patients were administered 2 × 10 mg of Cannabics SR per 24
hours for six months. During the study, after some patients
reported several psychoactive side effects, the dosage of each
capsule was reduced to 5 mg. Almost no side effects were reported
with the 5 mg dosage. Participants were weighed at each physician
visit. The primary objective of the study was a weight gain of ≥10%
from baseline. Of 24 patients who agreed to participate in the
study, 17 started the Cannabics SR treatment, but only 11
received the capsules for more than two weeks. Three of six
patients who completed the study period met the primary end-point.
The remaining three patients had stable weights. In quality of life
questionnaires patients reported less appetite loss after the
Cannabics SR treatment (p=0.05). According to patients’
self-reports, improvement in appetite and mood as well as a
reduction in pain and fatigue was demonstrated.
Despite various limitations, the preliminary study demonstrated a
weight increase of ≥10% in 3 out of 17 (17.6%) of patients with
doses of 5 mg × 1 or 5 mg × 2 capsules daily, without significant
side effects. The remaining patients had stable weights. Also, all
patients who remained in the study for at least 4.5 months reported
an increase in appetite, as did 83% of the patients who completed
the study. For 50% of the patients who completed the study, there
were reports of pain reduction and sleep improvement. Additional
results showed a significant decrease of appetite loss complaints
among 83% of the patients who completed the study. (See
Bar-Sela, Gil et al. “The Effects of Dosage-Controlled Cannabis
Capsules on Cancer-Related Cachexia and Anorexia Syndrome in
Advanced Cancer Patients: Pilot Study.” Integrative Cancer
Therapies vol. 18 (2019): 1534735419881498.
doi:10.1177/1534735419881498.)
Figure 3: Appetite loss among the six patients who
completed Cannabics SR treatment, as reported on European
Organization of Research and Treatment of Cancer Quality of Life
Questionnaire (EORTC QLC-C30)
We intend to conduct additional pilot studies in Israel to assess
the pharmacokinetics and pharmacodynamics of Cannabics SR in
humans. These studies are expected to commence in 2021 at an
anticipated cost of $250,000. Data from the pilot studies will
guide our decisions regarding
further clinical development and may better inform the design of
our anticipated Phase 1 trials.
Commercialization
The results of our planned pilot studies may permit us to
commercialize Cannabics SR in Israel under license by the
Israeli Ministry of Health. If we are granted such a permit, we
intend to engage a GMP manufacturer in Israel to produce
Cannabics SR capsules for national distribution.
On May 13, 2020, the Israeli Ministry of Economy signed a Free
Export Order, authorizing the export of GMP certified medical
cannabis products from Israel. We are currently evaluating our
export opportunities and optimal commercialization path for
Cannabics SR across all available international markets,
particularly with regard to the European Union, Canada, and
Australia.
In 2019, we signed a letter of intent with NewCanna Hub to
establish a joint venture for the production and marketing of
Cannabics SR capsules in Colombia. NewCanna Hub specializes in
genetic registration, large scale cultivation, research and
development, manufacturing, and distribution. Under the joint
venture, Cannabics SR capsules are expected to be produced in
various formulations at NewCanna's Good Manufacturing Practice
(GMP) certified facility in Columbia. The intention of the joint
venture will be to seek international distribution agreements for
Cannabics SR in relevant regulated territories.
Cannabics CDx Drug Sensitivity Test
Overview
Cannabics CDx is an ex-vivo drug sensitivity test that we
are developing as a product candidate to provide healthcare
providers with clinical decision support data from which they can
identify, for a particular cancer patient undergoing cannabinoid
therapy, which cannabinoids or cannabinoid combinations may have
the most beneficial anti-cancer effects and which cannabinoids may
be contraindicated.
Cancer and Personalized Medicine
The normal behavior of each cell in the human body is controlled by
its genetic material, comprised of chains of deoxyribonucleic acid
(DNA), units arranged in a particular order and packaged into
condensed structures called chromosomes, inside the cell’s nucleus.
The order of the DNA units as well as their three-dimensional
structure dictates which protein and how much of it is made by each
cell. Alterations in the DNA sequence, referred to as mutations,
can disrupt normal protein function and are the leading cause of
cancer development. Each person’s cancer has a unique combination
of mutations, and as a cancer progresses, additional mutations
accumulate. The number of cells within a growing tumor that carry a
given mutation depends on when the mutation was acquired during
tumor growth. Thus, even within the same tumor, different cancer
cells often have different genetic mutations. This variation, or
heterogeneity, within a tumor or between a primary and metastatic
tumor, is a leading cause of resistance to treatment and thereby
disease progression.
Comprehensive analyses of human cancer genomes over the past decade
have revealed numerous genetic mutations that are associated with a
variety of cancers. These discoveries have led to the development
of molecular therapies targeted at rectifying the cellular changes
that arise due to the mutations. While such therapeutics have
improved patient outcomes, tumor heterogeneity among patients has
limited the efficacy of these drugs to specific patient subtypes
and contributed to relapse. In addition, intra-tumor heterogeneity
leads to the emergence of drug resistant sub-populations of cancer
cells, particularly while under sudden selective pharmacological
pressure (such as chemotherapy) and further limits the efficiency
of cancer treatment.
The diversity of cancer patients, including their biological
characteristics and lifestyle factors, as well as the complex
milieu of tumor cells within a single patient, has led to a novel,
more personalized approach toward drug development and diagnosis.
Personalized medicine aims to tailor each person’s health care to
the prevention and treatment strategies most likely to be of
benefit, sparing each person the cost of and potential harms from
interventions and treatments that are unlikely to be of benefit. It
has the potential to transform medical interventions by providing
effective, tailored therapeutic strategies based on the genomic,
epigenomic, and proteomic profile of a patient in the context of
their personal situation. Personalized medicine may also improve
health outcomes by reducing healthcare costs, drug-development
costs, and time.
Cannabinoids and Personalized Medicine
While preclinical research during the last decade has stimulated
interest in the therapeutic potential of cannabinoid compounds in
oncology, one of the challenges facing healthcare providers and
patients in selecting a cannabinoid based therapy has been the
diversity of the cannabis plant, which encompasses thousands of
distinct profiles, each with its own chemical composition and
effects. After decades of highly restrictive regulation, there is
presently a lack of clinically relevant information as to which
cannabinoids are best suited to the unique medical needs of a
patient across multiple lines of therapy. The result has left
healthcare providers and patients at a loss as to which
cannabinoids may be best suited to treat the unique cancer profiles
of individual patients.
Cannabics CDx
We believe that the success of personalized medicine depends on the
development of accurate and reliable diagnostics. Our goal is to
expand the scope of personalized medicine across the cancer care
continuum to include cannabinoid-based therapies and enable
clinicians to make better informed decisions leading to improved
clinical outcomes and lower healthcare costs. To that end, we are
developing Cannabics CDx as a product candidate to provide clinical
decision support data to healthcare providers interested in
personalizing cannabinoid-based cancer therapies. We believe that
by making cannabinoid therapy selection more accurate and
accessible, Cannabics CDx may play a significant role in ushering
medical cannabinoids into the mainstream of oncology.
Cannabics CDx is an innovative drug screening system that measures
the effectiveness of cannabinoid compounds on a patient’s biopsy,
identifies alternatives, and alerts healthcare providers to
cannabinoids that may be contraindicated. Biopsied samples are
delivered by courier to our laboratory, where we perform novel
cannabinoid sensitivity tests on them using our high-content drug
sensitivity screening integrated with our bioinformatics platform.
We then apply advanced analytics to the test results and other
relevant biological and clinical information provided by each
patient’s healthcare provider to derive clinical support data from
which healthcare providers can make better informed treatment
decisions.
Figure 4:Sample personalized patient report
produced by Cannabics CDx
By enabling healthcare providers to more precisely tailor
cannabinoid therapies to a patient’s cancer and clinical profile,
we believe that Cannabics CDx will meet a significant unmet
need of the growing population of cancer patients being treated
with cannabis.
Validation
We are currently planning a clinical validation study expected to
commence in 2022 to assess the sensitivity and specificity of
Cannabics CDx. We are currently seeking strategic partners to
collaborate on the validation and commercialization process.
Commercialization
Upon completion of our planned validation study, we will evaluate
our options for commercializing Cannabics CDx with a view
towards maximizing our return while expanding our collaborative
network and opportunities in the rapidly emerging sector of
pharmaceutical development. Consistent with our policies, we will
not offer Cannabics CDx in any jurisdiction where it is not
permitted or where it might otherwise be construed as a violation
of law. In particular, we will not offer Cannabics CDx in the
United States while cannabis is listed by the DEA as a Schedule I
controlled substance.
Other Research and Development Programs
Our bioinformatics platform enables us to conduct a broad range of
preclinical research and development activities to explore other
uses of cannabinoids in the treatment of human diseases with unmet
medical needs. While our current research focus is on the
development of cannabinoid therapies and other technologies for the
treatment of cancer, particularly cancers of the gastrointestinal
tract, other areas of research include Alzheimer’s disease and auto
immune diseases. These other programs are at various early stages
of development and their continued progress is subject to available
resources and our ability to secure necessary funding. We will
determine which programs to continue based on several strategic
factors, including economic potential and available resources. We
may choose to partner with external parties for some or all of
these programs.
Strategic Partnerships
We continue to explore and
establish strategic partnerships with prominent companies and
leading-edge research institutions in areas where we believe such
relationships will benefit the further development of our product
candidates and technologies. We may also out-license our
product candidates and technologies to collaborative partners for
the development of therapies of low strategic interest to the
Company. We believe that these partnerships will enhance the value
of our intellectual property and allow us to retain selected
interests in such therapies without having to acquire the resources
needed for in-house development.
Maripharm
On September 1, 2020, we entered into a memorandum of understanding
with Maripharm Production B.V., a Dutch company that develops and
grows unique cannabis strains, for a collaboration on a proof of
concept evaluation of certain oil extracts from Maripharm’s
cannabis strains whereby we will perform certain HTS screening to
determine the necrolic and apoptotic effects of these strains upon
cancer cell lines.
NewCanna Hub
On February 24, 2020, we entered into a collaboration agreement
with NewCanna Hub for the purpose of examining the potential
anti-tumor properties of five cannabinoid strains found in
indigenous Colombian landraces on various gastrointestinal cancer
cell lines. NewCanna has amassed one of the world's most extensive
assortments of legally registered landraces and hybrid cannabis
cultivars, including several landraces, unique to Colombia. The
cannabis landraces to be studied as part of the collaboration are
native plant populations that have grown for centuries, adapting to
the environmental conditions of their geographical location,
resulting in the development of unique characteristics over
time.
RCKMC Ltd.
On February 5, 2020, we entered into a memorandum of understanding
with RCKMC Ltd., an Israeli company specializing in the breeding of
tailor-made strains of medical cannabis and the production of
reliably homogeneous cannabis hybrid-seeds. The memorandum
contemplates a research collaboration whereby RCKMC will provide
raw cannabis flowers containing approximately 10-15 separate
cannabinoid profiles to the Company, from which we will extract the
resin and perform high-throughput screening for necrotic and
apoptotic effects of extracts on gastrointestinal cancer cell
lines. Subject to positive results from such research, the
memorandum contemplates that the parties will enter into a joint
venture agreement for the development of specific chemovars of
medical cannabis specifically targeting gastro-intestinal
cancers.
On March 11, 2020, we
announced that our analysis of the cannabinoid profiles provided by
RCKMC identified two specific cultivars demonstrating
increased necrotic effects on gastric adenocarcinoma cells. The
results will be used to further breed the selected cultivars as a
possible source of active pharmaceutical ingredients in the
development of pharmaco product candidates for the treatment of
gastrointestinal and other forms of cancer.
Cannomed Medical Cannabis Industries Ltd.
On June 9, 2020, we entered into a memorandum of understanding with
Cannomed Medical Cannabis Industries Ltd., a publicly traded
Israeli company engaged in the production and distribution of
medical cannabis. The memorandum contemplates a research
collaboration whereby Cannomed Medical Cannabis Industries will
provide the Company with raw cannabis plants representing 17 unique
strains from which we will extract the resin and perform full
high-throughput screening to determine their necrotic and apoptotic
effects on cancer cell lines. If both parties are satisfied with
the screening results, the memorandum further contemplates that
they will enter into a joint venture agreement for the development
of specific strains of medical cannabis with elevated chemovars
specifically targeting cancers.
Commercial Operations
We have not established a sales, marketing, or product distribution
infrastructure. We plan to commercialize any drugs we develop
through licensing arrangements and strategic partnerships with
established companies in the pharmaceutical industry having strong
marketing capabilities and distribution networks. We generally
intend to advance our drug candidates through Phase 1 and Phase 2
clinical trials as appropriate in order to establish their clinical
and commercial potential before negotiating the terms of any
licensing or collaboration. For other product candidates, such as
Cannabics CDx, we may seek strategic partnerships earlier in their
clinical development to accelerate the approval process, facilitate
commercialization and mitigate risk. We believe that this approach
will achieve the fullest marketing and distribution potential of
any drugs or other products that we may develop in the short
term.
Competition
The biotechnology and pharmaceutical industries are characterized
by rapidly advancing technologies, intense competition and a strong
emphasis on proprietary products. We believe that our scientific
knowledge, experience, technology and development capabilities
provide us with competitive advantages, but we face competition
from many different sources, including major pharmaceutical,
specialty pharmaceutical and biotechnology companies, academic
institutions, governmental agencies and public and private research
institutions. Many of our current and potential competitors have
longer operating histories and substantially greater financial,
scientific, technical, intellectual property, regulatory and human
resources than we have, as well as greater experience in developing
and commercializing products, including obtaining FDA and other
regulatory approvals.
As the medical use of cannabis increasingly receives government
approval worldwide, we face growing competition from many new and
existing companies seeking to develop cannabinoid-based therapies.
Companies currently known to be developing cannabinoid-based human
therapeutics include GW Pharmaceuticals PLC, Cannabis Science Inc.,
InMed Pharmaceuticals Inc., Emerald Bioscience Inc., Corbus
Pharmaceuticals Holdings Inc., Zynerba Pharmaceuticals Inc.,
PharmaCyte Biotech, Inc., Tetra Bio-Pharma Inc,. and Cure
Pharmaceutical Holding Corp.
Many of our competitors are conducting research targeting the same
technologies, applications, and markets as we are. Consequently,
they may develop products for the same indications we are pursuing
or may pursue in the future that are more effective, better
tolerated, more widely-prescribed or accepted, more useful, and
less costly. Any products that we successfully develop and
commercialize will compete with existing products, as well as those
currently in development or that may become available in the
future.
In addition to competing for market position, we will also compete
in terms of recruiting and retaining qualified personnel, acquiring
intellectual property, establishing clinical trial sites, and
enrolling patients for clinical trials and in obtaining
funding.
Given the rapid changes affecting the global, national, and
regional economies in general and cannabis-related medical research
and development in particular, we may not be able to create and
maintain a competitive advantage in the marketplace. Time-to-market
is a critical factor in our industry and our success will depend on
our ability to timely develop innovative technologies that will be
accepted by patients. Our competitors may be better able to react
to market changes, respond more rapidly to new regulations, or
allocate greater resources to the development of their products
than we can, which may result in our technologies and products
becoming obsolete before we are able to enter the market, recover
the expenses incurred to develop them, or generate significant
revenue. Our success will depend, in part, upon our ability to
develop our product candidates in a timely manner, keep our future
products current with advancing technologies, achieve market
acceptance of our future products, gain name recognition and a
positive reputation in the healthcare industry, and establish
successful marketing, sales, and distribution efforts. We 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.
Our Research and Development:
To address these problems and improve clinical outcomes Cannabics
focuses on the development of diagnostics that monitor cancer
progression and cannabinoid-cancer sensitivity tests to tailor
treatment of cancer with cannabinoid medicine. Utilizing novel
High-Throughput Screening (HTS) methods to perform studies on
cancer cell lines and on circulating tumor cells (CTC) derived from
cannabis medicated patients.
We aim to treat a wide scope of cancers both as the main treatment
and as a conjugate to conventional chemotherapy. We believe a
significant need remains for novel oral and natural drugs for
patients who do not respond to existing therapies or for whom these
therapies bear undesirable side effects. We are currently exploring
several formulations containing active compounds from the cannabis
plant, including the psychoactive cannabinoid -THC and
non-psychoactive cannabinoids - CBD, CBDA, THCA, THVC, CBN, CBG,
CBGA and CBC. We recognize the potential therapeutic applications
of the synergistic effects of these active compounds thus building
the methodology and procedures that decipher specific ratios of
active compounds in regard to their antitumor activity. Following
successful research and development, we intend to license
cannabinoid-based products and treatments that will be standardized
in composition, formulation and dose, administered by means of an
appropriate and efficient delivery system, and tested in properly
controlled pre-clinical and clinical studies.
Our government licensed laboratory operates a unique, custom
designed and built research and development laboratory which
combines high throughput screening, (HTS) capabilities with the
most advanced data tools allowing us to enable miniaturization and
automation of a variety of biological assays. The automated system
is comprised of:
| |
1. |
High
Content Screening (HCS) Platform, which is an automated cellular
imaging and analysis platform designed for quantitative
microscopy. |
| |
2. |
Flow
Cytometry, which enables multi-parametric single cell
analysis. |
| |
3. |
Automated
workstation, for liquid handling for dispensing accurate and
reproducible volumes of liquids and compounds. |
| |
4. |
Multimode
microplate reader, designed for fast measurements of numerous
biological reactions/processes. |
The integration of these instruments is enabled via a robotic arm,
which allows a continuous process which utilizes all
instruments.
Readouts generated from these instruments provide us with insights
to the effect of our cannabinoid library on parameters such as,
proliferation inhibition, apoptosis induction, angiogenesis
prevention and toxicity on cancerous cells.
These experiments will produce multiplexed data composed of images
of cells, cell specific markers and the extent/signal of the
biological response. The biological response will be measured using
different concentration of cannabinoids and their combinations,
thus determining the most effective cannabinoid treatment for a
specific cancer type.
Invitro Studies – Drug Screening
We have a proprietary procedure of high throughput screening (HTS)
and high content screening (HCS) for the detection of correlations
between cannabinoid ratios, dosages and anti-tumor activity using a
growing library of human cancer cell lines and creating an enlarged
variety of Cannabis-based compounds. We examine the biological
activity of these compounds on tumor cell lines of distinct tissue
lineage and creating a highly valuable therapeutic data. We Screen
for the most potent cannabinoid/natural extracts. Our goal in the
invitro studies is to build a library of both purified and natural
cannabinoid extracts and to reveal their biological impact on a
library of cancer cell lines. The HTS technology enables us to gain
this data base in a faster manner and to reveal more mechanisms of
action that are related to the genetics of the cancer. We are now
in the process of merging our data with sophisticated data mining
to help find meaningful insights of both treatment and outcome.
Personalized Cannabis Medicine - The Opportunity
With minor side effects and no toxicity, the only barrier to
millions of cancer patients is worldwide regulation. Current
changes in legislated cannabis legality and public support are
creating a unique situation in which this highly potent drug is now
being consumed by hundreds of millions of people seeking therapy in
a wide spectrum of indications. One of the major groups are cancer
patients who are mainly treated with chemotherapy or radiation,
however, are now more exposed to the option of using cannabis for
its palliative properties. This new industry permeates the
pharmaceutical, nutraceutical and food supplement markets and
brings many different products i.e. high CBD/high THC,
oral/sublingual, dosage and purity. However, doctors are still not
educated to differentiate between strains/products and subscribe
cannabis generally. Hence, the growing unmet need is to better
understand the biology of cannabinoids and the clinical outcome of
such products.
Intellectual Property
Our success depends in significant part on our ability to protect
the proprietary nature of our Product Prospects, technology and
know-how, to operate without infringing on the proprietary rights
of others; and to defend challenges and oppositions from others and
prevent others from infringing on our proprietary rights, including
our provisional patents described below.
We plan to continue to seek patent protection in the United States
and other countries for our proprietary technologies. To date, our
intellectual property portfolio includes three provisional patents,
filed with the USPTO, related to our line of activity
(pharmaceutical formulations; drug delivery; therapeutic uses of
cannabinoids and other cannabis compounds and personalized
cannabinoid diagnostics), as well as know-how and trade
secrets.
