CNBX 10-Q
CNBX Pharmaceuticals Inc. (CNBX)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM
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For the quarterly period ended
OR
For the transition period from ______ to ______.
Commission File Number:
___________________________________________________
(Exact name of registrant as specified in its charter)
___________________________________________________
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(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) | |
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| (Address of principal executive offices) | (Zip Code) |
(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.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company," and “emerging growth company” in Rule 12b-2 of the Exchange Act:
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller reporting company | |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
As of July 14, 2024, the registrant had shares of its Common Stock, $0.0001 par value, outstanding.
When used in this quarterly report, the terms “CNBX,” “the Company,” “we,” “our,” and “us” refer to CNBX Pharmaceuticals Inc. and its wholly owned subsidiaries, G.R.I.N Ultra Ltd., and Digestix Bioscience Inc.
CNBX PHARMACEUTICALS INC.
FORM 10-Q
MAY 31ST, 2024
INDEX
| 2 |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain information set forth in this Quarterly Report on Form 10-Q, including in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere herein may address or relate to future events and expectations and as such constitutes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements which are not historical reflect our current expectations and projections about our future results, performance, liquidity, financial condition, prospects and opportunities and are based upon information currently available to us and our management and their interpretation of what is believed to be significant factors affecting our business, including many assumptions regarding future events. Such forward-looking statements include statements regarding, among other things:
| · | the size and growth of the potential markets for our products and the ability to serve those markets; | |
| · | our expectations regarding our expenses and revenue, the sufficiency of our cash resources and needs for additional financing; | |
| · | the rate and degree of market acceptance of any of our products; | |
| · | our expectations regarding competition; | |
| · | our anticipated growth strategies; | |
| · | our ability to attract or retain key personnel; | |
| · | our ability to establish and maintain development partnerships; | |
| · | regulatory developments in the U.S. and foreign countries, especially those related to change in, and enforcement of, cannabis laws; | |
| · | our ability to obtain and maintain intellectual property protection for our products; and | |
| · | the anticipated trends and challenges in our business and the market in which we operate. |
Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “should,” “would,” “could,” “scheduled,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “seek,” or “project” or the negative of these words or other variations on these words or comparable terminology. Actual results, performance, liquidity, financial condition and results of operations, prospects and opportunities could differ materially and perhaps substantially from those expressed in, or implied by, these forward-looking statements as a result of various risks, uncertainties and other factors. These statements may be found under the section of our Annual Report on Form 10-K for the year ended August 31, 2022, 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.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CNBX PHARMACEUTICALS INC.
Consolidated Balance Sheets
| May 31, | August 31, | |||||||
| 2024 | 2023 | |||||||
| Unaudited | Audited | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Prepaid expenses and other receivables | ||||||||
| Total current assets | ||||||||
| Equipment, net | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Convertible loan | ||||||||
| Due to a related party | ||||||||
| Total current liabilities | ||||||||
| Stockholders' equity (deficit): | ||||||||
| Preferred stock, $ par value, shares authorized, shares issued and outstanding | ||||||||
| Common stock, $ par value, shares authorized, and shares issued and outstanding at May 31, 2024 and August 31, 2023 respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders' equity (deficit) | ( | ) | ( | ) | ||||
| Total liabilities and stockholders' equity | $ | $ | ||||||
See accompanying notes to consolidated financial statements.
* On May 12, 2023, the Company effected a reverse-split of its common stock on a 1:120 basis.
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CNBX PHARMACEUTICALS INC.
Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| May 31, | May 31, | May 31, | May 31, | |||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Unaudited | ||||||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development expense | $ | $ | $ | $ | ||||||||||||
| General and administrative expenses | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income | ||||||||||||||||
| Capital Gain (loss) | ( | ) | ( | ) | ||||||||||||
| Financial Income (loss) | ( | ) | ||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Profit (loss) from available for sale assets | ( | ) | ||||||||||||||
| Total comprehensive (income) loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share - basic and diluted: | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average number of shares outstanding - Basic and Diluted | ||||||||||||||||
See accompanying notes to consolidated financial statements.
| 5 |
CNBX PHARMACEUTICALS INC.
