CNBX Pharmaceuticals Inc. - Quarter Report: 2021 May (Form 10-Q)

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________

FORM 10-Q

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

For the quarterly period ended May 31^st, 2021

OR

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

For the transition period from ______ to ______.

Commission File Number: 000-52403

___________________________________________________

CANNABICS PHARMACEUTICALS INC.

(Exact name of registrant as specified in its charter)

___________________________________________________

(877) 424-2429

(Registrant’s telephone number, including area code)

____________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  ☒  No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company," and “emerging growth company” in Rule 12b-2 of the Exchange Act:

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No  ☒

As of July 14, 2021, the registrant had 146,661,247 shares of its Common Stock, $0.0001 par value, outstanding.

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

CANNABICS PHARMACEUTICALS INC.

FORM 10-Q

MAY 31, 2021

INDEX

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “should,” “would,” “could,” “scheduled,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “seek,” or “project” or the negative of these words or other variations on these words or comparable terminology. Actual results, performance, liquidity, financial condition and results of operations, prospects and opportunities could differ materially and perhaps substantially from those expressed in, or implied by, these forward-looking statements as a result of various risks, uncertainties and other factors. These statements may be found under the section of our Annual Report on Form 10-K for the year ended August 31, 2020 (filed on November 4th, 2020) entitled “Risk Factors” as well as in our other public filings.

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

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

CANNABICS PHARMACEUTICALS INC.

Consolidated Balance Sheets

See accompanying notes to consolidated financial statements.

CANNABICS PHARMACEUTICALS INC.

Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

See accompanying notes to consolidated financial statements.

CANNABICS PHARMACEUTICALS INC.

Consolidated Statements of Stockholders' Equity (Deficit)

CANNABICS PHARMACEUTICALS INC.

Consolidated Statements of Stockholders' Equity (Deficit)

(continued)

See accompanying notes to consolidated financial statements.

CANNABICS PHARMACEUTICALS INC.

Consolidated Statements of Cash Flows

(Unaudited)

See accompanying notes to consolidated financial statements.

CANNABICS PHARMACEUTICALS INC.

Notes to Consolidated Financial Statements

(Unaudited)

Note 1–Nature of Business, Presentation and Going Concern

Organization

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

On April 25, 2014, the Company experienced a change in control. Cannabics, Inc. (“Cannabics”) acquired a majority of the issued and outstanding common stock of the Company in accordance with stock purchase agreements. On the closing date, April 25, 2014, pursuant to the terms of the Stock Purchase Agreement, Cannabics purchased 41,000,000 shares of the Company’s outstanding restricted common stock for $198,000, representing 51%.

On May 21, 2014, the Company changed its name, via merger in the state of Nevada, to Cannabics Pharmaceuticals Inc. The Company’s principal offices are in Bethesda, Maryland. The Company changed its course of business to laboratory research and development.

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

On August 25, 2014, the Company organized G.R.I.N. Ultra Ltd. (“GRIN”), an Israeli corporation, as a wholly-owned subsidiary. GRIN will provide research and development activities for the Company’s products in Israel.

On November 16, 2020, the Company established its new subsidiary Digestix Bioscience Inc., specifically focused on treatment of early-stage neoplastic local tumors.

On April 26^th, 2021 the Company announced its new Research Program for development of a Melanoma Treatment Drug Candidate for FDA Approval Track, see our press release of this date.

On May 25^th, 2021, The European Patent Office granted the Company its Patent for Personalized medicine Drug Discovery Technology, see our press release of this date.

Basis of Presentation

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

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

Principles of Consolidation

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

Going Concern

The accompanying unaudited financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. While the Company has incurred a net loss of $2,513,297 for the nine months ended May 31, 2021, it has incurred cumulative losses since inception of $16,144,568. These conditions raise substantial doubt about the ability of the Company to continue as a going concern.

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

Research and Development Costs

The Company accounts for research and development costs in accordance with Accounting Standards Codification 730 “Research and Development” (“ASC 730”). ASC 730 requires that research and development costs be charged to expense when incurred. Research and development costs charged to expense were $1,300,530 and $1,280,533 for the nine months ended May 31, 2021 and 2020, respectively.

Reclassifications

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

Note 2 – Related Party Transactions

During the nine months ending May 31, 2021, the Company paid $264,061 in salaries, including socials benefits, to two directors, compared to $336,137 for the nine months ending May 31, 2020.

The Company had a balance outstanding at May 31, 2021 and at May 31, 2020 of $223,645, payable to Cannabics, Inc. The advance is due on demand and bears no interest.

Note 3 – Stockholders’ Equity (Deficit)

Authorized Shares

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

During the nine months ending May 31, 2021, a $1,340,833 convertible loan was exercised to 7,300,000 shares of common stock.

During the nine months ending May 31, 2021, 125,000 shares of common stock were issued for services, the fair value of these services were $60,125.

Note 4 – Commitments and Contingencies

The company leases its office in Tel Aviv. In November 2020, the Company extended its lease agreement by 12 months until January of 2022. The monthly lease is approximately $3,600.

