CITRINE GLOBAL, CORP. - Annual Report: 2020 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the fiscal year ended December 31, 2020

or

For the transition period from ________________ to ________________

Commission file number 000-55680

CITRINE GLOBAL, CORP.
(Exact Name of Registrant As Specified In Its Charter)

Registrant’s Telephone Number, Including Area Code: + (972) 73 7600341

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to section 12(g) of the Act:

(Title of class)

Common Stock, $0.0001 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. [  ] Yes [X] No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. [  ] Yes [X] No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [  ] No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). [X] Yes [  ] No

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 definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” or “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. [  ]

Indicate whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) [  ] Yes [X] No

On June 30, 2020, the aggregate market value of the common stock held by non-affiliates of the registrant was approximately $113 million based on the closing price of $0.23 per share of the Registrant’s common stock on June 30, 2020.

The registrant had 942,568,006 shares of common stock outstanding as of March 31, 2021.

TABLE OF CONTENTS

Cautionary Statement regarding Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, or the Exchange Act. These forward-looking statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these terms or other comparable terminology. These forward-looking statements are only predictions and involve known and unknown risks, uncertainties and other factors, any of which may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

Forward-looking statements are made based on management’s beliefs, estimates and opinions on the date the forward-looking statements are made, and we undertake no obligation to update forward-looking statements should these beliefs, estimates, and opinions or other circumstances change. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these forward-looking statements to actual results.

Our financial statements are stated in United States dollars, or US$, and are prepared in accordance with United States generally accepted accounting principles, or GAAP. In this Annual Report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common stock” refer to the shares of our common stock. As used in this Annual Report, the terms “we,” “us,” “our,” “Citrine Global,” the “Company” and the “Registrant” mean Citrine Global, Corp. and its subsidiaries unless the context clearly requires otherwise.

PART I

ITEM 1. BUSINESS

Corporate History and Background

Our business activity is comprised of developing Israeli technologies and solutions and bringing them to global markets. We believe in the health, wellness, food-tech, botanicals, and medical cannabis industries that demonstrate high growth potential and focus on these markets.

Our headquarters, directors, and executive officers are all based in Israel, where we operate via our wholly-owned subsidiary, CTGL - Citrine Global Israel Ltd. (“Citrine Global Israel”).

We have developed a unique platform of operational innovation centers (each, an “Operational Innovation Center”) that create eco-systems for the health, wellness, botanicals, and medical cannabis industries. Our first Operational Innovation Center will be the Cannovation Center Israel (the “Cannovation Center in Israel”), focusing on Israeli health, wellness, botanicals, and medical cannabis Industries: supported in part by Israeli government grants and benefits.

We have an experienced team and a network of partners that include leading experts with a proven track record in technology, high-tech, biotech, investment, entrepreneurship, real estate, finance, and strategic business development in Israel and worldwide. We plan to operate worldwide through domestic subsidiaries, local teams, partners, and industry experts in each area.

Our vision is to become a global leader in developing Israeli technologies and solutions that improve people’s health and quality of life worldwide.

We created a 5-element approach of multi-strategy solutions to realize our vision:

On January 6, 2020, our predecessor company, TechCare Corp., a Delaware corporation (“TechCare”), and Citrine S A L Investment & Holdings Ltd., an Israeli corporation and a major shareholder of the Company (“Citrine S A L”), and a group of related persons and entities (the “Citrine S A L Group”) entered into a Common Stock Purchase Agreement (the “Citrine S A L Group Agreement”), which was later amended and restated on February 23, 2020 (the “AR Citrine S A L Group Agreement”). Pursuant to the AR Citrine Agreement, TechCare agreed to sell Citrine S A L Group and its group of business partners, up to an aggregate of 893,699,276 shares of TechCare’s common stock, representing approximately 95% of TechCare’s fully diluted capital, in two tranches, with the initial tranche of up to 452,063,196 shares of the TechCare’s common stock to be sold conditioned upon (i) the resignation of the Company’s existing members of its board of directors (the “Board”), consisting of Oren Traistman and Yossef De-Levy, (ii) the appointment of each of Ora Elharar Soffer (formerly Ora Meir Soffer), Ilan Ben Ishay and Ilanit Halperin as members of the Board, and (iii) the transfer of the TechCare’s signatory rights to all Company bank accounts in the name of Citrine S A L Group’s nominee. In addition, the AR Citrine S A L Group Agreement provides for the second tranche of up to the remaining number of shares of common stock that will result in Citrine S A L Group, owning 95% of the TechCare’s fully diluted capital stock, to be sold conditioned upon the filing of the Company’s previously approved amendment to its First Amended and Restated Certificate of Incorporation to increase the Company’s authorized capital.

On January 6, 2020, definitive agreements were executed for the sale of 90% of the shares in Novomic Ltd. (“Novomic”) to Traistman Radziejewski Fundacja Ltd, which was completed on May 14, 2020 (the “Novomic Divestment”), and for the issuance and sale of a number of shares equal after the issuance to 95% of the fully diluted capital stock of the Company to Citrine S A L Group, which was amended on February 23, 2020, to provide for the issuance and sale of the shares in stages (the “Citrine Global Transaction”). Shares of the Company were issued and sold in accordance with this amended agreement to Citrine S A L Group on February 27, 2020, March 5, 2020, and, after the Company amended its Certificate of Incorporation to increase its authorized share capital, on November 11, 2020.

On February 27, 2020, the resignations of all then serving directors became effective, and the appointments of Ora Elharar Soffer, Ilan Ben-Ishay, and Ilanit Halperin as new directors became effective. Zviel Gedalihou was appointed as Chief Financial Officer of the Company on March 17, 2020, and was replaced in that role by Ilanit Halperin on May 27, 2020, and Ora Elharar Soffer was appointed Chief Executive Officer of the Company on May 7, 2020. Doron Birger was appointed as a fourth director on September 3, 2020.

On April 1, 2020, we entered into a Convertible Note Purchase Agreement (the “CL Agreement”) with Citrine S A L, WealthStone Private Equity Ltd, WealthStone Holdings Ltd, Golden Holdings Neto Ltd, Beezz Home Technologies Ltd, Citrine Biotech 5 LP, Citrine High Tech 6 LP, Citrine High Tech 7 LP, Citrine 8 LP, Citrine 9 LP and Citrine Biotech 10 LP (together, the “Buyer”), all of which are affiliated with the Company. Under the CL Agreement, the Buyer agreed to purchase, and the Company agreed to issue and sell, for up to an aggregate principal amount of up to $1,800 thousand, notes convertible into shares of common stock of the Company (the “Notes”), with a drawdown period starting on April 1, 2020, and ending upon the earlier of (i) 6 months thereafter and (ii) the consummation of a public offering by the Company. The CL Agreement provides that the Notes will bear an annual interest rate of six percent (6%) and that the conversion price per share of common stock shall equal 85% multiplied by the market price (as defined in the Notes), representing a discount of 15%, and that each Note will mature 18 months following the payment date. On April 19, 2020 and June 12, 2020, the Company provided draw-down notices under the CL Agreement for amounts of $170 thousand and $1 million, respectively, which were received in cash by the Company. On June 12, 2020, the CL Agreement (hereafter “CL Agreement Amendment”) was amended to provide that for each draw down made by the Company under the CL Agreement, the Buyer shall be entitled to receive two types of warrants: A Warrants and B Warrants, with the A Warrants exercisable at any time between 6 and 12 months after issuance for an exercise price per share equal to 1.25 times the average of the closing prices of the 3 trading days preceding the draw down, and the B Warrants exercisable at any time between 6 and 24 months after issuance for an exercise price per share equal to 1.5 times the average of the closing prices of the 3 trading days preceding the draw down, and that the number of each of the A Warrants and the B Warrants issued will be equal to the draw down amount divided by the average of the closing prices of the 3 trading days preceding the draw down, and that these amended terms will apply in respect of all draw downs, including drawdowns made prior to the date of the amendment. On April 12, 2021, the parties to the CL Agreement amended the agreement, so that (i) the annual interest on the Notes should be changed to nine percent (9%) applicable from January 1, 2021, (ii) the Company shall repay the loans at the time it consummates an investment of at least $5 million in the Company’s securities, and (iii) the exercise prices of each of the A Warrants and B Warrants be modified to $0.10 per share, and the term of the warrants be extended by one (1) year for the A Warrants and B Warrants.

On May 31, 2020, we entered into a strategic partnership with Intelicanna Ltd., an Israeli medical cannabis company listed on the Tel Aviv Stock Exchange with ticker symbol INTL (“Intelicanna”), via a share exchange agreement and an agreement for future issuance of shares. The share exchange agreement provides that (i) the number of shares each party issues to the other will be calculated by dividing $500 thousand by the volume-weighted average price (VWAP) of the issuing party’s shares in the three trading days preceding the signing of the agreement, (ii) the issuance by Intelicanna will take place upon, and subject to, receipt of approval from the Tel Aviv Stock Exchange and the issuance by the Company will follow immediately thereafter, and (iii) the parties may not sell the shares within the first six months after issuance, and thereafter the parties may sell the shares issued to them if the shares become registered through a prospectus approved by the relevant securities authority, or under an exemption provided by applicable securities law, subject to a limit on the number of shares either party may sell per day. The agreement for future issuance of shares provides that a fall in a share price of a party, not exceeding 20%, measured six months after issuance of shares by both parties pursuant to the share exchange agreement, will be offset by the issuance of additional shares to the other party to bring up to $500 thousand the total value of the shares issued to the other party.

Furthermore, on June 25, 2020, Citrine Global Israel has entered into a services agreement with Intelicanna to provide business development and consulting services to Intelicanna, including assistance with raising financing (the “Services Agreement”) (references in this paragraph to the Company include the Israeli Subsidiary). The terms of the Services Agreement include: (1) the Company will, for a period of 18 months, assist Intelicanna to raise up to NIS 15 million for Intelicanna’s working capital purposes, whether through issuance of convertible securities or any other means; all sums raised must be approved in advance by the Company, and in accordance with a business plan presented to the Company from time to time; the Company will have no obligation under the Services Agreement to invest in Intelicanna, and no liability if its efforts to source financing for Intelicanna are unsuccessful; (2) in the event Intelicanna raises funds through assistance from the Company, the Company will be entitled to (i) cash consideration equal to 5% of any amount raised, whether directly from the Company, or from any of its affiliates or any unrelated third party, and (ii) options to acquire a number of shares of Intelicanna equal to 5% of the amount raised divided by the Exercise Price; the “Exercise Price” will be the price per share at which the amount was raised, or if it was not raised through issuance of shares, the price per share at which Intelicanna last raised funds through issuance of shares; and (3) for one or more periods of at least 90 days, each time at Intelicanna’s request which the Company may accept or decline at its discretion, the Company will provide business development and strategy-building services, including: consulting on strategy and business plan; assistance defining financing needs; helping identify ways to develop potential sources of finance; and ongoing consulting support to Intelicanna’s management team and board. Intelicanna will pay the Company a fee of NIS 2,500 per day for such services.