Consolidated Statements of Stockholders' Equity (Deficit)
| Common stock | Additional paid in | Unrealized gain (loss) on available-for sale financial | Accumulated | Total stockholders’ equity | ||||||||||||||||||||||||
| Shares | Amount | capital | Warrants | gain | deficit | (deficit) | ||||||||||||||||||||||
| Balance, August 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| Share based payment | – | |||||||||||||||||||||||||||
| Exercise of a Convertible loan to shares of common stock. | ||||||||||||||||||||||||||||
| Net loss | – | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, May 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| Common stock | Additional paid in | Unrealized gain (loss) on available-for sale financial | Accumulated | Total stockholders’ equity | ||||||||||||||||||||||||
| Shares | Amount | capital | Warrants | gain | deficit | (deficit) | ||||||||||||||||||||||
| Balance, February 28, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| Share based payment | – | |||||||||||||||||||||||||||
| Net Loss | – | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, May 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| 6 |
CNBX PHARMACEUTICALS INC.
Consolidated Statements of Stockholders' Equity (Deficit)
(continued)
| Common stock | Additional paid in | Unrealized gain (loss) on available-for sale financial | Accumulated | Total stockholders’ equity | ||||||||||||||||||||||||
| Shares | Amount | capital | Warrants | gain | deficit | (deficit) | ||||||||||||||||||||||
| Balance, August 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||
| Exercise of CLA to shares | ||||||||||||||||||||||||||||
| Share based payment | – | |||||||||||||||||||||||||||
| Realization of available for sale asset | – | |||||||||||||||||||||||||||
| Net loss | – | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, May 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||
| Common stock | Additional paid in | Unrealized gain (loss) on available-for sale financial | Accumulated | Total stockholders’ equity | ||||||||||||||||||||||||
| Shares | Amount | capital | Warrants | gain | deficit | (deficit) | ||||||||||||||||||||||
| Balance, February 28, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||
| Share based payment | – | |||||||||||||||||||||||||||
| Exercise of CLA to shares | ||||||||||||||||||||||||||||
| Net Loss | – | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, May 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||
See accompanying notes to consolidated financial statements.
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CNBX PHARMACEUTICALS INC.
Consolidated Statements of Cash Flows
(Unaudited)
| For the Nine Months Ended, | ||||||||
| May 31, | May 31, | |||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments required to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Interest on loans | ||||||||
| Capital Loss | ||||||||
| Convertible loan valuation | ||||||||
| Share based payment | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts Receivable and pre paid expenses | ( | ) | ||||||
| Accounts payable and accrued liabilities | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Proceeds from sale of available for sale investments | ||||||||
| Sale of equipment | ||||||||
| Acquisition of equipment | ( | ) | ||||||
| Net cash gain in investing activities | ||||||||
| Cash flows from financing activities: | ||||||||
| Convertible loan | ||||||||
| Proceeds from sale of common stock | ||||||||
| Costs of raising capital | ||||||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate fluctuations on cash | ||||||||
| Net decrease in cash | ( | ) | ( | ) | ||||
| Cash and cash equivalents at beginning of the Period | ||||||||
| Cash and cash equivalents at end of the Period | $ | $ | ||||||
| Significant non-cash transactions: | ||||||||
| Exercise of a Convertible loan to shares of common stock. | $ | $ | ||||||
See accompanying notes to consolidated financial statements.
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CNBX PHARMACEUTICALS INC.
Notes to Consolidated Financial Statements
(Unaudited)
Note 1 – Nature of Business, Presentation and Going Concern
Organization
CNBX Pharmaceuticals Inc. (the “Company”), was incorporated in the State of Nevada, on September 15, 2004, under the name of Thrust Energy Corp.
On September 30, 2010, we increased our authorized capital to 900 million shares of common stock (par value $0.0001) and 100 million shares of preferred stock (par value $0.0001) and effected a 20-for-1 reverse split of our issued and outstanding common stock. As a result of the reverse split, our issued and outstanding common stock was reduced from 13,604,000 shares to 680,202 common shares, 100,000,000 preferred shares were unaffected.
