Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________

 

FORM 10-Q

_______________

 

x    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 30, 2020

OR

o    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     46-5644005

(State or other jurisdiction of

incorporation or organization)

    (IRS Employer Identification No.)
       

#3 Bethesda Metro Center, Suite 700

Bethesda, MD

    20814
(Address of principal executive offices)     (Zip Code)

 

(877) 424-2429

(Registrant’s telephone number, including area code)

 

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 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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x  No  o

 

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  x  No  o

 

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  o Accelerated filer  o
Non-accelerated filer  x Smaller reporting company  x
  Emerging growth company   o

 

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. o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No  x

 

As of January 14, 2020, the registrant had 135,237,584 shares of its Common Stock, $0.0001 par value, outstanding.

 

When used in this quarterly report, the terms “Cannabics,” “the Company,” “we,” “our,” and “us” refer to Cannabics Pharmaceuticals Inc. and its wholly-owned subsidiary, G.R.I.N Ultra Ltd.

     

 

 

CANNABICS PHARMACEUTICALS INC.

FORM 10-Q

NOVEMBER 30, 2020

 

INDEX

 

Cautionary Note Regarding Forward-Looking Statements 3
   
PART I – FINANCIAL INFORMATION 4
     
Item 1. Consolidated Financial Statements 4
  Consolidated Balance Sheets as of November 30, 2020 (unaudited) and August 31, 2020 4
  Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended November 30, 2020 and 2019 (unaudited) 5
  Consolidated Statements of Stockholders Equity (Deficit) for the Three Months Ended November 30, 2020 and 2019 (unaudited) 6
  Consolidated Statements of Cash Flows for the Three Months Ended November 30, 2020 and 2019 (unaudited) 7
  Notes to Consolidated Financial Statements (unaudited) 8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 11
Item 3 Quantitative and Qualitative Disclosures About Market Risk 22
Item 4. Controls and Procedures 22
     
PART II -- OTHER INFORMATION 23
     
Item 1. Legal Proceedings 23
Item 1A. Risk Factors 23
Item 2. Recent Sale of Unregistered Securities 23
Item 6. Exhibits 23
     
SIGNATURES   24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  2  

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Certain information set forth in this Quarterly Report on Form 10-Q, including in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere herein may address or relate to future events and expectations and as such constitutes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements which are not historical reflect our current expectations and projections about our future results, performance, liquidity, financial condition, prospects and opportunities and are based upon information currently available to us and our management and their interpretation of what is believed to be significant factors affecting our business, including many assumptions regarding future events. Such forward-looking statements include statements regarding, among other things:

 

  · the size and growth of the potential markets for our products and the ability to serve those markets;
     
  · our expectations regarding our expenses and revenue, the sufficiency of our cash resources and needs for additional financing;
     
  · the rate and degree of market acceptance of any of our products;
     
  · our expectations regarding competition;
     
  · our anticipated growth strategies;
     
  · our ability to attract or retain key personnel;
     
  · our ability to establish and maintain development partnerships;
     
  · regulatory developments in the U.S. and foreign countries, especially those related to change in, and enforcement of, cannabis laws;
     
  · our ability to obtain and maintain intellectual property protection for our products; and
     
  · the anticipated trends and challenges in our business and the market in which we operate.

 

Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “should,” “would,” “could,” “scheduled,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “seek,” or “project” or the negative of these words or other variations on these words or comparable terminology. Actual results, performance, liquidity, financial condition and results of operations, prospects and opportunities could differ materially and perhaps substantially from those expressed in, or implied by, these forward-looking statements as a result of various risks, uncertainties and other factors. These statements may be found under the section of our Annual Report on Form 10-K for the year ended August 31, 2019 (filed on November 29, 2019) entitled “Risk Factors” as well as in our other public filings.

 

In light of these risks and uncertainties, and especially given the start-up nature of our business, there can be no assurance that the forward-looking statements contained herein will in fact occur. Readers should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.

 

 

 

 

 

 

  3  

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

CANNABICS PHARMACEUTICALS INC.