The Company’s current patent applications:
|
Title |
|
Application
Type |
|
Country |
|
Status |
|
Filing
Date |
| System
and Method for High-throughput Screening of Cancer
Cells |
|
Non-provisional Utility patent application
(national Phase)
|
|
United
States |
|
Published,
Pending |
|
17/09/2017 |
| System
and Method for High-throughput Screening of Cancer
Cells |
|
National
Phase Patent application |
|
China |
|
Published,
Pending |
|
27/11/2017 |
| System
and Method for High-throughput Screening of Cancer
Cells |
|
National
Phase Patent application |
|
Japan |
|
Published,
Pending |
|
27/11/2017 |
| System
and Method for High-throughput Screening of Cancer
Cells |
|
National
Phase Patent application |
|
Canada |
|
Pending,
(not Published) |
|
13/09/2017 |
| System
and Method for High-throughput Screening of Cancer
Cells |
|
National
Phase Patent application |
|
India |
|
Published,
Pending |
|
15/09/2017 |
| System
and Method for High-throughput Screening of Cancer
Cells |
|
National
Phase Patent |
|
Israel |
|
Granted |
|
18/09/2017 |
| System
and Method for High-throughput Screening of Cancer
Cells |
|
National
Phase Patent application |
|
Australia |
|
Pending,
(not Published) |
|
19/09/2017 |
| System
and Method for High-throughput Screening of Cancer
Cells |
|
National
Phase Patent application |
|
Europe |
|
Published,
Pending |
|
04/10/2017 |
| System
and Method for High-throughput Screening of Cancer
Cells |
|
National
Phase Patent application |
|
Brazil |
|
Published,
Pending |
|
10/10/2017 |
| System
and Method for High-throughput Screening of Cancer
Cells |
|
National
Phase Patent application |
|
Mexico |
|
Pending,
(not Published) |
|
10/10/2017 |
| System
and Method for High-throughput Screening of Cancer
Cells |
|
National
Phase Patent |
|
South
Africa |
|
Granted |
|
13/10/2017 |
| System
and Method for High-throughput Screening of Cancer
Cells |
|
National
Phase Patent application |
|
Hong
Kong |
|
Pending,
(not Published) |
|
11/10/2018 |
| Cannabinoid
Compositions, Methods of Manufacture and Use Thereof |
|
National
Phase Patent application |
|
Israel |
|
Published,
Pending |
|
24/02/2016 |
| Cannabinoid
Compositions, Methods of Manufacture and Use Thereof |
|
Patent
Co-operation Treaty, International patent
application |
|
Israel |
|
Published,
Pending |
|
23/02/2017 |
| Cannabinoid
Compositions, Methods of Manufacture and Use Thereof |
|
Non-provisional Utility patent application
(national Phase)
|
|
United
States |
|
Pending,
(not Published) |
|
23/08/2018 |
| The
Effects of Dosage-Controlled Cannabis Capsules on Cancer- Related
Cachexia and Anorexia Syndrome Among Advanced Cancer
Patients |
|
Provisional
patent application |
|
United
States |
|
Filed,
Pending, (not Published) |
|
25/10/2018 |
| Method
for Sensitivity Testing of Cannabinoids on Patient-Derived Tumor
Biopsies and CTCs |
|
Patent
Co-operation Treaty, International patent
application |
|
Israel |
|
Filed,
Pending, (not Published) |
|
02/01/2018 |
| Novel
System and Method for Microbiome Profiling and Modulation by Means
of Cannabis Administration |
|
Non-provisional Utility patent application
(national Phase)
|
|
United
States |
|
Pending,
(not Published) |
|
07/11/2018 |
| A
System and Method for Providing or Growing a Personalized Cannabis
Product |
|
Provisional
patent application |
|
United
States |
|
Filed,
Pending, (not Published) |
|
17/09/2018 |
| A
System and Method for Providing Magnetic Targeting of Cannabinoids
to Cancer Patients |
|
Provisional
patent application |
|
United
States |
|
Filed,
Pending, (not Published) |
|
28/11/2018 |
| Personalized
Cannabimetic Compositions Modeling and Production System and
Methods Thereof |
|
Provisional
patent application |
|
United
States |
|
Filed,
Pending, (not Published) |
|
28/11/2018 |
| A
System and Method for Providing a Personalized Cannabis Derived
Product for an Alcohol Withdrawal Syndrome (AWS)
Patient |
|
Provisional
patent application |
|
United
States |
|
Filed,
Pending, (not Published) |
|
27/12/2018 |
| A
System and Method for Providing a Personalized Cannabis Derived
Product for a Psychogenic Non-Epileptic Seizures (PNES)
Patient |
|
Provisional
patent application |
|
United
States |
|
Filed,
Pending, (not Published) |
|
07/01/2019 |
We anticipate that we will file additional patent applications in
conjunction with our research, testing, and development of our
cannabis-based Product Prospects.
Our policy is to seek patent protection for the technology,
inventions and improvements that we consider important to the
development of our business, but only in those cases where we
believe that the costs of obtaining patent protection is justified
by the scientific and commercial potential of the technology, and
typically only in those jurisdictions that we believe present
significant commercial opportunities. We anticipate that we will
file additional patent applications in conjunction with our
research, testing, and development of our cannabis-based
products.
Competitive Factors
The Pharmaceutical industry is highly competitive and we will be
competing with many other and better financed companies.
We are an early stage pharmaceutical company, with relatively
deminimis cash flow. We compete with other early stage bio-tech and
pharmaceutical companies for financing from a limited number of
investors that are prepared to make investments in early stage
development companies. The presence of competing early stage
pharmaceutical companies may impact on our ability to raise
additional capital in order to fund our research and development if
investors are of the view that investments in competitors are more
attractive based on their subjective analysis of our company, the
general market conditions and the price of the investment offered
to investors.
Regulations
Cannabics Pharmaceuticals Inc. is purely a Bio-Technology
Pharmaceutical company which licenses use of its Intellectual
Property, it does not produce, manufacture or provide any product
in any location. We are duly licensed by the Israeli Health
Ministry for our research in Israel. Beyond the Israeli Health
Ministry (by whom we are licensed), we are not under the aegis of
any Federal or State regulatory scheme as we have no manufacturing
activity. Any licensee whom we engage must be duly licensed and
certified according to all pertinent local government regulations
in their jurisdiction.
Employees
As of August 31, 2020, the Company had nine employees, three of
which were our Directors Gavriel Yariv, Itamar Borochov and Eyal
Barad, which along with our counsel and CFO were given monthly
salaries. 4 of whom were employed in research and development and 1
of whom employed in administration and business development. These
employees are in Israel.
Israeli labor laws principally govern the length of the workday,
minimum wages for employees, procedures for hiring and dismissing
employees, determination of severance pay, annual leave, sick days,
advance notice of termination of employment, equal opportunity and
anti-discrimination laws and other conditions of employment.
Subject to certain exceptions, Israeli law generally requires
severance pay upon the retirement, death or dismissal of an
employee, and requires us and our employees to make payments to the
National Insurance Institute, which is similar to the U.S. Social
Security Administration. Our employees have defined benefit pension
plans that comply with applicable Israeli legal requirements, which
also include the mandatory pension payments required by applicable
law and allocations for severance pay.
Item 1A. Risk Factors
Risk Factors
You should consider carefully the risks and uncertainties
described below, together with all of the other information in this
Annual Report on Form 10-K. If any of the following risks are
realized, our business, financial condition, results of operations
and prospects could be materially and adversely affected. The risks
described below are not the only risks facing the Company. Risks
and uncertainties not currently known to us or that we currently
deem to be immaterial also may materially adversely affect our
business, financial condition, results of operations and
prospects.
Risks Related to Our Company and Business
Our independent auditors have expressed substantial doubt about our
ability to continue operating as a going concern, which could
prevent us from obtaining new financing on reasonable terms or at
all.
Our independent registered public accountants have expressed
substantial doubt about our ability to continue as a going concern.
This opinion could materially limit our ability to raise additional
funds by issuing new debt or equity securities or otherwise. If we
fail to raise sufficient capital when needed, we will not be able
to complete our proposed business. As a result we may have to
liquidate our business and investors may lose their investments.
Our ability to continue as a going concern is dependent upon our
ability to successfully accomplish our plan of operations described
in this filing, obtain financing and eventually attain profitable
operations. Investors should consider our independent registered
public accountant’s comments when deciding whether to invest in the
Company.
We have not generated any significant revenue since our inception
and we may never achieve profitability.
We are an early stage biotechnology company and have not generated
any significant revenue since we commenced our present operations
in April 2014. At the present time, Cannabics SR is the only
product that we have commercialized. To date, we have financed our
operations primarily through private placements of common stock,
warrants, and direct equity investments. As we continue our
research and development of cannabinoid-based diagnostics, our
expenses are expected to increase significantly. Accordingly, we
will need to generate significant revenue to achieve profitability.
Even as we begin to commercialize our technologies, we expect our
losses to continue as a result of ongoing research and development
expenses. These losses, among other things, have had and will
continue to have an adverse effect on our working capital, total
assets and stockholders’ equity. Because of the numerous risks and
uncertainties associated with product development and
commercialization efforts, we are unable to predict at what stage
the Company will become profitable. We may never become profitable.
Even if we do achieve profitability, we may not be able to sustain
or increase profitability on a quarterly or annual basis. If we are
unable to achieve and then maintain profitability, our business,
financial condition and results of operations will be negatively
affected and the market value of our common stock will decline.
Since we have a limited operating history in our business, it is
difficult for potential investors to evaluate our business.
We commenced operations as a biotechnology company in April 2014,
and therefore have a relatively short operating history upon which
an evaluation of our future success or failure can objectively be
made. Our business is a highly speculative undertaking and involves
a substantial degree of risk. We have not demonstrated an ability
to successfully overcome many of the risks and uncertainties
frequently encountered by early-stage companies in new and rapidly
evolving competitive fields, including under-capitalization, cash
shortages, limitations with respect to personnel, financial, and
other resources and lack of revenue. The likelihood of our success
must be considered in light of the early stage of our operations.
There is no assurance that our business will ever be successful or
that we will be able to attain profitability. Any failure by the
Company to report profits may adversely affect the price of our
common stock.
We will need to raise additional capital to meet our business
requirements in the future, which may be costly or difficult to
obtain and could dilute our stockholders’ ownership interests.
The Company has not yet generated significant revenue and will
require additional capital to continue its research and development
activities, conduct clinical trials, commercialize its products and
otherwise fund its operations. Our ability to secure required
financing will depend in part upon investor perception of our
ability to create a successful business. Capital market conditions
and other factors beyond our control may also play important roles
in our ability to raise capital. There can be no assurance that
debt or equity financing will be available or sufficient for our
requirements or for other corporate purposes, or if debt or equity
financing is available, that it will be on terms acceptable to us.
Moreover, future activities may require us to alter our
capitalization significantly. Our inability to access sufficient
capital for our operations could have a material adverse effect on
our financial condition, results of operations and prospects. If we
are unable to obtain additional funding as needed, we may be
required to reduce the scope of our research and development
activities, which could harm our business plan, financial condition
and operating results, or we may be required to cease our
operations entirely, in which case, our investors will lose all of
their investment.
Any additional capital raised through the sale of equity or
equity-backed securities may dilute our stockholders’ ownership
percentages and could also result in a decrease in the market value
of our equity securities. The terms of any securities issued by us
in future capital transactions may be more favorable to new
investors, and may include preferences, superior voting rights and
the issuance of warrants or other derivative securities, which may
have a further dilutive effect on the holders of our securities
then outstanding. Any debt financing secured in the future could
involve restrictive covenants relating to capital raising
activities and other financial and operational matters, which may
make it more difficult for us to obtain additional capital and to
pursue business opportunities.
In addition, we may incur substantial costs in pursuing future
capital financing, including investment banking fees, legal fees,
accounting fees, securities law compliance fees, printing and
distribution expenses and other costs. We may also be required to
recognize non-cash expenses in connection with certain securities
we issue, such as convertible notes and warrants, which may have an
adverse impact on our financial condition.
We are highly dependent on the success of cannabinoid technology,
and we may not be able to develop the technology, successfully
obtain regulatory or marketing approval for, or successfully
commercialize, our products or product candidates.
Our business is focused entirely upon the research, development and
commercialization of cannabinoid-based technologies for the
detection and treatment of cancer. Our success is dependent upon
the viability of this technology and the development of cancer
diagnostics and therapies.
Neither we nor any other company has received regulatory approval
from the United States Food and Drug Administration (the “FDA”) to
market any diagnostics or therapeutics based on botanical
cannabinoids, though the FDA has approved two drugs that contain a
synthetic substance that acts similarly to cannabis compounds but
is not present in the cannabis plant.
The scientific evidence underlying the feasibility of developing
cannabinoid-based technologies for the detection and treatment of
cancer is both preliminary and limited. In 2017, an ad hoc
committee of the National Academies of Sciences, Engineering, and
Medicine determined that while there is conclusive or substantial
evidence that oral cannabinoids are effective antiemetics in the
treatment of chemotherapy-induced nausea and vomiting, there was
insufficient evidence to make any statement about the efficacy of
cannabinoids as a treatment for cancer. The ad hoc committee
went on to state that further clinical research into the
anti-cancer effects of cannabinoids needs to be conducted.
If our cannabinoid technology is found to be ineffective or unsafe
in humans, or if it never receives regulatory approval for
commercialization, we may never be able bring our product
candidates to market and may never become profitable. Further, our
current business strategy, including all of our research and
development, is focused on utilizing cannabinoid technology to
detect and treat cancer. This lack of diversification increases the
risk associated with the ownership of our common stock. If we are
unsuccessful in developing and commercializing our
cannabinoid-based technology and its application to the detection
and treatment of cancer, we may be required to alter our scope and
direction and steer away from the intellectual property we have
developed as well as the core capabilities of our management team
and advisory board. Without successful commercialization of our
products and product candidates, we may never become profitable,
which would have a material adverse effect on our business, results
of operations and financial condition.
Our success depends upon our ability to retain our senior
management and our ability to attract, retain and motivate other
qualified personnel.
We are an early stage biotechnology company. As of August 30, 2020,
we had five employees and several key consultants. Our success
materially depends upon the efforts of our management and other key
personnel, including but not limited to Dr. Eyal Ballan, our Chief
Technology Officer and a Director. If we lose the services of Dr.
Ballan or any other executive officers or significant employees,
our business would likely be materially and adversely affected. At
this time, we do not currently have “key man” life insurance for
Dr. Ballan or any other executive officer.
Because of the specialized scientific and managerial nature of our
business, we rely heavily on our ability to attract and retain
qualified scientific, technical and managerial personnel. The
competition for qualified personnel in the biotechnology industry
is intense. Due to this intense competition, we may be unable to
continue to attract and retain qualified personnel necessary for
the development of our business or to recruit suitable replacement
personnel. Any difficulties in obtaining and retaining qualified
officers, employees and consultants could have a material adverse
effect on our operations.
The relative lack of public company experience by our management
team may put us at a competitive disadvantage.
As a company with a class of securities registered under the United
States Securities Exchange Act of 1934, as amended (the “Exchange
Act”), we are subject to reporting and other legal, accounting,
corporate governance, and regulatory requirements imposed by the
Exchange Act and rules and regulations promulgated under the
Exchange Act. With the exception of our CFO, Uri Ben-Or, our
management team lacks significant public company experience, which
could impair our ability to comply with these legal, accounting,
and regulatory requirements. Such responsibilities include
complying with federal securities laws and making required
disclosures on a timely basis. Our senior management may not be
able to implement and effect programs and policies in an effective
and timely manner that adequately respond to such increased legal
and regulatory compliance and reporting requirements. Our failure
to do so could lead to the imposition of fines and penalties and
further result in the deterioration of our business.
If we are unable to enter into acceptable sales, marketing and
distribution arrangements with third parties or establish sales,
marketing and distribution capabilities, we may not be successful
in commercializing any product candidate that we develop if and
when a product candidate is approved.
We do not have any sales, marketing or distribution infrastructure
and have no experience in the commercialization of biotechnology.
To achieve commercial success for any product, we must develop a
sales and marketing organization, outsource these functions to
third parties or license our products to others.
In the United States, we intend to only commercialize our products
by licensing them to organizations having greater resources and
experience than we do. While we have already licensed our Cannabics
SR medical cannabis capsules in Colorado to Mountain High Products
LLC, and in states outside of Colorado to the Cima Group LLC, there
can be no assurance that such licensing efforts will be successful,
or that we will be able to license any future products on
satisfactory terms, or at all. We do not presently have any other
agreement or arrangement for the commercialization of our products
in the United States or elsewhere.
While we generally intend to adopt a licensing model for the
commercialization of our products, we may also seek one or more
strategic partners for commercialization of our products outside
the United States. As a result of entering into arrangements with
third parties to perform sales, marketing and distribution
services, our product revenue or the profitability of our product
revenue may be lower, perhaps substantially lower, than if we were
to directly market and sell products in those markets. Furthermore,
we may be unsuccessful in entering into the necessary arrangements
with third parties or may be unable to do so on terms that are
favorable to us. In addition, we may have little or no control over
such third parties and any of them may fail to devote the necessary
resources and attention to sell and market our product candidates
effectively.
If we do not license our products or outsource our
commercialization efforts, we will be required to develop our own
sales, marketing and distribution capabilities, which will require
substantial resources and will be time-consuming, and could delay
any product launch. Moreover, we may not be able to hire or retain
a sales force that is sufficient in size or has adequate expertise
in the consumer health markets that we plan to target. If we are
unable to establish or retain a sales force and marketing and
distribution capabilities, our operating results may be adversely
affected.
If we do not successfully license our products or establish sales
and marketing capabilities, either on our own or in collaboration
with third parties, it is likely that we will be unable to
commercialize any of our products.
We face intense competition, often from companies with greater
resources and experience than we have, which may result in others
developing or commercializing competing products before us or more
successfully.
The market for cancer diagnostics and therapies is intensely
competitive, subject to rapid change and significantly affected by
new product introductions and other market activities of industry
participants. Our competitors include large multinational
corporations and their operating units, including Abbott
Laboratories Inc., Cepheid Inc., Philips, GE Healthcare, Siemens,
Gen-Probe Incorporated, MDxHealth SA, EpiGenomics AG, Roche
Diagnostics, Exact Sciences Corporation, Sequenom, Inc. and several
others. We also compete against pharmaceutical companies, specialty
pharmaceutical companies and biotechnology companies worldwide, as
well as smaller and other early-stage companies. Other potential
competitors include academic institutions, government agencies and
other public and private research organizations that conduct
research, seek patent protection and establish collaborative
arrangements for research, development, manufacturing and
commercialization.
Many of our competitors and potential competitors have or will have
substantially greater financial, technological, managerial and
research and development resources and experience than we have, and
many have been engaged in the biotechnology industry for a much
longer time than we have. Many of our competitors spend
significantly more funds on research, development, promotion and
sale of new and existing products than we do, and may therefore be
able to react more quickly to new or emerging technologies,
shifting market conditions and regulatory changes.
There can be no assurance that any of our current or future
products and technologies will have a competitive advantage in the
marketplace, or that they will remain competitive following the
introduction of competing products or technologies. Our commercial
opportunity could be reduced or eliminated if our competitors
develop and commercialize products that are safer, more effective,
more convenient or less expensive. There can be no assurance that
we will be successful in the face of increasing competition from
new technologies or products introduced by existing companies in
the industry or by new companies entering the market.
If we are unable to compete successfully, there may be a material
and adverse effect on our business, financial condition and results
of operations.
If the marketplace does not accept the products in our development
pipeline or any other diagnostic products we might develop, we may
be unable to generate sufficient revenue to sustain and grow our
business.
Even if we are able to successfully develop and obtain regulatory
approval of a product candidate, our ability to generate
significant revenue will depend on the acceptance of our products
by physicians and patients. Physicians, hospitals, clinical
laboratories, researchers or others in the healthcare industry may
not use our current or future diagnostic product candidates unless
they are determined to be an effective and cost-efficient means of
detecting and diagnosing cancer. Market acceptance of our current
or future therapeutic products will depend on a number of factors,
including the indication statement and warnings approved by
regulatory authorities in the product label, continued
demonstration of efficacy and safety in commercial use, physicians’
willingness to prescribe the product, reimbursement from
third-party payers such as government healthcare systems and
insurance companies, the price of the product, the nature of any
post-approval risk management plans mandated by regulatory
authorities, competition, marketing and distribution support. In
addition, we will need to expend a significant amount of resources
on marketing and educational efforts to create awareness of our
products and to encourage their acceptance and adoption. If the
market for our products does not develop sufficiently or the
products are not accepted, our revenue potential will be
harmed.
We do not presently have any product liability insurance coverage
and there is no assurance that we will be able to obtain such
insurance at an affordable price or that it will be sufficient to
cover all liabilities that we may incur.
We are exposed to potential product liability risks that are
inherent in the testing, manufacturing and marketing of cancer
diagnostics, pharmaceuticals and dietary supplements. While we do
not presently carry any product liability insurance coverage, we
intend to obtain such insurance in amounts we believe to be
commercially reasonable for our current level of activity and
exposure. There is no assurance, however, that we will be able to
obtain or maintain insurance coverage that will be adequate to
cover our potential liabilities, or that premiums will be
commercially justifiable. Furthermore, insurance that might
otherwise be readily available, may be more difficult for us to
find and more expensive because we work with medicinal cannabis. If
we are the subject of a successful product liability claim that
exceeds the limits of, or is not otherwise covered by our
insurance, or if we incur such liability at a time when we are not
able to obtain liability insurance, we may incur substantial
charges that adversely affect our earnings and require the
commitment of capital resources that might otherwise be available
for the development and commercial launch of our product
programs.
If we fail to protect our intellectual property rights, our ability
to pursue the development of our technologies and products would be
negatively affected.
Our success will depend in part on our ability to protect our
intellectual property. This is done, in part, by obtaining patents
and trademarks and then maintaining adequate protection of our
technologies, tradenames and products. If we do not adequately
protect our intellectual property, competitors may be able to use
our technologies to produce and market products in direct
competition with us and erode our competitive advantage. Some
foreign countries lack rules and methods for defending intellectual
property rights and do not protect proprietary rights to the same
extent as the United States. Many companies have had difficulty
protecting their proprietary rights in these foreign countries. We
may not be able to prevent misappropriation of our proprietary
rights.
We are currently seeking patent protection for several processes
and finished products. However, the patent process is subject to
numerous risks and uncertainties, and there can be no assurance
that we will be successful in protecting our products by obtaining
and defending patents. These risks and uncertainties include the
following:
| |
• |
patents
that may be issued or licensed may be challenged, invalidated, or
circumvented, or otherwise may not provide any competitive
advantage; |
| |
• |
our
competitors, many of which have substantially greater resources
than us and many of which have made significant investments in
competing technologies, may seek, or may already have obtained,
patents that will limit, interfere with, or eliminate our ability
to make, use, and sell our products and product candidates either
in the United States or in international markets; |
| |
• |
there
may be significant pressure on the United States government and
other international governmental bodies to limit the scope of
patent protection both inside and outside the United States for
treatments that prove successful as a matter of public policy
regarding worldwide health concerns; |
| |
• |
countries
other than the United States may have less restrictive patent laws
than those upheld by United States courts, allowing foreign
competitors the ability to exploit these laws to create, develop,
and market competing products. |
Any patents issued to us may not provide us with meaningful
protection, and third parties may challenge, circumvent or narrow
them. Third parties may also independently develop products similar
to our products or product candidates, duplicate our unpatented
product or product candidates, and design around any patents on
product candidates we may develop.