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, CNBX Pharmaceuticals Inc. 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 CNBX 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 19, 2014, FINRA granted final approval of Change of Name & Ticker Symbol of the Corporation from American Mining Corporation to CNBX PHARMACEUTICALS INC., with the new Ticker Symbol of “CNBX”. Said approval was predicated upon CNBX Pharmaceuticals Inc.’s filing of Articles of Merger with American Mining Corporation with the Nevada Secretary of State on May 21st, 2014. Under the laws of the State of Nevada, CNBX Pharmaceuticals Inc. was merged with and into the Registrant, with the Registrant being the surviving entity. The Merger was completed under Section 92A.180 of the Nevada Revised Statutes, Chapter 92A, as amended, and as such, does not require the approval of the stockholders of either the Registrant or CNBX Pharmaceuticals Inc.
On August 25, 2014, the Company organized G.R.I.N. Ultra Ltd. (“GRIN”), an Israeli corporation, as a wholly-owned subsidiary. GRIN will provide research and development activities for the Company’s products in Israel.
On July 24, 2017, the Company announced its establishment of a genetics laboratory to develop diagnostic tools based on human genome, tumor genetics and specific cannabinoids.
On August 20, 2020, the Company announced the creation of a new Division for its Anti-Tumor drug candidate RCC-33, for the treatment of colorectal cancer. The emanates from the Company’s focus on a clinical validation path, including in-vivo experiments, collaborations with key medical centers, and the preparation of a product dossier with which the company plans to schedule a Pre IND-Meeting with the US FDA.
On October 18, 2021, the Company filed 2 new Provisional Patent applications on Compositions and Methods for treating cancer, including colorectal cancer and early intervention therapy for colorectal cancer patients.
On February 13, 2022, the company established a Nomination and Governance Committee.
On May 10, 2022, the Company filed a certificate of change (the “Certificate”) with the Secretary of State of the State of Nevada. Pursuant to the Certificate, the Company effectuated a one-for-one hundred twenty (1:120) reverse split of the issued and outstanding shares of common stock of the Company without changing the par value of the stock.
| 9 |
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, 2023 annual financial statements included in our Form 10-K, filed with the U.S. Securities and Exchange Commission (“SEC”) on November 30, 2023.
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 $
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
$
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.
| 10 |
Note 2 – Related Party Transactions
During the nine months ending May 31, 2024, the
Company paid $
During the nine months ending May 31, 2024
the Company accrued $
As of May 31, 2024, the Company had a balance
outstanding payable to two directors: Gabriel Yariv and Eyal Barad in the total of $
The Company had a balance outstanding at May 31,
2024 and at May 31, 2023 of $
During the nine months ending May 31, 2024, the Company recorded a non-cash expense of $ in share-based payment, to the company chairman, board members and advisor.
Note 3 – Stockholders’ Equity (Deficit)
Authorized Shares
The Company is authorized to issue up to shares of common stock, par value $ per share. There is also shares of Preferred stock, none of which has been issued. 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.
For the period ending at May 31, 2024, the company
issued shares as a result of a convertible of a loan at a total of $
Note 4 – Realization of fixed assets
On February 15, 2024, the Company realized all
of its fixed assets in consideration of $
Note 5 – Private Placement of Notes and Warrant
On December 16, 2020, we entered into a Securities Purchase Agreement (“SPA”) with an institutional investor for a private placement of senior secured convertible notes totaling up to an aggregate of $2,750,000 to be issued in three tranches subject to the achievement of certain milestones. The convertible notes include a conversion right, at the Investor’s option, to convert the convertible notes into shares of our Common Stock at a conversion price equal to the lower of (i) $42 per share or (ii) eighty percent (80%) of the average of the two lowest daily volume-weighted average price for the Company’s Common Stock during the ten (10) consecutive trading days preceding the conversion date (the “notes”). The investor has the right to have the conversion price reduced if we issue Common Stock or convertible notes at a lower conversion price than $42 during the period that the notes are outstanding. The notes are due one year from issuance. The notes will be interest free, but in the event of a default, they will bear annual interest at a rate of 18.00%. The SPA and the notes contain events of default, including, among other things, failure to repay the notes by the maturity date, and bankruptcy and insolvency events, that would result in the imposition of the default interest rate.
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On December 21, 2020, we closed the first tranche
and issued a note in the amount of $
On April 23, 2021, we entered into a senior secured
promissory note (the “Senior Secured Note”) for $
On February 15, 2022, we entered into a forbearance agreements with the institutional investor relating to that certain Senior Secured Note. Pursuant to the forbearance agreement, the investor, through March 7, 2022, agreed to forbear from exercising any rights and remedies against the Company related to the outstanding payments and to waive certain other defaults under the Senior Secured Note and related rights pursuant to the registration rights agreement entered into in December 2020 between the Company and the investor.