The company leases its lab facilities in Rehovot. The monthly lease is approximately $5,700.

Effective June 1, 2018, the Company entered into a 36-month car lease for one of its executive officers. Said lease has been extended until August of this year. As security for its obligation under a property lease agreement, car lease and credit cards, the Company’s subsidiary provided a bank guarantee in the amount of $50,000.

Note 5 – Major events during the nine months ended on May 31, 2021.

On January 27, 2021, the Company filed an S-1with the SEC registering the shares of an institutional investor on a Convertible Note of $2,500,000.

On February 16, 2021, the Company announced its findings for its RCC-33 Anti-Cancer treatment on mice, which conclusively demonstrated a 33% lower tumor volume, (p ≤ 0.016), as noted in the Company’s press release of that date.

On February 18, 2021, the Company sold its entire holding of 900,000 shares of Wize Pharma Inc. in a private sale, netting proceeds of $645,968. The company incurred a capital gain of $195,968 from Wize Pharma Inc realization

Note 6 – Subsequent Events

On June 15, 2021, the Company received a Conversion Notice from i3 LLC for a total 1,000,000 shares of common stock, eradicating $148,600 in debt.

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

Company Overview

The Company is a biopharmaceutical corporation specializing in the discovery, development and commercialization of novel effective cannabinoid-based products and innovative technologies for the treatment of cancer. Cannabics is a pioneer in the constellation of cannabis cancer and diagnostics. Our vision is to reveal and personalize the potential of cannabis medicine to treat cancer itself, as well as side effects. We develop cancer diagnostics in conjunction with cannabinoid medicine, utilizing novel bio-technological tools, striving to prevent cancer onset in healthy adults and progression in patients. Personalization of cannabinoid-based treatments is the main scope of the company. We combine the power of our proprietary technologies with the expertise of our leading scientists to unlock the medicinal properties of cannabis and its diversity of bioactive compounds. We have conducted thousands of tests on biopsies and cell lines in order to identify the physiologic impact of cannabinoids on cell cycle and cell death. This scientific workflow has generated an ongoing stream of biological data through which we have accumulated in-depth knowledge of the various therapeutic effects of cannabinoids and identified cannabinoid ratios demonstrating anti-tumor potential. We believe that our cannabinoid research coupled with our proprietary technologies and intellectual property positions the Company to play an important role in the rapidly growing medical cannabis marketplace.

Our core technology is a continuously evolving bioinformatics platform that utilizes high-throughput screening technology, advanced data analytics, and proprietary methodologies to rapidly examine the physiologic effect of multiple cannabinoid compounds on tumor cells. This technology enables us to screen thousands of cannabinoid combinations weekly, generating multiple datasets on the anti-tumor properties of different cannabinoid formulations and ratios. We conduct a broad range of preclinical research on cannabinoids through our bioinformatics platform, which informs the development of our product candidates.

Our lead product candidate is RCC-33, an oral capsule for the treatment of colorectal cancer (“CRC”). RCC-33 contains high concentrations of the cannabinoids CBDV and CBGA, which have demonstrated complex synergistic anti-tumor activity in our in vitro studies, with minimal psychoactive effects. We are currently in the early planning stage of a clinical development pathway for RCC-33. We plan to conduct further preclinical studies to establish the safety and efficacy of RCC-33 in an in vivo murine model of colorectal cancer. Subject to the results of our preclinical studies, we intend to proceed to phase 1/2a clinical study in the second half of 2022.

Cannabics SR is a lipid-based capsule containing a standardized formulation of cannabinoids that we are developing as a product candidate for the treatment of cancer anorexia-cachexia syndrome (“CACS”). With a rapid onset of action and sustained effects for up to 6-8 hours, we believe that the convenience of once or twice daily oral dosing of Cannabics SR may improve quality of life and increase patient compliance with treatment regimens, leading to better health outcomes. A two-year pilot study of Cannabics SR led by Dr. Gil Bar-Sela of the Rambam Hospital Health Care Campus, Division of Oncology, in Haifa, Israel, demonstrated a clinically significant weight increase in CACS patients treated with Cannabics SR capsules (Source: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6785913/ ). In the second half of 2021, we intend to commence an additional pilot study in Israel to assess the pharmacokinetics and pharmacodynamics of Cannabics SR in humans. Data from the study will inform our clinical development plan for Cannabics SR. In the meantime, we anticipate that the results of these studies may enable us to obtain a permit from the Israeli Ministry of Health to commercialize Cannabics SR in Israel.

Another product candidate we are developing is Cannabics CDx, a drug sensitivity test designed to provide innovative decision support to healthcare providers interested in personalizing cannabinoid-based cancer therapies. Cannabics CDx applies data analytics and high-content drug sensitivity screening integrated with our proprietary database to measure the effectiveness of cannabinoid compounds on a patient’s biopsy, suggest preferred alternatives, and alert healthcare providers to cannabinoids that may be contraindicated. We believe that Cannabics CDx will meet a significant unmet need of the growing population of cancer patients being treated with cannabis by enabling healthcare providers to more precisely tailor cannabinoid treatments to a patient’s cancer and clinical profile. We are currently seeking strategic partners for a clinical validation study expected to commence in 2022 to assess the sensitivity and specificity of Cannabics CDx with a view towards commercializing Cannabics CDx in Europe, the United States, and other territories.