Consolidated Balance Sheets

 

 

    November 30,     August 31,  
    2020     2020  
    Unaudited     Audited  
ASSETS            
Current assets:                
Cash and cash equivalents   $ 184,031     $ 777,611  
Prepaid expenses and other receivables     168,574       152,299  
Total current assets     352,605       929,910  
                 
Available for sale Investment     539,609       426,522  
                 
Equipment, net     806,317       862,879  
                 
Total assets   $ 1,698,531     $ 2,219,311  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
                 
Current liabilities:                
Accounts payable and accrued liabilities   $ 219,042     $ 231,142  
Due to a related party     223,645       223,645  
Total current liabilities     442,687       454,787  
                 
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, 135,237,584 shares issued and outstanding at November 30 2020 And 135,080,441 shares issued and outstanding at August 31, 2020.     13,524       13,508   
Additional paid-in capital     15,405,295       15,372,311  
Issuance of warrants     2,784,387       2,784,387  
Other comprehensive loss     (2,661,324 )     (2,774,411 )
Accumulated deficit     (14,286,038 )     (13,631,271 )
Total stockholders' equity (deficit)     1,255,844       1,764,524  
                 
Total liabilities and stockholders' equity   $ 1,698,531     $ 2,219,311  

 

 

See accompanying notes to consolidated financial statements.

  

 

 

 

  4  

 

 

 

CANNABICS PHARMACEUTICALS INC.

Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

 

  For the Three Months Ended  
    November 30,     November 30,  
    2020     2019  
  Unaudited  
Net revenue           1,754  
                 
Operating expenses:                
Research and development expense   $ 433,730     $ 466,033  
Sales and marketing expenses     7,551       24,117  
General and administrative expenses     218,451       326,460  
                 
Total operating expenses     659,732       817,610  
                 
Loss from operations     (659,732 )     (815,856 )
                 
Other income                
Financial (Loss) Income     4,965       (4,326,339 )
                 
Net loss     (654,767 )     (5,142,195 )
                 
Income (Loss) from available for sale assets     113,087       (3,550,813 )
Total comprehensive (income) loss   $ (541,680 )   $ (8,693,008 )
                 
Net loss per share - basic and diluted:   $ (0.005 )   $ (0.038 )
Weighted average number of shares outstanding - Basic and Diluted     135,105,839       133,653,941  

 

See accompanying notes to consolidated financial statements.

 

 

 

 

 

  5  
 

 

CANNABICS PHARMACEUTICALS INC.

Consolidated Statements of Stockholders' Equity (Deficit)

Unaudited

 

 

    Common Stock     Additional Paid In           Other Comprehensive     Accumulated     Total Stockholders’ Equity  
    Shares     Amount     Capital     Warrants     Gain     Deficit     (Deficit)  
                                           
Balance, August 31, 2020     135,080,441     $ 13,508     $ 15,372,311     $ 2,784,387     $ (2,774,411 )   $ (13,631,271 )   $ 1,764,524  
                                                         
Issuance of common stock for services.     157,143       16       32,984                         33,000  
                                                         
Other comprehensive loss                             113,087             113,087  
                                                         
Net loss                                   (654,767 )     (654,767 )
                                                         
Balance, November 30, 2020     135,237,584     $ 13,524     $ 15,405,295     $ 2,784,387     $ (2,661,324 )   $ (14,286,038 )   $ 1,255,844  

 

 

    Common Stock     Additional Paid In           Other Comprehensive     Accumulated     Total Stockholders’ Equity  
    Shares     Amount     Capital     Warrants     Gain     Deficit     (Deficit)  
                                           
Balance, August 31, 2019     134,418,775     $ 13,450     $ 15,300,250     $ 2,784,387     $ 2,810,013     $ (6,163,807 )   $ 14,744,292  
                                                         
Issuance of common stock for services.     80,000             (30,000 )                        (30,000 ) 
                                                         
Other comprehensive loss                             (3,550,813 )           (3,550,813 ) 
                                                         
Net loss                                   (5,142,195 )     (5,142,195 )
                                                         
Balance, November 30, 2019     134,498,775     $ 13,450     $ 15,270,250     $ 2,784,387     $ (740,800 )   $ (11,306,003 )   $ 6,021,284  

 

The accompanying notes are an integral part of the financial statements.

 

 

  6  

 

 

CANNABICS PHARMACEUTICALS INC.

Consolidated Statements of Cash Flows

(Unaudited)

 

  For the Three Months Ended  
    November 30,     November 30,  
    2020     2019  
  Unaudited  
Cash flows from operating activities:                
Net Loss   $ (654,767 )   $ (5,142,194 )
Adjustments required to reconcile net loss to net cash used in operating activities:                
Depreciation     57,505       51,578  
Royalties receivables valuation           4,363,000  
Stock issued for services     33,000       (30,000 )
Profit from held for trading investments           (58,730 )
Changes in operating assets and liabilities:                
Decrease (increase) Accounts Receivable and prepaid expenses     (16,275 )     53,076  
Increase (decrease) Accounts payable and accrued liabilities     (12,100 )     1,583  
Net cash used in operating activities     (592,637 )     (761,687 )
                 
Cash flows from investing activities:                
Realization of Held for trading Investments           824,849  
Acquisition of equipment     (943 )     (9,800 )
Net cash used in investing activities     (943 )     815,049  
                 
Net increase (Decrease) in cash     (593,580 )     53,362  
Cash and cash equivalents at beginning of the Period     777,611       265,982  
Cash and cash equivalents at end of the Period   $ 184,031     $ 319,344  

 

See accompanying notes to consolidated financial statements.