Also on June 25, 2020, to assist Intelicanna to raise the first NIS 1 million, the Company and the Israeli Subsidiary entered into an agreement to grant Intelicanna NIS 1 million in cash (approximately USD 290 thousand) in direct financing for working capital purposes. The financing will bear 6% annual interest and Intelicanna will make additional payments equalling 6% of its gross revenues between the date the financing is received and the date Intelicanna’s aggregate gross revenues thereafter equal NIS 2 million. If the total of the 6% interest plus the additional payments would result in a return of less than 12% in the year to the Company, the interest will be increased to bring the total return to 12%. Every three months Intelicanna must pay the interest, and after 12 months, it must repay the capital, plus the total of the additional payments due, plus any outstanding interest, and it must pay interest of 2% per month on any late payments, provided however that until the foregoing obligations are paid in full Intelicanna must pay 50% of its gross revenues to the Company upon receipt. If Intelicanna does not pay all amounts due within 18 months, it shall, at the Company’s option, issue to the Company a number of its shares equal to NIS 1.5 million divided by the lower of (i) the volume-weighted average price (“VWAP”) of the three trading days prior to the lapse of the 18 months, and (ii) VWAP of the three trading days prior to the signing of the financing agreement. The financing must be paid by the Company to Intelicanna within 30 days of signing the financing agreement, subject to completion of due diligence to the Company’s satisfaction and to Intelicanna receiving a commercial growing license.

On July 9, 2020, we transferred to Intelicanna NIS 500 thousand (approximately $145 thousand) on account of the above loan. On March 31, 2021, Intelicanna repaid the loan with the 12% interest.

On August 4, 2020, the Board of the Company approved for the Company and Citrine Global Israel to proceed with preparations for investing in iBOT Israel Botanicals Ltd., an Israeli botanical nutraceutical company (“iBOT”). iBOT has a manufacturing facility for a wide range of botanical formulations, and part of its strategy is to combine this with hemp and cannabidiol (“CBD”). The Board gave its approval, subject to agreement of definitive terms and receipt of all necessary corporate and other approvals, for a proposed transaction in which (1) the Company would have an option to make one or more investments during a period of 12 months in an aggregate amount of up to $1 million; (2) the investments may be through loans, direct equity purchases, or other means, and would be based on milestones; and (3) iBOT would grant the Company a 25% discount in its next fundraising. In addition, the Board approved for the Company to proceed with preparations for entering a services agreement with iBOT pursuant to which the Company would provide consulting and other services to iBOT. iBOT is controlled by an affiliate of the Company. The Company is still in the process of examining the cooperation with iBOT.

On September 17, 2020 we issued to Intelicanna 2,143,470 shares of common stock in exchange for 619,589 of Intelicanna’s ordinary shares. Ilanit Halperin, a director and the Chief Financial Officer of the Company, is also the Chief Financial Officer of Intelicanna, and Doron Birger, a director of ours, is the chairman of the board of directors of Intelicanna effective April 2021. The lock-up period under the share exchange agreement with respect to the 619,589 Intelicanna’s ordinary shares held by the Company has lapsed in March 2021.

On June 22, 2020, we entered into a share purchase agreement with Nanomedic Technologies Ltd., an Israeli private company and a related party as further described below (“Nanomedic”) as part of A-1 funding round open only to existing Nanomedic shareholders and their affiliates. Nanomedic developed SpinCare, a system that integrates electrospinning technology into a portable bedside device, offering immediate wound and burn care treatment. We paid $450 thousand for A-1 preferred shares of Nanomedic and also received warrants to purchase A-1 preferred shares. Such investment represents a holding of approximately 3.3% in Nanomedic. The round raised approximately $2.2 million in total. Citrine S A L and certain of its partnerships, all affiliates of the Company, were already beneficial shareholders of Nanomedic immediately prior to the A-1 funding round. Ilan Ben-Ishay, a director of the Company, was already a beneficial shareholder of Nanomedic immediately prior to the A-1 funding round. Ora Elharar Soffer, our chairperson and CEO, was already a director of both Nanomedic and its Israeli parent company, Nicast Ltd., immediately prior to the A-1 funding round, and she was also already a beneficial shareholder of Nanomedic immediately prior to the A-1 funding round.

On July 21, 2020, Citrine Global Israel began to work with certain Company shareholders, Beezz Home Technologies Ltd., in which Ora Elharar Soffer, our chairperson and CEO holds shares, and Golden Holdings Neto Ltd., in which Ilan Ben-Ishai, a director of the Company, holds shares, have been working towards establishing an Operational Innovation Center focuses on the medical cannabis industry, CBD, hemp, botanical, food supplements and cosmetics products. Our Board approved Citrine Global Israel to proceed with preparations for entering into an agreement to incorporate a new company, named Cannovation Center Israel Ltd., with Beezz Home Technologies Ltd.and Golden Holdings Neto Ltd., and to accept limitations on Citrine Global Israel’s rights in the Cannovation Center if and as mandated under Israeli regulations on the involvement of foreign entities.

On August 20, 2020, Citrine Global Israel, Beezz Home Technologies Ltd., and Golden Holdings Neto Ltd. incorporated Cannovation Center Israel Ltd. Citrine Global Israel holds 60% of Cannovation Center Israel Ltd.’s shares, while each of Beezz Home Technologies Ltd.and Golden Holdings Neto Ltd. holds 20% of its shares.

On December 30, 2020, the Ministry of the Economy of the Israeli government approved the grant of 10,000 square meters of industrial land in the Yeruham Biopharma Park to Cannovation Center Israel for building the Cannovation Center, that will include factories, laboratories, logistics and a distribution center for the medical cannabis, CBD, hemp and botanicals industries.

On November 22, 2020, certain of the Company’s stockholders representing more than 50% of the Company’s outstanding share capital (the “Majority Consenting Stockholders”) approved an amendment to the Company’s Certificate of Incorporation (the “Reverse Stock Split Certificate of Amendment”) in order to effect a reverse stock split of the Company’s common stock pursuant to a range of between 40-to-1 and 100-to-1 (the “Reverse Stock Split”). Pursuant to the Reverse Stock Split, each forty or one hundred shares of common stock, as shall be determined by the Board at a later time, will be automatically converted, without any further action by the stockholders, into one share of common stock. No fractional shares of common stock will be issued as the result of the Reverse Stock Split. Instead, each stockholder of the Company will be entitled to receive one share of common stock in lieu of the fractional share that would have resulted from the Reverse Stock Split. In addition, the Majority Consenting Stockholders also approved the elimination of the Company’s entire authorized class of fifty million (50,000,000) undesignated preferred stock, thereby reducing the total number of shares of capital stock that the Company may issue from one billion five hundred fifty-thousand (1,550,000,000) shares to one billion five hundred thousand (1,500,000,000) shares, all of which are designated as common stock (the “Certificate of Elimination”). The Certificate of Elimination will be effective upon the filing with the Secretary of the State of Delaware, which was not completed as of the date of this annual report’s filing. The Reverse Stock Split Certificate of Amendment will be effective upon receipt of approval from the Financial Industry Regulatory Authority (“FINRA”) and the filing with the Secretary of the State of Delaware, which both were not completed as of the date of the filing of this annual report.

As of March 31, 2021, the Company has one wholly-owned subsidiary, Citrine Global Israel, a company incorporated in Israel with registration number 516201159, which holds 60% of the share capital of Cannovation Center Israel Ltd., a company incorporated in Israel with registration number 516241270.

*See above detailed description of the Share Purchase Agreements with Intelicanna and Nanomedic.

** See above detailed description about Novomic deal.

Our registered office address in the State of Delaware is c/o Business Filings Incorporated, 108 West 13^th St., City of Wilmington, County of Newcastle, Delaware 19801, and the address of our primary executive office is 2 Jabotinsky St., Atrium Tower, Ramat Gan, Tel Aviv District, Israel. Our website address is www.citrine-global.com.

To better align our name with our new business, we changed the name of the Company to Citrine Global, Corp. and the ticker symbol to “CTGL.” These changes became effective on August 26, 2020. Our common stock is traded in the United States on the OTCQB market under the ticker symbol “CTGL.We have applied to list our common stock on the Nasdaq Capital Market. No assurance can be given that our application will be approved or that a trading market will develop.

Description of Business

Our business activity is comprised of developing Israeli technologies and solutions and bringing them to global markets. We believe in the health, wellness, food-tech, botanicals, and medical cannabis industries that demonstrate high growth potential and focus on these markets.

Our headquarters, directors, and executive officers are all based in Israel, where we operate via our wholly-owned subsidiary, Citrine Global Israel.

We have developed a unique Operational Innovation Centers platform that creates eco-systems for the health, wellness, botanicals, and medical cannabis industries. Our first Operational Innovation Center will be the Cannovation Center in Israel, which will focus on Israeli health, wellness, botanicals, and medical cannabis technologies and is supported in part by Israeli government grants and benefits.

We have an experienced team and a network of partners that include leading experts with a proven track record in technology, high-tech, biotech, investment, entrepreneurship, real estate, finance, and strategic business development in Israel and worldwide. We plan to operate worldwide through domestic subsidiaries, local teams, partners, and industry experts in each area.

Our vision is to become a global leader in developing Israeli technologies and solutions that improve

people’s health and quality of life worldwide.

We created a 5 element approach of multi-strategy solutions to realize our vision.

The 1st Element: Focus on the Israeli Technology Market

Israeli headquarters, top executives and partners

Our headquarters, top executives and partners are based in Israel, where we operate our 100%-owned-subsidiary, Citrine Global Israel. Our team and partners have a proven track record and expertise in technology, high-tech, biotech, investment, entrepreneurship, real-estate, finance, and strategic business development. We have been operating for many years in the Israeli market and are experienced in creating supportive technology eco-systems having an extensive network of relationships with top scientists, researchers, and industry leaders.

Cannovation Center Israel Supported in part by the Israeli Government

The Israeli government promotes and provides grants to support various technology fields, among them: healthcare, biotech, botanicals, food tech and the medical cannabis industries. The Israeli Government also promotes Multinational Corporations’ R&D centers and a multitude of joint programs and incubators in cooperation with academic institutes and universities. Cannovation Center Israel Ltd. will build our first innovation and operation center focused on health, wellness, botanicals, and medical cannabis industries supported in part by the Israeli government. Cannovation Center Israel Ltd. submitted a detailed plan for building and operating the Cannovation Center Israel. Following a lengthy examination process, it was awarded grants by the Israeli Economic and Industry Ministry in December 2020.

