News Column

CANNABIS THERAPY CORP. FILES (8-K) Disclosing Change in Shell Company Status, Financial Statements and Exhibits

August 13, 2014

ITEM 5.06. CHANGE IN SHELL COMPANY STATUS.

We are actively engaged in the business of developing, manufacturing, marketing and selling pharmaceutical level products containing phytocannabinoids for the treatment of various conditions and diseases and are no longer a shell company. Since March 2014 we have achieved the following milestones:

March 2014: engagement of a management team with extensive experience as

biotech and biomedical executives, entrepreneurs and researchers;

March 2014 - present: raising $815,000 in working capital through sales of our

common stock;

March 31, 2014: establishment of corporate headquarters and operations in

Boulder, Colorado;

May 1, 2014: execution of a Farm Lease and Service Agreement with Rocky

Mountain Hemp Inc. and Ryan Loflin under which we are growing industrial hemp in Colorado and actively developing hemp seed genetics;



May 16, 2014: obtaining an Industrial Hemp License from the Colorado Department

of Agriculture;

June 26, 2014: execution of a Services Agreement with Caerus Discovery, LLC, a

biotech company which will be providing us with contract research services intended to support product development and design of our proposed anti-inflammatory and autoimmune disease prevention and alleviation products while out laboratory is being established in Colorado; and



July 29, 2014: execution of a License Agreement with Canna-Pet, LLC a company

which develops, produces and sells medical cannabis products made from hemp and low tetrahydrocannabinol cannabis plants which are intended exclusively for consumption by pets, under which we received a perpetual, exclusive worldwide license to use Canna-Pet, LLC's intellectual property and produce and sell products based thereon. 5



--------------------------------------------------------------------------------

DESCRIPTION OF BUSINESS



Since early March 2014 we have been operating as a bio-pharmaceutical and neutraceutical company seeking to develop, manufacture, market and sell safe, high quality, medicinal products extracted from low tetrchydrocannabinoid ("THC") cannabis plants. THC is the primary psychoactive ingredient in cannabis that produces a "high" effect. Our initial focus will be (i) the exploitation of the exclusive license we received from Canna-Pet, LLC, a developer of ingestible health products for pets made from hemp, and (ii) developing over-the-counter, THC-free, cannabis based products for the prevention and alleviation of the symptoms associated with inflammatory and auto-immune diseases. Using US-grown hemp, a low THC cannabis plant, we intend to develop, market and sell products containing non-psychotropic phytocannabinoids.

History

As described above, we were incorporated in Nevada as Surf A Movie Solutions, Inc. on December 18, 2007 to engage in the business of the development sale and marketing of online video sales. We were not successful in our efforts and discontinued this line of business. Since that time and until August 8, 2014, we were a "shell company" (as such term is defined in Rule 12b-2 under the Exchange Act). On August 30, 2013 we changed our name to Frac Water Systems, Inc. and on October 10, 2013 we determined to engage in the business of providing economically and environmentally sound solutions for the treatment and recycling of wastewater resulting principally from oil and gas exploration and production activities. On December 31, 2013 we determined not to move forward with this line of business.

In early March 2014 we determined to enter into the business of developing, manufacturing and marketing pharmaceutical level products containing phytocannabinnoids, an abundant and pharmaceutically active component of cannabis, for the treatment of various conditions and diseases. In connection therewith, on March 17, 2014 we changed our name to Cannabis Therapy Corporation and on March 24, 2014 changed our trading symbol on OTC Markets to "CTCO".

We currently have authorized 350,000,000 shares of capital stock, consisting of (i) 325,000,000 shares of common stock, and (ii) 25,000,000 shares of "blank check" Preferred Stock.

On August 15, 2012 our board of directors and stockholders owning a majority of our outstanding common shares authorized a 50 for 1 forward stock split of our common stock. The forward split became effective on September 27, 2012. As a result of the forward split each outstanding share was split into 50 shares. On March 11, 2014 our board of directors authorized a 1.5 for 1 forward stock split of our common stock in the form of a dividend. In connection therewith, our shareholders of record as of the close of business on March 28, 2014 received an additional .5 share of our common stock for each share of our common stock held by them on such date. The forward stock split became effective on April 1, 2014. All share amount references in this Report give retroactive effect to the forward stock splits.

