UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
MARK ONE
for
the Quarterly Period ended
for the transition period from ________ to ________
Commission
file number
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
| (Address of principal executive offices) | Zip Code |
+
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| N/A | N/A | N/A |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☐ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
As of May 13, 2022, shares of the registrant’s common stock, par value $0.0001 per share, were outstanding.
CITRINE GLOBAL, CORP
Form 10-Q
March 31, 2022
| 2 |
CITRINE GLOBAL, CORP.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2022
| 3 |
CITRINE GLOBAL, CORP.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2022
U.S. DOLLARS IN THOUSANDS
TABLE OF CONTENTS
| 4 |
CITRINE GLOBAL, CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands, except share and per share data)
| March 31, 2022 | December 31, 2021 | |||||||
| (Unaudited) | ||||||||
| A s s e t s | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | ||||||||
| Restricted cash | ||||||||
| Short-term loan granted to others | ||||||||
| Prepaid expenses | ||||||||
| Other current assets | ||||||||
| Total Current assets | ||||||||
| Non-current assets | ||||||||
| Investments valued under the measurement alternative | ||||||||
| Property and equipment, net | ||||||||
| Total non-current assets | ||||||||
| T o t a l assets | ||||||||
| Liabilities and Shareholders’ Deficit | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | ||||||||
| Accrued compensation | ||||||||
| Total current liabilities | ||||||||
| Convertible component in convertible notes | ||||||||
| Convertible notes | ||||||||
| T o t a l liabilities | ||||||||
| Stockholders’ Deficit | ||||||||
| Common stock, par value $ per share, shares authorized at March 31, 2022 and December 31, 2021; shares issued and outstanding at March 31, 2022 and December 31, 2021 | ||||||||
| Additional paid-in capital | ||||||||
| Stock to be issued | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| T o t a l stockholders’ deficit | ( | ) | ( | ) | ||||
| T o t a l liabilities and stockholders’ deficit | ||||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
| 5 |
CITRINE GLOBAL, CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(U.S. dollars in thousands, except share and per share data)
| Three months ended | ||||||||
| March 31 | ||||||||
| 2022 | 2021 | |||||||
| (Unaudited) | ||||||||
| Research and development expenses | ( | ) | ||||||
| Marketing, general and administrative expenses | ( | ) | ( | ) | ||||
| Operating loss | ( | ) | ( | ) | ||||
| Financing expenses, net: | ||||||||
| Expenses related to convertible loan terms | ( | ) | ( | ) | ||||
| Other financing expenses, net | ( | ) | ( | ) | ||||
| Financing expenses, net | ( | ) | ( | ) | ||||
| Net loss attributable to common stockholders | ( | ) | ( | ) | ||||
| Loss per common stock (basic) | ( | ) | ( | ) | ||||
| Basic weighted average number of shares of common stock outstanding | ||||||||
| Comprehensive loss: | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Other comprehensive income attributable to foreign currency translation | ||||||||
| Comprehensive loss | ( | ) | ( | ) | ||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
| 6 |
CITRINE GLOBAL, CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)
(U.S. dollars in thousands, except share and per share data)
Redeemable convertible preferred stock | Common stock | Additional paid-in | Stock to be | Accumulated | Accumulated other comprehensive | Total stockholders’ | ||||||||||||||||||||||||||||||
| Stock | Amount | Stock | Amount | capital | issued | deficit | income | deficit | ||||||||||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2021 | - | - | ( | ) | | ( | ) | |||||||||||||||||||||||||||||
| CHANGES DURING THE PERIOD OF THREE MONTHS ENDED MARCH 31, 2022: | ||||||||||||||||||||||||||||||||||||
| Extinguishment of convertible note | - | - | - | - | ( | ) | - | - | - | ( | ) | |||||||||||||||||||||||||
| Warrants issued in connection with convertible notes | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
| Share based compensation | ||||||||||||||||||||||||||||||||||||
| Other comprehensive income | ||||||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | - | - | ( | ) | - | ( | ) | |||||||||||||||||||||||||
| BALANCE AT MARCH 31, 2022 (unaudited) | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
Redeemable convertible preferred stock
| Common stock | Additional paid-in | Stock to be | Accumulated | Accumulated other comprehensive | Total stockholders’ | ||||||||||||||||||||||||||||||
| Stock | Amount | Stock | Amount | capital | issued | deficit | income | deficit | ||||||||||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2020 | - | - | ( | ) | ||||||||||||||||||||||||||||||||
| CHANGES DURING THE PERIOD OF THREE MONTHS ENDED MARCH 31, 2021: | ||||||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | - | - | ( | ) | - | ( | ) | |||||||||||||||||||||||||
| BALANCE AT MARCH 31, 2021 (unaudited) | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
| 7 |
CITRINE GLOBAL, CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands, except share and per share data)
| Three months ended | ||||||||
| March 31, | ||||||||
| 2022 | 2021 | |||||||
| (Unaudited) | ||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Finance expenses, net | ||||||||
| Financial expenses with respect to convertible notes and loans | ||||||||
| Share based payment | ||||||||
| Fair value adjustment of liability in connection with stock exchange agreement | ||||||||
| Changes in fair value of marketable securities | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Increase in inventory | ( | ) | ||||||
| Prepaid and other current assets | ||||||||
| Accounts payable and accrued expenses | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of property and equipment | ( | ) | ||||||
| Repayments of short-term loan granted to others | ||||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from issuance of secured promissory note | ||||||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rates on cash and cash equivalents | ||||||||
| Net increase in cash and cash equivalents | ||||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD | ||||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD | ||||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Non-cash transactions: | ||||||||
| Fair Value of convertible component in convertible loan | ( | ) | ||||||
| Warrants issued in connection with convertible notes | ( | ) | ||||||
| Extinguishment of convertible notes | ( | ) | ||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
| 8 |
CITRINE GLOBAL, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 1 - GENERAL
Citrine Global, Corp. (“Citrine Global” or the “Company”) was incorporated under the laws of the State of Delaware on May 26, 2010. The Company’s common stock is traded in the United States on the OTCQB market under the ticker symbol “CTGL.”
