Skytech Orion Global Corp 10-Q for FY2021 Q3
Skytech Orion Global Corp. (SKTG)
About this 10-Q
Skytech Orion Global Corp filed this 10-Q on November 15, 2021, covering the quarter ended September 30, 2021 (FY2021 Q3).
Headline figures
Quarter ended September 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $1.55M
- compared with a net loss of $1.23M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
MARK ONE
for
the Quarterly Period ended
for the transition period from ________ to ________
Commission file number
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
| (Address of principal executive offices) | Zip Code |
+
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| N/A | N/A | N/A |
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. ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 November 15, 2021, shares of the registrant’s common stock, par value $0.0001 per share, were outstanding.
CITRINE GLOBAL, CORP
Form 10-Q
September 30, 2021
| 2 |
CITRINE GLOBAL, CORP.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2021
IN U.S. DOLLARS
TABLE OF CONTENTS
| 3 |
CITRINE GLOBAL, CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. dollars except share and per share data)
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | ||||||||
| Prepaid share based payment to a service provider | - | |||||||
| Trading securities | - | |||||||
| Short-term loan measured at fair value | - | |||||||
| Other current assets | ||||||||
| Total Current assets | ||||||||
| Non-current assets | ||||||||
| Investments valued under the measurement alternative | ||||||||
| Property and equipment, net | ||||||||
| Total non-current assets | ||||||||
| Total assets | ||||||||
| Liabilities and Shareholders’ Equity (Deficit) | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | ||||||||
| Accrued Compensation | ||||||||
| Fair value of a liability in connection with stock exchange agreement | - | |||||||
| Convertible component in convertible notes | - | |||||||
| Convertible notes | - | |||||||
| Share-based compensation liability | - | |||||||
| Total current liabilities | ||||||||
| Non-current liabilities | ||||||||
| Convertible notes (Note 4D) | - | |||||||
| Total liabilities | ||||||||
| Stockholders’ equity (deficit) | ||||||||
| Common stock, par value $ per share, shares authorized at September 30, 2021 and December 31, 2020; shares issued and outstanding at September 30, 2021 and December 31, 2020 | ||||||||
| Additional paid-in capital | ||||||||
| Stock to be issued | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Total stockholders’ equity (deficit) | ( | ) | ||||||
| Total liabilities and stockholders’ equity (deficit) | ||||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
| 4 |
CITRINE GLOBAL, CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(U.S. dollars except share and per share data)
| Nine months ended | Three months ended | |||||||||||||||
| September 30 | September 30 | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Revenues | - | - | - | |||||||||||||
| Cost of revenues | - | - | - | |||||||||||||
| Gross loss | - | ( | ) | - | - | |||||||||||
| Research and development expenses | ( | ) | ( | ) | ( | ) | - | |||||||||
| Marketing, general and administrative expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain from deconsolidation of a subsidiary | - | - | - | |||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Financing income expenses, net: | ||||||||||||||||
| Fair value adjustment of liability in connection with stock exchange agreement | - | ( | ) | - | ||||||||||||
| Change in fair value of trading securities | - | ( | ) | - | ( | ) | ||||||||||
| Change in fair value of short-term loan measured at fair value | - | - | ||||||||||||||
| Expenses related to convertible loan terms | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss from extinguishment in connection with convertible loan restructuring (Note 4B) | ( | ) | - | - | - | |||||||||||
| Other financing income, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Financing expenses, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss attributable to common stockholders | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss per common stock (basic and diluted) | (*)(0.00 | ) | ( | ) | (*)(0.00 | ) | (*)(0.00 | ) | ||||||||
| Basic weighted average number of shares of common stock outstanding | ||||||||||||||||
| Comprehensive loss: | ||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other comprehensive expense attributable to foreign currency translation | - | ( | ) | - | - | |||||||||||
| Comprehensive loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| (*) |
The accompanying notes are an integral part of the condensed consolidated financial statements.
| 5 |
CITRINE GLOBAL, CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)
(U.S. dollars, except share and per share data)
| Redeemable convertible preferred stock | Common stock | Additional paid-in capital | Stock to be issued |
Accumulated deficit | Accumulated other comprehensive income | Total stockholders’ deficit | ||||||||||||||||||||||||||||||
| Stock | Amount | Stock | Amount | |||||||||||||||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2019 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Conversion preferred stock to common stock | ( | ) | ( | ) | 10,344,828 | - | - | - | ||||||||||||||||||||||||||||
| Issuance of common stock and warrants | - | - | - | - | - | |||||||||||||||||||||||||||||||
| Issuance of common stock for services | - | - | - | - | - | |||||||||||||||||||||||||||||||
| Waiver of fee by related part | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
| Other comprehensive income | - | - | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||
| Warrants issued in connection with convertible notes | ||||||||||||||||||||||||||||||||||||
| Issuance of common stock in exchange investment in marketable securities | ||||||||||||||||||||||||||||||||||||
| Issuance of common stock in exchange investment in marketable securities, shares | ||||||||||||||||||||||||||||||||||||
| Modification of warrants in connection with convertible loan restructuring (Note 4B) | ||||||||||||||||||||||||||||||||||||
| Warrants issued in connection with convertible notes | ||||||||||||||||||||||||||||||||||||
| Classification of embedded conversion feature from liability to equity (Note 4B) | ||||||||||||||||||||||||||||||||||||
| Commitment for issuance of fixed number of ordinary shares | ||||||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | - | - | ( | ) | - | ( | ) | |||||||||||||||||||||||||
| BALANCE AT MARCH 31, 2020 (unaudited) | - | ( | ) | |||||||||||||||||||||||||||||||||
| Warrants issued in connection with convertible notes | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | - | - | ( | ) | - | ( | ) | |||||||||||||||||||||||||
| BALANCE AT JUNE 30, 2020 (unaudited) | - | ( | ) | |||||||||||||||||||||||||||||||||
| Issuance of common stock in exchange investment in marketable securities | - | - | - | - | - | |||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | - | - | ( | ) | - | ( | ) | |||||||||||||||||||||||||
| BALANCE AT SEPTEMBER 30, 2020 (unaudited) | - | ( | ) | |||||||||||||||||||||||||||||||||
| 6 |
| Redeemable convertible preferred stock | Common stock | Additional paid-in capital | Stock to be issued | Accumulated deficit | Accumulated other comprehensive income | Total stockholders’ deficit | |||||||||||||||||||||||||||||
| Stock | Amount | Stock | Amount | ||||||||||||||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2020 | - | ( | ) | ||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||
| BALANCE AT MARCH 31, 2021 (unaudited) | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Modification of warrants in connection with convertible loan restructuring (Note 4B) | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||
| Warrants issued in connection with convertible notes | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||
| BALANCE AT JUNE 30, 2021 (unaudited) | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Classification of embedded conversion feature from liability to equity (Note 4B) | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||
| Commitment for issuance of fixed number of ordinary shares | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||
| BALANCE AT SEPTEMBER 30, 2021 (unaudited) | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| 7 |
CITRINE GLOBAL, CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars, except share and per share data)
| Nine months ended | ||||||||
| September 30, | ||||||||
| 2021 | 2020 | |||||||
| (Unaudited) | ||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | ( |
) | ( |
) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Finance expenses, net | - | |||||||
| Gain from deconsolidation of a subsidiary | - | ( |
) | |||||
| Change in fair value of convertible component in convertible notes | ||||||||
| Interest and change in fair value of short-term loan measured at fair value | ( |
) | ||||||
| Prepaid Share based payment to a service provider | - | |||||||
| Expenses related to convertible loan terms | ||||||||
| Loss from extinguishment in connection with convertible loan restructuring (Note 4b) | - | |||||||
| Inventory subject to refund | - | |||||||
| - | - | |||||||
| Share-based compensation liability | - | |||||||
| Management fee waiver | - | |||||||
| Fair
value adjustment of liability in connection with stock exchange agreement |
( |
) | ||||||
| Changes in fair value of marketable securities | ||||||||
| Loss from sale of marketable securities | - | |||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | - | ( |
) | |||||
| Prepaid share based payment to a service provider | - |
|||||||
| Net changes in operating leases | - | ( |
) | |||||
| Related parties | - | ( |
) | |||||
| Other current assets | ( |
) | ( |
) | ||||
| Inventory | - | |||||||
| Deferred Revenue | - | ( |
) | |||||
| Accounts payable and accrued expenses | ||||||||
| Net cash used in operating activities | ( |
) | ( |
) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Net cash outflow from deconsolidation of a subsidiary (Appendix A) | - | ( |
) | |||||
| Investment valued under the measurement alternative | - | ( |
) | |||||
| Repayment of short-term loan | - | ( |
) | |||||
| Proceeds from sale of trading securities | - | |||||||
| Proceeds from repayments of short-term loan | - | |||||||
| Net cash provided by (used in) investing activities | ( |
) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from related party loans | - | |||||||
| Proceeds from issuance of common stock, net | - | |||||||
| Commitment to issue shares to related parties | - | |||||||
| Proceeds from the issued convertible notes and warrants | ||||||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rates on cash and cash equivalents | ( |
) | ( |
) | ||||
| Net increase in cash and cash equivalents | ||||||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | ||||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | ||||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Non-cash transactions: | ||||||||
| Conversion preferred stock to common stock | - | |||||||
| Classification of embedded conversion feature from liability to equity (see note 4D) | ||||||||
| Commitment for issuance of fixed number of ordinary shares | ||||||||
| Issuance of common stock in exchange investment in trade securities | - | |||||||
| Appendix A - Net cash outflow from deconsolidation of a subsidiary | ||||||||
| Working capital (excluding cash and cash equivalents), net | - | ( |
) | |||||
| Long term assets | - | |||||||
| Long term liabilities | - | ( |
) | |||||
| Gain from deconsolidation of a subsidiary | - | |||||||
| - | ( |
|||||||
The accompanying notes are an integral part of the condensed consolidated financial statement
| 8 |
CITRINE GLOBAL, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 1 - GENERAL
Citrine Global, Corp. (“Citrine Global” or the “Company”) was incorporated under the laws of the State of Delaware on May 26, 2010. The Company’s common stock is traded in the United States on the OTCQB market under the ticker symbol “CTGL.”
On June 3, 2020 the Company established a wholly owned new Israeli subsidiary: CTGL – Citrine Global Israel Ltd, (the “Israeli Subsidiary”).
On August 20, 2020, the Israeli Subsidiary, Beezz Home Technologies Ltd., and Golden Holdings Neto Ltd. incorporated Cannovation Center Israel Ltd. Israeli Subsidiary holds % of Cannovation Center Israel Ltd.’s shares, while each of Beezz Home Technologies Ltd. and Golden Holdings Neto Ltd. holds 20% of its shares.
On
July 13, 2021,
| 9 |
CITRINE GLOBAL, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
On April 13, 2021, Citrine S A L Investment & Holding Ltd., (“Citrine S A L”) a major shareholder of the Company, on behalf of itself and its affiliates and related parties, has furnished the Company with an irrevocable letter of obligation to financially support the Company until June 30, 2022. On August 13, 2021, Citrine S A L Investment & Holding Ltd. extended this support through December 30, 2022.
See also Notes 4C and 6A with additional cash proceeds to the Company.
Based on the Company’s current cash balances, and the irrevocable letter of obligation from Citrine S A L noted above, the Company believes it has sufficient funds for its plans for the next twelve months from the issuance of these financial statements. As the Company is embarking on its new activity as detailed herein, it is incurring losses. It cannot determine with reasonable certainty when and if it will have sustainable profits.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
Unaudited Interim Financial Statements
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiary, prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions to Form 10-Q. In the opinion of management, the financial statements presented include all material adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the financial condition, results of operations and cash flows for the three and nine months ended September 30, 2021. However, these results are not necessarily indicative of results for any other interim period or for the year ended December 31, 2021.
Certain information and footnote disclosures normally included in financial statements in accordance with generally accepted accounting principles have been omitted pursuant to the rules of the U.S. Securities and Exchange Commission (“SEC”). These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Citrine Global and its Israeli Subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of expenses during the reporting periods. Significant estimates include share-based compensation liability (see Note 3). Actual results could differ from those estimates.
| 10 |
CITRINE GLOBAL, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF RESENTATION (cont.)
Fair value
Fair value of certain of the Company’s financial instruments including cash, accounts receivable, accounts payable, accrued expenses, and other accrued liabilities approximate cost because of their short maturities. The Company measures and reports fair value in accordance with Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosure,” which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements.
Fair value, as defined by ASC 820, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset should reflect its highest and best use by market participants, principal (or most advantageous) markets, and an in-use or an in-exchange valuation premise. The fair value of a liability should reflect the risk of nonperformance, which includes, among other things, the Company’s credit risk.
Valuation techniques are generally classified into three categories: (i) the market approach; (ii) the income approach; and (iii) the cost approach. The selection and application of one or more of the techniques may require significant judgment and are primarily dependent upon the characteristics of the asset or liability, and the quality and availability of inputs. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 also provides fair value hierarchy for inputs and resulting measurement as follows:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.
Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities; and
Level 3: Unobservable inputs for the asset or liability that are supported by little or no market activity, and that are significant to the fair values.
Fair value measurements are required to be disclosed by the level within the fair value hierarchy in which the fair value measurements in their entirety fall. Fair value measurements using significant unobservable inputs (in level 3 measurements) are subject to expanded disclosure requirements including a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (i) total gains or losses for the period (realized and unrealized), (ii) segregating those gains or losses included in earnings, and (iii) a description of where those gains or losses included in earning are reported in the statement of operations.
| 11 |
CITRINE GLOBAL, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF RESENTATION (cont.)
Fair value (cont.)
As of September 30, 2021, there are no financial assets or financial liabilities that are measured at fair value on a recurring basis. The Company’s financial assets and liabilities that are measured at fair value on a recurring basis by level within the fair value hierarchy are as follows:
SCHEDULE OF FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON A RECURRING BASIS
| Balance as of December 31, 2020 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Trading securities | ||||||||||||||||
| Short-term loan measured at fair value | ||||||||||||||||
| Total assets | ||||||||||||||||
| Liabilities: | ||||||||||||||||
| Fair value of convertible component in convertible notes | ||||||||||||||||
| Fair Value of forward option | ||||||||||||||||
| Total liabilities | ||||||||||||||||
The following table presents the changes in fair value of the level 3 liabilities and assets for the period ended September 30, 2021:
SCHEDULE OF CHANGES IN FAIR VALUE OF LIABILITIES
Changes in Fair value | ||||
| Assets: | ||||
| Short term loan outstanding at December 31, 2020 | ||||
| Proceeds of short term loan | ( | ) | ||
| Interest and change in fair value of short-term loan measured at fair value | ( | ) | ||
| Short term loan outstanding at September 30, 2021 | - | |||
| Liabilities: | ||||
| Outstanding at December 31, 2020 | ||||
| Fair value of convertible component in additional convertible notes issued during the period | ||||
| Classification of embedded conversion feature from liability to equity | ( | ) | ||
| Commitment for issuance of fixed number of ordinary shares | ( | ) | ||
| Changes in fair value | ||||
| Outstanding at September 30, 2021 | - | |||
| 12 |
CITRINE GLOBAL, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF RESENTATION (cont.)