Yeruham is considered a national priority area for investments by the Israeli government. The mayor of Yeruham is leading an initiative to make Yeruham into a Medical Cannabis capital on a global scale. Government support includes allocation of land by auction at a subsidy, building permits, and an “Approved Factory” status entailing subsidies and benefits, reduced long term lease payments for the establishment and expansion of factories, reduced corporate tax.

Israel, dubbed “the Startup Nation”

Israel, dubbed the Startup Nation, is uniquely positioned to be a leading source of technology innovation for global markets. Israel is considered a leader in many areas in the high tech and biotech industries and has a vast and innovative life sciences sector and a cutting-edge medical technology industry. The Israeli technology sector is backed by the Israeli Government, which views technology and innovation as important growth engines of the Israeli economy.

Positioned at the forefront of global innovation, Israel is widely regarded as a leader in developing unique technologies that offer solutions to challenging issues across the world. The presence of multinational corporations in Israel demonstrates the importance of Israeli innovation worldwide. Israel has been considered a global innovation powerhouse for decades with strong scientific research and R&D capabilities.

Israeli companies’ exits demonstrate consistent growth in the past decade, with 1,210 deals totaling $111.29 billion. Israel has a local presence and innovation centers of the world’s leading multinational companies: Microsoft, Motorola, Google, Apple (with three R&D centers), Facebook, Berkshire-Hathaway, Intel, HP, Siemens, GE, IBM, Philips, Lucent, AOL, Cisco, Applied Materials, IBM, J&J, EMC, and Toshiba, Tata, Kodak, Citi bank, and more.

Israel has an advantage in the Life Sciences industry with growth in the number of companies developing technologies for the health and medical cannabis industries. There are currently hundreds of companies researching medical pharma-grade cannabinoid drugs for treating diseases, such as cancer, epilepsy, autism, as well as companies developing solutions for using big data and artificial intelligence (AI) in healthcare, digital health solutions, food tech engineering, and supplements, agritech, and more.

Experts involved in Israel’s booming cannabis industry estimate that Israel has the potential to be a global cannabis hub thanks to a critical mass of scientists and clinicians familiar with and open to medical uses of cannabis, strong biotech industry, and researchers in leading medical institutes and universities and a positive government approach to the medical cannabis industry. The world’s major companies have already begun to express interest in Israeli research in this field.

The 2nd element: caNnovation center israel - Operational Innovation Center

We have developed a unique Operational Innovation Centers platform to promote innovation, operational scale-up, and business growth. Our first Operational Innovation Center will be built in Israel by Cannovation Center Israel Ltd. It will focus on building an ecosystem for Israeli health, wellness, botanicals, and medical cannabis industries.

The innovation and operation center will include laboratories for botanical and cannabis research, plant genetics, pharmacological research, product development and facilities for preclinical and clinical trials, certified factories for cannabis, health and wellness products, storage, packaging, distribution, and consultancy services for strategy and business development.

External and Internal Views of the Plans of Cannovation Center Israel – all images rights reserved to the company. All images are for illustration purposes only and do not bind the company.

Cannovation Center Israel, an Eco-System for Health, Wellness, Botanicals and Medical Cannabis Innovation on a Global Scale

We believe in collaborations and synergies to promote innovation. Cannovation Center Israel was designed and will be built to create an eco-system that will attract partners, market leaders, companies and technologies in the fields of health, wellness, botanicals, and medical cannabis industries from Israel and around the world to become a global center in these fields.

Cannovation Center Israel Divisions and Internal Design

Cannovation Center Israel is designed to be a knowledge hub for cannabis and botanical innovation and a center of attraction for visitors and world-renowned experts from all around the world. Cannovation Center Israel includes 10,000 square meters of land, out of which 5,000 are built factories, laboratories, logistics, distribution, offices, visitor center, training center and more.

The Architect chosen to design Cannovation Center Israel is Mr. Avner Sher, one of Israel’s most respected architects who is also a famous international artist. When designing Cannovation Center Israel, we wanted to create a spectacular unique design. The roof was shaped like a leaf being the recognized brand symbol of Cannovation Center buildings in Israel & worldwide. Cannovation Center Israel will be built in accordance with ecological green principles of saving energy, including solar panels, which are specifically adapted to the environment and weather conditions in Yeruham, Israel. We own the property, which we believe will only grow in value.

Cannovation Center Israel is divided into 3 main areas:

Cannovation Center Israel is designed by professionals that specialize in the construction of cannabis, pharma and botanical factories and includes clean rooms and certified factories and laboratories that are compliant with all the required regulations and certifications of the State of Israel and the countries to which export is planned, such as within the EU.

Cannovation Center Israel Manufacturing Plants:

I. Manufacturing Plant for cannabis inflorescence: IMC-GMP licensed medical cannabis automated production lines for packaging inflorescences of different types and origins.

II. Manufacturing Plant for cannabis oil: IMC-GMP licensed medical cannabis automated production lines equipped for extraction, distillation filling & bottling of Cannabis oil.

III. Manufacturing Plant for botanical products: GMP licensed to produce food supplements & botanical formulas composed of plant extracts, minerals, medicinal mushrooms, and other components.

IV. Boutique cosmetics Manufacturing Plant: production lines equipped and GMP licensed to produce selected quantities of natural cosmetic products, including extracts from the cannabis plant, hemp and other botanical components.

V. Boutique beverages Manufacturing Plant: production lines equipped and GMP licensed to produce selected quantities of beverages, including water-soluble extracts from the cannabis plant, hemp, and other botanical components.

VI. Boutique pharmaceutical Manufacturing Plant: production lines equipped and GMP licensed to produce selected quantities of pharma grade medications for pilot and small-scale production of dry granulated and liquid production.

Cannovation Center Israel Laboratories Area:

I. Quality control lab: equipped laboratory for quality control (QC) of raw materials, in-process products, and finished products. The laboratory will also provide regulatory testing and professional consultancy services.

II. Research and development lab: equipped and licensed laboratory for research, product development and testing, including chemical synthesis and application of analytical and bio-analytical methods; research of raw materials and finished products and stability tests; examination of cannabis strains with high genetic quality to ensure high quality and high yield; collaborations with other laboratories and researchers from Israel and worldwide.

III. Preclinical and clinical trial lab: equipped and licensed clinical and preclinical clinical trials performed at the highest medical and pharmacological standards in cooperation with physicians and hospitals.

Cannovation Center Israel Distribution Area:

Licensed distribution area for local and global distribution of medical cannabis and botanical products, including import and export services with all needed approvals and licenses required locally and globally.

The plan is to have import and export to and from Europe, Canada, Japan, Africa, Australia, and any country that will have the relevant regulatory approvals.

Important note: the company does not, and will not, undertake any business activities in the U.S. that are illegal under applicable U.S. federal and state laws or any business activities in any other jurisdiction that are illegal under the laws of such jurisdiction.

Cannovation Center Israel Logistics & Storage Area

Cannovation logistics & storage area will include licensed, controlled, and protected warehouses for storing cannabis raw materials, in-process and finished products and botanical products.

Cannovation Center Israel Management & Consultants Area

The Cannovation management area will include:

The consultancy services range from assistance with strategic business planning to operational execution and financing and cover professional fields related to health, wellness, botanicals, and medical cannabis industries.

Business development consulting services to Cannovation Center companies and partners:

Cannovation Center Israel International Visitor Complex

The Cannovation Center Israel International Visitor Complex will be dedicated to promoting awareness and publicity for the center and will include:

Government Support:

In December 2020, the Israeli Economic and Industry Ministry approved support for establishing the Cannovation Center Israel, the first of its kind, located in Yeruham. The cannabis production facility will be built on an area of 10,000 square meters and will include an approved investment status factory for the production of cannabis products, R&D laboratories, quality assurance, a plant for the production of nutritional supplements and cosmetics combined with CBD and hemp, and storage, packaging, and distribution centers.

Cannovation Center Israel Real-Estate:

The Cannovation Center Israel is a property that includes 10,000 sqm, out of which 5,000 sqm are built and include factories, laboratories, offices, etc. It is owned, built, and managed by Cannovation Center Israel Ltd. Cannovation Center Real Estate Division includes a management company responsible for providing services for the industrial and manufacturing areas, labs, warehouses, offices, commercial areas, and more. The services include rental, sale, maintenance, infrastructure, facilities, regulatory compliance, licensing, and surveillance 24/7 services as required in the botanical and cannabis industries.

Business Model of Cannovation Center Israel:

Cannovation Center Israel’s vision is to bring together the entire cannabis and botanical industry from Israel and worldwide and create a supportive eco-system and a leading operation and research center that promotes scientific research and commercial collaborations between technologies, partners, companies, and academics institutions.

As a global center for botanical and cannabis innovation, it has laboratories and R&D at the highest medical and pharmaceutical standards for research on plant genetics and pharmacological effects, cultivation methods, preclinical & clinical trials, and health and wellness product development.

We intend to do significant research and development activities and to develop a unique line of products under the Cannovation brand in the fields of botanicals, medical cannabis, cannabinoid-based pharmaceutical products, cosmetics and beverages, and more.

Each division of the Israel Cannovation Center will be managed together with selected partners who are experts in their field.

The selection of partners is completed after successful due diligence, covering legal, financial, technological, business, and intellectual property aspects. We are currently in advanced processes with several companies and technologies to take part in Cannovation Center Israel, the details of which will be disclosed when finalized. Expected revenues from Cannovation Center Israel include ownership in center companies, rental of work and research spaces, management fees, consulting fees, and more.

The 3rd element: focus on the health, wellness, botanicals, and medical cannabis industries.

HEALTH & WELLNESS INDUSTRY OVERVIEW AND POTENTIAL

We believe in the health, wellness, botanicals, and medical cannabis industries which demonstrate high growth potential, and we are primarily focused on these industries.

The health and wellness industries are growing consistently creating addressable target markets of trillions of dollars:

The awareness of health and wellness is growing, with an emphasis on preventive medicine and wellbeing solutions and the use of botanicals, food supplements and edibles, and cosmetics infused with CBD and hemp (non-addictive cannabis components), which are beneficial for a variety of health problems, is expanding. In addition, changing consumer behavior and disruptive technologies are enabling the rapid consumerization and personalization of healthcare. There is an evolution from prescription drugs, doctor-administered diagnostics, and medical treatments to a new marketplace centered around people’s well-being as individuals, not patients, enabling and improving ‘quality of life’ in ways that can be seamlessly integrated into their daily routines.

The COVID-19 pandemic has brought attention and budgets to developing solutions to answer market needs for treatment, prevention, and everyday life solutions in this new situation. The fields of health and wellness have been the focus of global attention and even more so since the outbreak of the COVID-19 pandemic.

For these reasons, we decided to focus on health and wellness and particularly on the growing industries of botanicals, medical cannabis, and CBD/hemp industries, and we intend to do so in accordance with current rules and regulations applicable in every country.