Cancer and Cannabinoids

Cancer is a general term used to describe a group of more than 100 related diseases characterized by uncontrolled growth and spread of abnormal cells, leading to the development of a mass commonly known as a tumor, followed by invasion of the surrounding tissues and subsequent spread, or metastasis, to other parts of the body. Despite enormous investment in research and the introduction of new treatments, cancer remains a critical area of unmet medical need. According to the World Health Organization, cancer is the second leading cause of mortality worldwide, responsible for an estimated 9.6 million deaths in 2018. As of January 1, 2019, there were more than 16.9 million people with a history of cancer living in the United States, with 1.8 million new cases and 606,520 cancer deaths expected in 2020 (Source: American Cancer Society. Cancer Facts & Figures 2020).

Over the past decade, there has been growing interest in the therapeutic value of cannabinoid compounds in oncology. Cannabis has long been suggested as a well-tolerated, safe, and effective option to help patients cope with cancer related symptoms by reducing nausea and vomiting, alleviating cancer pain, stimulating appetite, and improving quality of life. Beyond their palliative benefits, however, cannabinoids have also been receiving increased attention for their anti-cancer potential, which we believe may one day revolutionize cancer therapy.

Cannabinoids are a diverse class of chemical compounds that occur naturally within cannabis plants and are pharmacologically similar to cannabinoids produced by the human body, known as endocannabinoids. Endocannabinoids form part of the human endocannabinoid system (ECS), a complex biological network that also includes cannabinoid receptors and enzymes involved in cannabinoid formation, transport, and degradation. The ECS is regarded as an important endogenous system implicated in regulation of the most vital biological processes to maintain homeostasis, assisting the body to remain stable and balanced despite external, or environmental, fluctuations (Source: Current Pharmaceutical Design, 2016;22(12):1756-1766).

Cannabinoids have demonstrated selective anti-tumor properties in preclinical studies, exerting anti-proliferative, proapoptotic, anti-angiogenic, and anti-metastatic and anti-inflammatory effects depending on tumor type and specific setting (Source: Cancer Medicine, 2018:7(3):765-775). These effects appear to be more pronounced when cannabinoids are used together versus being administered separately, a mechanism known as the entourage effect. We believe, therefore, that cannabinoid combinations may hold promise for an improved anti-proliferative strategy for cancer management.

In addition to their potential role as anti-cancer agents, cannabinoids have been observed to act synergistically with some conventional antineoplastic drugs, such as chemotherapeutic agents, enhancing their effectiveness (Source: Cancer Medicine, 2018;7(3)765-775). This raises the potential for combinational therapies that may increase the range of chemotherapeutic options available to patients and enable targeting of tumor progression at different levels while also permitting dosages of cytotoxic drugs to be dramatically reduced without compromising efficacy.

Figure 1: Synergistic effects of cannabis extracts and chemotherapies on cancer biopsy after treatment with the same extract and three different chemotherapy combinations

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

Our Proprietary Bioinformatics Platform

We have developed a continuously evolving preclinical bioinformatics platform that enables us to evaluate and classify the physiological impact of multiple cannabinoid compounds on various cancer cells. Utilizing state-of-the-art high-throughput screening and flow cytometry, our platform is capable of testing thousands of compounds weekly, allowing us to rapidly and effectively examine their interactions with a growing library of human cancer cell lines and biopsies. Through the large body of data generated by our platform, we are accumulating in-depth knowledge of the various therapeutic effects of cannabinoids and patterns of cannabinoid ratios that demonstrate meaningful physiologic impact on cancer.

Our bioinformatics platform includes the following:

Once a series of potentially active cannabinoids is identified for a specific cancer type, we then test and confirm their activity through in vitro and ex-vivo evaluation studies to determine their potential activity. Through this process, we are able to assess their therapeutic potential. The results of our pre-clinical experiments provide starting points for our clinical development programs.

Biopharmaceutical Collaboration

As medical cannabis becomes increasingly recognized for its therapeutic potential in the age of personalized medicine and genomics, we believe that there is a growing global demand by biopharmaceutical companies for research and diagnostic tools that both facilitate and accelerate the generation of biological information for the development of cannabinoid drugs and formulations. We believe that our bioinformatics platform will be of benefit to such companies and may therefore represent collaborative opportunities, market potential and downstream value-creation for the Company.

Finding novel ways to treat and cure diseases is a fundamental challenge in biomedical research. Unsuccessful clinical trials are the most expensive obstacle for drug development because of the immense costs and the low success rate. Only 1 out of 10 drugs successfully pass through clinical development, with 80% of drugs excluded before Phase 3 clinical trials (Source: Biotechnology Innovation Organization, “Clinical Development Success Rates, 2006-2015). The low clinical target validation success rate reflects a lack of reliable drug target prediction methods. This is particularly true in the case of research on cancer, which is increasingly being understood as not just many but thousands of different diseases, requiring more well-defined targets and biomarkers. A 2018 study by MIT found that trials using biomarkers for patient stratification have higher success rates, especially in the area of oncology, where clinical trials using biomarkers exhibited almost twice the overall probability of success compared to trials without biomarkers (Source: Biostatistics, 2019;20(2):273-286).

