What changed in this filing

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Item 1. Business

2019-05-03 compared with 2018-05-01 · 92 added, 413 removed, 107 unchanged (83% of the section changed)

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Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our financial statements are stated in U.S.

Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

In this annual report, unless otherwise specified, all dollar amounts are expressed in US dollars and all references to “common shares” refer to the common shares in our capital stock.

Our financial statements are stated in Canadian Dollars (CDN) and are prepared in accordance with United States Generally Accepted Accounting Principles.

In this annual report, unless otherwise specified, all dollar amounts are expressed in CDN dollars and all references to “common shares” refer to the common shares in our capital stock.

As used in this annual report, the terms “we”, “us”, “our” and “our company” mean Pivot Pharmaceuticals Inc., unless otherwise indicated.

General Overview

We are a development stage pharmaceutical and nutraceutical company.

We are an early stage pharmaceutical company.

We were incorporated in the Province of British Columbia, Canada under the name “649186 B.C.

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· For pharmaceutical products, milestone payments payable upon first Investigative New Drug Approval, upon positive outcome of Phase II trial in first indication, and upon New Drug Application approval.

On September 23, 2017, we entered into a collaboration and license agreement with SolMic GmbH (“Solmic”) whereby we will acquire worldwide rights to Solmic’s Solubilisation Technology for the development and commercialization of cannabinoid-containing natural extracts.

Milestones include payments upon the following developments:

1) Regulatory approval of a natural health product;

2) First approval of an investigative new drug application for a pharmaceutical product;

3) Positive outcome of a Phase II clinical trial of a pharmaceutical product in the first indication;

and 4) Approval of a New Drug Application for a pharmaceutical product by the US Food and Drug Administration.

Other consideration include a sales milestone upon aggregate net sales of $5,000,000 and royalties on aggregate net sales.

On December 19, 2017, we commenced trading on the Canadian Securities Exchange under the symbol “PVOT”.

On February 28, 2018, we completed the acquisition of ERS Holdings, LLC (“ERS”) pursuant to an Exchange Agreement dated as of February 10, 2018 among Pivot Pharmaceuticals Inc.

("Pivot"), ERS and the members of ERS.

As consideration for the purchase, we paid $333,333 in cash on closing and will pay an additional $333,333 six and twelve (12) months after closing for total cash payment of $1 million.

On February 28, 2018, we completed the acquisition of Pivot Naturals, LLC (previously ERS Holdings, LLC) (“Pivot Naturals”) pursuant to an Exchange Agreement dated as of February 10, 2018 among Pivot Pharmaceuticals Inc.

(“Pivot”), Pivot Naturals and the members of Pivot Naturals.

As consideration for the purchase, we paid US$333,333 in cash on closing and will pay an additional US$333,333 six (6) and twelve (12) months after closing for total cash payment of US$1 million.

The payment due six (6) months after closing was paid in September 2018.

The payment due twelve (12) months after closing has been extended to May 31, 2019 for an extension fee of 2.5% per month payable in cash and/or shares of common stock.

In addition, we also issued 5,000,000 shares of our common stock and will pay royalties on future net sales.

ERS has developed a patented technology called “RTIC” Ready-To-Infuse-Cannabis, relating to the transformation of cannabis oil into powder for infusion into a variety of food and beverage products such as capsules, K-Cups, stick packs, baked mixes, liquid shots, protein shakes, topicals, lotions, and bottled beverages.

Pivot Naturals has developed a patented technology called “RTIC” Ready-To-Infuse-Cannabis, relating to the transformation of cannabis oil into powder for infusion into a variety of food and beverage products such as capsules, K-Cups, stick packs, baked mixes, liquid shots, protein shakes, topicals, lotions, and bottled beverages.

On March 2, 2018, we completed the acquisition of Thrudermic, LLC (“Thrudermic”) and worldwide rights to Thrudermic’s patented Transdermal Nanotechnology for the development and commercialization of transdermal cannabinoids pursuant to an Exchange Agreement dated as of March 2, 2018 among Pivot, Dr.

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As consideration for the purchase, we paid $1 in cash on closing and issued 500,000 shares of our common stock.

On August 7, 2018, we entered into a licensing agreement with Formulex Pharma Innovations (formerly Solubest Ltd.) (“Formulex”) whereby we acquired worldwide rights for the use, development and commercialization of its patented Solumer™ Oral Drug Delivery Technology (“Solumer™”) for the improved bioavailability, delivery and commercialization of CBD, THC and other biocannabis-based products.

Financial consideration included:

· Royalties on net sales;

· Monthly license fee from execution of the agreement until commercialization;

· Monthly development fee of licensed products;

· Milestone payments upon commercialization and aggregate net sales of $5,000,000.

On December 17, 2018, we entered into a joint venture arrangement whereby we hold 50% of the issued and outstanding shares of Pivot-Cartagena Joint Venture Inc.

(“Pivot-Cartagena JV”).

Pivot-Cartagena JV will develop and commercialize cannabis-infused non-alcoholic beverages combining the industry expertise of Licorera del Sur with our patented Solumer™ and RTIC™ powderization technologies.

Our principal executive office is located at 1275 West 6th Avenue, Vancouver, B.C.

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Our Current Business

Pivot Pharmaceuticals Inc.

is a biopharmaceutical company engaged in the development and commercialization of therapeutic pharmaceuticals and nutraceuticals using innovative drug delivery platform technologies.

Our company focuses on pharmaceutical development of proprietary drug delivery technologies for multiple indications using small molecules, biological and botanical (e.g.

cannabinoids) products to treat unmet medical needs.

During our year ended January 31, 2018, we in-licensed a patented topical transdermal drug delivery technology platform, BiPhasix, and an oral drug delivery technology, Solmic Micelle, for delivery of cannabinoids.

Subsequent to January 31, 2018, we have also acquired the Thrudermic Transdermal Nanotechnology (transdermal) and the Ready-To-Infuse Cannabis technology.

Our fully-owned subsidiaries, Pivot Green Stream Health Solutions Inc.

(“PGS”) and Pivot Naturals, LLC (“Pivot Naturals”) (formerly, ERS), acquired subsequent to January 31, 2018, focus on the research, development, and commercialization of cannabinoid based nutraceuticals.

PGS will generate data to support the safety and efficacy of cannabinoids as Natural Health Product (“NHPs”) as outlined in Health Canada Regulations in order to make particular health claims.

Health Canada publishes the Natural Health Products Regulations (“NHPR”) which set out the requirements governing the sale, manufacture, packaging, labelling, importation, distribution and storage of NHPs.

According to Health Canada, the objective of the NHPR is to provide reasonable assurance that products offered for sale in Canada are safe, efficacious and of high quality.

PGS may also follow applicable and harmonized regulations for product development and commercialization in the US, European Union and Asia Pacific regions.

Alternatively, PGS will commercialize certain cannabinoid products with a Licensed Producer and/or Licensed Distributor as per the regulations concerning Access to Cannabis for Medical Purposes Regulations (“ACMPR”) since certain active ingredients in cannabinoids remain restricted until new legislation permits ease of development and distribution in 2018.

Lastly, PGS may also develop products containing cannabinoid active ingredients obtained from industrial hemp according to the Industrial Hemp Regulations (“IHR”) permitting such products provided they are sourced from industrial hemp.