On November 28, 2022, we entered into a forbearance agreements with the institutional investor relating to that certain Senior Secured Note. Pursuant to the forbearance agreement, the investor, through December 12, 2022, agreed to forbear from exercising any rights and remedies against the Company related to the outstanding payments and to waive certain other defaults under the Senior Secured Note and related rights pursuant to the registration rights agreement entered into in December 2020 between the Company and the investor.
On March 16, 2022, we issued to the investor a
demand promissory note (the “Demand Note”) in the principal amount of $
We entered into a forbearance agreements with the institutional investor relating to that certain Senior Secured Note. Pursuant to the forbearance agreement, the investor, through January 31, 2023, agreed to forbear from exercising any rights and remedies against the Company related to the outstanding payments and to waive certain other defaults under the Senior Secured Note and related rights pursuant to the registration rights agreement.
| 12 |
On June 15, 2022, the Company entered into a Securities
Purchase Agreement providing for the issuance of the Convertible Promissory Note in the principal amount of $
In the period of January through March 2023,
the Company entered into a Securities Purchase Agreement providing for the issuance of the Convertible Promissory Note in the principal
amount of $
On June 12, 2023, the Company entered into a Securities
Purchase Agreement providing for the issuance of the Convertible Promissory Note in the principal amount of $
On October 13, 2023, the Company entered into a Securities Purchase Agreement providing for the issuance of the Convertible Promissory Note in the principal amount of $24,993 ($25,000 net of issuance expenses). The Convertible Promissory Note carry interest of 5% and due on January 1, 2024.
Interest expenses amounted to $
Note 6 – Commitments and Contingencies
The company had a lease of laboratory in Rehovot, Israel, the monthly
lease was $
The lease was terminated at the end of February 2024.
Note 7 – Subsequent Events
On June 1, 2024, the company issued 1,000,000 shares as a result of a convertible of a loan at the total of $11,491.
| 13 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Company Overview
We are a pre-clinical-stage, platform technology biopharmaceutical company which has developed proprietary innovative medicines in areas of significant unmet medical needs in oncology, with a current focus on colorectal cancer ("CRC"). Our drug candidate under development for colon cancer is RCC-33, a first-in-class therapy being developed primarily in two settings: one to reduce tumor cell activity in colon cancer patients as a standalone in neoadjuvant treatment or "window of opportunity" at the time after colonoscopy, prior to cancer staging; and another for patients with refractory to therapy and adjuvant to surgery also at the time after colonoscopy. The Company hopes to start first in human Phase I/II clinical trials in 2024. Neoadjuvant treatment is the administration of a therapy before the surgical treatment to improve patient outcome, and our business strategy is to advance our programs through clinical studies including with partners, and to opportunistically add programs in areas of high unmet medical needs through acquisition, collaboration, or internal development.
Results of Operations
For the Three Months Ended May 31, 2023 and 2022
Revenues
For the three months ended May 31, 2024, there were no incomes, compared to $310,165 for the three months ended May 31, 2023
The company revenues are consisting of laboratory services.
Operating Expenses
For the three months ended May 31, 2024, our total operating expenses were $152,278 compared to $483,247 for the three months ended May 31, 2023, resulting in a decrease of $330,969. The decrease is attributable to a decrease of $110,738 in general administration, and sales and marketing expenses and a decrease of $220,231 in research and development expenses due to a reduction in the company's activities.
We realized financial loss of $21,646 for the three months ended May 31st, 2024, compared to $18,392 for the three months ended May 31, 2023.
As a result, the net loss was $130,632 for the three months ended May 31st, 2024, compared to a net loss of $154,690 for the three months ended May 31, 2023.
Net Loss
Net loss was $130,632 compared to net loss $154,690 for the three months ended May 31st, 2024, for the reasons noted supra.
For the nine Months Ended May 31st, 2024 and 2023
Revenues
For the nine months ended May 31, 2024, our total income $130,074 compared to $310,165 for the nine months ended May 31, 2023.