Conversion feature
See Note 4(c) with regard to the loans to which the following conversion features were embedded derivatives. In accordance with ASC 815-15-25, the conversion feature was considered embedded derivative instrument, and is to be recorded at its fair value separately from the convertible notes, within current liabilities in the Company’s balance sheet. The conversion component is then marked to market each reporting period with the resulting gains or losses shown in the statements of operations (See also Note 4B).
Loan #1 (See Note 4B) that occurred on August 13, 2021:
SCHEDULE OF FAIR VALUE OF CONVERTIBLE FEATURE USING VALUATION ASSUMPTIONS
August 13, 2021 | December 31, 2020 | |||||||
| Expected volatility (%) | % | % | ||||||
| Risk-free interest rate (%) | % | % | ||||||
| Expected dividend yield | % | % | ||||||
| Contractual term (years) | ||||||||
| Conversion price | (* | ) | (* | ) | ||||
| Underlying share price (U.S. dollars) | ||||||||
| Convertible notes amount | ||||||||
| Fair value of the conversion feature (U.S. dollars) | ||||||||
| (*) | the conversion price is 85% of the share price, during the period of 5 days preceding the conversion date |
Loan #2 (See Note 4C) that occurred on August 13, 2021:
| August 13, 2021 | June 24, 2021 | |||||||
| Expected volatility (%) | % | % | ||||||
| Risk-free interest rate (%) | % | % | ||||||
| Expected dividend yield | % | % | ||||||
| Contractual term (years) | ||||||||
| Conversion price | (* | ) | (* | ) | ||||
| Underlying share price (U.S. dollars) | ||||||||
| Convertible notes amount | ||||||||
| Fair value of the conversion feature (U.S. dollars) | ||||||||
| (*) | the conversion price is 85% of the share price, during the period of 5 days preceding the conversion date. |
Recent Accounting Pronouncements
In May 2021, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (“ASU”) 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation— Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815- 40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU 2021-04”). The guidance is effective for the Company on January 1, 2022. The Company is currently evaluating the impact of adopting these standards.
In August 2020, issued (“ASU”) No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 will simplify the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. ASU 2020-06 also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions.
| 13 |
CITRINE GLOBAL, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF RESENTATION (cont.)
ASU 2020-06 will be effective for public companies for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently evaluating the impact that the adoption of ASU 2020-06 will have on the Company’s consolidated financial statement presentation or disclosures.
Other new pronouncements issued but not effective as of September 30, 2021 are not expected to have a material impact on the Company’s consolidated financial statements.
| A. | On August 15, 2021, the Company’s board of directors determined to increase the number of shares reserved for issuance under the 2018 Stock Incentive Plan to shares of common stock thereunder and recommended to the Company shareholders to approve the increase in the pool. The Board also determined to grant to each of Ilanit Halperin and David Kretzmer, directors of the Company, a grant of options to purchase shares of common stock, and Doron Birger, a Company director, options to purchase shares, in each case at per share exercise price of $, provided, that such grant is subject to approval by the shareholders of the increase in the plan pool. The options vest over a two year period, in eight (8) equal installments, with the first instalment vesting on the third month anniversary of each individual’s start date and each further instalment on each subsequent third month anniversary, where the start date is, in the case of Ilanit Halperin February 27, 2020, in the case of Doron Birger September 20, 2020 and in the case of David Kretzmer is March 1, 2021, subject to such individual’s continued service with the Company. |
Since this grant is subject to approval by the shareholders of the increase in the plan pool, as of September 30, 2021, the options are recorded as a liability and changes each period will be recorded through the statement of income until the grant of date. The fair value at September 30, 2021 was determined using the Black-Scholes pricing model, assuming a risk free rate of %, a volatility factor of %, dividend yields of % and an expected life of years. The Company estimated the fair value of the options at September 30, 2021 at $. Total share based compensation expenses during the three months ended September 30, 2021 amounted to $.
SCHEDULE OF STOCK OPTION ACTIVITY
| Number of Options | Weighted Average Exercise Price | |||||||
| Outstanding at December 31, 2020 | ||||||||
| Granted | ||||||||
| Exercised | ||||||||
| Forfeited or expired | ||||||||
| Outstanding at September 30, 2021 | ||||||||
| Number of options exercisable at September 30, 2021 | ||||||||
The aggregate intrinsic value of the awards outstanding as of September 30, 2021 is $. These amounts represent the total intrinsic value, based on the Company’s stock price of $ as of September 30, 2021, less the weighted exercise price. This represents the potential amount received by the option holders had all option holders exercised their options as of that date.
| 14 |
CITRINE GLOBAL, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
| B. | On March 5, 2020 and November 11, 2020, the Company issued and shares of Common Stock, respectively, to its former legal counsel in exchange for its legal consulting services, which was provided until February 28, 2021. The Company estimated the fair value of the shares issued based on the share price at the grant date at $thousand. |
The Company recorded a share based compensation expense in the amount of thousands in the three months ended March 31, 2021.
NOTE 4 – EVENTS DURING THE PERIOD
| A. |
On
July 9, 2020, the Company transferred to Intelicanna NIS
As
of September 30, 2021, Intelicanna repaid the full principal of the loan together with
| B. | On
April 12, 2021, the parties to the Convertible Note Purchase Agreement (the “CL Agreement”) amended the CL Agreement
to (i) change the annual interest on the Notes to nine percent, applicable from January 1, 2021, (ii) ensure that the Company shall
repay the loans at the time it consummates an investment in the amount of at least $ |
The Company concluded that the change in term does not constitute a trouble debt restructuring. Thereafter, the Company applied the guidance in ASC 470-50, Modifications and Extinguishments. The accounting treatment is determined by whether terms of the new debt and original debt are substantially different.
| 15 |
CITRINE GLOBAL, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
The new debt and the old debt are considered “substantially different” pursuant to ASC 470-50 when the present value of the cash flows under the terms of the new debt instrument is at least 10% different from the present value of the remaining cash flows under the terms of the original instrument (including the incremental fair value resulting from the change in the terms of the warrants held by the lender). If the original and new debt instruments are substantially different, the original debt is derecognized and the new debt should be initially recorded at fair value, with the difference recognized as an extinguishment gain or loss. Based on the analysis, the Company concluded that the change in terms should be accounted for as an extinguishment.