On June 3, 2020 the Company established a wholly owned new Israeli subsidiary: CTGL – Citrine Global Israel Ltd, (the “Israeli Subsidiary”).
On July 21, 2020, the Israeli Subsidiary began to work with certain Company shareholders, Beezz Home Technologies Ltd., in which Ora Elharar Soffer, the Company’s chairperson and CEO holds shares, and Golden Holdings Neto Ltd., in which Ilan Ben-Ishai, a director of the Company, holds shares, have been working towards establishing an Operational Innovation Center focuses on the medical cannabis industry, CBD, hemp, botanical, food supplements and cosmetics products. The Company’s Board of Directors approved the Israeli Subsidiary to proceed with preparations for entering into an agreement to incorporate a new company, named Cannovation Center Israel Ltd. (“Cannovation”), with Beezz Home Technologies Ltd.and Golden Holdings Neto Ltd., and to accept limitations on the Israeli Subsidiary’s rights in the Cannovation Center if and as mandated under Israeli regulations on the involvement of foreign entities.
On
August 4, 2020, the Board of the Company approved for the Company and its Israeli Subsidiary to proceed with preparations for investing
in iBOT Israel Botanicals Ltd., an Israeli nutritional supplements’ company developing and manufacturing botanical formulas and
nutritional supplements for custom contract manufacturing for leading botanical companies (“iBOT”). iBOT has a manufacturing
facility for a wide range of botanical formulations. 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. On August 4, 2020, the Board of Directors approved for the Company and Citrine
Global Israel to proceed with preparations for investing in iBOT. On August 9, 2021, through the
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.
On August 20, 2020, the Israeli Subsidiary, Beezz Home Technologies Ltd., and Golden Holdings Neto Ltd. incorporated Cannovation. Israeli Subsidiary holds % of Cannovation’s shares, while each of Beezz Home Technologies Ltd. and Golden Holdings Neto Ltd. holds 20% of its shares. See note 4 for additional information.
| 9 |
CITRINE GLOBAL, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 1 - GENERAL (cont.)
Stock split
Financial support from shareholders
The Company has not yet to generate revenues and is dependent on raising funds from its current shareholders or from other sources. On April 13, 2021, Citrine S A L, 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 March 17, 2022, Citrine S A L Investment Holding Ltd. extended this support through June 30, 2023.
The Company has no significant firm commitments that require it to remit cash, and can control the level of expenses it incurs. Based on the Company’s current cash balances, and the irrevocable letter of obligation from Citrine S A L noted above, the Company believes it has sufficient funds for its plans for the next twelve months from the issuance of these financial statements. As the Company is embarking on its new activity as detailed herein, it is incurring losses. It cannot determine with reasonable certainty when and if it will have sustainable profits.
COVID-19
On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus (SARS-CoV-2) to be a global pandemic (COVID-19), which continues to spread throughout the world. The COVID-19 pandemic is having significant effects on global markets, supply chains, businesses, and communities. Specifically with respect to the Company, COVID-19 may impact various parts of its 2022 plans, operations and financial results, including but not limited to difficulties in obtaining additional financing. The Company considered the impact of COVID-19 on the estimates and assumptions and determined that there were no material adverse impacts on the consolidated financial statements for the period ended December 31, 2021 and 2020. The Company believes it is taking appropriate actions to mitigate the negative impact, including by focusing its activities initially only within the country of Israel. However, the full impact of COVID-19 is unknown and cannot be reasonably estimated as these events are still developing.
| 10 |
CITRINE GLOBAL, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
Unaudited Interim Financial Statements
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiary, prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions to Form 10-Q. In the opinion of management, the financial statements presented herein have not been audited by an independent registered public accounting firm but include all material adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the financial condition, results of operations and cash flows for the three months ended March 31, 2022. However, these results are not necessarily indicative of results for any other interim period or for the year ended December 31, 2022.
Certain information and footnote disclosures normally included in financial statements in accordance with generally accepted accounting principles have been omitted pursuant to the rules of the U.S. Securities and Exchange Commission (“SEC”). These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
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 fair value estimates of derivative liabilities and assets. Actual results could differ from those estimates.
| 11 |
CITRINE GLOBAL, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (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:
| 12 |
CITRINE GLOBAL, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (cont.)
Fair value (cont.)
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.
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:
| Balance as of March 31, 2022 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| US$ in thousands | ||||||||||||||||
| Liabilities: | ||||||||||||||||
| Fair value of convertible component in convertible notes | ||||||||||||||||
| Total liabilities | ||||||||||||||||
The following table presents the changes in fair value of the level 3 liabilities for the period ended March 31, 2022:
| Changes in Fair value | ||||
| US$ in thousands | ||||
| Liabilities: | ||||
| Outstanding at December 31, 2021 | - | |||
| Initial recognition of equity component as part of modification in note terms | ||||
| Initial recognition of convertible component as part of convertible notes issued | ||||
| Changes in fair value | ||||
| Outstanding at March 31, 2022 | ||||
| 13 |
CITRINE GLOBAL, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (cont.)