We believe that our bioinformatics platform could make the development of cannabinoid-based drugs more successful by providing a more accurate and reliable drug target prediction method. Our proprietary analytics may benefit biopharmaceutical companies across a range of applications, including patient selection and recruitment for clinical trials and identification of new targets for drug development.

Development Pipeline

We are currently developing a portfolio of proprietary technologies and formulations with a variety of research, analytic, and therapeutic applications. Our most advanced development programs include the following:

We continue to conduct research and seek collaborations for new advances in biotechnology that may lead to the development of additional product candidates.

RCC-33 for Colorectal Cancer

Overview

Our lead product candidate is RCC-33, which we are developing as a treatment for CRC. RCC-33 is an oral capsule containing a proprietary formulation of cannabinoids that have demonstrated synergistic efficacy in reducing the viability of human colon cancer cell lines in preclinical studies.

Colorectal Cancer

CRC is one of the more common forms of cancer worldwide, representing a significant challenge to the global healthcare system. According to the World Health Organization, CRC is the third most diagnosed cancer in the world and the second-leading cause of cancer-related mortality. In the United States, there were approximately 1,348,087 people living with CRC in 2017 (Source: National Cancer Institute. “Cancer Stat Facts: Colorectal Cancer”). It is estimated that 147,950 Americans will be diagnosed with CRC in 2020, representing 8.2% of all new cancer cases, and 53,200 Americans will die from the disease (Source: American Cancer Society. “Cancer Facts & Figures 2020”).

Most CRCs begin as a noncancerous growth called a polyp that develops on the inner lining of the colon or rectum. The most common kind of polyp is called an adenomatous polyp or adenoma. According to the American Cancer Society, an estimated one-third to one-half of all individuals will eventually develop one or more adenomas. Although all adenomas have the capacity to become cancerous, fewer than 10% are estimated to progress to invasive cancer. The likelihood that an adenoma will evolve into cancer increases as it becomes larger or when it acquires certain histopathological characteristics. Adenomas that become cancerous, called adenocarcinomas, comprise nearly 96% of all CRCs (Source: American Cancer Society. “Colorectal Cancer Facts & Figures 2017-2019”). Adenocarcinomas may grow into blood vessels or lymph vessels, increasing the chance of metastasis to other anatomical sites.  

CRC usually develops slowly, over a period of 10 to 20 years. The complex sequence of events occurring during initiation, development and propagation of adenocarcinomas is likely the result of a lifelong accumulation of mutations caused by both genetic and environmental factors known as the adenoma to carcinoma sequence. While the specific cause of any particular case of CRC is often unknown, more than one-half of all cases and deaths are attributable to lifestyle and environmental factors, such as smoking, unhealthy diet, high alcohol consumption, physical inactivity, and excess body weight (Source: American Cancer Society. “Cancer Facts & Figures 2020”).

CRC does not usually cause symptoms until the disease is advanced, therefore early detection of adenomas by screening is vital. If not treated or removed, an adenoma can become a potentially life-threatening cancer. Treatment options for CRC patients depend on several factors, including the type and stage of cancer, possible side effects, and the patient’s preferences and overall health. Surgical removal of the tumor is the most common form of treatment, particularly in the early stages of malignancy. Patients with more advanced stages of CRC may be given adjuvant chemotherapy to kill any cancer cells remaining after surgery, though standard chemotherapy is associated with severe side effects and provides marginal benefit to the majority of patients. While radiation therapy is often used to treat rectal cancer, it is not generally recommended for colon cancer patients except in the later stages of the disease (Source: American Cancer Society. “Treating Colorectal Cancer”).

Cannabinoids and Colorectal Cancer

A new emerging area of scientific understanding in the treatment of CRC lies in the development and use of cannabinoid therapeutics. The ECS is regarded as an important regulatory system in the gastrointestinal tract, being involved in several important functions such as motility, secretion, sensation, inflammation, and carcinogenesis. Recent studies advocate that the ECS plays a critical role in the development of CRC and should therefore be considered as an appropriate target for CRC inhibition (Source: Frontiers in Pharmacology, 2016;7:361). The expression of ECS components in CRC has been found to be increased and associated with poorer prognosis and advanced stages of disease (Source: Cannabis and Cannabinoid Research, 2018, 3(1):272-281). For example, cannabinoid receptors have been found to be overexpressed in tumor cells of the colon and this up-regulation has been postulated to be an indicator of cancer outcome (Source: British Journal of Pharmacology, 2018; 175(13): 2566-2580).