Additionally, extensive time is required for development, testing
and regulatory review of product candidates. While extension of a
patent term due to regulatory delays may be available, it is
possible that before any of our product candidates can be
commercialized, any related patent, even with an extension, may
expire or remain in force for only a short period following
commercialization, thereby reducing any advantages of the
patent.
In addition, the United States Patent and Trademark Office (the
“USPTO”), and patent offices in other jurisdictions have often
required that patent applications concerning biotechnology-related
inventions be limited or narrowed substantially to cover only the
specific innovations exemplified in the patent application, thereby
limiting the scope of protection against competitive challenges.
Thus, even if we or our licensors are able to obtain patents, the
patents may be substantially narrower than anticipated.
In addition to patents, we rely on a combination of trade secrets,
confidentiality, nondisclosure and other contractual provisions,
and security measures to protect our confidential and proprietary
information. These measures may not adequately protect our trade
secrets or other proprietary information. If they do not adequately
protect our rights, third parties could use our technology, and we
could lose any competitive advantage we may have. In addition,
others may independently develop similar proprietary information or
techniques or otherwise gain access to our trade secrets, which
could impair any competitive advantage we may have.
Costly litigation may be necessary to protect our intellectual
property rights and we may be subject to claims alleging the
violation of the intellectual property rights of others.
We may face significant expense and liability as a result of
litigation or other proceedings relating to patents and other
intellectual property rights of others. If another party has also
filed a patent application or been issued a patent relating to an
invention or technology claimed by us in pending applications, we
may be required to participate in an interference proceeding
declared by the USPTO to determine priority of invention, which
could result in substantial uncertainties and costs, even if the
eventual outcome were favorable to us. We could also be required to
participate in interference proceedings involving issued patents
and pending applications of another entity. An adverse outcome in
an interference proceeding could require us to cease using the
technology or to license rights from prevailing third parties.
The cost to us of any patent litigation or other proceeding
relating to our patents or patent applications, even if resolved in
our favor, could be substantial. Our ability to enforce our patent
protection could be limited by our financial resources, and may be
subject to lengthy delays.
A third party might claim that we are using inventions claimed by
their patents and might go to court to stop us from engaging in our
normal operations and activities, such as research, development and
the sale of any future products. Such lawsuits are expensive and
would consume time and other resources. There is a risk that the
court will decide that we are infringing the third party’s patents
and will order us to stop the activities claimed by the patents,
redesign our products or processes to avoid infringement or obtain
licenses (which may not be available on commercially reasonable
terms). In addition, there is a risk that a court will order us to
pay the other party damages for having infringed their patents.
There is no guarantee that any prevailing patent owner would offer
us a license so that we could continue to engage in activities
claimed by the patent, or that such a license, if made available to
us, could be acquired on commercially acceptable terms. In
addition, third parties may, in the future, assert other
intellectual property infringement claims against us with respect
to our products, technologies or other matters.
Failure in our information technology or storage systems could
significantly disrupt our operations and our research and
development efforts, which could adversely impact our revenues, as
well as our research, development and commercialization
efforts.
Our ability to execute our business strategy depends, in part, on
the continued and uninterrupted performance of our information
technology (“IT”), systems, which support our operations and our
research and development efforts, as well as our storage systems.
Due to the sophisticated nature of the technology we use in our
products and service offerings, we are substantially dependent on
our IT systems. IT systems are vulnerable to damage from a variety
of sources, including telecommunications or network failures,
malicious human acts and natural disasters. Moreover, despite
network security and back-up measures, some of our servers are
potentially vulnerable to physical or electronic break-ins,
computer viruses and similar disruptive problems. Despite the
precautionary measures we have taken to prevent unanticipated
problems that could affect our IT systems, sustained or repeated
system failures that interrupt our ability to generate and maintain
data, could adversely affect our ability to operate our
business.
We will need to grow the size of our organization, and we may
experience difficulties in managing any growth we may achieve.
As of the date of this filing, we have two full-time employees. As
our development and commercialization plans and strategies
progress, we expect to need additional research, development,
managerial, operational, sales, marketing, financial, accounting,
legal and other resources. Future growth would impose significant
added responsibilities on our management, which may not be able to
accommodate those added responsibilities. If we fail to effectively
manage our future growth, it could delay the execution of our
business plan and disrupt our operations.
We are subject to financial reporting and other requirements that
place significant demands on our resources.
We are subject to reporting and other obligations under the
Securities Exchange Act of 1934, as amended, including the
requirements of Section 404 of the Sarbanes-Oxley Act of 2002.
Section 404 requires us to conduct an annual management assessment
of the effectiveness of our internal controls over financial
reporting. These reporting and other obligations place significant
demands on our management, administrative, operational, internal
audit and accounting resources. The costs of preparing and filing
annual and quarterly reports, proxy statements and other
information with the SEC and furnishing audit reports to
stockholders causes our expenses to be higher than they would be if
we remained a privately-held company. The increased costs
associated with operating as a public company may decrease our net
income or increase our net loss, and may cause us to reduce costs
in other areas of our business or increase the prices of our
product to offset the effect of such increased costs. Additionally,
if these requirements divert our management’s attention from other
business concerns, they could have a material adverse effect on our
business, financial condition and results of operations.
Our disclosure controls and procedures and internal controls over
financial reporting were determined not to be effective for the
prior fiscal year ended August 31, 2020, and may not be effective
in future periods.
Effective internal controls are necessary for us to provide
reasonable assurance with respect to our financial reports and to
effectively prevent fraud. If we cannot provide reasonable
assurance with respect to our financial reports and effectively
prevent fraud, our reputation and operating results could be
harmed. Pursuant to the Sarbanes-Oxley Act of 2002, we are required
to furnish a report by management on internal control over
financial reporting, including management’s assessment of the
effectiveness of such control. Internal control over financial
reporting may not prevent or detect misstatements because of its
inherent limitations, including the possibility of human error, the
circumvention or overriding of controls, or fraud. Therefore, even
effective internal controls can provide only reasonable assurance
with respect to the preparation and fair presentation of financial
statements. In addition, projections of any evaluation of
effectiveness of internal control over financial reporting to
future periods are subject to the risk that the control may become
inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate. If we
fail to maintain the adequacy of our internal controls, including
any failure to implement required new or improved controls, or if
we experience difficulties in their implementation, our business
and operating results could be adversely impacted, we could fail to
meet our reporting obligations, and our business and stock price
could be adversely affected.
At August 31, 2020, our Chief Executive Officer and Chief Financial
Officer evaluated the effectiveness of the design and operation of
our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act) and concluded that,
subject to the inherent limitations identified in Item 9A of Part
II of our Annual Report on Form 10-K for the fiscal year ended
August 31, 2020, our disclosure controls and procedures were not
effective due to the existence of material weaknesses in our
internal control over financial reporting arising from inadequate
segregation of duties over authorization, review and recording of
transactions, as well as the financial reporting of such
transactions, the lack of an audit committee, insufficient
documentation of review procedures and insufficient information
technology procedures. Our independent auditors issued an adverse
attestation report regarding the effectiveness of our internal
control over financial reporting as at August 31, 2020.
We believe we have taken appropriate and reasonable steps to make
the necessary improvements to remediate these deficiencies, however
we cannot be certain that our remediation efforts will ensure that
our management designs, implements and maintains adequate controls
over our financial processes and reporting in the future or that
the changes made will be sufficient to address and eliminate the
material weaknesses previously identified. Our inability to remedy
any additional deficiencies or material weaknesses that may be
identified in the future could, among other things, have a material
adverse effect on our business, results of operations and financial
condition, as well as impair our ability to meet our quarterly,
annual and other reporting requirements under the Exchange Act in a
timely manner, and require us to incur additional costs or to
divert management resources.
Risks Related to Cannabis
Our failure to comply with controlled substance legislation could
restrict or harm our ability to develop and commercialize our
products.
Our business is, and will be, subject to wide-ranging laws and
regulations of Israel, the United States (federal and state), the
European Community and other governments in each of the countries
where we may develop and market our products. We must comply with
all regulatory requirements if we expect to be successful.
Most countries are parties to the Single Convention on Narcotic
Drugs of 1961 as amended by the 1972 Protocol, which governs
international trade and domestic control of narcotic substances,
including cannabis extracts. Countries may interpret and implement
their treaty obligations in a way that creates a legal obstacle to
us obtaining marketing approval in those countries for any
cannabinoid-based products we develop. These countries may not be
willing or able to amend or otherwise modify their laws and
regulations to permit our products to be marketed, or achieving
such amendments to the laws and regulations may take a prolonged
period of time. In the case of countries with similar obstacles, we
would be unable to market our product candidates in countries in
the near future or perhaps at all if the laws and regulations in
those countries do not change.
Any cannabinoid-based product candidate that we may develop for use
in the United States, will be subject to U.S. controlled substance
laws and regulations that will require us, along with our
collaborators and licensees, to expend time, money and effort in
all areas of regulatory compliance, including, if applicable,
manufacturing, production, quality control and assurance and
clinical trials. Any failure to comply with these laws and
regulations, or the cost of compliance with these laws and
regulations, could adversely affect the results of our business
operations and our financial condition.
The constant evolution of laws and regulations affecting the
research and development of cannabis-based diagnostics and
therapies could detrimentally affect our business. Laws and
regulations related to the therapeutic uses of cannabis are subject
to changing interpretations. These changes may require us to incur
substantial costs associated with legal and compliance fees and
ultimately require us to alter our business plan. Furthermore,
violations or alleged violation of these laws could disrupt our
business and result in a material adverse effect on our operations,
including our ability to conduct clinical trials that are
prerequisite to our ability to commercialize our cannabis-based
medical products and therapies. We cannot predict the nature of any
future laws, regulations, interpretations or applications of laws
and regulations and it is possible that new laws and regulations
may be enacted in the future that will be directly applicable to
our business.
Cannabis remains illegal under U.S. federal law, and any change in
the enforcement priorities of the federal government could render
our current and planned future operations unprofitable or even
prohibit such operations.
We are a biotechnology company focused on the research and
development of cannabinoid-based diagnostics, anti-cancer
pharmaceuticals and palliative therapies. The commercial viability
of our products and technologies in the United States depends, in
part, on state laws and regulations; however, Cannabis remains
illegal under federal law.
The United States federal government regulates drugs through the
Controlled Substances Act, which places controlled substances,
including cannabis, on one of five schedules. Cannabis is currently
classified as a Schedule I controlled substance, which is viewed as
having a high potential for abuse and no currently accepted medical
use in treatment in the United States. No prescriptions may be
written for Schedule I substances, and such substances are subject
to production quotas imposed by the United States Drug Enforcement
Administration. Because of this, doctors may not prescribe cannabis
for medical use under federal law, although they can recommend its
use under the First Amendment.
Currently, twenty-eight U.S. states and the District of
Columbia allow the use of medical cannabis. Eight states and the
District of Columbia also allow its recreational use. Because
cannabis is a Schedule I controlled substance, however, the
development of a legal cannabis industry under the laws of these
states is in conflict with the Federal Controlled Substances Act,
which makes cannabis use and possession illegal on a national
level. The United States Supreme Court has confirmed that the
federal government has the right to regulate and criminalize
cannabis, including for medical purposes, and that federal law
criminalizing the use of cannabis pre-empts state laws that
legalize its use.
In 2014, the United States House of Representatives passed an
amendment (the “Rohrabacher-Farr Amendment”) to the Commerce,
Justice, Science, and Related Agencies Appropriations Bill, which
funds the United States Department of Justice (the “DOJ”). The
Rohrabacher-Farr Amendment prohibits the DOJ from using funds to
prevent states with medical cannabis laws from implementing such
laws. In August 2016, a Ninth Circuit federal appeals court ruled
in United States v. McIntosh that the Rohrabacher-Farr
Amendment bars the DOJ from spending funds on the prosecution of
conduct that is allowed by state medical cannabis laws, provided
that such conduct is in strict compliance with applicable state
law. In March 2015, bipartisan legislation titled the Compassionate
Access, Research Expansion, and Respect States Act (the “CARERS
Act”) was introduced, proposing to allow states to regulate the
medical use of cannabis by changing applicable federal law,
including by reclassifying cannabis under the Controlled Substances
Act to a Schedule II controlled substance and thereby changing the
plant from a federally-criminalized substance to one that has
recognized medical uses.
Although these developments have been met with a certain amount of
optimism in the scientific community, the CARERS Act has not yet
been adopted, and the Rohrabacher-Farr Amendment, being an
amendment to an appropriations bill, must be renewed annually. The
currently enacted Commerce, Justice, Science, and Related Agencies
Act, which includes the Rohrabacher-Farr Amendment, is effective,
by passage of a short-term continuing resolution, through April 28,
2017. The federal government could at any time change its
enforcement priorities against the cannabis industry. We do not
grow or distribute cannabis, but our current and planned business
operations involve licensing cannabinoid-based products and
technology. Any change in enforcement priorities could render such
operations unprofitable or even prohibit such operations.
Our ability to earn revenue through licensing our product in the
United States is dependent on additional states legalizing medical
marijuana.
We are engaged in the business developing and commercializing
cannabinoid-based products for the detection and treatment of
cancer. Our ability to commercialize our products in the United
States is dependent upon the continued progress of legislative
authorization of cannabis at the state level for medical purposes
and, in certain states, based on the specifics of the legislation
passed in that state. Any number of factors could slow or halt the
progress. Furthermore, progress, while encouraging, is not assured.
The legislative process normally encounters set-backs before
achieving success. While there may be ample public support for
legislative proposals, there must be political will in the
legislative committee or a bill may never advance to a vote.
Numerous factors impact the legislative process. Any one of these
factors could slow or halt the progress and adoption of cannabis
for medical purposes, which would limit the market for our products
and negatively impact our business and revenues.
Changes in consumer preferences and acceptance of medical cannabis,
or any negative trends, will adversely affect our business.
Our business is substantially dependent on market acceptance of
medical cannabis. Market perception of medical cannabis can be
significantly influenced by a number of social, political and
economic factors that are beyond our control, including scientific
research or findings, regulatory investigations, litigation, media
attention and other publicity regarding such products and
treatments. There can be no assurance that future scientific
research, findings, regulatory proceedings, litigation, media
attention or other research findings or publicity will be favorable
to the market for any of our current or future cannabinoid-based
diagnostics or therapies. Future research reports, findings,
regulatory proceedings, litigation, media attention or other
publicity that are perceived as less favorable than, or that
question, earlier research reports, findings or publicity could
have a material adverse effect on the demand for our products, as
well as our business, results of operations, financial condition
and cash flows.
We believe that as cannabis-based biotechnology becomes more widely
accepted by the U.S. medical community and the public at large, the
stigma associated with medical cannabis will moderate and, as a
result, consumer demand will likely continue to grow. There is,
however, no assurance that such increase in demand will occur, that
we will benefit from any demand increase or that our business will
ever become profitable. We cannot predict the future growth rate
and size of the market, assuming that the regulatory climate
permits, of which there can be no assurance. Any negative outlook
on medical cannabis will adversely affect our business
prospects.
We also believe that large, well-funded pharmaceutical and
other related businesses and industries may have economic reasons
to oppose cannabinoid-based therapies. The pharmaceutical industry
is well-funded with a strong and experienced lobby presence at both
the federal and state levels, as well as internationally, that
surpasses financial resources of the current group of medical
cannabis research and development companies. Any effort by the
pharmaceutical lobby to halt or delay cannabinoid-based medical
products and therapies could have a detrimental impact on our
business.
Risks Related to Product Development
If we fail to successfully develop and commercialize diagnostics,
pharmaceutical or therapies, we may be unable to execute our plan
of operations.
Our current business strategy focuses on discovering, developing
and commercializing cannabinoid-based diagnostics, anti-cancer
pharmaceuticals and palliative therapies. To date, we have only
commercialized Cannabics SR, our non-pharmaceutical extended
release capsules for palliative therapy. The success of our
business will depend upon our ability to fully develop and
commercialize the diagnostics and therapeutic product candidates in
our current development pipeline as well as to continue the
discovery and development of other products and technology.
Prior to commercializing our product candidates, we will be
required to undertake time-consuming and costly development
activities with uncertain outcomes, including conducting clinical
studies and obtaining regulatory clearance or approval in Israel,
the United States, the European Union and other countries where we
may develop and market our product candidates. Delays in obtaining
approvals and clearances could have material adverse effects on us
and our ability to fully carry out our plan of operations. We have
limited experience in taking products through these processes and
there are considerable risks involved in these activities. The
science and methods that we are employing are innovative and
complex, and it is possible that our development programs will
ultimately not yield products suitable for commercialization or
government approval. Product candidates that appear promising in
early development may fail to be validated in subsequent studies,
and even if we achieve positive results, we may still fail to
obtain the necessary regulatory clearances or approvals. Few
research and development projects result in commercial products,
and perceived viability in early clinical studies often is not
replicated in later studies. At any point, we may abandon
development of a product candidate, or we may be required to expend
considerable resources obtaining additional clinical and
nonclinical data, which would adversely impact the timing for
generating potential revenue from those products. Further, our
ability to develop and launch product candidates is dependent on
our receipt of substantial additional funding. If our discovery and
development programs yield fewer commercial product candidates than
we expect, we may be unable to execute our business plan, and our
business, financial condition and results of operations may be
adversely affected.
If we fail to maintain or establish satisfactory arrangements for
the supply of raw materials or the manufacture of our product
candidates for preclinical or clinical trials, or if we experience
an interruption of supply, we might not have sufficient quantities
of our product candidates at an acceptable cost, which could delay,
prevent or impair our development or commercialization efforts
We do not produce medical cannabis, and therefore our ability to
research, develop and commercialize our cannabinoid-based
diagnostics and therapeutic product candidates is dependent upon a
sufficient supply of medical cannabis strains. Any significant
interruption or negative change in the availability or economics of
the supply chain for medical cannabis could materially impact our
business, financial condition and operating results. Some strains
of medical cannabis may only be available from a single supplier or
a limited group of suppliers. If a sole source supplier were to go
out of business, we might be unable to find a replacement source in
a timely manner or at all. If a sole source supplier were to be
acquired by a competitor, that competitor might elect not to supply
us. Any inability to secure required supplies of medical cannabis
or to do so on appropriate terms could have a materially adverse
impact on our business, financial condition and operating
results.
Our clinical diagnostics may never be validated.
The FDA regulates the sale and distribution, in interstate
commerce, of in vitro diagnostic test kits, reagents and
instruments used to perform diagnostic testing. To the extent that
any diagnostic test we develop is regarded as an in vitro
diagnostic test rather than as a Laboratory Developed Test (“LDT”),
we will be subject to increased FDA regulation that will delay and
add to the cost of commercialization of our diagnostic product
candidates, which will have a material adverse effect on our
business, results of operations and financial condition.
We are also subject to the United States Clinical Laboratory
Improvement Amendments of 1988 (“CLIA”), federal regulatory
standards that apply to all clinical laboratories that perform
testing on specimens derived from humans in the United States for
the purpose of providing information for the diagnosis, prevention
or treatment of disease. CLIA is intended to ensure the quality and
reliability of clinical laboratories in the United States by
mandating specific standards in the areas of personnel
qualifications, administration, and participation in proficiency
testing, patient test management, quality control, quality
assurance and inspections. Accreditation by the College of American
Pathologists (“CAP”), one of six CLIA-approved accreditation
organizations, is sufficient to satisfy the requirements of
CLIA.
The validation for CLIA or CAP is a two-step process. The first
step is optimization of all of the steps of the test protocol to
show that the test is able to produce repeatable and consistent
results. The second step is the clinical validation, in which
statistically significant sensitivity and specificity of the test
on the appropriate human samples are determined. Overall, the
purpose of the validation process is to determine the accuracy,
precision, sensitivity and specificity of the test. The time and
cost to complete the validation process can vary widely, and it is
possible that we would be unable to complete the validation process
along the timeline and within the budget as planned.
As of the date of this filing, our clinical diagnostics have not
yet been validated for commercialization in a CLIA or CAP
laboratory, and we have not yet begun the validation process. We
may be unable to enter into an agreement with a CLIA or CAP
laboratory on favorable terms, or at all. Although we may be able
to validate the tests, they might have sensitivity and specificity
that is insufficient to bring the product to market. Any delays or
incurrence of greater costs than budgeted in validating these tests
may have a material adverse effect on our business, results of
operations and financial condition.
The Federal Food and Drug Administration may impose additional
regulatory obligations and costs upon the development of our
diagnostics.
On October 3, 2014, the FDA issued draft guidance regarding
oversight of LDTs, titled “Framework for Regulatory Oversight of
Laboratory Developed Tests (LDTs).” According to this guidance, the
FDA plans to take a phased-in risk-based approach to regulating
LDTs. The FDA plans to phase in enforcement of LTD premarket
review, quality system oversight and adverse event reporting over a
number of years. The FDA would require that laboratories providing
LDTs, subject to certain limited exemptions, within six months
after the guidance documents are finalized to comply with (i)
either a new notification procedure in which the laboratory must
provide the FDA with certain basic information about each LDT
offered by their laboratory or the FDA’s device registration and
listing requirements, and (ii) the medical device reporting, or
MDR, requirements for LDTs offered by that laboratory. Under this
new risk-based approach, it is possible that some level of
pre-market review may be required for our LDTs, which may require
us to obtain additional clinical data.
The FDA draft guidance was subject to public comment until February
2, 2015. On January 13, 2017, the FDA issued a discussion paper on
LDTs that does not represent the formal position of FDA and is not
enforceable, but is intended to advance public discussion on future
LDT oversight. At the present time, we cannot assess what the
additional costs and regulatory burdens of any FDA final guidance
or FDA enforcement will be, or the impact it may have on our
business and operations.
If the FDA requires us to seek clearance or approval for any of our
diagnostic products (as opposed to simply licensing our technology
to a CLIA lab), we may not be able to obtain such approvals on a
timely basis, or at all. The cost of conducting clinical trials and
otherwise developing data and information to support any
applications may be significant. Failure to comply with applicable
regulatory requirements of the FDA could result in enforcement
action, including receiving untitled or warning letters, fines,
injunctions, or civil or criminal penalties. In addition, we could
be subject to a recall or seizure of products, operating
restrictions, partial suspension or total shutdown of production.