Botanicals Industry Overview and Potential

The global botanical ingredients market size was estimated at $131.5 billion in 2019 and is expected to grow at a compound annual growth rate (CAGR) of 7.0% from 2020 to 2027 and reach $225 billion in 2027. The global botanical ingredients market growth is driven by growing awareness towards health and safety in the pharmaceutical, food and beverage industries. Authentic consumption has become a significant food and beverage trend, and people seek non-artificial and natural ingredients. Products such as ginseng, echinacea, Ginkgo Biloba, and garlic are considered as the major selling botanical products and are considered natural remedies for inflammation and infections.

The growth of the market for botanical ingredients is further driven by the ongoing pandemic COVID-19. People looking for strengthening the natural immune system also with vitamins and minerals and moving towards natural colorant-based plant juice products since they provide better and long-lasting protection from virus and bacteria. In addition, botanicals are widely used by people who suffer from diseases related to weight management, clinical nutrition, digestive health (gut health problems), immunity, diabetes, and cardio fitness, either as treatment or prevention.

The cosmetic and personal care segment is also on the rise with companies constantly discovering novel herbal ingredients as people are inclining more towards natural ingredients-based products.

The main applications of botanicals are in the following market segments: Food & Beverages, Dietary Supplements, Cosmetic & Personal Care, and Pharmaceuticals.

Biotech/Healthcare Industry Overview and Potential – Specific Areas

BIOTECH:

The global Biotechnology Market is expected to reach USD 833.34 Billion by 2027 and includes areas such as Nano-biotechnology, DNA Sequencing, Fermentation, PCR Technology, Cell-based Assay, Chromatography, Tissue engineering and Regeneration, and others. The solutions are applied in Agriculture, Industrial Processing, Pharmacy, Bioinformatics, Environment, Bio services and more.

DIGITAL HEALTH:

The emergence and growth of healthcare IT and remote patient monitoring services, coupled with the increasing penetration of smart devices and mobile platforms, apart from favorable government policies, has spurred the growth of this market and it is attracting a lot of investments. Market size would touch $379 billion by 2024, growing at an astounding CAGR of more than 25.9%.

BIG DATA FOR THE HEALTHCARE INDUSTRY

The global big data analytics in the healthcare market is predicted to reach $148.34 billion by 2028, up from $22.43 billion in 2019. Amid the uncertainty of the Covid-19 pandemic, 166 healthcare AI startups globally raised over $2.1 billion in the first half of 2020.

Healthcare and specifically the biopharma industry face significant challenges such as high R&D costs, harsh regulatory compliance demands, increase in the cost needed to bring products to market, the threat of patent expirations, and more. A significant change is needed to the current pharma R&D model to increase productivity and profitability. The technology that can bring forward this change is big data analysis based on artificial intelligence (“AI”) and machine learning (“ML”), which can introduce greater efficiency, productivity, economy, and quality.

Most big pharma companies (such as Novartis, Roche, Pfizer, Merck, AstraZeneca, GlaxoSmithKline, Sanofi, AbbVie, Bristol-Myers Squibb and Johnson & Johnson, etc.) are already starting to take advantage of AI innovation.

Big Data-based AI/ML technologies can be implemented in all stages of drug development, from early discovery to commercialization, as they are involved in collecting and using very large datasets.

Healthcare big data is too vast and complex to be available and meaningful by traditional means. The development of AI algorithms, incorporating ML and deep learning, has enabled the automatic and efficient collection, management, and analysis of big biomedical data in all its forms, including medical records, DNA and RNA sequencing, and medical images. Health maintenance organizations, health insurers and pharmaceutical companies are all looking for tools based on artificial intelligence and big data, in order to gain a significant advantage over their competitors in the market by improving their products, services, and results. Artificial intelligence systems are beginning to be assimilated as tools in clinical and research environments. Today, only 4% of the clinical and biological data is being utilized.

Medical Cannabis and CBD Industry Overview and Potential

Global trends explaining exponential growth of cannabis market and recent emergence of pharma-level certified cannabis drugs:

The Impact of COVID-19. The COVID-19 pandemic has had a profound impact on the global economy. Countries seeking to recover financially in the aftermath of the pandemic will seek new sources of taxable revenue, which medical and adult-use cannabis could offer. CBD consumption increased because many consumers with increased awareness of their health sought to treat COVID-19 induced anxieties.

The Impact of The New US administration. The US presidential election in November 2020 was a momentous event for the cannabis industry not only did all cannabis legalization ballots pass in all five states (Mississippi, South Dakota, New Jersey, Arizona, and Montana), but also democratic leaders Joe Biden and Senator Kamala Harris were elected into the White House. Both the president and vice president-elect have indicated an interest in tackling federal cannabis reform in the country during their term in office. We have taken a conservative approach regarding the US. We decided that since the legal landscape for medical cannabis is not finalized and varies from state to state, we will not operate in the US in the cannabis industry. We plan to establish innovation centers in the US in industries such as health, wellness, botanicals, food-tech, and other areas that we are exploring with local partners.

EU Trade implications. Following the European Court of Justice verdict on CBD, we’ve already seen the European Commission take action to realign its position on the substance. This has resulted in the EU recommencing the frozen CBD Novel Food marketing authorization applications.

The Global Medical Cannabis Export Arms Race. The race to supply the growing demand of the European medical cannabis market is on. Once dominated by Canadian and Dutch exports, in the past year or so, we have seen Portugal become a major supplier and smaller export successes from the likes of Spain, Australia, and Israel.

Pharma Approved CBD. The European dronabinol industry (a drug approved by the FDA as safe and effective for HIV/AIDS-induced anorexia and chemotherapy-induced nausea and vomiting) attracts major players in global cannabis as Breath of Life Pharma, Cantourage, Tilray, and Echo Pharmaceuticals. In the same year, the UK’s Food Standards Agency classified CBD as a novel food granting UK CBD companies a head start compared to their European competitors. Despite the considerable uncertainties which will arise from the new trade relations with Europe; the UK also has an opportunity to develop their line on the regulation of cannabis and CBD. Latin American cannabis and hemp markets are going to be in the spotlight in 2021. While Brazil is expecting Congress to vote on law PL399 in early 2021, which, if approved, would represent a new major cultivation player, Mexico voted for the law and potentially is to become the largest adult-use market this decade.

MEDCIAL CANNABIS:

Medical cannabis solutions have been approved for medical use in many countries. They have been shown to benefit more than 40 serious medical conditions, including cancer, multiple sclerosis, Parkinson, epilepsy, chronic pain, post-trauma, Chronic digestive problems, Crohn’s Disease, anxiety and sleep disorders, Concentration and memory problems, Tourette Syndrome, and more.

The global legal cannabis market is forecast to be worth up to $103.9 billion by the year 2024, driven, in the most part, by the burgeoning international medicinal cannabis market, worth a potential $62.7 billion by the same year.

Propelled onwards by the increasing number of countries considering cannabis reform and the penetration of cannabis products into new consumer product markets, the first-of-its-kind global report expects the worldwide cannabis market to reach new heights by 2024.

PHARMA GRADE CANNABIS DRUGS

Earlier this year, Jazz Pharmaceuticals purchased GW Pharmaceuticals in a $7.2 billion cash-and-stock deal. The target of the deal was to promote its neuroscience business by adding cannabis-based epilepsy treatment in 2020 third-quarter sales, contributing a sizeable chunk to the overall sales of about $600 million. The acquisition will allow Jazz to expand its offerings beyond sleep disorders and cancer by adding GW Pharma’s Epidiolex. The cannabis-based drug was approved in the United States in June 2018.

CANNABIS CAPITAL MARKET

S&P Global reported that U.S. and Canadian cannabis and cannabis-related companies completed 124 deals in 2020, worth a combined $615.1 million. In the past few months, some big deals have taken place in the cannabis industry. In December 2020, news of a near-$4 billion merger, including Canadian cannabis giants Aphria (NASDAQ:APHA) and Tilray (NASDAQ:TLRY), will create the largest cannabis company in the world in terms of revenue. In February 2021, Jazz Pharmaceuticals (NASDAQ:JAZZ) also announced it would be acquiring GW Pharmaceuticals (NASDAQ:GWPH). and with more states in the U.S. legalizing cannabis and slightly more friendly U.S.presidential administration, there is currently a lot of excitement in the industry.

MARKET DRIVERS AND GROWTH ENGINES FOR CANNABIS EXPONENTIAL GROWTH

THE CBD INDUSTRY

The CBD market size is set to grow at around 52.7% CAGR between 2020 and 2026. CBD is a compound found in the hemp plant utilized due to its therapeutic properties in humans. The growing trend among individuals to treat a variety of ailments such as anxiety, nausea, stress, chronic pain, neurological conditions, and seizures is booming. This is due to the antibiotic and analgesic effects and properties present in CBD.

Market and industry data were taken from third-party sources, industry reports and publications, websites, and other publicly available information. There can be no assurance as to the accuracy or completeness thereof. Actual outcomes may vary materially from those forecasts. Market and economic data are subject to variations and cannot be verified due to limits on the availability and reliability of data inputs, the data gathering process and other limitations and uncertainties the are part of the market research process.

The 4th element: acquiring technologies and developing scientific, research, and commercial collaborations to LEVERAGE COMPANY VALUE AND intellectual property (“IP”).

We plan to leverage our IP and value by acquiring technologies and companies and building commercial, scientific, and research collaborations using various business models. This will include acquiring technologies and companies in various business models, promoting scientific, research, and commercial collaborations in our target markets, creating synergies between technologies, partners, companies, and academic institutions, and providing consulting services for building winning strategies.

We intend to do significant research and development activities to bring new products and new technologies to market. We also plan to develop a unique line of products and cooperation initiatives for joint innovation, research, development, and production under the Cannovation brand in the fields of botanicals, medical cannabis, cannabinoid-based pharmaceutical products, cosmetics, and beverages.

We are already in process with several technology companies in the industry for joint research and development projects in the fields of botanicals, medical cannabis, cannabinoid-based pharmaceutical products, big data, AI, machine learning solutions, and more.

The 5th element: creating a global network of offices, domestic subsidiaries, and Operational Innovation Centers worldwide.

Overview

Our global growth strategy is to create a network that operates worldwide through subsidiaries, local teams, partners, and Cannovation Operational Innovation Centers. We have developed a unique Operational Innovation Centers platform for building eco-systems for the health, wellness, botanicals & medical cannabis industries to promote innovation, operational scale-up, and business growth.

Our first innovation and operation center is being built by Cannovation Center Israel Ltd. (our 60%-owned-subsidiary), for the Israeli health, wellness, botanicals, and medical cannabis industries and is backed by the Israeli government grants and benefits. Cannovation center Israel includes laboratories for botanicals & cannabis research, pharmacological research, product development, preclinical & clinical trials, certified factories for cannabis, health and wellness products, storage, packaging, distribution, import, export, consultancy services, strategy & business development, real estate, asset management solutions, and more.