Otherwise stated, this means that the plants and plant parts of the genera Cannabis, the leaves and flowering heads of which do not contain more than 0.3% THC w/w, and includes the derivatives of such plants and plant parts.

PGS’s pipeline targets indications such as cancer supportive care, pain and inflammation, women’s sexual dysfunction, dermatology and eye disease.

Our overall strategy includes the following:

Acquire market-ready natural health products from third-parties for rebranding and re-sale;

Acquire cannabinoid-based food additives for medical consumer sales;

Develop cannabinoid-based natural health products using our BiPhasix topical platform technology;

Develop pharmaceutical products delivered using our BiPhasix topical platform technology;

Obtain partnerships with Health Canada approved Authorized Licensed Producers and/or Licensed Distributors, which can provide restricted and non-restricted cannabinoids as per the ACMPR or the IHR;

Acquire novel proprietary drug delivery technologies, for example, metered dose, intra-nasal, suppositories;

Make an application at the appropriate time to acquire Health Canada’s Authorized Licensed Producers and Licensed Dealers licenses as per the ACMPR;

Out-license our platform technologies to Licensed Producers or Licensed Distributors and other drug developers;

Secure and develop further intellectual property;

Opportunistically acquire later stage drug candidates that provide new treatment options to address unmet medical needs in health care;

Establish partnerships with large and specialty pharmaceutical companies and/or biotechnology companies to collaboratively develop and/or commercialize our products.

We are a bio-cannabis consumer products company engaged in the commercialization of patented, science-based, premium health and wellness products.

We have invested in the acquisition and licensing of patented drug delivery technologies and have developed and tested differentiated cannabis formulations using pharmaceutical grade CBD and THC isolates as active ingredients.

Working with our network of pharmaceutical product experts, we have created a catalogue of bioavailable, stable cannabis products.

Our products will be manufactured at current Good Manufacturing Practices (“GMP”) accredited facilities in Canada, California, Vermont and Germany.

Our products will initially be marketed under our “Pivot Naturals” brand and distributed globally through established wholesale, retail, e-commerce and government partners.

Our premium branded product line includes tablets, capsules and soft gels, bulk powder, stick packs, infused beverages, oral solutions, lotions, creams, gels, gums, mints, candies, intimate lubricant and pet supplements.

Our strategic priorities are to:

Continue to build our industry leading portfolio of patented drug delivery technologies;

Commercialize our bio-cannabis product lines;

Secure global distribution channels for our product lines;

Establish partnerships with large and specialty pharmaceutical companies and/or biotechnology companies to collaboratively develop and/or commercialize certain products in our portfolio.

Our Research and Development Strategies

Our management team has implemented a business minded and cost conscious approach to product research and development by focusing on development of novel therapies to address unmet needs in health care.

Our research and development strategy will apply novel drug delivery options for new and/or existing drugs or NHPs.

For a drug to be successful it must be both efficacious and acceptably safe.

Before a drug may be commercially marketed, it must be scrutinized and approved by applicable health authorities (such as Health Canada and the FDA in the United States) in each country or jurisdiction where it is sought to be sold.

In pharmaceutical research and development, clinical trials are conducted to assess the safety and efficacy of the drug and the data to be collected for such new drugs.

Health authorities then scrutinize the pre-clinical and clinical data and determine, based on the results, whether a drug may be sold to the public.

Similarly, clinical trials can only take place once satisfactory information has been gathered on the quality of the product and its non-clinical safety, and approval to conduct clinical trials has been granted by the appropriate health authority in the country where the trial is scheduled to take place.

Clinical trials involving new drugs are commonly classified into four phases.

Each phase of the drug approval process is treated as a separate clinical trial.

The drug development process will normally proceed through all four phases over many years.

If the drug successfully passes through Phases I, II and III, it will usually be approved by the national regulatory authority for use in the general population.

Phase IV trials are ‘post approval’ studies.

Due to the considerable cost that may be required to complete a full series of clinical trials, the burden of paying for all the necessary people and services is usually borne by the sponsor, who may be the pharmaceutical or biotechnology company that developed the drug that is the subject of the study.

Since the diversity of roles may exceed the resources of the sponsor, clinical trials are often managed by outsourced partners such as contract research organizations.

Furthermore, approval rates for new drugs at each clinical trial stage are prohibitively low, which may require the sponsor to finance additional trials or abandon the drug under development altogether.

We will also develop products regulated under Canada’s Natural Health Products Guidance and support claims with clinical based data as per current regulations.

Pre-clinical safety studies for pharmaceutical or NHP product development are ongoing to advance at least two of our product candidates.

Our management team has implemented a business-minded and cost-conscious approach to product research and development by focusing on development of bio-cannabis nutraceuticals and selling the finished products into markets where regulations permit.

We will use contract development and manufacturing organizations on a fee for service basis to perform any research or development that is required.

Our Platform Technologies

BiPhasix Transdermal Drug Delivery Technology (Topical Platform)

Pivot has acquired worldwide rights from Altum for its patented topical transdermal drug delivery technology platform, or BiPhasix, which we will use for the delivery and commercialization of cannabinoid, cannabidiol (“CBD”) and tetrahydrocannabinol (“THC”) based products.

We have acquired worldwide rights from Altum Pharmaceuticals Inc.

for its patented topical transdermal drug delivery technology platform, or BiPhasix, which we will use for the delivery and commercialization of cannabinoid, CBD and THC-based products.

The BiPhasix technology has the potential to deliver drugs less invasively than by injections.

It also has the potential to topically deliver therapeutic amounts of drugs with better absorption rates, where creams, ointments or conventional liposomes have not been effective.

Dermal Barrier and Challenges

The skin is often the subject of intensive dermatological therapy.

However, except for certain low molecular weight compounds, it is seldom viewed as a route of delivery for systemically acting drugs.

This is due partly to the fact that, by design, the skin is a formidable barrier to penetration by external agents and the traditional arsenal of creams, ointments and gels have not proven themselves to be effective in delivery.

In order to reach their target site within the underlying layers of the skin or beyond the skin to the systemic circulation, topical drugs must first penetrate the stratum corneum, the outermost layer of the skin.

It is this layer which is considered to be the rate-limiting barrier to drug absorption.

For dermatological applications where the goal is to treat the skin, the residence time of drugs in the target tissue should be of sufficiently long duration since rapid systemic absorption may limit the therapeutic response and contribute to systemic side effects.

This latter case may be the fate of many small molecules formulated in conventional vehicles.

In some cases, it is desirable and possible to achieve systemic delivery of small molecules via the transdermal route (for example, nicotine).

However, larger molecules, whether intended for dermatological or systemic delivery, would normally not gain entry beyond the stratum corneum.

The goal is to have a safe delivery system that does not irritate or damage the skin barrier after repeated usage in patients.

Pivot will use BiPhasix as the next generation of patented liposomal delivery system where a number of features of liposomes are greatly improved.

In contrast to traditional liposomes that entrap a single, aqueous phase, our system is a complex system where the lipid bilayers entrap both aqueous and oil phases in the form of a stabilized emulsion.