The company revenues consist of laboratory services.
| 14 |
Operating Expenses
For the nine months ended May 31, 2024, our total operating expenses were $660,680 compared to $1,080,046 for the nine months ended May 31, 2023, resulting in a decrease of $419,366. The decrease is attributable to a decrease of $349,758 in general administration, and sales and marketing expenses mostly due to decrease in salaries of $120,100, share based payment of $40,760 $ and Professional services of $83,504 and a decrease of $69,608 in research and development expenses.
We realized financial loss of $15,075 for the nine months ended May 31, 2024, compared to financial income of $28,499 for the nine months ended May 31, 2023. The increase in financial loss was mainly attributable to Currency exchange differences.
We incurred capital loss from a realization of equipment of $88,934 for the nine months ended May 31, 2024, compared to a capital loss of $2,395,298 for the nine months ended May 31, 2023 incurred form a realization of the Company’s shares held in Sativus Inc.
As a result, the net loss was $634,614 for the nine months ended May 31, 2024, compared to a net loss of $3,136,680 for the nine months ended May 31, 2023.
Net loss
Net loss was $634,614 compared to $3,136,680 for the nine months ended May 31, 2024 and May 31, 2023, for the reasons explained supra.
Liquidity and Capital Resources
Overview
As of May 31, 2024, we had $73,406 in cash compared to $129,696 on August 31, 2023. 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, 2023 compared to the nine Months Ended May 31, 2022
We used cash in operations of $196,019 for the nine months ended May 31, 2024, compared to cash used in operations of $133,038 for the nine months ended May 31, 2023. The negative cash flow from operating activities for the nine months ended May 31, 2024, is primarily attributable to the Company's net loss from operations of $634,614, offset by depreciation of $72,320, capital loss of $88,934, an increase in accounts payables and accrued liabilities of $67,809, an decrease of $87,991 in account receivables and prepaid expenses, and share based payment in a total of $104,745.
We had cash flow from investing activities of $113,477 during the nine months ended May 31, 2024, compared to cash flow investing activities of $24,702 for the nine months ended May 31, 2023. The cash flow from investing activities is mainly due to sale of equipment of $114,673.
We had cash flow from financing activities of $26,252 convertible loan during the nine months ended May 31, 2024, compared to $34,972 convertible loan for the nine months ended May 31, 2023.
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.
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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, 2023 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, 2023, included in our Annual Report on Form 10-K as filed on November 30th, 2023, for a discussion of our critical accounting policies and estimates.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The disclosure required under this item is not required to be reported by smaller reporting companies; as such term is defined by Item 503(e) of Regulation S-K.
Item 4. Controls and Procedures.
| (a) | Evaluation of Disclosure Controls and Procedures |
The Company maintains a set of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In accordance with Rule 13a-15(b) of the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out under the supervision and with the participation of the Company’s management, including its Chief Executive Officer, Chief Financial Officer and the full Audit Committee, of the effectiveness of its disclosure controls and procedures. The Audit Committee assessed, reviewed and determined that the Company’s disclosure controls and procedures were effective as to this quarterly filing. Based on that evaluation, The Board accepted and ratified the findings of the Audit Committee that the Company’s disclosure controls and procedures, as of May 31st, 2023, the end of the period covered by this Quarterly Report on Form 10-Q, were effective to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to the Company’s management, including the Chief Executive Officer, Chief Financial Officer, and Audit Committee as appropriate to allow timely decisions regarding required disclosure.
| (b) | Changes in Internal Control over Financial Reporting |
Since our annual report, the Company has maintained an Audit Committee to better review our internal financial reporting. There were no other changes in our internal control over financial reporting during the period ending May 31, 2024, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| (c) | Limitations on the Effectiveness of Internal Controls |
Readers are cautioned that our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our control have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any control design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
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
None.
Item 5. Other Information
During the quarter ended
May 31, 2024, no director or officer of the Company
Item 6. Exhibits
______________________________
| * | Filed herewith. |
| ** | Furnished herewith. |
| *** | XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| CNBX Pharmaceuticals Inc. | ||
| Date: July 15, 2024 | By: | /s/ Eyal Barad |
| Eyal Barad | ||
| Title: |
Chief Executive Officer (Principal Executive Officer) | |
| Date: July 15, 2024 | By: | /s/ Uri Ben Or |
| Uri Ben Or | ||
| Title: |
Chief Financial Officer (Principal Financial Officer) | |
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