Any such enforcement action would have a material adverse effect on
our business, financial condition and operations.
Changes in laws and regulations concerning clinical diagnostic
tests may adversely affect our business, financial condition and
results of operations.
The clinical laboratory testing industry is highly regulated, and
failure to comply with applicable regulatory, supervisory or
licensing requirements may adversely affect our business, financial
condition and results of operations. In particular, the laws and
regulations governing the marketing and research of clinical
diagnostic testing are extremely complex and in many instances
there are no clear regulatory or judicial interpretations of these
laws and regulations, which increase the risk that we may be found
to be in violation of these laws.
The regulatory environment in which we operate may change
significantly and adversely in the future. The molecular
diagnostics industry as a whole is a growing industry and
regulatory agencies such as the FDA may also apply heightened
scrutiny to new developments in the field of molecular diagnostics.
Should we be deemed to not be in compliance with regulatory
requirements or any changes thereto, we may be subject to sanctions
which could include required changes to our operations, adverse
publicity, substantial financial penalties and criminal
proceedings. Any change in the laws and the regulations relating to
our business, whether in the form of new or amended laws or
regulations or regulatory policies, or the application of any of
the above, may adversely affect our business, financial condition
and results of operations by increasing our costs to comply with
the new laws or constraining our ability to develop, market and
commercialize our diagnostic tests.
For example, a development affecting our industry is the increased
enforcement of the federal False Claims Act and, in particular,
actions brought pursuant to the False Claims Act's "whistleblower"
or " qui tam " provisions. The False Claims Act imposes
liability on any person or entity that, among other things,
knowingly presents, or causes to be presented, a false or
fraudulent claim for payment by a federal governmental payer
program. The qui tam provisions of the False Claims Act
allow a private individual to bring civil actions on behalf of the
federal government for violations of the False Claims Act and
permit such individuals to share in any amounts paid by the
defendant to the government in fines or settlement. When an entity
is determined to have violated the False Claims Act, it is subject
to mandatory damages of three times the actual damages sustained by
the government, plus mandatory civil penalties ranging from $5,500
to $11,000 for each false claim. In addition, various states have
enacted false claim laws analogous to the federal False Claims Act,
and in some cases go even further because many of these state laws
apply where a claim is submitted to any third-party payer and not
merely a governmental payer program.
In addition, there has been a recent trend of increased U.S.
federal and state regulation of payments made to physicians, which
are governed by laws and regulations including the Stark Law. Among
other requirements, the Stark Law requires laboratories to track,
and places a cap on, non-monetary compensation provided to
referring physicians. While we have a compliance plan to address
compliance with applicable fraud and abuse laws and regulations,
the evolving commercial compliance environment and the need to
build and maintain robust and expandable systems to comply with
multiple jurisdictions with different compliance and reporting
requirements increases the possibility that we could violate one or
more of these requirements.
All of our diagnostics and therapeutic product candidates are in
clinical and preclinical development, the validation of which may
not be successful and may be subject to delays, which would have a
material adverse effect on our business, results of operation and
financial condition.
To date, we have devoted our resources towards developing the
technology upon which we are building our clinical diagnostics and
therapeutic product candidates. Our clinical diagnostic product
candidates have yet to be validated and our clinical therapeutic
product candidates are currently in a preclinical development
phase. As of the date of this filing, only Cannabics SR, our
non-pharmaceutical palliative therapy, has been commercialized.
We may be unable to successfully complete the clinical validation
process for our diagnostic product candidates due to several
factors, including our ability to acquire enough samples for full
validation and the procurement of materials necessary to conduct
testing.
We may not be able to successfully complete the preclinical testing
necessary to advance our therapeutic product candidates into
clinical development, including animal pharmacology and toxicity
studies. The results of any preclinical work may indicate that our
therapeutic product candidates do not have the safety or efficacy
necessary to file an Investigational New Drug (“IND”) with the FDA
in order to move our product on to the clinical development
process.
Once we initiate the clinical development of our product
candidates, it may be difficult to identify and qualify patients to
participate in future clinical trials for our product candidates,
and the timing of our clinical trials depends on the speed at which
we can recruit patients to participate in testing as well as
completion of required follow-up periods. If patients are unwilling
to participate in our clinical trials due to concerns over the
safety of the product candidate or for other reasons, the timeline
for conducting the trials and obtaining regulatory approval may be
delayed. Furthermore, we may also compete for patients with other
companies conducting similar clinical trials. Any delays in our
future clinical trials could result in increased costs, delays in
product development or termination of the clinical trials
altogether.
Any of these events could have a material adverse effect on our
business, results of operations and financial condition.
We may fail to demonstrate the safety and efficacy of our
therapeutic product candidates in accordance with regulatory
standards and may incur delays and substantial costs in our
clinical trials.
In order to commercialize our therapeutic product candidates, we
must conduct extensive clinical trials demonstrating the safety and
efficacy of our product candidates in humans. The clinical testing
process is expensive, difficult to design and implement, takes many
years to complete and is unpredictable in both its duration and
outcome. A failure of one or more clinical trials can occur at any
stage of testing. There is a high failure rate for drugs and
biological products proceeding through clinical trials. The
research, testing, manufacturing, labeling, packaging, storage,
approval, sale, marketing, advertising and promotion, pricing,
export, import and distribution of drug products are subject to
extensive regulation by the FDA and other regulatory authorities in
the United States and other countries, which regulations differ
from country to country. We are not permitted to market our
therapeutic product candidates as a prescription pharmaceutical
product in the United States until we receive approval of a New
Drug Application (“NDA”), from the FDA, or in any foreign countries
until we receive the requisite approval from such countries. In the
United States, the FDA generally requires the completion of
pre-clinical testing and clinical trials of each drug to establish
its safety and efficacy and extensive pharmaceutical development to
ensure its quality before an NDA is approved. Regulatory
authorities in other jurisdictions impose similar requirements. Of
the large number of drugs in development, only a small percentage
result in the submission of an NDA to the FDA and even fewer are
eventually approved for commercialization. We have not submitted an
NDA to the FDA or comparable applications to other regulatory
authorities. Preclinical and clinical data is often susceptible to
varying interpretations and types of analyses and regulatory
authorities may fail to approve our product. In addition, even if
we successfully complete early clinical trials, such results may
not be indicative of the success or results of our later clinical
trials.
Our successful completion of clinical trials may be materially
adversely affected by many factors, including:
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• |
ineffective
trial design and disagreement with the FDA on final trial
design; |
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• |
imposition
of a clinical hold following an inspection of our clinical trial
operations by the FDA or other regulatory authorities; |
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• |
difficulties
or delays in reaching an agreement with a contract research
organization, and clinical trial sites; |
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• |
delays
in obtaining required institutional review board approval for each
trial site; |
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• |
data
collected from clinical trials may not be sufficient to support the
submission of a NDA or other submission or to obtain regulatory
approval in the United States or elsewhere; |
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• |
delays
or difficulties in recruiting suitable patients to participate in
clinical trials; |
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• |
delays
in manufacturing or delivering products and materials to clinical
trial sites; |
| |
• |
delays
or difficulties caused by lack of patient adherence to treatment or
post-treatment follow-up; |
| |
• |
delays
caused by patients dropping out of a trial and the need for
recruiting additional patients; and |
| |
• |
delays
caused by clinical sites dropping out of the trial and the time
required to recruit a new site. |
Any of these delays or difficulties could cause us to be delayed in
obtaining marketing approval from regulatory authorities, if at
all, or allow us to obtain approval for specific indications or
patient populations that are not as broad as currently targeted. In
addition, such delays or difficulties may cause our development
costs or our time to bring our product candidates to market to
increase, may weaken our competitive positioning in the market and
may have a material adverse effect on our business, results of
operations and financial condition.
We cannot predict if or when we will receive regulatory approval to
commercialize a therapeutic product candidate.
We cannot commercialize a therapeutic product candidate until the
appropriate regulatory authorities, such as the FDA or a state
regulating authority, have reviewed and approved the product
candidate. Even if our therapeutic product candidates demonstrate
safety and efficacy in clinical trials, regulatory agencies may not
complete their review processes in a timely manner, and we may not
be able to obtain timely regulatory approval. We may never be able
to receive regulatory approval for our therapeutic product
candidates at all. Additional delays may result if an FDA advisory
committee or other regulatory authority recommends non-approval or
restrictions on approval. In addition, we may experience delays or
rejections based upon additional government regulation from future
legislation or administrative action, or changes in regulatory
agency policy during the period of product development, clinical
trials and the review process. Regulatory agencies may also approve
a product candidate for fewer or more limited indications than
requested or may grant approval subject to the performance of
post-marketing studies. In addition, regulatory agencies may not
approve the labeling claims that are necessary or desirable for the
successful commercialization of our product candidates. Delays or
failure to obtain necessary regulatory approvals could have a
material adverse effect on our business, results of operations and
financial condition.
Even if we obtain regulatory approval for a therapeutic product
candidate, we will remain subject to extensive regulatory
scrutiny.
Even if we obtain regulatory approval in the United States for our
therapeutic product candidates, the FDA and other appropriate
regulatory agencies may still impose significant restrictions or
delays, including restriction of patient population or indications
or additional costly studies. Any changes to the approved product
or its labeling or manufacturing process would require FDA
approval. Any advertisements or promotions must comply with FDA
regulations and are subject to FDA review as well as state and
federal laws. Drug product manufacturers are subject to continual
review and inspection by the FDA and other regulatory authorities
to comply with Current Good Manufacturing Practice standards. If
the FDA or other regulatory authority finds previously undiscovered
compliance issues with products, such as unanticipated adverse
effects or issues with the manufacturing facility, the FDA or other
regulatory authority may:
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· |
issue
a warning letter asserting that we are in violation of
law; |
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· |
impose
civil or criminal penalties or monetary fines; |
| |
· |
suspend
or withdraw regulatory approval; |
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· |
suspend
currently ongoing clinical trials; |
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· |
refuse
any pending applications; |
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· |
prohibit
us from entering into beneficial or necessary contracts such as
supply or government contracts. |
Any government investigation of alleged violations of law could
require us to expend significant time and resources in response,
could result in litigation and litigation-related expense and could
generate negative publicity. The occurrence of any event or penalty
described above may inhibit our ability to commercialize our
therapeutic product candidates and generate revenue, which would
have a material adverse effect on our business, results of
operations and financial condition.
In addition, even if we obtain regulatory approvals, the timing or
scope of any approvals may prohibit or reduce our ability to
commercialize our therapeutic product candidates successfully. For
example, if the approval process takes too long, we may miss market
opportunities and give other companies the ability to develop
competing products or establish market dominance. Any regulatory
approval that we ultimately obtain may be limited or subject to
restrictions or post-approval commitments that render our products
not commercially viable. For example, regulatory authorities may
approve our therapeutic product candidates for fewer or more
limited indications than we request, may not approve the price we
intend to charge for our therapeutic product candidates, may grant
approval contingent on the performance of costly post-marketing
clinical trials, or may approve our therapeutic product candidates
with a label that does not include the labeling claims necessary or
desirable for the successful commercialization of that indication.
Further, the FDA may place conditions on approvals including
potential requirements or risk management plans and the requirement
for a Risk Evaluation and Mitigation Strategy (“REMS”) to assure
the safe use of the drug. If the FDA concludes a REMS is needed,
the sponsor of the NDA must submit a proposed REMS; the FDA will
not approve the NDA without an approved REMS, if required. A REMS
could include medication guides, physician communication plans, or
elements to assure safe use, such as restricted distribution
methods, patient registries and other risk minimization tools. Any
of these limitations on approval or marketing could restrict the
commercial promotion, distribution, prescription or dispensing of
our therapeutic product candidates. Moreover, product approvals may
be withdrawn for non-compliance with regulatory standards or if
problems occur following the initial marketing of the product. Any
of the foregoing scenarios could materially harm the commercial
success of our product candidates and have a material adverse
effect on our business, results of operations and financial
condition.
We may fail to obtain orphan drug status for our therapeutic
product candidates.
We intend to seek orphan drug status from the FDA for those
anti-cancer therapeutic product candidates we are presently
developing to the extent such product candidates are eligible for
orphan drug status under the Orphan Drug Act of 1983. The orphan
drug status gives the manufacturer specific financial incentives to
develop a pharmacological agent. If a product that has an orphan
drug designation receives the first FDA approval for the disease
for which it has such designation, the product is entitled to
orphan drug exclusivity, which means that the FDA may not approve
any other applications to market the same medication for the same
indication, except in very limited circumstances, for seven years.
Failure to obtain an orphan drug designation for our product
candidates may have a material adverse effect on our business,
results of operations and financial condition.
Any of our therapeutic product candidates may cause adverse effects
or have properties that could delay or prevent their regulatory
approval or limit the scope of any specific indications or market
acceptance.
Adverse events caused by our therapeutic product candidates could
cause interruptions, delays or the halting of our clinical trials.
If adverse effects are observed in any clinical trials for our
therapeutic product candidates, we may be unable to obtain timely,
or any, regulatory approval of our therapeutic product candidates.
Adverse effects caused by our therapeutic product candidates could
also subject us to litigation and liability, which could have a
material adverse effect on our business, results of operations and
financial condition.
In addition, if any of our therapeutic product candidates are
approved for commercialization and are found to cause serious or
unpredicted side effects, serious consequences may result,
including but not limited to, the withdrawal of marketing approval
by regulatory authorities, restrictions on distribution by
regulatory authorities, the need to conduct additional clinical
trials, litigation and potential liability for personal injury to
patients and damage to our reputation. Furthermore, our ability to
achieve and maintain profitability may be permanently impaired. Any
of these events could have a material adverse effect on our
business, results of operations and financial condition.
Our dietary supplements are subject to government regulation, both
in the United States and internationally, which could increase our
costs significantly and limit or prevent the sale of our dietary
supplements.
The manufacture, packaging, labeling, advertising, promotion,
distribution and sale of Cannabics SR, and any other dietary
supplements that we may develop and commercialize, is subject to
regulation by numerous national and local governmental agencies in
the United States and other countries, including the FDA and
Federal Trade Commission in the United States, and the Ministry of
Health in Israel. Failure to comply with these regulatory
requirements may result in various types of penalties or fines.
These include injunctions, product withdrawals, recalls, product
seizures, fines and criminal prosecutions. Individual states also
regulate dietary supplements. A U.S. state may interpret claims or
products presumptively valid under federal law as illegal under
that state’s regulations. In markets outside the United States, we
will likely be required to obtain approvals, licenses, or
certifications from a country’s ministry of health or comparable
agency, as well as labeling and packaging regulations, all of which
vary from country to country. Approvals or licensing may be
conditioned on reformulation of products or may be unavailable with
respect to certain products or product ingredients. Any of these
government agencies, as well as legislative bodies, can change
existing regulations, or impose new ones, or could take aggressive
measures, causing or contributing to a variety of negative
consequences, including:
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· |
requirements
for the reformulation of certain or all products to meet new
standards; |
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· |
the
recall or discontinuance of certain or all products; |
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· |
additional
record keeping; |
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· |
expanded
documentation of the properties of certain or all
products; |
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· |
expanded
or different labeling; |
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· |
adverse
event tracking and reporting; and |
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· |
additional
scientific substantiation. |
Any or all of these requirements could have a material adverse
effect on us. There can be no assurance that the regulatory
environment in which we operate will not change or that such
regulatory environment, or any specific action taken against us,
will not result in a material adverse effect on us.
Changes in legislation or regulation in the health care systems in
the United States and foreign jurisdictions may affect us.
Our ability to successfully commercialize our cannabinoid-based
products may depend on how the healthcare systems of the United
States, the European Union and other governments provide coverage
or reimbursement. Reimbursement and healthcare payment systems in
international markets vary significantly by country, and include
both government sponsored healthcare and private insurance. To
obtain reimbursement or pricing approval in some countries, we may
be required to produce clinical data, which may involve one or more
clinical trials, that compares the cost-effectiveness of our
products to other available therapies. We may not obtain
international reimbursement or pricing approvals in a timely
manner, if at all. Our failure to receive international
reimbursement or pricing approvals would negatively impact market
acceptance of our products in the international markets in which
those approvals are sought.
We believe that future reimbursement may be subject to increased
restrictions in the United States, the European Union and in other
international markets. There is increasing pressure by governments
worldwide to contain health care costs by limiting both the
coverage and the level of reimbursement for therapeutic products
and by refusing, in some cases, to provide any coverage for
products that have not been approved by the relevant regulatory
agency. Future legislation, regulation or reimbursement policies of
third-party payers may adversely affect the demand for our product
candidates currently under development and limit our ability to
sell our product candidates on a profitable basis. In addition,
third party payers continually attempt to contain or reduce the
costs of healthcare by challenging the prices charged for
healthcare products and services. If reimbursement for our products
is unavailable or limited in scope or amount or if pricing is set
at unsatisfactory levels, market acceptance of our products
candidates will be impaired and future revenues, if any, will be
adversely affected.
Risks Related to Our Dependence on Third Parties
We rely and expect to continue to rely heavily on third parties to
conduct our preclinical studies and clinical trials, and those
third parties may not perform satisfactorily, including failing to
meet deadlines for the completion of such studies and trials.
We do not have in-house research facilities and, as a consequence,
we must currently rely on third parties to conduct our clinical
trials. We expect to continue to rely heavily on third parties,
such as contract research organizations, clinical data management
organizations, medical institutions, clinical investigators and
others to conduct our clinical trials. Our agreements with these
third parties generally allow the third party to terminate our
agreement with them at any time. If we are required to enter into
alternative arrangements because of any such termination, the
introduction of our product candidates to market could be
delayed.
Our reliance on third parties for research and development will
reduce our control over such activities but will not relieve us of
our responsibilities. Likewise, our reliance on third parties whom
we do not control does not relieve us of our responsibility to
comply with regulatory requirements to use Current Good Clinical
Practice standards when conducting, recording and reporting the
results of clinical trials in order to ensure that data and
reported results are credible and accurate and that the rights,
integrity and confidentiality of trial participants are protected.
We are also required to register ongoing clinical trials and post
the results of completed clinical trials on a government-sponsored
database of regulatory agencies within specified timeframes.
Failure to do so can result in fines, adverse publicity and civil
and criminal sanctions.
The third parties on whom we rely may also have relationships with
other entities, some of whom may be our competitors. If these third
parties do not successfully carry out their contractual duties,
meet expected deadlines or conduct our clinical trials in
accordance with the requirements of a regulatory agency or our
stated protocols, we will not be able to obtain, or may be delayed
in obtaining, marketing approvals for our product candidates and
will not be able to, or may be delayed in our efforts to,
successfully commercialize our product candidates.
Collaboration agreements that we may enter into in the future may
not be successful, which could adversely affect our ability to
develop and commercialize our diagnostics and therapeutic product
candidates.
We may enter into collaboration agreements with pharmaceutical
companies and biotechnology institutions for the development or
commercialization of our cannabinoid-based diagnostics and
therapeutic product candidates, which agreements may contain
provisions based upon, among other things, the merits of retaining
certain rights. We will face significant competition in seeking
appropriate collaborators and in negotiating agreements at
acceptable terms, if at all. We may not be successful in our
efforts to enter, implement and maintain collaboration agreements.
Disagreements stemming from collaboration agreements concerning
development, intellectual property, regulatory or commercialization
matters can lead to delays and, in some cases, termination of our
collaboration agreements or otherwise result in the potentially
significant costs and fees in seeking to enforce or protect our
rights, if any. Any such disagreements can be difficult if, in
fact, neither of the parties has final decision-making authority.
The resulting outcome of any disputes or disagreements would in all
likelihood adversely affect our business.
Data provided by collaborators and others upon which we rely that
has not been independently verified could turn out to be false,
misleading, or incomplete.
We rely on third-party vendors, scientists, and collaborators to
provide us with significant data and other information related to
our projects, clinical trials, and our business. If such third
parties provide inaccurate, misleading, or incomplete data, our
business, prospects, and results of operations could be materially
adversely affected.
Our business model is substantially dependent on third party
licensees to market and sell our products, which will subject us to
a number of risks.
We depend on third party licensees to sell, market, and service our
products and current and future products in our intended markets.
We are subject to a number of risks associated with reliance upon
third party licensees, including:
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lack
of day-to-day control over the activities of licensees; |
| |
· |
third
party licensees may not commit the necessary resources to market
and sell our current and future products to our level of
expectations; |
| |
· |
third
party licensees may terminate their arrangements with us on limited
or no notice or may change the terms of these arrangements in a
manner unfavorable to us; and |
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· |
disagreements
with our future licensees could result in costly and time-consuming
litigation or arbitration which we could be required to conduct in
jurisdictions with which we are not familiar. |
If we fail to establish and maintain satisfactory relationships
with our future third party licensees, our revenue and market share
may not grow as anticipated, and we could be subject to unexpected
costs which could harm our results of operations and financial
condition.
Risks Related To Operating In Israel
Failure to secure the necessary Israeli licenses to use cannabis
for medical research could limit our ability to execute our
research and development activities, delay the launch of our
products and adversely affect the results of our business
operations.
To date, we have only conducted our research in Israel and, in
fact, have limited our operations to Israel. The biotechnologies
that we are developing contain cannabis, a “controlled substance”
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, Israel Medical Cannabis Unit (“IMCU”), on an ad hoc
basis. We have obtained all IMCU licenses that are necessary for us
to carry out our research. Even though we have an established track
record of successfully obtaining the requisite licenses as
required, there can be no assurance that we will continue to be
able to secure licenses in the future. If we fail to comply with
Israeli rules and regulations related to the licensing of cannabis,
we may not be able to research and develop our product candidates
as we intend or at all.
We may become subject to claims for remuneration or royalties for
assigned service invention rights by our employees, which could
result in litigation and adversely affect our business.