Recent Accounting Pronouncements
On October 1, 2021, the Company early adopted ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06), which simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments. This guidance also eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method. The new standard was effective for us beginning January 1, 2022, with early adoption permitted. The adoption of this new standard is not expected to have a material impact on the consolidated financial statements.
Other new pronouncements issued but not effective as of March 31, 2022 are not expected to have a material impact on the Company’s consolidated financial statements.
| Number of Options | Weighted Average Exercise Price ($) | |||||||
| Outstanding at December 31, 2021 | ||||||||
| Granted | ||||||||
| Exercised | ||||||||
| Forfeited or expired | ||||||||
| Outstanding at March 31, 2022 | ||||||||
| Number of options exercisable at March 31, 2022 | ||||||||
| Exercise price | Stock options outstanding | Weighted average remaining contractual life – years | Stock options vested | ||||||||||
| As of March 31, 2022 | |||||||||||||
Compensation
expense recorded by the Company in respect of its stock-based compensation awards for the period ended March 31, 2022 was $
| 14 |
CITRINE GLOBAL, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 4 – EVENTS DURING THE PERIOD
| A. | On
January 5, 2022, Citrine 9 LP, one of the Buyer entities (hereinafter “Citrine 9”) agreed to honor a Draw Down Notice
(as defined in the Convertible Note Agreement) for, and has advanced to the Company, $ |
As
provided for under the terms of the Convertible Note Agreement, Citrine 9 will be issued
The Company allocated the proceeds received to the freestanding components – the convertible loan, A Warrants and B Warrants, based on their relative fair values, since all three components will not be subsequently measured at fair value (see below),
Conversion feature
In accordance with ASC 815-15-25 the conversion feature was considered a liability classified embedded derivative instrument, and is to be recorded at its fair value separately from the convertible notes, within non-current liabilities in the Company’s balance sheet. The conversion component is then remeasured at fair value at each reporting period with the resulting gains or losses shown in the statements of operations.
The fair value of the convertible component was estimated by third party appraiser as weighted average of the two possible scenarios of the total convertible notes amount conversion (each, 50% probability):
The scenario in which the convertible loan would be converted prior to its maturity (scenario 1) was estimated by the appraiser using the Black-Scholes option pricing model, to compute the fair value of the derivative and to market the fair value of the derivative at each balance sheet date. The following are the data and assumptions used as of issuance dates and as of the balance sheet date:
| January 5, 2022 | March 31, 2022 | |||||||
| Dividend yield (%) | % | % | ||||||
| Risk-free interest rate (%) | % | % | ||||||
| Expected term (years) | ||||||||
| Volatility | % | % | ||||||
| Share price (U.S. dollars) | ||||||||
| Exercise price (U.S. dollars) | ||||||||
| Fair value of the conversion feature (U.S. dollars in thousands) | ||||||||
| 15 |
CITRINE GLOBAL, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 4 – EVENTS DURING THE PERIOD (cont.)
The
scenario in which the Company would raise at least $
| January 5, 2022 | March 31, 2022 | |||||||
| Dividend yield (%) | % | % | ||||||
| Risk-free interest rate (%) | % | % | ||||||
| Expected term (years) | ||||||||
| Volatility | % | % | ||||||
| Share price (U.S. dollars) | ||||||||
| Exercise price (U.S. dollars) | ||||||||
| Fair value of the conversion feature U.S. dollars in thousands) | ||||||||
The
fair value of the convertible component was estimated by the third-party appraiser after giving effect to the weighted average of the
two possible scenarios as of issuance dates was $
Warrants
The
fair value of the warrants as of the drawdowns dates was estimated at $
The following are the data and assumptions used:
| Warrants A | ||||
| Dividend yield (%) | % | |||
| Risk-free interest rate (%) | % | |||
| Expected term (years) | ||||
| Volatility | % | |||
| Share price (U.S. dollars) | ||||
| Exercise price (U.S. dollars) | ||||
| Fair value of the conversion feature (U.S. dollars in thousands) | ||||
| Warrants B | ||||
| Dividend yield (%) | % | |||
| Risk-free interest rate (%) | % | |||
| Expected term (years) | ||||
| Volatility | % | |||
| Share price (U.S. dollars) | ||||
| Exercise price (U.S. dollars) | ||||
| Fair value of the conversion feature (U.S. dollars in thousands) | ||||
| 16 |
CITRINE GLOBAL, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 4 – EVENTS DURING THE PERIOD (cont.)
Fair Value Proportional Allocation
The
fair value of the note was estimated at $
Based on the above, the fair value proportion allocation as of January 5, 2022 was as follows:
June 24, 2021 (US dollars in thousands) | ||||
| Conversion Component | $ | |||
| Warrants | ||||
| Convertible Notes | ||||
| Total | $ | |||
| B. | Additionally, on January 5, 2022, the Company and the related entities who are the signatory lenders (hereinafter the “Buyers”) under the Convertible Loan Agreement dated as of April 1, 2020 (the “CL Agreement”) with the Company entered into the Fourth Amendment to the CL Agreement pursuant to which the following was agreed to: |
| (i) | The
principal and accrued interest on all outstanding loans in the aggregate principal amount of $ | |
| (ii) | The
conversion price on all outstanding notes under the CL Agreement was adjusted to a conversion price of $ | |
| (iii) | The
exercise price on all outstanding warrants issued in connection with advances made under the CL Agreement was adjusted
to an exercise price of $ |
The Company concluded that the change in terms does not give rise to a trouble debt restructuring, as no concession was given to the Company.