 

 

 

  7  

 

 

CANNABICS PHARMACEUTICALS INC.

Notes to Consolidated Financial Statements

(unaudited)

 

 

Note 1– Nature of Business, Presentation and Going Concern

 

Organization

 

Cannabics Pharmaceuticals Inc. (the “Company”), was incorporated in the State of Nevada, on September 15, 2004, under the name of Thrust Energy Corp.

 

On 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. On the closing date, April 25, 2014, pursuant to the terms of the Stock Purchase Agreement, Cannabics purchased 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 principal offices are in Bethesda, Maryland. The Company changed its course of business to laboratory research and development.

 

On June 3, 2014, the Company’s Board of Directors declared a two-to-one forward stock split of all outstanding shares of common stock. The stock split was approved by FINRA on June 25, 2014.

 

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.

 

On July 24, 2017, the Company announced its establishment of a genetics laboratory to develop diagnostic tools based on human genome, tumor genetics and specific cannabinoids.

 

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.

  

 

  8  

 

 

Basis of Presentation

 

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial statement presentation and in accordance with Form 10-Q. Accordingly, they do not include all of the information and footnotes required in annual financial statements. In the opinion of management, the unaudited financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position and results of operations and cash flows. The results of operations presented are not necessarily indicative of the results to be expected for any other interim period or for the entire year.

 

These unaudited financial statements should be read in conjunction with our August 31, 2020 annual financial statements included in our Form 10-K, filed with the U.S. Securities and Exchange Commission (“SEC”) on November 4, 2020.

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of the Company and GRIN. All significant inter-company balances and transactions have been eliminated in consolidation.

 

Going Concern

 

The accompanying unaudited financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred a net loss of $654,767 for the three months ended November 30, 2020, and has incurred cumulative losses since inception of $14,286,038. These conditions raise substantial doubt about the ability of the Company to continue as a going concern.

 

The ability of the Company to continue as a going concern is dependent upon its abilities to generate revenues, to continue to raise investment capital, and develop and implement its business plan. No assurance can be given that the Company will be successful in these efforts.

 

Research and Development Costs

 

The Company accounts for research and development costs in accordance with Accounting Standards Codification 730 “Research and Development” (“ASC 730”). ASC 730 requires that research and development costs be charged to expense when incurred. Research and development costs charged to expense were $433,730 and $466,033 for the three months ended November 30, 2020 and 2019, respectively.

 

Reclassifications

 

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported losses, total assets, or stockholders’ equity as previously reported.

 

Note 2 – Related Party Transactions

 

During the three months ending November 30, 2020, the Company paid $105,000 in salaries, including socials benefits, to two directors, compared to $125,000 for the three months ending November 30, 2019.

 

The Company had a balance outstanding at November 30, 2020 and at November 30, 2019 of $223,645 payable to Cannabics, Inc. The advance is due on demand and bears no interest.  

 

 

 

  9  

 

 

Note 3 – Stockholders’ Equity (Deficit)

 

Authorized Shares

 

The Company is authorized to issue up to 900,000,000 shares of common stock, par value $0.0001 per share. Each outstanding share of common stock entitles the holder to one vote per share on all matters submitted to a stockholder vote. All shares of common stock are non-assessable and non-cumulative, with no pre-emptive rights.

 

Note 4 – Commitments and Contingencies

 

The company leases its office in Tel Aviv. In May, 2019, the Company extended its lease agreement for an additional twelve-month extension which expires on April 1st, 2021. The monthly lease is $1,390.00

 

Effective June 1, 2018, the Company entered into a 36-month car lease for one of its executive officers.

 

As security for its obligation under a property lease agreement, car lease and credit cards, the Company’s subsidiary provided a bank guarantee in the amount of $50,000.

 

Note 5 – Subsequent Events

 

On October 27th, 2020, the Company announced that it had received an "Intention to Grant a European Patent" by the European Patent Office for its System and Method for High Throughput Screening of Cancer Cells patent application relating to its “CDx” diagnostic drug sensitivity test.

