UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington,
WASHINGTON, D.C. 20549
FORM 10-Q
MARK ONE
☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For
for the quarterly periodQuarterly Period ended September 30, 20172021; or
Or☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Forfor the transition period from ________________________ to ________________________
Commission file number: number 000-55680
TechCare Corp.CITRINE GLOBAL, CORP
(Exact Name Of Registrant As Specified In Its Charter)name of registrant as specified in its charter)
| Delaware | 68-0080601 | |
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
| 4 HaOgen Street, HerzeliaIsrael | 4655102 | |
| (Address of |
+ (972) 73 7600341
(Registrant’s Telephone Number, Including Area Code: + (972) 3 750-3060 or (646) 380-6645telephone 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. Yes [X]☒ 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). [X] Yes [ ]☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, (as definedsmaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in ruleRule 12b-2 of the Exchange Act), or a smaller reporting company.Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | ||||
| Non-accelerated filer | Smaller reporting company | ☒ | |||||
| Emerging | ☐ |
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. ☐
Yes [ ] No [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] ☐ No [X] ☒
OnAs of November 9, 2017, the Registrant had 21,817,54415, 2021, shares of the registrant’s common stock, par value $0.0001 per share, were outstanding.
CITRINE GLOBAL, CORP
TABLE OF CONTENTSForm 10-Q
September 30, 2021
| 2 |
PART I - FINANCIAL INFORMATIONCITRINE GLOBAL, CORP.
ITEM 1.CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
TechCare Corp.AS OF SEPTEMBER 30, 2021
Condensed Consolidated Balance SheetsIN U.S. DOLLARS
As of September 30, 2017TABLE OF CONTENTS
| 3 |
CITRINE GLOBAL, CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. dollars except share and December 31, 2016per share data)
(Unaudited)
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | 684,302 | 206,278 | ||||||
| Prepaid share based payment to a service provider | - | 1,736,534 | ||||||
| Trading securities | - | 521,615 | ||||||
| Short-term loan measured at fair value | - | 165,185 | ||||||
| Other current assets | 90,266 | 19,414 | ||||||
| Total Current assets | 774,568 | 2,649,026 | ||||||
| Non-current assets | ||||||||
| Investments valued under the measurement alternative | 450,000 | 450,000 | ||||||
| Property and equipment, net | 4,051 | 5,502 | ||||||
| Total non-current assets | 454,051 | 455,502 | ||||||
| Total assets | 1,228,619 | 3,104,528 | ||||||
| Liabilities and Shareholders’ Equity (Deficit) | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | 240,308 | 173,799 | ||||||
| Accrued Compensation | 671,400 | 302,400 | ||||||
| Fair value of a liability in connection with stock exchange agreement | - | 71,722 | ||||||
| Convertible component in convertible notes | - | 381,147 | ||||||
| Convertible notes | - | 772,602 | ||||||
| Share-based compensation liability | 871,699 | - | ||||||
| Total current liabilities | 1,783,407 | 1,701,670 | ||||||
| Non-current liabilities | ||||||||
| Convertible notes (Note 4D) | 1,372,645 | - | ||||||
| Total liabilities | 3,156,052 | 1,701,670 | ||||||
| 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 | 94,256 | 94,256 | ||||||
| Additional paid-in capital | 21,577,743 | 20,414,217 | ||||||
| Stock to be issued | 44,468 | 30,000 | ||||||
| Accumulated deficit | (23,749,736 | ) | (19,241,451 | ) | ||||
| Accumulated other comprehensive income | 105,836 | 105,836 | ||||||
| Total stockholders’ equity (deficit) | (1,927,433 | ) | 1,402,858 | |||||
| Total liabilities and stockholders’ equity (deficit) | 1,228,619 | 3,104,528 | ||||||
| September 30, 2017 | December 31, 2016 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 84,282 | $ | 275,041 | ||||
| Other receivables | 160,620 | 23,069 | ||||||
| Total current assets | 244,902 | 298,110 | ||||||
| Non-current assets: | ||||||||
| Severance pay fund | 10,403 | 5,988 | ||||||
| Long-term deposits | 12,071 | 5,670 | ||||||
| Property and equipment, net | 99,744 | 100,841 | ||||||
| Total non-current assets | 122,218 | 112,499 | ||||||
| Total assets | $ | 367,120 | $ | 410,609 | ||||
| Liabilities and Stockholders’ Equity (Capital Deficiency) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 137,780 | $ | 203,962 | ||||
| Option liability | 182,720 | - | ||||||
| Notes payable | 87,192 | 80,026 | ||||||
| Total current liabilities | 407,692 | 283,988 | ||||||
| Non-current liability: | ||||||||
| Liability for severance pay | 21,184 | 12,663 | ||||||
| Total liabilities | 428,876 | 296,651 | ||||||
| Commitments | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, par value $0.0001 per share, 10,000,000 shares authorized: none issued and outstanding at September 30, 2017 and December 31, 2016 | - | - | ||||||
| Common stock, par value $0.0001 per share, 500,000,000 shares authorized: 21,776,762 and 20,381,211 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively | 2,177 | 2,038 | ||||||
| Accumulated other comprehensive income | 107,061 | 97,003 | ||||||
| Additional paid-in capital | 6,970,542 | 3,727,610 | ||||||
| Stock payable | 48,964 | - | ||||||
| Accumulated deficit | (7,190,500 | ) | (3,712,693 | ) | ||||
| Total stockholders’ equity (capital deficiency) | (61,756 | ) | 113,958 | |||||
| Total liabilities and stockholders’ equity (capital deficiency) | $ | 367,120 | $ | 410,609 | ||||
The accompanying notes are an integral part of thesethe condensed consolidated financial statements.
| 4 |
TechCare Corp.CITRINE GLOBAL, CORP.
Condensed Consolidated Statements of OperationsCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(U.S. dollars except share and Comprehensive lossper share data)
(Unaudited)
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Nine months ended | Three months ended | |||||||||||||||
| September 30 | September 30 | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Revenues | - | 11,372 | - | - | ||||||||||||
| Cost of revenues | - | 13,621 | - | - | ||||||||||||
| Gross loss | - | (2,249 | ) | - | - | |||||||||||
| Research and development expenses | (123,287 | ) | (17,586 | ) | (57,564 | ) | - | |||||||||
| Marketing, general and administrative expenses | (3,281,063 | ) | (2,815,282 | ) | (1,167,826 | ) | (1,058,335 | ) | ||||||||
| Gain from deconsolidation of a subsidiary | - | 52,330 | - | - | ||||||||||||
| Operating loss | (3,404,350 | ) | (2,782,787 | ) | (1,225,390 | ) | (1,058,335 | ) | ||||||||
| Financing income expenses, net: | ||||||||||||||||
| Fair value adjustment of liability in connection with stock exchange agreement | - | (59,629 | ) | - | 5,951 | |||||||||||
| Change in fair value of trading securities | - | (49,809 | ) | - | (49,809 | ) | ||||||||||
| Change in fair value of short-term loan measured at fair value | - | 6,954 | - | 6,954 | ||||||||||||
| Expenses related to convertible loan terms | (412,752 | ) | (35,251 | ) | (235,034 | ) | (35,251 | ) | ||||||||
| Loss from extinguishment in connection with convertible loan restructuring (Note 4B) | (619,671 | ) | - | - | - | |||||||||||
| Other financing income, net | (71,512 | ) | (94,500 | ) | (88,755 | ) | (98,980 | ) | ||||||||
| Financing expenses, net | (1,103,935 | ) | (232,235 | ) | (323,789 | ) | (171,135 | ) | ||||||||
| Net loss attributable to common stockholders | (4,508,285 | ) | (3,015,022 | ) | (1,549,179 | ) | (1,229,470 | ) | ||||||||
| Loss per common stock (basic and diluted) | (*)(0.00 | ) | (0.01 | ) | (*)(0.00 | ) | (*)(0.00 | ) | ||||||||
| Basic weighted average number of shares of common stock outstanding | 942,568,006 | 389,877,347 | 942,568,006 | 495,074,789 | ||||||||||||
| Comprehensive loss: | ||||||||||||||||
| Net loss | (4,508,285 | ) | (3,015,022 | ) | (1,549,179 | ) | (1,229,470 | ) | ||||||||
| Other comprehensive expense attributable to foreign currency translation | - | (9,652 | ) | - | - | |||||||||||
| Comprehensive loss | (4,508,285 | ) | (3,024,674 | ) | (1,549,179 | ) | (1,229,470 | ) | ||||||||
| For the three | For the three | For the nine | For the nine | |||||||||||||
| months ended | months ended | months ended | months ended | |||||||||||||
| September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | |||||||||||||
| Restated | Restated | |||||||||||||||
| Research and development expenses | 131,765 | 303,597 | 872,874 | 782,231 | ||||||||||||
| Change in fair value of option liability | (93,430 | ) | - | 182,720 | - | |||||||||||
| General and administrative expenses | 361,342 | 544,747 | 2,441,860 | 636,911 | ||||||||||||
| Operating loss | 399,677 | 848,344 | 3,497,454 | 1,419,142 | ||||||||||||
| Financial expenses (income), net | (5,305 | ) | 42,335 | (24,495 | ) | 43,064 | ||||||||||
| Loss before income taxes | 394,372 | 890,679 | 3,472,959 | 1,462,206 | ||||||||||||
| Tax expenses | - | - | 4,848 | - | ||||||||||||
| Net loss | $ | 394,372 | $ | 890,679 | $ | 3,477,807 | $ | 1,462,206 | ||||||||
| Net loss per common stock: | ||||||||||||||||
| Basic | $ | (0.02 | ) | $ | (0.05 | ) | $ | (0.16 | ) | $ | (0.10 | ) | ||||
| Diluted | $ | (0.02 | ) | $ | (0.05 | ) | $ | (0.16 | ) | $ | (0.10 | ) | ||||
| Weighted average number of common stock outstanding: | ||||||||||||||||
| Basic | 21,752,409 | 17,527,020 | 21,722,199 | 15,066,978 | ||||||||||||
| Diluted | 22,018,967 | 17,527,020 | 21,722,199 | 15,066,978 | ||||||||||||
| Comprehensive loss: | ||||||||||||||||
| Net loss | 394,372 | 890,679 | 3,477,807 | 1,462,206 | ||||||||||||
| Other comprehensive loss (income) attributable to foreign currency translation | 2,344 | 148,737 | (10,058 | ) | 150,212 | |||||||||||
| Comprehensive loss | 396,716 | 1,039,416 | 3,467,749 | 1,612,418 | ||||||||||||
| (*) | Less than $0.01 |
The accompanying notes are an integral part of thesethe condensed consolidated financial statements.
