SEC Company Response from CNBX Pharmaceuticals (CNBX) — Oct 20, 2015
CNBX Pharmaceuticals Inc.
Date: Oct. 20, 2015 · CIK: 0001343009 · Accession: 0001019687-15-003759
AI Filing Summary & Sentiment
File numbers found in text: 000-52403
Letter
Re: Cannabics Pharmaceuticals Inc. Form 10-K for the Fiscal Year Ended August 31, 2014 Filed December 15, 2014 File No. 000-52403
Dear Ms. Marlowe,
We are in receipt of your letter dated August 14th, 2015 regarding Cannabics Pharmaceuticals Inc. and the aforementioned filing. Below please find our respective responses:
Form 10-K for the Fiscal Year Ended August 31, 2014
Item 1. Description of Business, page 1
Regulations, page 7
1. We note your response to comment 3 and we partially reissue. Please clarify the statement on page 6 that “this factor should not be discounted when assessing potential exposure in investing with our company.” In addition, as previously requested, please also revise your disclosure to alert investors that your operations could be deemed to facilitate the selling or distribution of marijuana in violation of the federal Controlled Substances Act, or to constitute aiding or abetting, or being an accessory to, a violation of that Act.
RESPONSE – The issuer herein submits alternative language, inclusive of similar language to that requested previously. The issuer strenuously continues to believe that the facts particular to its business operations simply do not avail themselves to the elements minimally necessary for “selling, aiding or abetting”, however proffers the following language regarding the FCSA.
“It is imperative for the reader of this report to recognize that the company itself does not manufacture, distribute, or dispense any controlled substances, including cannabis, rather it develops proprietary technologies that are then licensed for use by certified and governmentally approved manufacturers. However, as is well known, US Federal regulations continue to consider Cannabis a schedule 1 drug, meaning that it has no currently accepted medical use in treatment, and thus illegal under Federal US laws. As such, the company could be deemed to be at variance with the Federal Controlled Substances Act.”
2. In addition, we note the added disclosure on page 6 that “it is assumed that any licensee of ours would be under certain state or federal regulations, which must be scrupulously adhered to.” Please reconcile with the disclosure on page 5 that your technology “is exempt from long and arduous pharmaceutical development processes.”
RESPONSE – There is no incongruity in the two statements you have noted, and hence no need to “reconcile”. These are two entirely separate matters involving separate entities which are not the same – the Issuer’s technology IS exempt from the “pharmaceutical development process” involving FDA Regulations as the Issuer is not creating a synthesized medical product for which it seeks FDA approval (that is the requirement for FDA oversight). The manufacturer on the other hand is manufacturing a 100% natural botanical (hence outside of any FDA regulation), but the manufacturer must comply with state or any federal health codes, and they possess such a license, that’s all. The state of Colorado has licensed the licensee per §12-43.3-404 CRS as a “Medical Marijuana Infused Product Manufacturer”. There is no other/further regulatory schema, period.
Item 8. Financial Statements and Supplementary Data, page F-1
Notes to Consolidated Financial Statements, page F-7
Note 12 – Correction of an Error – Technology Rights, page F-16
3. Please provide to us the journal entry that reflects the correct method of accounting for the transfer of the institutional knowledge. We see you have credited the capital accounts $150,000, but we do not see which account has been debited.
ANSWER - The journal entry for the $150,000- equity raise was against the cash tendered by Cannabics, Delaware, as such you will see that the cash account was debited in this same amount.
Item 12. Security Ownership of Certain Beneficial Owners and Management, page 18
4. We note your response to comment 5 and we reissue the comment. Please clearly disclose the beneficial owners. In addition, to the extent your officers and directors are deemed the beneficial owners, please revise the amount and percent of the shares held by the officers and directors as a group to include the shares held by Cannabics Inc. Lastly, to the extent that Mr. Itamar Borochov may be considered a control person or a promoter of the company, please expand the disclosure to the extent necessary to comply with all material requirements of Item 404(c) of Regulation S-K, or advise. See Item 404(d)(2) of Regulation S-K.
RESPONSE – For clarification purposes, there are no shares held by any Director or Officer in their own name, the only shares with any tangential connection are held in the one certificate of “Cannabics Inc.” We have updated our response to enumerate all Directors’ and Officers’ holdings (through Cannabics Inc.). For review purposes, I have placed said section again below. Additionally, aside from the one transaction regarding the technology transfer with Cannabics Delaware, neither Mr. Borochov (nor anyone else from the Issuer) has had any related party transaction which would involve 404© disclosure requirements.