Therefore, the Company went on to assess the whether the terms of the modified note are substantially different. The Company concluded that the change in terms should be accounted for as a debt extinguishment.debt extinguishment.
Following
the abovementioned amendment on January 5, 2022, 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 meets the bifurcation criteria, the
fair value of the conversion component calculated as of January 5, 2022, in the amount of $
Conversion feature
In accordance with ASC 815-15-25 the conversion feature was considered an embedded derivative instrument, and is to be recorded at its fair value separately from the convertible notes, within non-current liabilities in the Company’s balance sheet. The conversion component is then remeasured at fair value at each reporting period with the resulting gains or losses shown in the statements of operations.
The fair value of the convertible component was estimated by third party appraiser as weighted average of the two possible scenarios of the total convertible notes amount conversion (each, 50% probability):
| 17 |
CITRINE GLOBAL, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 4 – EVENTS DURING THE PERIOD (cont.)
| March 31, 2022 | ||||||||
| June 15, 2020 convertible loans | April 1, 2021 convertible loans | |||||||
| Dividend yield (%) | ||||||||
| Risk-free interest rate (%) | % | % | ||||||
| Expected term (years) | ||||||||
| Volatility | % | % | ||||||
| Share price (U.S. dollars) | ||||||||
| Exercise price (U.S. dollars) | ||||||||
| Fair value of the conversion feature (U.S. dollars in thousands) | ||||||||
The
scenario in which the Company would raise at least $
| March 31, 2022 | ||||||||
| June 15, 2020 convertible loans | April 1, 2021 convertible loans | |||||||
| Dividend yield (%) | ||||||||
| Risk-free interest rate (%) | % | % | ||||||
| Expected term (years) | ||||||||
| Volatility | % | % | ||||||
| Share price (U.S. dollars) | ||||||||
| Exercise price (U.S. dollars) | ||||||||
| Fair value of the conversion feature (U.S. dollars in thousands) | ||||||||
The
fair value of the convertible component was estimated by the third-party appraiser after giving effect to the weighted average of the
two possible scenarios as of March 31, 2022 was $
| C. | On
February 8, 2022, Cannovation Ltd received from the Israel Land Authority (“ILA”) a counter-signed development agreement
to purchase rights for long term lease to | |
| D. | On
February 15, 2022, the Company signed an investor relations service agreement with a consultant pursuant to which the Company agreed
to pay the consultant a monthly retainer of $ |
| 18 |
CITRINE GLOBAL, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 5 – RELATED PARTIES
A. Transactions and balances with related parties
Three months ended March 31 | ||||||||
| 2022 | 2021 | |||||||
| Research and development expenses: | ||||||||
| Directors compensation and fees to officers | ||||||||
| General and administrative expenses: | ||||||||
| Directors compensation and fees to officers (*) | ||||||||
| (*) Share based compensation | ||||||||
| Financing expenses, net: | ||||||||
| Interest on loan | ||||||||
B. Balances with related parties:
| As of March 31, | ||||||||
| 2022 | 2021 | |||||||
| Current Assets: | ||||||||
| Short term loan | ||||||||
| Prepaid expenses | ||||||||
| Current Liabilities: | ||||||||
| Convertible notes | ||||||||
| Accrued compensation | ||||||||
| Non-current Liabilities: | ||||||||
| Convertible notes | ||||||||
| 19 |
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Forward-looking Statements
This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other Federal securities laws, and is subject to the safe-harbor created by such Act and laws. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of such terms, or other variations thereon or comparable terminology. The statements herein and their implications are merely predictions and therefore inherently subject to known and unknown risks, uncertainties, assumptions and other factors that may cause actual results, performance levels of activity, or our achievements, or industry results to be materially different from those contemplated by the forward-looking statements. Except as required by law, we undertake no obligation to release publicly the result of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Further information on potential factors that could affect our business is described under the heading “Risk Factors” in Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 as filed with the Securities and Exchange Commission, or the SEC, on April 8, 2022. Readers are also urged to carefully review and consider the various disclosures we have made in that report. As used in this quarterly report, the terms “we”, “us”, “our”, the “Company” and “Citrine” mean Citrine Global, Corp. and our wholly-owned subsidiary CTGL -Citrine Global Israel Ltd. unless otherwise indicated or as otherwise required by the context.
Overview
We are a plant-based wellness pharma solutions company. Our business activity is primarily comprised of developing wellness and pharma solutions, focused on science backed plant-based products to improve quality of life and complementary solutions for balancing side effects caused by using medicines, cannabis, treatments, or an unbalanced lifestyle.
The global health and wellness market is expected to reach USD 7.6 trillion by 2030, growing at a CAGR of 5.5% from 2021 to 20301 with growing awareness of health and wellness solutions for improving people’s quality of life2. We are witnessing a global movement of health and wellbeing becoming a priority for the public, further emphasized by the recent global COVID-19 pandemic. There is increasing recognition that people need to take charge of their own health, improve their quality of life, use natural products, and balance side effects caused by medicines and treatment3.