Our principal executive offices are located at 4410 Arapahoe Avenue, Suite 100, Boulder, CO 80303. Our telephone number is 303.415.2557. Our primary website address is www.cannabistherapy.com.

6



--------------------------------------------------------------------------------

Our Business

Since March 2014 we have been engaged in the business of developing and marketing low tetrahydrocannabinoid ("THC") or THC free cannabis based medicinal products intended for over-the-counter sale via distribution networks applicable to products classified as nutraceuticals. By using U.S. grown hemp, a low THC content cannabis plant, we expect to be able to develop and market products containing cannabinoids under the same rules that apply to hemp-based energy drinks and other hemp based products. Hemp-based products have been legal in the U.S. for several years when manufactured with imported, THC-free hemp paste. Recently, hemp cultivation was legalized in 11 states, including Colorado, and, on a limited basis, at the federal level as part of the Agricultural Act of 2014 (the "2014 US Farm Bill") passed in February 2014, which sets the agricultural product apart from marijuana. Industrial hemp has THC content below 0.3% compared to the 1-20% typically found in marijuana. The levels of non-THC medicinal cannabinoids are expected to vary between different hemp strains, and can be increased and optimized by plant breeding. One of our goals is to develop proprietary hemp strains containing improved medicinal properties and to establish third party product validation. Our initial focus is the leveraging of our Canna-Pet license under which we will produce and sell hemp based animal health products (see "Canna-Pet License Agreement") and the development of products for the prevention and alleviation of the symptoms associated with inflammatory and auto-immune diseases. We have particular interest in cannabis-derived phytocannabinoids which can exert their different effects through the CB1 and CB2 cannabinoid receptors in the human body (see figure below). These receptors are triggered both by endogenous human cannabinoids, the endocannabinoids, and plant-derived phytocannabinoids, such as those extracted from cannabis plants. The CB1 and CB2 receptors are part of the endocannabinoid system, which is important for homeostasis and human health. CB1 receptors are primarily found in the brain and throughout peripheral nerves and the autonomic nervous system. These receptors have been associated with the anticonvulsive effects of cannabis. CB2 receptors localize primarily to immune cells and the spleen, and are thought to account for the anti-inflammatory and other therapeutic effects of cannabis.

[[Image Removed]] 7



--------------------------------------------------------------------------------

We are planning to extract and develop non-psychotropic phytocannabinoids which have anti-inflammatory effects. We intend to use distinct extraction methods to enrich the phytocannabinoids and will then test them in different laboratory inflammation models. Scaleup manufacturing and production will be in compliance with the regulations for nutraceuticals.

[[Image Removed]]



Phytocannabinoids are a class of plant-derived cannabinoids that can be isolated from the cannabis plant. More than 85 different phytocannabinoids have been described and fall into 8 classes of compounds, of which tetrahydrocannabinol (THC), Cannabidiol (CBD) and Cannabinol (CBN) are the best characterized. Accumulating scientific evidence supports the therapeutic properties of CBD, which is reported to be effective in easing symptoms of a wide range of conditions, including rheumatoid arthritis, diabetes, alcoholism, post-traumatic stress disorder, epilepsy, antibiotic-resistant infections and neurological disorders and in particular pain mitigation. The figure above summarizes different pharmacodynamic effects attributed to different phytocannabinoids.

8



--------------------------------------------------------------------------------

[[Image Removed]]



In addition to the leveraging of our Canna-Pet license, our plan is to establish a vertically integrated operation in Colorado by the fourth quarter of 2014. The operation is expected to consist of three business units: (i) Plant Growth / Hemp Cultivation, (ii) Extraction and Testing, and (iii) Sales and Marketing. Each unit will have unique infrastructure, licensing and staffing requirements, and are expected to offer separate revenue streams while supporting our product development and sales.

Plant Growth / Hemp Cultivation

Hemp is an industrial plant related to marijuana. Fiber from the plant is used to make paper, clothing, rope and other products. Its oil is found in body-care products such as lotion, soap and cosmetics and in a variety of foods, including energy bars, waffles, milk-free cheese, veggie burgers and bread. Numerous uses exist, including hemp plant extracts that are used as a medicine, nutritional supplements and food sources. Beyond this, applications into textiles, building materials, bio-fuels, paper, bio-plastics, livestock feed/bedding as well as personal care products are readily available. Both hemp and marijuana are classified under the same biological category of Cannabis L Sativa. The basic difference between the two is that marijuana has significant amounts of tetrahydrocannabinoil (THC) (5-20%), a psychoactive ingredient; whereas hemp has virtually no THC (less than 0.3%). The 0.3% or less THC found in hemp is too low to provide the psychoactive effect or "high" that supports recreational usage.