 

On November 16th, 2020, the Company established a subsidiary named Digestix Bioscience Inc., specifically dedicated to development of medical devices and pharmaceutical compositions for precancerous neoplastic tumors, as noted in the 8-K filed November 26th, 2020.

 

On December 16, 2020, the Company executed a Securities Purchase Agreement with 3i LP for a series of convertible notes for an aggregate funding total of $2,750,000, to be carried out over four tranches, the first of which having been received. Per the agreements between the companies, the underlying shares for said notes are to be registered with the SEC. Until such time, the Company has issued 3,913,663 shares on December 18, 2020. Any other shares are to be registered in the future. For complete and detailed information on the Agreements with 3i LP, please see our 8-K for this event, filed December 21, 2020.

 

On December 21st, 2020, the Company announced that it had initiated is In-Vivo Animal Studies for an FDA Pre-IND meeting. The purpose of these studies is for the Company’s “RCC-33” rug candidate on mice transplanted with colorectal cancer tumor cell lines.

 

The Company has evaluated subsequent events through the date the financial statements were issued and filed with the SEC and has determined that there are no other such events that warrant disclosure or recognition in the financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  10  

 

 

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Company Overview

 

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.

 

 

 

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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).

 

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

 

 

 

 

 

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As of the date of this filing, we are not aware of any cannabinoid-based therapies approved for the treatment of cancer.

 

Our Proprietary 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
  Ø regulatory expertise.

 

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.

 

 

 

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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.

 

 

 

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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. 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”).

 

Cannabinoids and Colorectal Cancer

 

A new emerging area of scientific understanding 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 and can confirm absolutely 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.

 

 

 

 

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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. LAST PR RE FDA PRE-IND STUDIES – TALK ABOUT SCALPA

 

Preclinical Studies

 

We have now written and shall shortly begin 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.

 

 

 

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Cannabics SR for Cancer Anorexia-Cachexia Syndrome

 

Overview

 

At the same time, we are pursuing our work on colorectal cancer, we are continuing our development of 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.

 

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.

 

 

 

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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.

 

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. Participants were weighed at each physician visit. The primary objective of the study was a weight gain of ≥10% from baseline. Despite various limitations, the preliminary study demonstrated a weight increase of 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.)

 

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 medical distribution.

 

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.

 

 

 

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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.

 

 

 

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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.

 

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. A full list of our IP applications in all countries can be found in our Annual 10-K filing of November 4, 2020 at page 25.

 

Results of Operations

 

For the Three Months Ended November 30, 2020 and 2019

 

Revenues

 

We have not received royalties during the three months ended November 30, 2020 due to the termination of the royalties agreement, compared to $1,754 for the three months ended November 30, 2019. The reason for the decrease in revenues is due to the termination of our relationship with the licensee.

 

Operating Expenses

 

For the three months ended November 30, 2020 our total operating expenses were $659,732 compared to $817,610 for the three months ended November 30, 2019 resulting in an decrease of $157,878. The decrease is attributable to decrease of $108,009 in general administration expenses and a total decrease of $49,869 in research and development expenses, and sales and marketing expenses.

 

We incurred a financial income of $4,965 for the three months ended November 30, 2020, compared to financial expense of $4,326,339 for the three months ended November 30, 2019. The decrease in financial expense was mainly attributable to revaluation of a financial asset of $4,363,000. This revaluation relates to our Company’s investment in Seedo Corp., which is obligated by the afore-mentioned sum in future royalties. Subsequent to November 30th, 2019, but prior to the date of this filing, the Company was made aware of a Petition for Debt Settlement filing by E-Roll Grow Tech Ltd., the fully owned subsidiary of Seedo Corp. Said filing calls into question the ability of Seedo Corp. to fulfill its royalty obligations to us. This accounting treatment does not release Seedo from its obligations under the agreement. As such, the Company has removed its anticipated Royalties for accounting purposes from Seedo at this time. As a result, the net loss was $654,767 for the three months ended November 30, 2020 compared to $5,141,195 for the three months ended November 30, 2019.

 

Net loss

 

Net loss decreased by $4,487,428 to $654,767 for the three months ended November 30, 2020, compared to a net loss of $5,142,195 for the three months ended November 30, 2019.

 

 

 

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Liquidity and Capital Resources

 

Overview

 

As of November 30, 2020, we had $184,031 in cash compared to $319,344 on November 30, 2019. We expect to incur a minimum of $1,000,000 in expenses during the next twelve months of operations. We estimate that these expenses will be comprised primarily of general expenses including overhead, legal and accounting fees, research and development expenses, and fees payable to outside medical centers for clinical studies.