We believe the power of plant-based solutions from nature can help improve people’s health and quality of life. We have built an end-to-end strategy to bring to market innovative plant-based wellness and pharma solutions covering the whole spectrum from innovation, research and development, product development, infrastructure for production and manufacturing, distribution, and marketing and sales on a global scale. Leveraging technology and research, we are focused on developing products portfolio based on rigorous scientific research ranging from synergistic botanicals, herbal extract tinctures, medicinal mushrooms together with plant extracts, vitamins, minerals, botanical formulations from seeds, roots, bark, fruits and a wide variety of plants that contain substances with health-supportive effects. Such supportive effects include, but aren’t limited to, enhancing oral care, anti-inflammatory properties, relaxation, sleep enhancement, energizing, mood and body balancing, and alleviating side effects.
Our headquarters and top executives are based in Israel, where we operate via our 100%-owned-subsidiary “CTGL Citrine Global Israel Ltd.” and 60%-owned “Cannovation Center Israel Ltd.” Our experienced team and partners are leaders in their respective fields with proven track records as top-level businesspeople and executives in technology, high-tech, biotech, investments, entrepreneurship, real estate, finance, and proven experience in bringing companies to global success. We have a professional, experienced group of primary shareholders that include Citrine S A L Investment Technologies, which are supporting the Company.
1 Research, P., 2022. Health and Wellness Market Size to Hit USD 7,656.7 Bn by 2030. [online] GlobeNewswire News Room.
2 NielsenIQ. 2022. An inside look into the 2021 global consumer health and wellness revolution. [online]
3 Sullivan, F., 2022. Increasing Health Consciousness Among Consumers to Shift the Global Prebiotic Ingredients Market. [online] Prnewswire.com.
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Our presence in Israel combined with our close contacts with leading universities, researchers, companies, shareholder and governmental support powers us to access the latest technologies, talent, and innovation to bring innovative solutions to the global market.
Our mission is to become a leading company for plant-based wellness pharma solutions to improve people’s quality of life.
Our recent achievements and upcoming milestones include:
Developing Bringing Plant-Based Wellness Pharma Products to Market
We are developing plant-based solutions which include products for improving quality of life and complementary solutions for balancing selected side effects caused by using medicines, cannabis, treatments, or an unbalanced lifestyle. In December 2021 we finalized the development of 25 proprietary formulations in multiple form factors under the brand name of Green Side by Side™ for the wellness industry.
The Green Side by Side™ product line includes herbals medicinal mushrooms, vitamins, minerals, and a variety of researched plants known for their healing qualities that contain substances with different anti-inflammatory properties and a variety of health-supportive effects that are relaxing, sleep enhancing, energizing, mood and body balancing, as well as enhancing oral care, alleviating side effects, and many botanical formulations that we target for balancing selected side effects and improving quality of life.
Green Side by Side products are manufactured in Israel in a GMP-certified manufacturing facility approved by the Israeli Ministry of Health. In Q1 2022 we launched in the Israeli market several products from the Green Side by Side™ product line, which includes the SmokLy TM series, a line of sprays for the oral cavity to support people suffering from cavity dryness (xerostomia) as a side effect.
We have commercially started marketing the products with a local Israeli partner that is targeting medical cannabis distribution channels and we plan to expand our activity in the Israeli market as well as distribute worldwide with local partners and according to local regulations. Green Side by Side is positioned to capture market share in the nutritional supplements market that is expected to reach $625 billion by 20304.
IP and Research Development Strategy
Our IP strategy and RD roadmap include building our patent portfolio, conducting clinical studies, advancing products through regulatory approvals. Leveraging technology and research, we continue to innovate, developing solutions that combine botanical formulations, herbal extracts, tinctures, sprays and other natural delivery methods with a variety of researched plants known for their healing qualities.
We target to bring to the wellness and pharma market innovative products to improve quality of life and complementary solutions for balancing selected side effects caused by medicines, treatments, cannabis, aging, stress, or an unbalanced lifestyle.
Our mission includes developing plant-based medicines for the plant-derived drug market that is expected to reach $53 billion by 20265.
4 Research, P., 2022. Nutritional Supplements Market to Hit US$ 624.7 Billion by 2030. [online] GlobeNewswire News Room.
5 2018-2026, G. and 2018-2026, G., 2022. Botanical and Plant Derivative Drug Market - Global Forecast 2018-2026. [online] Inkwood Research.
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Side Effects Caused by Medicines, Cannabis and Treatments, or an Unbalanced Lifestyle
A broad range of medicines, including use of cannabis, and treatments have common side effects such as dryness in the oral cavity (xerostomia), headaches, dizziness, drowsiness, fatigue, nausea, vomiting, lack of concentration, and impaired appetite. We are researching and developing complementary solutions to address the need to balance selected effects through wellness solutions, as well as clinically developed plant-based pharmaceutical solutions6.
Addressing a significant market need, we filed a provisional patent application with the US Patent and Trademark Office to address the side effects of cannabis use titled “Pharmaceutical Compositions and Methods for the Treatment of Side-Effects Associated with the Use of Cannabis, Cannabinoids and Related Products” patent No: 63/257,673.
Research shows that nearly 70% of cannabis users experience constant dry mouth and 20% percent of the elderly suffer from xerostomia as a side effect of their medications7. As part of our Green Side by Side product line, we developed the SmokLy TM series of sprays for the oral cavity which contain plant extracts distilled from seeds, roots, bark, fruits with active anti-inflammatory substances that encourage saliva production and taste in the oral cavity and can balance the dry mouth side effect (xerostomia) from using medicines and cannabis. We are working diligently on developing a broad array of plant-based wellness and pharma complementary solutions to address selected side effects caused by medicines, cannabis, treatments or an unbalanced lifestyle.
Green Vision Center Production Innovation Center for Plant-Based Wellness Pharma Products
The Green Vision Center is part of our strategy to create end-to-end plant-based solutions covering all the infrastructure, facilities, and activities required for developing, manufacturing, and bringing to market innovative plant-based wellness and pharma products.
In February of 2022, we completed the acquisition of 125,000 sq ft (11,687 sq meters) of industrial land in Yerucham, a city in southern Israel, to build the Green Vision Center Israel with the Israeli government support. Approximately 90% of the acquisition cost was provided by Israeli government programs that encourage industrial development and includes additional grants and tax incentives.
Designed by Avner Sher, one of Israel’s most highly regarded architects and artists, Green Vision Center will be a 60,000 sq ft (5,500 sq meter) first-of-its-kind facility. The center will be constructed by a professional project construction company that will oversee the aspects of the building including interfacing with sub-contractors and obtaining the requisite building permits and other required authorizations.
As demand for plant-based products in industries ranging from wellness, to pharma, to cosmetics, to food continues to increase, our Green Vision Center will provide highly sought-after facilities for the development and production of botanical and plant-based products.
Green Vision Center is a first-of-its-kind center that combines:
| ● | Manufacturing facilities for botanicals and nutritional supplements, plant-based pharmaceuticals, medical cannabis and related products, plant-based cosmetics, foods, and beverages | |
| ● | RD laboratories for development, clinical studies, and quality control testing | |
| ● | Management and consultant offices | |
| ● | Distribution and global logistics center | |
| ● | International Visitor Complex including a conference center and museum |
6 WebMD. 2022. Medication Side Effects: Types of Side Effects and FDA Regulations. [online]
7 Harpreet, S., Joseph, K., Wafaa, S. and Seunghee, C., 2019. Impact of Cannabis on the Port of Entry-Oral Tissues: An Overview. International Journal of Oral and Dental Health, 5(3).
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Israel as a source of innovation Global Expansion Strategy
Our presence in Israel combined with our close contacts with leading universities, researchers, companies, shareholder and government support empowers us to access the latest technologies, talent, and innovations. Israel, known as the Startup Nation, is well positioned as a leader in technology with a critical mass of technology companies, researchers, scientists, and government support.
A core part of our strategy includes building a worldwide network with local teams, partners, subsidiaries, Green Vision Centers, strategic partnerships, collaborations, and mergers acquisitions of technology and distribution companies. Initially, we are planning to build infrastructure for business development and sales with local teams in North America and Europe.
Developments During the Quarter
(i) On January 5, 2022, Citrine 9 LP, one of the entities (hereinafter “Citrine 9”), one of the related entities who are the signatory lenders (hereinafter the “Buyers”) Convertible Note Purchase Agreement entered into by the Company and such Buyers in April 2020, as subsequently amended (the “CL Agreement”) agreed to honor a Draw Down Notice for, and has advanced to the Company, $180,000 on the same terms and conditions as are specified in the CL Agreement. The annual interest on the loan continues to be nine percent (9%). The principal and interest payment on the Note shall be made in New Israeli Shekels (NIS) at the conversion rate which was in effect on the date on which the loan was advanced. Citrine 9 was be issued 6,666,667 Series A warrants and 6,666,667 Series B warrants for shares of common stock, where the Series A warrants are exercisable beginning July 5, 2022 through July 5, 2024 and the Series B warrants are exercisable beginning July 5, 2022 through July 5, 2025, in each case at an exercise price of $0.05 per share.
Additionally, on January 5, 2022, the Company and the Buyers under the CL Agreement entered into the Fourth Amendment to the CL Agreement pursuant to which the following was agreed to:
| (i) | The repayment of principal and accrued interest on all outstanding loans shall be made in New Israeli Shekels (NIS) at the conversion rate which was in effect on the date on which the loan was advanced; | |
| (ii) | The conversion price on all outstanding notes under the C:L Agreement has been adjusted to a conversion price of $0.05 per share | |
| (iii) | The exercise price on all outstanding warrants issued in connection with advances made under the CL Agreement has been adjusted to an exercise price of $0.05 per share. |
(ii) We previously disclosed that the Israeli Ministry of the Economy recommended that the Company’s majority-owned subsidiary, Cannovation Center Israel, be granted the right to purchase an industrial parcel of land from the Israel Land Authority (“ILA”) at a subsidized price and exempt from a tender procedures typically required under Israeli law. On February 8, 2022, Cannovation Ltd. received from ILA a counter-signed development agreement (the “Development Agreement”) to purchase rights for long term lease to 11,687 square meters of industrial land in Yeruham in Southern Israel (the “Land”) for purposes of building the Cannovation Center, which is intended to include factories, laboratories, logistics and a distribution center for the wellness, pharma, medical cannabis and botanicals industries. During December 2021, Cannovation Ltd. remitted to the Israeli Ministry of the Economy and the ILA the aggregate amount of 687,650 NIS ($221,122 on the date of payment) to obtain the rights to the Land. The amount represents approximately 10% of the prevailing market price for comparable land space in the general area and is part of the grant by the Israeli government under government programs to encourage industrial development in Southern Israel. The amount remitted represents the total amount that Cannovation Ltd. is required to pay as the purchase price for the Land.