BiPhasix is constructed with multi-compartmental lipid vesicles, each comprising of aqueous compartments and bi-layer compartments in addition to the following unique features of this patented delivery system:

Micellar compartments and oily compartments.

These additional features make it possible to achieve greater formulation versatility than previously attainable with traditional creams, gels, ointments or conventional liposomal delivery systems.

Thus, the BiPhasix delivery system combines the advantages of liposomes and micro-emulsions, offering a wider range of formulation options for a variety of drug substances:

Water soluble compounds;

Lipid soluble compounds;

Technical Facts of BiPhasix

BiPhasix is a dermal delivery system for macro-molecules and has the following characteristics:

Flexible and able to deliver both lipophilic and hydrophilic molecules;

Vesicles are composed of phospholipid bilayers (formed from pro-liposomal gel) which entraps an oil-in-water submicron emulsion;

Hydrophilic active pharmaceutical ingredients are incorporated into the aqueous phase of the oil-in-water emulsion, whereas lipophilic active pharmaceutical ingredients can be incorporated into the oil phase of the submicron emulsion.

Structure, assembly and properties of BiPhasix carrying an active pharmaceutical ingredient include:

Vesicles consist of concentric phospholipid bilayers;

Cationic submicron emulsion droplets;

Cationic surfactant micelles;

A water phase.

Additional facts regarding the BiPhasix delivery system include:

The amount of drug that can be incorporated include quantities at the microgram to milligram levels;

The size of molecules formulated are approximately 300 daltons (“Da”) to 100 kilodaltons (“kDa”);

Loading capacity range from 30-70%;

Increased stability of proteins are provided;

No organic solvents are used in the process;

No specialized manufacturing equipment are required;

BiPhasix products are easily scalable using standard pharmaceutical industrial equipment;

BiPhasix formulated product have been reviewed by the U.S.

Food and Drug Administration (“FDA”), the European Medicines Agency (“EMA”) and the The German Federal Institute for Drugs and Medical Devices (BfArM).

Delivery Mechanisms

The delivery of the BiPhasix vesicles is achieved by the uptake of the vesicles and encapsulated drug into the skin or mucosa via the lipid rich channels, followed by release of drug from the vesicles in a formulation-controlled manner.

The result may be either a rapid cutaneous transit time to produce primarily transdermal delivery of the drug, or depot formation within the skin with slow release for primarily dermal delivery of the drug.

The following is a hypothetical diagram showing penetration of the biphasic vesicles into the skin for drug delivery:

BiPhasix liposomes and transportation through the skin (in light blue)

Key Advantages of BiPhasix

The key advantages of BiPhasix are:

Alternative routes:

BiPhasix can serve as an alternative dosage form to injectables by providing less invasive routes of administration, such as dermal, transdermal, nasal, vaginal and rectal.

Controlled release:

BiPhasix can be formulated to effect varying degrees of tissue penetration and rate of release at the target site, in accordance with a desired clinical goals.

Bioavailability studies:

As shown in the tables below, BiPhasix can significantly enhance the bioavailability of many drugs, leading to improved clinical outcomes.

As shown in the above tables, BiPhasix has demonstrated excellent stability with most therapeutic agents tested, especially proteins, which are characteristically unstable in traditional vehicles.

Vulnerable drugs can be shielded from degradation in BiPhasix, thereby enhancing their clinical usefulness and commercial viability.

BiPhasix is compatible with most plastics and other container-closure systems.

Solvent-free and no animal product:

BiPhasix is formulated with biocompatible materials.

Neither organic solvents nor ingredients of animal origin are used in its manufacture.

Manufacturing feasibility:

Clinical supplies and commercial batches can be prepared using conventional manufacturing equipment and container closure systems.

Specialized equipment and extensive capital investment are not required.

Patented technology:

The BiPhasix patent pending technology provides market exclusivity for new NHP or prescription drug products containing Cannabinoids, CBD and THC.

Clinical experience:

As shown in the above tables, the BiPhasix delivery system has been tested in FDA and EMA approved trial settings delivering large molecule interferon alpha 2b to women to treat HPV induced cervical neoplasia.

Thrudermic Transdermal Nanotechnology (Topical Platform)

Pivot has acquired, in March 2018, the worldwide rights to Thrudermic’s patented Transdermal Nanotechnology for the development and commercialization of transdermal cannabinoids.

We have acquired the worldwide rights to Thrudermic’s patented Transdermal Nanotechnology for the development and commercialization of transdermal cannabinoids.

Developed in Israel, the Thrudermic lipid-based nano dispersion technology for topical cannabinoids uses FDA approved materials.

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Solmic Solubilization Drug Delivery Technology (Oral Platform)

Pivot has acquired the worldwide rights to Solmic’s Solubilisation Technology for the development and commercialization of cannabinoid-containing natural extracts.

Solmic’s technology allows active ingredients to become water soluble without changing their composition and nature.

Solubilized substances that are packed in micelles are protected from degradation from light, stomach acid, and from enzymes released in the intestinal tract.

The micellisation process results in a stable, homogenous and transparent mixture, which significantly increases uptake of fat soluble ingredients from the gut into the blood system of fat soluble ingredients, resulting in greater bioavailability.

We will enter into purchase agreements with Solmic GmbH (“Solmic”) for the purchase of Solmic’s oral 1% Micelle solution.

Subject to meeting annual minimum order quantities, we will receive worldwide exclusive rights to this product, made with patented Micelle technology.

Ready-To-Infuse Cannabis Technology

Pivot’s patented Ready-To-Infuse-Cannabis (“RTIC”) process technology, acquired in February 2018, creates precise and repeatable dosing of cannabis by transforming concentrated cannabis oil into a stable, emulsifiable, odorless and flavorless powder form.

Pivot’s patented Ready-To-Infuse-Cannabis (“RTIC”) process technology creates precise and repeatable dosing of cannabis by transforming concentrated cannabis oil into a stable, emulsifiable, odorless and flavorless powder form.

The derived powder may then be encapsulated and infused for use in beverages, edibles, lotions and additional health and personal care products.

The RTIC process is conducive for manufacturing of a wide array of products, including:

Capsules/Tablets:

One of our patents is issued for use in capsules and tablets.

Another of our patents has numerous claims for adding other active ingredients to tablets and capsules, such as Melatonin or Gingko Biloba, allowing for specific treatment for targeted effects.

Efficient mass production of capsules, conforming to GMP standards is part of our core competencies and manufacturing capabilities.

Production of capsules is scheduled for the third quarter of the calendar year 2018.

Beverage/Additive Stick Packs:

Single-serve stick packs are convenient and functional when used in hot beverages.

Stick packs are also highly functional.

Production of stick packs is scheduled for the third quarter of the calendar year 2018.

Pet Products:

Our patented cannabis powder will also be mass produced and packaged in bulk for both consumer pet health needs.

Production of pet powders is scheduled for the third quarter of calendar year 2018.

Lotions and Topical Creams:

Our patented lotion and topical technology will be mass produced and packaged for consumer health needs.

Production of lotions and topical creams is scheduled for the first quarter of calendar 2019.

Our Product Development Initiatives

Our product development initiatives will address unmet medical needs in health care.

MARKET SIZE (1)

Solmic Solubilisate / Oral

The RTIC process is conducive for manufacturing of a wide array of products.