We plan to build Cannovation Centers in other countries worldwide, focusing on Europe’s first stage and several countries that we are already examining. We intend to prioritize countries with local government support and locally trained staff with know-how in the medical cannabis industry.

We have taken a conservative approach regarding the US. We decided that since the legal landscape for medical cannabis is not finalized and varies from state to state, we will not operate in the US in the cannabis industry. We plan to establish innovation centers in the US in industries such as health, wellness, botanicals, food tech, and other areas that we are exploring with local partners.

The Need for Cannovation Operational Innovation Center:

The Solution:

Cannovation Operational Innovation Centers will create eco-systems that are win-win environments for entrepreneurs, startups, growth-stage companies, research and academia institutes, laboratories, regulatory service providers, and more. It is a complete solution covering research and development, production, operation, distribution, as well as business strategy and professional consulting.

Utilizing our experience, we understand the global need for supplying an ecosystem tailored to the needs of the health, wellness, botanicals, and medical cannabis industries.

Our Vision: Global Coverage of Innovation Centers

As promoting innovation is our strategic focal point, we envision having a global network of Operational Innovation Centers, where each center in every territory provides a comprehensive solution tailored to the needs of the industry and the regulation in the territory. Each innovation center will focus on specific growing technology industries and tailor products and services in accordance with the needs of the industry and territory. This business model will allow companies to manufacture and sell products all over the world without import and export restrictions. Citrine Global Operational Innovation Centers will be built with local partners and local government support.

Advisory Board

We maintain an Advisory Board consisting of internationally recognized scientists who advise us on our strategy’s scientific and business aspects. The Advisory Board meets periodically to review specific projects and to assess the value of new technologies and developments to us. In addition, individual members of the Advisory Board meet with us periodically to provide advice in their particular areas of expertise. The Advisory Board and management consist of the following members, information concerning who is set forth below:

Edan Moshe Katz - CEO of Neto Financial Planning, Owner of Golden Holdings Neto Ltd., and chairman of the board of directors of WealthStone Holdings Group. As Neto Financial Planning CEO, he led the company to consistent growth with thousands of loyal customers, providing financial advisory services in respect of products with a market worth of over $4.5 billion. Edan has over 20 years of managerial and financial experience, and he is a licensed pension insurance consultant and a Certified Financial Planner in holistic financial planning.

David Kretzmer - an experienced international commercial lawyer and litigator with the ability to advise clients as to multi-jurisdictional, multi-language and multi-cultural transactions and disputes. David has more than 35 years of experience in international litigation and transactions and has concentrated on commercial law, property development and syndication, real estate law, corporate law, contracts, international trade, securities brokerage, investment banking, corporate restructuring, and corporate development. He also has extensive experience in structuring trusts for high net worth families and individuals and establishing and managing development stage companies. David began his legal career with Edward Nathan Friedland Mansel and Lewis’s premier law firm in Johannesburg, South Africa. He has since had a wide-ranging legal career in New York, Israel, and South Africa, with extensive legal and corporate experience in Europe and Great Britain. David has represented foreign investors in complex investment transactions and various forms of international dispute resolution. David also has served as arbitrator or mediator in such disputes. From 1995 through 2000, David served as a consultant to a New York-based brokerage firm structuring private placements and initial public offerings in the technology and life science industry, involving Israeli, American, European, and South African companies. From 2012 through 2014, David was a United Nations representative of the NGO, the International Association of Jewish Lawyers and Jurists, in New York and Geneva. David was licensed to practice law in New York in 2004, he was admitted to practice as an Advocate in Israel in 1981 and has been licensed to practice in South Africa since 1977. He has practiced law in New York, South Africa, and Israel and was most recently a senior partner in the law firm of Kretzmer and Associates PLLC in New York and the senior partner in the law firm Kretzmer and Associates in Tel Aviv.

Dr. Oded Sagee, Ph.D. founded and managed AquaAgro Lab Ltd., an investment subsidiary of the AquaAgro Fund that invested in agro-high-tech companies in the clean-tech industry. Prior to that, Dr. Sagee held management, sales, and R&D positions at Gaon Agro Industries Ltd, Phytech Ltd, and AminoLab Ltd. Dr. Sagee has in-depth knowledge in the fields of agriculture, biotechnology, life sciences, chemistry, and pharmaceuticals. He completed his Ph.D. in Plant Physiology at the Hebrew University of Jerusalem and served as a senior researcher and head of the department at the Agricultural Research Organization, Volcani Center, Israel. Dr. Sagee has published several papers, has extensive experience, and a proven track record in finance, venture capital, international business, consulting, and management.

Gil Shapira - an engineer with over 30 years of experience in planning, managing, and implementing complex engineering projects worldwide. Mr. Shapira is founder and CEO of a multidisciplinary design, construction and consultancy company specializing in the regulatory and construction needs of pharmaceutical, biotechnology and life sciences technology companies. Mr. Shapira’s company is one of the first companies to be involved in the design and establishment of GMP standard-compliant cannabis facilities. He is an expert in the design and installation of medical cannabis facilities in Israel worldwide. The company has built thousands of square meters of production facilities, clean rooms, laboratories, and production equipment, all certified by the relevant authorities, such as the FDA, European Medicines Agency, and the Israeli Ministry of Health.

Ron Avishur - attorney at law, Member of the Israeli Bar since 2005, L.L.B TLV University, L.L.M TLV University, Legal and strategic counseling for real estate and private equity funds, as well as in the cannabis industry.

Ronit Pasternak, M. Sc., owns over 20 years of experience in senior marketing management positions in start-ups and high-tech companies. Ronit brings to the table her expertise in international strategy, marketing, investor & public relations, branding, digital marketing, and market research. Previously, Ronit worked as a Human Factors’ Specialist designing User Interface for input devices and software applications for an avionics information system, including writing design requirements for FAA regulation. Ronit has an M.Sc. in Industrial Engineering and Management from the Technion - Israel Institute of Technology and B.A. cum laude in Psychology and English Linguistics and Literature from the Hebrew University of Jerusalem.

Primary Shareholders:

Citrine S A L investment & Holdings ltd & Citrine SAL Biotech & High tech funds - an Israeli privet investment funds various fields of technology, high-tech, and biotech.

Citrine S A L Biotech fuds - specialize in healthcare, wellness solutions, digital health, medical devices, food tech, botanical nutraceuticals, medical cannabis, and more,

Citrine S A L High-Tech funds - specialize in high-tech, cyber, IoT, hardware and software.

WealthStone Holdings Group is a long-standing investment body with extensive financial knowledge and experience. WealthStone specializes in alternative investments, real estate, technology, and hedge funds.

Neto Financial Planning has been operating for over 27 years and is one of the largest companies in the Israeli private and business financial planning and insurance industry. Neto has thousands of loyal customers, which it has been accompanying for many years, providing financial advisory services in respect of products with a market worth of over $4.5 billion.

Revenues

We plan on generating revenues from technology acquisitions and collaborations, professional and business consulting fees, brokering fees, leasing, and management services for real-estate assets we own, taking advantage of favorable market conditions to sell real-estate assets, company value appreciation, interest income, investments, and more.

Competition

The technological innovation and business strategy consulting landscape is very crowded and competitive. Many models for promoting innovation exist worldwide, from technology incubators and accelerators to joint ventures between industries, governments, and universities, to REITs and more. Our business model is unique in two aspects: (i) it provides a complete solution covering various fields, from research, development, to production, operations, strategy, and business consulting, and (ii) most solutions for promoting innovation address the initial stages of seed companies and startups. Our solutions cover these stages as well but are primarily focused on growth-stage industries and global expansion needs relating to sales and operations.

Among the competition, we can list other more established consulting firms, investment bankers, brokers, real-estate funds, investment firms, online lending sites, tech incubators, and more. Our business competes primarily in Israel, Europe, and North America. We mainly target clients with whom we have existing relationships, either directly or via our partners. We believe that our shareholders, directors, and officers’ experience and contacts and the fact that we offer a wide range of services under one roof will contribute to our competitiveness. Specifically relating to Cannovation Center in Israel, the medical cannabis industry is, and is expected to remain, very competitive.

The medical cannabis competition is primarily on a regional basis and could vary significantly pending on location and time, as regulations constantly change. The medical cannabis market is in a high growth phase. We are working to achieve a prominent position by taking advantage of the Israeli medical cannabis recognition and technological lead and our years of experience in the field.

Regulatory Environment

We need to obtain various regulatory approvals and licenses for the medical cannabis activities, botanicals, clinical and preclinical trials, real-estate assets we acquire and other businesses that require certain approvals and licenses for the premises in which they operate (such as laboratories).

According to current Israeli law regarding medical cannabis, IMC-GMP-certified manufacturers can sell to pharmacies or export.

The various components of the medical cannabis supply chain in Israel are currently obliged to meet Good Practices Procedures for Israel Medical Cannabis (‘‘IMC’’) as set forth by the Israeli Ministry of Health’s Medical Cannabis Unit (‘‘MCU’’). These standards are based on international standards and guarantee the high quality of Israeli medical cannabis products.

Employees

We currently engage 18 employees and service providers (some on a full-time basis, and others on a part-time basis) working in various fields of management, research and development, product management, marketing and regulatory advice.

We are subject to Israeli labor laws and regulations with respect to our employees located in Israel. These laws and regulations principally concern matters such as pensions, paid annual vacation, paid sick days, length of the workday and workweek, minimum wages, overtime pay, insurance for work-related accidents, severance pay and other conditions of employment. Our employees are not represented by a labor union. We consider our relationship with our employees to be good. To date, we have not experienced any work stoppages.

Legal Proceedings

We are not currently subject to any material legal proceedings.

ITEM 1A. RISK FACTORS

You should consider carefully the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K. If any of the following risks are realized, our business, financial condition, results of operations and prospects could be materially and adversely affected. The risks described below are not the only risks facing the Company. Risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, results of operations and prospects.

Risks Associated with Our Business

Our limited operating history does not afford investors a sufficient history on which to base an investment decision.

We have a limited operating history. Our operations will be subject to all the risks inherent in the establishment of a developing enterprise and the uncertainties arising from the absence of a significant operating history. We have not generated positive earnings and there can be no assurance that we will achieve profitable operations. If our business plan is not successful, and we are not able to operate profitably, investors may lose some or all of their investment in our company.

Failure in our information technology systems, including by cybersecurity attacks or other data security incidents, could significantly disrupt our operations.