The
extinguishment resulted in a loss of $
The fair value of the warrants immediately before the change were estimated using the Black-Scholes option pricing model. The assumptions used to perform the calculations as of April 12, 2021 are detailed below:
Fair value of the warrants immediately before the change:
SCHEDULE OF FAIR VALUE OF WARRANT USING ASSUMPTIONS
| Fair value of the warrants | A Warrant | B Warrant | ||||||
| Expected volatility (%) | % | % | ||||||
| Risk-free interest rate (%) | % | % | ||||||
| Expected dividend yield | % | % | ||||||
| Contractual term (years) | ||||||||
| Conversion price | ||||||||
| Underlying share price (U.S. dollars) | ||||||||
| Fair value (U.S. dollars) | ||||||||
Fair value of the warrants immediately after the change:
| Fair value of the warrants | A Warrant | B Warrant | ||||||
| Expected volatility (%) | % | % | ||||||
| Risk-free interest rate (%) | % | % | ||||||
| Expected dividend yield | % | % | ||||||
| Contractual term (years) | ||||||||
| Conversion price | ||||||||
| Underlying share price (U.S. dollars) | ||||||||
| Fair value (U.S. dollars) | ||||||||
| C. | On
June 24, 2021, the Company received from Citrine 8 LP, a related entity, a convertible loan of $ |
| 16 |
CITRINE GLOBAL, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Convertible Component of the Loan
The fair value of the conversion feature (hereafter “Convertible Component”) was estimated using the Monte Carlo Simulation Model to compute the Convertible Component’s fair value. The assumptions used to perform the Monte-Carlo simulation model on June 24, 2021 were consistent with those utilized in the Company’s Black-Scholes valuation for stock options are detailed below:
SCHEDULE OF FAIR VALUE OF WARRANT USING ASSUMPTIONS
| June 24, 2021 | ||||||||
| Expected volatility (%) | % | |||||||
| Risk-free interest rate (%) | % | |||||||
| Expected dividend yield | % | |||||||
| Contractual term (years) | ||||||||
| Conversion price | (*) | |||||||
| Underlying share price (US dollars) | ||||||||
| Convertible notes amount (US dollars) | ||||||||
| Fair value of the conversion feature (US dollars) | ||||||||
| (*) | the conversion price is 85% of the share price, during the period of 5 days preceding the conversion date. |
Warrants
The
fair value of such warrants granted as part of the June 24 agreement was estimated at $
The assumptions used on June 24, 2021 to perform the calculations are detailed below:
SCHEDULE OF FAIR VALUE OF WARRANT USING ASSUMPTIONS
| A Warrant | B Warrant | |||||||
| Expected volatility (%) | % | % | ||||||
| Risk-free interest rate (%) | % | % | ||||||
| Expected dividend yield | % | % | ||||||
| Contractual term (years) | ||||||||
| Conversion price | ||||||||
| Underlying share price (U.S. dollars) | ||||||||
| Fair value (U.S. dollars) | ||||||||
Fair Value Proportional Allocation for the June 24 Loan
The
fair value of the note was estimated at $
Based on the above, the fair value proportion allocation as of June 24, 2021 was as follows:
SCHEDULE OF FAIR VALUE OF DEBT
June 24, 2021 (US dollars) |
||||||||
| Conversion Component | $ | |||||||
| Warrants | ||||||||
| Convertible Notes | ||||||||
| Total | $ | |||||||
| 17 |
CITRINE GLOBAL, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
| D. | On
August 13, 2021, the Company and Citrine 8 LP. Citrine High Tech 7 LP and Citrine 9 LP, the holders of $ |
| (i) | Extension
of the maturity date on the Outstanding CL Notes to | |
| (ii) | Amendment
of the conversion price on the Outstanding CL Notes to a fixed conversion price of $ | |
| (iii) | Confirming
the agreement of |
The Company concluded that the change in term does not constitute a trouble debt restructuring. Thereafter, the Company applied the guidance in ASC 470-50, Modifications and Extinguishments. The accounting treatment is determined by whether terms of the new debt and original debt are substantially different.
The new debt and the old debt are considered “substantially different” pursuant to ASC 470-50 when the present value of the cash flows under the terms of the new debt instrument is at least 10% different from the present value of the remaining cash flows under the terms of the original instrument.
Since the present value of the cash flows under the terms of the new debt instrument is less than 10 percent different from the present value of the remaining cash flows under the terms of the original instrument, the Company concluded that the change in terms should be accounted for as a modification. A new effective interest rate was established based on the carrying value of the debt and the revised cash flows.
Following
the abovementioned amendment on August 13, 2021, the conversion component is qualifying for the scope exception under ASC 815-10-15-74(a).
In accordance with ASC 815-15-35-4, since the embedded conversion option in the convertible debt no longer meets the bifurcation criteria,
the fair value of the conversion component, in the amount of $
| 18 |
CITRINE GLOBAL, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
| E. | Between
August 3 – 9, 2021, the Company sold to an unrelated third party in an off market transaction ordinary shares of Intelicanna
Ltd., an Israeli medical cannabis company listed on the Tel Aviv Stock Exchange (“Intelicanna”), for aggregate gross
proceeds to the Company of NIS (approximately $ | |
| F. | On
August 9, 2021, through its | |
| G. | On
May 31, 2020, the Company entered into an agreement for future issuance of shares. The agreement for future issuance of shares provides
that a fall in a share price of a party, not exceeding | |
| H. | On
August 15, 2021, | |
| I. | On
August 15, 2021, |
| 19 |
CITRINE GLOBAL, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 5 – RELATED PARTIES
| A. | Transactions and balances with related parties |
SCHEDULE OF TRANSACTIONS AND BALANCES WITH RELATED PARTIES
Nine months ended September 30 | ||||||||
| 2021 | 2020 | |||||||
| Research and development expenses: | ||||||||
| Fees to officers | $ | |||||||
| General and administrative expenses: | ||||||||
| Directors compensation and fees to officers (*) | $ | $ | ||||||
| (*) Share base compensation | $ | |||||||
| B. | Balances with related parties: |
| As of September 30, | As of December 31, | |||||||
| 2021 | 2020 | |||||||
| Convertible notes | $ | $ | ||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| C. | Commencing
in February 2020, Ora Elharar Soffer, CEO and Chairperson of the Board, was entitled to a monthly fee of $ | |
| D. | Commencing
in February 2020, Ilanit Halperin and Ilan Ben-Ishay, each a director, are each entitled to a monthly fee of $ | |
| E. | Commencing
in May 2020, Ms. Halperin, CFO of the Company, was entitled to a monthly fee of an additional $ | |
| F. | Commencing
in March 2021, Adv. David Kretzmer, a director, is entitled to a monthly fee of $ | |
G. |
On September 29, 2021, Citrine Global advanced to iBOT,
a related party, a loan of $ | |
| G. | See also Notes 3A, 4H and 4I. |
| 20 |
CITRINE GLOBAL, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 6 – SUBSEQUENT EVENTS
| A. | On October 20, 2021, the Provisional Patent Application No: 63/257,673 for “PHARMACEUTICAL COMPOSITIONS AND METHODS FOR THE TREATMENT OF SIDE-EFFECTS ASSOCIATED WITH THE USE OF CANNABIS, CANNABINOIDS AND RELATED PRODUCTS” was registered at the US Patent and Trademark Office. The patent application describes a special cannabis based formula to treat the side effects of cannabis use. | |
| B. | On November, 2021, the Company, Cannovation Center Israel and CTGL – Citrine Global Israel Ltd., on the one hand (collectively the “Citrine Global Group”), and iBOT, on the other hand, entered into an Exclusive Strategic Collaboration and Alliance Agreement (the “Exclusive Rights Agreement”) pursuant to which iBOT granted to the Citrine Global Group, jointly and individually, exclusive world-wide rights, solely with respect to the cannabis market, to iBOT’s botanical formulas and nutritional supplements, including, the development, manufacture, distribution and sale of such products. The exclusive rights include the right of any of the Citrine Global Group to grant rights thereunder to third parties so long as such third parties shall agree to be bound by terms consistent with those contained in this Agreement. In consideration of the grant of the rights under the Exclusive Rights Agreement, Citrine Global Group granted to iBOT the exclusive right to manufacture in State of Israel (consistent with the terms of the Manufacturing Agreement) the botanical products. In addition, so long as iBOT is in compliance with the terms of this Agreement, in the event that the Citrine Global Group determines to manufacture botanical products outside of Israel, then iBOT is to be afforded the opportunity to perform such manufacturing for the Citrine Group at iBOT’s facility in Israel provided that iBOT complies with all of the terms and conditions relating to such manufacturing project, including the price per unit, delivery schedules, packaging requirements regulation and other relevant terms. | |
| C. | In
October 2021, iBOT granted to Citrine Global Group, a pre-emption right to any equity or equity linked securities that iBOT proposes
to issue to an unrelated third party with aggregate gross proceeds to the Company exceeding $ |
| 21 |
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Forward-looking Statements
This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other Federal securities laws, and is subject to the safe-harbor created by such Act and laws. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of such terms, or other variations thereon or comparable terminology. The statements herein and their implications are merely predictions and therefore inherently subject to known and unknown risks, uncertainties, assumptions and other factors that may cause actual results, performance levels of activity, or our achievements, or industry results to be materially different from those contemplated by the forward-looking statements. Except as required by law, we undertake no obligation to release publicly the result of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Further information on potential factors that could affect our business is described under the heading “Risk Factors” in Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 as filed with the Securities and Exchange Commission, or the SEC, on April 15, 2021. Readers are also urged to carefully review and consider the various disclosures we have made in that report. As used in this quarterly report, the terms “we”, “us”, “our”, the “Company” and “Citrine” mean Citrine Global, Corp. and our wholly-owned subsidiary CTGL -Citrine Global Israel Ltd. unless otherwise indicated or as otherwise required by the context.