9



--------------------------------------------------------------------------------

In May 2014 we entered into an exclusive land lease and crop service agreement with Rocky Mountain Hemp Inc., a southeastern Colorado based hemp grower, and are currently growing hemp for the purpose of extracting and testing non-THC cannabinoids for product formulations (see "Farm Lease and Service Agreement"). We are also exploring relationships with cannabis breeders with the goal of developing proprietary hemp strains with improved medicinal properties. Within the next 12 months, we intend to start an indoor plant-breeding and cultivation program to develop new and proprietary strains with superior features, such as a high extractable cannabinoid content and improved anti-inflammatory properties.

We expect to harvest our first outdoor hemp crop in the third calendar quarter of 2014 and, in parallel, expect to outsource indoor hemp cultivation to local growers. In a second phase, we plan to lease an indoor grow facility and equip this facility for state-of-the-art hemp cultivation. The mandatory Colorado Department of Agriculture hemp cultivation license was obtained on May 6, 2014, to enable our outdoor crop cultivation. The licensing process for indoor cultivation will be initiated once the facility plans are completed and is expected to be swift based on our experience with the Colorado Department of Agriculture application process, although no assurance can be given that this will prove to be the case. A full-time gardener with soil and hydroponic cultivation experience will be hired to oversee the day-to-day operations of the plant growth facility. The required capital investment to equip the grow facility will be significant, with lease, seed and salary costs representing the majority of the operating costs. No assurance can be given that we will have available capital as and when needed for this purpose. We estimate requiring $150,000 for the first year of indoor hemp cultivation.

We estimate that our plant growth facility will have potential to produce four crops annually, with a total annual yield of approximately 500 pounds of high cannabinoid content plant material. Excess hemp material (fibrous plant parts) may be sold for industrial use, potentially providing a secondary revenue stream.

Extraction and Testing

In June 2014 we entered into a Services Agreement with Caerus Discovery, LLC pursuant to which we have outsourced our present laboratory and research requirements (see "Research Services Agreement").

We intend to establish a fully operational in-house laboratory by the end of the first quarter of 2015. Our laboratory will serve multiple functions relating to CBD extraction, separation and characterization, as well as in-house quality control testing. It is expected that it will enable us to develop a proprietary, patentable, chemical extraction process platform that will drive new product development although no assurance can be given that this will prove to be the case. Quality control and validation systems are expected to be established in parallel, and as the laboratory expands, these capabilities may be offered to outside companies as a fee-for-service product, enabling a service-based revenue stream.

Our laboratory will operate under biopharma methods and standards, and will seek certification as soon as feasible. This will differentiate our laboratory, its services and cannabinoid products, from the majority of the cannabis industry, providing what we believe to be a significant competitive advantage. Our laboratory will also provide the necessary infrastructure to support collaborative work with scientists at the University of Colorado and elsewhere, . . .

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.

(d) Exhibits

In reviewing the agreements included or incorporated by reference as exhibits to this Report, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company or the other parties to the agreements. The agreements may contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the parties to the applicable agreement and:

should not in all instances be treated as categorical statements of fact, but

rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;



have been qualified by disclosures that were made to the other party in

connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;



may apply standards of materiality in a way that is different from what may be

viewed as material to you or other investors; and

were made only as of the date of the applicable agreement or such other date or

dates as may be specified in the agreement and are subject to more recent developments.



Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about the Company may be found elsewhere in this Report and the Company's other public filings, which are available without charge through the SEC's website at http://www.sec.gov.

