_______________

*Less than 1%. 

(1)Beneficial ownership is determined in accordance with Securities and Exchange Commission rules and generally includes voting or investment power with respect to shares of common stock. Shares of common stock subject to options and warrants currently exercisable, or exercisable within 60 days, are counted as outstanding for computing the percentage of the person holding such options or warrants but are not counted as outstanding for computing the percentage of any other person. 

(2)The amount and percentage of shares of our common stock that will be beneficially owned by the selling stockholders after completion of the offering assume that they will sell all shares of our common stock being offered pursuant to this prospectus. 

(3)Based on 69,854,141 shares of our common stock issued and outstanding as April 1, 2019. All shares of our common stock being offered pursuant to this prospectus by the selling stockholders are counted as outstanding for computing the percentage beneficial ownership of such selling stockholder. 

(4)James Arabia possesses sole voting and investment control over shares owned by TL-66, LLC and Cross & Company. 

(5)Conversion of the shares of common stock underlying the Convertible Promissory Note held by TL-66, LLC is limited to no more than 4.9% of the Company’s common stock on the date of conversion. 

Convertible Promissory Note

On February 16, 2018, the Company and TL-66, LLC entered into a convertible promissory note (the “TL-66 Note”) in the principal amount of $500,000. The TL-66 Note matures on February 16, 2030. Interest at a rate of 3% per annum shall be payable annually beginning on February 16, 20198 until maturity. There is no prepayment of the TL-66 Note without the consent of TL-66. The TL-66 Note is convertible, in whole or in part, at the election of TL-66 into shares of common stock of the Company at a conversion price of $0.10 per share, subject to adjustment in the event of stock splits, reclassifications or similar changes to the capital structure of the Company. The TL-66 Note contains a 4.9% beneficial ownership limitation which restricts TL-66’s ability to convert if such conversion would result in beneficial ownership by TL-66 and its affiliates of more than 4.9% of the outstanding common stock of the Company.

PLAN OF DISTRIBUTION

The selling stockholders will initially offer their shares for resale pursuant to this prospectus at $1.60 per share until such time as the Company’s shares of common stock are quoted on either the OTC Bulletin Board, OTCQX or OTCQB and, thereafter, from time to time in the open market, through privately negotiated transactions, or a combination of these methods at market prices prevailing at the time of sale or at negotiated prices.

Although our common stock is quoted on the OTC Pink Marketplace operated by the OTC Markets Group, Inc., or “OTC Pink,” prior to this offering there has been a very limited market for our securities. While our common stock is on the OTC Pink Marketplace, there has been no trading volume. Once this offering is effective, we plan to have our common stock qualified on the OTC Bulletin Board, OTCQX or OTCQB.

Once the Company’s shares are being quoted on either the OTC Bulletin Board, OTCQX or OTCQB, the selling stockholders and any of their respective pledgees, donees, assignees and other successors-in-interest may, from time to time, sell any or all of their shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at market prices prevailing at the time of sale or negotiated prices. The selling stockholders may use any one or more of the following methods when selling shares:

ordinary brokers transactions, which may include long or short sales, 

transactions involving cross or block trades on any securities or market where our common stock is trading,  

through direct sales to purchasers or sales effected through agents, 

through transactions in options, swaps or other derivatives (whether exchange listed of otherwise), or exchange listed or otherwise), or 

any combination of the foregoing.

In addition, once the Company’s common stock is beingquoted on either the OTC Bulletin Board, OTCQX or OTCQB, the selling stockholders may enter into hedging transactions with broker-dealers who may engage in short sales, if short sales were permitted, of shares in the course of hedging the positions they assume with the selling stockholders. The selling stockholders may also enter into option or other transactions with broker-dealers that require the delivery by such broker-dealers of the shares, which shares may be resold thereafter pursuant to this prospectus. The selling stockholders are not broker-dealers or affiliates of broker dealers.

We will advise the selling stockholders that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of shares in the market and to the activities of the selling security holders and their affiliates. In addition, we will make copies of this prospectus (as it may be supplemented or amended from time to time) available to the selling stockholders for the purpose of satisfying the prospectus delivery requirements of the Securities Act. The selling stockholders may indemnify any broker-dealer that participates in transactions involving the sale of the shares against certain liabilities, including liabilities arising under the Securities Act.

Brokers, dealers, or agents participating in the distribution of the shares may receive compensation in the form of discounts, concessions or commissions from the selling stockholders and/or the purchasers of shares for whom such broker-dealers may act as agent or to whom they may sell as principal, or both (which compensation as to a particular broker-dealer may be in excess of customary commissions). Neither the selling stockholders nor we can presently estimate the amount of such compensation. We know of no existing arrangements between the selling stockholder and any other stockholder, broker, dealer or agent relating to the sale or distribution of the shares. We will not receive any proceeds from the sale of the shares of the selling stockholders pursuant to this prospectus. We have agreed to bear the expenses of the registration of the shares.

DESCRIPTION OF SECURITIES

Capital Stock

Pursuant toour certificate of incorporation, as amended to date, our authorized capital stock consisting of (a) 200,000,000 shares of common stock, $0.0001 par value per share (“Common Stock”), and (b) 5,000,000 shares of preferred stock, $0.0001 par value per share (“Preferred Stock”), of which 75 shares have been designated as “Series A Preferred Stock” and 75 shares have been designated as “Series B Preferred Stock.” As ofMarch 1, 2019, there were 69,854,141 shares of common stock, 75 shares of Series A Preferred Stock, and 75 shares of Series B Preferred Stock are issued and outstanding. Our common stock is quoted on the OTC Pink Marketplace operated by the OTC Markets Group, Inc., or “OTC Pink” under the ticker symbol “KLFE,” but there is no established public trading market in our securities at this time nor has there been since our initial public offering went effective on July 15, 2016.

On November 9, 2018, the Company filed an amendment to its certificate of incorporation with the Delaware Secretary of State to change its name to Kannalife, Inc. The Company concurrently submitted a request to FINRA for approval of the name change as well as a ticker symbol change to “KLFE” and such action went effective on January 17, 2019.

Common Stock

Each share of common stock shall have one (1) vote per share for all purposes. Our common stock does not provide a preemptive, subscription or conversion rights and there are no redemption or sinking fund provisions or rights. Our common stock holders are not entitled to cumulative voting for election of Board of Directors.

Preferred Stock

Our certificate of incorporation, as amended to date, provides for "blank check" Preferred Stock whereby the Board may designate series of Preferred Stock, and issue shares of Preferred Stock pursuant to any such designation, without further shareholder approval and to set forth in any designation of Preferred Stock the rights, privileges, preferences and obligations of holders of the Preferred Stock being issued pursuant to its designation.

Series A Preferred Stock

Effective May 3, 2018, the Board authorized and designated 75 shares of the Company’s Preferred Stock as Series A Preferred Stock. Each share of the Series A Preferred Stock is entitled to a liquidation preference of $1,000 per share and is convertible into 1,000 shares of the Company’s Common Stock. The holders of a majority of the Series A Preferred Stock are entitled to elect up to four (4) Series A Directors to the Company’s Board at any annual or special meeting or without a meeting and without prior notice upon the written consent of the holders of a majority of the Series A Preferred Stock. The holders of the Series A Preferred Stock have exclusive rights in regard to the election or removal of Series A Directors. In all other voting matters, the holders of Series A Preferred Stock are entitled to cast 1,000 votes per share.

Series B Preferred Stock

Effective May 3, 2018, the Board authorized and designated 75 shares of the Company’s Preferred Stock as Series B Preferred Stock. Each share of the Series B Preferred Stock is entitled to a liquidation preference of $1,000 per share and is convertible into 1,000 shares of the Company’s Common Stock. The holders of a majority of the Series B Preferred Stock are entitled to elect up to three (3) Series B Directors to the Company’s Board at any annual or special meeting or without a meeting and without prior notice upon the written consent of the holders of a majority of the Series B Preferred Stock. The holders of the Series B Preferred Stock have exclusive rights in regard to the election or removal of Series B Directors. In all other voting matters, the holders of Series B Preferred Stock are entitled to cast 1,000 votes per share.

Anti-Takeover Effects of Delaware Law and Our Certificate of Incorporation and Bylaws

Some provisions of Delaware law, our certificate of incorporation and our amended and restated bylaws contain provisions that could make the following transactions more difficult: an acquisition of us by means of a tender offer; an acquisition of us by means of a proxy contest or otherwise; or the removal of our incumbent officers and directors. It is possible that these provisions could make it more difficult to accomplish or could deter transactions that stockholders may otherwise consider to be in their best interest or in our best interests, including transactions which provide for payment of a premium over the market price for our shares.

These provisions, summarized below, are intended to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of the increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging these proposals because negotiation of these proposals could result in an improvement of their terms.

Undesignated Preferred Stock

The ability of our board of directors, without action by the stockholders, to issue up to 4,999,850 shares of undesignated preferred stock with voting or other rights or preferences as designated by our board of directors could impede the success of any attempt to change control of us. These and other provisions may have the effect of deferring hostile takeovers or delaying changes in control or management of our company.

Removal of Directors

Our bylaws provide that (i) members of our board of directors appointed by holders of Series A Preferred Stock may only be removed, with or without cause, by the affirmative vote or consent of two-thirds (2/3) of the then outstanding Series A Preferred Stock, (ii) members of our board of directors appointed by holders of Series B Preferred Stock may only be removed, with or without cause, by the affirmative vote or consent of two-thirds (2/3) of the then outstanding Series B Preferred and (iii) regular directors may be removed at any time, with or without cause, by a vote of two-thirds (2/3) of the stockholders entitled to vote upon the matter.

Stockholders Not Entitled to Cumulative Voting

Our certificate of incorporation does not permit stockholders to cumulate their votes in the election of directors. Accordingly, other than any directors that holders of our preferred stock may be entitled to elect, holders of a majority of our capital stock can elect all of the directors standing for election, if they choose.

Delaware Anti-Takeover Statute

We are subject to Section 203 of the Delaware General Corporation Law, which prohibits persons deemed to be “interested stockholders” from engaging in a “business combination” with a publicly held Delaware corporation for three years following the date these persons become interested stockholders unless the business combination is, or the transaction in which the person became an interested stockholder was, approved in a prescribed manner or another prescribed exception applies. Generally, an “interested stockholder” is a person who, together with affiliates and associates, owns, or within three years prior to the determination of interested stockholder status did own, 15% or more of a corporation’s voting stock. Generally, a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. The existence of this provision may have an anti-takeover effect with respect to transactions not approved in advance by the board of directors.

Anti-Takeover Provisions of Certificate of Incorporation

Any proposed merger, consolidation or sale of substantially all of the assets of the Company (a “Business Transaction”) with any stockholder that owns more than 5% of any class of equity security of the Company may not be effected without the consent of holders of 75% of the voting securities of the Company, unless such Business Transaction has been approved by our board of directors.

Amendment of Charter Provisions

The amendment of any of the above provisions, except for the provision making it possible for our board of directors to issue preferred stock, would require approval by holders of at least a majority of the total voting power of all of our outstanding voting stock.

The provisions of Delaware law, our certificate of incorporation and our amended and restated bylaws could have the effect of discouraging others from attempting hostile takeovers and, as a consequence, they may also inhibit temporary fluctuations in the market price of our common stock that often result from actual or rumored hostile takeover attempts. These provisions may also have the effect of preventing changes in the composition of our board of directors and management. It is possible that these provisions could make it more difficult to accomplish transactions that stockholders may otherwise deem to be in their best interests.

EXPERTS

The financial statements of Kannalife Inc. as of and for the years ended December 31, 2018 and 2017 , appearing in this prospectus and the registration statement of which it is a part, have been audited by dbbmckennon, an independent registered public accounting firm, as set forth in their report dated April 9 , 201 9 appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

LEGAL MATTERS

Procopio, Cory, Hargreaves & Savitch, LLP has provided us with an opinion on the validity of the shares of our common stock being offered pursuant to this prospectus.

INTEREST OF NAMED EXPERTS AND COUNSEL

No expert named in the registration statement of which this prospectus forms a part as having prepared or certified any part thereof (or is named as having prepared or certified a report or valuation for use in connection with such registration statement) or counsel named in this prospectus as having given an opinion upon the validity of the securities being offered pursuant to this prospectus or upon other legal matters in connection with the registration or offering such securities was employed for such purpose on a contingency basis. Also at the time of such preparation, certification or opinion or at any time thereafter, through the date of effectiveness of such registration statement or that part of such registration statement to which such preparation, certification or opinion relates, no such person had, or is to receive, in connection with the offering, a substantial interest, direct or indirect, in our company or any of its parents or subsidiaries. Nor was any such person connected with our company or any of its parents or subsidiaries as a promoter, managing or principal underwriter, voting trustee, director, officer or employee.