Overview
Citrine Global’s business activity is primarily comprised of developing wellness and pharma technology solutions for the botanical and medical cannabis industries. The awareness to health and wellness is growing, with an emphasis on preventive medicine and wellbeing solutions. The use of botanicals, food supplements, and medical cannabis and cannabinoids is expanding and the medical cannabis market is forecast to nearly triple from $16 billion in 2021 to $46 billion in 2026 according to the Market Data Research Report from April 2021.
Our vision is to become a leading global company for wellness and pharma technology solutions in the botanical and medical cannabis industries and to improve people’s health and quality of life worldwide
Citrine Global created a five (5)-element strategy to realize the vision to become a leading global company:
| ● | 1st Element - Cannovation Center Platform |
| ● | 2nd Element - Developing & Commercializing Wellness & Pharma Products for the Botanical and Medical Cannabis Industries |
| ● | 3rd Element - Israeli Technology as a source of innovation for global markets |
| ● | 4th Element - Acquiring Companies |
| ● | 5th Element - Global Network & Market Potential |
Citrine Global’s headquarters and senior management are based in Israel, where the Company operates via its 100%-owned-subsidiary, CTGL Citrine Global Israel Ltd., and its 60% owned-subsidiary Cannovation Center Israel Ltd., and has a strong foothold in Israel through established contacts with leading universities, researchers, labs, entrepreneurs, and focuses on Israeli technologies as a source of innovation for global markets.
Cannovation Center Israel Ltd. filed in October 2021 in the U.S. Patent & Trademark Office a provisional patent application for “Pharmaceutical Compositions and Methods for the Treatment of Side Effects Associated with the Use of Cannabis, Cannabinoids, and Related Products”. The invention addresses technologies and solutions to support medical cannabis patients who experience side effects related to their cannabis treatment.
Medical cannabis solutions have been approved for medical use and shown to benefit serious medical conditions, including cancer, multiple sclerosis, parkinson, epilepsy, chronic pain, post trauma, and more. Research indicates that many medical cannabis patients experience side effects during their cannabis treatment, such as headaches, dry mouth and dry eyes, lightheadedness and dizziness, drowsiness, fatigue, nausea, vomiting, disorientation, hallucinations, increased heart rate, increased appetite, impaired judgement, impaired coordination, and more. Some medical cannabis patients continue treatment despite experiencing side effects, while research shows that at least 15% choose to discontinue treatment despite good clinical outcomes achieved with the cannabis treatment. Following thorough investigation of cannabis treatment related side effects, we decided to focus on answering this unmet need and developing complementary solutions. The patent application advances our ongoing botanical and cannabis-related research and planned clinical trials on wellness to pharma solutions and products.
We developed and commercialized the Green Botanicals ‘Side by Side’ product line that includes dozens of proprietary botanical formulations comprised of ingredients such as medicinal mushrooms, vitamins, minerals, and other herbal extracts. The Green Botanicals Side by Side product line will be offered to medical cannabis patients as complementary solutions together with their cannabis treatment with the aim of improving the quality of the cannabis treatment.
Our strategy is to market the Green Botanicals ‘Side by Side’ product line as nutritional supplements in collaboration with cannabis distribution channels, pharmacies, dispensers, and leading cannabis companies worldwide with all products meeting the relevant regulatory approvals in every territory.
We are in the process of running a clinical trial in which we monitor cannabis patients with our solutions as part of their cannabis treatment as part of our strategy of developing wellness & pharma solutions.
| 22 |
The Five Elements Strategy
We created a five-element approach of multi-strategy solutions to realize our vision to become a leading global company for wellness and pharma technology solutions for the botanical and medical cannabis industries and to improve people’s health and quality of life worldwide:
| 1. | The 1st Element - Cannovation Center Platform of an Operational Innovation Center for the Botanicals and Medical Cannabis Industries: |
We have developed a unique platform for Operational Innovation Centers to create ecosystems that promote operational scale-up and business growth for botanicals, and medical cannabis industries.
Our first innovation and operation center will be built with Israeli government grants and other benefits by Cannovation Center Israel Ltd and will include factories, laboratories, pharmacological research, product development, preclinical & clinical trials, clean rooms, logistics, import and export, distribution, business strategy and professional consultants.
Figure
1: Cannovation Center Israel Building
* Images are for demonstration purposes only and do not bind the company
| 23 |
* Images are for demonstration purposes only and do not bind the company
Government Support:
On July 13, 2021, the Ministry of Economy of the Israeli government recommended to the Israel Land Authority that it approve a grant of 11,687 square meters of industrial land in Yeruham, Israel for Cannovation Center Israel to build the Cannovation Center, to include factories, laboratories, logistics and a distribution center for the medical cannabis, and botanicals industries. The grant was initially awarded on December 30, 2020, for 10,000 square meters of industrial land in Yeruham, Israel and was increased to 11,687 square meters on July 13, 2021. Cannovation Center Israel is in process of receiving the required building permits and approvals to start the construction and is in process with several financing entities in real-estate financing.
Cannovation Center Israel’s vision is to become a worldwide center for the botanical and medical cannabis industries bringing global leaders and creating a supportive eco-system and a leading operation and research center that promotes scientific research and commercial collaborations between technologies, market leaders and companies, from Israel and around the world.
| 2. | The 2nd Element - Developing & Commercializing Wellness & Pharma Products for the Botanical and Medical Cannabis Industries |
Following on investigation of the cannabis treatment related side effects, we decided to focus on answering this unmet need and developing complementary solutions to support medical cannabis patient who experience side effects that include:
| 24 |
1. Provisional Patent Application No: 63/257,673 for “PHARMACEUTICAL COMPOSITIONS AND METHODS FOR THE TREATMENT OF SIDE-EFFECTS ASSOCIATED WITH THE USE OF CANNABIS, CANNABINOIDS AND RELATED PRODUCTS”.
2.The Green Botanicals Side by Side product line includes dozens of proprietary botanical formulations comprised of ingredients such as medicinal mushrooms, vitamins, minerals, and other herbal extracts and does not include any cannabis, cannabinoid, or cannabis related components.
The Green Botanicals ‘Side by Side’ product line will be offered to medical cannabis patients as complementary solutions together with their cannabis treatment with the aim of improving the quality of the cannabis treatment.
Our strategy is to market the Green Botanicals ‘Side by Side’ product line as nutritional supplements in collaboration with cannabis distribution channels, pharmacies, dispensers, and leading cannabis companies worldwide meeting the relevant regulatory approvals in every territory.
3. Products under development and regulation process:
| ● | Medical cannabis inflorescences. | |
| ● | Medical cannabis CBD oils. | |
| ● | Kits including Medical Cannabis inflorescences & Oils and Green Botanicals for supporting medical cannabis patients who experience side effects. | |
| ● | CBD and hemp formulations including synergistic combinations with medicinal mushrooms and selected herbal extracts. | |
| ● | CBD and hemp solutions for cosmetics, foods, beverages, and more. |
| * | All products will be released to market only after receiving regulatory approval from the Israeli Ministry of Health and compliance with the relevant regulations in each territory. |
| 3. | The 3rd Element - Israeli Technology as a Source of Innovation for Global Markets |
Israel is considered a global innovation powerhouse for decades with strong scientific research and R&D capabilities. Israel is considered a leader in many areas in the high tech, biotech botanical & medical cannabis industries.
Cannovation Center Israel Ltd. was awarded grants by the Israeli Economy and Industry Ministry for building the Cannovation Center Israel in Yeruham, in Southern Israel, as described above.
| 25 |
| 4. | The 4th Element - Acquiring & Merging Companies |
| ● | Our strategy consists of acquiring companies with IP, R&D, patents, and distribution networks to leverage company value and intellectual property. | |
| ● | We view mergers & acquisitions of companies with technologies, distribution infrastructure and other activities as part of our growth strategy. |
| 5. | The 5th Element - Market Potential & Global Network |
The 5th element of our strategy is to become a leading global company is creating a global network of subsidiaries, Cannovation Centers, and new technologies.
Our growth strategy includes:
| ● | Creating an international network of subsidiaries, local teams, partners worldwide. | |
| ● | Cannovation Centers’ worldwide Coverage, with each Cannovation Center choosing products and services according to regulations in the territory. |
Recent Developments
Between August 3 – 9, 2021, we sold to an unrelated third party in an off market transaction 619,589 ordinary shares of Intelicanna Ltd., an Israeli medical cannabis company listed on the Tel Aviv Stock Exchange (“Intelicanna”), for aggregate gross proceeds to the Company of 1,260,611 NIS (approximately $391,500 based on the current exchange rate). Following the sale, the Company no longer holds any Intelicanna shares. As previously reported, the Company obtained the Intelicanna shares in a share exchange agreement entered into with Intelicanna in September 2020. The Company’s decision to sell the Intelicanna shares was taken, in part, to avoid being subject to the terms of the Investment Company Act of 1940. In addition, on May 31, 2020, we entered into an agreement with Intelicanna for future issuance of shares. The agreement for future issuance of shares provides that a fall in a share price of a party, not exceeding 20%, measured six months after issuance of shares by both parties pursuant to a separate share exchange agreement, will be offset by the issuance of additional shares to the other party to bring up to $500 thousand the total value of the shares issued to the other party. On August 15, 2021, the Company’s board of directors determined that it is required to issue to Intelicanna 535,867 shares of the Company’s common stock and has authorized the issuance of such shares to Intelicanna.
On August 9, 2021, through our 60% owned subsidiary Cannovation Center Israel, we entered into an agreement with iBOT Israel-Botanicals Ltd., a company formed under the laws of the State of Israel (“iBOT”), pursuant to which iBOT agreed to manufacture a line of nutritional supplements for Cannovation Center Israel, including packaging and storage (the “Manufacturing Agreement”). iBOT is a botanical nutritional supplements’ company developing and manufacturing botanical formulas and nutritional supplements for custom & contract manufacturing for leading botanical companies. iBOT’s manufacturing facility is approved by the Israeli Ministry of Health and is GMP-certified, ISO9001-certified and HACCP certified by IQC. The principal shareholders and control persons of iBOT are the Company’s Chief Executive Officer and a Company director.
| 26 |
On August 13, 2021, the Company and Citrine 8 LP. Citrine High Tech 7 LP and Citrine 9 LP, the holders of $1,520,000 in principal amount under the CL Agreement (the “Outstanding CL Notes”), entered into an agreement pursuant to which the following principal terms were effected:
| (i) | Extension of the maturity date on the Outstanding CL Notes to July 31, 2023, provided, that if the Company consummates prior to maturity an investment of at least $5 million of the Company’s securities, then the Company shall repay the principal amount and accrued interest of the Notes from such proceeds; | |
| (ii) | Amendment of the conversion price on the Outstanding CL Notes to a fixed conversion price of $0.10; per share and | |
| (iii) | Confirming the agreement of the holders of the Outstanding CL Notes to honor draw down notice for balance of remainder of the $1,800,000 originally committed to under the CL Agreement (i.e., $280,000) through March 31, 2022. |
On May 31, 2020, the Company entered into an agreement for future issuance of shares. The agreement for future issuance of shares provides that a fall in a share price of a party, not exceeding 20%, measured six months after issuance of shares by both parties pursuant to a separate share exchange agreement, will be offset by the issuance of additional shares to the other party to bring up to $500 thousand the total value of the shares issued to the other party. On August 15, 2021, the Company’s board of directors determined that it is required to issue to Intelicanna 535,867 shares of the Company’s common stock and has authorized the issuance of such shares to Intelicanna. As of September 30, 2021 the common stock have not issued yet. As such, the Company recorded an additional $14,468 to be issued to Intellicana.
On August 15, 2021, the Company’s board of directors determined to increase the number of shares reserved for issuance under the 2018 Stock Incentive Plan to 90,000,000 shares of common stock thereunder and recommended to the Company shareholders to approve the increase in the pool to. The Board also determined to grant to each of Ilanit Halperin and David Kretzmer, directors of the Company, a grant of options to purchase 9,425,680 shares of common stock, and Doron Birger, a Company director, options to purchase 2,365,420 shares, in each case at per share exercise price of $0.05, provided, that such grant is subject to approval by the shareholders of the increase in the plan pool. The options vest over a two year period, in eight (8) equal installments, with the first instalment vesting on the third month anniversary of each individual’s start date and each further instalment on each subsequent third month anniversary, where the start date is, in the case of Ilanit Halperin February 27, 2020, in the case of Doron Birger September 20, 2020 and in the case of David Kretzmer is March 1, 2021, subject to such individual’s continued service with the Company.
On August 15, 2021, the board determined to award a bonus to the Company’s Chairperson of the Board, CEO, CFO, officers, directors and senior management equal to two percent (2%) of any capital raise, subject to prior repayment of the outstanding convertible loans and so long as the payment thereof would be part of the Company’s operating budget for a minimum period of 18 months. In addition, the Board agreed to a bonus Company’s Chairperson of the Board, CEO, CFO, officers, directors and senior management of 2% from operating profits which will become payable upon the fulfillment of certain specified targets that the Board will establish, subject to prior repayment of the outstanding convertible loans and so long as the payment thereof is from available funds and would be part of the Company’s operating budget for a minimum period of 18 months.
On August 15, 2021, David Kretzmer, a director of the Company, was also appointed to the board of directors of Cannovation Center Israel, the Company’s 60% owned subsidiary.
On August 15, 2021, the board of directors of Cannovation Center Israel determined to adjust the compensation of the founder and chairperson, Ora Elharar Soffer, to $10,000 per month, and that of the chief financial officer, Ilanit Halperin, to $4,000 per month, and that of Ilan Ben Ishay and David Kretzmer, directors, to $2,000 per month, in each case retroactive to July 1, 2021. These amounts would be paid at such time as they shall become due and payable from and as Cannovation Center Israel shall have available funds therefor.
| 27 |
On October 20, 2021,Provisional Patent Application No: 63/257,673 for “PHARMACEUTICAL COMPOSITIONS AND METHODS FOR THE TREATMENT OF SIDE-EFFECTS ASSOCIATED WITH THE USE OF CANNABIS, CANNABINOIDS AND RELATED PRODUCTS” registered at the US Patent and Trademark Office. The patent application describes a special cannabis based formula to treat the side effects of cannabis use.
On September 29, 2021, Citrine Global advanced to iBOT, a related party, a loan of $50,000 with a 12 month maturity date. The loan bears interest at an effective annual interest rate of 12% as and is convertible, at the option of Citrine Global, into equity shares of iBOT at conversion rate equal to the lower of (i) 25% discount to the most recent round of capital raised by iBOT during the term of the loan and (ii) the rate specified in the framework agreement]. In addition, Citrine Global is entitled to convert the outstanding loan, in whole or in part, to satisfy payments of amounts owed to iBOT under the services agreements between the parties
On November, 2021, the Company, Cannovation Center Israel and CTGL – Citrine Global Israel Ltd., on the one hand (collectively the “Citrine Global Group”), and iBOT, on the other hand, entered into an Exclusive Strategic Collaboration and Alliance Agreement (the “Exclusive Rights Agreement”) pursuant to which iBOT granted to the Citrine Global Group, jointly and individually, exclusive world-wide rights, solely with respect to the cannabis market, to iBOT’s botanical formulas and nutritional supplements, including, the development, manufacture, distribution and sale of such products. The exclusive rights include the right of any of the Citrine Global Group to grant rights thereunder to third parties so long as such third parties shall agree to be bound by terms consistent with those contained in this Agreement. In consideration of the grant of the rights under the Exclusive Rights Agreement, Citrine Global Group granted to iBOT the exclusive right to manufacture in State of Israel (consistent with the terms of the Manufacturing Agreement) the botanical products. In addition, so long as iBOT is in compliance with the terms of this Agreement, in the event that the Citrine Global Group determines to manufacture botanical products outside of Israel, then iBOT is to be afforded the opportunity to perform such manufacturing for the Citrine Group at iBOT’s facility in Israel provided that iBOT complies with all of the terms and conditions relating to such manufacturing project, including the price per unit, delivery schedules, packaging requirements regulation and other relevant terms.
In October 2021, iBOT granted to Citrine Global Group, a pre-emption right to any equity or equity linked securities that iBOT proposes to issue to an unrelated third party with aggregate gross proceeds to the Company exceeding $1 million or which will result in a change in control in iBOT following such issuance, then iBOT is to give to the Citrine Global Group written notice of such proposed issuance and the relevant terms thereof and the Citrine Global Group shall have ten (10) days thereafter to determine if it elects to purchase a minimum of 51% of the proposed issuance on the price and other terms specified in the notice sent by iBOT (the “Pre-Emption Right”). If the Citrine Global Group elects to exercise the Pre-Emption Right, such purchase is to take place at no more than 90 days following the expiration of the 10 day notice period to the Citrine Global Group. Any iBOT securities of the Pre-Emption Right that Citrine Global Group elects to not purchase are to be sold by not later than 90 days following the end of the Citrine Global Group’s notice period and if such shares are not sold to such third party within the 90 day period, the Pre-Emption right shall apply to any subsequent proposed issuance. The preemption right does not apply to certain specified exceptions
Comparison of the Three Months Ended September 30, 2021 compared to the Three Months Ended September 30, 2020
The following table presents our results of operations for the three months ended September 30, 2021 and 2020
| Three Months Ended | ||||||||
| September 30 | ||||||||
| 2021 | 2020 | |||||||
| Revenues | - | - | ||||||
| Cost of sales | - | - | ||||||
| Operating loss | - | - | ||||||
| Research and development expenses | (57,564 | ) | - | |||||
| Marketing, general and administrative expenses | (1,167,826 | ) | (1,058,335 | ) | ||||
| Gain from deconsolidation of a subsidiary | - | - | ||||||
| Operating loss | (1,225,390 | ) | (1,058,335 | ) | ||||
| Financing expenses, net | (323,789 | ) | (171,135 | ) | ||||
| Net loss | (1,549,179 | ) | (1,229,470 | ) | ||||
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Revenues. Revenues for the three months ended September 30, 2021 and 2020 were $nil.
Research and Development. Research and development expenses for the three months ended September 30, 2021 were $57,564 compare to $0 for the three months ended September 30, 2020. The increase is mainly attributable to expenses related to the development of our Green Botanical product line and provisional patent application related expenses.
Marketing, general and Administrative Expenses. Marketing, general and administrative expenses consist primarily of share-based compensation expenses and other non-personnel related expenses such as legal expenses. Marketing, general and administrative expenses increased from $1,058,335 for the three months ended September 30, 2020 to $1,167,826 for the three months ended September 30, 2021. The increase in our marketing, general and administrative expenses is mainly attributable to the increase in our non-cash share-based compensation expenses and in professional services offset by decrease in legal fees and in salaries and related expenses.
Financing Expenses, Net. Financing expenses, net was $323,789 and $171,135 for the three months ended September 30, 2021 and 2020, respectively.
Net Loss. Net loss for the three months ended September 30, 2021 was $1,549,179 and is attributable to the reasons discussed above.
Comparison of the Nine Months Ended September 30, 2021 compared to the Nine Months Ended September 30, 2020
The following table presents our results of operations for the nine months ended September 30, 2021 and 2020
| Nine Months Ended | ||||||||
| September 30 | ||||||||
| 2021 | 2020 | |||||||
| Revenues | - | 11,372 | ||||||
| Cost of sales | - | (13,621 | ) | |||||
| Operating loss | - | (2,249 | ) | |||||
| Research and development expenses | (123,287 | ) | (17,586 | ) | ||||
| Marketing, general and administrative expenses | (3,281,063 | ) | (2,815,282 | ) | ||||
| Gain from deconsolidation of a subsidiary | - | 52,330 | ||||||
| Operating loss | (3,404,350 | ) | (2,782,787 | ) | ||||
| Financing expenses, net | (1,103,935 | ) | (232,235 | ) | ||||
| Net loss | (4,508,285 | ) | (3,015,022 | ) | ||||
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Revenues. Revenues for the nine months ended September 30, 2021 were $ nil. Revenues for the nine months ended September 30, 2020 were $11,372. The decrease in our revenues is mainly attributable to our selling 90% of the shares we held in Novomic Ltd. (“Novomic”) and focusing on our new strategy and business activity, and, therefore, ceasing to consolidate the financial statements of Novomic.
Research and Development. Research and development expenses for the nine months ended September 30, 2021 were $123,287. Research and development expenses for the nine months ended September 30, 2021 were $17,586. The increase is mainly attributable to expenses related to the development of our Green Botanical product line and provisional patent application related expenses.
Marketing, general and Administrative Expenses. Marketing, general and administrative expenses consist primarily of share-based compensation expenses and other non-personnel related expenses such as legal expenses. marketing activities. General and administrative expenses increased from $2,815,282 for the nine months ended September 30, 2020 to $3,281,063 for the nine months ended September 30, 2021. The increase in our marketing, general and administrative expenses is mainly attributable to the increase in our non-cash share-based compensation expenses, professional services and legal fees offset by decrease in salaries and related expenses.
Financing Expenses, Net. Financing expenses, net was $1,103,935 and $232,235 for the nine months ended September 30, 2021 and 2020, respectively. The reason for the increase in financial expense was due to $619,671 thousand of loss from extinguishment in connection with convertible loan restructuring.
Net Loss. Net loss for the nine months ended September 30, 2021 was $4,508,285 and is attributable to the reasons discussed above.
Financial Condition, Liquidity and Capital Resources
Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. At September 30, 2021, we had current assets of $774,568 compared to total current assets of $2,649,026 as of December 31, 2020. At September 30, 2021, we had total assets of $1,228,619 compared to total assets of $3,104,528 as of December 31, 2020. The decrease in total assets is mainly due to decrease in our prepaid share based compensation payment to service provider. At September 30, 2021, we had current liabilities of $1,783,407 as compared to $1,701,670 as of December 31, 2020. At September 30, 2021, we had total liabilities of $2,112,219 as compared to $1,701,670 as of December 31, 2020. The increase is mainly attributed to the increase in the balance of accounts payables and accrued expenses and the balance of convertible notes.
At September 30, 2021, we had a cash balance of $684,302 compared to the cash balance of $206,278 as of December 31, 2020.
At September 30, 2021, we had a working capital deficiency of $1,008,839 as compared with a working capital of $947,356 at December 31, 2020.
On June 24, 2021, we received from Citrine 8 LP, a related entity, a loan of $350,000 made under and pursuant to the Convertible Note Purchase Agreement dated as of April 1, 2020, as subsequently amended (the “Convertible Note Agreement”), entered into by Citrine Global, Corp., Citrine 8 LP and other related entities. Citrine agreed to honor a Draw Down Notice for, and advanced to us, $350,000. In connection therewith, Citrine 8 agreed to extend the date on which a Draw Down Notice can be honored under the Convertible Note Agreement and advanced funds on the same terms and conditions as are specified in the Convertible Note Agreement. As provided for under the terms of the Convertible Note Agreement, Citrine 8 will be issued 10,500,105 A warrants and 10,500,105 B warrants for shares of common stock, where the A warrants are exercisable beginning December 24, 2021 through December 24, 2023 and the B warrants in each case at a per share exercise price of $0.10.
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Between August 3 – 9, 2021, we sold to an unrelated third party in an off market transaction 619,589 ordinary shares of Intelicanna Ltd., an Israeli medical cannabis company listed on the Tel Aviv Stock Exchange (“Intelicanna”), for aggregate gross proceeds to the Company of 1,260,611 NIS (approximately $391,500 based on the current exchange rate). Following the sale, the Company no longer holds any Intelicanna shares. As previously reported, the Company obtained the Intelicanna shares in a share exchange agreement entered into with Intelicanna in September 2020.
On April 13, 2021, the Citrine S A L Group has furnished the Company with an irrevocable letter of obligation to support the Company until December 30, 2022 financially. We believe that this commitment will allow the Company to be operational as planned and budgeted through this period (the “Irrevocable Letter”).
Finally, on August 15, 2021, we and the holders of the outstanding loans under the Convertible Loan Agreement entered into an agreement which, among other things, extends the maturity dates of these loans to July 31, 2023, provided that if we consummate prior to maturity an investment of at least $5 million of the Company’s securities, then the Company shall repay the principal amount and accrued interest of the Notes from such proceeds. In addition, these holders confirmed their agreement to honor draw down notice by the Company through March 31, 2022 for the balance of the originally committed amount of $1,800,000 (i.e., $280,000).
Based on the Company’s current cash balances, the proceeds of the loan made by Citrine 8 LP, the proceeds of the sale from the Intelicanna shares, the extensions of the maturity dates under the outstanding loans described above and the Irrevocable Letter, the Company believes that it has sufficient funds for its plans for the next twelve months from the issuance of these financial statements. As the Company is embarking on its activities as detailed herein, it is incurring losses. It cannot determine with reasonable certainty when and if it will have sustainable profits.
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s principal executive officer and the Company’s principal financial officer to allow for timely decisions regarding required disclosure. In designing and evaluating the Company’s disclosure controls and procedures, the Company’s management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. The Company’s management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based on the Company’s evaluation of the effectiveness of its disclosure controls and procedures as of September 30, 2021, the Company’s principal executive officer and the Company’s principal financial officer concluded that the Company’s disclosure controls and procedures are effective.
Changes in Internal Control over Financial Reporting
During the three months ended September 30, 2021, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting.
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PART II—OTHER INFORMATION
| ITEM 1. | LEGAL PROCEEDINGS |
From time to time we may become involved in various legal proceedings that arise in the ordinary course of business, including actions related to our intellectual property. Although the outcomes of these legal proceedings cannot be predicted with certainty, we are currently not aware of any such legal proceedings that arise in the ordinary course of business, including actions related to our intellectual property. Although the outcomes of these legal proceedings cannot be predicted with certainty, we are currently not aware of any such legal proceedings or claims that we believe, either individually or in the aggregate, will have a material adverse effect on our business, financial condition, or results of operations.
| ITEM 1A. | RISK FACTORS |
An investment in the Company’s Common Stock involves a number of very significant risks. You should carefully consider the risk factors included in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC on April 15, 2021, in addition to other information contained in our reports and in this quarterly report in evaluating the Company and its business before purchasing shares of our Common Stock. There have been no material changes to our risk factors contained in our Annual Report on Form 10-K for the year ended December 31, 2020.
| ITEM 2. | UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS |
None.
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
None.
| ITEM 4. | MINE SAFETY DISCLOSURES |
None.
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| ITEM 5. | OTHER INFORMATION: |
None
| ITEM 6. | EXHIBITS |
Exhibit Index:
* Filed herewith
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CITRINE GLOBAL. CORP
(Registrant)
| By: | /s/ Ora Elharar Soffer | By: | /s/ Ilanit Halperin | |
| Ora Elharar Soffer | Ilanit Halperin | |||
| Chief Executive Officer | Chief Financial Officer | |||
| (Principal Executive Officer) | (Principal Financial and Accounting Officer) |
| Date: | November 15, 2021 | Date: | November 15, 2021 |
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