47



--------------------------------------------------------------------------------

Exhibit

Number Description 2.1 Articles of Merger as filed with the Nevada Secretary of State on March



17, 2014 (incorporated by reference from Exhibit 2.1 to the Registrant's

Current Report on Form 8-K dated March 14, 2014 filed with the

Securities and Exchange Commission on March 20, 2014)

2.2 Agreement and Plan of Merger, dated March 14, 2014, by and between Frac

Water Systems, Inc. and Cannabis Therapy Corp. (incorporated by reference from Exhibit 2.2 to the Registrant's Current Report on Form 8-K dated March 14, 2014 filed with the Securities and Exchange Commission on March 20, 2014)



3.1 Articles of Incorporation of the Registrant (incorporated by reference

from Exhibit 3.1 to the Registrant's Form S-1, File Number 333-156480,

filed with the SEC on December 29, 2008)

3.2 Amendment to Articles of Incorporation of the Registrant (incorporated

by reference from Exhibit 3.1.2 to the Registrant's Annual Report on

Form 10-K filed with the SEC on December 26, 2012)

3.3 By-Laws of the Registrant (incorporated by reference from Exhibit 3.2 to

the Registrant's Form S-1, File Number 333-156480, filed with the SEC on

December 29, 2008)

4.1 Form of Registrant's 10% Senior Convertible Promissory Note

(incorporated by reference from Exhibit 4.1 to the Registrant's Annual

Report on Form 10-K filed with the SEC on October 17, 2013)

10.1 Joint Venture Agreement dated October 10, 2013 between Registrant and

Produced Water Solutions, Inc. (incorporated by reference from Exhibit

10.1 to the Registrant's Annual Report on Form 10-K filed with the SEC

on October 17, 2013)

10.2 Settlement Agreement and Mutual Release dated October 10, 2013 among

Registrant, Produced Water Solutions, Inc. and Montrose Capital Ltd.

(incorporated by reference from Exhibit 10.2 to the Registrant's Annual

Report on Form 10-K filed with the SEC on October 17, 2013)

10.3 Employment Agreement dated October 10, 2013 between Registrant and

Nadine C. Smith (incorporated by reference from Exhibit 10.3 to the

Registrant's Annual Report on Form 10-K filed with the SEC on October

17, 2013)

10.4 Consulting Agreement dated as of October 15, 2013 between Registrant and

Arnold Tinter (incorporated by reference from Exhibit 10.4 to the

Registrant's Annual Report on Form 10-K filed with the SEC on October

17, 2013)

10.5 Form of Engagement Agreement between Registrant and proposed members of

Registrant's Board of Directors (incorporated by reference from Exhibit

10.5 to the Registrant's Annual Report on Form 10-K filed with the SEC

on October 17, 2013)

10.6 Registrant's 2013 Equity Incentive Plan(incorporated by reference from

Exhibit 10.6 to the Registrant's Annual Report on Form 10-K filed with the SEC on October 17, 2013) 10.7 Share Cancellation Agreement dated October 10, 2013 between Registrant and Ufuk Turk(incorporated by reference from Exhibit 10.7 to the Registrant's Annual Report on Form 10-K filed with the SEC on October 17, 2013) 10.8 Share Cancellation Agreement dated October 10, 2013 between Registrant and Fadi Zeidan (incorporated by reference from Exhibit 10.8 to the Registrant's Annual Report on Form 10-K filed with the SEC on October 17, 2013) 10.9 Services Agreement dated as of May 15, 2014 between Registrant and Axiom Group (incorporated by reference from Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated May 15, 2014 filed with the Securities and Exchange Commission on May 22, 2014)



10.10 Registrant's 2014 Equity Incentive Plan (incorporated by reference from

Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated May

22, 2014 filed with the Securities and Exchange Commission on May 28,

2014)

10.11 License Agreement dated as of July 29, 2014 between Peak BioPharma Corp.

and Canna-Pet, LLC (incorporated by reference from Exhibit 10.1 to the

Registrant's Current Report on Form 8-K dated July 29, 2014 filed with

the Securities and Exchange Commission on August 4, 2014)

10.12 * Farm Lease and Service Agreement effective as of May 1, 2014 by and

between Rocky Mountain Hemp, Inc., Ryan Loflin and Peak BioPharma Corp.

10.13 * Services Agreement made as of June 26, 2014 by and between Caerus

Discovery, LLC and Registrant

10.14 * Industrial Hemp Registration License from the Colorado Department of

Agriculture issued on May 6, 2014

21.1 * Subsidiaries of the Registrant

* Filed herewith Management contract or compensatory plan or arrangement 48



--------------------------------------------------------------------------------


For more stories covering the world of technology, please see HispanicBusiness' Tech Channel



Source: Edgar Glimpses


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters