Item 1. Business
Item 1. Business
This annual report of Pivot Pharmaceuticals Inc. for the year ended January 31, 2019 contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. To the extent that such statements are not recitations of historical fact, such statements constitute forward looking statements which, by definition involve risks and uncertainties. In particular, statements under the Sections; Description of Business, Management’s Discussion and Analysis of Financial Condition and Results of Operations contain forward looking statements. Where in any forward looking statements, the Company expresses an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will result or be achieved or accomplished.
The following are factors that could cause actual results or events to differ materially from those anticipated, and include but are not limited to: general economic, financial and business conditions; changes in and compliance with governmental regulations; changes in tax laws; and the cost and effects of legal proceedings.
You should not rely on forward looking statements in this annual report. This annual report contains forward looking statements that involve risks and uncertainties. We use words such as “anticipates,” “believes,” “plans,” “expects,” “future,” “intends,” and similar expressions to identify these forward-looking statements. Prospective investors should not place undue reliance on these forward looking statements, which apply only as of the date of this annual report. Our actual results could differ materially from those anticipated in these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. 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 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 an early stage pharmaceutical company. We were incorporated in the Province of British Columbia, Canada under the name “649186 B.C. Ltd.”, on June 10, 2002. On September 9, 2003, we changed our name to “Xerxes Health Corp.” and on June 26, 2007, we changed our name to “Neurokine Pharmaceuticals Inc.”.
Effective June 4, 2014, we filed with the British Columbia Registrar of Companies a Form 11, Notice of Alteration, wherein we increased our authorized share capital from 500,000,000 common shares without par value to an unlimited number of common shares without par value. The increase of authorized capital was approved by our stockholders at the annual and special meeting held on June 3, 2014.
On September 26, 2014, our company held a special meeting of stockholders to approve the removal of our company’s Pre-Existing Company Provisions, the cancellation of our current Articles and the adoption of new Articles and to approve a reverse stock split on the basis of up to one new common stock for every 100 old common stock.
Effective October 8, 2014, we filed with the British Columbia Registrar of Companies a Form 11, Notice of Alteration, wherein we removed our Pre-Existing Company Provisions.
Effective April 7, 2015, we filed with the British Columbia Registrar of Companies a Form 11, Notice of Alteration, wherein we changed our name to “Pivot Pharmaceuticals Inc.”.
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Effective at the opening of trading on April 20, 2015, as approved by FINRA, our company effected a reverse stock split of our issued and outstanding common shares on the basis of 10 old common stock for 1 new common stock.
On November 20, 2015, we completed the acquisition of IndUS Pharmaceuticals, Inc. (“IndUS”), a Delaware corporation, pursuant to an Agreement and Plan of Merger and Acquisition Agreement dated as of November 4, 2015 among our company, Pivot Pharma U.S. Inc., our wholly owned subsidiary, IndUS and Sindu Research Laboratories Pvt Ltd. As consideration for the purchase, we issued 4,512,500 shares of common stock on November 23, 2015 and 237,500 shares of common stock on December 4, 2015 and granted 41,833 stock options pursuant to the Agreement and Plan of Merger. As part of the acquisition, we appointed Dr. Pravin Chaturvedi as our new Chief Executive Officer and Director. On September 11, 2017, we completed an exchange agreement whereby we exchanged with Dr. Chaturvedi 100% of its shares of common stock of IndUS and IndUS net liabilities for 3,800,000 shares of common stock of Pivot, upon which Dr. Chaturvedi resigned as Chief Executive Officer and Director.
On September 12, 2017, we entered into a licensing agreement with Altum Pharmaceuticals Inc. (“Altum”) whereby we were granted worldwide rights to BiPhasix Transdermal Drug Delivery Technology (“BiPhasix Technology”) for the delivery and commercialization of cannabinoids, cannabidiol (“CBD”), and tetrahydrocannabinol (“THC”) based products. Financial consideration included:
· Issuance of 2,500,000 shares of common stock on effective date of agreement
· Issuance of 2,500,000 shares of common stock of Pivot upon Health Canada Natural Product Number (“NPN”) approval;
· Royalties on annual gross sales; and
· 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 December 19, 2017, we commenced trading on the Canadian Securities Exchange under the symbol “PVOT”.
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. 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. Joseph Borovsky, Dr. Leonid Lurya and Thrudermic. 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; and
· 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.