A significant portion of our intellectual property has been
developed by our Israeli employees in the course of their
employment for us. Under the Israeli Patent Law, 5727-1967 (the
“Israeli Patent Law”), inventions conceived of by an employee
during the term and as part of the scope of his or her employment
with a company are regarded as “service inventions,” which belong
to the employer, absent a specific agreement between the employee
and employer giving the employee service invention rights. The
Israeli Patent Law also provides that if there is no such agreement
between an employer and an employee, the Israeli Compensation and
Royalties Committee (the “C&R Committee”), a body constituted
under the Israeli Patent Law, shall determine whether the employee
is entitled to remuneration for his or her inventions. The C&R
Committee (decisions of which have been upheld by the Israeli
Supreme Court) has held that employees may be entitled to
remuneration for their service inventions despite having
specifically waived any such rights. Further, the C&R Committee
has not yet set specific guidelines regarding the method for
calculating this remuneration or the criteria or circumstances
under which an employee’s waiver of his or her right to
remuneration will be disregarded. We generally enter into
intellectual property assignment agreements with our employees
pursuant to which such employees assign to us all rights to any
inventions created in the scope of their employment or engagement
with us. Although our employees have agreed to assign to us service
invention rights and have specifically waived their right to
receive any special remuneration for such assignment beyond their
regular salary and benefits, we may face claims demanding
remuneration in consideration for assigned inventions. As a
consequence of such claims, we could be required to pay additional
remuneration or royalties to our current or former employees, or be
forced to litigate such claims, which could negatively affect our
business.
We expect that our results of operations will be subject to
fluctuations in currency exchange rates because a substantial
portion of our anticipated revenue will be generated in U.S.
dollars and Euros while a significant portion of our expenses will
be incurred in New Israeli Shekels.
We expect a substantial portion of our revenue will be generated in
U.S. dollars and Euros, while a significant portion of our
expenses, principally salaries and related personnel expenses, is
paid in New Israeli Shekels, or NIS. As a result, we are exposed to
the risk that the rate of inflation in Israel will exceed the rate
of devaluation of the NIS in relation to the Euro or the U.S.
dollar, or that the timing of this devaluation will lag behind
inflation in Israel. Because inflation has the effect of increasing
the U.S. dollar and Euro costs of our operations, it would
therefore have an adverse effect on our dollar-measured results of
operations. The value of the NIS, against the Euro, the U.S.
dollar, and other currencies may fluctuate and is affected by,
among other things, changes in Israel’s political and economic
conditions. Any significant revaluation of the NIS may materially
and adversely affect our cash flows, revenues and financial
condition. Fluctuations in the NIS exchange rate, or even the
appearance of instability in such exchange rate, could adversely
affect our ability to operate our business.
We may not be able to enforce covenants not-to-compete under
current Israeli law.
We have non-competition agreements with most of our employees, all
of which are governed by Israeli law. These agreements generally
prohibit our employees from competing with us or working for our
competitors for a specified period following termination of their
employment. However, Israeli courts are reluctant to enforce
non-compete undertakings of former employees and tend, if at all,
to enforce those provisions for relatively brief periods of time in
restricted geographical areas and only when the employee has unique
value specific to that employer’s business and not just regarding
the professional development of the employee. Any such inability to
enforce non-compete covenants may cause us to lose any competitive
advantage arising from confidential information known to such
former employees.
It may be difficult for investors in the United States to enforce
any judgments obtained against us or some of our directors or
officers.
The majority of our assets are located outside the United States.
In addition, certain of our officers are nationals or residents of
countries other than the United States, and all or a substantial
portion of such persons’ assets are located outside the United
States. As a result, it may be difficult for investors to enforce
within the United States any judgments obtained against us or any
of our non-U.S. officers, including judgments predicated upon the
civil liability provisions of the securities laws of the United
States or any state thereof. It may also be difficult to assert
claims under United States securities law in actions originally
instituted outside of the United States. Moreover, Israeli courts
may refuse to hear a United States securities law claim because
Israeli courts may not be the most appropriate forums in which to
bring such a claim. Even if an Israeli court agrees to hear a
claim, it may determine that Israeli law, and not U.S. law, is
applicable to the claim. Further, if U.S. law is found to be
applicable, certain content of applicable U.S. law must be proved
as a fact, which can be a time-consuming and costly process, and
certain matters of procedure would still be governed by Israeli
law. Consequently, our investors may be effectively prevented from
pursuing remedies under U.S. federal and state securities laws
against us or any of our non-U.S. directors or officers.
If there are significant shifts in the political, economic and
military conditions in Israel and its neighbors, it could have a
material adverse effect on our business relationships and
profitability.
All of our research facilities and certain of our key personnel are
located in Israel. Our business is directly affected by the
political, economic and military conditions in Israel and its
neighbors. Since the establishment of the State of Israel in 1948,
a number of armed conflicts have occurred between Israel and its
Arab neighbors. A state of hostility, varying in degree and
intensity, has caused security and economic problems in Israel.
Although Israel has entered into peace treaties with Egypt and
Jordan, and various agreements with the Palestinian Authority,
there has been a marked increase in violence, civil unrest and
hostility, including armed clashes, between the State of Israel and
the Palestinians since September 2000. The establishment in 2006 of
a government in the Gaza Strip by representatives of the Hamas
militant group has created heightened unrest and uncertainty in the
region. In mid-2006, Israel engaged in an armed conflict with
Hezbollah, a Shiite Islamist militia group based in Lebanon, and in
June 2007, there was an escalation in violence in the Gaza Strip.
From December 2008 through January 2009 and again in November and
December 2012, Israel engaged in an armed conflict with Hamas,
which involved missile strikes against civilian targets in various
parts of Israel and negatively affected business conditions in
Israel. In July 2014, Israel launched an additional operation
against Hamas operatives in the Gaza strip in response to
Palestinian groups launching rockets at Israel. Recent political
uprisings and social unrest in Syria are affecting its political
stability, which has led to the deterioration of the political
relationship between Syria and Israel and have raised new concerns
regarding security in the region and the potential for armed
conflict. Similar civil unrest and political turbulence is
currently ongoing in many countries in the region. The continued
political instability and hostilities between Israel and its
neighbors and any future armed conflict, terrorist activity or
political instability in the region could adversely affect our
operations in Israel and adversely affect the market price of our
shares of common stock. In addition, several countries restrict
doing business with Israel and Israeli companies have been and are
today subjected to economic boycotts. The interruption or
curtailment of trade between Israel and its present trading
partners could adversely affect our business, financial condition
and results of operations.
Risks Related To Our Stock
There can be no assurance of an active, liquid and orderly trading
market for our common stock or that investors will be able to sell
their shares of common stock.
At present, our common stock is quoted on the OTCQB tier of the
marketplace maintained by OTC Markets Group Inc., under the symbol
“CNBX.” There is only a limited, liquid public trading market for
our common stock. There can be no assurance that a liquid market
for our common stock will continue. Market liquidity will depend on
the perception of our business and any steps that our management
might take to bring public awareness of our business to the
investing public within the parameters of the federal securities
laws. There is no assurance that any such awareness will be
generated or sustained. Therefore, investors may not be able to
liquidate their investment or liquidate it at a price paid by
investors equal to or greater than their initial investment in our
common stock. Moreover, holders of our common stock may not find
purchasers for their shares should they to decide to sell the
common stock held by them at any particular time if ever. Our
common stock should be purchased only by investors who have no
immediate need for liquidity in their investment and who can hold
our common stock, possibly for a prolonged period of time.
The price of our common stock is volatile, and the value of your
investment could decline.
The market price of our common stock has been highly volatile.
Between September 1st, 2020, and August 31st,
2020, the sales price of our stock on the OTCQB ranged from a low
of $0.08 per share to a high of $0.57 per share. Accordingly, it is
difficult to forecast the future performance of our common stock.
The market price of our common stock may be higher or lower than
the price you pay, depending on many factors, some of which are
beyond our control and may not be related to our operating
performance. These fluctuations could cause you to lose all or part
of your investment in our common stock. Factors that could cause
fluctuations in the trading price of our common stock include the
following:
| |
• |
technological
innovations or new products and services by us or our
competitors; |
| |
• |
regulatory
developments at the federal, state or local level; |
| |
• |
additions
or departures of key personnel; |
| |
• |
our
ability to execute our business plan; |
| |
• |
operating
results that fall below expectations; |
| |
• |
loss
of any strategic relationship; |
| |
• |
economic,
political and other external factors; and |
| |
• |
period-to-period
fluctuations in our financial results. |
The stock market generally and in particular, the market for stocks
of biotechnology companies with lower market capitalizations, like
us, have from time to time experienced, and likely will again
experience significant price and volume fluctuations that are
unrelated to the operating performance of a particular company. The
trading price of our common stock might decline in reaction to
events that affect other companies in our industry, even if these
events do not directly affect us.
Periods of volatility in the market price of a company’s securities
have often been followed by securities class action litigation
against that company. If our stock price continues to be volatile,
we may become the target of securities litigation, which could
result in substantial costs and divert our management’s attention
and resources from our business. This could have a material adverse
effect on our business, operating results and financial
condition.
We may never pay any dividends to our shareholders.
We currently intend to retain any future earnings for use in the
operation and expansion of our business. Accordingly, we do not
expect to pay any dividends in the foreseeable future, but will
review this policy as circumstances dictate. The declaration and
payment of all future dividends, if any, will be at the sole
discretion of our board of directors, which retains the right to
change our dividend policy at any time. Consequently, our
stockholders must rely on sales of their common stock after price
appreciation, which may never occur, as the only way to realize any
future gains on their investment.
Our principal stockholders and management own a significant
percentage of our stock and will be able to exert significant
control over matters subject to stockholder approval.
As at August 31, 2020, Cannabics Inc., a Delaware corporation, owns
64% of our common stock. Our three Directors are also holders of
shares in Cannabics Inc., and therefore have substantial influence
over it. Accordingly, the Company (and our management) may be able
to control the outcome of stockholder votes, including votes
concerning the election of directors, amendment of our
organizational documents, approval of mergers, sales of assets and
other significant corporate transactions. This concentration of
ownership in Cannabics Inc. (and our management) may have the
effect of delaying or preventing a change in our management and
voting control of Cannabics Inc., including preventing or
discouraging unsolicited acquisition proposals or offers for our
common stock that some of our stockholders may believe is in their
best interest.
We may issue shares of preferred stock with greater rights than our
common stock, which may entrench management and result in dilution
of our stockholders' investment.
Our Articles of Incorporation authorize the issuance of up to 100
million shares of preferred stock, par value $0.0001 per share. The
authorized but unissued preferred stock may be issued by our board
of directors from time to time on any number of occasions, without
stockholder approval, as one or more separate series of shares
comprised of any number of the authorized but unissued shares of
preferred stock, designated by resolution of our board of directors
stating the name and number of shares of each series and setting
forth separately for such series the relative rights, privileges
and preferences thereof, including, if any, the: (i) rate of
dividends payable thereon; (ii) price, terms and conditions of
redemption; (iii) voluntary and involuntary liquidation
preferences; (iv) provisions of a sinking fund for redemption or
repurchase; (v) terms of conversion to common stock, including
conversion price, and (vi) voting rights. Such preferred stock may
enable our board of directors to hinder or discourage any attempt
to gain control of the Company by a merger, tender offer at a
control premium price, proxy contest or otherwise. Consequently,
the preferred stock could entrench our management. The market price
of our common stock could be depressed by the existence of the
preferred stock.
Nevada law and certain provisions of our Articles of Incorporation
and bylaws may discourage mergers and other transactions.
Provisions of Nevada law, such as its business combination statute,
and certain provisions of our Articles of Incorporation and by-laws
could make it more difficult for someone to acquire control of the
Company and limit the price that certain investors might be willing
to pay for shares of our common stock. These provisions may make it
more difficult for stockholders to take certain corporate actions
and could delay or prevent someone from acquiring our business. The
provisions could be beneficial to our management and the board of
directors in a hostile tender offer, and could have an adverse
impact on stockholders who might want to participate in such tender
offer, or who might want to replace some or all of the members of
the board of directors.
Our common stock may be subject to penny stock rules, which may
make it more difficult for our investors to sell their common
stock.
Our common stock is presently considered to be a "penny stock" and
is subject to SEC rules and regulations that impose limitations
upon the manner in which such shares may be publicly traded, and
regulate broker-dealer practices in connection with transactions in
"penny stocks." Penny stocks generally are equity securities with a
price of less than $5.00 (other than securities registered on
certain national securities exchanges or quoted on the NASDAQ
system, provided that current price and volume information with
respect to transactions in such securities is provided by the
exchange or system). The penny stock rules require a broker-dealer,
prior to a transaction in a penny stock not otherwise exempt from
the rules, to deliver a standardized risk disclosure document that
provides information about penny stocks and the risks in the penny
stock market. The broker-dealer must also provide the customer with
current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the
transaction, and monthly account statements showing the market
value of each penny stock held in the customer's account. In
addition, the penny stock rules generally require that prior to a
transaction in a penny stock, the broker-dealer make a special
written determination that the penny stock is a suitable investment
for the purchaser and receive the purchaser's written agreement to
the transaction. These disclosure requirements may have the effect
of reducing the level of trading activity in the secondary market
for a stock that becomes subject to the penny stock rules which may
increase the difficulty investors may experience in attempting to
liquidate such securities. These requirements could also hamper our
ability to raise funds in the primary market for our shares of
common stock.
Item 1B. Unresolved Staff
Comments
None.
Item 2. Properties
Our executive offices are located in Bethesda, Maryland and are
sufficient for the time being. These offices are let to us by our
attorney free of charge. We lease the property of our laboratory in
Rehovot, Israel for 2 years, an additional 2 years extension option
period, and pay 3.5K (in US dollars) per month.
Item 3. Legal
Proceedings
On March 8th, 2020, the Company joined Cannabics Inc.,
our largest shareholder and affiliate in a suit against Seach Sarid
Ltd., Seach Medical Group Ltd. and Shay Sarid in Tel Aviv, Israel.
This suit was brought by the Company as it believes the defendants
pursued certain business arrangements which rightfully inured to
the Company. Said litigation is ongoing and currently entering
arbitration. The Company shall vigorously protect and pursue what
it believes to be the rights of the Company and its
shareholders.
Item 4. Mine Safety
Disclosures
Not applicable.
PART II
Item 5. Market For Common
Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Market Information.
We have one class of securities, Common Voting Equity Shares
("Common Stock"). The holders of our common stock have equal
ratable rights to dividends from funds legally available if and
when declared by our Board of Directors and are entitled to share
pro-rata in all of our available assets for distribution to holders
of common stock upon liquidation, dissolution or winding up of our
affairs; there are no preemptive, subscription or conversion rights
and there are no redemption or sinking fund provisions or
rights.
Our common stock is quoted on the NASDAQ OTC Bulletin Board
(“OTCBB”) under the symbol "CNBX". As of November 28th, 2020, the
Company’s common stock was held by 76 shareholders of record, which
does not include shares that are held in street or nominee
name.
The closing share prices presented below represent prices between
broker-dealers and do not include retail mark-ups and mark-downs or
any commission to the dealer.
|
QUARTER
ENDED |
|
HIGH |
|
|
LOW |
|
| August
31, 2020 |
|
$ |
0.31 |
|
|
$ |
0.19 |
|
| May
31, 2020 |
|
$ |
0.36 |
|
|
$ |
0.16 |
|
| February
28, 2020 |
|
$ |
0.57 |
|
|
$ |
0.08 |
|
| November
30, 2019 |
|
$ |
0.26 |
|
|
$ |
0.12 |
|
| August
31, 2019 |
|
$ |
0.34 |
|
|
$ |
0.25 |
|
Shareholders
Our shares of common stock are issued in registered form. The
registrar and transfer agent for our shares of common stock is
ClearTrust LLC, 16540 Pointe Village Dr. Suite 210, Lutz, FL 33558;
(813) 235-4490.
On October 15th, 2020, the shareholders' list of our shares of
common stock showed 76 registered holders of our shares of common
stock and 135,080,441 shares of common stock outstanding. The
number of record holders was determined from the records of our
transfer agent and does not include beneficial owners of shares of
common stock whose shares are held in the names of various security
brokers, dealers, and registered clearing agencies, which as of
last quarter was in excess of 35,000.
Dividend Policy
Our board of directors may declare and pay dividends on outstanding
shares of common stock out of funds legally available there for in
our sole discretion; however, to date no dividends have been
declared or paid on common stock.
Indemnification of Directors and Officers
Nevada Corporation Law allows for the indemnification of officers,
directors, and any corporate agents in terms sufficiently broad to
indemnify such persons under certain circumstances for liabilities,
including reimbursement for expenses, incurred arising under the
1933 Act. The Bylaws of the Company provide that the Company will
indemnify its directors and officers to the fullest extent
authorized or permitted by law and such right to indemnification
will continue as to a person who has ceased to be a director or
officer of the Company and will inure to the benefit of his or her
heirs, executors and Consultants; provided, however, that, except
for proceedings to enforce rights to indemnification, the Company
will not be obligated to indemnify any director or officer in
connection with a proceeding (or part thereof) initiated by such
person unless such proceeding (or part thereof) was authorized by
the Board of Directors. The right to indemnification conferred will
include the right to be paid by the Company the expenses (including
attorney’s fees) incurred in defending any such proceeding in
advance of its final disposition.
The Company may, to the extent authorized from time to time by the
Board of Directors, provide rights to indemnification and to the
advancement of expenses to employees and agents of the Company
similar to those conferred to directors and officers of the
Company. The rights to indemnification and to the advancement of
expenses are subject to the requirements of the 1940 Act to the
extent applicable.
Furthermore, the Company may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the
Company or another company against any expense, liability or loss,
whether or not the Company would have the power to indemnify such
person against such expense, liability or loss under the Nevada
General Corporation Law.
Recent Sales of Unregistered Securities
None.
Penny Stock Regulation
Our shares must comply with the Penny Stock Reform Act of 1990,
which may potentially decrease our shareholders’ ability to easily
transfer their shares. Broker-dealer practices in connection with
transactions in "penny stocks" are regulated. Penny stocks
generally are equity securities with a price of less than $5.00.
The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules,
to deliver a standardized risk disclosure document that provides
information about penny stocks and the risks in the penny stock
market. The broker-dealer also must provide the customer with
current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the
transaction, and monthly account statements showing the market
value of each penny stock held in the customer's account. In
addition, the penny stock rules generally require that prior to a
transaction in a penny stock, the broker-dealer make a special
written determination that the penny stock is a suitable investment
for the purchaser and receive the purchaser's written agreement to
the transaction. These disclosure requirements may have the effect
of reducing the level of trading activity in the secondary market
for a stock that must comply with the penny stock rules. Since our
shares must comply with such penny stock rules, our shareholders
will in all likelihood find it more difficult to sell their
securities.
Item 6. Selected Financial
Data
We are a smaller reporting company as defined by Rule 12b-2 of the
Exchange Act and are not required to provide the information
required under this item.
Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR
AUDITED FINANCIAL STATEMENTS AND THE RELATED NOTES THAT APPEAR
ELSEWHERE IN THIS ANNUAL REPORT. THE FOLLOWING DISCUSSION CONTAINS
FORWARD-LOOKING STATEMENTS THAT REFLECT OUR PLANS, ESTIMATES AND
BELIEFS. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD
CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THOSE DISCUSSED
BELOW AND ELSEWHERE IN THIS ANNUAL REPORT.
FORWARD-LOOKING STATEMENTS
Certain statements made in this report may constitute
“forward-looking statements on our current expectations and
projections about future events”. These forward-looking statements
involve known or unknown risks, uncertainties and other factors
that may cause the actual results, performance, or achievements of
the Company to be materially different from any future results,
performance or achievements expressed or implied by the
forward-looking statements. In some cases you can identify
forward-looking statements by terminology such as “may,” “should,”
“potential,” “continue,” “expects,” “anticipates,” “intends,”
“plans,” “believes,” “estimates,” and similar expressions. These
statements are based on our current beliefs, expectations, and
assumptions and are subject to a number of risks and uncertainties.
Although we believe that the expectations reflected-in the
forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements.
These forward-looking statements are made as of the date of this
report, and we assume no obligation to update these forward-looking
statements whether as a result of new information, future events,
or otherwise, other than as required by law. In light of these
assumptions, risks, and uncertainties, the forward-looking events
discussed in this report might not occur and actual results and
events may vary significantly from those discussed in the
forward-looking statements.
Overview
The Company was incorporated in the State of Nevada, on September
15, 2004, as Thrust Energy Corp. On May 5, 2011, the Company
changed its name to American Mining Company. Our principal offices
are in Bethesda, Maryland. On May 21st, 2014 the Company changed
its name to its current Cannabics Pharmaceuticals Inc.
The Company was originally engaged in the exploration, development
and production of oil and gas projects within North America, but
was unable to operate profitably. In May 2011, the Company
suspended its oil and gas operations and changed its business to
toll milling and refining and mine development. As of April 2014,
the Company has changed its course of business to Biotechnology
Pharmaceutical development. As such, the Company has divested
itself of its former mining properties.
Financing
We will require additional financing to implement our business
plan, which may include joint venture projects and debt or equity
financings. The nature of this enterprise and lack of positive cash
flow places debt financing beyond the credit-worthiness required by
most banks or typical investors of corporate debt until such time
as an economically viable profits and losses can be demonstrated.
Therefore any debt financing of our activities may be costly and
result in substantial dilution to our stockholders.
Future financing through equity investments is likely to be
dilutive to existing stockholders. Also, the terms of securities we
may issue in future capital transactions may be more favorable for
our new investors. Newly issued securities may include preferences,
superior voting rights, and the issuance of warrants or other
derivative securities, which may have additional dilutive effects.
Further, we may incur substantial costs in pursuing future capital
and financing, including investment banking fees, legal fees,
accounting fees, and other costs. We may also be required to
recognize non-cash expenses in connection with certain securities
we may issue, such as convertible notes and warrants, which will
adversely impact our financial condition.