Research on the effects of cannabinoid compounds on CRC has demonstrated an ability to reduce the viability of CRC cell lines in vitro (Source: Cancer Medicine, 2018;7(3):765-775), while there is also convincing scientific evidence that cannabinoids are able to prevent or reduce carcinogenesis in different animal models of colon cancer (Source: Expert Review of Gastroenterology & Hepatology, 11:10, 871-873).

We believe that cannabinoids are a promising therapeutic agent for the treatment of CRC. We have conducted several in vitro unpublished studies using our bioinformatics platform and can confirm absolutely that cannabinoids cause necrosis in colon cancer cells. While many cannabinoids demonstrate levels of toxicity on cancer cells, we have found that certain cannabinoid extracts and combinations show increased levels of toxicity relative to other isolated or combined cannabinoids. These findings have spurred the development of RCC-33, our product candidate for the treatment of CRC.

Figure 2: Synergistic effects of different cannabinoid combinations on viability of a colon cancer cell line.

RCC-33

We are developing RCC-33 as an oral capsule containing high concentrations of the cannabinoids CBDV and CBGA in a novel formulation, which we believe may be effective in the treatment of adenocarcinomas of the colon. The cannabinoids in RCC-33 have demonstrated complex synergistic anti-tumor effects in combination, with no psychoactive effect. In our preclinical in vitro studies evaluating the influence of 15 different cannabinoids on human colon cancer cell lines (RKO, HCT116), alone and in combination, RCC-33 demonstrated clear efficacy in reducing the viability of colon cancer cells versus alternative cannabinoid combinations.

Development Plan

We are currently in the early planning stage of a clinical development pathway for RCC-33. We plan to conduct further preclinical studies to establish the safety and efficacy of RCC-33 before proceeding with first-in-human clinical testing. Now that our studies on mice (See press release February 16, 2021) are complete, the company is now working on the logistics for further clinical studies in order to bring us to the US FDA for a pre IND meeting.

Preclinical Studies

We have now written and shall shortly begin a proof of concept non-clinical study in a murine model for colon adenocarcinoma to validate the results obtained in our cell-based assays. In addition, we plan to conduct non-clinical safety studies following Good Laboratory Practice (GLP) to evaluate the systemic and local toxicity of escalating doses of RCC-33 and establish dosing parameters. The results of these preclinical studies, which are expected in the fourth quarter of 2020, will guide our planned Phase 1/2a clinical trial. The non-clinical requirements to support the development program will be verified with the FDA at a pre-IND meeting expected to take place in the second half of 2021. Such studies may include repeated dose toxicity studies, male and female fertility studies, embryofetal development studies, animal abuse related studies, pharmacokinetics studies, drug-drug interaction studies, and others.

First in-vivo study in mice-

On February 16^th, 2021 we have completed our first in-vivo study - Evaluation of the antitumor activity of RCC-33 on mice bearing xenografts of human colorectal adenocarcinoma. In the study, Nude mice, 7 mice per group were inoculated subcutaneously with HT-29 and HCT-116 human colorectal adenocarcinoma cells. After reaching a tumor volume of 100 mm3, mice were intraperitoneally injected with 200 ul of RCC-33 or sham control. Tumor volume was measured 3 times per week. The experiment concluded when the first mouse (control group) reached the maximal tumor volume allowed,16 days after xenograft inoculation. A significant reduction in tumor volume of 33% (p value = 0.016) was observed in RCC-33 treated mice inoculated with HT-29. Mice inoculated with HCT-116 did not show significant results. These positive results will be more thoroughly investigated in additional in-vivo studies to better understand effective dosage/toxicity and genetic profiling to discover the mechanism of action. These studies will continue in the 2^nd quarter of 2020.

Figure 3. HT-29 - Human colorectal adenocarcinoma model

Clinical Trials

We plan to evaluate the safety, tolerability, and pharmacokinetic properties of RCC-33 in a Phase 1/2A ascending dose clinical trial in CRC patients, commencing in the second half of 2022. The clinical trial will examine the tolerability, pharmacokinetics, pharmacodynamics, and efficacy of multiple doses of RCC-33 in CRC patients. We are currently identifying potential contract research organizations and clinical trial centers to conduct the Phase 1/2a human proof of concept study, which is estimated to cost $1,000,000. We believe that the Company’s currently available funds will be sufficient to obtain all regulatory approvals necessary to conduct the Phase 1/2a trial. As at the date of this filing, however, the Company does not have sufficient funds to complete the Phase 1/2a study.

Subject to the results from our Phase 1 trials, we plan to submit an IND to the FDA for RCC-33 with the clinical protocol for a Phase 2 double-blind placebo controlled clinical trial evaluating RCC-33 in patients with CRC at various dosing levels versus placebo. The outcomes from the planned Phase 2 human proof of concept trial will inform our decision regarding further steps in the clinical development of RCC-33.

At this time, we do not expect to independently develop RCC-33 up to regulatory approval. Instead, we plan to seek a pharmaceutical partner or partners to continue our commercialization efforts. However, we may also seek to further advance the RCC-33 program with additional human clinical trials prior to finding a suitable pharmaceutical partner or partners. We estimate that it will take more than five years to bring RCC-33 to market, if at all, at a cost of more than $10 million.

Cannabics SR for Cancer Anorexia-Cachexia Syndrome

Overview

At the same time, we are pursuing our work on colorectal cancer, we are continuing our development of Cannabics SR as a product candidate for the treatment of CACS. Cannabics SR is a sustained-release oral capsule containing a standardized compound of cannabinoids that has demonstrated a clinically significant weight increase in CACS patients in a peer-reviewed pilot study conducted by Dr. Gil Bar-Sela of the Rambam Hospital Health Care Campus, Division of Oncology, in Haifa, Israel. Our patent-pending technology provides for a convenient, once or twice daily administration, with rapid onset and a steady state of therapeutic effect for a 6 to 8-hour duration.

Cancer Anorexia-Cachexia Syndrome

CACS is a common complication of cancer associated with high morbidity and mortality. It is a complex metabolic syndrome in which a persistently elevated basal metabolic rate is not compensated for by adequate calorie or protein intake, causing involuntary and progressive weight loss leading to increasing functional impairment in cancer patients, especially in advanced stages of the disease. Once established, CACS cannot presently be reversed using available pharmacological or nutritional support techniques.

Unlike starvation, body-weight loss in CACS patients arises mainly from loss of muscle mass, characterized by increased catabolism of skeletal muscle and decreased protein synthesis. This weight loss is associated with important clinical outcomes such as increased morbidity, diminished effectiveness of chemotherapy, muscle wasting, inflammation, fatigue, and reduced survival expectations. The impact of CACS on the patient is not, however, limited to the effect of weight loss. Quality of life, functional abilities, symptoms, psychological outcomes, and social aspects are all affected by CACS.

According to the National Cancer Institute, nearly one-third of cancer deaths can be attributed to the severe weight loss and “metabolic mutiny” associated with CACS, and more than 50% of patients with cancer die with cachexia being present. The overall prevalence of CACS is currently estimated to range from 40% at cancer diagnosis to 70-80% in advanced phases of the disease (Source: Critical Reviews in Oncology/Hematology, 2013;88(3):625-636), while the overall prevalence of weight loss in cancer patients may be as high as 86% in the last 1-2 weeks of life (Source: Journal of Pain and Symptom Management 2007;34:94–104).

The cause and subsequent development of CACS is still poorly understood, but several factors and biological pathways are known to be involved, including inflammation, decreased secretion of anabolic hormones, and altered metabolic response. While there have been important advances in the study of CACS over the past decade, including progress in understanding its mechanisms and the development of promising pharmacologic and supportive care interventions, there is presently no effective pharmacologic therapy for CACS.

Cannabinoid Therapies for CACS

Cannabis has long been suggested as a well-tolerated, safe, and effective option to help patients cope with cancer related symptoms with fewer serious side effects than most prescription drugs currently used as anti-emetics, analgesics, and the like. As such, cannabinoids are finding application in palliative care for reducing nausea and vomiting, alleviating cancer pain, and stimulating appetite, as well as improving quality of life in cancer patients. Dronabinol (Marinol®) and nabilone (Cesamet®), two drugs based on synthetic cannabinoids, have each been approved by the FDA for the treatment of chemotherapy-related nausea in patients who do not respond to conventional antiemetic therapy. Another drug, nabiximols (Sativex®), a specific cannabis extract, is approved in Canada and the United Kingdom for symptomatic relief of pain in advanced cancer patients.

Cannabics SR

Cannabics SR is an oral composition in the form of a hydroxypropylmethylcellulose (HPMC) capsule containing a patent-pending formulation of cannabinoid extracts suspended in a lipid emulsion. It provides a relatively rapid onset of action, typically within 30-40 minutes, followed by a gradual and sustained release of active cannabinoids, resulting in a steady state level of beneficial effects for up to 6 to 8 hours with each capsule. Cannabics SR provides a consistent, predictable concentration of cannabinoids with an absorption profile and bioavailability of active ingredients that we believe to be superior to other oral cannabinoid administrations. We believe that the multifactorial benefits of the active pharmaceutical ingredients in Cannabics SR address an unmet medical need for a safe and effective treatment of CACS, leading to improved patient adherence and better health outcomes.

Clinical Development

In 2016, we commenced a two-year pilot study to evaluate the influence of Cannabics SR capsules on CACS, and, in particular, on weight loss in advanced cancer patients. The study was led by Professor Gil Bar-Sela, the former Deputy Director of the Division of Oncology at Rambam Health Care Campus, Head of the Palliative and Supportive Oncology Unit, and Head of Service for Melanoma and Sarcoma Patients.

Patients were administered 2 × 10 mg of Cannabics SR per 24 hours for six months. Participants were weighed at each physician visit. The primary objective of the study was a weight gain of ≥10% from baseline. Despite various limitations, the preliminary study demonstrated a weight increase of 17.6% of patients with doses of 5 mg × 1 or 5 mg × 2 capsules daily, without significant side effects. The remaining patients had stable weights. Also, all patients who remained in the study for at least 4.5 months reported an increase in appetite, as did 83% of the patients who completed the study. For 50% of the patients who completed the study, there were reports of pain reduction and sleep improvement. Additional results showed a significant decrease of appetite loss complaints among 83% of the patients who completed the study. (See Bar-Sela, Gil et al. “The Effects of Dosage-Controlled Cannabis Capsules on Cancer-Related Cachexia and Anorexia Syndrome in Advanced Cancer Patients: Pilot Study.” Integrative Cancer Therapies vol. 18 (2019): 1534735419881498. doi:10.1177/1534735419881498.)

We intend to conduct additional pilot studies in Israel to assess the pharmacokinetics and pharmacodynamics of Cannabics SR in humans. These studies are expected to commence in 2021 at an anticipated cost of $250,000. Data from the pilot studies will guide our decisions regarding further clinical development and may better inform the design of our anticipated Phase 1 trials.

Commercialization

The results of our planned pilot studies may permit us to commercialize Cannabics SR in Israel under license by the Israeli Ministry of Health. If we are granted such a permit, we intend to engage a GMP manufacturer in Israel to produce Cannabics SR capsules for national medical distribution.

Cannabinoids and Personalized Medicine

While preclinical research during the last decade has stimulated interest in the therapeutic potential of cannabinoid compounds in oncology, one of the challenges facing healthcare providers and patients in selecting a cannabinoid-based therapy has been the diversity of the cannabis plant, which encompasses thousands of distinct profiles, each with its own chemical composition and effects. After decades of highly restrictive regulation, there is presently a lack of clinically relevant information as to which cannabinoids are best suited to the unique medical needs of a patient across multiple lines of therapy. The result has left healthcare providers and patients at a loss as to which cannabinoids may be best suited to treat the unique cancer profiles of individual patients.

Cannabics CDx

We believe that the success of personalized medicine depends on the development of accurate and reliable diagnostics. Our goal is to expand the scope of personalized medicine across the cancer care continuum to include cannabinoid-based therapies and enable clinicians to make better informed decisions leading to improved clinical outcomes and lower healthcare costs. To that end, we are developing Cannabics CDx as a product candidate to provide clinical decision support data to healthcare providers interested in personalizing cannabinoid-based cancer therapies. We believe that by making cannabinoid therapy selection more accurate and accessible, Cannabics CDx may play a significant role in ushering medical cannabinoids into the mainstream of oncology.

Cannabics CDx is an innovative drug screening system that measures the effectiveness of cannabinoid compounds on a patient’s biopsy, identifies alternatives, and alerts healthcare providers to cannabinoids that may be contraindicated. Biopsied samples are delivered by courier to our laboratory, where we perform novel cannabinoid sensitivity tests on them using our high-content drug sensitivity screening integrated with our bioinformatics platform. We then apply advanced analytics to the test results and other relevant biological and clinical information provided by each patient’s healthcare provider to derive clinical support data from which healthcare providers can make better informed treatment decisions.

Figure 4: Sample personalized patient report produced by Cannabics CDx

By enabling healthcare providers to more precisely tailor cannabinoid therapies to a patient’s cancer and clinical profile, we believe that Cannabics CDx will meet a significant unmet need of the growing population of cancer patients being treated with cannabis.

Validation

We are currently planning a clinical validation study expected to commence in 2022 to assess the sensitivity and specificity of Cannabics CDx. We are currently seeking strategic partners to collaborate on the validation and commercialization process.

Intellectual Property

Our success depends in significant part on our ability to protect the proprietary nature of our Product Prospects, technology and know-how, to operate without infringing on the proprietary rights of others; and to defend challenges and oppositions from others and prevent others from infringing on our proprietary rights, including our provisional patents described below.

We plan to continue to seek patent protection in the United States and other countries for our proprietary technologies. To date, our intellectual property portfolio includes three provisional patents, filed with the USPTO, related to our line of activity (pharmaceutical formulations; drug delivery; therapeutic uses of cannabinoids and other cannabis compounds and personalized cannabinoid diagnostics), as well as know-how and trade secrets. A full list of our IP applications in all countries can be found in our Annual 10-K filing of November 4, 2020 at page 25.

Results of Operations

For the Three Months Ended May 31, 2021 and 2020

Revenues

We haven’t received income from licensing agreements in the form of royalties during the three months ended May 31, 2021, compared to $1,886 received for the three months ended May 31, 2020. The reason for the decrease in revenues is due to a termination of the royalties agreement.

Operating Expenses

For the three months ended May 31, 2021 our total operating expenses were $676,252 compared to $692,400 for the three months ended May 31, 2020, resulting in a decrease of $16,148. The decrease is attributable to a total decrease of $196,906 in general administration, and sales and marketing expenses and an increase of $180,758 in research and development expenses.

We realized financial loss of $647,532 for the three months ended May 31, 2021, compared to incurring financial loss of $35,161 for the three months ended May 31, 2020. The increase in financial expense was mainly attributable to a convertible loan valuation expenses of $612,421 and other finance expenses of $29,000 . As a result, the net loss was $1,323,775 for the three months ended May 31, 2021, compared to a net loss of $725,675 for the three months ended May 31, 2020.