Our operations depend, in part, on the continued performance of our information technology systems. Our information technology systems are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptions. Failure of our information technology systems could adversely affect our business, profitability and financial condition. Although we have information technology security systems, a successful cybersecurity attack or other data security incident could result in the misappropriation and/or loss of confidential or personal information, create system interruptions, or deploy malicious software that attacks our systems. It is possible that a cybersecurity attack might not be noticed for some period of time. The occurrence of a cybersecurity attack or incident could result in business interruptions from the disruption of our information technology systems, or negative publicity resulting in reputational damage with our shareholders and other stakeholders and/or increased costs to prevent, respond to or mitigate cybersecurity events. In addition, the unauthorized dissemination of sensitive personal information or proprietary or confidential information could expose us or other third-parties to regulatory fines or penalties, litigation and potential liability, or otherwise harm our business.

We may need to hire industry professionals with experience in the production and sale of our products and proposed products.

At present, we are a small company. We expect to hire industry professionals with experience in the medical device and beauty industries. Our future financial performance and our ability to compete effectively will depend, in part, on our ability to manage any future growth effectively.

Foreign Expansion Efforts and Operations

The Company’s expansion into jurisdictions abroad is subject to additional business risks, including new or unexpected risks including economic instability, changes in laws and regulations, and the effects of competition, as well as operational, regulatory, compliance and reputational and foreign exchange rate risk. In addition, future global expansion may require up-front expenses, including those associated with obtaining regulatory approvals, as well as additional ongoing expenses, including those associated with infrastructure, staff, and regulatory compliance. Failure to support operational expansions could result in operational failures and regulatory fines or sanctions. There is no guarantee that the Company will be able to realize any of the anticipated benefits of any transactions related to the Company’s expansion strategy.

The COVID-19 pandemic, or any other pandemic, epidemic or outbreak of an infectious disease, may materially and adversely affect our business and operations.

The outbreak of COVID-19, which originated in Wuhan, China, in late 2019, has since spread across the globe, including the United States, Israel and many European countries in which we operate. On March 11, 2020, the World Health Organization declared the outbreak a pandemic. While COVID-19 is still spreading and the final implications of the pandemic are difficult to estimate at this stage, it is clear that it has affected the lives of a large portion of the global population. At this time, the pandemic has caused states of emergency to be declared in various countries, travel restrictions imposed globally, quarantines established in certain jurisdictions and various institutions and companies being closed. We are actively monitoring the pandemic and we are taking all necessary measures to respond to the situation in cooperation with the various stakeholders.

A COVID-19 infection outbreak among our workforce could result in a temporary or long-term disruption in our business activities, including manufacturing and other functions.

Based on guidelines provided by the Israeli Government, employers (including us) are required to prepare and increase as much as possible the capacity and arrangement for employees to work remotely. In that regard, and in compliance with all applicable Israeli rules and guidelines, our offices have remained closed since the middle of March 2020, and all of our employees currently work remotely.

Future deterioration or prolonged difficulty in economic conditions could have a material adverse impact on our business, financial position, and liquidity.

Future deterioration or prolonged difficulty in economic conditions, because of COVID-19 or otherwise, could have a material adverse impact on our business, financial position and liquidity. For example, it could adversely affect our ability to access the liquidity that is necessary to fund operations on terms that are acceptable to us or at all, and could reduce our ability to finance future projects. Financial or other difficulties at our affiliates and partners could negatively affect availability of credit to us in the future.

The Company’s bylaws provide for indemnification of its directors and officers and the purchase of directors and officers insurance at the Company’s expense. This will limit the potential liability of the Company’s directors and officers at a major cost to the Company and hurt the interests of its stockholders.

The Company’s bylaws include provisions that fully eliminate the personal liability of the directors and officers of the Company for monetary damages possible under the laws of the State of Delaware or other applicable law. These provisions eliminate the liability of directors and officers to the Company and its stockholders for monetary damages arising out of any violation of a director or officer of his fiduciary duty of due care. Under Delaware law, however, such provisions do not eliminate the personal liability of a director or officer for (i) breach of the director’s or officer’s duty of loyalty, (ii) acts or omissions not in good faith or involving intentional misconduct or knowing violation of law, (iii) payment of dividends or repurchases of stock other than from lawfully available funds, or (iv) any transaction from which the director or officer derived an improper benefit. These provisions do not affect a director’s and officer’s liabilities under the federal securities laws or the recovery of damages by third parties.

A certain group of the Company’s stockholders may exert significant influence over its affairs, including the outcome of matters requiring stockholder approval.

As of the date of this Annual Report, a certain group of stockholders, including Ora Elharar Soffer, our CEO and Chairperson of the Board, directly and through Beezz Home Technologies Ltd and Citrine S A L, and others, collectively own a majority of the issued and outstanding shares of the Company. As a result, such individuals will have the ability, acting together, to control the election of the Company’s directors and the outcome of corporate actions requiring stockholder approval, such as: (i) a merger or a sale of the Company, (ii) a sale of all or substantially all of its assets, and (iii) amendments to its certificate of incorporation and bylaws. This concentration of voting power and control could have a significant effect in delaying, deferring or preventing an action that might otherwise be beneficial to the Company’s other stockholders and be disadvantageous to the Company’s stockholders with interests different from those individuals. Certain of these individuals also have significant control over the Company’s business, policies and affairs as officers or directors of the Company. Therefore, you should not invest in reliance on your ability to have any control over the Company.

Our failure to manage growth effectively could impair our business.

Our ability to effectively manage growth may require us to expand the capabilities of our operational and management systems and to attract and retain qualified personnel. There can be no assurance that we will be able to do so. If we are unable to successfully manage growth, our business, prospects, financial condition, and results of operations could be adversely affected.

Our plans are dependent upon key individuals and the ability to attract qualified personnel.

In order to execute our business plan, we will be dependent on Ora Elharar Soffer, our Chief Executive Officer and Chairperson. The loss of Ms. Meir Soffer could have a material adverse effect upon our business prospects. Moreover, our success also depends on our ability to identify, attract and retain qualified personnel, including officers, directors, advisors, consultants, third party contractors and other partners, to assist with the execution of our business plans. Competition for such personnel is intense, and there can be no assurance that we will be successful in identifying, attracting and retaining such personnel in the future. The failure to succeed in these endeavors would have a material adverse effect on our ability to consummate our business plans.

We rely on knowledge and experience of our primary shareholders.

We rely on our access to knowledge and experience of our primary shareholders, including Citrine S A L Investment & Holdings Ltd, the Wealthstone Group and the Neto Group. If such access is reduced or lost, we may not be able to successfully execute our growth strategies, which could adversely affect our results of operations.

Risks relating to our exposure to equity securities of other companies in which we invest.

We are not primarily engaged in the business of investing, reinvesting, or trading in securities, and we do not hold ourselves out as being engaged in those activities; however, the Company has acquired or is in the process of acquiring securities of certain publicly traded and privately held companies. These investments carry risk of partial or total loss, as with any such investment of this kind. We generally monitor the Company’s investments to keep abreast of the investments and positions, but do not portend to actively trade in these securities and we do not have broker-dealers daily monitoring our investments to take positions in the event of market swings or fluctuations, whether on the upside or downside; hence, these investments bear certain risks of loss or failure to attain maximum gain.

We may be classified as an inadvertent investment company.

We are not primarily engaged in the business of investing, reinvesting, or trading in securities, and we do not hold ourselves out as being engaged in those activities. Under the Investment Company Act of 1940, as amended (the “1940 Act”), however, a company may be deemed an investment company under section 3(a)(1)(C) of the 1940 Act if the value of its investment securities is more than 40% of its total assets (exclusive of government securities and cash items) on a consolidated basis. An inadvertent investment company can avoid being classified as an investment company if it can rely on one of the exclusions under the 1940 Act. One such exclusion, Rule 3a-2 under the 1940 Act, allows an inadvertent investment company a grace period of one year from the earlier of (a) the date on which an issuer owns securities and/or cash having a value exceeding 50% of the issuer’s total assets on either a consolidated or unconsolidated basis and (b) the date on which an issuer owns or proposes to acquire investment securities having a value exceeding 40% of the value of such issuer’s total assets (exclusive of government securities and cash items) on an unconsolidated basis. Classification as an investment company under the 1940 Act requires registration with the SEC. If an investment company fails to register, it would have to stop doing almost all business, and its contracts would become voidable. Registration is time consuming and restrictive and would require a restructuring of our operations, and we would be very constrained in the kind of business we could do as a registered investment company. Further, we would become subject to substantial regulation concerning management, operations, transactions with affiliated persons and portfolio composition, and would need to file reports under the 1940 Act regime. The cost of such compliance would result in the Company incurring substantial additional expenses and could result in the complete cessation of our operations, and the failure to register if required would have a materially adverse impact to conduct our operations.

Risks Related to Our Common Stock

Our common stock may suffer from reduced liquidity or illiquidity and as such sale of your holding may take a considerable amount of time.

The shares of our common stock are thinly-traded on the OTCQB Market, meaning that the number of persons interested in purchasing our common stock at or near bid prices at any given time may be relatively small or non-existent. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that a broader or more active public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained. Due to these conditions, we can give you no assurance that you will be able to sell your shares at or near bid prices or at all if you need money or otherwise desire to liquidate your shares.

Shares eligible for future sale may adversely affect the market.

From time to time, certain of the Company’s stockholders may be eligible to sell all or some of their shares of common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144 promulgated under the Securities Act, subject to certain limitations. In general, pursuant to Rule 144, non-affiliate stockholders may sell freely after six months subject only to the current public information requirement. Affiliates may sell after six months subject to the Rule 144 volume, manner of sale (for equity securities), and current public information and notice requirements. Any substantial sales of the Company’s common stock pursuant to Rule 144 may have a material adverse effect on the market price of its common stock.

We are subject to compliance with securities laws, which exposes us to potential liabilities, including potential rescission rights.

We have offered and sold our common stock to investors pursuant to certain exemptions from the registration requirements of the Act, as well as those of various state securities laws. The basis for relying on such exemptions is factual; that is, the applicability of such exemptions depends upon our conduct and that of those persons contacting prospective investors and making the offering. We have relied upon the operative facts as the basis for such exemptions, including information provided by investors themselves.

If any prior offering did not qualify for such exemption, an investor would have the right to rescind its purchase of the securities if it so desired. It is possible that if an investor should seek rescission, such investor would succeed. A similar situation prevails under state law in those states where the securities may be offered without registration in reliance on the partial preemption from the registration or qualification provisions of such state statutes. If investors were successful in seeking rescission, we would face severe financial demands that could adversely affect our business and operations. Additionally, if we did not in fact qualify for the exemptions upon which we have relied, we may become subject to significant fines and penalties imposed by the SEC and state securities agencies.

We have never paid cash dividends and do not anticipate doing so in the foreseeable future.

We have never declared or paid cash dividends on our shares of common stock. We currently plan to retain any earnings to finance the growth of our business rather than to pay cash dividends. Payments of any cash dividends in the future will depend on our financial condition, results of operations and capital requirements, as well as other factors deemed relevant by our board of directors.