Solumer Drug Delivery Technology (Oral Platform)

We have acquired the worldwide rights to Formulex’s Solumer Technology for the oral delivery of cannabinoids, such as CBD and THC, with improved bioavailability.

The Solumer Technology allows to convert the cannabinoids to powder for tablets and capsules and the powder can be dispersed in liquids to give a clear solution that is colorless, and flavorless for beverage applications.

Our Pharmaceutical Product Development

In addition to our bio-cannabis nutraceutical product pipeline, we have the opportunity develop a pharmaceutical pipeline in the future, financing permitting.

DELIVERY TECHNOLOGY

GLOBAL MARKET SIZE (1)

Solmic Solubilisate / Oral or RTIC/Solumer Tablet

Cancer supportive care (CINV) (chemo-induced nausea and vomiting)

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Restless leg syndrome

Solmic Solubilisate / Oral

Solmic Solubilisate / Oral or RTIC/Solumer Tablet

Pain and inflammation (for opioid withdrawal)

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Cancer supportive care (mucositis relief)

BiPhasix / Topical

BiPhasix/Thrudermic / Topical

Female sexual dysfunction (HSDD) (hypoactive sexual desire disorder)

BiPhasix / Topical

BiPhasix/Thrudermic / Topical

Pain and inflammation (joints/opioid withdrawal)

BiPhasix / Topical

BiPhasix/Thrudermic / Topical

Dermatology (skin irritation/redness/ itching)

BiPhasix / Topical

BiPhasix/Thrudermic / Topical

Eye disease (glaucoma, intra-ocular pressure)

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Pain and inflammation (opioid withdrawal)

Solmic Solubilisate / Oral

Solmic Solubilisate / Oral or RTIC/Solumer

Migraine (nausea, vomiting, dizziness, sensitivity to light, sounds and smells)

(1) Derived from IMS data

Clinical Trial Phases (for Pharmaceuticals Products Only)

The following section describes the most common phases of clinical drug trials with reference to the clinical trial requirements that we anticipate will be required for each of our pharmaceutical products in the future and funding permitting.

Pre-Clinical Trials

Pre-clinical trials involve in vitro (test tube) and in vivo (animal) experiments using wide ranging doses of the study drug to obtain preliminary efficacy, toxicity and pharmacokinetic information.

Such tests assist pharmaceutical companies in deciding whether a drug candidate possesses scientific merit for further development as an investigational new drug.

In addition, formulation and dosage regimen work studies will need to be conducted.

Phase 0 is a recent designation for exploratory, first in human trials conducted in accordance with the FDA’s 2006 Guidance on Exploratory Investigational New Drug.

These trials are generally used for novel anticancer drugs.

Distinctive features of Phase 0 trials include the administration of single subtherapeutic doses (doses not intended to treat diseases) of the study drug to a small number of subjects (10-15) to gather preliminary data on the agent’s pharmacokinetics and pharmacodynamics.

Phase I trials are the first stage of drug testing in human subjects.

Normally, a small group of healthy volunteers (20-50) will be selected.

This phase includes trials designed to assess the safety, tolerability and effects of the drug in relation to the human body, including how it is absorbed, distributed, metabolized and eliminated by the body.

These trials are often conducted in an inpatient clinic, where the subject can be observed by full-time staff.

The subject who receives the drug is usually observed until several half-lives of the drug have passed.

Phase I trials also normally include dose-ranging (or dose escalation) studies so that the appropriate dose for therapeutic use can be found.

The tested range of doses will usually be a fraction of any dose that causes harm in animal testing.

Phase I trials most often include healthy volunteers;

however, real patients are used in some circumstances, such as when patients have an end-stage disease and lack other treatment options.

This exception to the rule most often occurs in oncology (cancer) and HIV drug trials.

Volunteers are paid an inconvenience fee for the time they spend in the volunteer center.

Pay ranges from a small amount of money for a short period of residence to a larger amount of up to approximately $6,000 depending on the length of the volunteer’s participation in the trial.

Once the initial safety of a study drug has been confirmed in Phase I trials, Phase II trials are performed on larger groups (20-300) and are designed to assess how well the drug works, as well as to continue Phase I safety assessments using a larger group of volunteers and patients.

When the development process for a new drug fails, this usually occurs during Phase II trials when the drug is discovered not to work as planned or to have toxic effects.

Phase II studies are sometimes divided into Phase IIA and Phase IIB.

Phase IIA is specifically designed to assess dosing requirements (how much of the drug should be given), while Phase IIB is specifically designed to study efficacy (how well the drug works at the prescribed dose(s)).

Some trials combine Phase I and Phase II, and test both efficacy and toxicity.

All of our planned anticancer products will need to undergo Phase II clinical trials.

Completion of these trials is subject to our ability to obtain adequate financing.

We will not establish a firm start date until we raise sufficient financing, which there is no guarantee that we will be able to do.

The trial protocol for our Phase II trial has been developed with input from our clinical advisors.

Phase III studies are randomized controlled multi-center trials on large patient groups (300-3,000 or more, depending upon the disease or medical condition studied), and are intended to definitively assess the effectiveness of the drug as compared to the current “gold standard” treatment.

Because of their size and comparatively long duration, Phase III trials are the most expensive, time-consuming and difficult trials to design and run, especially in therapies for chronic medical conditions.

It is common practice that certain Phase III trials may continue while a regulatory submission is pending at the appropriate regulatory agency.

This allows patients to continue to receive possibly lifesaving drugs until the drug can be obtained commercially.

Other reasons for performing additional trials at this stage may include “label expansion” (to show the drug is suitable for additional types of patients/diseases beyond the original use for which the drug was approved for marketing), obtaining additional safety data, or to support marketing claims for the drug.

Studies in this phase are categorized by some companies as “Phase IIIB studies”.

While not required in all cases, it is typically expected that at least two successful Phase III trials will be necessary to demonstrate a drug’s safety and efficacy to obtain approval from appropriate regulatory agencies, such as the FDA in the United States, the Therapeutic Goods Administration in Australia or the European Medicines Agency in the European Union, for example.

Once a drug has proved satisfactory after Phase III trials, the trial results are usually combined into a large document containing a comprehensive description of the methods and results of human and animal studies, manufacturing procedures, formulation details and shelf life.

This collection of information makes up the regulatory submission that is provided for review to the appropriate regulatory authorities in different countries.

They review each submission, and, it is hoped, give sponsors approval to market the drug.

Most drugs undergoing Phase III clinical trials can be marketed under FDA norms with proper recommendations and guidelines, but the drugs must be recalled immediately from the market if any adverse effects are reported.

While most pharmaceutical companies refrain from this practice, it is not abnormal to see many drugs undergoing Phase III clinical trials in the market.

We anticipate that all of our current planned products will require us to undertake the conduct of Phase III clinical trials;

however, we lack sufficient information to estimate the costs or timeframe required to complete any Phase III clinical trials at this time.

Our ability to pursue Phase III trials will be subject to our ability to obtain adequate financing and successfully complete earlier trials phases for the products in question.

A Phase IV trial is also known as a post-marketing surveillance trial.

Phase IV trials involve safety surveillance (pharmacovigilance) and ongoing technical support of a drug after it receives permission to be sold.

Phase IV studies may be required by regulatory authorities or may be undertaken by a sponsoring company for competitive or other reasons (for example, the drug may not have been tested for interactions with other drugs, or on certain population groups such as pregnant women, who are unlikely to subject themselves to trials).

The safety surveillance is designed to detect any rare or long-term adverse effects over a much larger patient population and longer time period than was possible during the Phase I through III clinical trials.

Harmful effects discovered by Phase IV trials may result in a drug no longer being sold or being restricted to certain uses.

We are unable to accurately anticipate at this time whether our current planned products will require us to undertake Phase IV clinical trials.

Similarly, we are unable to accurately anticipate at this time what the costs or timeframe to complete those trials might be.

Our ability to pursue any Phase IV trials which may be required of us or which we may undertake voluntarily will be subject to our ability to adequately finance those trials and to successfully complete Phase III trials.

We have no plans to initiate any clinical trials of our pharmaceutical pipeline at this time.

Health Canada - Standard Processor and Sale for Medical Purposes Licensing

The Cannabis Act and its Regulations provide, among other things, the framework for legal access to cannabis and control and regulate its production, distribution and sale.

The oversight of the cannabis supply chain is a shared responsibility across federal and provincial and territorial governments, municipalities, industry and other stakeholders.

One of Health Canada’s responsibilities is to provide the licensing and oversight framework for legal production of cannabis.

Under this framework, a person is required to obtain a license issued by Health Canada in order to conduct various activities with cannabis.

Applicants and license holders are responsible for compliance with the Cannabis Act and its Regulations as well as compliance with other applicable federal, provincial and territorial legislation and municipal by-laws.

The Cannabis Act establishes that an application for a license must be submitted to Health Canada in the form and manner specified by the Minister of Health and must include the information required by the Minister.

We have applied for a Standard Processor and Sale for Medical Purposes license from Health Canada.

Initially, we applied for a Health Canada Dealer’s License in March 2018 but transitioned to a Standard Processor license upon the introduction of the Cannabis Act in October 2018.

We are currently awaiting Health Canada’s approval of the aforementioned license.

Manufacturing

We have limited experience in, and do not own facilities for, manufacturing any products or product candidates.

Although we intend to continue to rely on contract manufacturers to produce our products for both clinical and commercial supplies, we will oversee the production of those products and do not anticipate relying on any particular contract manufacturer exclusively.

If we obtain FDA approval in the United States or marketing application approval outside the United States for any of our product candidates, we plan to rely on contract manufacturers to produce sufficient quantities for large-scale commercialization.

We will manufacture our products at a 50,000 square foot facility located in Dollard-des-Ormeaux, Quebec.

Half of this facility is operated by our contract manufacturer, Bio V Pharma Inc.

On a fee-for-service basis, Bio V will manufacture products for our Canadian and international customers.

The other half of the building will be operated by us, which focus will be on the manufacturing of edibles, including but not limited to cannabis-infused beverages.

This facility at Dollard-des-Ormeax will fall under our pending Health Canada Standard Processor and Sale for Medical Purposes license.

In addition, we also recently executed a letter of intent with Pharmascience Inc.

(“Pharmascience”), a large generics manufacturer located in Quebec, Canada.

Upon completion of a definitive agreement, Pharmascience will provide contract development and manufacturing services to Pivot on a fee-for-service basis.

United States

We have leased a 6,000 square foot facility in Costa Mesa’s “Measure X” zone which will serve as our manufacturing hub for the California market.

The California Department of Public Health has issued our wholly-owned subsidiary, Pivot Naturals, a Temporary Manufacturing License for adult and medicinal use cannabis products (Type N:Infusion).

In addition, the Bureau of Cannabis Control (California) has issued Pivot Naturals a Temporary Adult-Use and Medicinal - Distributor-Transport Only License.

We plan on relying on contract manufacturers to produce sufficient quantities for large‑scale commercialization.

These contract manufacturers will be subject to extensive government regulations.

Regulatory authorities in the markets that we intend to serve require that drugs be manufactured, packaged and labeled in conformity with current Good Manufacturing Practices (“GMP”) as set by the FDA.

In this regard, we plan to engage only contract manufacturers who have the capability to manufacture drug products in compliance with current GMP in bulk quantities for commercialization.

Regulatory authorities in the markets that we intend to serve require that drugs be manufactured, packaged and labeled in conformity with current GMP as set by the FDA.

In this regard, we plan to engage only contract manufacturers who have the capability to manufacture products in compliance with current GMP in bulk quantities for commercialization.

We also intend to safeguard our intellectual property when working with contract manufacturers by working only with manufacturers who in our estimation have a strong track record of safeguarding confidential information and who are willing to enter into agreements with us that impose upon them strict intellectual property protection measures.

Sales, Marketing and Distribution

We currently have no sales or distribution capabilities and limited marketing capabilities.

In order to commercialize our products, we must develop sales, marketing and distribution capabilities or make arrangements with other parties to perform these services for us.

If any of our products receive marketing approval, they may compete against, and may be used in combination with, well-established products that are currently used for the treatment of their respective indications.

By the time we are able to commercialize a product candidate, the competition and potential competition may be greater and more direct.

Several companies are focusing on new compounds, most of which are in pre-clinical or early phases of development.

We expect to compete with others on, among other things, the safety and efficacy of our products.

Competing successfully will depend on our continued ability to attract and retain skilled and experienced personnel;

to identify, secure the rights to and develop pharmaceutical products and compounds;

and to exploit these products and compounds commercially before others are able to develop competing products.

In addition, our ability to compete may be affected because insurers and other third-party payors in some cases seek to encourage the use of generic products making branded products less attractive to buyers from a cost perspective.

Patents and Proprietary Rights

We continue to build and expand our global sales, marketing and distribution channels.

Upon receipt of our Standard Processor and Medical Sales license, we will seek supply agreements with individual Canadian provincial authorities to serve our Canadian customers.

In the European Union, we will supplement existing distribution relationships, such as our relationship with S.T.U.

GmbH, to increase our customer base.

In California, we will engage wholesale distributors to bring our products to customers.

In addition, we have executed an agreement with Shopify Inc.

to develop our e-commerce solution for the Canadian market.

As regulations evolve and more countries legalize the use of cannabis, we will continue to add to our sales and distribution channels.

The burgeoning cannabis industry has and will continue to attract many new entrants.

We believe that we will be able to differentiate ourselves in the cannabis market by developing products that are IP-protected, bioavailable and stable.

Most products currently on the market are of inferior quality and have poor bioavailability.

Once consumers become educated on different product attributes, we believe they will likely seek out products, such as ours, that offer science-based solutions.

Our success will depend in part on our ability to protect our products and product candidates by obtaining and maintaining a strong proprietary position both in the United States and in other countries.

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Our current and future operations and research and development activities are or will be subject to various laws and regulations in the countries in which we conduct or plan to conduct our business, including but not limited to the United States, Canada, United Kingdom and potentially certain member countries from the European Union.

These laws and regulations govern the research, development, sale and marketing of pharmaceuticals, taxes, labor standards, occupational health and safety, toxic substances, chemical products and materials, waste management and other matters relating to the pharmaceutical industry.