Beneficial Ownership
Name of Beneficial Owner Common Shares Percentage of class
Cannabics Inc. * 88,289,594 88.3%
Dr. Zohar Koren 88,289,594 88.3%
Dr. Eyal Ballan 88,289,594 88.3%
Itamar Borochov 88,289,594 88.3%
All directors and executive officers, as a group 88,289,594 88.3%
Our 3 Directors Dr. Zohar Koren, Dr. Eyal Ballan, and Itamar Borochov are also Directors of Cannabics, Inc. The mailing address for all directors, executive officers and beneficial owners of more than 5% of our common stock is #3 Bethesda Metro Center, Suite 700, Bethesda, Maryland, 20814.
*The Directors of the Company hold positions in Cannabics, Inc., the majority holder. The relative positions of Cannabics, Inc. are listed below:
Shareholder Common Stock % Issued
Zohar Koren 22.82%
Eyal Ballan 22.82%
Shay Avraham Sarid 22.82%
Itamar Borochov 22.82%
Seach Sarid Ltd. 3.88%
Ariel Kirtchuk 2.43%
Eyal Bar-ad 2.43%
Total 1,030 100.00%
Signatures, page 21
5. We reissue comment 6. Please amend the filing to include the signature of your principal financial officer, and principal accounting officer or controller. Refer to General Instruction D(2)(a). The signatures should clearly reflect each capacity in which the individual is signing.
RESPONSE – We have revised the filing to include the signature of Mr. Dov Weinberg, our CFO per (D)(2)(a).
Other Exchange Act Reports
Forms 10-Q
6. Please tell us how you plan to revise the interim financial statements to give effect to the error in accounting for the Technology Rights.
RESPONSE – We are now working on the revisions to the previous financial statements filed sequentially since this 10-K to accurately reflect the IP accounting on a cost basis for the technology rights, as noted in our 8-K 4.02 filed October 13th, 2015.
Form 8-K
7. Please file an Item 4.02 Form 8-K for the error correction.
RESPONSE – Please note said 8-K was filed October 13th, 2015.
In conclusion, the Company acknowledges that the Company is responsible for the adequacy and accuracy of the disclosure in the filing, the staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing, and the Company does not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
Should you have any questions or comments, please do contact me at any time. Thank you for your assistance in this matter.
Sincerely yours,
/s/ David E. Price
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filename1.htm
#3 BETHESDA
METRO CENTRE
SUITE 700
BETHESDA, MD
20814
---------
Tel (877) 424-2429
Cannabics.com
October 20th, 2015
US Securities & Exchange Commission
Corporate Finance Division
Washington, DC 20549
Attn: Ms. Julie Marlowe
Re: Cannabics Pharmaceuticals Inc.
Form 10-K for the Fiscal Year Ended August
31, 2014
Filed December 15, 2014
File No. 000-52403
Dear Ms. Marlowe,
We are in receipt of your
letter dated August 14th, 2015 regarding Cannabics Pharmaceuticals Inc. and the aforementioned filing. Below please
find our respective responses:
Form 10-K for the Fiscal Year Ended August 31, 2014
Item 1. Description of Business, page 1
Regulations, page 7
1. We note your response to comment 3 and we partially reissue. Please clarify the statement
on page 6 that “this factor should not be discounted when assessing potential exposure in investing with our company.”
In addition, as previously requested, please also revise your disclosure to alert investors that your operations could be deemed
to facilitate the selling or distribution of marijuana in violation of the federal Controlled Substances Act, or to constitute
aiding or abetting, or being an accessory to, a violation of that Act.
RESPONSE – The issuer herein submits
alternative language, inclusive of similar language to that requested previously. The issuer strenuously continues to believe that
the facts particular to its business operations simply do not avail themselves to the elements minimally necessary for “selling,
aiding or abetting”, however proffers the following language regarding the FCSA.
“It is imperative for the reader of
this report to recognize that the company itself does not manufacture, distribute, or dispense any controlled substances, including
cannabis, rather it develops proprietary technologies that are then licensed for use by certified and governmentally approved manufacturers.
However, as is well known, US Federal regulations continue to consider Cannabis a schedule 1 drug, meaning that it has no currently
accepted medical use in treatment, and thus illegal under Federal US laws. As such, the company could be deemed to be at variance
with the Federal Controlled Substances Act.”
2. In addition, we note the added disclosure on page 6 that “it is assumed that
any licensee of ours would be under certain state or federal regulations, which must be scrupulously adhered to.” Please
reconcile with the disclosure on page 5 that your technology “is exempt from long and arduous pharmaceutical development
processes.”