TechCare Corp.
Condensed Consolidated Statements of Cash Flows
For the Nine-Months Periods Ended September 30, 2017 and 2016
(Unaudited)
| For the nine | For the nine | |||||||
| months ended | months ended | |||||||
| September 30, 2017 | September 30, 2016 | |||||||
| Restated | ||||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (3,477,807 | ) | $ | (1,462,206 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | (727,113 | ) | ||||||
| Depreciation | 10,193 | 9,233 | ||||||
| Stock issued in relation to consulting services | 70,964 | - | ||||||
| Change in fair value of option liability | 182,720 | - | ||||||
| Stock-based compensation | 2,166,821 | 441,603 | ||||||
| Changes in cash attributed to changes in operating assets and liabilities: | ||||||||
| Other receivables and prepaid expenses | 36,810 | 63,194 | ||||||
| Accounts payable and accrued expenses | (60,512 | ) | 60,481 | |||||
| Liability for severance pay | 5,229 | - | ||||||
| Net cash used in operating activities | (1,065,582 | ) | (887,695 | ) | ||||
| Cash flow from investing activities: | ||||||||
| Severance pay fund | (1,592 | ) | - | |||||
| Purchase of fixed assets | (4,170 | ) | (40,717 | ) | ||||
| Investment in short-term deposit | - | (13,565 | ) | |||||
| Investment in long-term deposit | (6,059 | ) | (5,798 | ) | ||||
| Net cash used in investing activities | (11,821 | ) | (60,080 | ) | ||||
| Cash flow from financing activities: | ||||||||
| Proceeds from issuance of common stock | 878,250 | 166,532 | ||||||
| Proceeds of funds on account of reverse merger | - | 1,144,930 | ||||||
| Net cash provided by financing activities | 878,250 | 1,311,462 | ||||||
| Translation adjustments on cash and cash equivalents | 8,394 | 54,731 | ||||||
| Net increase (decrease) in cash and cash equivalents | (190,759 | ) | 418,418 | |||||
| Cash and cash equivalents - beginning of period | 275,041 | 254,324 | ||||||
| Cash and cash equivalents - end of period | $ | 84,282 | $ | 672,742 | ||||
| Non-cash financing activity during the period: | ||||||||
| Issuance of common stock and warrants | $ | 194,995 | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 5 |
CITRINE GLOBAL, CORP.
TechCare Corp.
Notes to Unaudited Financial StatementsCONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)
September 30, 2017 (Unaudited)(U.S. dollars, except share and per share data)
| Stock | Amount | Stock | Amount | |||||||||||||||||||||||||||||||||
| 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 | 10,344,828 | 300,000 | 35,449,400 | 3,545 | 10,042,496 | 30,000 | (10,602,292 | ) | 115,488 | (410,763 | ) | |||||||||||||||||||||||||
| Conversion preferred stock to common stock | (10,344,828 | ) | (300,000 | ) | 10,344,828 | 1,034 | 298,966 | - | - | - | 300,000 | |||||||||||||||||||||||||
| Issuance of common stock and warrants | - | - | 433,927,587 | 43,393 | 28,607 | - | - | - | 72,000 | |||||||||||||||||||||||||||
| Issuance of common stock for services | - | - | 15,000,000 | 1,500 | 4,783,500 | - | - | - | 4,785,000 | |||||||||||||||||||||||||||
| Waiver of fee by related part | - | - | - | - | 11,417 | - | - | - | 11,417 | |||||||||||||||||||||||||||
| Other comprehensive income | - | - | - | - | - | - | - | (9,652 | ) | (9,652 | ) | |||||||||||||||||||||||||
| 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 | - | - | - | - | - | - | (688,749 | ) | - | (688,749 | ) | |||||||||||||||||||||||||
| BALANCE AT MARCH 31, 2020 (unaudited) | - | - | 494,721,815 | 49,472 | 15,164,986 | 30,000 | (11,291,041 | ) | 105,836 | 4,059,253 | ||||||||||||||||||||||||||
| Warrants issued in connection with convertible notes | - | - | - | - | 301,665 | - | - | - | 301,665 | |||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | - | - | (1,096,803 | ) | - | (1,096,803 | ) | |||||||||||||||||||||||||
| BALANCE AT JUNE 30, 2020 (unaudited) | - | - | 494,721,815 | 49,472 | 15,466,651 | 30,000 | (12,387,844 | ) | 105,836 | 3,264,115 | ||||||||||||||||||||||||||
| Issuance of common stock in exchange investment in marketable securities | - | - | 2,143,470 | 214 | 514,072 | - | - | - | 514,286 | |||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | - | - | (1,229,470 | ) | - | (1,229,470 | ) | |||||||||||||||||||||||||
| BALANCE AT SEPTEMBER 30, 2020 (unaudited) | - | - | 496,865,285 | 49,686 | 15,980,723 | 30,000 | (13,617,314 | ) | 105,836 | 2,548,931 | ||||||||||||||||||||||||||
NOTE 1: NATURE
| 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 | - | - | 942,568,006 | 94,256 | 20,414,217 | 30,000 | (19,241,451 | ) | 105,836 | 1,402,858 | |||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | - | - | (2,100,414 | ) | - | (2,100,414 | ) | ||||||||||||||||||||||||
| BALANCE AT MARCH 31, 2021 (unaudited) | - | - | 942,568,006 | 94,256 | 20,414,217 | 30,000 | (21,341,865 | ) | 105,836 | (697,556 | ) | ||||||||||||||||||||||||
| Modification of warrants in connection with convertible loan restructuring (Note 4B) | - | - | - | - | 360,802 | - | - | - | 360,802 | ||||||||||||||||||||||||||
| Warrants issued in connection with convertible notes | - | - | - | - | 132,500 | - | - | - | 132,500 | ||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | - | - | (858,692 | ) | - | (858,692 | ) | ||||||||||||||||||||||||
| BALANCE AT JUNE 30, 2021 (unaudited) | - | - | 942,568,006 | 94,256 | 20,907,519 | 30,000 | (22,200,557 | ) | 105,836 | (1,062,946 | ) | ||||||||||||||||||||||||
| Classification of embedded conversion feature from liability to equity (Note 4B) | - | - | - | - | 670,224 | - | - | - | 670,224 | ||||||||||||||||||||||||||
| Commitment for issuance of fixed number of ordinary shares | - | - | - | - | - | 14,468 | - | - | 14,468 | ||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | - | - | (1,549,179 | ) | - | (1,549,179 | ) | ||||||||||||||||||||||||
| BALANCE AT SEPTEMBER 30, 2021 (unaudited) | - | - | 942,568,006 | 94,256 | 21,577,743 | 44,468 | (23,749,736 | ) | 105,836 | (1,927,433 | ) | ||||||||||||||||||||||||
| 7 |
CITRINE GLOBAL, CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESCASH FLOWS
(U.S. dollars, except share and per share data)
| 2021 | 2020 | |||||||
| Nine months ended | ||||||||
| September 30, | ||||||||
| 2021 | 2020 | |||||||
| (Unaudited) | ||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | (4,508,285 | ) | (3,015,022 | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 1,451 | 6,664 | ||||||
| Finance expenses, net | - | 2,026 | ||||||
| Gain from deconsolidation of a subsidiary | - | (52,330 | ) | |||||
| Change in fair value of convertible component in convertible notes | 176,052 | 35,251 | ||||||
| Interest and change in fair value of short-term loan measured at fair value | 1,459 | (6,954 | ) | |||||
| Prepaid Share based payment to a service provider | - | 2,201,100 | ||||||
| Expenses related to convertible loan terms | 236,700 | 95,857 | ||||||
| Loss from extinguishment in connection with convertible loan restructuring (Note 4b) | 619,671 | - | ||||||
| Inventory subject to refund | - | 1,299 | ||||||
| - | - | |||||||
| Share-based compensation liability | 871,699 | - | ||||||
| Management fee waiver | - | 11,417 | ||||||
| Fair value adjustment of liability in connection with stock exchange agreement | (57,254 | ) | 59,629 | |||||
| Changes in fair value of marketable securities | 36,967 | 49,809 | ||||||
| Loss from sale of marketable securities | 95,616 | - | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | - | (5,714 | ) | |||||
| Prepaid share based payment to a service provider | 1,736,534 | - | ||||||
| Net changes in operating leases | - | (864 | ) | |||||
| Related parties | - | (9,320 | ) | |||||
| Other current assets | (70,851 | ) | (33,302 | ) | ||||
| Inventory | - | 6,789 | ||||||
| Deferred Revenue | - | (4,998 | ) | |||||
| Accounts payable and accrued expenses | 438,523 | 45,254 | ||||||
| Net cash used in operating activities | (421,718 | ) | (613,409 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Net cash outflow from deconsolidation of a subsidiary (Appendix A) | - | (13,810 | ) | |||||
| Investment valued under the measurement alternative | - | (450,000 | ) | |||||
| Repayment of short-term loan | - | (145,000 | ) | |||||
| Proceeds from sale of trading securities | 389,032 | - | ||||||