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Our principal executive office is located at 1275 West 6th Avenue, Vancouver, B.C. Canada V6H 1A6. Our telephone number is (514) 943-1899.
Our Current Business
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:
1. Continue to build our industry leading portfolio of patented drug delivery technologies;
2. Commercialize our bio-cannabis product lines;
3. Secure global distribution channels for our product lines; and
4. 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 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)
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.
Thrudermic Transdermal Nanotechnology (Topical Platform)
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. The technology has the ability to specifically formulate individual drugs to control and prolong drug release while maintaining steady therapeutic concentrations, The technology can handle water soluble and water insoluble drugs with no change to the skin morphology, no sensitivity to the digestive system, no pain from injections and no observed adverse reactions.
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Solmic Solubilization Drug Delivery Technology (Oral Platform)
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 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.
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.
PRODUCT
DELIVERY TECHNOLOGY
INDICATION
GLOBAL MARKET SIZE (1)
PGS-N001
Solmic Solubilisate / Oral or RTIC/Solumer Tablet
Cancer supportive care (CINV) (chemo-induced nausea and vomiting)
>$1B
PGS-N002
Solmic Solubilisate / Oral
Restless leg syndrome
>$2B
PGS-N003
Solmic Solubilisate / Oral or RTIC/Solumer Tablet
Pain and inflammation (for opioid withdrawal)
>$15B
PGS-N004
Solmic Solubilisate / Oral
Cancer supportive care (mucositis relief)
>$12B
PGS-N005
BiPhasix/Thrudermic / Topical
Female sexual dysfunction (HSDD) (hypoactive sexual desire disorder)
>$6B
PGS-N006
BiPhasix/Thrudermic / Topical
Pain and inflammation (joints/opioid withdrawal)
>$20B
PGS-N007
BiPhasix/Thrudermic / Topical
Dermatology (skin irritation/redness/ itching)
>$13B
PGS-N008
BiPhasix/Thrudermic / Topical
Eye disease (glaucoma, intra-ocular pressure)
>$3B
PGS-N009
Thrudermic / Topical
Pain and inflammation (opioid withdrawal)
>$15B
PGS-N010
Solmic Solubilisate / Oral or RTIC/Solumer
Migraine (nausea, vomiting, dizziness, sensitivity to light, sounds and smells)
>$10B
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(1) Derived from IMS data
We have no plans to initiate any clinical trials of our pharmaceutical pipeline at this time.
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Licensing
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
Canada
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. (“Bio V”). 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 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 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.
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Competition
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. To develop and maintain our proprietary position, we will rely on patent protection, regulatory protection, trade secrets, know‑how, continuing technological innovations and licensing opportunities.
It is our policy to require our employees, consultants, contractors, or scientific and other advisors, to execute confidentiality agreements upon the commencement of employment or consulting relationships with us. These agreements provide that all confidential information developed or made known to the individual during the individual’s relationship with us is to be kept confidential and not disclosed to third parties except in specific circumstances. These agreements provide that all inventions related to our business that are conceived by the individual during our relationship shall be our exclusive property. There can be no assurance, however, that these agreements will provide meaningful protection or adequate remedies for our trade secrets in the event of unauthorized use or disclosure of such information.
Government Regulations
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 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.
Governmental authorities have the power to enforce compliance with lease conditions, regulatory requirements and the provisions of required permits, registrations or other authorizations, and violators may be subject to civil and criminal penalties including fines, injunctions, or both. The failure to obtain or maintain a required permit may also result in the imposition of civil and criminal penalties, and third parties may have the right to sue to enforce compliance.
We expect to be able to comply with all applicable laws and regulations and do not believe that such compliance will have a material adverse effect on our competitive position. We have obtained and intend to obtain all permits, licenses and approvals required by all applicable regulatory agencies to maintain our current operations and to carry out our future research and development activities. 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.
Subsidiaries
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 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.
REPORTS TO SECURITY HOLDERS
We are required to file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission and our filings are available to the public over the internet at the Securities and Exchange Commission’s website at http://www.sec.gov. The public may read and copy any materials filed by us with the Securities and Exchange Commission at the Securities and Exchange Commission’s Public Reference Room at 100 F Street N.E. Washington D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the Securities and Exchange Commission at 1-800-732-0330. The SEC also maintains an Internet site that contains reports, proxy and formation statements, and other information regarding issuers that file electronically with the SEC, at http://www.sec.gov.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.