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.
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
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:
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high-throughput screening, high content screening, flow cytometry, machine learning, robotics, and proprietary methodologies;
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a library of human cancer cell lines and thousands of different combinations and ratios of cannabinoid compounds in a costumed matrix;
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a growing database of biological response data;
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in-house extraction, processing methodologies, and analytical techniques that yield well-characterized and standardized extracts;
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collaborations with regulated cannabis producers that may expand our cannabinoid compound library and provide us with access for future proprietary cultivars;
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fully integrated in-house research and development; and
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regulatory expertise.
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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:
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Product Candidate
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Indication/Description
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Current Development Status
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Expected Next Steps
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Partner(s)
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RCC-33
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Colorectal Cancer
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Pre-clinical
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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
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None
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Cannabics SR
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Cancer Anorexia-Cachexia Syndrome
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Phase 0
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Additional pilot studies expected to commence in the second half of 2021
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None
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Cannabics CDx
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Drug sensitivity test for cannabinoid-based cancer therapies.
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Pre-clinical
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Clinical validation study to commence in 2022
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To be determined
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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. 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.
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. Now that our studies on mice (See press release February 16, 2021) are complete,
the company is now working on the logistics for further clinical studies in order to bring us to the US FDA for a pre IND meeting.
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.
First in-vivo study in mice-
On February 16th, 2021 we have completed
our first in-vivo study - Evaluation of the antitumor activity of RCC-33 on mice bearing xenografts of human colorectal adenocarcinoma.
In the study, Nude mice, 7 mice per group were inoculated subcutaneously with HT-29 and HCT-116 human colorectal adenocarcinoma cells.
After reaching a tumor volume of 100 mm3, mice were intraperitoneally injected with 200 ul of RCC-33 or sham control. Tumor volume was
measured 3 times per week. The experiment concluded when the first mouse (control group) reached the maximal tumor volume allowed,16 days
after xenograft inoculation. A significant reduction in tumor volume of 33% (p value = 0.016) was observed in RCC-33 treated mice inoculated
with HT-29. Mice inoculated with HCT-116 did not show significant results. These positive results will be more thoroughly investigated
in additional in-vivo studies to better understand effective dosage/toxicity and genetic profiling to discover the mechanism of action.
These studies will continue in the 2nd quarter of 2020.
Figure 3. HT-29 - Human colorectal adenocarcinoma
model
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
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.
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.
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.
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 February 28, 2021 and 2020
Revenues
We had no revenues from licensing agreements in
the form of royalties during the three months ended February 28, 2021 compared to $1,310 for the three months ended February 28, 2020.
The reason for the decrease in revenues is due to termination of the licensing agreement.
Operating Expenses
For the three months ended February 28, 2021 our
total operating expenses were $667,869 compared to $867,678 for the three months ended February 29, 2020, resulting in a decrease of $199,809.
The decrease is attributable to a total decrease of $71,351 in general administration, and sales and marketing expenses and a decrease
of $128,458 in research and development expenses.
We realized other income of $133,114 for the three
months ended February 28, 2021, compared to a other loss of $1,497 for the three months ended February 29, 2020. The decrease in financial
expense was mainly attributable to capital gain of $195,968 off set by exchange differences in total of $21,071 and other finance expenses
of $30,000. As a result, the net loss was $534,755 for the three months ended February 28, 2021, compared to a net loss of $867,865 for
the three months ended February 29, 2020.
Net Loss
Net loss for the three months ended February 28,
2021 was $534,755 compared to net loss $867,865 for the three months ended February 29, 2020, for the reasons explained above.
Other comprehensive profit
We incurred another comprehensive income of $2,622,133
for the three months ended February 28, 2021. The income was due to a valuation of a financial asset, consisting of the Company’s
shares held in Seedo Inc., as a result; the total comprehensive income was $2,087,378 for the three months ended February 28, 2021.
For the Six Months Ended February 28, 2021 and 2020
Revenues
We had no revenues from licensing agreements in
the form of royalties during the six months ended February 28, 2021 compared to $3,064 the six months ended February 28, 2020. The reason
for the decrease in revenues is due to termination of the licensing agreement.
Operating Expenses
For the six months ended February 28, 2021 our
total operating expenses were $1,327,601 compared to $1,685,288 for the six months ended February 29, 2021, resulting in a decrease of
$357,687. The decrease is attributable to a total decrease of $196,926 in general administration, and sales and marketing expenses and
partially and a decrease of $160,761 in research and development expenses.
We realized other income of $138,079 for the six
months ended February 28, 2021 which mainly attributable to capital gain of $195,968 off set by exchange differences in total of $26,683
and other finance expenses of $30,000. Compared to other loss of $4,327,837 for the six months ended February 29, 2020. 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. 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 on the six months ended February
29, 2020. As a result, the net loss was $1,189,522 for the six months ended February 28, 2021, compared to a net loss of $6,010,061 for
the six months ended February 29, 2020.
Net loss
Net loss for the six months ended February 28,
2021 was $1,189,522 compare to net loss of $6,010,061 for the six months ended February 29, 2020.
Other comprehensive profit
We incurred another comprehensive loss of $2,735,220
for the six months ended February 28, 2021. The income was mainly attributable to a valuation of a financial asset, consisting of the
Company’s shares held in Seedo and Wize Pharma Inc , in the total amount of $2,735,220 As a result; the total comprehensive income
was $1,545,698 for the six months ended February 28, 2021.
Liquidity and Capital Resources
Overview
As of February 28, 2021, we had $1,334,409 in
cash compared to $777,611 on August 31, 2020. 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
Six Months Ended February 28, 2021 compared to the Six Months Ended February 29, 2020
We used cash in operations of $1,294,977 for the
six months ended February 28, 2021 compared to cash used in operations of $1,485,317 for the six months ended February 29, 2020. The negative
cash flow from operating activities for the six months ended February 28, 2021 is primarily attributable to the Company's net loss from
operations of $1,189,522, capital gain of $195,968 and stock issued for services in a total of $33,000. Offset by depreciation of $114,007,
a decrease in accounts payables and accrued liabilities of $38,200, a decrease of $18,294 in account receivables and prepaid expenses.
We had cash flow from investing activities of
$645,025 during the six months ended February 28, 2021, compared to cash flow from investing activities of $1,806,307 for the six months
ended February 29, 2020. The cash flow from investing activities is due to the Company’s Realization of Wize Pharma Inc shares of
$645,968 and its purchase of fixed assets in the aggregate amount of $943.
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.
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.