| Proceeds from repayments of short-term loan | 163,726 | - | ||||||
| Net cash provided by (used in) investing activities | 552,758 | (608,810 | ) | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from related party loans | - | 154,341 | ||||||
| Proceeds from issuance of common stock, net | - | 72,000 | ||||||
| Commitment to issue shares to related parties | - | 105,000 | ||||||
| Proceeds from the issued convertible notes and warrants | 350,000 | 1,170,000 | ||||||
| Net cash provided by financing activities | 350,000 | 1,501,341 | ||||||
| Effect of exchange rates on cash and cash equivalents | (3,016 | ) | (2,026 | ) | ||||
| Net increase in cash and cash equivalents | 478,024 | 277,096 | ||||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 206,278 | 17,636 | ||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | 684,302 | 294,732 | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Non-cash transactions: | ||||||||
| Conversion preferred stock to common stock | - | 300,000 | ||||||
| Classification of embedded conversion feature from liability to equity (see note 4D) | 670,224 | |||||||
| Commitment for issuance of fixed number of ordinary shares | 14,468 | |||||||
| Issuance of common stock in exchange investment in trade securities | - | 514,286 | ||||||
| Appendix A - Net cash outflow from deconsolidation of a subsidiary | ||||||||
| Working capital (excluding cash and cash equivalents), net | - | (217,111 | ) | |||||
| Long term assets | - | 155,988 | ||||||
| Long term liabilities | - | (5,017 | ) | |||||
| Gain from deconsolidation of a subsidiary | - | 52,330 | ||||||
| Net cash outflow from deconsolidation of a subsidiary | - | (13,810) | ||||||
A. NatureThe accompanying notes are an integral part of operationsthe condensed consolidated financial statement
| 8 |
TechcareCITRINE GLOBAL, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 1 - GENERAL
Citrine Global, Corp. (“Techcare”, the “Registrant”Citrine Global” or the “Company”“Company”), formally known as BreedIT Corp. (“BreedIt”), 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 Marketmarket under the ticker symbol “TECR”.“CTGL.”
On February 8, 2016,June 3, 2020 the Company signedestablished a Merger Agreementwholly 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 November 22, 2020, certain of the Company’s stockholders representing more than 50% of the Company’s outstanding share capital (the “Majority Consenting Stockholders”) approved an amendment to the Company’s Certificate of Incorporation (the “Reverse Stock Split Certificate of Amendment”) in order to effect a reverse stock split of the Company’s common stock pursuant to a range of between 40-to-1 and 100-to-1 (the “Reverse Stock Split”). Pursuant to the Reverse Stock Split, each forty or one hundred shares of common stock, as shall be determined by the Board at a later time, will be automatically converted, without any further action by the stockholders, into one share of common stock. No fractional shares of common stock will be issued as the result of the Reverse Stock Split. Instead, each stockholder of the Company will be entitled to receive one share of common stock in lieu of the fractional share that would have resulted from the Reverse Stock Split. In addition, the Majority Consenting Stockholders also approved the elimination of the Company’s entire authorized class of fifty million () undesignated preferred stock, thereby reducing the total number of shares of capital stock that the Company may issue from one billion five hundred fifty-thousand () shares to one billion five hundred thousand () shares, all of which are designated as common stock (the “Certificate of Elimination”). The Certificate of Elimination will be effective upon the filing with Novomic Ltd. (“Novomic”), a private company incorporated under the lawsSecretary of the State of Israel. The closing of the merger took place on August 9, 2016 pursuant toDelaware, which Novomic became a wholly-owned subsidiary of the Company. The merger was structured as a reverse merger.
On August 23, 2017, the Company entered into a binding memorandum of understanding (the “MOU”) with Naturalicious Holdings B.V., a Dutch corporation (including its subsidiaries, “Natur”), pursuant to which the Company will acquire certain assets, operations and activities of Natur, in consideration for which the Company will issue a number of shares of common stock, par value $0.0001 per share representing fifty percent (50%) of the Company’s issued and outstanding common stock, on a fully diluted basis. The parties have agreed to use commercially reasonable efforts to negotiate and execute a definitive agreement within thirty (30) days of the execution of the MOU and subsequent closing of the aforesaid transactions (the “Closing”). In connection with the transaction, the parties shall enter into a separate stockholders’ agreement pursuant to which the board of directors of the Company (the “Board”), following the closing, will be comprised of six (6) directors, three (3) of whom shall be nominated for election by the controlling stockholders of Natur and three (3) of whom shall be nominated for election by the Company’s current controlling stockholders. The MOU may be terminated by either party in the event definitive agreements are not executed by the parties within eighty (80) days of the execution of the MOU.
Also, on August 23, 2017, the Company announced the appointment of Mr. Shlomi Arbel as the Company’s Chief Executive Officer, effectivecompleted as of that date. Mr. Arbel, a member of the management team of the Company and Novomic, succedes Mr. Zvi Yemini who remained the chairman of the Board.
Going Concern
During the nine months period ended September 30, 2017, the Company had a comprehensive loss of approximately $3.5 million (out of which $2.2 million is related to stock-based compensation). As of September 30, 2017, the Company had accumulated losses of approximately $7.2 million (out of which $2.9 million is related to stock-based compensation). Based on the projected cash flows and Company’s cash balances as of September 30, 2017, Company’s management is of the opinion that without further fund raising it will not have sufficient resources to enable it to continue advancing its activities including the development, manufacturing and marketing of its products for a period of at least 12 months from the date of issuancethis report’s filing. The Reverse Stock Split Certificate of these financial statements. As a result, there is substantial doubt aboutAmendment will be effective upon receipt of approval from the Company’s ability to continue as a going concern.
Management’s plans includeFinancial Industry Regulatory Authority (“FINRA”) and the continued commercializationfiling with the Secretary of the products, continue taking cost reduction stepsState of Delaware, both of which were not completed as of the date of the approval of the financial statements.
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 securing sufficient financinga distribution center for the medical cannabis, and botanicals industries. As noted, Citrine Global owns 60% of the share capital of Cannovation Center Israel, through the saleIsraeli Subsidiary. The grant was initially awarded on December 30, 2020 for 10,000 square meters of additional equity securities, debt or capital inflows from strategic partnerships. There are no assurances however, thatindustrial 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 Company will be successfulrequired building permits and approvals to start the construction and is in obtainingprocess with several financing entities in the levelarea of financing needed for its operations. If the Company is unsuccessful in commercializing its products and securing sufficient financing, it may need to reduce activities, curtail or cease operations. These financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.real-estate financing.
B. Summary of significant accounting policiesCITRINE GLOBAL, CORP.
The accounting policies adopted are consistent with thoseNOTES 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 previousCompany, 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 year.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.