These laws and regulations govern the research, development, sale and marketing of cannabis products, taxes, labor standards, occupational health and safety, toxic substances, chemical products and materials, waste management and other matters relating to the pharmaceutical industry.

We may require permits, registrations or other authorizations to maintain our operations and to carry out our future research and development activities, and these permits, registrations or authorizations will be subject to revocation, modification and renewal.

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We are not aware of any material violations of permits, licenses or approvals issued with respect to our operations, and we believe that we will continue to comply with all applicable laws and regulations.

Pharmaceutical Regulatory Regimes

Regulation by governmental authorities in the United States and other countries is a significant factor in the development, manufacture and marketing of pharmaceuticals.

All our pharmaceutical product candidates will require regulatory approval by governmental agencies prior to commercialization.

Our drug candidates are subject to rigorous pre-clinical testing and subsequent clinical trials and other premarketing approval requirements of the FDA and regulatory authorities in other countries.

Various federal, state and foreign statutes and regulations govern or affect the manufacturing, safety, labeling, stability, record-keeping and marketing of pharmaceutical products.

The lengthy process of seeking required approvals and the continuing need for compliance with applicable statutes and regulations require the expenditure of substantial resources.

When we obtain regulatory approval for any of our product candidates, the approval may be limited in scope, which may significantly limit the indicated uses for which our product candidates may be marketed, promoted and advertised.

Further, approved pharmaceuticals and manufacturers are subject to ongoing review and previously unknown problems may be discovered that may result in restrictions on the manufacture, sale or use of approved pharmaceuticals or their withdrawal from the market.

Pre-Clinical Studies

Before testing any compounds with potential therapeutic value in human subjects in the United States, stringent governmental requirements for pre-clinical data must be satisfied.

Pre-clinical testing includes both in vitro and in vivo laboratory evaluation and characterization of the safety and efficacy of a drug and its formulation.

Pre-clinical testing results obtained from these studies, including tests in several animal species, are submitted to the FDA as part of an Investigational New Drug Application and are reviewed by the FDA prior to the commencement of human clinical trials.

These pre-clinical data must provide an adequate basis for evaluating both the safety and the scientific rationale for initial trials in human volunteers.

Clinical Trials

If a company wants to conduct clinical trials in the United States to test a new drug in humans, an Investigational New Drug (“IND”) Application must be prepared and submitted to the FDA.

The IND Application becomes effective, if not rejected or put on clinical hold by the FDA, within 30 days of filing the application.

In addition, an Institutional Review Board must review and approve the trial protocol and monitor the trial on an ongoing basis.

The FDA may, at any time during the 30 day review period or at any time thereafter, impose a clinical hold on proposed or ongoing clinical trials.

If the FDA imposes a clinical hold, clinical trials may commence or recommence without FDA authorization, and then only under terms authorized by the FDA.

The IND Application process can result in substantial delay and expense.

New Drug Application

After completion of clinical trials, if there is substantial evidence that the drug is both safe and effective, a New Drug Application is prepared and submitted to the FDA for review.

The New Drug Application must contain all of the essential information on the drug gathered to that date, including data from preclinical studies and clinical trials, and the content and format of a New Drug Application must conform with all FDA regulations and guidelines.

Accordingly, the preparation and submission of a New Drug Application is an expensive and major undertaking for a sponsor.

The FDA reviews all New Drug Applications submitted before it accepts them for filing and may request additional information from the sponsor rather than accepting a New Drug Application for filing.

In such an event, the New Drug Application must be submitted with the additional information and, again, is subject to review before filing.

Once the submission is accepted for filing, the FDA begins an in depth review of the New Drug Application.

By law, the FDA has 180 days in which to conduct the initial review the New Drug Application and respond to the applicant.

The review process is often significantly extended by the FDA through requests for additional information and clarification.

The FDA may refer the application to an appropriate advisory committee, typically a panel of clinicians, for review, evaluation and a recommendation as to whether the application should be approved and the scope of any approval.

The FDA is not bound by the recommendation, but gives great weight to it.

If the FDA evaluations of both the New Drug Application and the manufacturing facilities are favorable, the FDA may issue either an approval letter or an approvable letter, which usually contains a number of conditions that must be satisfied in order to secure final approval.

If the FDA’s evaluation of the New Drug Application submission or manufacturing facility is not favorable, the FDA may refuse to approve the New Drug Application or issue a not approvable letter.

Fast Track Designation and Priority Review

The FDA’s fast track program is intended to facilitate the development and expedite the review of drugs that are intended for the treatment of a serious or life-threatening condition for which there is no effective treatment and which demonstrate the potential to address unmet medical needs for their condition.

Under the fast track program, the sponsor of a new drug may request the FDA to designate the drug for a specific indication as a fast track product at any time during the clinical development of the product.

The FDA must determine if the product qualifies for fast track designation within 60 days of receipt of the sponsor’s request.

For a product candidate where fast track designation is obtained, the FDA may initiate review of sections of a New Drug Application before the application is complete.

This rolling review is available if the applicant provides a schedule for the submission of the remaining information and pays applicable user fees.

However, the time period specified in the Prescription Drug User Fees Act , which governs the time period goals the FDA has committed to reviewing a New Drug Application, does not begin until the complete application is submitted.

Additionally, the fast track designation may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process.

In some cases, the FDA may designate a product for priority review.

A product is eligible for priority review, or review within a targeted six-month time frame from the time of acceptance of filing a New Drug Application, if the product provides a significant improvement compared to marketed products in the treatment, diagnosis or prevention of a disease.

A fast track designated product generally meets the FDA’s criteria for priority review.

We cannot guarantee that any of our products will receive a priority review designation, or if a priority designation is received, that review or approval will be faster than conventional FDA procedures.

When appropriate, we intend to seek fast track designations for our products.

We cannot predict the ultimate impact, if any, of the fast track process on the timing or likelihood of FDA approval on any of our potential products.

Importantly, fast track designation does not result in the elimination or waiver of any pre-clinical or clinical trial requirements.

Orphan Drug Designation

The FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition that affects fewer than 200,000 individuals in the United States.

Orphan drug designation must be requested before submitting a New Drug Application.

If the FDA grants orphan drug designation, the generic identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA.

Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.

If a product that has orphan drug designation subsequently receives FDA approval for the indication for which it has such designation, the product is entitled to a longer market [orphan] exclusivity, which means the FDA may not approve any other applications to market the same drug for the same indication, except in very limited circumstances, for up to seven years after receiving FDA approval.

The Hatch-Waxman Act

Under the Drug Price Competition and Patent Term Restoration Act of 1984, known as the Hatch-Waxman Act , newly approved drugs may benefit from a statutory period of non-patent marketing exclusivity in the United States.

The Hatch-Waxman Act provides five years of marketing exclusivity to the first applicant to gain approval of a New Drug Application under Section 505(b) of the Food, Drug and Cosmetic Act for a new chemical entity.

A drug qualifies as a new chemical entity if the FDA has not previously approved any other drug containing the same active ingredient.

The Hatch-Waxman Act provides data exclusivity by prohibiting abbreviated New Drug Applications, and the submission of section 505(b)(2) applications, which are marketing applications where the applicant does not own or have a legal right of reference to all the data required for approval, by another company for another version of such drug during the exclusive period.