Our ability to obtain needed financing may be impaired by such
factors as the capital markets, both generally and specifically in
the bio-pharma industry, and the fact that we have not been
profitable to date, which could impact the availability or cost of
future financings. If the amount of capital we are able to raise
from financing activities, together with our revenue from
operations, is not sufficient to satisfy our capital needs, even to
the extent that we reduce our operations accordingly, we may be
required to cease operations.
There is no assurance that we will be able to obtain financing on
terms satisfactory to us, or at all. We do not have any
arrangements in place for any future financing. If we are unable to
secure additional funding, we may cease or suspend operations. We
have no plans, arrangements or contingencies in place in the event
that we cease operations.
Results of Operations
Year ended August 31, 2020 compared to the year ended August
31, 2019
Revenues
The revenues for the year ended August 31, 2020 totaled to $7,157
compared to $9,843 for the year ended August 31, 2019
Operating and Other Expenses
For the year ended August 31, 2020 our total operating expenses
were $3,050,609 compared to $3,313,450 for the year ended August
31, 2019. The decrease is attributable mainly to sales and
marketing expenses of $228,166, decrease in general and
administrative of $173,378, and increase in research and
development expenditures of $138,702. The decrease in the sales and
marketing expenses attributed mainly to the company PR services of
$21,665, had none travel abroad and conferences expenses for the
year ended August 31, 2020 comparing to $125,672 and $51,817
respectively for the year ended August 31, 2019.
The net loss for the year ended August 31, 2020 was $7, 467, 463
compared to net Income of $1,132,970 for the year ended August 31,
2019.
Liquidity and Capital Resources
Overview
For the years ended August 31, 2020, as well as August 31, 2019, we
funded our operations through issuance of common stock and advances
from our majority shareholder. Our principal use of funds during
the year ended August 31, 2020 has been for laboratory and clinical
research relating to our proprietary materials normative corporate
operating expenses.
Liquidity and Capital Resources during the year ended August
31, 2020 compared to the year ended August 31, 2019
As of August 31, 2020, we had $777,611 in cash compared to $265,982
as of August 31, 2019. The Company used cash in operations of
$2,774,954 for the year ended August 31, 2020 compared to cash used
in operations of $3,093,782 for the year ended August 31, 2019.
During the year ended August 31, 2020, the Company's investing
earned totaled $3,286,584. This compares to net cash used for
investing activities in the year ended August 31, 2019 in the
amount of $5,251,115. The difference reflects primarily of
realized held for trading investments and purchase of fixed
assets.
During the year ended August 31, 2020, the Company's had no
financing activities. This compares to net cash earned from
financing activities in the year ended August 31, 2020 in the
amount of $7,217,270.
Year ended August 31, 2019 compared to the year ended August
31, 2018
Revenues
The revenues for the year ended August 31, 2019 totaled to $9,843
compared to $9,601 for the year ended August 31, 2018
Operating and Other Expenses
For the year ended August 31, 2019 our total operating expenses
were $3,313,450 compared to $3,818,328 for the year ended August
31, 2018. The decrease is attributable mainly to, general and
administrative of $910,870, decrease in marketing expenses of
$133,852, and increase in research and development expenditures of
$539,843. The decrease in the general and administrative expenses
attributed mainly to the company share based compensation in total
of $247,307 for the year ended August 31, 2019 comparing to
$910,870 for the year ended August 31, 2018.
The net income for the year ended August 31, 2019 was $1,132,970
compared to net loss $3,776,617 for the year ended August 31,
2018.
Liquidity and Capital Resources
Overview
For the years ended August 31, 2019, as well as August 31, 2018, we
funded our operations through issuance of common stock and advances
from our majority shareholder. Our principal use of funds during
the year ended August 31, 2019 has been for laboratory and clinical
research relating to our proprietary materials normative corporate
operating expenses.
Liquidity and Capital Resources during the year ended August
31, 2019 compared to the year ended August 31, 2018
As of August 31, 2019, we had $265,982 in cash compared to
$1,393,608 as of August 31, 2018. The Company used cash in
operations of $3,093,782 for the year ended August 31, 2019
compared to cash used in operations of $1,974,692 for the year
ended August 31, 2018.
During the year ended August 31, 2019, the Company's investing
activities totaled $5,251,115. This compares to net cash used for
investing activities in the year ended August 31, 2018 in the
amount of $1,442,394. The difference reflects primarily of
held for trading and available for sale investments and purchase of
fixed assets.
During the year ended August 31, 2019, the Company's financing
activities earned $7,217,270. This compares to net cash earned for
financing activities in the year ended August 31, 2019 in the
amount of $1,443,000 during the year ended August 31,2018.
Going Concern
Our independent auditors included an explanatory paragraph in their
report on the accompanying consolidated financial statements
regarding concerns about our ability to continue as a going
concern. Our financial statements contain additional note
disclosures describing the circumstances that lead to this
disclosure by our independent auditors.
Our financial statements have been prepared on a going concern
basis, which assumes the realization of assets and settlement of
liabilities in the normal course of business. Our ability to
continue as a going concern is dependent upon our ability to
generate profitable operations in the future and/ or to obtain the
necessary financing to meet our obligations and repay our
liabilities arising from normal business operations when they
become due. The outcome of these matters cannot be predicted with
any certainty at this time and raise substantial doubt that we will
be able to continue as a going concern. Our financial statements do
not include any adjustments to the amount and classification of
assets and liabilities that may be necessary should we be unable to
continue as a going concern.
There is no assurance that our operations will be profitable. The
Company has conducted private placements of its common stock, which
have generated funds to satisfy the initial cash requirements of
its planned Nevada exploration ventures. Our continued existence
and plans for future growth depend on our ability to obtain the
additional capital necessary to operate either through the
generation of revenue or the issuance of additional debt or
equity.
Off-Balance Sheet Arrangements
We currently have no off-balance sheet arrangements that have or
are reasonably likely to have a current or future material effect
on our financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources.
Item 7A. Quantitative and
Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the
Exchange Act and are not required to provide the information
required under this item.
Item 8. Financial Statements
and Supplementary Data.
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Cannabics
Pharmaceuticals Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of
Cannabics Pharmaceuticals Inc. ("the Company") as of August 31,
2020 and 2019 and the related statements of operations, changes in
stockholders' deficit and cash flows, for each of the years ended
August 31, 2020 and 2019, 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 August 31,
2020 and 2019, and the results of its operations and its cash flows
for each of the periods ended August 31, 2020 and 2019, in
conformity with generally accepted accounting principles in the
United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the
Company's financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting
Oversight Board (United States) ("PCAOB") and are required to be
independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error
or fraud. The company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting. As part of our audits we are required to obtain an
understanding of internal control over financial reporting but not
for the purpose of expressing an opinion on the effectiveness of
the Company's internal control over financial reporting.
Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis
for our opinion.
Going Concern
The accompanying financial statements have been prepared assuming
the Company will continue as a going concern. As more fully
described in Note 1, the Company has incurred significant losses
and needs to raise additional funds to meet its obligations and
sustain its operations. These conditions raise substantial doubt
about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in
Note 1. These financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Weinstein International. C.P.A.
We have served as the Company's auditor since 2019.
Tel - Aviv, Israel
November 4, 2020
CANNABICS PHARMACEUTICALS INC.
Audited Consolidated Balance
Sheets
| |
|
August 31, |
|
|
August 31, |
|
| |
|
2020 |
|
|
2019 |
|
| ASSETS |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Current assets: |
|
|
|
|
|
|
|
|
| Cash
and cash equivalents |
|
$ |
777,611 |
|
|
$ |
265,982 |
|
| Prepaid expenses
and other receivables |
|
|
152,299 |
|
|
|
284,496 |
|
| Held for trading
Investments |
|
|
– |
|
|
|
3,256,456 |
|
| Current
royalties |
|
|
– |
|
|
|
500,000 |
|
| Total
current assets |
|
|
929,910 |
|
|
|
4,306,934 |
|
| |
|
|
|
|
|
|
|
|
| Available for sale Investment |
|
|
426,522 |
|
|
|
6,010,946 |
|
| Long term royalties |
|
|
– |
|
|
|
3,863,000 |
|
| |
|
|
|
|
|
|
|
|
| Equipment,
net |
|
|
862,879 |
|
|
|
1,002,286 |
|
| |
|
|
|
|
|
|
|
|
| Total
assets |
|
$ |
2,219,311 |
|
|
$ |
15,183,166 |
|
| |
|
|
|
|
|
|
|
|
| LIABILITIES AND STOCKHOLDERS'
EQUITY |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
|
|
|
| Accounts payable
and accrued liabilities |
|
$ |
231,142 |
|
|
$ |
215,229 |
|
| Due to a
related party |
|
|
223,645 |
|
|
|
223,645 |
|
| Total
current liabilities |
|
|
454,787 |
|
|
|
438,874 |
|
| |
|
|
|
|
|
|
|
|
| Stockholders' equity (deficit): |
|
|
|
|
|
|
|
|
| Preferred
stock, $.0001 par value, 5,000,000 shares authorized no shares
issued and outstanding. |
|
|
– |
|
|
|
– |
|
| Common
stock, $.0001 par value, 900,000,000 shares authorized, 135,080,441
and 134,498,775 shares issued and outstanding at August 31, 2020
and August 31, 2019 respectively. |
|
|
13,508 |
|
|
|
13,450 |
|
|
Additional paid-in capital |
|
|
15,372,311 |
|
|
|
15,300,250 |
|
| issuance of
warrants |
|
|
2,784,387 |
|
|
|
2,784,387 |
|
| Other
comprehensive income |
|
|
(2,774,411 |
) |
|
|
2,810,013 |
|
|
Accumulated deficit |
|
|
(13,631,271 |
) |
|
|
(6,163,807 |
) |
| Total
stockholders' equity (deficit) |
|
|
1,764,524 |
|
|
|
14,744,292 |
|
| |
|
|
|
|
|
|
|
|
| Total
liabilities and stockholders' equity |
|
$ |
2,219,311 |
|
|
$ |
15,183,166 |
|
The accompanying notes are an integral part of the financial
statements
CANNABICS PHARMACEUTICALS INC.
Audited Consolidated Statements
of Operations
| |
|
For the Year
Ended August 31, |
|
| |
|
2020 |
|
|
2019 |
|
| Net revenue |
|
$ |
7,157 |
|
|
$ |
9,843 |
|
| |
|
|
|
|
|
|
|
|
| Operating expenses: |
|
|
|
|
|
|
|
|
|
Research and development expense |
|
|
1,682,462 |
|
|
|
1,543,759 |
|
| Sales and marketing
expenses |
|
|
59,997 |
|
|
|
288,163 |
|
|
General and administrative expenses |
|
|
1,308,150 |
|
|
|
1,481,528 |
|
| |
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
3,050,609 |
|
|
|
3,313,450 |
|
| |
|
|
|
|
|
|
|
|
| Loss from
operations |
|
|
(3,043,451 |
) |
|
|
(3,303,607 |
) |
| Other income |
|
|
|
|
|
|
|
|
|
Financial (loss) income, net |
|
|
(4,424,012 |
) |
|
|
4,436,576 |
|
| |
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(7,467,464 |
) |
|
$ |
1,132,970 |
|
| |
|
|
|
|
|
|
|
|
|
(Loss) Profit from available for sale assets |
|
|
(5,584,424 |
) |
|
|
2,810,013 |
|
| |
|
|
|
|
|
|
|
|
|
Total comprehensive (loss) income |
|
|
(13,051,887 |
) |
|
|
3,942,983 |
|
| |
|
|
|
|
|
|
|
|
|
Net (loss) per share - basic and diluted: |
|
$ |
(0.10 |
) |
|
$ |
0.02 |
|
| |
|
|
|
|
|
|
|
|
| Weighted average
number of shares outstanding - Basic and Diluted |
|
|
134,551,721 |
|
|
|
132,450,953 |
|
The accompanying notes are an integral part of the financial
statements.
CANNABICS PHARMACEUTICALS INC.
Audited Consolidated
Statements of Cash Flows
| |
|
For the year
Ended August 31, |
|
| |
|
2020 |
|
|
2019 |
|
| Cash flows from operating
activities: |
|
|
|
|
|
|
|
|
| Net (Loss)
Profit |
|
$ |
(7,467,464 |
) |
|
$ |
1,132,970 |
|
| Adjustments required to reconcile net
loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
| Depreciation |
|
|
215,155 |
|
|
|
188,928 |
|
| Royalties
receivables valuation |
|
|
4,363,000 |
|
|
|
(4,363,000 |
) |
| Stock
issued for services |
|
|
72,120 |
|
|
|
247,307 |
|
|
Profit from held for trading investments |
|
|
(105,876 |
) |
|
|
(142,226 |
) |
| Changes in
operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
Accounts Receivable and prepaid expenses |
|
|
132,197 |
|
|
|
(57,252 |
) |
|
Accounts payable and accrued liabilities |
|
|
15,913 |
|
|
|
(100,509 |
) |
|
Net cash used in operating activities |
|
|
(2,774,955 |
) |
|
|
(3,093,782 |
) |
| |
|
|
|
|
|
|
|
|
| Cash flows from
investing activities: |
|
|
|
|
|
|
|
|
| Available for sale
investments |
|
|
– |
|
|
|
(1,920,000 |
) |
| Held for trading
Investments |
|
|
3,362,332 |
|
|
|
(3,114,233 |
) |
|
Acquisition of equipment |
|
|
(75,748 |
) |
|
|
(216,882 |
) |
| Net
cash used in investing activities |
|
|
3,286,584 |
|
|
|
(5,251,115 |
) |
| |
|
|
|
|
|
|
|
|
| Cash flows from financing
activities: |
|
|
|
|
|
|
|
|
| Proceeds from sale
of common stock |
|
|
– |
|
|
|
7,294,259 |
|
|
Costs of raising capital |
|
|
– |
|
|
|
(76,989 |
) |
| Net
cash provided by financing activities |
|
|
– |
|
|
|
7,217,270 |
|
| |
|
|
|
|
|
|
|
|
| Net increase (decrease) in cash |
|
|
511,629 |
|
|
|
(1,127,626 |
) |
| |
|
|
|
|
|
|
|
|
| Cash and cash
equivalents at beginning of year |
|
|
265,982 |
|
|
|
1,393,608 |
|
| |
|
|
|
|
|
|
|
|
| Cash and cash
equivalents at end of the year |
|
$ |
777,611 |
|
|
$ |
265,982 |
|
| |
|
|
|
|
|
|
|
|
| Significant non-cash
transactions: |
|
|
|
|
|
|
|
|
| Issuance of
Shares |
|
$ |
– |
|
|
$ |
939,933 |
|
The accompanying notes are an integral part of the financial
statements.
CANNABICS PHARMACEUTICALS INC.
Audited Consolidated
Statements of Stockholders' Equity (Deficit)
| |
|
Common stock |
|
|
Additional
paid in
|
|
|
|
|
|
Accumulated |
|
|
Total stockholders' equity |
|
| |
|
Shares |
|
|
Amount |
|
|
capital |
|
|
Warrants |
|
|
deficit |
|
|
(deficit) |
|
|
Balance, August 31, 2018 |
|
|
121,575,388 |
|
|
$ |
12,158 |
|
|
$ |
9,840,420 |
|
|
$ |
89,722 |
|
|
$ |
(7,296,777 |
) |
|
$ |
2,645,523 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares of common stock for
cash |
|
|
10,277,777 |
|
|
|
1,028 |
|
|
|
4,441,384 |
|
|
|
2,784,387 |
|
|
|
– |
|
|
|
7,226,799 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for
services |
|
|
2,645,610 |
|
|
|
264 |
|
|
|
1,018,445 |
|
|
|
– |
|
|
|
– |
|
|
|
1,018,709 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Expiration of warrants |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(89,722 |
) |
|
|
– |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive profit |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
2,810,013 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit for the year ended August
31, 2020 |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
1,132,970 |
|
|
|
1,132,970 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, August 31, 2019 |
|
|
134,498,775 |
|
|
$ |
13,450 |
|
|
$ |
15,300,249 |
|
|
$ |
2,784,387 |
|
|
$ |
(6,163,807 |
) |
|
$ |
14,744,292 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for
services |
|
|
581,666 |
|
|
|
58 |
|
|
|
72,062 |
|
|
|
– |
|
|
|
– |
|
|
|
72,120 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive profit |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(5,584,424 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended August 31,
2020 |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(7,467,464 |
) |
|
|
(7,467,464 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, August 31, 2020 |
|
|
135,080,441 |
|
|
$ |
13,508 |
|
|
$ |
15,372,311 |
|
|
$ |
2,784,387 |
|
|
$ |
(13,631,271 |
) |
|
$ |
1,764,524 |
|
The accompanying notes are an integral part of the financial
statements.
CANNABICS PHARMACEUTICALS INC.
Notes to Consolidated
Financial Statements
As of August 31, 2020
Note 1 – Nature of Business, Presentation and Going
Concern
Organization
Cannabics Pharmaceuticals Inc. (the "Company"), was incorporated in
the State of Nevada, on September 15, 2004, under the name of
Thrust Energy Corp. The Company was originally engaged in the
exploration, exploitation, development and production of oil and
gas projects within North America, but was unable to operate
profitably.
In May 2011, the Company changed its name to American Mining
Corporation, suspending its oil and gas operations and changing its
business to toll milling and refining, mineral exploration and mine
development.
On April 25, 2014, the Company experienced a change in control.
Cannabics, Inc. (“Cannabics”) acquired a majority of the issued and
outstanding common stock of the Company in accordance with stock
purchase agreements by and between Cannabics and Thomas Mills
(“Mills”). On the closing date, April 25, 2014, pursuant to the
terms of the Stock Purchase Agreement, Cannabics purchased from
Mills 41,000,000 shares of the Company’s outstanding restricted
common stock for $198,000, representing 51%.
On May 21, 2014, the Company changed its name, via merger in the
state of Nevada, to Cannabics Pharmaceuticals Inc. The Company’s
principle offices are in Bethesda, Maryland. As of May 21, 2014,
the Company has changed its course of business to laboratory
research and development.
On August 25, 2014, the Company organized G.R.I.N. Ultra Ltd.
(“GRIN”), an Israeli corporation, as a wholly-owned subsidiary.
GRIN will provide research and development activities for the
Company’s products in Israel.
Stock Split
On June 3, 2014, the Company’s Board of Directors declared a
two-to-one forward stock split of all outstanding shares of common
stock. The stock split was approved by FINRA on June 25, 2014. The
effect of the stock split increased the number of shares of common
stock outstanding from 40,880,203 to 81,760,406. All common share
and per common share data in these financial statements and related
notes hereto have been retroactively adjusted to account for the
effect of the stock split for all periods presented prior to June
3, 2014. The total number of authorized common shares and the par
value thereof was not changed by the split.
Basis of Presentation
The accompanying consolidated financial statements have been
prepared in accordance with accounting principles generally
accepted in the United States of America and the rules and
regulations of the Securities and Exchange Commission
(“SEC”).
Note 1 – Nature of Business, Presentation and Going Concern
(Continued)
Going Concern
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The
Company has incurred a net loss of $7,467,463 for the year ended
August 31, 2020 and has incurred cumulative losses since inception
of $13,631,271. These conditions raise substantial doubt about the
ability of the Company to continue as a going concern.
The Company’s continuation as a going concern is dependent upon its
ability to generate revenues, its ability to continue to raise
investment capital, and implementing its business plan. No
assurance can be given that the Company will be successful in these
efforts.
These financial statements do not include any adjustments relating
to the recoverability and classification of recorded asset amounts
or the amounts and classification of liabilities that might be
necessary should the Company be unable to continue as a going
concern. Management believes that actions presently being taken to
obtain additional funding and implement its strategic plans provide
the opportunity for the Company to continue as a going concern. No
assurance can be given that the Company will be successful in these
efforts.
Note 2 – Summary of Significant Accounting Policies
Functional currency
The currency of the primary economic environment in which the
operations of the Company and its Subsidiary are conducted is the
U.S. dollar (“$” or “dollar”). Therefore, the functional currency
of the Company and its Subsidiary is the dollar.
Transactions and balances denominated in dollars are presented at
their original amounts. Non-dollar transactions and balances have
been re-measured to dollars in accordance with the provisions of
ASC 830-10 (formerly Statement of Financial Accounting Standard
52), "Foreign Currency Translation". All transaction gains and
losses from re-measurement of monetary balance sheet items
denominated in non-dollar currencies are reflected in the statement
of operations as financial income or expenses, as appropriate.
Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from those estimates. Significant estimates in the accompanying
financial statements include the amortization period for intangible
assets, impairment valuation of intangible assets, valuation of
share-based payments and the valuation allowance on deferred tax
assets.
Principles of Consolidation
The consolidated financial statements include the accounts of
Cannabics Pharmaceutical Inc. and its wholly-owned subsidiary,
G.R.I.N. Ultra Ltd. All significant inter-company balances and
transactions have been eliminated in consolidation.
Note 2 – Summary of Significant Accounting Policies
(Continued)
Cash and Cash Equivalents
The Company considers all highly liquid temporary cash investments
with an original maturity of three months or less to be cash
equivalents. At August 31, 2020 and 2019, cash equivalents
consisted of bank accounts held at financial institutions.
Concentration of Credit Risk
The Company places its cash and cash equivalents with high credit
quality financial institutions. There is Federal Deposit Insurance
on the Company’s U.S. bank accounts.
Equipment, net
Equipment at August 31, 2020 consists of computer equipment, office
equipment and cars recorded at cost. Expenditures for major
additions and betterments are capitalized. Maintenance and repairs
are charged to operations as incurred. Depreciation of property and
equipment is computed by the straight-line method (after taking
into account their respective estimated residual values) over the
assets estimated useful lives of 3 years for computer equipment, 14
years for office equipment and 7 years for cars. Upon sale or
retirement of property and equipment, the related cost and
accumulated depreciation are removed from the accounts and any gain
or loss is reflected in the consolidated statements of
operations.