BUSINESS

Our Business

We are a biopharmaceutical company focused on discovering, developing and commercializing novel therapeutics from our proprietary cannabinoid product platform in a broad range of disease areas. In our 8 years of operations, we have been principally involved in the research and development of synthetic cannabidiol (“CBD”) therapeutics through pre-clinical drug discovery and development processes. We have developed our own intellectual property portfolio and established relationships with third parties who are considered leaders in active pharmaceutical (“API”) contract manufacturing, formulation; and contract bulk drug manufacturing. All of the operations of the Company to date have been in the pre-clinical stage of drug discovery.

CBD is a naturally occurring cannabinoid constituent of cannabis. It was discovered in 1940 and is known to exhibit neuroprotective properties in many experimental systems. However, development of CBD as a drug has been confounded by the following: 1) low potency; 2) a large number of molecular targets; 3) marginal pharmacokinetic properties; and 4) designation as a schedule 1 controlled substance. Our present work has compared the properties of CBD with our patented novel cannabidiol derived molecule, KLS-13019, that has structural similarities to CBD. The design strategy for KLS-13019 was to increase hydrophilicity while optimizing neuroprotective potency against oxidative stress toxicity relevant to hepatic encephalopathy. In early pre-clinical studies, the responses of CBD and KLS-13019 were compared in dissociated rat hippocampal cultures in a pre-clinical model for overt hepatic encephalopathy (“OHE”) and also chemotherapy induced peripheral neuropathy (“CIPN”).

Comparisons between CBD and KLS-13019 have been published in peer reviewed articles in ACS Medicinal Chemistry Letters (2016, 7, 424-428) and Journal of Molecular Neuroscience (14 August 2018)

The Company has been the only licensee from the National Institutes of Health (“NIH”) for the licensed use of the U.S. Government’s patent 6,630,507 – “Cannabinoids as Antioxidants and Neuroprotectants” (the “’507 Patent”) in the disease indications of hepatic encephalopathy (“HE”) and Chronic Traumatic Encephalopathy (“CTE”). Having been the only licensee to the ‘507 Patent has given the Company an early start in the research and development of cannabinoid therapeutics within this emerging market. The Company is the only company that has had use of the ‘507 Patent and corresponding licenses from NIH-OTT.

The jurisdictions in which the ‘507 Patent is valid are: the U.S., the U.K., Ireland, the E.U., and Australia. The patent life in these jurisdictions are good until April 21, 2019.

The Company believes that these licenses with the NIH have given the Company, through the years, the preclinical lead time to evaluate both HE and CTE without stress of competition. The Company also believes that such advances in preclinical have led to a drug development program regarding cannabidiol based therapeutics that focuses on neurodegenerative and oxidative stress related diseases described in the ‘507 Patent, and also the development of the Company’s own intellectual property underlying U.S. Patents 9,611,213 and 10,004,722.

Furthermore, it is on the Company’s belief and knowledge that while the U.S. Government patent 6,630,507 is due to expire on April 21, 2019, there may be additional opportunities related to the original licensing of the ‘507 Patent in which the Company may engage with the NIH and certain collaborators of the aforementioned patent to enter into a Cooperative Research and Development Agreement (“CRADA”) with the NIH for one or more disease indications underlying the ‘507 Patent, including but not limited to HE and CTE. Moreover, the weight of the Company’s future success, drug development program regarding cannabidiol based therapeutics is not centered on the ‘507 Patent, but rather its own intellectual property underlying U.S. Patents 9,611,213 and 10,004,722.

HE, is an altered level of consciousness as a result of liver failure. Onset may be gradual or sudden. Other symptoms may include movement problems, changes in mood, or changes in personality. In the advanced stages it can result in a coma.

CTE, formerly known as dementia pugilistica, is a neurodegenerative disease found in people who have had multiple head injuries. Symptoms may include behavioral problems, mood problems, and problems with thinking.

The Company’s lead target drug candidate, KLS-13019, is part of an estate of new chemical entities (NCEs) underlying U.S. Patent 9,611,213 titled “Functionalized 1,3 Benzene-diols and their Method of Use for the Treatment of Hepatic Encephalopathy”. This patent is part of a divisional patent application by the Company to the USPTO whereby the Company sought separate claims for composition of matter, covered in Pat. 9,611,213 and separate claims for method for treatment; and U.S. Patent 10,004,722 titled “Method for Treating Hepatic Encephalopathy or a Disease Associated with Free Radical Mediate Stress and Oxidative Stress with Novel Functionalized 1,3 Benzene-diols.”

KLS-13019 and its related molecules under the aforementioned patents, describe novel functionalized 1,3-benzenediols (“Cannabidiol Derived Molecules”) and methods that may be useful and have potential for the treatment of hepatic encephalopathy and related conditions. The present invention further describes a novel chemotype that may be useful and have potential for the treatment of diseases associated with hepatic encephalopathy. The present invention further describes a novel chemotype that may be useful and have potential as neuroprotective agents. The Cannabidiol Derived Molecules under the present invention may be useful and have potential for treating and preventing diseases associated with free radical mediated stress and oxidative stress including, for example, as previously mentioned, hepatic encephalopathy, Parkinson’s disease, Alzheimer’s, Huntington’s disease, traumatic head injury, stroke, epilepsy, neuropathic pain, Chronic Traumatic Encephalopathy (CTE), Post Cardiac Arrest Hypoxic Ischemic Encephalopathy, and Epileptic Encephalopathy.

To date, we have synthesized, pre-clincally tested and patented our proprietary CBD derived new chemical entities (“NCEs”), including KLS-13019 and also formulated a new CBD based molecule, KLS-13023.

In pre-clinical studies performed pursuant to a Phase 1 small business technology transfers (“STTR”) agreement between us, and Temple University, funded by the NIH – National Institute on Drug Abuse (“NIDA”), our research determined that one of our patented CBD derived target drug candidates, KLS-13019 was superior to CBD in the potential treatment of chemotherapy induced peripheral neuropathy (“CIPN”).

Results from pharmacokinetic (“PK”) and pharmacodynamic (“PD”) studies performed in evaluating CBD versus KLS-13019 have shown KLS-13019 to be superior in aqueous solubility (potential for drug absorption after oral administration); Log P (ratio which measures difference in solubility in two phases); bioavailability (proportion of the drug that enters the circulation); and C max at 10 mg/kg, p.o. (peak serum concentration).

Results from our pre-clinical efforts in the potential treatment of OHE and the potential treatment of CIPN have shown a marked improvement over 99.7% pure pharmaceutical grade synthetic CBD in side by side pre-clinical comparison. In a pre-clinical comparison for neuroprotection between CBD and KLS-13019, results indicated increased potency for the new molecule (KLS-13019) as determined by six assays, while both molecules exhibited efficacy in preventing oxidative stress-related toxicities back to control values.

However, treatment with KLS-13019 alone was 5-fold less toxic than CBD. Previous studies suggested that CBD targeted the Na ⁺ Ca ²⁺ (sodium-calcium) exchanger in mitochondria to regulate intracellular calcium levels, an important determinant of neuronal survival. After treatment with an inhibitor, the mNCX inhibitor (“CGP-37157”), no detectable neuroprotection from ethanol toxicity was observed for either CBD or KLS-13019. Furthermore, AM630 (a CB2 antagonist) significantly attenuated CBD-mediated neuroprotection, while having no detectable effect on KLS-13019 neuroprotection. Our studies indicated KLS-13019 was more potent and less toxic than CBD. Both molecules can act through mNCX. KLS-13019 may provide an alternative to CBD as a therapeutic candidate to treat disease associated with oxidative stress.  

Again, here, comparisons between CBD and KLS-13019 have been published in peer reviewed articles in ACS Medicinal Chemistry Letters (2016, 7, 424-428) and Journal of Molecular Neuroscience (14 August 2018)

According to Fallon, et al. in the March/April 2006 edition of Clinical Medicine, pain is uncontrolled with opioid treatments in approximately 20% of patients with advanced cancer, or 420,000 people in the United States. There are currently no approved non-opioid treatments for patients who do not respond to, or experience negative side effects with, opioid medications. We believe that KLS-13019 has the potential to address a significant unmet need in this large market by treating patients with a product that employs a differentiated non-opioid mechanism of action, and offers the prospect of pain relief without increasing opioid-related adverse side effects.

We expect to open an Investigational New Drug Application, or IND to pursue a clinical development program with either the U.S. Food and Drug Administration (“FDA”) or the Therapeutic Goods Administration (“TGA”), the regulatory body for therapeutic goods (including medicines, medical devices, gene technology, and blood products) in Australia,

Additionally, the Company plans on screening and conducting preliminary research and development of some of its patented, proprietary cannabidiol-derived new chemical entities (“NCEs”), for use as topical solutions, ointments, and creams for disorders such as diabetic neuropathies, diabetic ulcers, and for use as an anti-pruritic. Anti-pruritics are known as anti-itch drugs and medications that inhibit the itching often associated with a variety of disorders and diseases.

To date there has been only one cannabidiol based medicament, EpidiolexÒ approved for use in humans by the U.S. Food and Drug Administration (“FDA”). The drug, EpidiolexÒ, is used to treat seizures due to certain medical conditions (such as Lennox-Gastaut syndrome, Dravet syndrome). It is not known how this medication works for these seizures. Cannabidiol belongs to a class of drugs known as cannabinoids. Additionally, the FDA’s Office of Orphan Products Development (“OOPD”) has designated cannabidiol eighteen (18) times since 2013 for a multitude of diseases ranging from rare forms of epilepsy to prevention of reperfusion injury due to organ transplantation to glioblastoma multiforme to autoimmune hepatitis. While the Company’s primary indications of OHE and CIPN have not, heretofore, been targeted by CBD-based or CBD-derived drugs and cleared by the FDA or other foreign regulatory agency, neither have the aforementioned eighteen orphan designated indications targeted by cannabidiol.

Corporate Strengths and Weaknesses

We believe that we offer the following key distinguishing characteristics:

 We believe we are the first commercial drug discovery company in the cannabinoid therapeutics space to successfully synthesize CBD derived new chemical entities and pre-clinically test lead NCEs for potential treatment of oxidative stress related diseases, including OHE and CIPN.  

 We are the only commercial drug discovery company in the cannabinoid therapeutics space to license the ‘507 Patent from NIH on two separate occasions.  

 We have completed pharmacokinetic and pharmacodynamic pre-clinical studies with high purity scale, pharmaceutical grade CBD and KLS-13019 for potential treatment of oxidative stress related disease – OHE and CIPN.  

 We anticipate commencing a Phase 1 trial in CIPN sometime in the 2 ^nd quarter of 2020.  

 We anticipate commencing a Phase 1 trial in OHE sometime in the 4 ^th quarter of 2020.  

 We anticipate commencing a Phase 1 trial in Mild Traumatic Brain Injury in the 2 ^nd quarter of 2021.  

 We have a firm understanding of the mechanism of action of CBD and KLS-13019 in certain oxidative stress related disorders.  

 We believe we have a strong next generation intellectual property estate on cannabidiol derived NCEs. On this basis, we believe we can expand the approved indications KLS-13019 and develop additional cannabinoid therapeutic agents to add to our IP portfolio.  

 We believe that our pre-clinical drug development program points to a significant opportunity in cancer pain, a large market.  

 We believe that our pre-clinical drug development program points to a significant opportunity in opioid replacement / reduction market.  

While the Company believes it is well positioned to be competitive in the cannabinoid therapeutics space, it also believes it will face significant challenges in successfully completing one or more clinical trials. In addition, there is a competitive landscape that exists in the market for the Company’s target indications of OHE and CIPN. The competitive landscape is challenging. Competition in OHE and CIPN is well established, with significantly greater resources than the Company and leaders in the current standard of care for these diseases.

The current standard of care for patients suffering with OHE is 550mg of XifaxanÒ, originally an antibiotic useful in treating traveler’s diarrhea and irritable bowel syndrome. It’s exact mechanism of action is not known, however it is theorized that XifaxanÒ clinical activity may be attributed to effects on metabolic function of gut microbiota, rather than a change in the relative bacterial abundance. Currently, there is no drug in the market for OHE that is being used to treat the toxic effects on the hippocampus, the cognitive and behavioral dysfunction associated with OHE, and the action of neuroprotection from ammonia and ethanol toxicity.  

Given the competitive landscape in OHE, the Company believes it can participate in the OHE market with primary and adjunctive therapeutics currently under pre-clinical development, and potentially obtain orphan drug designation for one or more of its target therapeutic agents.  

With respect to competitive landscape for CIPN, eight agents have been studied in randomized controlled trials for the treatment of CIPN, but there has been limited success. The characteristics and results of these studies are summarized in the study and abstract “Management of Chemotherapy Induced Peripheral Neuropathy” (Physician’s Education Resource LLC, Meghna S. Trivedi, MD; Dawn L. Hershman, MD, MS; Katherine D. Crew, MD, MS). Clinical trials of the antiepileptic agents gabapentin and lamotrigine and the antidepressants nortriptyline and amitriptyline have all been negative.

Additionally, there have been several small placebo-controlled trials which have shown that intravenous administration of glutathione with platinum-based chemotherapy regimens can decrease the incidence of neurotoxicity without diminishing the effect of chemotherapy. In a North Central Cancer Treatment Group / Alliance trial in 2014, this trial studied the use of glutathione with carboplatin and paclitaxel and found no improvement in neurotoxicity symptoms, suggesting that glutathione may not help in taxane-induced CIPN.

Furthermore, the continuous use of opiates in the current standard of care to treat CIPN have resulted in mixed results, addiction problems and dose tolerance problems.

The Company believes that, while the current standard of care is well positioned in the market, there is an unmet need for the treatment of CIPN in the reduction of use of opiates. This presents itself as an opportunity for the Company to participate with a novel therapeutic agent to treat CIPN.

Clinical Timelines

Corporate History

TYG Solutions Corp. was incorporated in the State of Delaware on March 25, 2013. Our original business plan was to develop iPhone and Android smartphone apps for companies who need an app for their internal and external operations. We subsequently expanded our operations to offering corporate website design services.

On July 25, 2018, the Company entered into a Share Exchange Agreement with Kannalife Sciences, Inc., a Delaware corporation (“Kannalife Sciences”) and certain stockholders of Kannalife Sciences (the “Kannalife Sciences Stockholders”). Pursuant to the terms of the Share Exchange Agreement, the Company acquired approximately nearly all of the issued and outstanding shares of Kannalife Sciences by means of a share exchange with the Kannalife Sciences Stockholders in exchange for newly issued shares of the common stock of the Company (the “Share Exchange”). As a result of the Share Exchange, Kannalife Sciences became a 99.7% owned subsidiary of the Company. The business operations of the Company regarding iPhone and Android smartphone apps shall be reduced significantly to focus efforts on target therapeutics and drug discovery, and accordingly, by virtue of the Share Exchange, the Company acquired the business of Kannalife Sciences including all of its assets. The Share Exchange was accounted for as a reverse acquisition and change in reporting entity, whereby Kannalife Sciences was the accounting acquirer.

Kannalife Sciences was incorporated in the State of Delaware on August 11, 2010. Kannalife Sciences is a developmental stage phyto-medical/pharmaceutical and drug discovery company that specializes in the research, development of cannabinoid and cannabinoid-based therapeutic products derived from synthetic and botanical sources, including the Cannabis “ taxa ” (the word “taxa” is the plural of “taxon” which defines a group of one or more populations of an organism or organisms to form a unit.)On November 9, 2018, the Company filed an amendment to its certificate of incorporation with the Delaware Secretary of State to change its name to Kannalife, Inc. The Company concurrently submitted a request to FINRA for approval of the name change as well as a ticker symbol change to “KLFE” and such action went effective on January 17, 2019.  

Controlled Substances Laws and Regulations

Our drug candidates contain controlled substances as defined in the Controlled Substances Act (CSA). Controlled substances that are pharmaceutical products are subject to a high degree of regulation under the CSA, which establishes, among other things, certain registration, manufacturing quotas, security, recordkeeping, reporting, import, export and other requirements administered by the DEA.

Despite recent approvals by the FDA and DEA for a newly approved medication which contains cannabidiol (CBD), the scheduling of these substances, many of which are beyond our control, could jeopardize our ability to obtain regulatory approval for and successfully market KLS-13019 or KLS-13023. Moreover, because our business is almost entirely dependent upon these two product candidates, any such setback in our pursuit of regulatory approval would have a material adverse effect on our business and prospects. See our full description of the impact controlled substances laws and regulations have on our business in the “Risk Factors” section of this prospectus.

KLS-13019 does not contain cannabidiol and is a new chemical entity that would not fall under the Controlled Substances Act (“CSA”) or be deemed a Schedule 1 controlled substance.

KLS-13023 is a formulation that does contain cannabidiol. At present, cannabidiol is deemed a Schedule 1 controlled substance by the U.S. Drug Enforcement Agency under the Controlled Substances Act. And like the drug molecule EpidiolexÒ, which was recently approved by the FDA for marketing and sale for use in treating Dravet’s Syndrome and Lennox-Gasteau Syndrome (forms of child epilepsy), KLS-13023 would need to follow the guidance set forth by the CSA, complete a successful human clinical trial and apply for rescheduling, as was the case with EpidiolexÒ, now a Schedule 5 drug.

On January 14, 2019, the Company received written notice from the Drug Enforcement Administration (“DEA”) Drug and Chemical Evaluation Section, as follows: “Please be advised that your material meets the definition of ‘Hemp’ and is not regulated under the CSA, as long as it consists of high purity Cannabidiol (CBD) that contains approximately 0.1% delta-9- THC. (However, if it contains more than 0.3% delta-9 THC, it is considered ‘Marihuana’ and would be in Schedule 1 of the CSA).” While this notice is an official notice from the DEA regarding the scheduling of high purity CBD, the Company will continue to abide by the CSA in all respects with regards to its treatment and handling of CBD.

Corporate Operations

The Company is primarily involved in the research and development of novel therapeutic agents for use in and as U.S. Food and Drug Administration (“FDA”) approved ethical pharmaceuticals (available by doctor prescription); FDA Monograph topical solutions; and Personal Care Products Council / International Nomenclature of Cosmetic Ingredients (“INCI”) registered. The primary focus of the Company’s research and development revolves around its patented, proprietary cannabidiol-derived new chemical entities and cannabidiol.

The Company has been the only licensee from the National Institutes of Health (“NIH”) for the licensed use of the U.S. Government’s patent 6,630,507 – “Cannabinoids as Antioxidants and Neuroprotectants” (the “’507 Patent”) in the disease indications of hepatic encephalopathy (“HE”) and Chronic Traumatic Encephalopathy (“CTE”). Having been the only licensee to the ‘507 Patent has given the Company an early start in the research and development of cannabinoid therapeutics within this emerging market. The Company is the only company that has had use of the ‘507 Patent and corresponding licenses from NIH-OTT.

The jurisdictions in which the ‘507 Patent is valid are: the U.S., the U.K., Ireland, the E.U., and Australia. The patent life in these jurisdictions are good until April 21, 2019.

The Company believes that these licenses with the NIH have given the Company, through the years, the preclinical lead time to evaluate both HE and CTE without stress of competition. The Company also believes that such advances in preclinical have led to a drug development program regarding cannabidiol based therapeutics that focuses on neurodegenerative and oxidative stress related diseases described in the ‘507 Patent, and also the development of the Company’s own intellectual property underlying U.S. Patents 9,611,213 and 10,004,722.

Furthermore, it is on the Company’s belief and knowledge that while the U.S. Government patent 6,630,507 is due to expire in 2019, there may be additional opportunities related to the original licensing of the ‘507 Patent in which the Company may engage with the NIH and certain collaborators of the aforementioned patent to enter into a Cooperative Research and Development Agreement (“CRADA”) with the NIH for one or more disease indications underlying the ‘507 Patent, including but not limited to HE and CTE. Moreover, the weight of the Company’s future success, drug development program regarding cannabidiol based therapeutics is not centered on the ‘507 Patent, but rather its own intellectual property underlying U.S. Patents 9,611,213 and 10,004,722.

The Company’s lead target drug candidate, KLS-13019, is part of an estate of new chemical entities (NCEs) underlying U.S. Patent 9,611,213 titled “Functionalized 1,3 Benzene-diols and their Method of Use for the Treatment of Hepatic Encephalopathy”. This patent is part of a divisional patent application by the Company to the USPTO whereby the Company sought separate claims for composition of matter, covered in Pat. 9,611,213 and separate claims for method for treatment; and U.S. Patent 10,004,722 titled “Method for Treating Hepatic Encephalopathy or a Disease Associated with Free Radical Mediate Stress and Oxidative Stress with Novel Functionalized 1,3 Benzene-diols.”  

KLS-13019 and its related molecules under the aforementioned patents, describe novel functionalized 1,3-benzenediols (“Cannabidiol Derived Molecules”) and methods that may be useful and have potential for the treatment of hepatic encephalopathy and related conditions. The present invention further describes a novel chemotype that may be useful and have potential for the treatment of diseases associated with hepatic encephalopathy. The present invention further describes a novel chemotype that may be useful and have potential as neuroprotective agents. The Cannabidiol Derived Molecules under the present invention may be useful and have potential for treating and preventing diseases associated with free radical mediated stress and oxidative stress including, for example, as previously mentioned, hepatic encephalopathy, Parkinson’s disease, Alzheimer’s, Huntington’s disease, traumatic head injury, stroke, epilepsy, neuropathic pain, traumatic head injury, stroke, Chronic Traumatic Encephalopathy (CTE), Post Cardiac Arrest Hypoxic Ischemic Encephalopathy, and Epileptic Encephalopathy.

Management believes the claims made in the Pat. 9,611,213 and Pat. 10,004,722 sufficiently cover the use of the novel molecule KLS-13019 in the treatment of neuropathic pain, which is broadly defined and includes chemotherapy induced neuropathic pain (a/k/a: chemotherapy induced peripheral neuropathy).

The Company’s core businesses are comprised of the following:

A drug development company focused on the research and development (R&D) of synthetic and phyto-medical products from: 

onaturally recurring sources, including but not limited to cannabis, hemp, and other similar species of plantae; 

osemi-synthetic sources; and 

osynthetic and bio-synthetic sources. 

Drug discovery platform to evaluate and potentially treat neurological and oxidative stress related disorders such as Overt Hepatic Encephalopathy (“OHE”), Chronic Traumatic Encephalopathy (“CTE”) and Chemotherapy Induced Peripheral Neuropathy (“CIPN”) with high quality assured, quality controlled cGMP pharmaceutical grade semi-synthetic and synthetic cannabinoids, cannabidiol (“CBD”), and cannabidiol-like molecules. 

Topical skin care pre-clinical program designed to some of its patented, proprietary cannabidiol-derived new chemical entities (“NCEs”), for use as topical solutions, ointments, and creams for disorders such as diabetic neuropathies, diabetic ulcers, and for use as an anti-pruritic. Anti-pruritics are known as anti-itch drugs and medications that inhibit the itching often associated with a variety of disorders and diseases. 

With respect to certain other proprietary molecules underlying Pat. 9,611,213, the Company plans on pursuing topical solutions as potential relief creams and/or ointments for neuropathic pain, anti-inflammation, anti-pruritic and skin ulcers. The Company is considering commercialization routes that include, but are not limited to, filing and FDA Monograph and/or pursing a path to the marketplace through INCI certification and registration with the PCPC. In preclinical testing, certain molecules under Pat. 9,611,213 were screened for neuroprotection and may have the potential mechanism of action for reducing inflammation and neuropathic pain. These molecules indicate that they are more soluble than cannabidiol, also deemed a neuroprotectant with potential anti-inflammatory properties. A molecule that is potentially more water soluble than cannabidiol in this regard may be good candidate(s) for use in topical applications. 

The Company believes it has the sufficient capital to proceed forth with a Phase 1 human safety trial for the treatment of Chemotherapy Induced Peripheral Neuropathy. All preclinical work in this indication, including animal toxicity studies, are expected to be completed before the end of the third quarter 2019. The Company plans on entering into clinical trials sometime in the first quarter 2020. Additionally, the Company believes it has the sufficient capital to proceed forth with a Phase 1 human safety trial for the treatment of Overt Hepatic Encephalopathy. All preclinical work in this indication, including animal toxicity studies, are expected to be completed before the end of the fourth quarter 2019. 

The Company intends on seeking additional capital to proceed forth with its business plan regarding additional drug pipeline opportunities.

The Company’s current relationships with Noramco, a supplier of bulk active pharmaceutical ingredients (APIs), specifically pharmaceutical grade cannabidiol, and Catalent Pharma Solutions, a manufacturer of formulated and packaged pharmaceuticals, will enable the Company to meet its objectives in the production of target drug candidates that can be used in clinical trials and, beyond successful clinical trials, meet patient demand in commercial sales for each of the Company’s target disease indications.

The Company has estimated that the cost of a Phase 1 trial, limited to 100 patients in CINP and 76 patients in the OHE indication will cost approximately $1,800,000 and $1,600,000, respectively. As part of the Company’s plans to initiate Phase 1 clinical trials in Australia, the Australian government has provided incentives that provide for research and development rebates.

Research & Development tax incentives offered by the government actively encourage overseas sponsors to conduct research in Australia. These incentives have also made it attractive for global companies to access Australian research facilities, as holding the intellectual property within Australia is not mandatory. Sponsors wishing to be eligible for this benefit can either establish an affiliate company in Australia (which may take from 1 week to 1 month) or choose a Contract Research Organization (CRO) to act on their behalf. Non-Australian Sponsors should consider these options and how they can impact on eligibility for the 43.5% R&D tax incentive provided by the Australian government before proceeding.

Therapeutic Goods Administration (TGA) – Australia

Clinical trials conducted in Australia are subject to various regulatory controls to ensure the safety of participants. The TGA regulates the use of therapeutic goods supplied in clinical trials in Australia under the therapeutic goods legislation. 

Clinical trial sponsors must be aware of the requirements to import, export, manufacture and supply therapeutic goods in Australia. The following avenues provide for the importation into and/or supply in Australia of 'unapproved' therapeutic goods for use in a clinical trial: 

Clinical Trial Notification (CTN) scheme; and 

Clinical Trial Exemption (CTX) scheme. 

The CTN Scheme is a notification process involving the following:

The Australian clinical trial sponsor must notify us of the intent to sponsor a clinical trial involving an 'unapproved' therapeutic good. This must take place before starting to use the goods. The notification form must be submitted online and accompanied by the relevant fee. 

The TGA may give the sponsor of the trial written notice to provide specified information relating to goods notified in the CTN form. 

The TGA does not evaluate any data relating to the clinical trial at the time of submission. The Human Research Ethics Committee (HREC) reviews the scientific validity of the trial design, the balance of risk versus harm of the therapeutic good, the ethical acceptability of the trial process, and approves the trial protocol. The HREC is also responsible for monitoring the conduct of the trial. 

The institution or organization at which the trial will be conducted, referred to as the 'Approving Authority', gives the final approval for the conduct of the trial at the site, having due regard to advice from the HREC. 

It is the responsibility of the sponsor to ensure that all relevant approvals are in place before supplying the 'unapproved' therapeutic goods in the clinical trial. 

The CTX Scheme is anapproval process involving the following:

A sponsor submits an application to us seeking approval to supply 'unapproved' therapeutic goods in a clinical trial. The application must be accompanied by the relevant fee. 

The TGA evaluates summary information about the product including relevant, but limited, scientific data (which may be preclinical and early clinical data) prior to the start of a trial. 

The HREC is responsible for considering the scientific and ethical issues of the proposed trial protocol. 

The sponsor must notify us of each trial conducted using the unapproved therapeutic good(s) approved in the CTX application. 

Clinical trials that do not involve 'unapproved' therapeutic goods are not subject to requirements of the CTN or CTX schemes. It is the responsibility of the Australian clinical trial sponsor to determine whether a product is considered an 'unapproved' therapeutic good. 

Clinical trials that do not involve 'unapproved' therapeutic goods are not subject to requirements of the CTN or CTX schemes. It is the responsibility of the Australian clinical trial sponsor to determine whether a product is considered an 'unapproved' therapeutic good. 

On September 27, 2013, the TGA approved Nabiximols (Sativex®), a pharmaceutical manufactured by GW Pharmaceuticals for its collaborator Novartis Pharmaceuticals Australia Pty Limited in the treatment for symptom improvement in patients with moderate to severe spasticity due to multiple sclerosis (MS) who have not responded adequately to other anti-spasticity medication and who demonstrated clinically significant improvement in spasticity related symptoms during the initial trial of therapy. 

In Australia, in 2014, the Advisory Council on Medicines Scheduling recommended rescheduling cannabidiol from a prohibited substance to being a prescription medicine because, according to the Advisory Council on Medicines Scheduling, “there is a low risk of misuse or abuse as cannabidiol does not possess psychoactive properties”. The TGA accepted this recommendation and the decision took effect in July 2015. 

Cannabidiol (CBD) is one of the cannabinoids which may be extracted as a therapeutic good from cannabis. From 1 June 2015, cannabidiol has been included under Schedule 4 (S4) Prescription Only Medicine of the Poisons Standard when preparations for therapeutic use contain 2% or less of other cannabinoids found in cannabis. 

In February 2016, the Australian Federal Government passed legislation that amended the Narcotic Drugs Act, allowing the supply of suitable medicinal cannabis products for the management of painful and chronic conditions. This legislation does not relate to the decriminalization of cannabis for general cultivation or recreational use and it does not include the provision of medicinal grade herbal cannabis, only processed, non-smokable medicinal grade products^.

Much of the detail remains unclear. For example, the legislation does not specify which products will be covered under the amendment, and it does not specify which particular conditions or symptoms will be eligible for treatment with cannabis-based products. Before products can be prescribed, they must be registered with the Therapeutic Goods Administration (TGA) or, in rare circumstances, receive special approval from the TGA. The registration process requires evidence of testing and efficacy and it is therefore unlikely Australia will see a TGA registered medicinal cannabis product that GPs can prescribe any time soon. 

Whilst there are currently no cannabis-based products that are lawfully produced in Australia, the medicinal use of pharmaceutical products containing cannabinoids is not prohibited, as long as authorization for prescribing is granted from the Commonwealth Therapeutic Goods Administration and at this point in time, NSW Health. 

Kannalife Intellectual Properties

Kannalife PCT Patent – PCT/US2015/010827

On January 13, 2014, the Company filed for a provisional patent with the USPTO for its “Novel Functionalized 1, 3-Benzene-diols and Their Treatment of Hepatic Encephalopathy”, under application 61/926,869.

On January 9, 2015, the Company filed a non-provision patent application Patent Cooperation Treaty (“PCT”) Application under application number PCT/US2015/010827 titled, “Novel Functionalized 1,3-Benzene Diols and Their Method of Use for the Treatment of Hepatic Encephalopathy” (the “PCT Patent”). Under the PCT Patent, the present invention describes novel functionalized 1,3-benzenediols (“Cannabidiol Derived Molecules”) and methods that may be useful and have potential for the treatment of hepatic encephalopathy and related conditions. The present invention further describes a novel chemotype that may be useful and have potential for the treatment of diseases associated with hepatic encephalopathy. The present invention further describes a novel chemotype that may be useful and have potential as neuroprotective agents.

The Cannabidiol Derived Molecules under the present invention that may be useful and have potential for treating and preventing diseases associated with free radical mediated stress and oxidative stress including, for example, as previously mentioned, hepatic encephalopathy, Parkinson’s disease, Alzheimer’s, Huntington’s disease, traumatic head injury, stroke, epilepsy, neuropathic pain, traumatic head injury, stroke, Chronic Traumatic Encephalopathy (CTE), Post Cardiac Arrest Hypoxic Ischemic Encephalopathy, and Epileptic Encephalopathy.

Regarding one of the Company’s target indications, overt hepatic encephalopathy (“OHE”), it is a sub-set of the disease hepatic encephalopathy (HE), a neuropsychiatric disorder that includes learning deficits and impairment of long-term memory. If left unchecked, HE can progress to hepatic coma (also referred to as coma hepaticum) and ultimately death (Cordoba, 2011). The pathogenesis of HE includes damage to the prelimbic cortex, striatum and the hippocampus (Aria et al., 2013). Hepatic encephalopathy is caused by accumulation of toxic substances in the bloodstream that are normally removed by the liver.

The hippocampus, is a major component of the brains of humans and other vertebrates. The hippocampus belongs to the limbic system and plays important roles in the consolidation of information from short-term memory to long-term memory, and in spatial memory that enables navigation.

It has been previously demonstrated that impaired liver function and liver disease is associated with the production of free radical and oxidative stress (Bailey and Cunningham, 1998). The accumulation of these free radicals and oxidative stress contribute to cognitive impairment, learning deficits, memory impairment, as well as damage and death of neuronal tissue. There is a long felt need for neuroprotective agents that are both disease-modifying and effective in treating patients that are experiencing HE. The present invention addresses the need to prevent free radical mediated stress and oxidative stress, as well as to prevent the neural damage associated with HE. The present invention further addresses the need to prevent cognitive impairment, learning deficits, memory impairment, as well as damage and death of neuronal tissue associated with HE.Cognitive impairment is when a person has trouble remembering, learning new things, concentrating, or making decisions that affect their everyday life. Cognitive impairment ranges from mild to severe.

On November 29, 2016, as part of the Company’s patent cooperation treaty global patent application the United States Patent and Trademark Office (“USPTO”) granted allowance on the composition of matter portion, covering claims 1 through 14 of the Company’s PCT Patent covering claims of its novel cannabidiol derived molecule. In January 2017, the Company filed a divisional application with the USPTO to cover the method claims, which were originally covered in claims 15 through 22 of the original PCT Patent. The Company currently holds a valid allowance in the United States on the composition of matter for a new cannabidiol derived molecules.

On April 4, 2017 the Company was awarded U.S. Patent 9,611,213 titled “Functionalized 1,3 Benzene-diols and their Method of Use for the Treatment of Hepatic Encephalopathy”. This patent is part of a divisional patent application by the Company to the USPTO whereby the Company sought separate claims for composition of matter, covered in Pat. 9,611,213 and separate claims for method for treatment.

On June 26, 2018, the Company was awarded U.S. Patent 10,004,722 titled “Method for Treating Hepatic Encephalopathy or a Disease Associated with Free Radical Mediate Stress and Oxidative Stress with Novel Functionalized 1,3 Benzene-diols.”

The Company has patent pending status of the same PCT Patent in Canada, the European Union, Brazil, Russia, India, China, Japan and Australia.

National Institutes of Health – Office of Technology Transfer (“NIH-OTT”) – Patent 6,630,507

On June 12, 2010 the Company filed an application for an exclusive license with National Institutes of Health – Office of Technology Transfer (“NIH-OTT”), for the development and commercialization of a target drug candidate to be used in the treatment of patients suffering with hepatic encephalopathy (“HE”). The application for exclusive license was made for the license and use of U.S. patent 6,630,507 “Cannabinoids as Antioxidants and Neuroprotectants (the “‘507 Patent”).

On November 17, 2011 the Company received notice of publication in the Federal Register of NIH-OTT’s Prospective Grant of Exclusive License – Development of Cannabinoid(s) and Cannabidiol(s) Based Therapeutics to treat hepatic encephalopathy in humans.

On June 12, 2012, theCompany entered into an exclusive license with NIH-OTT for the use of the ‘507 Patent in the commercialization of one or more cannabinoid therapeutics to treat HE.

In addition to the exclusive use of the ‘507 Patent for the treatment of hepatic encephalopathy, On July 16, 2014, the Company formally entered into a second license agreement with NIH-OTT for the non-exclusive license of the ‘507 Patent for the treatment of Chronic Traumatic Encephalopathy (“CTE”).

The Company is the only company that has use of the ‘507 Patent and corresponding licenses from NIH-OTT. The jurisdictions in which the ‘507 Patent is valid are: the U.S., the U.K., Ireland, the E.U., and Australia. The patent life in these jurisdictions are good until April 21, 2019.

To date, while the Company has properly maintained and paid all of the minimum annual royalties and past prosecution fees underlying its two (2) licenses of the ‘507 Patent, the Company has not been able to secure the necessary funds to advance its drug discovery efforts into human clinical trials and met the additional financial benchmarks set forth in the NIH licenses L-113-2012/0 and L-302-2014/0.

From the time of the issuance of the L-113 License on June 15, 2012 and the issuance of the L-302 License on July 17, 2014, the Company has paid initial license fees of $25,000 per license, minimum annual royalties of $10,000 per license; and a total of approximately $100,000 in past patent prosecution fees on the ‘507 Patent (covering both the L-113 and L-302 Licenses). The Company’s commitment to date to NIH has totaled approximately $290,000.

Pursuant to Section 6 of both the L-113 and L-302 Licenses, “a patent or patent application licensed under this Agreement shall cease to fall within the Licensed Patent Rights for the purpose of computing earned royalty payments in any given country on the earliest of the dates that: (a) the patent application has been abandoned and not continued; (b) the patent expires or irrevocably lapses; or (c) the patent has been held to be invalid or unenforceable by an unappealed or unappealable decision of a court of competent jurisdiction or administrative agency.”

The ‘507 Patent, underlying both the L-113 and L-302 Licenses, expires on April 21, 2019 in the remaining jurisdictions of the United States, Australia and Europe and the Company’s obligation to NIH effectively ends under both, the L-113 and L-302 License agreements.

PRE-CLINICAL DRUG DISCOVERY

Since inception in 2010, the Company’s primary drug discovery plans have revolved around neuroprotection and the use of cannabidiol as well as the development of proprietary cannabidiol-derived molecules as a target drug candidates to treat neurodegenerative and oxidative stress related diseases.

Conceptual Drug Discovery of Cannabidiol Derived Molecules

An emerging concept is that blockade of free radical mediated stress and oxidative stress will prevent the neural damage associated with hepatic encephalopathy and prevent cognitive impairment, learning deficits, memory impairment, as well as damage and death of neuronal tissue associated with HE. Cannabidiol Derived Molecules may have the potential of acting as neuroprotective agents by blocking the damage caused by free radicals and oxidative stress may prevent the neural damage associated with hepatic encephalopathy and may also prevent cognitive impairment, learning deficits, memory impairment, as well as damage and death of neuronal tissue associated with HE.

It has been discovered that prevention of free radical mediated stress and oxidative stress can prevent damage and death of neuronal tissue, as well as prevent cognitive impairment, learning deficits, and memory impairment associated with damage and death of neuronal tissue. Without wishing to be limited by theory, it is believed that the neuroprotective agents of the disclosure can ameliorate, abate, otherwise cause to be controlled, diseases associated free radical mediated stress and oxidative stress.

Free radical mediated stress and oxidative stress is also known to contribute to additional pathological conditions including, but not limited to epilepsy, neuropathic pain, traumatic head injury, stroke, Chronic Traumatic Encephalopathy (CTE), Post Cardiac Arrest Hypoxic Ischemic Encephalopathy, Epileptic Encephalopathy, and neurodegenerative diseases such as Parkinson’s disease, Alzheimer’s, Huntington’s disease, and amyotrophic lateral sclerosis (ALS). Under the present invention, these Cannabidiol Derived Molecules, may be capable of acting as neuroprotective agents, and may be useful for the treatment of epilepsy, neuropathic pain, traumatic head injury, stroke, Chronic Traumatic Encephalopathy (CTE), Post Cardiac Arrest Hypoxic Ischemic Encephalopathy, Epileptic Encephalopathy, and neurodegenerative diseases such as Parkinson’s disease, Alzheimer’s, Huntington’s disease, and amyotrophic lateral sclerosis (ALS).

Current Pre-clinical Discovery Efforts

The Company’s research and development efforts at the Pennsylvania Biotechnology Center are centered on the creation of novel synthetic cannabinoid and cannabinoid-like molecules, the pre-clinical andin vitro efficacy of CBD, a non-psychotropic molecule, and the testing and control of Kannalife’s lead target drug candidates alongside CBD for the treatment of OHE and CTE. As part of the Company’s research and development efforts, the Company has sought to establish the pre-clinical efficacy of CBD, which along with Kannalife’s novel and proprietary lead target molecules, have shown to have neuroprotective properties. The Company is currently conducting preclinical evaluation and formulation of a CBD based target drug candidate that the Company is calling KLS-13023, and the subject of the Company’s ongoing feasibility study with Catalent Pharma Solutions. While the Company has evaluated CBD on its own, in a highly purified form, its plans on bringing a CBD based target drug therapeutic revolve around a formulated product in oral dose administration capsule (KLS-13023) which is currently the subject of the Company’s ongoing feasibility study with Catalent Pharma Solutions.

As of October 2013, the Company had performed six (6) distinct pre-clinical studies on murine specimens, including functional assay screens on twenty-four (24) viable analogues and pre-clinical studies against CBD as a therapeutic control. Analogues are compounds or molecules having a structure similar to that of another compound or molecule, but differing from it in respect to a certain component.

As a result of the screening process, the Company found that there were four (4) target candidates along with CBD that were screened for final pre-clinical in vitro testing for pharmacokinetics (“PK”), CACO permeability, lethal dose (“LD”), EC50 and IC90 testing. “Pharmacokinetics” or “PK” relate to the branch of pharmacology concerned with the movement of drugs within the body. Factors in PK studies include CACO permeability which relates to assays that measure the ability of a drug to be absorbed from the gastrointestinal tract and thereby to evaluate whether the drug can be suitably dosed via an oral route. EC50 and IC90 relate tothe concentration of a drug, antibody or toxicant which induces a response halfway between the baseline and maximum after a specified exposure time. It is commonly used as a measure of a drug's potency (EC50); andthe concentration of a medication in the blood that will inhibit the replication of a specified percentage of microorganisms (IC90).

The Company’s lead target drug candidate was then analyzed using a mouse model to determine, among other things, blood brain barrier concentrations, tissue and organ distribution, bioavailability, administration (IV vs. Oral), spinal fluid concentration, and blood plasma concentration.A route of “administration” in pharmacology and toxicology is the path by which a drug, fluid, poison, or other substance is taken into the body. Whereas, “bioavailability’ is a subcategory of absorption and relates to a fraction of an administered dose of a drug that reaches systemic circulation in the body. “Blood plasma concentration”, otherwise known as volume of distributionis a theoretic concept that relates the amount of drug in the body (dose) to the concentration (C) of drug that is measured (in blood, plasma, and unbound in tissue water).

In May 2014, the Company commissioned the first of two animal behavioral studies via research pact with Temple University. The aim of the study was to test the effects of CBD and KLS-13019 on cognitive function in a mouse model of overt hepatic encephalopathy (OHE) in support of the identification of molecules with in vivo efficacy. An established model of OHE, the thioacetamide model (TAA, 200 mg/kg i.p.), was used to assess the effect of CBD (5.0 mg/kg i.p.) and KLS-13019 (0.5 – 5.0 mg/kg i.p.) on learning and memory in male C57Bl6 mice. The autoshaping procedure, an operant learning and memory assay that rapidly assesses acquisition and retention of a simple task, was the primary cognitive assay used. The task is an operant conditioning task wherein food restricted mice are placed in experimental chambers and must learn how to make a behavioral response to gain access to food rewards.

In summary, thioacetamide induced a robust but variable toxicity associated with cognitive impairment, morbidity, and mortality. KLS13019, administered in the absence of thioacetamide, produced no negative behavioral or general health effects, and actually appeared to improve cognitive functioning in the behavioral task. The 5.0 mg/kg dose of KLS 13019 also significantly prevented thioacetamide-induced cognitive performance deficit, and the lower dose of 1.0 mg/kg showed a trend in this direction.

Dr. Ward is regarded as one of the foremost experts in pre-clinical and clinical animal model based behavioral studies using cannabinoid molecules and agents. The Company believes that upon successful conclusion of this study and conclusive animal toxicity studies to be performed thereafter, that it will be able to file an IND with the FDA for the use of the Company’s novel target drug candidate in the treatment of overt hepatic encephalopathy.

The Company believes that, as a result of the completion of most of its pharmacokinetic (“PK”) and pharmacodynamics (“PD”) studies to date, that to complete the remainder of its pre-clinical evaluation and drug master file, what remains in the most part, is one animal toxicity study and one drug interaction study before the Company can file an investigative new drug application with the FDA, for the clinical evaluation of KLS-13023 (containing CBD) in OHE.

Kannalife Studies on CBD

In March 2013, the Company began its pre-clinical research and discovery efforts at the Pennsylvania Biotechnology Center/Baruch Blumberg Institute in Doylestown, PA. The Company began the research and development, and pre-clinical work focused on the identification, synthesis and/or extraction of novel Cannabis-derived molecules for the treatment of impairments associated with oxidative stress in overt hepatic encephalopathy (OHE). Prior research (published on April 16, 2011, in the British Journal of Pharmacology under the title “Cannabidiol Improves Brain and Liver Function in a Fulminant Hepatic Failure Induced Model of Hepatic Encephalopathy in Mice”) has produced substantial behavioral and histochemical evidence demonstrating the effectiveness of certain Cannabis-derived molecules such as CBD in the improvement of brain and liver function in fulminant hepatic failure. Findings from the above referenced study include reversal of locomotors and cognitive pathologies, reversal of structural changes such as Alzheimer’s Type II astrogliosis, and reversal of increases in ammonia levels.

The Company published an abstract on its completed studies regarding CBD at the 24th Annual International Cannabinoid Research Society symposium, titled “Cannabidiol Provides Protection from Ethanol and Ammonium Toxicity in a Hippocampal Model of Hepatic Encephalopathy.” In the present study, an in vitro model of HE has been utilized to evaluate the protective properties of CBD, a substance with demonstrated protective properties against oxidative stress in pre-clinical studies targeting the OHE range of neuronal toxicity.

HE is a known oxidative stress related disorder.  Although ammonia is considered the main factor involved in the pathogenesis of hepatic encephalopathy (HE), it correlates well with the severity of HE in acute liver failure, but not in chronic liver disease. Oxidative stress is another factor believed to play a role in the pathogenesis of this syndrome; it represents an imbalance between the production and neutralization of reactive oxygen species, which leads to cellular dysfunction (“Oxidative Stress: A Systemic Factor Implicated in the Pathogenisis of Hepatic Encephalopathy”, Metabolic Brain Disease, 28 June 2013, 175-178).

On January 22, 2015, the Company signed an agreement with Catalent Pharma Solutions LLC (“Catalent”), a $3.9 billion pharmaceutical manufacturer, for the performance of a feasibility study named “Solution for Cannabidiol Softgel Feasibility” (the “CBD OTC Feasibility Study”). Catalent has over seventy-five (75) years of experience in capsule and softgel manufacturing capabilities and experience.

The purpose of the CBD OTC Feasibility Study with Catalent is to advance the Company’s plans to one or more products for FDA clinical trials to treat certain oxidative stress related and neurodegenerative related diseases such as Traumatic Brain Injury (“TBI”).

Traumatic Brain Injury (“TBI”),also known as intracranial injury, occurs when an external force injures the brain. TBI can be classified based on severity, mechanism (closed or penetrating head injury), or other features (e.g., occurring in a specific location or over a widespread area). Head injury is a broader category that may involve damage to other structures such as the scalp and skull. TBI can result in physical, cognitive, social, emotional, and behavioral symptoms, and outcome can range from complete recovery to permanent disability or death.

The Centers for Disease Control and Prevention (the “CDC”) has compiled statistics on traumatic brain injury (TBI), which occurs more with children and older adults. According to the CDC, total combined rates for traumatic brain injury (TBI)-related emergency department (ED) visits, hospitalizations and deaths have increased over the past decade. Total combined rates of TBI-related hospitalizations, ED visits, and deaths climbed slowly from a rate of 521.0 per 100,000 in 2001 to 615.7 per 100,000 in 2005. The rates then dipped to 595.1 per 100,000 in 2006 and 566.7 per 100,000 in 2007. The rates then spiked sharply in 2008 and continued to climb through 2010 to a rate of 823.7 per 100,000 according to the CDC. SeeRates of TBI-Related Emergency Department Visits, Hospitalizations, and Deaths – United States 2001-2010, Centers for Disease Control and Prevention, January 22, 2016.

On March 4, 2015, the Company and Catalent commenced the feasibility study named “Solution for Cannabidiol Softgel Feasibility.”

On March 16, 2015, the Company received notice from Catalent that the U.S. Drug Enforcement Agency (“DEA”) that the cannabidiol (CBD) drug code 7360 has been added to Catalent’s Schedule 1 2104,registration and that a quota for a certain quantum of cannabidiol was successfully submitted for the importation of 150 grams of 99.7% pure synthetic cannabidiol from Noramco.

Additionally, on July 13, 2018, the Company received notice from the DEA that it was approved for its own Schedule 1 Controlled Substance license for the purpose of research activity. The addition of this license will further assist the Company in the bailment and delivery of cannabidiol to and from research collaborators like Catalent and Temple University as well as others.

The Company’s relationship with Catalent was founded on the Company’s efforts to produce a formulated version of a CBD based gel capsule, herein referred to as KLS-13023 for further advancements in the treatment of oxidative stress related disorders, such as overt hepatic encephalopathy. Catalent does not share in any royalties, or ownership of intellectual property that is provided to Catalent by the Company or developed under the feasibility study with Catalent described herein. The current feasibility study being performed is for the Company’s efforts to create a high quality controlled and assured pharmaceutical grade product for use in an FDA clinical trial to treat patients suffering with overt hepatic encephalopathy. Catalent’s efforts in this instance is as a contract manufacturer involved in the advancement of the Company’s intellectual property and for Catalent to be a third party contract manufacturer for the commercial production of KLS-13023.

A satisfactory and successful completion of the feasibility study with Catalent, followed by the completion of the Company’s pre-clinical evaluation of KLS-13023 in and animal toxicity model, and thereafter the application of KLS-13023 under an NDA with the FDA would lead to a bulk commercial drug manufacturing agreement between the Company and Catalent. The Company has only committed to completing the feasibility study with Catalent and is under no obligation to enter into a commercial drug manufacturing agreement with Catalent. Thereafter the completion of its feasibility study with Catalent, management believes the logical next step in its commercial development plans for KLS-13023 is to engage with Catalent as its contract drug manufacturer for KLS-13023.

CBD Reclassified by DEA for Epidiolex

In a significant decision relating to the classification of CBD, currently a Schedule I narcotic by the DEA under the Controlled Substances Act, on September 27, 2018,the Department of Justice and the DEA announced that Epidiolex, the newly approved medication by the Food & Drug Administration, is being placed in schedule V of the Controlled Substances Act, the least restrictive schedule of the CSA. On June 26 2018, the FDA announced it approved Epidiolex for the treatment of seizures associated with two rare and severe forms of epilepsy, Lennox-Gastaut syndrome and Dravet syndrome, in patients two years of age and older.Epidiolex contains cannabidiol (CBD), a chemical constituent of the cannabis plant (commonly referred to as marijuana). The CBD in Epidiolex is extracted from the cannabis plant and is the first FDA-approved drug to contain a purified extract from the plant. Schedule V drugs represents the least potential for abuse.Schedule V drugs, substances, or chemicals are defined as drugs with lower potential for abuse than Schedule IV and consist of preparations containing limited quantities of certain narcotics.  

We believe this is a significant reclassification that validates the efforts by the Company in the research and development of ethical pharmaceuticals containing CBD as an active pharmaceutical ingredient and reduces the regulatory and market risks associated with the use of CBD, currently and still a Schedule I narcotic. 

The Company has maintained since its inception, that the only clear path to reclassification is to follow the regulatory path of proving medical purpose through traditional Phase 1 through Phase 3 clinical trials. The approval of Epidiolex by the FDA on June 26, 2018 and reclassification of CBD as it relates to Epidiolex by the DEA on September 27, 2018, is clear evidence of the need to follow the regulatory path in order to meet the requirements of reclassification of a Schedule I controlled substance. 

Kannalife CBD Target Drug Candidate – Orphan Drug Potential for OHE

An Orphan Drugis a pharmaceutical agent that has been developed specifically to treat a rare medical condition, the condition itself being referred to as an orphan disease. In the US and EU it is easier to gain marketing approval for an orphan drug, and there may be otherfinancial incentives, such as extended exclusivity periods, all intended to encourage the development of drugs which might otherwise lack a sufficient profit motive. The target threshold in epidemiology for patient population in any rare disease is 200,000.

The assignment of orphan status to a disease and to any drugs developed to treat it is a matter of public policy in many countries, and has resulted in medicalbreakthroughs that may not have otherwise been achieved due to the economics of drug research and development. Existing data on CBD, as well as the Company’s target drug candidate have indicated that cannabinoids may be effective for use in clinical trials for the treatment of HE and would, thus provide a new mechanism of action as well as be useful as an adjuvant in combination with existing treatments.

This combination of mechanisms of action could lead to additive or synergistic effects. Existing treatment methods, such as lactulose, Rifaximin and others under study (e.g., AST-120), manage symptoms by reducing ammonia uptake in the digestive system. However, once blood ammonia levels have increased, they putatively provide limited benefits. CBD, as well as the Company’s target drug candidate, instead, act in the central nervous system ameliorating the downstream pathological effects of ammonia.

In June 2016, the Company filed for Orphan Drug Designation with the Office of Orphan Products Development (“OOPD”) at the U.S. Food and Drug Administration (“FDA”) for the use of CBD to treat a sub-set of hepatic encephalopathy. It is estimated that approximately 121,000 +/- hospitalizations occur every year from overt hepatic encephalopathy ammonia neurotoxicity traumas, which put the patient in severe cognitive and behavioral impairment. The current standard of care for the treatment of these traumatic events includes diuretics and anti-biotics, but none currently deal with the neurotoxic aspects of the brain.

In November 2016, the Company received an initial abeyance letter from the OOPD regarding the Company’s orphan drug application. The abeyance letter seeks clarification on the epidemiology regarding the Company’s target sub-set of the HE disease. In October 2017, the Company responded to the questions set forth in the epidemiology and disease sub-set. The Company received a response on November 30, 2017 from the OOPD agreeing with the Company’s position on the orphan disease threshold of patients suffering from the target sub-set of the HE disease. However, the OOPD requested additional information to support the limiting use for hospitalized patients in the sub-set of the HE disease. The Company believes it has the necessary information and data to support its position in requesting orphan drug designation for CBD (as the active pharmaceutical ingredient) in the target sub-set of the HE disease, also referred to as OHE. Accordingly, the Company plans to provide adequate rationale for limiting use of the drug to the orphan sub-set of HE patients requiring inpatient hospital treatment by November 2019.

Kannalife Strategic Third Party Business Relationships, Licenses and Joint Ventures

Natural Products Discovery Institute – Pennsylvania Biotechnology Center

In December 2013, the Company entered into a Materials Transfer and Testing Agreement (“MTTA”) with the Institute for Hepatitis and Virus Research and their division, the Natural Products Discovery Institute (“NPDI”) located at Pennsylvania Biotechnology Center in Doylestown, PA. The purpose of the MTTA, is among other things, the research of original material made up of plants, plant matter, and plant extracts (the “Plant Materials”) to identify bioactive molecules contained in these Plant Materials which may lead to the commercial production of bioactive molecules. To date, the Company has screened one plant source and has fractionated extracts to determine its neuroprotective activity. This plant source and extracted material has shown a high degree of neuroprotectant factor in the face of ethanol and ammonium toxicity in neuronal cell cultures. The Company plans on furthering the commercial development of this material and also filing for patent protection on the process, method and use of this material in the treatment of neurodegenerative diseases.

Under the terms of the MTTA, once the Company agrees to license the biologically active compound from the NPDI, the Company will pay the Baruch S. Blumber Institute (“BSBI”), the parent of the NPDI, (1.) an upfront license fee of $30,000, followed by minimum annual royalties of $10,000; (2.) a three percent (3%) net sales royalty; (3.) milestone payments as follows: (a.) $40,000 upon initiation of Phase 1 clinical trial or foreign equivalent, (b.) $100,000 upon initiation of Phase 2 clinical trial or foreign equivalent, (c.) $250,000 upon initiation of Phase 3 clinical trial or foreign equivalent, and (d.) $500,000 upon first marketing approval by FDA or foreign equivalent; and (4.) additional sub-licensing royalties of twelve percent (12%) on the fair market value of any consideration received for granting each sub-license. The MTTA was entered into December 18, 2013 and had a five (5) year term. The MTTA has effectively expired, with the exception of the terms of confidentiality and ownership of the material and modifications associated with the MTTA.

The NPDI, as an institute, is dedicated to making productive use of one of the world’s greatest collections of natural products. The NPDI provides microbial and plant extracts, fermentation optimization, purification chemistry to support bioassay driven fractionation, and structure elucidation. It houses a collection of >30,000 fungi and actinomycete microorganisms, and genomic DNA. This previously private collection of natural products is provided to qualified researchers in academia and industry. Research activity has led to the discovery of novel molecules with biological activity and to the formation of new life sciences companies that will seek to commercialize discoveries centered on natural products. Businesses include those developing pharmaceutical, nutritional, flavor enhancing, cosmetic ingredient, agricultural, and animal health products. 

To date, the Company’s research and development efforts with NPDI have been centered on selective screening of certain natural product for the purpose of identifying extracts and further isolating molecules that may be effective as potential anti-inflammatory, neuro-protective and oxidative stress relieving molecules. The Company has identified one or more selected extracts that it will continue pre-clinical screening for furtherance of developing potential novel therapeutic agents. The Company’s agreement with NPDI, provides for certain royalties to be paid to NPDI in connection with the commercialization of products derived from its research and development efforts with NPDI.

Kannaway LLC – Product Development and Marketing Agreement

On March 29, 2014 we signed a five (5) year product development agreement with Kannaway LLC (“Kannaway”), a lifestyle network and relationship marketing company that sells lifestyle products containing ingredients derived from cannabidiol (CBD) rich hemp oil and hemp based (i.) botanical products, (ii.) naturopathic and nutritional supplements, and (iii.) nutraceuticals. Kannaway currently has over 50,000 independent sales and marketing representatives in its network. Kannaway sells lifestyle products containing ingredients derived from cannabidiol (CBD) rich hemp oil and hemp based (i.) botanical products, (ii.) naturopathic and nutritional supplements, and (iii.) nutraceuticals. The product development agreement between Kannaway and the Company includes, among other things, product development milestone revenues for the Company totaling $750,000 and a stock swap of 4.99% of the Common Stock of the Company in exchange for 4.99% interest in Kannaway.

In January 2015, after we entered into an Application Development Agreementthe product development agreement with a clientKannaway, Kannaway was sold, by its parent company, to develop an inventory app. TheMJNA for 833,333,333 shares of MJNA common stock. We made demands upon MJNA and Kannaway’s former parent company has completedto deliver 41,583,333 shares of MJNA common stock as part of the appstock swap in the product development agreement between us and deliveredKannaway. A dispute arose between us, MJNA and Kannaway’s former parent which held up the completed appdelivery of the 41,583,333 shares of common stock to the client.Company. The total price we charged the client for our services was $7,500, the client has paiddispute between the Company and MJNA revolved around a corporate relocation clause found in the full amount. A copyterms underlying the product development agreement.

In June 2018, we entered into a settlement agreement with MJNA, Kannaway, and the former parent company of Kannaway. The settlement agreement called for the release of all obligations in exchange for the issuance of 41,583,333 shares of common stock in MJNA to the Company.On June 1, 2018, the Company received 41,583,333 shares of Medical Marijuana, Inc. (“MJNA”) common stock pursuant to a settlement agreement as part of the Application Development Agreements is attached hereto as Exhibit 10.1.cancellation of the above agreement.

Temple University – Animal Behavioral/Pre-Clinical Model

On February 16,May 1, 2014, the Company signed a Research Services Agreement with Temple University to test the effects of cannabidiol and cannabidiol like molecules in a hepatic encephalopathy model of cognitive impairment in support of the identification of molecules within vivo efficacy. The tests were performed by Temple University in the pre-clinical model for hepatic encephalopathy have involved a mouse model of overt hepatic encephalopathy (“OHE”) and administration of CBD and KLS-13019 conducted by Dr. Sara Jane Ward and Dr. Ronald Tuma, with the study titled – “Cognitive, neurological, and motor function in a mouse model of hepatic encephalopathy: effects of CBD and CBD analogues (KLS-13019).” The results of this study have shown that KLS-13019 is superior to CBD in the intervention of cognitive impairment from associated neurotoxicity in the OHE model.

On January 4, 2017, the Company applied for a Phase 1 Small Business Technology Transfer (“STTR”) grant from the National Institutes of Health. This grant application was made in collaboration with Temple University and titled “Development of KLS-13019 for Chemotherapy Induced Peripheral Neuropathy and Drug Dependence”. In December 2017, the Company was informed that the Phase 1 grant was awarded.

The following is a summary outline of the aims proposed in the aforementioned grant.

Chemotherapy-induced peripheral neuropathy (CIPN) can be a chronic, severely debilitating consequence of cancer therapy for which there are no effective management strategies. Moreover, upwards of 80% of CIPN patients reported using prescription opioids for pain management despite the fact that there is only weak evidence that the long-term continuation of opiods provides clinically significant pain relief in these patients.

Mitochondrial dysfunction, oxidative stress, and inflammation have all been implicated in its etiology. We have shown that the non-psychoactive cannabinoid cannabidiol (CBD) prevents the development of CIPN in a mouse model of paclitaxel-induced cold and mechanical allodynia. This target, allodynia, refers to central pain sensitization (increased response of neurons) following normally non-painful, often repetitive stimulation. It can lead to the triggering of pain response from stimuli which normally do not provoke pain.

In vitro, we observe that paclitaxel increases microglial expression of several putative mediators of neuropathic pain, and that this effect can be blocked by CBD in a mitochondrial Na+/Ca2+ exchanger (mNCX)- dependent manner. We have also recently shown that a more potent, hydrophilic analogue of CBD, KLS-13019, protects against paclitaxel-induced oxidative stress in cultured dorsal root ganglia neurons, and that the mechanism underlying this neuroprotection is also regulation of intracellular calcium via the mNCX. Preliminary results demonstrate that KLS-13019 can attenuate mechanical sensitivity associated with CIPN while also reducing microglial activation and T cell infiltration into the spinal cord.

Dorsal root ganglia (“DRG”) is a cluster of neurons (a ganglion) in the dorsal root of a spinal nerve. The cell bodies of sensory neurons known as the first-order neurons are located in the dorsal root ganglia.Even though dorsal root ganglia are a part of the system of peripheral nerves, they lie very close to the spine, and therefore to the central nervous system. That makes them an important connection between the two systems. These nerve clusters help transmit messages toward the brain and play a key role in neuropathic pain development and maintenance. Peripheral nerve injury-induced neuropathic pain is one of major clinical disorders characterized by spontaneous ongoing or intermittent burning pain, sensory abnormalities (dysesthesia), an increased response to painful stimuli (hyperalgesia), and pain in response to normally innocuous stimuli (allodynia).

Our central hypothesis is that administration of CBD or KLS-13019 helps preserve Ca2+ homeostasis by promoting activity of the mNCX, which in turn protects from both mitochondrial dysfunction and microglial activation to prevent the neuronal and glial changes associated with the development and maintenance of paclitaxel-induced neuropathic pain. Results from experiments in AIM 1 will demonstrate that the neuroprotective properties of CBD and KLS-13019 can be reduced by pharmacological or gene knockdown of the mNCX in a statistically significant manner. Results from experiments in AIM 2 will further confirm the i.p. and p.o. efficacy of KLS-13019 vs CBD to prevent or reverse mechanical sensitivity and neuroinflammation in a mouse model of paclitaxel-induced neuropathic pain and that repeated administration of these molecules does not lead to analgesic tolerance. Remarkably, the non-psychoactive CBD has also been shown to inhibit cue-induced heroi-seeking and neurochemical correlates thereof in a rat model of relapse and decrease heroin craving in a small human study. Experiments in AIM 3 are designed to test the hypothesis that KLS-13019 and CBD will attenuate reinstatement of morphine seeking behavior in a rat model of opioid relapse. The overall impact of the results from the proposed research will be significant advancements into 1) identification of specific mechanisms that induce CIPN, 2) application of this knowledge to facilitate design of novel treatment strategies for neuropathic pain, and 3) novel treatment strategies to reduce or replace prescription opioid use and decrease prescription opioid abuse.

Chemotherapy-induced peripheral neuropathy (CIPN) can be a chronic, severely debilitating consequence of cancer therapy for which there are no effective management strategies. Moreover, upwards of 80% of CIPN patients reported using prescription opioids for pain management, despite the weak evidence of their efficacy and the risks of long term dependence. Mitochondrial dysfunction, calcium dysregulation, oxidative stress, and inflammation have all been implicated in its etiology. In pre-clinical studies, cannabidiol (CBD), a non-psychoactive component of cannabis sativa, has shown evidence in a murine model to be a potentially effective treatment for CIPN and relieving opiate dependence currently experienced by certain patients undergoing current therapeutic chemotherapy and pain management regimens in cancer treatment. However, CBD has severe limitations in terms of potency, safety, oral bioavailability, and regulatory restrictions. KLS-13019 is a novel new chemical entity that, as per pre-clinical testing, may be able to target these problems. This grant research seeks to demonstrate the efficacy of KLS- 13019 in models of CIPN and opiate dependence, and also further elucidate its mechanism of action in regulation of calcium levels and inflammatory sequelae.

Proposed Study for Traumatic Brain Injury

To investigate the mechanisms of action through which cannabidiol and a cannabinoid analogue (KLS-13019) provide neuroprotection form neurotoxicity factors (glutamate and CCL11) relevant to TBI. Neural damage associated with TBI has been associated with multiple processes including excitotoxicity, oxidative stress and neuroinflammation. Because of the recognized protective effects of cannabinoids on all of these toxic processes, we have chosen to explore the effects and mechanism of action of two molecules: 1) cannabidiol (CBD), a substance found in cannabis; and 2) KLS-13019, a novel CBD-like analogue that has been shown to protective from various toxicity associated with oxidative stress (Kinney et al., 2016). In this proposal, we intend to investigate the protective mechanisms related to the attenuation of CCL11 for both molecules in disease-relevant in vitro test systems that utilized glutatmate as a relevant toxin and then explore their effectiveness in animal models of TBI.

Catalent Pharma Solutions

In December 2014, the Company signed a feasibility study contract with Catalent Pharma Solutions (“Catalent”), for among other things, tocommence a feasibility study on a dose controlled soft-gel containing cannabidiol as the main active pharmaceutical ingredient (the “CBD Feasibility Study”). The purpose of the CBD Feasibility Study with Catalent is to enable the Company to develop a proprietary drug product formulation using CBD that has suitable solubility and stability characteristics for IND enabling pre-clinical studies in animals and clinical studies in humans, as part of Kannalife’s ongoing research and development of a cannabinoid therapeutic for the treatment of neurodegenerative diseases, including chronic traumatic encephalopathy (CTE) and overt hepatic encephalopathy (OHE). Catalent is the leading global provider of advanced delivery technologies and development solutions for drugs, biologics, consumer health and animal health products. With over 80 years serving the industry, Catalent has proven expertise in bringing more customer products to market faster, enhancing product performance and ensuring reliable clinical and commercial product supply. Catalent employs approximately 8,700 people, including over 1,000 scientists, at 31 facilities across 5 continents, and in fiscal 2015 generated more than $1.8 billion in annual revenue. Catalent is headquartered in Somerset, N.J.

Noramco, Inc.

In April 2015, the Company entered into discussions with Noramco, Inc. (“Noramco”), for among other things, the long term supply of high purity,pharmaceutical grade, synthetic cannabidiol for the purpose of delivering CBD as an Application Development Agreementactive pharmaceutical ingredient to Catalent in connection with the Company’s CBD Feasibility Study.

In addition to the procurement of CBD through Noramco, the Company and Noramco have discussed an additional feasibility study for the scale-up and commercial production of KLS-13019.

Noramco, Inc. (“Noramco”) was formed in 1979 to provide a secure source of Codeine Phosphate. With the acquisition of Tasmanian Alkaloids and addition of the Athens, Georgia site in 1982, and continuous expansions over the past three decades at both US facilities, Noramco now contributes to billion dollar affiliate franchises, as well as to significant 3rd party generic and branded pharmaceutical products worldwide.

Noramco is a world leader in specialty active pharmaceutical ingredients, with a client, wherebyparticular focus in controlled substances. The Company’s headquarters and primary production facility is in Wilmington DE, with additional sites in Athens, GA and Schaffhausen Switzerland.

SK Capital Partners (“SK Capital”) acquired Noramco from Johnson & Johnson in July 2016.SK Capital is a private investment firm with a disciplined focus on the client agreed to pay the company to develop certain iPhonespecialty materials, chemicals and Android applicationshealthcare sectors. The firm builds strong and growing businesses that include a Package tracking app, Voice recording app, Compare prices app, File sharing app, Screen recorder app, Puzzle game, Card game, Adventure game, News template app and a Weather broadcast app. The total price we charged the clientgenerate substantial long-term value for our services was $78,785,investors. SK Capital utilizes its industry, operating and investment experience toidentify opportunities to transform businesses into higher performing organizations with improved strategic positioning, growth and profitability as well as lower operating risk. The firm currently has more than $1.5 billion of third party capital under management.

Quintiles IMS / IQVIA (formerly CotéOrphan LLC)

In May 2016, the Company completedengaged with Coté Orphan LLC (“Coté Orphan”) to assist the appsCompany in its filing of an application with the FDA for Orphan Drug Designation in the use of CBD to treat a sub-set of HE. (also referred to herein as OHE).Coté Orphan is a boutique full-service regulatory group with a primary focus on Orphan Drugs. From the lab to the market, Coté Orphan takes concepts to Orphan Drug and deliveredClinical Trial applications before the files to client. The client paidFDA and EMA for approval. Coté Orphan is led by Dr. Tim Coté, the company the full amount. A copyformer Director of the ApplicationFDA’s Office of Orphan Products Development Agreements(“OOPD”).

The advantages of having a strategic relationship with Coté Orphan is attached hereto as Exhibit 10.2.follows:

As director of the OOPD at the FDA, Dr. Tim Coté personally signed off on 1,400 orphan designation applications, awarding designations to 800 and withholding approval of 600.  

Oversaw the progress to full marketing approval of 150+ orphan drugs from 2007 to 2011. 

Team of twenty-five (25) professionals of whom over seventy percent (>70%) are doctoral-level trained. 

Regulatory scientists who have deep knowledge and experience in the “unwritten rules” of the FDA regarding orphan drugs.  

Coté Orphan is the largest submitter of FDA and EMA orphan designations worldwide.  

Coté Orphan does not merely opine, they do the work of creating quality regulatory filings.  

On June 2, 2017, Coté Orphan LLC was purchased and is now wholly owned by Quintiles IMS. The Company has continued its efforts through IQVIA, a division of Quintiles IMC, in petitioning the FDA’s OOPD in furtherance of the Company’s application for orphan designation for CBD to treat a sub-set of HE.

The Company has filed for orphan designation with the U.S. Food and Drug Administration (“FDA”) for the use of CBD in the treatment overt hepatic encephalopathy (“OHE”). The Company has received notice from the FDA that its current application qualifies for a patient population of less than 200,000, but is currently in abeyance to resolve clinical use of CBD in this sub-set of hepatic encephalopathy. The Company has retained Coté Orphan to continue the process of responding to the FDA’s abeyance letter. On November 5, 2018, the FDA has granted the Company a one year extension to respond to the abeyance letter until November 30, 2019.

PRIMARY TARGETS FOR DRUG DISCOVER AND MARKET SIZE

Target 1:Hepatic Encephalopathy – $2+ Billion Market in the U.S.

Hepatic encephalopathy (a complication of liver cirrhosis) is one of the most important clinical manifestations in decompensated liver cirrhosis. Accepted concepts regarding the pathophysiology of hepatic encephalopathy are that the endogenous neurotoxic substances, including ammonia: (i.) escape from catabolism by the liver due both to the impaired function of the cirrhotic liver and also to the presence of portal systemic shunting; (ii.) circulate at elevated concentrations in the systemic blood flow; (iii.) reach the brain through the blood-brain barrier; and (iv.) impair cerebral function leading to disturbances of consciousness. SeeDiscovery of KLS-13019, a Cannabidiol-Derived Neuroprotective Agent, with Improved Potency, Safety, and Permeability. William A. Kinney, Mark E. McDonnell, Hua Marlon Zhong, Chaomin Liu, Lanyi Yang, Wei Ling, Tao Qian, Yu Chen, Zhijie Cai, Dean Petkanas, and Douglas E. Brenneman – ACS Med. Chem. Lett., 2016, 7 (4), pp 424–428.

The majority of these toxins are produced in the intestine by the bacterial flora, and are absorbed into the portal venous flow. In spite of improved therapeutic options for encephalopathy, the long-term survival is still low. Thus, hepatic encephalopathy remains a serious complication of liver cirrhosis. We believe that the establishment of truly effective prevention modalities and broader application of liver transplantation will help rescue patients suffering from this complication of liver cirrhosis in the near future.

The Company’s exclusive license and use of the ‘507 Patent and the Company’s commercial development plan will focus on the identification, synthesis and/or extraction of novel Cannabis-derived molecules for the treatment of impairments associated with oxidative stress in Hepatic Encephalopathy (HE).

According to an article published in the British Journal of Pharmacology Research over the past decade has produced substantial behavioral and histochemical evidence demonstrating the effectiveness of certain Cannabis-derived molecules such as Cannabidiol (“CBD”) in the improvement of brain and liver function in fulminant hepatic failure. Findings include reversal of locomotors and cognitive pathologies, reversal of structural changes such as Alzheimer’s Type II astrogliosis, and reversal of increases in ammonia levels. Beyond the supportive preclinical evidence, multiple factors provide reasons for enthusiasm in the pursuit of the HE indication:

New mechanism of action: Cannabinoids, if shown effective in clinical trials, would provide a new mechanism of action and thus be an incremental clinical tool to combine with existing treatments. This combination of mechanisms of action could lead to additive or synergistic effects. Existing treatment methods, such as lactulose, Rifaximin and others under study (e.g., AST-120), manage symptoms by reducing ammonia uptake in the digestive system. However, once blood ammonia levels have increased, they putatively provide limited benefits. Cannabinoids, instead, act in the central nervous system ameliorating the downstream pathological effects of ammonia.  

Multiple preventive benefits: According to National Institute of Health, pre-clinical studies have shown that CBD, the major constituent in Kannalife’s intended lead target drug molecule and candidate, may provide benefits in the secondary prevention of HE. 

oSteatosis:In vitro studies have shown CBD to reverse the histopathology associated with steatosis or fatty liver syndrome. This is particularly relevant because fatty liver is a major cause of liver cirrhosis, and has no current drug-based treatment. In addition, multiple currently marketed drugs are known to induce steatosis. These include steroids (e.g., triamcinolone, cortisone, prednisone), the anti-cancer drug Tamoxifen (a breast cancer drug), HIV anti-retrovirals and anti-arrythmic drug Amiodarone. 

oFibrogenesis: Animal studies have shown that endocannabinoids are involved in the regulation of fibrogenesis in the liver. CB2 -/- mice show increased fibrogenesis in response to CCl4 injection, whereas CB1 -/- mice have decreased hepatic fibrogenesis. This suggests an opportunity to modulate fibrogenesis, a critical intermediate step in liver cirrhosis, through a proper selection of cannabinoid antagonists.  

Hepatic encephalopathy (HE) is a neuropsychiatric disorder that includes learning deficits and impairment of long-term memory. Hepatic encephalopathy can be caused by chronic and excessive ethanol ingestion along with the accumulation of toxic substances that are normally removed by the liver. The pathogenesis of HE in the central nervous system includes damage to the pre-limbic cortex, striatum and the hippocampus, and this pathology is believed to be mediated by the accumulation of free radicals and oxidative stress. Hepatic encephalopathy has primary epidemiological precursors in cirrhosis, hepatitis B, hepatitis C, and portal hypertension. The incidence rate of HE among alcohol induced cirrhosis patients is as high as 45%, making HE a leading opportunistic disease stemming from alcoholism. If left unchecked, HE can progress to hepaticcoma and ultimately death. The pathogenesis of HE includes damage to the prelimbic cortex, striatum, and the hippocampus. Hepatic encephalopathy is caused by accumulation of toxic substances in the bloodstream that are normally removed by the liver.