Net Loss

Net loss was $1,323,775 compared to net loss $725,675 for the three months ended May 31, 2021, for the reasons noted supra.

For the nine Months Ended May 31, 2021 and 2020

Revenues

We haven’t received income from licensing agreements in the form of royalties during the nine months ended May 31, 2021, compared to $4,950 received for the nine months ended May 31, 2020. The reason for the decrease in revenues is due to a termination of the royalties agreement.

Operating Expenses

For the nine months ended May 31, 2021, our total operating expenses were $2,003,853 compared to $2,377,688 for the nine months ended May 31, 2020, resulting in an decrease of $373,835. The decrease is attributable to a total decrease of $393,832 in general administration, and sales and marketing expenses and partially offset by an increase of $19,997 in research and development expenses.

We realized financial loss of $705,412 for the nine months ended May 31, 2021, compared to financial income of $4,362,998 for the nine months ended May 31, 2020. The decrease in financial expense was mainly attributable to exchange differences in total of $32,260 and a convertible loan valuation expenses of $612,421 and other finance expenses of $59,000, offset by a capital gain of $195,968 from and held for trading revaluation . As a result, the net loss was $2,513,297 for the nine months ended May 31, 2021, compared to a net income of $6,735,736 for the three months ended May 31, 2020.

Net loss

Net loss was $2,513,297 compared to net income of $6,735,736 for the nine months ended May 31, 2021 and May 31, 2020, for the reasons explained supra.

Other comprehensive profit

We incurred another comprehensive gain of $1,004,635 for the nine months ended May 31, 2021. The gain was mainly attributable to a valuation of a financial asset, consisting of the Company’s shares held in Seedo and Wizepharma, in the total amount of $2,982,638 As a result; the total comprehensive gain was $8,632,667 for the nine months ended May 31, 2021.

Liquidity and Capital Resources

Overview

As of May 31, 2021, we had $1,968,291 in cash compared to $777,611 on August 31, 2020. We expect to incur a minimum of $1,000,000 in expenses during the next twelve months of operations. We estimate that these expenses will be comprised primarily of general expenses including overhead, legal and accounting fees, research and development expenses, and fees payable to outside medical centers for clinical studies.

Liquidity and Capital Resources during the nine Months Ended May 31, 2021 compared to the nine Months Ended May 31, 2020

We used cash in operations of $1,911,094 for the nine months ended May 31, 2021 compared to cash used in operations of $2,060,996 for the nine months ended May 31, 2020. The negative cash flow from operating activities for the nine months ended May 31, 2021 is primarily attributable to the Company's net loss from operations of $2,513,297, offset by depreciation of $169,953, a decrease in accounts payables and accrued liabilities of $38,001, an increase of $6,326 in account receivables and prepaid expenses, convertible loan valuation of $612,241 , capital gain of $195,953 and stock issued for services in a total of $60,124.

We had cash flow from investing activities of$645,025 during the nine months ended May 31, 2021, compared to cash flowfrom investing activities of $2,152,643 for the nine months ended May 31, 2020. The cash flow from investing activities is due to the Company’s Realization of Wize Pharma Inc shares of$645,968 and its purchase of fixed assets in the aggregate amount of$943.

We had cash flow from financing activities of $2,456,750 during the nine months ended May 31, 2021, compared to none for the nine months ended May 31, 2020. The reason for the increase in cash flow from financing activities is due to the Company’s issuance of a convertible loan.

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

Going Concern

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

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

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

Off-Balance Sheet Arrangements

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

Critical Accounting Policies

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

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

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

Item 4. Controls and Procedures.

In connection with the preparation of this Quarterly Report on Form 10-Q, an evaluation was carried out by our management, with the participation of our principal executive officer and the principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)) as of May 31, 2021. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to management, including the chief executive officer and the chief financial officer, to allow timely decisions regarding required disclosures.

Based on that evaluation, our management concluded, as of the end of the period covered by this report, that our disclosure controls and procedures were not effective in recording, processing, summarizing, and reporting information required to be disclosed, within the time periods specified in the SEC's rules and forms, and that such information was accumulated and communicated to management, including the principal executive officer and the principal financial officer, to allow timely decisions regarding required disclosures.

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

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

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

On March 8^th, 2020, the Company joined Cannabics Inc., our largest shareholder and affiliate in a suit against Seach Sarid Ltd., Seach Medical Group Ltd. and Shay Sarid in Tel Aviv, Israel. This suit was brought by the Company as it believes the defendants pursued certain business arrangements which rightfully inured to the Company. Said litigation is ongoing and currently in Court appointed arbitration. The Company shall vigorously protect and pursue what it believes to be the rights of the Company and its shareholders.

Item 1A. Risk Factors

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

Item 2. Recent Sale of Unregistered Securities

During the Quarter ending May 31, 2021, the Company issued a total of 125,000 common shares to two consultants pursuant to their consulting agreement with the company.

Item 6. Exhibits

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.