Depreciation expense was $215,155 and $188,928 for the years ended
August 31, 2020 and 2019, respectively.
Revenue recognition
Revenue is recognized when delivery has occurred, evidence of an
arrangement exists, title and risks and rewards for the products
are transferred to the customer, collection is reasonably assured
and product returns can be reliably estimated.
Revenue from license agreements is recognized over the periods from
which the Company is entitled to the respective payments.
The Company’s revenues are concentrated in a small number of
customers. For the year ended August 31, 2020 the revenues were for
license fees.
Impairment or Disposal of Long-Lived Assets
The Company accounts for the impairment or disposal of long-lived
assets according to the Financial Accounting Standards Board’s
(“FASB”) Accounting Standards Codification (“ASC”) 360 “Property,
Plant and Equipment”. ASC 360 clarifies the accounting for the
impairment of long-lived assets and for long-lived assets to be
disposed of, including the disposal of business segments and major
lines of business. Long-lived assets are reviewed when facts and
circumstances indicate that the carrying value of the asset may not
be recoverable. When necessary, impaired assets are written down to
estimated fair value based on the best information available.
Estimated fair value is generally based on either appraised value
or measured by discounting estimated future cash flows.
Considerable management judgment is necessary to estimate
discounted future cash flows. Accordingly, actual results could
vary significantly from such estimates.
Note 2 – Summary of Significant Accounting Policies
(Continued)
Fair Value of Financial Instruments
The following provides an analysis of financial instruments that
are measured subsequent to initial recognition at fair value,
grouped into Levels 1 to 3 based on the degree to which fair value
is observable:
Level 1 - fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or
liabilities;
Level 2 - fair value measurements are those derived from inputs
other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices); and
Level 3 - fair value measurements are those derived from valuation
techniques that include inputs for the asset or liability that are
not based on observable market data (unobservable inputs).
Fair value estimates discussed herein are based upon certain market
assumptions and pertinent information available to management as of
August 31, 2020 and 2019. The respective carrying value of certain
on-balance-sheet financial instruments approximated their fair
values due to the short-term nature of these instruments.
The Company applied ASC 820 for all non-financial assets and
liabilities measured at fair value on a non-recurring basis. The
adoption of ASC 820 for non-financial assets and liabilities did
not have a significant impact on the Company’s financial
statements.
As of August 31, 2020, the fair values of the Company’s level 1
financial instruments are in total of $426,522. And none of level 3
investments. As of August 31, 2020, the fair values of the
Company’s financial instruments approximate their historical
carrying amount.
Research and development, net
Research and development expenses include costs directly
attributable to the conduct of research and development programs,
including the cost of salaries, employee benefits, the cost of
supplies, the cost of services provided by outside contractors,
including services related to the Company’s clinical trials,
clinical trial expenses and the full cost of manufacturing product
for use in research and preclinical development. All costs
associated with research and developments are expensed as
incurred.
Clinical trial costs are a significant component of research and
development expenses and include costs associated with third-party
contractors. The Company outsources a substantial portion of its
clinical trial activities, utilizing external entities such as
Contract Research Organizations, independent clinical
investigators, and other third-party service providers to assist
the Company with the execution of its clinical studies. For each
clinical trial that the Company conducts, clinical trial costs are
expensed immediately.
Note 2 – Summary of Significant Accounting Policies
(Continued)
Stock Based Compensation
The Company accounts for Stock-Based Compensation under ASC 718
“Compensation – Stock Compensation”, which addresses the accounting
for transactions in which an entity exchanges its equity
instruments for goods or services, with a primary focus on
transactions in which an entity obtains employee services in
share-based payment transactions. ASC 718-10 requires measurement
of the cost of employee services received in exchange for an award
of equity instruments based on the grant-date fair value of the
award. Incremental compensation costs arising from subsequent
modifications of awards after the grant date must be
recognized.
The Company accounts for stock-based compensation awards to
non-employees in accordance with ASC 505-50, Equity-Based Payments
to Non-Employees. Under ASC 505-50, the Company determines the fair
value of the warrants or stock-based compensation awards granted as
either the fair value of the consideration received or the fair
value of the equity instruments issued, whichever is more reliably
measurable. Any stock options or warrants issued to non-employees
are recorded in expense and additional paid-in capital in
shareholders' deficit over the applicable service periods using
variable accounting through the vesting dates based on the fair
value of the options or warrants at the end of each period.
The Company issues stock to consultants for various services. The
costs for these transactions are measured at the fair value of the
consideration received or the fair value of the equity instruments
issued, whichever is more reliably measurable. The value of the
common stock is measured at the earlier of (i) the date at which a
firm commitment for performance by the counterparty to earn the
equity instruments is reached or (ii) the date at which the
counterparty's performance is complete. The Company recognized
consulting expense and a corresponding increase to additional
paid-in-capital related to stock issued for services.
Income Taxes
Income taxes are accounted for under the liability method of
accounting for income taxes. Under the liability method, future tax
liabilities and assets are recognized for the estimated future tax
consequences attributable to differences between the amounts
reported in the financial statement carrying amounts of assets and
liabilities and their respective tax bases. Future tax assets and
liabilities are measured using enacted or substantially enacted
income tax rates expected to apply when the asset is realized or
the liability settled. The effect of a change in income tax rates
on future income tax liabilities and assets is recognized in income
in the period that the change occurs. Future income tax assets are
recognized to the extent that they are considered more likely than
not to be realized.
The FASB has issued ASC 740 “Income Taxes”. ASC 740 clarifies the
accounting for uncertainty in income taxes recognized in an
enterprise’s financial statements. This standard requires a company
to determine whether it is more likely than not that a tax position
will be sustained upon examination based upon the technical merits
of the position.
If the more-likely-than-not threshold is met, a company must
measure the tax position to determine the amount to recognize in
the financial statements.
As a result of the implementation of this standard, the Company
performed a review of its material tax positions in accordance with
recognition and measurement standards established by ASC 740 and
concluded that the tax position of the Company has not met the
more-likely-than-not threshold as of August 31, 2020.
Note 2 – Summary of Significant Accounting Policies
(Continued)
Comprehensive Income
The Company adopted ASC 220, Comprehensive Income which
establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. The Company is
disclosing this information on its Statement of Stockholders'
Equity. Comprehensive income comprises equity except those
resulting from investments by owners and distributions to owners.
The Company has no elements of “other comprehensive income” for the
years ended August 31, 2020 and 2019.
Basic and Diluted Loss per Share
The Company computes income (loss) per share in accordance with ASC
260, "Earnings per Share", which requires presentation of both
basic and diluted earnings per share (“EPS”) on the face of the
statement of operations. Basic EPS is computed by dividing income
(loss) available to common shareholders by the weighted average
number of shares outstanding during the period. Diluted EPS gives
effect to all dilutive potential shares of common stock outstanding
during the period using the treasury stock method and convertible
preferred stock using the if-converted method. In computing diluted
EPS, the average stock price for the period is used in determining
the number of shares assumed to be purchased from the exercise of
stock options or warrants. Diluted EPS excludes all dilutive
potential shares if their effect is anti-dilutive. As of August 31,
2020, and 2019, the potentially dilutive shares were
anti-dilutive.
Segment Information
In accordance with the provisions of ASC 280-10, “Disclosures about
Segments of an Enterprise and Related Information”, the Company is
required to report financial and descriptive information about its
reportable operating segments. The Company does not consider itself
to have any operating segments as of August 31, 2020 and 2019.
Reclassification
Certain amounts in the prior period financial statements have been
reclassified to conform to the current period presentation.
Note 3 – Recent Accounting Pronouncements
In February 2015, the Financial Accounting Standards Board (the
“FASB”) issued Accounting Standards Update (“ASU”) 2015-02,
“Consolidation (Topic 810): Amendments to the Consolidation
Analysis”, which provides guidance in evaluating entities for
inclusion in consolidations. ASU 2015-02 is effective for fiscal
years beginning after December 15, 2015. The Company does not
believe the adoption of ASU 2015-02 will have a material effect on
its consolidated financial statements.
In June 2014, the FASB issued Accounting Standards Update (“ASU”)
No. 2014-10 (“ASU 2014-10”), Development Stage Entities (Topic
915), Elimination of Certain Financial Reporting Requirements,
Including an Amendment to Variable Interest Entities Guidance in
Topic 810, Consolidation. The objective of the amendments in
this Update is to improve financial reporting by reducing the cost
and complexity associated with incremental reporting requirements
for development stage entities. The amendments in this Update also
eliminate an exception provided to development stage entities in
Topic 810, Consolidation, for determining whether an entity is a
variable interest entity on the basis of the amount of investment
equity at risk. The amendments related to the elimination of
inception-to-date information and the other remaining disclosure
requirements of Topic 915 should be applied retrospectively except
for the clarification to Topic 275, which shall be applied
prospectively. These amendments are effective for annual
reporting periods beginning after December 15, 2014, and interim
periods therein.
Note 3 – Recent Accounting Pronouncements
(Continued)
The amendment eliminating the exception to the
sufficiency-of-equity-at-risk criterion for development stage
entities in paragraph 810-10-15-16 should be applied
retrospectively for annual reporting periods beginning after
December 15, 2015 and interim periods therein. Early application of
each of the amendments is permitted for any annual reporting period
or interim period for which the entity’s financial statements have
not yet been issued. The Company has adopted ASU 2014-10 in the
fourth quarter of 2014 and does not expect this adoption to have a
material impact on its consolidated financial condition, results of
operations or cash flows.
In August 2014, the FASB issued ASU No. 2014-15, Presentation of
Financial Statements-Going Concern (Subtopic 205-40), Disclosure of
Uncertainties about an Entity’s Ability to Continue as a Going
Concern. The objective of the amendments in this Update is to
provide guidance on determining when and how to disclose
going-concern uncertainties in the financial statements. The new
standard requires management to perform interim and annual
assessments of an entity’s ability to continue as a going concern
within one year of the date the financial statements are issued. An
entity must provide certain disclosures if “conditions or events
raise substantial doubt about the entity’s ability to continue as a
going concern.” The ASU applies to all entities and is effective
for annual periods ending after December 15, 2017, and interim
periods thereafter, with early adoption permitted. The Company is
evaluating the impact of ASU 2014-15 on its consolidated financial
condition, results of operations and cash flows.
In September 2015, the Financial Accounting Standards Board
(“FASB”) issued Accounting Standards Update No. 2015-16 (ASU
2015-16) "Simplifying the Accounting for Measurement Period
Adjustments". ASU 2015-16 require that an acquirer recognize
adjustments to provisional amounts that are identified during the
measurement period in the reporting period in which the adjustment
amounts are determined. The amendments in ASU 2015-16 require that
the acquirer record, in the same period’s financial statements, the
effect on earnings of changes in depreciation, amortization, or
other income effects, if any, as a result of the change to the
provisional amounts, calculated as if the accounting had been
completed at the acquisition date. The amendments in ASU 2015-16
require an entity to present separately on the face of the income
statement or disclose in the notes the portion of the amount
recorded in current-period earnings by line item that would have
been recorded in previous reporting periods if the adjustment to
the provisional amounts had been recognized as of the acquisition
date. For public business entities, the amendments in ASU 2015-16
are effective for fiscal years beginning after December 15, 2015,
including interim periods within those fiscal years. The amendments
in ASU 2015-16 should be applied prospectively to adjustments to
provisional amounts that occur after the effective date of this
update with earlier application permitted for financial statements
that have not been issued. For all other entities, the amendments
in ASU 2015-16 are effective for fiscal years beginning after
December 15, 2017, and interim periods within fiscal years
beginning after December 15, 2017. The amendments in ASU 2015-16
should be applied prospectively to adjustments to provisional
amounts that occur after the effective date of this update with
earlier application permitted for financial statements that have
not yet been made available for issuance.
Note 4 – Related Party Transactions
During the year ended August 31, 2020 and August 31 2019, the
Company paid approximately of $595,000 and $515,555 as salary to
three of its directors.
Cannabics Inc. (the parent company) balance at August 31, 2020 and
at August 31, 2019 was $223,645. The advance is due on demand and
bears no interest.
Note 5 – Commitments and Contingencies
As security for its obligation under a property lease agreement,
cars lease and credit cards of the Company’s subsidiary provided a
bank guarantee in the amount of $45,000.
Note 6 – Stockholders’ Equity (Deficit)
Authorized Shares
The Company is authorized to issue up to 900,000,000 shares of
common stock par value $0.0001 per share. Each outstanding share of
common stock entitles the holder to one vote per share on all
matters submitted to a stockholder vote. All shares of common stock
are non-assessable and non-cumulative, with no pre-emptive rights.
The Company’s initial Articled authorized 5,000,000 preferred
shares at .0001 par value, no other attributes have been assigned
and no such shares have ever been issued.
Common Stock
During the year ended August 31, 2020, the Company issued 581,666
shares of its common stock to 2 consultants and an advisor for
services rendered at a fair value of $72,120 or an average of
$0.124 per share.
Note 7 – Warrants
Since August 31st, 2019, the company has issued no
Warrants. The only Warrants outstanding are 5,000,000 Warrants to
two entities from 2018, with a strike price of $1.00 per Warrant
and are exercisable until August 24th, 2023.
| |
1. |
On
September 24, 2018, as part of a securities purchase agreement the
company issued 5,000,000 Warrants, to purchase common shares of the
Company at $1.00 per share; said Warrants are valid for five years,
expiring on August 24th, 2023. |
| |
|
|
| |
|
The
fair value of each warrant is approximately $0.556 and the total
value of the 5,000,000 warrants is $2,784,387 |
| |
|
|
| |
|
The
fair value of the warrants are estimated using the Black Scholes
option-pricing model with the following assumptions: |
| PV of
exercise Share price |
|
$1 |
| Expected
Volatility |
|
102.0% |
| Risk
Free Interest Rate |
|
1.58% |
| Expected
Term (years) |
|
5 |
| Expected Dividend Yield |
|
0% |
| |
2. |
On
December 12, 2018 the company granted 50,000 Warrants to an
advisor, to purchase 50,000 common shares of the Company at $1 per
share; said Warrants are valid for one year, expiring on December
12, 2019. |
| |
|
|
| |
|
The
fair value of each warrant is approximately $0.0.0874 and the total
value of the 50,000 warrants issued was $4,370. |
| |
|
|
| |
|
The
fair value of the warrants are estimated using the Black Scholes
option-pricing model with the following assumptions: |
| PV of
exercise Share price |
|
$1 |
| Expected
Volatility |
|
112.72
% |
| Risk
Free Interest Rate |
|
2.7% |
| Expected
Term (years) |
|
1 |
| Expected
Dividend Yield |
|
0% |
| |
|
|
| |
|
The
said Warrants expired on December 12, 2019. |
| |
|
|
Note 7 – Warrants (Continued)
| |
3. |
On
June 19, 2019 the company granted 125,000 Warrants each to two of
its directors totaling 250,000 Warrants, to purchase common shares
of the Company at $0.30 per share; said Warrants are valid for one
year, expiring on June 19, 2020. |
| |
|
|
| |
|
The
fair value of each warrant is approximately $0.1224 and the total
value of the 250,000 warrants issued was $30,600. |
| |
|
|
| |
|
The
fair value of the warrants are estimated using the Black Scholes
option-pricing model with the following assumptions: |
| PV of
exercise Share price |
|
$0.3 |
| Expected
Volatility |
|
100.34% |
| Risk
Free Interest Rate |
|
1.96% |
| Expected
Term (years) |
|
1 |
| Expected
Dividend Yield |
|
0% |
| |
|
The said Warrants
expired on June 19, 2020. |
The following table presents the warrant activity for the years
ended August 31, 2020 and 2019.
| |
|
2020 |
|
|
2019 |
|
|
2018 |
|
| |
|
Weighted Average
Exercise |
|
|
Weighted Average
Exercise |
|
|
Weighted Average
Exercise |
|
| |
|
Warrants |
|
|
Price |
|
|
Warrants |
|
|
Price |
|
|
Warrants |
|
|
Price |
|
|
Warrants outstanding as of September 1 |
|
|
5,300,000 |
|
|
$ |
1.00 |
|
|
|
500,000 |
|
|
$ |
1.00 |
|
|
|
1,566,671 |
|
|
$ |
0.02 |
|
| Issued |
|
|
– |
|
|
$ |
– |
|
|
|
5,300,000 |
|
|
$ |
0.97 |
|
|
|
1,000,000 |
|
|
$ |
2.00 |
|
| Exercised |
|
|
– |
|
|
$ |
– |
|
|
|
– |
|
|
$ |
– |
|
|
|
(500,000 |
) |
|
$ |
0.02 |
|
|
Expired |
|
|
(300,000 |
) |
|
$ |
0.42 |
|
|
|
(1,000,000 |
) |
|
$ |
2.00 |
|
|
|
(1,066,671 |
) |
|
$ |
0.20 |
|
|
Warrants outstanding as of August 31 |
|
|
5,000,000 |
|
|
$ |
1.00 |
|
|
|
5,300,000 |
|
|
$ |
0.97 |
|
|
|
1,000,000 |
|
|
$ |
2.00 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants exercisable as of August 31 |
|
|
5,000,000 |
|
|
$ |
1.00 |
|
|
|
5,300,000 |
|
|
$ |
0.97 |
|
|
|
1,000,000 |
|
|
$ |
2.00 |
|
The weighted average remaining contractual life for the options
outstanding as of August 31, 2020 was 3 years.
Note 8 – Income Taxes
Taxes on income included in the consolidated statements of
operations represent current taxes due to taxable income of the
Company and its Subsidiary.
Corporate taxation in the U.S.
The applicable corporate tax rate for the Company is 21%.
No provision for income tax was made for the period from September
15, 2004 (Inception) to August 31, 2020 as the Company had
cumulative operating losses. For the years ended August 31, 2020
and 2019, the Company incurred net losses for tax purposes of
$2,229,392 and $1,114,659, respectively. Under U.S. tax laws,
subject to certain limitations, carry forward tax losses expire 20
years after the year in which incurred. In the case of the Company,
subject to potential limitations in accordance with the relevant
law, the net loss carry forward will expire in the years 2032
through 2036.
Note 8 – Income Taxes (continued)
Corporate taxation in Israel:
The Subsidiary is taxed in accordance with Israeli tax laws. The
corporate tax rate applicable to 2020 is 23%.
In December 2016, the Israeli Parliament approved the Economic
Efficiency Law (Legislative Amendments for Applying the Economic
Policy for the 2020 and 2019 Budget Years), which further reduces
the corporate income tax rate to 24% (instead of 25%) effective
from January 1, 2017 and to 23% effective from January 1, 2020.
As of August 31, 2020, the Subsidiary has an accumulated tax loss
carry forward of approximately $7,833,000 (as of August 31, 2019,
approximately $5,600,000). Under the Israeli tax laws, carry
forward tax losses have no expiration date.
The income tax expense (benefit) differs from the amount computed
by applying the United States Statutory corporate income tax rate
as follows:
| |
|
For the Year
Ended August 31, |
|
| |
|
2020 |
|
|
2019 |
|
| United States statutory
corporate income tax rate |
|
|
21.0 |
% |
|
|
21.0 |
% |
| Change in
valuation allowance on deferred tax assets |
|
|
-21.0 |
% |
|
|
-21.0 |
% |
| |
|
|
|
|
|
|
|
|
| Provision for
income tax |
|
|
– |
% |
|
|
– |
% |
Deferred income taxes reflect the tax effect of temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for tax
purposes. The components of the net deferred income tax assets are
approximately as follows:
| |
|
August
31, |
|
| |
|
2020 |
|
|
2019 |
|
| US Deferred income tax assets: |
|
|
|
|
|
|
|
|
| Net
operating loss carry forwards benefit |
|
$ |
1,800,098 |
|
|
$ |
785,628 |
|
|
Valuation allowance |
|
|
(1,800,098 |
) |
|
|
(785,628 |
) |
| Net deferred
income tax assets |
|
$ |
– |
|
|
$ |
– |
|
| |
|
|
|
|
|
|
|
|
| Outside US Deferred income tax
assets: |
|
|
|
|
|
|
|
|
| Net operating loss
carry forwards benefit |
|
$ |
1,845,645 |
|
|
$ |
1,209,215 |
|
|
Valuation allowance |
|
|
(1,845,645 |
) |
|
|
(1,209,215 |
) |
| |
|
$ |
– |
|
|
$ |
– |
|
| |
|
August
31, |
|
| |
|
2020 |
|
|
2019 |
|
| Consolidated Deferred income tax
assets: |
|
|
|
|
|
|
|
|
| Net
operating loss carry forwards benefit |
|
$ |
3,615,744 |
|
|
$ |
1,994,843 |
|
|
Valuation allowance |
|
|
(3,615,744 |
) |
|
|
(1,994,843 |
) |
| Net deferred
income tax assets |
|
$ |
– |
|
|
$ |
– |
|
Note 8 – Income Taxes (continued)
The amount taken into income as deferred income tax assets must
reflect that portion of the income tax loss carry forwards that is
more likely than not to be realized from future operations. The
Company has established a full valuation allowance on its net
deferred tax assets because of a lack of sufficient positive
evidence to support its realization. The valuation allowance
increased by $1,670,901 and decreased $234,549 for the years ended
August 31, 2020 and 2019, respectively.
No provision for income taxes has been provided in these financial
statements due to the net loss for the years ended August 31, 2020
and 2019. At August 31, 2020, the Company has net operating loss
carry forwards of approximately $13,631,270 which expire commencing
2032. The potential tax benefit of these losses may be limited due
to certain change in ownership provisions under Section 382 of the
Internal Revenue Code (“IRS”) and similar state provisions.
IRS Section 382 places limitations (the “Section 382 Limitation”)
on the amount of taxable income which can be offset by net
operating loss carry forwards after a change in control (generally
greater than 50% change in ownership) of a loss corporation.