Protection under the Hatch-Waxman Act will not prevent the filing or approval of a full New Drug Application for the same active ingredient, although the applicant would be required to conduct its own adequate and well-controlled clinical trials to demonstrate safety and effectiveness.

Other Regulatory Requirements

Any products we manufacture or distribute under FDA approvals are subject to pervasive and continuing regulation by the FDA, including record-keeping requirements and reporting of adverse experiences with the products.

Drug manufacturers and their subcontractors are required to register with the FDA and, where appropriate, state agencies, and are subject to periodic unannounced inspections by the FDA and state agencies for compliance with current Good Manufacturing Practices, or cGMP, regulations which impose procedural and documentation requirements upon us and each third-party manufacturer we utilize.

The FDA closely regulates the marketing and promotion of drugs.

A company can make only those claims relating to safety and efficacy that are approved by the FDA.

Failure to comply with these requirements can result in adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties.

Physicians may prescribe legally available drugs for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA.

Such off-label uses are common across medical specialties.

Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances.

The FDA does not regulate the behavior of physicians in their choice of treatments.

The FDA does, however, restrict manufacturers from communicating on the subject of off-label use.

The FDA’s policies may change and additional government regulations may be enacted which could prevent or delay regulatory approval of our programs or our future product candidates, or such approval of new indications for our future products.

We cannot predict the likelihood, nature or extent of adverse governmental regulations that might arise from future legislative or administrative action, either in the United States or abroad in the European Union.

Clinical Trials

Similar to the United States, the various phases of pre-clinical and clinical research in the European Union are subject to significant regulatory controls.

The regulatory controls on clinical research in the European Union are now largely harmonized following the implementation of the Clinical Trials Directive 2001/20/EC, or CTD.

Compliance with the national implementations of the CTD has been mandatory since May 1, 2004.

However, variations in member state regimes continue to exist, particularly in the small number of member states that have yet to implement the CTD fully.

All member states currently require regulatory and independent ethics committee approval of interventional clinical trials.

European regulators and ethics committees also require the submission of adverse event reports during a study and a copy of the final study report.

Marketing Authorization

In the European Union, approval of new medicinal products can be obtained through the mutual recognition procedure or the centralized procedure.

The mutual recognition procedure entails initial assessment by the national authorities of a single member state and subsequent review by national authorities in other member states based on the initial assessment.

The centralized procedure requires the submission of a single Marketing Authorization Application (a “MAA”) to the EMA leading to an approval that is valid in all European Union member states.

It is required for certain medicinal products, such as biotechnology products and certain new chemical entities, and is optional, or available at the EMA’s discretion, for other new chemical entities or innovative medicinal products with novel characteristics.

Under the centralized procedure, a MAA is submitted to the EMA.

Two European Union member states are appointed to conduct an initial evaluation of each MAA.

These countries each prepare an assessment report, which are then used as the basis of a scientific opinion of the Committee for Medicinal Products for Human Use.

If this opinion is favorable, it is sent to the European Commission which drafts a decision.

After consulting with the member states, the European Commission adopts a decision and grants a marketing authorization, which is valid throughout the European Union and confers the same rights and obligations in each of the member states as a marketing authorization granted by that member state.

In the European Union, the promotion of prescription medicines is subject to intense regulation and control, including a prohibition on direct-to-consumer advertising.

Some jurisdictions require that all promotional materials for prescription medicines be subjected to either prior internal or regulatory review or approval.

Data Exclusivity

For an MAA filed after October 30, 2005, European Union regulators offer eight years of data exclusivity during which generic drug manufacturers cannot file abridged applications.

This is followed by two years of market exclusivity during which generic MAAs may be reviewed and approved but during which generic drug manufacturers cannot launch products.

The manner in which these new exclusivity provisions will be applied in practice remains far from clear and there can be no assurance that our programs or our other current or future product candidates will qualify for such exclusivity.

Other Regulatory Requirements

If a marketing authorization is granted for our products in the European Union, the holder of the marketing authorization will be subject to ongoing regulatory obligations.

A holder of a marketing authorization for our products is legally obliged to fulfill a number of obligations by virtue of its status as a Marketing Authorization Holder (a “MAH”).

While the associated legal responsibility and liability cannot be delegated, the MAH can delegate the performance of related tasks to third parties, provided that this delegation is appropriately documented.

A MAH can therefore either ensure that it has adequate resources, policies and procedures to fulfill its responsibilities, or can delegate the performance of some or all of its obligations to others, such as distributors or marketing partners.

The obligations of a MAH include:

Manufacturing and Batch Release:

MAHs should guarantee that all manufacturing operations comply with relevant laws and regulations, applicable good manufacturing practices, the product specifications and manufacturing conditions set out in the marketing authorization and that each batch of product is subject to appropriate release formalities.

Pharmacovigilance:

MAHs are obliged to monitor the safety of products post-approval and to submit to the regulators safety reports on an expedited and periodic basis.

There is an obligation to notify regulators of any other information that may affect the risk benefit ratio for the product.

Advertising and Promotion:

MAHs remain responsible for all advertising and promotion of their products in the relevant jurisdiction, including promotional activities by other companies or individuals on their behalf.

Some jurisdictions require that a MAH subject all promotional materials to either prior internal or regulatory review and approval.

Medical Affairs/Scientific Service:

MAHs are required to have a function responsible for disseminating scientific and medical information on their medicinal products, predominantly to healthcare professionals, but also to regulators and patients.

Legal Representation and Distributor Issues:

MAHs are responsible for regulatory actions or inactions of their distributors and agents, including the failure of distributors to provide a MAH with safety data within a timeframe that allows the MAH to fulfill its reporting obligations.

Preparation, Filing and Maintenance of the Application and Subsequent Marketing Authorization:

MAHs have general obligations to maintain appropriate records, to comply with the marketing authorization’s terms and conditions, to submit renewal applications and to pay all appropriate fees to the authorities.

There are also general reporting obligations, such as an obligation to inform regulators of any information that may lead to the modification of the marketing authorization dossier or product labeling, and of any action to suspend, revoke or withdraw an approval or to prohibit or suspend the marketing of a product.

We may hold marketing authorizations for our products in our own name, or appoint an affiliate or a collaboration partner to hold the marketing authorization on our behalf.

Any failure by a MAH to comply with these obligations may result in regulatory action against the MAH and its approvals and ultimately threaten our ability to commercialize our products.

Approvals Outside of the United States and the European Union

We will also be subject to a wide variety of foreign regulations governing the development, manufacture and marketing of our products.

Whether or not FDA approval or European marketing authorization has been obtained, approval of a product by the comparable regulatory authorities of other foreign countries must still be obtained prior to manufacturing or marketing the product in those countries.

The approval process varies from country to country and the time needed to secure approval may be longer or shorter than that required for FDA approval or a European marketing authorization.

We cannot assure you that clinical trials conducted in one country will be accepted by other countries or that approval in one country will result in approval in any other country.

Third-Party Reimbursement and Pricing Controls

In the United States and elsewhere, patients’ access to pharmaceutical products depends in significant part on the coverage and reimbursement of a product or service by third-party payors, such as government programs, private insurance plans and employers.

Third-party payors increasingly are challenging the prices charged for medical products and services.