 

Liquidity and Capital Resources during the Three Months Ended November 30, 2020 compared to the Three Months Ended November 30, 2019

 

We used cash in operations of $592,637 for the three months ended November 30, 2020 compared to cash used in operations of $761,687 for the three months ended November 30, 2019. The negative cash flow from operating activities for the three months ended November 30, 2020 is primarily attributable to the Company's net loss from operations of $654,767, a decrease in accounts payables and accrued liabilities of $12,100 and an increase of $16,275 in account receivables and prepaid expenses. Offset by depreciation of $57,505 and shares issued for services of $33,000.

 

We had cash flow from investing activities of $943 during the three months ended November 30, 2020, compared to $815,049 cash flow from investing activities for the three months ended November 30, 2019. The reason for the decrease in cash flow from investing activities is primarily due to the purchase of fixed assets in an aggregate amount of $934, for the period ended November 30, 2020, and realization of held for trading shares in the aggregate amount of $824,849 for the period ended November 30, 2019.

 

We will have to raise funds to pay for our expenses. We may have to borrow money from shareholders, issue equity or enter into a strategic arrangement with a third party. There can be no assurance that additional capital will be available to us. We currently have no arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources. Since we have no such arrangements or plans currently in effect, our inability to raise funds for our operations will have a severe negative impact on our ability to remain a viable company.

 

Going Concern

 

Due to the uncertainty of our ability to meet our current operating and capital expenses, our independent auditors included an explanatory paragraph in their report on the audited financial statements for the year ended August 31, 2020 regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.

 

Our unaudited financial statements have been prepared on a going concern basis, which assumes the realization of assets and settlement of liabilities in the normal course of business. Our ability to continue as a going concern is dependent upon our ability to generate profitable operations in the future and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they become due. The outcome of these matters cannot be predicted with any certainty at this time and raise substantial doubt that we will be able to continue as a going concern. Our unaudited financial statements do not include any adjustments to the amount and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.

 

There is no assurance that our operations will be profitable. Our continued existence and plans for future growth depend on our ability to obtain the additional capital necessary to operate either through the generation of revenue or the issuance of additional debt or equity.

 

Off-Balance Sheet Arrangements

 

We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

 

 

 

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Critical Accounting Policies

   

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Such estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experiences and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions and conditions. We continue to monitor significant estimates made during the preparation of our financial statements. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates under different future conditions.

 

See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 2, “Summary of Significant Accounting Policies” in our audited consolidated financial statements for the year ended August 31, 2020, included in our Annual Report on Form 10-K as filed on November 4, 2020, for a discussion of our critical accounting policies and estimates.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

The disclosure required under this item is not required to be reported by smaller reporting companies; as such term is defined by Item 503(e) of Regulation S-K.

  

Item 4. Controls and Procedures.

 

  (a) Evaluation of Disclosure Controls and Procedures

 

In connection with the preparation of this Quarterly Report on Form 10-Q, an evaluation was carried out by our management, with the participation of our principal executive officer and the principal financial officer, of the effectiveness of our 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 November 30, 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, our management concluded, as of the end of the period covered by this report, that our disclosure controls and procedures were not effective in recording, processing, summarizing, and reporting information required to be disclosed, within the time periods specified in the SEC's rules and forms, and that such information was accumulated and communicated to management, including the principal executive officer and the principal financial officer, to allow timely decisions regarding required disclosures.

 

  (b) Changes in Internal Control over Financial Reporting

 

There were no other changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

  (c) Limitations on the Effectiveness of Internal Controls

 

Readers are cautioned that our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our control have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any control design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

  

  

 

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PART II- OTHER INFORMATION

 

Item 1. 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 the Company shall vigorously protect and pursue what it believes to be the rights of the Company and its shareholders.

 

Item 1A. Risk Factors

 

We are a smaller reporting company as defined in Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

 

Item 2. Recent Sale of Unregistered Securities

 

During the Quarter ending November 30, 2020, the Company issued a total of 157,143 common shares to a third party pursuant to their convertible loan agreement with the company’s subsidiary Grin Ultra Ltd.

 

Item 6. Exhibits  

 

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

______________________________

* Filed herewith.
   
** Furnished herewith.
   
*** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

 

 

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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.

 

 

  Cannabics Pharmaceuticals Inc.
     
Date: January 14, 2021 By: /s/ Eyal Barad
    Eyal Barad
  Title:

Chief Executive Officer

(Principal Executive Officer)

     
     
Date: January 14, 2021 By: /s/ Uri Ben Or
    Uri Ben Or
  Title:

Chief Financial Officer

(Principal Financial Officer)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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