Our Common Stock is subject to the “Penny Stock” rules of the SEC and the trading market in our stock is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment.

The SEC has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require that a broker or dealer approve a person’s account for transactions in penny stocks, and the broker or dealer receives from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience objectives of the person, and make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form sets forth the basis on which the broker or dealer made the suitability determination and that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock. Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

Financial Industry Regulatory Authority, Inc. (“FINRA”) sales practice requirements may limit a stockholder’s ability to buy and sell our common stock.

In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our Common Stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

Our share price could be volatile and our trading volume may fluctuate substantially.

The price of our common stock has been and may in the future continue to be extremely volatile, with the sale price fluctuating from a low of $0.03 to a high of $0.29 during the year commencing as of January 1, 2020. Many factors could have a significant impact on the future price of our common stock, including:

Our annual and quarterly results may fluctuate greatly, which may cause substantial fluctuations in our common stock price.

Our annual and quarterly operating results may in the future fluctuate significantly depending on factors including the timing of purchase orders, new product releases by us and other companies, gain or loss of significant customers, price discounting of our product, the timing of expenditures, product delivery requirements and economic conditions. Revenues related to our product are required to be recognized upon satisfaction of all applicable revenue recognition criteria. The recognition of revenues from our product is dependent on a number of factors, including, but not limited to, the terms of any license agreement.

Any unfavorable change in these or other factors could have a material adverse effect on our operating results for a particular quarter or year, which may cause downward pressure on our common stock price. We expect quarterly and annual fluctuations to continue for the foreseeable future.

Delaware law contains provisions that could discourage, delay, or prevent a change in control of the Company, prevent attempts to replace or remove current management and reduce the market price of its common stock.

Provisions in the Company’s certificate of incorporation and bylaws may discourage, delay or prevent a merger or acquisition involving the Company that its stockholders may consider favorable. For example, the Company is subject to the anti-takeover provisions of the Delaware General Corporation Law (“DGCL”). Under these provisions, if anyone becomes an “interested stockholder,” the Company may not enter into a “business combination” with that person for three years without special approval, which could discourage a third party from making a takeover offer and could delay or prevent a change in control of the Company. An “interested stockholder” is, generally, a stockholder who owns 15% or more of the Company’s outstanding voting stock or an affiliate of the Company who has owned 15% or more of the Company’s outstanding voting stock during the past three years, subject to certain exceptions as described in the DGCL.

Risks Related to our Operations in Israel

We conduct our operations in Israel and therefore our results may be adversely affected by political, economic and military instability in Israel and the region.

Our principal offices are located in central Israel and some of our officers, employees and directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect our business. Any hostilities involving Israel or the interruption or curtailment of trade within Israel or between Israel and its trading partners could adversely affect our operations and results of operations and could make it more difficult for us to raise capital. During November 2012 and from July through August 2014, Israel was engaged in an armed conflict with a militia group and political party who controls the Gaza Strip, and during the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group and political party. In December 2008 and January 2009 there was an escalation in violence among Israel, Hamas, the Palestinian Authority and other groups, as well as extensive hostilities along Israel’s border with the Gaza Strip, which resulted in missiles being fired from the Gaza Strip into Southern Israel. Similar hostilities accompanied by missiles being fired from the Gaza Strip into Southern Israel, as well at areas more centrally located near Tel Aviv and at areas surrounding Jerusalem, occurred during November 2012 and July through August 2014. These conflicts involved missile strikes against civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected business conditions in Israel.

In addition, recent political uprisings and conflicts in various countries in the Middle East, including Egypt and Syria, are affecting the political stability of those countries. It is not clear how this instability will develop and how it will affect the political and security situation in the Middle East. This instability has raised concerns regarding security in the region and the potential for armed conflict. In addition, it is widely believed that Iran, which has previously threatened to attack Israel, has been stepping up its efforts to achieve nuclear capability. Iran is also believed to have a strong influence among extremist groups in the region, such as Hamas in Gaza and Hezbollah in Lebanon. Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions and could harm our results of operations. Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary. In addition, the political and security situation in Israel may result in parties with whom we have agreements involving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions in such agreements.

Our commercial insurance does not cover losses that may occur as a result of events associated with war and terrorism. Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or that it will sufficiently cover our potential damages. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts or political instability in the region would likely negatively affect business conditions and could harm our results of operations.

Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict business with the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial conditions or the expansion of our business. A campaign of boycotts, divestment and sanctions has been undertaken against Israel, which could also adversely impact our business.

In addition, Israel is experiencing a level of unprecedented political instability. The Israeli government has been in a transitionary phase since December 2018, when the Israeli Parliament, or the Knesset, first resolved to dissolve itself and call for new general elections. Since then, Israel held general elections four times – in April and September of 2019, in March of 2020 and in March of 2021. The Knesset has not passed a budget for the year 2021, and certain government ministries, which may be critical to the operation of our business, are without necessary resources and may not receive sufficient funding moving forward. In the event that the current political stalemate is not resolved during 2021, our ability to conduct our business effectively may be adversely affected.

Finally, many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40 (or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases in terrorist activity, there have been periods of significant call-ups of military reservists. It is possible that there will be military reserve duty call-ups in the future. Our operations could be disrupted by such call-ups, which may include the call-up of members of our management. Such disruption could materially adversely affect our business, prospects, financial condition and results of operations.

Our operations are subject to currency and interest rate fluctuations.

We incur expenses in U.S. dollars and NIS, but our financial statements are denominated in U.S. dollars. The U.S. dollar is our functional currency. However, as we also incur expenses in NIS, we are affected by foreign currency exchange fluctuations through both translation risk and transaction risk. As a result, we are exposed to the risk that the NIS may appreciate relative to the dollar, or, if the NIS instead devalues relative to the dollar, that the inflation rate in Israel may exceed such rate of devaluation of the NIS, or that the timing of such devaluation may lag behind inflation in Israel. In any such event, the dollar cost of our operations in Israel would increase and our dollar-denominated results of operations would be adversely affected.

It may be difficult to enforce a judgment of a United States court against us and our officers and directors to assert United States securities laws claims in Israel or to serve process on our officers and directors and these experts.

Our executive office and corporate headquarters are located in Israel. In addition, all of our officers and directors are residents of Israel. All of our assets and most of the assets of these persons are located in Israel. Service of process upon us or our non-U.S. resident directors and officers and enforcement of judgments obtained in the United States against us or our non-U.S. our directors and executive officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may be difficult to assert claims under U.S. securities laws in original actions instituted in Israel, or obtain a judgment based on the civil liability provisions of U.S. federal securities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our non-U.S. officers and directors because Israel may not be the most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Israeli courts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our non-U.S. officers and directors.

Moreover, an Israeli court will not enforce a non-Israeli judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject to exceptional cases), if its enforcement is likely to prejudice the sovereignty or security of the State of Israel, if it was obtained by fraud or in the absence of due process, if it is at variance with another valid judgment that was given in the same matter between the same parties, or if a suit in the same matter between the same parties was pending before a court or tribunal in Israel at the time the foreign action was brought.

Our operations may be disrupted as a result of the obligation of management or key personnel to perform military service.

Our employees and consultants in Israel, including members of our senior management, may be obligated to perform one month, and in some cases longer periods, of military reserve duty until they reach the age of 40 (or older, for citizens who hold certain positions in the Israeli armed forces reserves) and, in the event of a military conflict, may be called to active duty. In response to increases in terrorist activity, there have been periods of significant call-ups of military reservists. It is possible that there will be similar large-scale military reserve duty call-ups in the future. Our operations could be disrupted by the absence of a significant number of our officers, directors, employees and consultants. Such disruption could materially adversely affect our business and operations.

Risks Related to Cannabis

Our failure to comply with controlled substance legislation could restrict or harm our ability to develop and commercialize our products.

Our business is, and will be, subject to wide-ranging laws and regulations of Israel, the United States (federal and state), the European Community and other governments in each of the countries where we may develop and market our products. We must comply with all regulatory requirements in each jurisdiction if we expect to be successful. Most countries are parties to the Single Convention on Narcotic Drugs of 1961 as amended by the 1972 Protocol, which governs international trade and domestic control of narcotic substances, including cannabis extracts. Countries may interpret and implement their treaty obligations in a way that creates a legal obstacle to us obtaining marketing approval in those countries for any cannabinoid-based products we develop. These countries may not be willing or able to amend or otherwise modify their laws and regulations to permit our products to be marketed, or achieving such amendments to the laws and regulations may take a prolonged period of time. In the case of countries with similar obstacles, we would be unable to market our product candidates in countries in the near future or perhaps at all if the laws and regulations in those countries do not change. Any cannabinoid-based product candidate that we may develop for use in the United States, will be subject to U.S. controlled substance laws and regulations that will require us, along with our collaborators and licensees, to expend time, money and effort in all areas of regulatory compliance, including, if applicable, manufacturing, production, quality control and assurance and clinical trials. Any failure to comply with these laws and regulations, or the cost of compliance with these laws and regulations, could adversely affect the results of our business operations and our financial condition. The Company does not intend to operate in the U.S. with any activity related to medical cannabis or CBD for this time being.

Changes in consumer preferences and acceptance of medical cannabis, or any negative trends, will adversely affect our business.

Our business is substantially dependent on market acceptance of medical cannabis. Market perception of medical cannabis can be significantly influenced by a number of social, political and economic factors that are beyond our control, including scientific research or findings, regulatory investigations, litigation, media attention and other publicity regarding such products and treatments. There can be no assurance that future scientific research, findings, regulatory proceedings, litigation, media attention or other research findings or publicity will be favorable to the market for any of our current or future cannabinoid-based therapies. Future research reports, findings, regulatory proceedings, litigation, media attention or other publicity that are perceived as less favorable than, or that question, earlier research reports, findings or publicity could have a material adverse effect on the demand for our products, as well as our business, results of operations, financial condition and cash flows.

General Risk Factors

Failure in our information technology systems, including by cybersecurity attacks or other data security incidents, could significantly disrupt our operations.

Our operations depend, in part, on the continued performance of our information technology systems. Our information technology systems are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptions. Failure of our information technology systems could adversely affect our business, profitability and financial condition. Although we have information technology security systems, a successful cybersecurity attack or other data security incident could result in the misappropriation and/or loss of confidential or personal information, create system interruptions, or deploy malicious software that attacks our systems. It is possible that a cybersecurity attack might not be noticed for some period of time. The occurrence of a cybersecurity attack or incident could result in business interruptions from the disruption of our information technology systems, or negative publicity resulting in reputational damage with our shareholders and other stakeholders and/or increased costs to prevent, respond to or mitigate cybersecurity events. In addition, the unauthorized dissemination of sensitive personal information or proprietary or confidential information could expose us or other third-parties to regulatory fines or penalties, litigation and potential liability, or otherwise harm our business.