Basis of Presentation
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 condensed footnotes have beenits subsidiary, prepared in accordance with the applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by U.S.accounting principles generally accepted accounting principlesin the United States of America (“GAAP”GAAP”), for complete financial statements. 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 items) consideredadjustments) which are, in the opinion of management, necessary for a fair statement of results for the interim periods presented have been included. Thefinancial condition, results of operations and cash flows for the ninethree and the threenine months ended September 30, 20172021. However, these results are not necessarily indicative of the results to be expectedfor any other interim period or for the year or for other interim periods or for future years. The consolidated balance sheet as ofended December 31, 2016 is derived from audited2021.
Certain information and footnote disclosures normally included in financial statements as of that date; however, it does not include allin accordance with generally accepted accounting principles have been omitted pursuant to the rules of the informationU.S. Securities and footnotes required by GAAP for complete financial statements.Exchange Commission (“SEC”). These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes includedthereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, which was filed with the SEC on May 10, 2017.2020.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of TechCare,Citrine Global and its subsidiary, Novomic.Israeli Subsidiary. All significant intercompany accountsbalances 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 | - | 521,615 | - | 521,615 | ||||||||||||
| Short-term loan measured at fair value | - | - | 165,185 | 165,185 | ||||||||||||
| Total assets | - | 521,615 | 165,185 | 686,800 | ||||||||||||
| Liabilities: | ||||||||||||||||
| Fair value of convertible component in convertible notes | - | - | 381,147 | 381,147 | ||||||||||||
| Fair Value of forward option | - | - | 71,722 | 71,722 | ||||||||||||
| Total liabilities | - | - | 452,869 | 452,869 | ||||||||||||
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 | 165,185 | |||
| Proceeds of short term loan | (163,726 | ) | ||
| Interest and change in fair value of short-term loan measured at fair value | (1,459 | ) | ||
| Short term loan outstanding at September 30, 2021 | - | |||
| Liabilities: | ||||
| Outstanding at December 31, 2020 | 452,869 | |||
| Fair value of convertible component in additional convertible notes issued during the period | 116,534 | |||
| Classification of embedded conversion feature from liability to equity | (670,224 | ) | ||
| Commitment for issuance of fixed number of ordinary shares | (14,468 | ) | ||
| Changes in fair value | 115,289 | |||
| 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 (%) | 149.04 | % | 164.43 | % | ||||
| Risk-free interest rate (%) | 0.05 | % | 0.1 | % | ||||
| Expected dividend yield | 0.0 | % | 0.0 | % | ||||
| Contractual term (years) | ||||||||
| Conversion price | (* | ) | (* | ) | ||||
| Underlying share price (U.S. dollars) | 0.05 | 0.045 | ||||||
| Convertible notes amount | 1,312,194 | 1,275,204 | ||||||
| Fair value of the conversion feature (U.S. dollars) | 379,086 | 381,147 | ||||||
| (*) | the conversion price is 85% of the share price, during the period of 5 days preceding the conversion date |
NOTE 2: RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Loan #2 (See Note 4C) that occurred on August 13, 2021:
| August 13, 2021 | June 24, 2021 | |||||||
| Expected volatility (%) | 151.48 | % | 156.8 | % | ||||
| Risk-free interest rate (%) | 0.13 | % | 0.17 | % | ||||
| Expected dividend yield | 0.0 | % | 0.0 | % | ||||
| Contractual term (years) | ||||||||
| Conversion price | (* | ) | (* | ) | ||||
| Underlying share price (U.S. dollars) | 0.05 | 0.3 | ||||||
| Convertible notes amount | 397,293 | 397,293 | ||||||
| Fair value of the conversion feature (U.S. dollars) | 115,086 | 116,534 | ||||||
| (*) | the conversion price is 85% of the share price, during the period of 5 days preceding the conversion date. |
Recent Accounting Pronouncements
In March 2016,May 2021, the FASBFinancial 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 No. 2016-09, which simplifies certain aspects of2020-06 will simplify the accounting for share-based payments, including accounting for income taxes, classification of awards as either equity or liabilities, classification on the statement of cash flows as well as allowing an entity-wide accounting policy election to either estimateconvertible instruments by reducing the number of awardsaccounting 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 expectednot clearly and closely related to vest or accountthe host contract, that meet the definition of a derivative, and that do not qualify for forfeituresa scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as they occur. Thepaid-in capital. ASU is2020-06 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 annual reporting periods (includingpublic companies for fiscal years beginning after December 15, 2023, including interim periods within those annual reporting periods)fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2016 and all amendments of2020, including interim periods within those fiscal years. The Company is currently evaluating the ASUimpact that apply must be adopted in the same period. The adoption by the Company of ASU No. 2016-09 on January 1, 2017, did not2020-06 will have any effect on the Company’s consolidated financial statements.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 restated itsestimated the fair value of the options at September 30, 2016 statement of operations, comprehensive loss and cash flows in order to correct2021 at $. Total share based compensation expenses during the following errors:
1) Reclassification of certain property, plant and equipment items that was previously expensed.2) Measurement of stock-based compensation modification for the Company’s 2015 stock grants.3) The accounting treatment of thereverse merger (including the effect on earnings per share).
Statement of operations and comprehensive loss for the ninethree months period ended September 30, 2016:2021 amounted to $.
| As previously reported | Adjustments | As presented in these financial statements | ||||||||||
| U.S. Dollar | ||||||||||||
| Research and development expenses | 211,222 | 571,009 | 782,231 | |||||||||
| General and administrative expenses | 946,169 | (309,258 | ) | 636,911 | ||||||||
| Financial expenses (income), net | (129,675 | ) | 172,739 | 43,064 | ||||||||
| Net loss for the period | 1,027,716 | 434,490 | 1,462,206 | |||||||||
| Total comprehensive loss | 979,361 | 633,057 | 1,612,418 | |||||||||
| Loss per share – Basic and diluted | (0.15 | ) | 0.05 | (0.10 | ) | |||||||
| Weighted average number of common stock outstanding – Basic and diluted | 6,853,206 | 8,213,772 | 15,066,978 | |||||||||
StatementThe following table presents the Company’s stock option activity for employees and directors of operations and comprehensive loss for the three months period ended September 30, 2016:
| As previously reported | Adjustments | As presented in these financial statements | ||||||||||
| U.S. Dollar | ||||||||||||
| Research and development expenses | 64,020 | 239,577 | 303,597 | |||||||||
| General and administrative expenses | 287,462 | 257,285 | 544,747 | |||||||||
| Financial expenses (income), net | (131,302 | ) | 173,637 | 42,335 | ||||||||
| Net loss for the period | 220,180 | 670,499 | 890,679 | |||||||||
| Total comprehensive loss | 203,749 | 835,667 | 1,039,416 | |||||||||
| Loss per share – Basic and diluted | (0.02 | ) | (0.03 | ) | (0.05 | ) | ||||||
| Weighted average number of common stock outstanding – Basic and diluted | 10,570,821 | 6,956,199 | 17,527,020 | |||||||||
Statements of cash flowsCompany for the nine months ended September 30, 2016:2021:
SCHEDULE OF STOCK OPTION ACTIVITY
| As previously reported | Adjustments | As presented in these financial statements | ||||||||||
| U.S. Dollar | ||||||||||||
| Net cash used in operating activities | (806,128 | ) | (81,567 | ) | (887,695 | ) | ||||||
| Net cash provided by (used in) investing activities | 1,121,540 | (1,181,620 | ) | (60,080 | ) | |||||||
| Net cash provided by financing activities | 165,000 | 1,146,462 | 1,311,462 | |||||||||
| Number of Options | Weighted Average Exercise Price | |||||||
| Outstanding at December 31, 2020 | 46,762 | 0.0011 | ||||||
| Granted | - | - | ||||||
| Exercised | - | - | ||||||
| Forfeited or expired | - | - | ||||||
| Outstanding at September 30, 2021 | 46,762 | 0.0011 | ||||||
| Number of options exercisable at September 30, 2021 | 46,762 | 0.0011 | ||||||
NOTE 4: STOCKHOLDERS’ EQUITYThe 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.
Share capital
| 14 |
DuringCITRINE 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 nineamount of thousands in the three months ended March 31, 2021.
NOTE 4 – EVENTS DURING THE PERIOD
| A. | On June 25, 2020, the Company and the Israeli Subsidiary entered into an agreement to grant Intelicanna Ltd. (“Intelicanna”) New Israeli Shekel (“NIS”)million in cash (approximately $) in direct financing for working capital purposes. The financing will bear 6% annual interest, and Intelicanna will make additional payments equal to 6% of its gross revenues from the date the financing was received and until the date Intelicanna’s aggregate gross revenues reach NIS 2 million (approximately $600 thousand).If the total of the 6% interest plus the additional payments would result in a return of less than 12% per year to the Company, the interest would be increased to bring the total return to 12%. Every three months Intelicanna must pay the interest, and after 12 months, it must repay the capital, plus the total of the additional payments due, plus any outstanding interest, and it must pay interest of 2% per month on any late payments, provided, however, that until the foregoing obligations are paid in full, Intelicanna must pay 50% of its gross revenues to the Company upon receipt.If Intelicanna does not pay all amounts due within 18 months, it shall, at the Company’s option, issue to the Company a number of its shares equal to NIS 1.5 million (approximately $0.45 million ) divided by the lower of (i) volume weighted average price (VWAP) of the three trading days prior to the lapse of the 18 months, and (ii) VWAP of the three trading days prior to the signing of the financing agreement. The financing must be paid by the Company to Intelicanna within 30 days of signing the financing agreement, subject to completion of due diligence to the Company’s satisfaction and to Intelicanna receiving a commercial growing license. |
On July 9, 2020, the Company transferred to Intelicanna NIS 500,000 (approximately $145,000).
As of September 30, 20172021, Intelicanna repaid the full principal of the loan together with 12% interest, which amounted to NIS 46,000 (approximately $14,000).
| 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 $5 million in the Company’s securities, and (iii) modify the exercise prices of each of the A Warrants and B Warrants to $0.10 per share, and the term of the warrants be extended by one year for the A Warrants and B Warrants. |
The Company concluded that the change in term does not constitute a trouble debt restructuring. Thereafter, the Company entered into several agreements,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 whichthe 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 raisedconcluded that the change in terms should be accounted for as an aggregate amountextinguishment.
The extinguishment resulted in a loss of $878,250. In October 2017, the Company entered into an Advance Investment Agreement for a bridge investment$619,671 (including of $360,802 – change in the aggregate amountfair value of US$250,000 – See note 10.the warrants which are considered transaction costs).
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 (%) | 150.5 | % | 158.7 | % | ||||
| Risk-free interest rate (%) | 0.04 | % | 0.08 | % | ||||
| Expected dividend yield | 0.0 | % | 0.0 | % | ||||
| Contractual term (years) | ||||||||
| Conversion price | 0.26 | 0.31 | ||||||
| Underlying share price (U.S. dollars) | 0.07 | 0.07 | ||||||
| Fair value (U.S. dollars) | 3,030 | 120,822 | ||||||
Fair value of the warrants immediately after the change:
| Fair value of the warrants | A Warrant | B Warrant | ||||||
| Expected volatility (%) | 158.7 | % | 158.7 | % | ||||
| Risk-free interest rate (%) | 0.08 | % | 0.22 | % | ||||
| Expected dividend yield | 0.0 | % | 0.0 | % | ||||
| Contractual term (years) | ||||||||
| Conversion price | 0.1 | 0.1 | ||||||
| Underlying share price (U.S. dollars) | 0.07 | 0.07 | ||||||
| Fair value (U.S. dollars) | 210,961 | 273,693 | ||||||
| C. | On June 24, 2021, the Company received from Citrine 8 LP, a related entity, a convertible loan of $350,000 made under and pursuant to the CL Agreement. Citrine agreed to honor a Draw Down Notice for, and advanced to the Company, $350,000, under the terms of the CL Agreement. As provided for under the terms of the CL Agreement, Citrine 8 LP was also 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, 2023and the B warrants, in each case at a per share exercise price of $0.10. See Note 4D for the change in the loan that occurred in August 2021. |
| 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
| Expected volatility (%) | 156.8 | % | ||||||
| Risk-free interest rate (%) | 0.17 | % | ||||||
| Expected dividend yield | 0.0 | % | ||||||
| Contractual term (years) | 1.5 | |||||||
| Conversion price | (*) | |||||||
| Underlying share price (US dollars) | 0.03 | |||||||
| Convertible notes amount (US dollars) | 397,293 | |||||||
| Fair value of the | 116,534 | |||||||
| (*) | the conversion price is 85% of |
Warrants
The fair value of such warrants granted as part of the June 24 agreement was estimated at $404,063 using the Black-Scholes option-pricing model and recorded as additional paid-in capital on the balance sheet.
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 (%) | 156.8 | % | 156.8 | % | ||||
| Risk-free interest rate (%) | 0.37 | % | 0.59 | % | ||||
| Expected dividend yield | 0.0 | % | 0.0 | % | ||||
| Contractual term (years) | ||||||||
| Conversion price | 0.1 | 0.1 | ||||||
| Underlying share price (U.S. dollars) | 0.03 | 0.03 | ||||||
| Fair value (U.S. dollars) | 183,875 | 220,188 | ||||||
Fair Value Proportional Allocation for the June 24 Loan
The fair value of the note was estimated at $307,898. The note is accounted for according to the effective interest method.
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 | $ | 116,534 | ||||||
| Warrants | 132,500 | |||||||
| Convertible Notes | 100,966 | |||||||
| Total | $ | 350,000 | ||||||
| 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 $1,520,000 in principal amount under the CL Agreement (the “Outstanding CL Notes”) (as detailed in Notes 4B and 4C above), entered into an additional agreement pursuant to which, among other things, the following 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. |
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 $670,224, was reclassified from short-term liability to shareholders equity at that date.
| 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 $389,032 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. | |
| F. | On August 9, 2021, through its 60% owned subsidiary Cannovation Center Israel, the Company entered into an agreement with | |
| 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 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 | |
| H. | 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 from available funds and 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 would be from available funds and as part of the Company’s operating budget for a minimum period of 18 months. | |
| I. | On August 15, 2021, the board of directors of Cannovation Center Israel determined to adjust the compensation of the Chairperson (and interim Chief Executive Officer), 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 Cannovation Center shall become due and payable from, and such time as Cannovation Center Israel shall have, available funds therefor and as part of the operating budget for a minimum period of 18 months. |
| 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 | $ | 24,000 | - | |||||
| General and administrative expenses: | ||||||||
| Directors compensation and fees to officers (*) | $ | 1,225,199 | $ | 216,000 | ||||
| (*) Share base compensation | $ | 871,699 | - | |||||
| B. | Balances with related parties: |
| As of September 30, | As of December 31, | |||||||
| 2021 | 2020 | |||||||
| Convertible notes | $ | 1,372,645 | $ | 772,602 | ||||
| Accounts payable and accrued expenses | $ | 683,673 | $ | 312,173 | ||||
| C. | Commencing in February 2020, Ora Elharar Soffer, CEO and Chairperson of the Board, was entitled to a monthly fee of $20,000 and certain reimbursements for traveling, lodging and other expenses on behalf of the Company. As of September 30, 2021, an amount of $409,400, representing compensation earned by Ms. Elharar Soffer, was deferred until the Company consummates an investment of at least $1.8 million in the Company’s securities. | |
| D. | Commencing in February 2020, Ilanit Halperin and Ilan Ben-Ishay, each a director, are each entitled to a monthly fee of $3,500 and certain reimbursements for traveling lodging and vehicle expenses on behalf of the Company. As of September, 30, 2021, an amount of $69,000 representing compensation earned by Mr. Ben-Ishay, was deferred until the Company consummates an investment of at least $1.8 million in the Company’s securities. | |
| E. | Commencing in May 2020, Ms. Halperin, CFO of the Company, was entitled to a monthly fee of an additional $3,500, resulting in an aggregate monthly fee (from the February 2020 agreement in Note 5D) of $7,000. As of September, 30, 2021, an amount of $132,000 representing compensation earned by Ms. Halperin, was deferred until the Company consummates an investment of at least $1.8 million in the Company’s securities. | |
| F. | Commencing in March 2021, Adv. David Kretzmer, a | |
G. | 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 | |
| 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 | |
| ||
| In | ||
Stock-Based Compensation
Stock based awards are accounted for using the fair value method in accordance with ASC 718, Shared Based Payment. The Company’s primary type of stock based compensation consists of stock options to directors, employees, officers, consultants, and advisors. The Company uses the Black-Scholes option pricing model in valuing options.
During March 2017, the Company granted to certain employees options to purchase 723,027 of the Company’s common stock and to non-employees options to purchase 2,000,952 of the Company’s common stock for an exercise price of $0.0001. Out of all the option grants, 1,298,737 options were granted to related parties.During September 2017, the Company granted to its CEO options to purchase 266,369 of the Company’s common stock for an exercise price of $0.0001 per share.
A summary of the stock option activity for the nine-month period ended September 30, 2017:
| Number of Options | Weighted Average Exercise Price | |||||||
| U.S Dollar | ||||||||
| Options outstanding at January 1, 2017 | 1,666,617 | 0.0001 | ||||||
| Granted | 2,723,979 | 0.0001 | ||||||
| Options outstanding at June 30, 2017 | 4,390,596 | 0.0001 | ||||||
| Granted | 266,369 | 0.0001 | ||||||
| Options outstanding at September 30, 2017 | 4,656,965 | 0.0001 | ||||||
The options granted during the nine months period ended in September 30, 2017 were fully vested on the grant date and exercisable for 2.5-5 years. The following assumptions were applied in determining the options’ fair value on their grant date:
The Company based the risk-free interest rate on the U.S. Treasury yield curve. The expected term in years represents the period of time that the awards granted are expected to be outstanding. The assumption for dividend yield is zero because the Company has not historically paid dividends nor does it expect to do so in the foreseeable future. The volatility was based on the historical stock volatility of several peer companies, as the Company has limited trading history to use the volatility of its own common stock. Stock-based compensation expense included in the Company’s statements of operations were allocated as follows:
| Nine months ended September 30, 2017 | Nine months ended September 30, 2016 | |||||||
| Restated | ||||||||
| Research and development expenses | $ | 364,674 | $ | 142,506 | ||||
| General and administrative expenses | 1,802,147 | 299,097 | ||||||
| $ | 2,166,821 | $ | 441,603 | |||||
| Three months ended September 30, 2017 | Three months ended September 30, 2016 | |||||||
| Restated | ||||||||
| Research and development expenses | $ | - | $ | 142,506 | ||||
| General and administrative expenses | 123,681 | 299,097 | ||||||
| $ | 123,681 | $ | 441,603 | |||||
NOTE 5: OEM DISTRIBUTION AGREEMENT
On June 23, 2017, the Company entered into an OEM agreement (the “OEM Agreement”) with a medical device and wellness applications company based in the United States (the “OEM Distributor”), according to which the OEM Distributor will manufacture, distribute and sell the Company’s Novokid head lice treatment products in the United States, Canada, Brazil, Argentina, Costa Rica and Colombia, all on an exclusive basis, pursuant to and in accordance with the terms and conditions set forth in the OEM Agreement, including minimum royalties commitments. The OEM Distributor will be solely responsible for obtaining and maintain the approval from the US Food and Drug Administration (the “FDA”) and shall bear all costs related to such approval.
As part of the OEM Agreement, the OEM Distributor paid a royalty advance of $10,000 and also an amount of $140,000 which is held in an escrow account, until the Company completes certain milestones, as described in the OEM Agreement.
NOTE 5: OEM DISTRIBUTION AGREEMENT(continued)
Also, as part of the OEM Agreement, the Company granted the OEM Distributor an option to purchase up to 9.09% of the Company’s common stock for a total consideration of up to $900,000, exercisable until January 15, 2018. The fair value of the option as of September 30, 2017 amounted to $182,720. The key assumptions used in the options’ valuation was as follows:
NOTE 6: INCOME TAXES
a. Basis of taxation
The Company and its subsidiary are taxed under the domestic tax laws of the jurisdiction of incorporation of each entity, United States and Israel, respectively.
b. Carryforward Tax Losses
As of September 30, 2017 and December 31, 2016, the subsidiary had net operating carry forward tax losses of approximately $1.7 million and $0.9 million, respectively. A full valuation allowance was created against these carry forward tax losses since the realization of any future benefit from these net operating losses cannot be sufficiently assured at September 30, 2017 and December 31, 2016.
c. Corporate tax rates
The corporate tax rate in Israel was 26.5% in 2015 and 25% in 2016. The regular corporate tax rate starting January 1, 2017 is 24% and starting January 1, 2018 will be 23%. The corporate tax rate in the U.S is approximately 35%.
NOTE 7: LOSS PER SHARE
Loss per share is based on the loss that is attributed to the stockholders holding common stock, divided by the weighted average number of common stock in issue during the period.
For purposes of the calculation of the diluted loss per share, the Company adjusts the weighted average number of common stock using the treasury stock method assuming conversion of all of the dilutive potential stock. The potential stock are taken into account only if their effect is dilutive (increases loss per share).
NOTE 8: FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the Company’s financial instruments, including cash equivalents, current assets, accounts payable and accrued liabilities and notes payables approximate their fair value, due to their short term in nature and their carrying amounts approximates the amounts expected to be received or paid.
A hierarchy has been established for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The Company accounts for option liability as Level 3 since its inputs are unobservable inputs for the liability.
The following table is a reconciliation of the change for the financial liability where fair value measurement is estimated utilizing Level 3 inputs:
| 2017 | ||||
| US dollar | ||||
| Fair value as of January 1, | $ | - | ||
| Change in fair value recognized in statement of operations | 276,150 | |||
| Fair value as of June 30, | 276,150 | |||
| Change in fair value recognized in statement of operations | (93,430 | ) | ||
| Fair value as of September 30, | $ | 182,720 | ||
NOTE 9: RELATED PARTY TRANSACTIONS
For the issuance of shares of common stock to the Company’s Chairman of the Board’s affiliated entity, other related parties and option grants to the Company’s directors, refer to note 4.
On February 22, 2017, the Company signed an amendment to the original service agreement with Zvi Yemini, the Company’s chairman of the Board, through his affiliated entity, YMY. According to the amendment, Mr.Yemini’s monthly payment was increased to 45,000 NIS (approximately $12 thousand) starting February 2017.
On October 17, 2017, the Company entered into an Advance Investment Agreement with YMY and with Traistman Radziejewski Fundacja Ltd., a company affiliated to Oren Traistman, a member of the Board. For further details, please refer to note 10 below.
NOTE 10: SUBSEQUENT EVENTS
On October 17, 2017, the Company entered into an Advance Investment Agreement (the “Advance Investment Agreement”) with YMY and Traistman Radziejewski Fundacja Ltd. Pursuant to the Advance Investment Agreement, YMY and Traistman Radziejewski Fundacja Ltd. provided the Company with a bridge investment in the aggregate amount of US$250,000 (the “Investment Amount”). The Investment Amount will be immediately payable upon the consummation of an Asset Purchase Agreement with Natur (the “Asset Purchase Agreement”, see note 1 above), provided the consummation of which occurs prior to or on December 31, 2017 (the “Trigger Date”) or upon other insolvency events of the Company, as described in the agreement. In the event that the Company has not consummated the Asset Purchase Agreement prior to or on the Trigger Date, then the entire then outstanding Investment Amount will be automatically converted into shares of common stock of the Company, par value $0.0001 per share (the “Shares”) on the first business day following the Trigger Date, at a price per share equal to 70% of the volume weighted average price (as defined in the Advance Investment Agreement) of the Shares as of such date (the “PPS”). The Investment amount will also be converted into Shares at the PPS upon a Deemed Liquidation Event (as defined in the Advance Investment Agreement).
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.Forward-looking Statements
FORWARD-LOOKING STATEMENTS
The following discussion provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. This section includes a number ofQuarterly Report on Form 10-Q contains certain forward-looking statements that reflect our current views with respect to future events and financial performance. Certain statements that the Company may make from time to time, including all statements contained in this Form 10-Q that are not statements of historical fact, constitute “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 provisions set forth in Section 27A of the Securitiessafe-harbor created by such Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-lookinglaws. In some cases, you can identify forward-looking statements may be identified by wordsterminology such as “plans,” “expects,” “believes,” “anticipates,” “estimates,” “projects,“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 wordsfactors that may cause actual results, performance levels of similar meaning used in conjunction with, among other things, discussions of future operations, financial performance, product development and new product launches, market position and expenditures. The Company assumesactivity, 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 updaterelease publicly the result of any forward-looking statements. Additional information concerning factors which could cause differences betweenrevision to these forward-looking statements and future actual resultsthat 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 discusseddescribed under the heading “Risk Factors” in the Company’sPart I, Item 1A, of our Annual reportReport on Form 10-K for the fiscal year ended December 31, 2020 as filed with the Securities and Exchange Commission, or the SEC, on May 10, 2017. You should not place undue certainty on these forward-looking statements. These forward-looking statementsApril 15, 2021. Readers are subjectalso urged to certain riskscarefully review and uncertaintiesconsider the various disclosures we have made in that could cause actual results to differ materially from our predictions.
The following Management’s Discussionreport. As used in this quarterly report, the terms “we”, “us”, “our”, the “Company” and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help you understand our historical results of operations during the periods presented“Citrine” mean Citrine Global, Corp. and our financial conditionwholly-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 periods ended September 30, 2017botanical and 2016. This MD&A shouldmedical 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 readoffered 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 conjunctioncollaboration 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 consolidated financial statements and the accompanying notes to consolidated financial statements for the years ended December 31, 2016 and 2015.
Overview and Recent Developments
We are a technology company engaged in the design, development and commercializationsolutions as part of a delivery platform utilizing proprietary vaporization various compounds to enable a wide variety of health, wellness and beauty treatments (the “Platform”).
We anticipate to commence generating revenues from the sale of Novokid, our head licetheir cannabis treatment device, during the fourth quarter of 2017, following its receipt of regulatory approval from the CE (the European Union), obtained by the Company during the third quarter of 2017, which now permits us to commence sales and marketing activities in Europe.
Before we enter the U.S. market, we will need to secure approval from the FDA. Pursuant to our OEM Agreement signed in June 2017 with a medical device and wellness application company based in the United States (the “OEM Distributor”), the OEM Distributor will be solely responsible for obtaining and maintain the FDA approval and shall bear all costs related to such approval.
We are a company with limited operations and no revenues from our business operations. There is substantial doubt that we can continue as a going concern for the next twelve months without the successpart of our new business operations. We project that we will need to raise approximately $1,200,000 during the next 12 months in order to successfully implement our business plan and to become profitable,strategy of which there can be no assurance. Failure to obtain this necessary capital at acceptable terms, if at all, when needed, may force us to delay, limit, or terminate our product development efforts and secure regulatory approvals and would adversely impact our planned research and development efforts in connection with the Company’s future products, which may make it more difficult for us to attain profitability.developing wellness & pharma solutions.
Recent Developments
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 Planspharma technology solutions for the botanical and medical cannabis industries and to improve people’s health and quality of life worldwide:
Our current and future products are all based on our Platform, which was developed over a period of 7 years. During the past 18 months, we have achieved the following:
| The 1st Element - Cannovation Center Platform of an Operational Innovation Center for the | ||
During the next 12-18 months, we planWe have developed a unique platform for Operational Innovation Centers to focus our efforts on the following:create ecosystems that promote operational scale-up and business growth for botanicals, and medical cannabis industries.
|
We may be required to obtain additional regulatory approvals for our head lice treatment platformOur first innovation and any future products. If unable to receive regulatory approval or commercialize our product candidates, our businessoperation center will be adversely affected. CE approval is requiredbuilt 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 marketing, distributing and sale of our products in the EU, whereas FDA approval is required for such marketing, distributing and sale in the United States. In the event that our products are to be sold in certain territories requiring additional regulatory approvals, such approvals will need to be obtained by us or by our distributors.company
On August 23, 2017, we entered into an MOU with Natur, pursuant to which we will acquire certain assets, operations and activities of Natur, in consideration for which we will issue a number of shares of common stock, par value $0.0001 per share representing fifty percent (50%) of our issued and outstanding common stock, on a fully diluted bases. The parties have agreed to use commercially reasonable efforts to negotiate and execute a definitive agreement within thirty (30) days of the execution of the MOU and subsequent closing of the aforesaid transactions. In connection with the transaction, the parties shall enter into a separate stockholders’ agreement pursuant to which our Board, following the Closing, shall be comprised of six (6) directors, three (3) of whom shall be nominated for election by the controlling stockholders of Natur and three (3) of whom shall be nominated for election by our current controlling stockholders. The MOU may be terminated by either party in the event definitive agreements are not executed by the parties within eighty (80) days of the execution of the MOU.
Our Treatment Solution
* Images are for demonstration purposes only and do not bind the company
Novokid - Natural, Plant-based and Effective Lice TreatmentGovernment Support:
Parents and children exposed to head lice are now forced to use standard OverOn July 13, 2021, the Counter treatments that are toxic, often ineffective, time consuming and expensive. The global market for head lice treatments is estimated at $1.8 billion per annum whereas 6-12 million children get head lice each year inMinistry of Economy of the US alone causing indirect damages estimated at $4-8 billion per annum. AccordingIsraeli government recommended to the JournalIsrael Land Authority that it approve a grant of Medical Entomology, 98%11,687 square meters of lice have developed resistanceindustrial land in Yeruham, Israel for Cannovation Center Israel to existing treatments inbuild the US and they have now referredCannovation Center, to as “super-lice”. Most current treatments contain pesticides, alcohol or silicone, which are all associated with a wide variety of hazardous side effects. Novokid is a non-pesticide, natural, plant-based and eco-friendly solution that eliminates lice and super lice by a 10 minute dry treatment. This compares with current treatments that required 20-40 minutes of shampooing and daily combing. Our treatment is fast, dry, clean, and easily administered at home or on the go. Novokid can also be used as a maintenance and preventative treatment if used regularly.
Shine - Natural Haircare Rejuvenation
Shine uses cold vaporizationinclude factories, laboratories, logistics and a proprietary formulationdistribution 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 clean, treat11,687 square meters on July 13, 2021. Cannovation Center Israel is in process of receiving the required building permits and improveapprovals to start the appearanceconstruction 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 hair and scalp. In addition to removing the residue of products, the treatments will balance the hair’s pH levels, add body and shine, define curls, and strengthen and protect hair from further damage. Like our solution for lice, users simply put a Shine capsule in the compressor, place the attached cap on their head and sit for a 10-minute treatment. There is no need to rinse or shampoo following the treatment.
The global hair care market is estimated to be in excess of $80 billion per annum, andcannabis treatment related side effects, we are looking to establish a presence in the hair salon and home treatment niche. To that end, we are in the process of expanding the Shine treatment product line to include formulations for the needs of specific hair types, such as dry, curly, colored, and over-processed hair.
Business model
While the vaporizer for both Novokid and Shine is designated to be a one-time purchase, the head cap, and especially the capsules, will be sold based on the razor/razor-blade business model and based on our estimates, which we believe are both reasonable and conservative, our target customers for Novokid and Shine are expected to purchase between 12-16 capsules, on average, per year. Therefore, we estimate that the majority of the revenues that the Company will generate in the future will be based on capsules sales for both Novokid and Shine products.
The Company plansdecided to focus its initial saleson answering this unmet need and marketing efforts on two of the largest markets in the world - the European Union and the United States markets, starting in the European Union where CE approval was obtained during the third quarter of 2017.
In order to achieve its intended global footprint and market presence, the Company’s primary distribution method will be based on the business-to-business OEM and distribution agreements, as oppose to direct sales to end-customers. We believe that these models will reduce our sales and marketing costs to a minimum while starting to generate revenuesdeveloping complementary solutions to support our research and development efforts for utilizing our technological platform to expand our product line.medical cannabis patient who experience side effects that include:
Intellectual Property
Due to the importance1. 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 patents, the Company has devoted significant effortsproprietary botanical formulations comprised of ingredients such as medicinal mushrooms, vitamins, minerals, and resourcesother herbal extracts and will continue to invest resources in strengthening its patent portfolio. Below is the list of patents registered by the Company to date:
The Company plans to expand existing patentsdoes not include any cannabis, cannabinoid, or cannabis related to pushing air using its vaporizer and new substances which are now being researched and documented, and more subjects that will be developed during research.
Research and Development
We spent approximately $1. 5 million on research and development (excluding stock based compensation expenses) during the past two years. During this period, we completed the product development of both Novokid and Shine, which included finalization of commercial design of compressor, capsules and head cap and optimizing the products efficiency.components.
The Company plansGreen Botanicals ‘Side by Side’ product line will be offered to build upon the research and development achievements it hadmedical cannabis patients as complementary solutions together with their cannabis treatment with the completionaim of improving the quality of the head lice treatment product as the basis to expand its variety of treatments and solutions, which will also be based on the developed platform and the knowledge the Company gained principally during the past two years.
Results of Operations during the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016
During the nine months ended September 30, 2017 and 2016, we generated no revenues.cannabis treatment.
Our researchstrategy is to market the Green Botanicals ‘Side by Side’ product line as nutritional supplements in collaboration with cannabis distribution channels, pharmacies, dispensers, and development expenses duringleading cannabis companies worldwide meeting the nine months ended September 30, 2017 were $872,874 (compared to $782,231 during the same periodrelevant regulatory approvals in the prior year), comprised of $508,200 of ongoing research and development expenses (compared to $639,725 during the same period in the prior year) and additional sum of $364,674 (compared to $142,506 during the same period in the prior year) in stock based compensation to the Company’s research and development employees and service providers.every territory.
Our general3. Products under development and administrative expenses during the nine months ended September 30, 2017, were $2,441,860 (compared to $636,911 during the same periodregulation 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 prior year) comprised of $639,713 of payroll and service providers’ consultancy (compared to $337,814 during the same period in the prior year) and an additional sum of $1,802,147 in stock based compensation to our management, consultants and service providers (compared to $299,097 during the same period in the prior year).high tech, biotech botanical & medical cannabis industries.
DuringCannovation Center Israel Ltd. was awarded grants by the nine months ended September 30, 2017, we incurred a net loss of $3,477,807 (compared to $1,462,206 duringIsraeli Economy and Industry Ministry for building the same periodCannovation Center Israel in the prior year). Excluding a sum of $2,166,821Yeruham, in stock based compensation (compared to $441,603 during the same period in the prior year) we incurred a net loss of $1,310,985 (compared to a net loss of $1,020,603 in the same period in the prior year) principally for the reasons notedSouthern Israel, as described above.
| 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 |
ResultsThe 5th element of Operationsour 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.
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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.
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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, 2017 as compared to2021 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, 20162021 and 2020 were $nil.
DuringResearch and Development. Research and development expenses for the three months ended September 30, 2017 and 2016, we generated no revenues.
Our research and development expenses during2021 were $57,564 compare to $0 for the three months ended September 30, 2017, were $131,765 compared to $303,597 (comprised of ongoing research and development expenses of $161,091 and additional sum of $142,506 in stock based compensation) during the same period in the prior year.2020. The decreaseincrease is mainly dueattributable to completion of research and development activities related to Novokid, offset by ongoing research and development expenses related to Shine.the development of our Green Botanical product line and provisional patent application related expenses.
During the nine monthsMarketing, general and three months ended September 30, 2017, we recorded $182,720 fair value option expenses and $93,430 fair value option income, respectively, related to the OEM Agreement with the OEM Distributor in June 2017 mainly due to the change in stock price.
OurAdministrative Expenses. Marketing, general and administrative expenses duringconsist 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, 2017, were $361,342 compared2020 to $544,747 during the same period in the prior year. The decrease is mainly due to stock based compensation expenses.
We incurred a net loss of $394,372 during$1,167,826 for the three months ended September 30, 2017,2021. 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 a net loss of $890,679 in the same period in the prior year due principally for the reasons noted above.
Liquidity and Capital Resources
Our balance sheet as ofNine Months Ended September 30, 2017, reflects total assets2020
The following table presents our results of $367,120 consisting mainly of cash of $84,282, other receivables of $160,620 and property and equipment net, of $99,744. As of December 31, 2016, the balance sheet reflects total assets of $410,609 consisting mainly of cash of $275,041, other receivables of $23,069 and property and equipment net, of $100,841.The decrease is related mainly to a decrease of our cash balances by $190,759 offset by an increase in other receivables by $137,551.
As of September 30, 2017, we had total current liabilities of $407,692 consisting of accounts payable and accrued expenses of $137,780, notes payable of $87,192 and option liability of $182,720. As of December 31, 2016, we had total current liabilities of $283,988 consisting of $203,692 in accounts payable and accrued expenses and $80,026 in notes payable. The increase is mainly due to option liability recorded as part of the OEM distribution agreement offset by payment of certain accounts payable and accrued expenses balances.
As of September 30, 2017, we had negative working capital of $162,790 compared to positive working capital of $14,122 at December 31, 2016. The working capital has been sufficient to sustain our operations to date, although there is substantial doubt about our ability to continue as going concern. Our total liabilities as of September 30, 2017 were $428,876 compared to $296,651 at December 31, 2016.
Duringfor the nine months ended September 30, 2017, we used $1,065,582 of cash in our operating activities. This resulted mainly from an overall net loss of $3,477,807, offset by stock-based compensation expenses of $2,166,821, fair value option expenses of $182,7202021 and a decrease in accounts payable and accrued expenses of $60,512.2020
| 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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DuringRevenues. Revenues for the nine months ended September 30, 2016, we used $887,695 in our operating activities. This resulted mainly from a net loss of $1,462,206, a decrease in other receivables of $63,194, an increase in accounts payable and accrued expenses of $60,481, offset by stock based compensation expenses of $441,603.
During2021 were $ nil. Revenues for the nine months ended September 30, 2017, we used $11,8212020 were $11,372. The decrease in our investing activities as comparedrevenues is mainly attributable to $60,080our 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 same period in the prior year. The decrease was mainly due to a decrease in the purchasefinancial statements of fixed assets.Novomic.
DuringResearch and Development. Research and development expenses for the nine months ended September 30, 2017,2021 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 financing activitiesGreen 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 us with $878,250 throughfor under the issuanceterms 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 comparedplanned 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 $1,311,462 inJuly 31, 2023, provided that if we consummate prior to maturity an investment of at least $5 million of the same period inCompany’s securities, then the prior year, outCompany shall repay the principal amount and accrued interest of which $166,532 were inthe 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 common stock and $1,144,930 were acquired through the reverse merger with Novomic.
While management believesthese 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 be successful in its current and planned operating activities, there can be no assurance that the Company will be successful in the achievement of sales of its products that will generate sufficient revenues to earn a profit and sustain the operations of the Company.have sustainable profits.
Our ability to create sufficient working capital to sustain us over the next twelve-month period and beyond, is dependent on our ability to raise additional funds through the issuance of equity or debt instrument.
There can be no assurance that sufficient capital will be available to us. We currently have no agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources.
Going Concern Consideration
As result of the above, there is substantial doubt about our ability to continue as a going concern. Our financial statements contain additional note disclosures with respect to this matter, but no accounting adjustments that relate to this matter.
Off-Balance Sheet Arrangements
We haveThe Company has no off-balance sheet arrangements.
Critical Accounting Policies
There was no change to our critical accounting policies since the year ended December 31, 2016.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of disclosure controlsDisclosure Controls and procedures.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 Chief Executive Officer (who is the Company’s principal executive officer)officer and the Company’s Chief Financial Officer, (who is the Company’s principal financial officer)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, and theobjectives. 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 ourthe effectiveness of its disclosure controls and procedures as of September 30, 2017, our Chief Executive Officer2021, the Company’s principal executive officer and Chief Financial Officerthe Company’s principal financial officer concluded that as of such date, the Company’s disclosure controls and procedures were ineffective due to material weaknesses identified in the Company’s internal control over financial reporting as described below.are effective.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over the Company’s financial reporting. In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002, our management, with the participation of the Company’s principal executive officer and principal financial officer has conducted an assessment, including testing, using the criteria in Internal Control - Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) (2013). Our system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. This assessment included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Based on this evaluation, the Company’s management concluded its internal control over financial reporting was not effective and required improvement as of September 30, 2017. The ineffectiveness of the Company’s internal control over financial reporting was due to the following material weaknesses:
(i) Inadequate segregation of duties consistent with control objectives; and
(ii) Ineffective controls over period-end financial disclosure and reporting processes.
Our management believes the material weaknesses identified above led to the restatement of the March 31, 2016 and September 30, 2016 interim financial statements and the December 31, 2015 annual financial statements. We are currently still reviewing our internal controls and procedures related to these material weaknesses and still expect to implement changes in the current fiscal year as resources allow, including identifying specific areas within our governance, accounting and financial reporting processes to add adequate resources to potentially mitigate these material weaknesses.
Our management will continue to monitor and evaluate the effectiveness of our internal controls and procedures over financial reporting on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Changes in Internal Control over Financial Reporting
During the quarterthree months ended September 30, 2017,2021, there were no changes in ourthe 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 - II—OTHER INFORMATION
| ITEM 1. | LEGAL PROCEEDINGS |
We know of no material, active or pendingFrom time to time we may become involved in various legal proceedings againstthat arise in the ordinary course of business, including actions related to our Company, norintellectual property. Although the outcomes of these legal proceedings cannot be predicted with certainty, we are currently not aware of any such legal proceedings that a governmental authority is contemplating against us. We knowarise in the ordinary course of no materialbusiness, including actions related to our intellectual property. Although the outcomes of these legal proceedings to whichcannot be predicted with certainty, we are currently not aware of any of our directors, officers, affiliates, owner of recordsuch legal proceedings or beneficially of more than 5 percent of our voting securitiesclaims that we believe, either individually or security holders is an adverse party or hasin the aggregate, will have a material interest adverse toeffect on our interest.business, financial condition, or results of operations.
| ITEM 1A. | RISK FACTORS |
ITEM 1A. RISK FACTORSAn 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 |
Not applicable.None.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEED
None.
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
ITEM 3. DEFAULTS UPON SENIOR SECURITIESNone.
None.
| ITEM 4. | MINE SAFETY DISCLOSURES |
ITEM 4. MINE SAFETY DISCLOSURE.None.
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| ITEM 5. | OTHER INFORMATION: |
Not applicable.None
Not applicable.
| ITEM 6. | EXHIBITS |
ITEM 6. EXHIBITSExhibit Index:
(a) The following documents are filed as exhibits to this report on Form 10-Q or incorporated by reference herein. Any document incorporated by reference is identified by a parenthetical reference to the SEC filing that included such document.
* Filed herewith
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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.undersigned thereunto duly authorized.
CITRINE GLOBAL. CORP
(Registrant)
| By: | By: | /s/ Ilanit Halperin | |||
| Ora Elharar Soffer | Ilanit Halperin | ||||
| Chief Executive Officer | Chief Financial Officer | ||||
| (Principal Executive Officer) | |||||
| (Principal Financial and |
| Date: | November 15, 2021 | Date: | November |
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