Generally, after a change in control, a loss corporation cannot
deduct operating loss carry forwards in excess of the Section 382
Limitation. Due to these “change in ownership” provisions,
utilization of the net operating loss and tax credit carry forwards
may be subject to an annual limitation regarding their utilization
against taxable income in future periods. The Company has not
concluded its analysis of Section 382 through August 31, 2020, but
believes the provisions will not limit the availability of losses
to offset future income.
The Company is subject to income taxes in the U.S. federal
jurisdiction and is subject to examination for a period of three
years for current filings and indefinitely for any delinquent
filings. The tax regulations within each jurisdiction are subject
to interpretation of related tax laws and regulations and require
significant judgment to apply. The Company estimates that the
amount of penalties, if any, will not have a material effect on the
results of operations, cash flows or financial position. No
provisions have been made in the financial statements for such
penalties, if any.
Note 9 – Subsequent Events
On September 2nd, 2020, the Board dismissed Itamar
Borochov as Director and Chair of the company.
The Company has evaluated subsequent events through the date the
financial statements were issued and filed with the Securities and
Exchange Commission and has determined that there are no other such
events that warrant disclosure or recognition in the financial
statements.
Note 10 – General & administrate expenses
| |
|
For the year
Ended
August 31,
2020 |
|
|
For the year
Ended
August 31,
2019 |
|
| Salaries and related
expenses |
|
$ |
220,586 |
|
|
$ |
97,060 |
|
| Legal and professional fees |
|
|
828,003 |
|
|
|
676,096 |
|
| Consulting – Stock based
compensation |
|
|
72,120 |
|
|
|
247,307 |
|
| Insurance |
|
|
103,389 |
|
|
|
131,853 |
|
| Other
expenses |
|
|
84,051 |
|
|
|
329,212 |
|
| |
|
$ |
1,308,150 |
|
|
$ |
1,481,528 |
|
Note 11 – Financial (Income) expenses
| |
|
For the year
Ended
August 31,
2020 |
|
|
For the year
Ended
August 31,
2019 |
|
| Interest and bank
charges |
|
$ |
8,133 |
|
|
$ |
18,348 |
|
| Other financial expense |
|
|
60,000 |
|
|
|
– |
|
| Capital gain from selling of held for
trading investments |
|
|
(69,974 |
) |
|
|
(19,621 |
) |
| Loss (Gain) from Held for trading
Investments |
|
|
– |
|
|
|
(54,077 |
) |
| Loss (Profit) from royalties
valuation |
|
|
4,363,000 |
|
|
|
(4,363,000 |
) |
| Currency exchange
differences loss (profit) |
|
|
62,852 |
|
|
|
(18,226 |
) |
| |
|
$ |
4,424,011 |
|
|
$ |
(4,436,576 |
) |
Item 9. Changes in and
Disagreements with Accountants on Accounting and Financial
Disclosure
None.
Item 9A. Controls and
Procedures
Evaluation of Disclosure Controls and Procedures
In connection with the preparation of this Annual Report, an
evaluation was carried out by Cannabics Pharmaceuticals Inc.’s
management, with the participation of the Chief Executive Officer
and the Chief Financial Officer, of the effectiveness of the
Company’s disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934
(“Exchange Act”)) as of August 31, 2020. Disclosure controls and
procedures are designed to ensure that information required to be
disclosed in reports filed or submitted under the Exchange Act is
recorded, processed, summarized, and reported within the time
periods specified in the SEC rules and forms and that such
information is accumulated and communicated to management,
including the Chief Executive Officer and the Chief Financial
Officer, to allow timely decisions regarding required
disclosures.
Based on that evaluation, the Company’s management concluded, as of
the end of the period covered by this report, that the Company’s
disclosure controls and procedures were not effective.
Management’s Report on Internal Control Over Financial
Reporting
The Company’s management is responsible for establishing and
maintaining adequate internal control over financial reporting.
Internal control over financial reporting is defined in Rule
13a-15(f) and Rule 15d-15(f) promulgated under the Exchange Act as
a process designed by, or under the supervision of, the Company’s
principal executive and principal financial officers, or persons
performing similar functions, and effected by the Company’s Board
of Directors, management and other personnel, to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. The
Company’s internal control over financial reporting includes those
policies and procedures that:
| |
· |
pertain
to the maintenance of records that in reasonable detail accurately
and fairly reflect the transactions and dispositions of the
Company’s assets; |
| |
· |
provide
reasonable assurance that transactions are recorded as necessary to
permit preparation of the financial statements in accordance with
generally accepted accounting principles, and that receipts and
expenditures are being made only in accordance with authorizations
of management and the Board of Directors; and |
| |
· |
provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the Company’s
assets that could have a material effect on the financial
statements. |
The Company’s management conducted an assessment of the
effectiveness of the Company’s internal control over financial
reporting as of August 31, 2020, based on criteria established in
Internal Control – Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”). As a result of this assessment, management identified
material weaknesses in internal control over financial
reporting.
A material weakness is a deficiency, or a combination of
deficiencies, in internal control over financial reporting such
that there is a reasonable possibility that a material misstatement
of the Company’s annual or interim financial statements will not be
prevented or detected on a timely basis.
The material weaknesses identified are described below.
Procedures for Control Evaluation. Management has not
established with appropriate rigor the procedures for evaluating
internal controls over financial reporting. Due to limited
resources and lack of segregation of duties, documentation of the
limited control structure has not been accomplished.
Lack of Audit Committee. The Company does not have a
standing Audit Committee. It is management’s view that such a
committee, including a financial expert, is an utmost important
entity level control over the financial reporting process.
Insufficient Documentation of Review Procedures We
employ policies and procedures for reconciliation of the financial
statements and note disclosures, however, these processes are not
appropriately documented. The Company has only one individual
responsible for the preparation of the financial records.
Insufficient Information Technology Procedures.
Management has not established methodical and consistent data
back-up procedures to ensure loss of data will not occur.
As a result of the material weaknesses in internal control over
financial reporting described above, the Company’s management has
concluded that, as of August 31, 2020, the Company’s internal
control over financial reporting was not effective based on the
criteria in Internal Control – Integrated Framework issued by
COSO.
This Annual Report does not include an attestation report of our
independent registered public accounting firm regarding internal
control over financial reporting. We were not required to have, nor
have we, engaged our independent registered public accounting firm
to perform an audit of internal control over financial reporting
pursuant to the rules of the Securities and Exchange Commission
that permit us to provide only management’s report in this Annual
Report.
Changes in Internal Control Over Financial Reporting
As of the end of the period covered by this report, there have been
no changes in internal control over financial reporting (as defined
in Rule 13a-15(f) of the Exchange Act) during the year ended August
31, 2020, that materially affected, or are reasonably likely to
materially affect, the Company’s internal control over financial
reporting.
Item 9B. Other Information
None.
PART III
Item 10. Directors, Executive
Officers, Promoters and Control Persons; Compliance With Section
16(A) of the Exchange Act
The following individuals serves as Directors and Executive
Officers of the Company as of the date of this Annual Report.
Directors of the Company hold office until the next annual meeting
of our shareholders or until their successors have been elected and
qualified. Executive officers of the Company are appointed by our
board of directors and hold office until their death, resignation
or removal from office.
| Name |
|
Position |
|
Age |
|
Held
Position Since |
| Dr.
Eyal Ballan |
|
CTO |
|
44 |
|
April
29, 2014 |
| Uri
Ben-Or |
|
CFO |
|
49 |
|
November
05, 2016 |
| Eyal
Barad |
|
Director,
CEO |
|
54 |
|
November
13, 2018 |
| Gabriel
Yariv |
|
Director,
COO |
|
44 |
|
October
2, 2019 |
Dr. Eyal Ballan, 43, is a co-founder of Cannabics Inc. and is its
CTO. Dr. Ballan holds a Ph.D. in Neurophysiology, EEG, Brain Wave
Analysis and Cortical Connectivity. After obtaining his Ph.D. he
was an entrepreneur in the field of Biofeedback Studies and
developed a Resonating Neuro-Feedback system. Dr. Ballan holds a
M.Sc. from Tel-Aviv University - Magna Cum Laude - in anticancer
drug development. Dr. Ballan was part of the renowned research team
which developed Salirasib (Treatment for Non-Small Cell Lung
Cancer). He is an expert in molecular biology, cell cultures and
genomics with a focus towards identification of anticancer
compounds and delivery systems to tumors and a member of the
American Neurology Association.
Uri Ben-Or, 49 CPA, MBA - CFO, has More than 15 years of experience
as CFO of public and private companies in the life science and
Medical Device Industry. Uri has significant expertise in public
Life Science companies traded on the TASE. In addition, Uri has
strong finance, operation, and business development background in
both startups and public global companies in the US, Europe, and
Israel including developing strategic policy and guidance with
respect to corporate structure and fundraising.
Eyal Barad, 53, is a co-founder of Cannabics Inc. He was named
Director & COO on November 13, 2017, as noted in the 8K of that
date. Mr. Barad brings over 20 years of executive managerial
experience in successful technology ventures. He has a BA in
Economics & International Relations from the Hebrew University
in Jerusalem, and an MBA with Honors from Haifa University.
Gabriel Yariv - Mr. Yariv, 42, brings over 20 years of successful
executive experience in the medical industry. Mr. Yariv was part of
the founding group of BreathID, an Oridion Medical
business unit (now Medtronic) and its
subsequent spinoff company, Exalenz Bioscience,
which develops and manufactures advanced non-invasive diagnostic
medical devices for gastrointestinal and liver conditions. Mr.
Yariv also co-founded SimuTec, a medical simulation and training
company in Brazil that develops and commercializes advanced
personalized Virtual Reality training programs for physicians. Mr.
Yariv is actively engaged in non-profit and philanthropic
activities including ongoing business mentoring of
entrepreneurs, founder of the Yariv Foundation for Leadership,
and current member of the Friends of the Israel Museum society. Mr.
Yariv holds a BA (Cum Laude) in History, Philosophy & Political
science from Boston University, and a Certificate Course in
Cyberlaw from Harvard University.
All directors serve for terms of one year each, and are subject to
re-election at Annual Meeting of Shareholders, unless they earlier
resign.
There are no material proceedings to which any of our directors,
officers or affiliates, any owner of record or beneficially of more
than five percent of any class of our voting securities, or any
associate of any such director, officer, affiliate, or security
holder is a party adverse to us or any of our subsidiaries or has a
material interest adverse to us or any of our subsidiaries.
We have attempted and will continue to attempt to ensure that any
transactions between we and our officers, directors, principal
shareholders, or other affiliates have been and will be on terms no
less favorable to us than could be obtained from unaffiliated third
parties on an arm’s length basis.
Involvement in Certain Legal Proceedings
Except as noted herein or below, during the last ten (10) years
none of our directors or officers have:
(1) had any bankruptcy petition filed by or against any business of
which such person was a general partner or executive officer either
at the time of the bankruptcy or within two years prior to that
time;
(2) been convicted in a criminal proceeding or subject to a pending
criminal proceeding;
(3) been subject to any order, judgment, or decree, not
subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining,
barring, suspending or otherwise limiting his involvement in any
type of business, securities or banking activities; or
(4) been found by a court of competent jurisdiction in a civil
action, the Commission or the Commodity Futures Trading Commission
to have violated a federal or state securities or commodities law,
and the judgment has not been reversed, suspended, or vacated.
All of these filing requirements were satisfied by the Company’s
officers, directors, and ten-percent holders.
In making these statements, we have relied on the written
representation of our Directors and Officers or copies of the
reports that they have filed with the Commission.
Committees of the Board
All proceedings of the board of directors for the fiscal year ended
August 31, 2020 were conducted by resolutions consented to in
writing by our board of directors and filed with the minutes of the
proceedings of our board of directors. Our company currently does
not have nominating, compensation or audit committees or committees
performing similar functions nor does our company have a written
nominating, compensation or audit committee charter. Our board of
directors does not believe that it is necessary to have such
committees because it believes that the functions of such
committees can be adequately performed by the board of
directors.
The Company does not have any defined policy or procedure
requirements for shareholders to submit recommendations or
nominations for directors. The Company’s board of directors
believes that, given the stage of our development, a specific
nominating policy would be premature and of little assistance until
our business operations develop to a more advanced level. The
Company does not currently have any specific or minimum criteria
for the election of nominees to the board of directors and we do
not have any specific process or procedure for evaluating such
nominees. The board of directors will assess all candidates,
whether submitted by management or shareholders, and make
recommendations for election or appointment.
A shareholder who wishes to communicate with the Company’s board of
directors may do so by directing a written request addressed to any
of our Directors at the address appearing on the first page of this
registration statement.
Audit Committee Financial Expert
We do not have a standing audit committee. Our directors perform
the functions usually designated to an audit committee. Our board
of directors has determined that we do not have a board member that
qualifies as an "audit committee financial expert" as defined in
Item 407(d)(5) of Regulation S-K, nor do we have a board member
that qualifies as "independent" as the term is used in Item
7(d)(3)(iv)(B) of Schedule 14A under the Securities Exchange Act of
1934, as amended, and as defined by Rule 4200(a)(14) of the NASD
Rules.
We believe that our board of directors is capable of analyzing and
evaluating our financial statements and understanding internal
controls and procedures for financial reporting. Our board of
directors does not believe that it is necessary to have an audit
committee because management believes that the functions of an
audit committees can be adequately performed by the board of
directors. In addition, we believe that retaining an independent
director who would qualify as an "audit committee financial expert"
would be overly costly and burdensome and is not warranted in our
circumstances given the stage of our development and the fact that
we have not generated positive cash flow to date.
Code of Ethics
The Company has adopted a Code of Ethics for Senior Financial
Officers that is applicable to our principal executive officer,
principal financial officer, principal accounting officer or
controller, or persons performing similar functions.
Indemnification
Under our Articles of Incorporation and Bylaws of the corporation,
we may indemnify an officer or director who is made a party to any
proceeding, including a law suit, because of his position, if he
acted in good faith and in a manner he reasonably believed to be in
our best interest. We may advance expenses incurred in defending a
proceeding. To the extent that the officer or director is
successful on the merits in a proceeding as to which he is to be
indemnified, we must indemnify him against all expenses incurred,
including attorney's fees. With respect to a derivative action,
indemnity may be made only for expenses actually and reasonably
incurred in defending the proceeding, and if the officer or
director is judged liable, only by a court order. The
indemnification is intended to be to the fullest extent permitted
by the laws of the State of Nevada.
Regarding indemnification for liabilities arising under the
Securities Act of 1933, which may be permitted to directors or
officers under Nevada law, we have been advised that, in the
opinion of the Securities and Exchange Commission, indemnification
is against public policy, as expressed in the Act and is,
therefore, unenforceable.
Item 11. Executive
Compensation
We pay a monthly salary to three of our Directors, our CFO and
Counsel. For the current year ending August 31, 2020, the three
Directors received a yearly salary of $595,000.
Summary Compensation Table
| |
|
|
|
|
|
|
|
|
|
|
Stock |
|
|
All Other |
|
|
|
|
| Name and Principal
Position |
|
Year |
|
|
Salary |
|
|
Bonus |
|
|
Awards |
|
|
Compensation |
|
|
Total |
|
| Eyal Ballan, Director,
CTO |
|
|
2020 |
|
|
$ |
222,000 |
|
|
$ |
– |
|
|
$ |
– |
|
|
$ |
– |
|
|
$ |
222,000 |
|
| Eyal Barad, Director, CEO |
|
|
2020 |
|
|
$ |
222,000 |
|
|
$ |
– |
|
|
$ |
– |
|
|
$ |
– |
|
|
$ |
222,000 |
|
| Gabriel Yariv, Director COO |
|
|
2020 |
|
|
$ |
151,000 |
|
|
$ |
– |
|
|
$ |
– |
|
|
$ |
– |
|
|
$ |
151,000 |
|
| Uri Ben-Or, CFO |
|
|
2020 |
|
|
$ |
75,000 |
|
|
$ |
– |
|
|
|
– |
|
|
$ |
– |
|
|
$ |
75,000 |
|
The following table sets forth, as of October 14th,
2020, information concerning ownership of our securities by (i)
each director, (ii) each executive officer, (iii) all directors and
executive officers as a group; and (iv) each person known to us to
be the beneficial owner of more than five percent of each
class:
The number and percentage of shares beneficially owned includes any
shares as to which the named person has sole or shared voting power
or investment power and any shares that the named person has the
right to acquire within 60 days.
| |
|
|
Beneficial
Ownership |
|
| Name
of Beneficial Owner |
|
|
Common
Shares |
|
|
|
Percentage
of class |
|
| Cannabics
Inc. * |
|
|
88,289,594 |
|
|
|
64.361% |
|
____________________
*Our 2 Directors Eyal Barad and Gabriel Yariv are also holders of
Cannabics, Inc. The mailing address for all directors, executive
officers and beneficial owners of Cannabics Inc. is #3 Bethesda
Metro Center, Suite 700, Bethesda, Maryland, 20814.
*The Directors of the Company hold positions in Cannabics, Inc.,
the majority holder. The relative positions of Cannabics, Inc. are
listed below:
|
Shareholder |
|
Common Stock |
|
%
Issued |
| Eyal Barad, Director,
CEO |
|
316 |
|
26% |
| Eyal Ballan, Director, CTO |
|
141 |
|
12% |
| Gabriel Yariv, Director COO |
|
21 |
|
0.3^ |
| Shay Avraham Sarid |
|
235 |
|
20% |
| Itamar Borochov |
|
222 |
|
18% |
| Seach Sarid Ltd. |
|
40 |
|
3% |
| Ariel Kirtchuk |
|
25 |
|
2% |
| J Reiger Ltd |
|
128 |
|
11% |
| Total |
|
1,205 |
|
100.00% |
Unless otherwise noted, we believe that all persons or entities
named in the table have sole voting and investment power with
respect to all shares of common stock beneficially owned by them.
For purposes hereof, a person is considered to be the beneficial
owner of securities that can be acquired by such person within 60
days from the date hereof.
Item 12. Security Ownership
of Certain Beneficial Owners and Management Related Stockholder
Matters.
None.
Item 13. Certain
Relationships and Related Transactions, and Director
Independence
None.
Item 14. Principal Accounting
Fees and Services
Audit Fees
The aggregate fees billed by Weinstein International CPA for
professional services rendered for the audit of our annual
financial statements included in this Annual Report on Form 10-K
for the fiscal year ended August 31, 2020, were $10,000.00
Tax Fees
For the fiscal years ended August 31, 2020 and 2019, the Company
paid fees of $1,000 for tax compliance.
All Other Fees
For the fiscal years ended August 31, 2020 and 2019, the Company
did not pay any other fees.
Effective May 6, 2003, the Securities and Exchange Commission
adopted rules that require that before Weinstein International CPA
is engaged by us or our subsidiaries to render any auditing or
permitted non-audit related service, the engagement be:
| |
· |
approved
by our audit committee; or |
| |
· |
entered
into pursuant to pre-approval policies and procedures established
by the audit committee, provided the policies and procedures are
detailed as to the particular service, the audit committee is
informed of each service, and such policies and procedures do not
include delegation of the audit committee's responsibilities to
management. |
We do not have an audit committee. Our Board of Directors
pre-approves all services provided by our independent auditors. All
of the above services and fees were reviewed and approved by our
Board of Directors either before the respective services were
rendered.
PART IV
Item 15. Exhibits
| Exhibit
3.1 |
Amended Articles of
Incorporation, Cannabics Pharmaceuticals Inc., Incorporated by
reference. |
| |
|
| Exhibit
3.2 |
Bylaws of Cannabics
Pharmaceuticals, Incorporated by reference. |
| |
|
| Exhibit
3.3 |
Subsidiary – G.R.I.N.
Ultra Ltd – Board Resolution Authorizing Creation, Incorporated by
reference. |
| |
|
| Exhibit
3.4 |
Subsidiary – G.R.I.N.
Ultra Ltd – Official Companies Listing (Israel) Incorporated by
reference. |
| |
|
| Exhibit
3.5 |
Material Contract –
Collaboration & Exclusivity Agreement with Cannabics, Inc.,
incorporated by reference from Form 8K filed July 25th,
2014. |
| |
|
| Exhibit
3.6 |
Intellectual Property
& Subsidiary Assignment of October 7th, 2015, Incorporated by
reference from form 8K of October 8th, 2015. |
| |
|
| Exhibit
3.7 |
Assignment &
Assumption of Debt & Liabilities Agreement of October 7th,
2015, Incorporated by reference from form 8K of October 8th,
2015. |
| |
|
| Exhibit
3.8 |
Debt Cancellation
Agreement of October 7th, 2015, Incorporated by reference from form
8K of October 8th, 2015. |
| |
|
| Exhibit
3.9 |
IP Licensing Agreement
with The CIMA Group LLC, December 17th, 2015. |
| |
|
| Exhibit
31.1 |
Certification by the Principal Executive
Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)). * |
| |
|
| Exhibit
31.2 |
Certification by the Principal Financial
Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)). * |
| |
|
| Exhibit
32.1 |
Certification by the Principal Executive
Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002. * |
| |
|
| Exhibit
32.2 |
Certification by the Principal Financial
Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002. * |
| |
|
| 101.INS |
XBRL Instance
Document |
| |
|
| 101.SCH |
XBRL Taxonomy Extension
Schema Document |
| |
|
| 101.CAL |
XBRL Taxonomy Extension
Calculation Linkbase Document |
| |
|
| 101.DEF |
XBRL Taxonomy Extension
Definition Linkbase Document |
| |
|
| 101.LAB |
XBRL Taxonomy Extension
Label Linkbase Document |
| |
|
| 101.PRE |
XBRL Taxonomy Extension
Presentation Linkbase Document |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934 the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized.
| Date:
November 4, 2020 |
By: |
/s/
Eyal Barad |
| |
|
Eyal Barad, Director
Chief Executive Officer
|
| |
|
|
| |
|
|
| |
|
|
| |
|
/s/
Uri Ben-Or |
| |
|
Uri Ben-Or, Chief Financial Officer
Principal Accounting Officer
|
| |
|
|