Our management team may not be able to successfully implement our business strategies.

If our management team is unable to execute on its business strategies, then our development, including the establishment of revenues and our sales and marketing activities would be materially and adversely affected. In addition, we may encounter difficulties in effectively managing the budgeting, forecasting and other process control issues presented by any future growth. We may seek to augment or replace members of our management team or we may lose key members of our management team, and we may not be able to attract new management talent with sufficient skill and experience.

A decline in the price of our common stock could affect our ability to raise working capital and adversely impact our ability to continue operations.

A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital. A decline in the price of our common stock could be especially detrimental to our liquidity and our operations. Such reductions may force us to reallocate funds from other planned uses and may have a significant negative effect on our business plan and operations, including our ability to develop new services and continue our current operations. If our common stock price declines, we can offer no assurance that we will be able to raise additional capital or generate funds from operations sufficient to meet our obligations. If we are unable to raise sufficient capital in the future, we may not be able to have the resources to continue our normal operations.

We will need additional capital to fund our operations.

We will require additional capital to fund our current operations and anticipated expansion of our business and to pursue targeted revenue opportunities. We cannot assure you that we will be able to raise additional capital. If we are able to raise additional capital, we do not know what the terms of any such capital raises would be, and whether they will be on terms acceptable to us. In addition, any future sale of our equity securities would dilute the ownership and control of our current stockholders and could be at prices substantially below prices at which our shares currently trade. Our inability to raise capital could require us to significantly curtail or terminate our operations.

Future changes in financial accounting standards or practices may cause adverse unexpected financial reporting fluctuations and affect reported results of operations.

A change in accounting standards or practices can have a significant effect on our reported results and may even affect our reporting of transactions completed before the change is effective. New accounting pronouncements and varying interpretations of accounting pronouncements have occurred and may occur in the future. Changes to existing rules or the questioning of current practices may adversely affect our reported financial results or the way we conduct business.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our executive office is at 2 Jabotinsky St., Atrium Tower, Ramat Gan, Israel. The offices consist of approximately 100square meters, and monthly rental of approximately $5,000, for a period of 2 years ending in September 2023. The address of the Company’s registered office in the State of Delaware is c/o Business Filings Incorporated, 108 West 13th St., City of Wilmington, County of Newcastle, Delaware 19801.

ITEM 3. LEGAL PROCEEDINGS

The Company knows of no active or pending legal proceedings against the Company, nor of any proceedings that a governmental authority is contemplating against the Company.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

The Company’s common stock is traded in the United States on the OTCQB market under the ticker symbol “CTGL.” Any over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. CTGL.” We have applied to list our common stock on the Nasdaq Capital Market. No assurance can be given that our application will be approved or that a trading market will develop.

Holders of our Common Stock

As of March 31, 2021, the Company had 109 registered stockholders holding 942,568,006 shares of common stock.

Dividends

Since the Company’s inception, it has not declared nor paid any cash dividends on its capital stock and the Company does not anticipate paying any cash dividends in the foreseeable future. Its current policy is to retain any earnings in order to finance its operations. Its Board of directors will determine future declarations and payments of dividends, if any, in light of the then-current conditions it deems relevant and in accordance with applicable corporate law.

Securities Authorized for Issuance under Equity Compensation Plans

The following table provides certain aggregate information with respect to the Company’s shares of common stock that as of December 31, 2020 were issuable under its equity compensation plans in effect as of December 31, 2020. During the first quarter of 2020, in connection with the Citrine Global Transaction, all options to purchase shares of the Company were waived and cancelled.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.

ITEM 6. SELECTED FINANCIAL DATA

Not applicable.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes appearing elsewhere in this Annual Report. In addition to historical information, the following discussion contains forward-looking statements that involve risks, uncertainties and assumptions. See “Forward-looking Statements” for a discussion of the uncertainties and assumptions associated with these statements. Our actual results may differ materially from those discussed below.

Liquidity and Capital Resources

The Company’s balance sheet as of December 31, 2020 reflects total assets of approximately $3,104 thousand consisting mainly of cash and cash equivalents in the amount of approximately $206 thousand, Prepaid share based payment to a service provider in the amount of approximately $1,737 thousand, Investments valued under the measurement alternative in the amount of approximately $450 thousand, Trading Securities in the amount of approximately $522 thousand and a short-term loan measured at fair value in the amount of approximately $165 thousand. The Company’s balance sheet as of December 31, 2019, reflects total assets of approximately $257 thousand consisting mainly of cash and cash equivalents in the amount of approximately $18 thousand, inventory in the amount of approximately $35 thousand, other receivables in the amount of approximately $19 thousand and property and equipment net, in the amount of approximately $156 thousand. The increase is related mainly to Prepaid share-based payment, investment valued under the measurement alternative and trading securities.

As of December 31, 2020, the Company had total current liabilities of approximately $1,702 thousand consisting mainly of approximately $476 thousand in accounts payable and accrued expenses and convertible notes in the amount of approximately $1,154 thousand. As of December 31, 2019, the Company had total current liabilities of approximately $368 thousand consisting mainly of accounts payable and accrued expenses in the amount of approximately $224 thousand and notes payable in the amount of approximately $123 thousand.

As of December 31, 2020, the Company had positive working capital in the amount of approximately $947 thousand, compared to negative working capital in the amount of approximately $278 thousand at December 31, 2019.

The Company’s total liabilities as of December 31, 2020 and 2019 were approximately $1,702 thousand and $368 thousand respectively.

During the twelve months ended December 31, 2020, the Company used approximately $696 thousand in its operating activities. This resulted in operating expenses of approximately $6,537 thousand, net of non-cash items mainly comprised of an increase in stock-based compensation of approximately $7,422 thousand, interest accrued on convertible loan of approximately $288 and increase in account payables of $258.

During the twelve months ended December 31, 2019, the Company used approximately $1,226 thousand in its operating activities. This resulted in operating expenses of approximately $1,874 thousand, net of non-cash items comprised mainly of management fee waiver of approximately $243, a decrease in accounts receivable of approximately $172 thousand and inventory impairment of approximately $176 thousand.

During the year ended December 31, 2020, the Company’s cash used in investing activities amounted to $615 thousand, consisting mainly of $450 thousand investment valued under the measurement alternative and $145 thousand of short term loan. During the year ended December 31, 2019, the Company’s cash provided by investing activities amounted to $27 thousand mainly as a result of decrease in severance pay fund.

During the twelve months ended December 31, 2020, the Company’s net cash provided by financing activities was $1,501 thousand comprised of approximately $1,170 thousand proceeds from the issued convertible notes, $177 thousand proceeds from issuance of common stock and $154 thousand proceeds from related parties’ loans as compared to net cash provided by financing activities for the year ended December 31, 2019 of approximately $757 thousand comprised of $457 thousand proceeds from issuance of common stock and $300 thousand from Proceeds from issuance of redeemable convertible preferred shares.

On April 13, 2021, the Citrine S A L Group has furnished the Company with an irrevocable letter of obligation to support the Company until June 30, 2022, financially, which will allow the Company to be operational as planned and budgeted through this period (the “Irrevocable Letter”).

Based on the Company’s current cash balances, capital raised during the year ended December 31, 2020, and the Irrevocable Letter, the Company has sufficient funds for its plans for the next twelve months from the issuance of these financial statements. As the Company is embarking on its new activity as detailed herein, it is incurring losses. It cannot determine with reasonable certainty when and if it will have sustainable profits.

Results of Operations

Year ended December 31, 2020 as compared to the year ended December 31, 2019

During the twelve months ended December 31, 2020, the Company generated $11 thousand in revenues, compared to $149 thousand in 2019. The decrease is mainly attributable to a reduction as a result of our selling 90% of our shares in Novomic and focusing on our new strategy and business activity, and therefore ceasing to consolidate the financial statements of Novomic.

The Company’s research and development expenses decreased to $18 thousand comprised of ongoing research and development expenses during the twelve months ended December 31, 2020, compared to approximately $115 thousand during the prior year. The decrease is mainly attributable to us selling 90% of our shares in Novomic and focusing on our new business activity, and therefore ceasing to consolidate the financial statements of Novomic.

The Company’s marketing, general and administrative expenses during the year ended December 31, 2020, were $8,350 thousand compared to $1,536 thousand during the year ended December 31, 2019. The increase in our marketing, general and administrative expenses is mainly attributable to the increase in our share-based compensation expenses, related to legal fees paid in connection with the TechCare Transaction, and which was partially offset by a decrease in marketing expenses and salary and related expenses as a result of the conclusion of our board of directors that the Company would not be able to successfully commercialize the Novomic products and therefore ceasing to consolidate the financial statements of Novomic.

During the twelve months ended December 31, 2020, the Company incurred financial expenses of $322 thousand, as compared to financial expenses of $38 thousand during the year ended December 31, 2019. The reason for the increase in financial expense was due to $72 thousand of fair value adjustment of liability in connection with stock exchange agreement, $50 thousand change in fair value of trading securities, $96 thousand of change in convertible component in convertible notes, as well as exchange rate differences resulting from variations in the New Israel Shekel exchange rate to the U.S. Dollar.

As a result of the above, the Company incurred a net loss of approximately $8,639 thousand during the twelve months ended December 31, 2020 as compared to a net loss of approximately $1,874 thousand in 2019.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

Recently issued accounting pronouncements

Recently issued accounting pronouncements are described in the notes to our financial statements for the years ended December 31, 2020 and 2019, which are included within Item 8 in this annual report.

Critical Accounting Policies

Our significant accounting policies are described in the notes to our financial statements for the years ended December 31, 2020 and 2019 and which included within Item 8 in this annual report.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CITRINE GLOBAL CORP.

CONSOLIDATED FINANCIAL STATEMENTS

IN U.S. DOLLARS

TABLE OF CONTENTS

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Citrine Global Corp.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Citrine Global Corp. and its subsidiary (the “Company”), as of December 31, 2020 and 2019, and the related consolidated statements of operations and comprehensive loss, of redeemable convertible preferred stock and stockholders’ equity (deficit) and of cash flows for the years then ended, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the financial statements and (ii) involved our especially challenging, subjective, or complex judgments. We determined there are no critical audit matters.

We have served as the Company’s auditor since 2020.

CITRINE GLOBAL CORP.

CONSOLIDATED BALANCE SHEETS

(U.S. dollars except share and per share data)

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

CITRINE GLOBAL CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(U.S. dollars except share and per share data)

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

CITRINE GLOBAL CORP.

REDEEMBALE CONVERTIBLE PREFERRED STOCK AND

CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)

(U.S. dollars, except share and per share data)

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

CITRINE GLOBAL CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. dollars except)