RESPONSE – There is no
incongruity in the two statements you have noted, and hence no need to “reconcile”. These are two entirely separate
matters involving separate entities which are not the same – the Issuer’s technology IS exempt from the “pharmaceutical
development process” involving FDA Regulations as the Issuer is not creating a synthesized medical product for which it seeks
FDA approval (that is the requirement for FDA oversight). The manufacturer on the other hand is manufacturing a 100% natural
botanical (hence outside of any FDA regulation), but the manufacturer must comply with state or any federal health codes, and they
possess such a license, that’s all. The state of Colorado has licensed the licensee per §12-43.3-404 CRS as a “Medical
Marijuana Infused Product Manufacturer”. There is no other/further regulatory schema, period.
Item 8. Financial Statements and Supplementary
Data, page F-1
Notes to Consolidated Financial Statements,
page F-7
Note 12 – Correction of an Error –
Technology Rights, page F-16
3. Please provide to us the journal entry that reflects the correct method of accounting
for the transfer of the institutional knowledge. We see you have credited the capital accounts $150,000, but we do not see which
account has been debited.
ANSWER - The journal entry for the $150,000-
equity raise was against the cash tendered by Cannabics, Delaware, as such you will see that the cash account was debited in this
same amount.
Item 12. Security Ownership of Certain Beneficial
Owners and Management, page 18
4. We note your response to comment 5 and we reissue the comment. Please clearly disclose
the beneficial owners. In addition, to the extent your officers and directors are deemed the beneficial owners, please revise
the amount and percent of the shares held by the officers and directors as a group to include the shares held by Cannabics Inc.
Lastly, to the extent that Mr. Itamar Borochov may be considered a control person or a promoter of the company, please expand
the disclosure to the extent necessary to comply with all material requirements of Item 404(c) of Regulation S-K, or advise. See
Item 404(d)(2) of Regulation S-K.
RESPONSE –
For clarification purposes, there are no shares held by any Director or Officer in their own name, the only shares
with any tangential connection are held in the one certificate of “Cannabics Inc.” We have updated our response
to enumerate all Directors’ and Officers’ holdings (through Cannabics Inc.). For review purposes, I have placed said
section again below. Additionally, aside from the one transaction regarding the technology transfer with Cannabics Delaware, neither
Mr. Borochov (nor anyone else from the Issuer) has had any related party transaction which would involve 404© disclosure requirements.
Beneficial Ownership
Name of Beneficial Owner
Common Shares
Percentage of class
Cannabics Inc. *
88,289,594
88.3%
Dr. Zohar Koren
88,289,594
88.3%
Dr. Eyal Ballan
88,289,594
88.3%
Itamar Borochov
88,289,594
88.3%
All directors and executive officers, as a group
88,289,594
88.3%
Our 3 Directors Dr. Zohar Koren, Dr. Eyal Ballan,
and Itamar Borochov are also Directors of Cannabics, Inc. The mailing address for all directors, executive officers and beneficial
owners of more than 5% of our common stock is #3 Bethesda Metro Center, Suite 700, Bethesda, Maryland, 20814.
*The Directors of the Company hold positions
in Cannabics, Inc., the majority holder. The relative positions of Cannabics, Inc. are listed below:
Shareholder
Common Stock
% Issued
Zohar Koren
235
22.82%
Eyal Ballan
235
22.82%
Shay Avraham Sarid
235
22.82%
Itamar Borochov
235
22.82%
Seach Sarid Ltd.
40
3.88%
Ariel Kirtchuk
25
2.43%
Eyal Bar-ad
25
2.43%
Total
1,030
100.00%
Signatures, page 21
5. We reissue comment 6. Please amend the filing
to include the signature of your principal financial officer, and principal accounting officer or controller. Refer to General
Instruction D(2)(a). The signatures should clearly reflect each capacity in which the individual is signing.
RESPONSE – We
have revised the filing to include the signature of Mr. Dov Weinberg, our CFO per (D)(2)(a).
Other Exchange Act Reports
Forms 10-Q
6. Please tell us how you plan to revise the
interim financial statements to give effect to the error in accounting for the Technology Rights.
RESPONSE –
We are now working on the revisions to the previous financial statements filed sequentially since this 10-K to accurately reflect
the IP accounting on a cost basis for the technology rights, as noted in our 8-K 4.02 filed October 13th, 2015.
Form 8-K
7. Please file an Item 4.02 Form 8-K for the
error correction.
RESPONSE –
Please note said 8-K was filed October 13th, 2015.
In conclusion, the Company
acknowledges that the Company is responsible for the adequacy and accuracy of the disclosure in the filing, the staff comments
or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the
filing, and the Company does not assert staff comments as a defense in any proceeding initiated by the Commission or any person
under the federal securities laws of the United States.
Should you have any questions
or comments, please do contact me at any time. Thank you for your assistance in this matter.
Sincerely yours,
/s/ David E. Price
David E. Price, Esq.
Corp Secretary & Counsel
DEP/mc
Cc: Board of Dirs.