Under the Development Agreement, Cannovation Ltd. will build and develop the Green Vision Center in accordance with by the time frames, terms and conditions of the Agreement. Typically, the initial time frame for completing the development is four (4) years, subject to extensions that the ILA may approve. Upon completion of the development within the time frames and other requirements specified in the Development Agreement, then Cannovation Ltd. will be entitled subject to Israeli law to long term lease agreement (49 years) to the land (equivalent to ownership rights as most of the land in Israel is government owned and when marketed usually the developers are granted with development/long lease rights).
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Our subsidiary Cannovation Ltd., holds title to the land under the Development Agreement. Under local law in Israel, there are restrictions relating to the transfer of ownership of the premises on the land to a non-Israeli parties, as well as restrictions on the composition of each of Cannovation’s shareholders to ensure that Israeli citizens control each such shareholder. Accordingly, the shareholders of Cannovation, which include our 60% owned subsidiary CTGL Israel, entered into an agreement under which they undertook that at all times they will comply with applicable law in this regard.
Cannovation Ltd. is developing its Green Vision Center as development and production of wellness pharma plant-based products, including botanical solutions, nutritional supplements, vitamins, healthy snacks beverages, natural cosmetics, medical cannabis cannabinoid-based products, plant-based pharma products and botanical drugs, and it is planned to include manufacturing plants, laboratories, logistics, import and export, offices, training, conference center, and an international visitor complex.
On February 7, 2022, the board of directors of Cannovation Ltd. authorized management of Cannovation Ltd. to finalize the terms of an agreement with one of the leading real estate project construction companies in Israel to commence building the Green Vision Center. The selected project manager is reputed for the successful completion of many projects amounting to hundreds of thousands of square meters of offices, malls, stadiums, hospitals and public institutions throughout Israel. The project manager will oversee all aspects of the building project, including interfacing with the sub-contractors and obtaining the requisite building permits and other required authorizations.
Cannovation Ltd. and the Company are in discussions with commercial banks and prospective investors regarding the financing of the planned development.
Components of Operating Results
The following discussion summarizes the key factors our management believes are necessary for an understanding of our consolidated financial statements.
Revenues
We have not generated any revenues from product sales as of March 31, 2022.
Research and Development Expenses
The process of researching and developing our products is lengthy, unpredictable, and subject to many risks. We expect to continue incurring substantial expenses through 2022 as we continue to develop our product line. We are unable, with any certainty, to estimate either the costs or the timelines in which those expenses will be incurred. Our current product development plans focus on the development of our Green Side by Side Products.
Our research and development costs include costs are comprised of:
● internal recurring costs, such as personnel-related costs (salaries, employee benefits, equity compensation and other costs), materials and supplies, facilities and maintenance costs attributable to research and development functions; and
● fees paid to external parties who provide us with contract services, such as preclinical testing, manufacturing and related testing and clinical trial activities.
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Marketing
Marketing expenses consist primarily of salaries, employee benefits, equity compensation, and other personnel-related costs associated with executive and other support staff. Other significant marketing expenses include the costs associated with professional fees to develop our marketing strategy.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries, employee benefits, equity compensation, and other personnel-related costs associated with executive, administrative and other support staff. Other significant general and administrative expenses include the costs associated with professional fees for accounting, auditing, insurance costs, consulting and legal services, along with facility and maintenance costs attributable to general and administrative functions.
Financial Expenses
Financial expenses consist primarily impact of exchange rate derived from re-measurement of monetary balance sheet items denominated in non-dollar currencies. Other financial expenses include bank’s fees and interest on long term loans.
Comparison of the Three Months Ended March 31, 2022 compared to the Three Months Ended March 31, 2021
The following table presents our results of operations for the three months ended March 31, 2022 and 2021
| Three Months Ended | ||||||||
| March 31 | ||||||||
| 2022 | 2021 | |||||||
| Revenues | - | - | ||||||
| Cost of sales | - | - | ||||||
| Operating loss | - | - | ||||||
| Research and development expenses | (25,000 | ) | - | |||||
| Marketing, general and administrative expenses | (315,000 | ) | (1,975,000 | ) | ||||
| Operating loss | (340,000 | ) | (1,975,000 | ) | ||||
| Income (expenses) related to convertible loan terms | (379,000 | ) | (122,000 | ) | ||||
| Other financing expenses, net | (10,000 | ) | (3,000 | ) | ||||
| Net loss | (729,000 | ) | (2,100,000 | ) | ||||
Revenues. Revenues for the three months ended March 31, 2022 and 2021 were $nil.
Research and Development. Research and development expenses for the three months ended March 31, 2022 were $25,000 compared to $nil for the three months ended March 31, 2021 The increase is mainly attributable to expenses related to the development of our Green Botanical product line and provisional patent application related expenses.
Marketing, general and Administrative Expenses. Marketing, general and administrative expenses consist primarily of professional services, share-based compensation expenses and other non-personnel related expenses such as legal expenses. Marketing, general and administrative expenses decreased from $1,975,000 for the three months ended March 31, 2021 to $315,000 for the three months ended March 31, 2022. The decrease in our marketing, general and administrative expenses is mainly attributable to the decrease in our non-cash share-based compensation expenses offset by increase in professional services expenses.