It will be time consuming and expensive for us to go through the process of seeking reimbursement from Medicare, Medicaid and private payors.

We may be unable to achieve reimbursement from some payors because they may not consider our products to be “reasonable and necessary” or cost-effective.

Furthermore, it is possible that even if payors are willing to reimburse patients for our products, the reimbursement levels may not be sufficient to allow us to sell our products on a competitive and profitable basis.

In many foreign markets, including the countries in the European Union, the pricing of pharmaceutical products is subject to direct governmental control and to drug reimbursement programs with varying price control mechanisms.

In the European Union, governments influence the price of pharmaceutical products through their pricing and reimbursement rules and the control of national health care systems that fund a large part of the cost of such products to consumers.

The approach taken varies from member state to member state:

some jurisdictions operate positive and/or negative list systems under which products may only be marketed once a reimbursement price has been agreed, and other member states allow companies to fix their own prices for medicines, but monitor and control company profits.

The downward pressure on health care costs in general, particularly prescription drugs, has become very intense.

As a result, increasingly high barriers are being erected to the entry of new products, as exemplified by the National Institute for Clinical Excellence in the United Kingdom which evaluates the data supporting new medicines and passes reimbursement recommendations to the government.

In addition, in some countries cross-border imports from low-priced markets (parallel imports) exert a commercial pressure on pricing within a country.

In the United States, there have been, and we expect that there will continue to be, a number of federal and state proposals to implement means by which the government can negotiate lower drug prices for Medicare and Medicaid beneficiaries.

While we cannot predict whether such legislative bills will become law, their enactment could have a material adverse effect on our business, financial condition and results of operations.

In the following section, all references to “CMS” refer to the Center for Medicare and Medicaid Services.

We expect that in the United States, some or possibly a majority of the patients who are treated with our products will be Medicare beneficiaries.

The CMS is the agency within the Department of Health and Human Services that administers both Medicare and Medicaid.

Two aspects of Medicare reimbursement will be relevant to our products:

the availability of reimbursement for physician services for administration of our products and the availability of reimbursement for our products themselves.

The CMS has asserted the authority of Medicare not to cover particular products or services if it determines that they are not “reasonable and necessary” for Medicare beneficiaries.

The CMS may create a national coverage determination (a “NCD”) for a product, which establishes on a nationwide basis the indications that will be covered and the frequency limits for administration of the product.

However, for most new drugs that are eligible for payment, the CMS does not create a NCD.

We do not know whether we will seek or obtain a NCD for any of our current or potential products or whether any NCD we obtain will contain favorable coverage terms.

As mentioned above, if Medicare coverage for our products is available, the CMS may decide to provide reimbursement through one of two avenues:

Part B coverage for physician-administered drugs, or Part D coverage for outpatient prescription drugs.

Under Part B coverage, Medicare reimburses purchasers of drugs that meet three statutory requirements:

the product is reasonable and necessary;

the product is not usually self-administered and as such is incidental to a physician’s service in the office setting;

the administering physician bills Medicare directly for the product.

If there is not a national coverage decision, the local Medicare contractors that are responsible for administering the Part B program on a regional basis may have the discretion to decline coverage and reimbursement for a drug or to issue a local coverage decision (an “LCD”).

These policies can include both coverage criteria for the drug and frequency limits for the administration of the drug.

The local contractors in different areas of the country may determine that our products should be treated like most topical patches and may deny coverage under Part B or, even if they allow coverage, may establish varying coverage criteria and frequency limits for any product.

Furthermore, obtaining LCDs in the various regions can be a time-consuming and expensive process.

Medicare payment for physician services related to the administration of any of our products, if any, will most likely be determined according to a prospectively set payment rate, determined by a procedure code established by the American Medical Association.

These codes, called Current Procedural Terminology (“CPT”) codes, describe the procedure performed and can be specific or more general in nature.

We believe that although there are existing CPT codes that could be used, although a specific code for the administration of each of our products would be preferable.

If applicable, we plan to apply for a specific CPT code.

If, at launch, a specific CPT code is not available, local Medicare contractors will advise which existing CPT code should be used for services related to the administration of our products.

The CMS has been considering changes to Medicare reimbursement that could result in lower payments for physician-administered drugs, and Congress may also consider legislation that would mandate lower reimbursement levels.

A reduction in reimbursement levels could materially and adversely affect our revenue.

The CMS may determine that some of our products do not qualify for Part B coverage and should instead be covered under the Part D outpatient prescription drug benefit.

Because, unlike Part B, Part D coverage reimburses patients only for the drug itself and does not provide reimbursement for the physician’s administration services (though a physician can bill for service under Part B and it is possible that the CMS will provide such coverage for the administration of any of our products, even if the product in question is covered under Part D), physicians may not consider our products as attractive a treatment option if they are reimbursed under Part D instead of Part B.

In addition, under Part D, there are multiple types of plans and numerous plan sponsors, each with its own formulary and product access requirements.

While the CMS evaluates Part D plans’ proposed formularies for potentially discriminatory practices, the plans have considerable discretion in establishing formularies, establishing tiered co-pay structures and placing prior authorization and other restrictions on the use of specific products.

Moreover, Part D plan sponsors are permitted and encouraged to negotiate rebates with manufacturers.

Revenue for our products will be substantially affected by their respective formulary status on Part D plans and the rebates that Part D plan sponsors are able to negotiate.

Most State Medicaid programs have established preferred drug lists, and the process, criteria and timeframe for obtaining placement on the preferred drug list vary from state to state.

A federal law establishes minimum rebates that a manufacturer must pay for Medicaid utilization of a product, and many states have established supplemental rebate programs as a condition for including a drug product on a preferred drug list.

Submitting a preferred drug list application to each state will be a time-consuming and expensive process, and it is not clear how many or which state programs will accept the applications.

Review times for these applications can vary from weeks to 14 months or more.

Private Insurance Reimbursement:

Commercial insurers usually offer two types of benefits:

medical benefits and pharmacy benefits.

In most private insurance plans, physician-administered drugs are provided under the medical benefit.

If private insurers decide to cover any of our products, they will reimburse for the drug(s) and its administration in a variety of ways, depending on the insurance plan’s revenue targets, employer and benefit manager input and the contract negotiated with their physicians.

Like Medicare and Medicaid, commercial insurers have the authority to place coverage and utilization limits on physician-administered drugs.

Many private insurers tend to adopt reimbursement methodologies for a product similar to those adopted by Medicare.

Revenue for our products may be materially and adversely affected if private payors make unfavorable reimbursement decisions or delay making favorable reimbursement decisions.

We own 100% of the outstanding common stock of Pivot Green Stream Health Solutions Inc., Pivot Naturals, LLC and Thrudermic, LLC.

Employees and Consultants

As of May 1, 2018, we have employment contracts with our chief business officer, chief financial officer as well as our president, director and vice president of our wholly-owned subsidiaries.

As of May 2, 2019, we have employment contracts with our chief executive officer, chief financial officer.

We currently engage independent contractors in the areas of legal and auditing services.

We plan to engage independent contractors in the areas of preclinical toxicity studies and clinical trial execution and data management.

REPORTS TO SECURITY HOLDERS

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What changed 10-K

Item 1. Business