Financing Expenses, Net. Financing expenses, net for the three months ended March 31, 2022 were $389,000 compared to $125,000 for the three months ended March 31, 2021. The reason for the increase in financial expenses, net was due to $379,000 of expenses related to convertible loan terms.
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Net Loss. Net loss for the three months ended March 31, 2022 was $34,000 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 March 30, 2022, we had current assets of $386,000 compared to total current assets of $349,000 as of December 31, 2021. At March 31, 2022, we had current liabilities of $1,232,000 as compared to $1,064,000 as of December 31, 2021. At March 31, 2022, we had total liabilities of $3,097,000 as compared to $2,495,000 as of December 31, 2021. The increase is mainly attributed to the increase in the balance of accounts payables and accrued expenses and the balance of convertible component in convertible notes.
At March 31, 2022, we had a cash balance of $293,000 compared to the cash balance of $270,000 as of December 31, 2021.
At March 31, 2022, we had a working capital deficiency of $846,000 as compared with a working capital deficiency of $715,000 at December 31, 2021.
On January 5, 2022, Citrine 9 LP (hereinafter “Citrine 9”), one of the related partnership entities (collectively, the “Buyers”) that entered into the Convertible Loan Agreement dated as of April 1, 2020, as subsequently amended (the “Convertible Loan Agreement”) agreed to honor a Draw Down Notice (as defined in the Convertible Note Agreement) for, and advanced to the Company, $180,000 on the same terms and conditions as are specified in the Convertible Note Agreement. The maturity date of the loan is the earlier of July 31, 2023 or at such time as the Company shall have consummated an investment of at least $5 million in Company securities. The terms of the advances under the Convertible note agreement were previously disclosed by the Company in Current Reports on Form 8-K filed on each of April 21, April 23, June 12, 2020 and June 24, 2021. The annual interest on the loan continues to be nine percent (9%). The principal and interest payment on the Note shall be made in New Israeli Shekels (NIS) at the conversion rate which was in effect on the date on which the loan was advanced.
As provided for under the terms of the Convertible Note Agreement, Citrine 9 will be issued 6,666,667 Series A warrants and 6,666,667 Series B warrants for shares of common stock, where the Series A warrants are exercisable beginning July 5, 2022 through July 5, 2024 and the Series B warrants are exercisable beginning July 5, 2022 through July 5, 2025, in each case at an exercise price of $0.5 per share.
Additionally, on January 5, 2022, the Company and the Buyers entered into the Fourth Amendment to the Convertible Note Agreement pursuant to which the following was agreed to:
| (i) | The repayment of the principal and accrued interest on all outstanding loans shall be made in New Israeli Shekels (NIS) at the exchange rate which was in effect on the date on which the loan was advanced; | |
| (ii) | The conversion price on all outstanding notes under the Convertible Note Agreement has been adjusted to a conversion price of $0.05 per share | |
| (iii) | The exercise price on all outstanding warrants issued in connection with advances made under the Convertible Note Agreement has been adjusted to an exercise price of $0.05 per share. |
Based on the Company’s current cash balances, the Company believes that it has sufficient funds for its plans for the next twelve months from the issuance of these financial statements. As the Company is embarking on its activities as detailed herein, it is incurring losses. It cannot determine with reasonable certainty when and if it will have sustainable profits.
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
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| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Not Applicable.
| ITEM 4. | CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s principal executive officer and the Company’s principal financial officer to allow for timely decisions regarding required disclosure. In designing and evaluating the Company’s disclosure controls and procedures, the Company’s management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. The Company’s management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based on the Company’s evaluation of the effectiveness of its disclosure controls and procedures as of March 31, 2022, the Company’s principal executive officer and the Company’s principal financial officer concluded that the Company’s disclosure controls and procedures are effective.
Changes in Internal Control over Financial Reporting
During the three months ended March 31, 2022, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting.
PART II—OTHER INFORMATION
| ITEM 1. | LEGAL PROCEEDINGS |
From time to time we may become involved in various legal proceedings that arise in the ordinary course of business, including actions related to our intellectual property. Although the outcomes of these legal proceedings cannot be predicted with certainty, we are currently not aware of any such legal proceedings that arise in the ordinary course of business, including actions related to our intellectual property. Although the outcomes of these legal proceedings cannot be predicted with certainty, we are currently not aware of any such legal proceedings or claims that we believe, either individually or in the aggregate, will have a material adverse effect on our business, financial condition, or results of operations.
| ITEM 1A. | RISK FACTORS |
An investment in the Company’s Common Stock involves a number of very significant risks. You should carefully consider the risk factors included in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on April 8, 2022, 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, 2021.
| ITEM 2. | UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS |
None.
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
None.
| ITEM 4. | MINE SAFETY DISCLOSURES |
None.
| 27 |
| ITEM 5. | OTHER INFORMATION: |
None
| ITEM 6. | EXHIBITS |
Exhibit Index:
* Filed herewith
| 28 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CITRINE GLOBAL. CORP
(Registrant)
| By: | /s/ Ora Elharar Soffer | By: | /s/ Ilanit Halperin | |
| Ora Elharar Soffer | Ilanit Halperin | |||
| Chief Executive Officer | Chief Financial Officer | |||
| (Principal Executive Officer) | (Principal Financial and Accounting Officer) |
| Date: | May 16, 2022 | Date: | May 16, 2022 |
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