It has been previously demonstrated that impairment of hepatocytes by ethanol is associated with the production of free radical and oxidative stress. The accumulation of these free radicals and oxidative stress contribute to cognitive impairment, learning deficits, memory impairment, as well as damage and death of neuronal tissue. An emerging concept is that blockade of free radical mediated stress and oxidative stress will prevent the neural damage associated with hepatic encephalopathy and prevent cognitive impairment, learning deficits, memory impairment, as well as damage and death of neuronal tissue associated with HE.

The Company’s proposed commercialization of the ‘507 Patent is intended to benefit the public health by reducing the oxidative stresses and neurological complications that are prevalent in patients suffering with hepatic encephalopathy.

Currently in the United States, there are over 1.5 million sufferers of HE across four stages, including approximately 121,000 patients hospitalized each year from the overt hepatic encephalopathy (OHE) stage of the disease.

Cannabidiol (CBD) vs. KLS-13019 in Overt Hepatic Encephalopathy (OHE)

In a publication in American Chemical SocietyMedicinal Chemistry Letters on February 10, 2016, our abstract read as follows:

“Cannabidiol is the nonpsychoactive natural component of C. sativa (cannabis sativa) that has been shown to be neuroprotective in multiple animal models. Our interest is to advance a therapeutic candidate for the orphan indication overt hepatic encephalopathy (OHE). OHE is a serious neurological disorder that occurs in patients with cirrhosis or liver failure. Although cannabidiolhas shown evidence in a murine model to be a potentially effective treatment for OHE, it has limitations in terms of safety and oral bioavailability. Herein, we describe a series of side chain modified resorcinols that were designed for greater hydrophilicity and “drug likeness”, while varying hydrogen bond donors, acceptors, architecture, basicity, neutrality, acidity, and polar surface area within the pendent group. Our primary screen evaluated the ability of the test agents to prevent damage to hippocampal neurons induced by ammonium acetate and ethanol at clinically relevant concentrations. Notably, KLS-13019 was 50-fold more potent and >400-fold safer than cannabidiol and exhibited an in vitro profile consistent with improved oral bioavailability.”

Cannabidiol has been shown to be neuroprotective by blocking the damage caused by free radicals and oxidative stress. This effect was independent of cannabinoid receptors because it could not be blocked by a cannabinoid antagonist. CBDhas shown evidence in two a murine models to be a potentially effective treatment for HE, thioacetamide induced and bile duct ligation induced liver damage, at a dose of 5 mg/kg IP (intraperitoneal injection). Importantly, CBD treated animals in the first study exhibited improvements in both liver and brain function as compared to untreated control animals. Free radical mediated stress and oxidative stress are also known to contribute to additional pathological conditions including epilepsy, neuropathic pain, traumatic head injury, stroke, chronic traumatic encephalopathy (CTE), and neurodegenerative diseases such as Parkinson’s disease, Alzheimer’s disease, Huntington’s disease, and amyotrophic lateral sclerosis (ALS).

Other examples of neuroprotection by CBD include use in hypoxia-ischemia and stroke models. A wide range of possible mechanisms have been attributed for CBD’s neuroprotective effects including antioxidant, anti-inflammatory, adenosine signaling, cannabinoid receptor GPR55 (G Protein-coupled receptor 55), and serotonin mediated pathways; however, mitochondrial calcium modulation is fundamental. The GPR55 receptor is a G protein receptor in humans that is encoded by the GPR55 gene. The GPR55 receptor has been identified as a novel cannabinoid receptor. Receptors are sensing molecules which communicate signals between cells to illicit physiological changes in the body. To hedge our bets, we chose to interrogate the hippocampal neuron, as a phenotypic screen that will measure neuroprotection independent of a mechanism.

Target 2:Chronic Traumatic Encephalopathy (CTE) – $2+ Billion Market in the U.S.

Not unlike Overt hepatic encephalopathy, chronic traumatic encephalopathy is a neuro-degenerative disease of the brain and is associated with repeated head traumas like concussions. In the National Football League (“NFL”), the statistics are alarming. In 2010 there were .679 concussions per game (218 in 321 combined pre-season and regular season games). While there was a decrease in incidents in 2011 (.594 concussions per game), the statistics are still the source of significant concern. SeeNFL to Follow Army’s Lead on Helmet Sensors in Attempt to Prevent Head Injury – L. Madden, SportsMoney, July 26, 2012.

Chronic Traumatic Encephalopathy (“CTE”) is a form of encephalopathy that is a progressive neuro-degenerative disease, which can only be definitively diagnosed postmortem, in individuals with a history of multiple concussions and other forms of head injury. The disease was previously called dementia pugilistica (“DP”), as it was initially found in those with a history of boxing. CTE has been most commonly found in professional athletes participating in American football, ice hockey, professional wrestling and other contact sports who have experienced repetitive brain trauma.

It has also been found in soldiers exposed to a blast or a concussive injury, in both cases resulting in characteristic degeneration of brain tissue and the accumulation of tau protein. Individuals with CTE may show symptoms of dementia, such as memory loss, aggression, confusion and depression, which generally appear years or many decades after the trauma. Repeated concussions and injuries less serious than concussions (“sub-concussions”) incurred during the play of contact sports over a long period can result in CTE. In the case of blast injury, a single exposure to a blast and the subsequent violent movement of the head in the blast wind can cause the condition.

The primary physical manifestations of CTE include a reduction in brain weight, associated with atrophy of the frontal and temporal cortices and medial temporal lobe. The lateral ventricles and the third ventricle are often enlarged, with rare instances of dilation of the fourth ventricle.

Other physical manifestations of CTE include pallor of the substantia nigra and locus ceruleus, and atrophy of the olfactory bulbs, thalamus, mammillary bodies, brainstem and cerebellum. As CTE progresses, there may be marked atrophy of the hippocampus, entorhinal cortex, and amygdala.

On a microscopic scale the pathology includes neuronal loss, tau deposition, TAR DNA- binding Protein 43 (TDP 43) beta-amyloid deposition, white matter changes, and other abnormalities. The tau deposition occurs as dense neurofibrillary tangles (NFT), neurites, and glial tangles, which are made up of astrocytes and other glial cells Beta-amyloid deposition is relatively uncommon feature of CTE.

A small group of individuals with CTE have chronic traumatic encephalo-myopathy (CTEM), characterized by motor neuron disease symptoms and mimics Amyotrophic Lateral Sclerosis (ALS) or Lou Gehrig’s disease. Progressive muscle weakness and balance and gait problems seem to be early signs of CTEM.

Target 3:Chemotherapy Induced Peripheral Neuropathy (CIPN) – $3+ Billion Market in U.S.

In December 2016, as part of a Small Business Technology Transfer (“STTR”) program, the Company, in cooperation with Temple University, Kannalife and Temple University filed an STTR grant proposal with the National Cancer Institute (“NCI”) to demonstrate improved in vivo efficacy of an orally administered KLS-13019, Kannalife’s lead target drug candidate in a head-to-head comparison to intraperitoneal injection (“IP Injection”) of CBD in a model of chemotherapy-induced peripheral neuropathy.

At the conclusion of Phase I STTR application, we will demonstrate that KLS-13019 (Per os – taken through the mouth) can control mechanical sensitivity and inflammation associated with CIPN in the absence of tolerance development, and also reduce opioid craving behavior with comparable efficacy to cannabidiol (intraperitoneal injection). In Phase II STTR, we will investigate a back-up series and will execute the CMC, pharmacokinetic, safety pharmacology, and toxicology assessments required for IND filing on KLS-13019.

A visual image of the chemical structure of cannabidiol and KLS-13019 can be seen as follows, along with selected data describing EC₅₀ (the concentration of a drug that give half-maximum response); Safety Margin (pre-clinical toxicity), and Bioavailability (seen as “F”):

KLS-13019 does not contain cannabidiol and is a new chemical entity that would not fall under the Controlled Substances Act (“CSA”) or be deemed a Schedule 1 controlled substance.

KLS-13023 is a formulation that does contain cannabidiol. At present, cannabidiol is deemed a Schedule 1 controlled substance by the U.S. Drug Enforcement Agency under the Controlled Substances Act. And like the drug molecule EpidiolexÒ, which was recently approved by the FDA for marketing and sale for use in treating Dravet’s Syndrome and Lennox-Gasteau Syndrome (forms of child epilepsy), KLS-13023 would need to follow the guidance set forth by the CSA, complete a successful human clinical trial and apply for rescheduling, as was the case with EpidiolexÒ, now a Schedule 5 drug.

The Company plans on using KLS-13019 as its lead target drug candidate for the treatment of CIPN.

A priority therapeutic opportunity is the treatment of chemotherapy-induced peripheral neuropathy (CIPN), because to date no one drug or drug class is considered to be safe and effective in this disabling disease. Tricyclic antidepressants are often the first choice in most patients but are associated with significant side effects including sedation and cardiovascular complications as well as marginal efficacy (Wolf et al 2008). Anticonvulsants, despite their efficacy in animal models of CIPN, are only partially effective in the majority of patients (Bosnjak et al 2002).

Even more problematic, upwards of 80% of CIPN patients report using prescription opioids for pain management despite lacking strong evidence for efficacy and increasing safety concerns in the face of the current devastating opioid epidemic. The exact mechanism of CIPN has not been fully elucidated and can differ across classes of chemotherapeutic agents. It is therefore necessary to identify novel therapies to prevent or treat CIPN that target one or more of these putative mechanisms. Recently there has been resurgence in interest in the potential medical utility of the Cannabis plant and its constituents, and mechanism-based basic research is warranted to develop safe and effective cannabinoid-based pain treatments. CBD is a non-psychoactive component of Cannabis sativa that is neuroprotective, independent of cannabinoid receptors (Hampson 1998).

Prior studies at Temple University revealed that CBD prevents the development of paclitaxel-induced mechanical sensitivity in mice in vivo (Ward et al 2011, 2014). Additionally, CBD attenuates morphine reward and heroin seeking behavior in animal models (Ren, Whittard et al. 2009; Katsidoni, Anagnostou et al. 2013) and a small trial in humans suggests attenuation of heroin craving in humans (Hurd, Yoon et al. 2015). However, CBD has limitations in terms of potency, safety, and oral bioavailability. The Company believes it may be able to address these problems in its fully owned series of side chain modified derivatives, which have been protected in a non-provisional patent application WO2015/106108A2.

One of the molecules covered by the patent is KLS-13019, which in pre-clinical studies, including PK studies, has shown evidence of improved in vitro efficacy, improved safety, and improved oral bioavailability over CBD in side by side preclinical evaluation, and is not a controlled substance. (Pharmacological Comparisons Between Cannabidiol and KLS-13019, Journal of Molecular Neuroscience, 14 August 2018)

Preliminary Effects of KLS-13019 in CIPN model:In a preliminary study, we treated 8 mice with saline and 16 mice with paclitaxel (Days 1, 3, 5, and 7, 8.0 mg/kg IP). Half of the paclitaxel-treated mice were pretreated with KLS-13019 (2.5 mg/kg IP) and half were pretreated with its vehicle alone. On days 9, 14, and 21 post initiation of injections, mechanical sensitivity was tested using von Frey filaments and compared with baseline sensitivities prior to treatment (Fig. 3). One-way ANOVA revealed a significant effect of KLS-13019 on Day 14 to prevent the development of paclitaxel-induced mechanical sensitivity [F_{(2, 21)} = 4.67, p<0.05]. Dunnett’s multiple comparison’s test revealed a significant difference between the saline and paclitaxel treated groups, but not between the saline and KLS-13019+paclitaxel treated groups. Preliminary flow cytometry results with pooled cords from three mice in each group revealed that paclitaxel-treated mice had increased numbers of CD4+ T cells and microglia in the whole spinal cord, and that this increase is prevented by KLS-13019 treatment.

E1. Aim 1.Research Plan.Determine target for the neuroprotective actions of CBD and KLS-13019.As mentioned above, DRG neurons are a primary cytotoxic target of chemotherapeutic agents. In addition, spinal microglia have been heavily implicated in the development and maintenance of neuropathic pain and have shown to become activated in animal models of CIPN.At the conclusion of Aim 1, we will demonstrate that the neuroprotective properties can be reduced by pharmacological or gene knock-down of a relevant target in a statically significant manner.

E2. Aim 2.Assess KLS-13019, CBD, and morphine against paclitaxel-induced peripheral neuropathy.At the conclusion of Aim 2, we will have demonstrated that KLS-13019 performs as well as CBD (ip and po) against CIPN and CNS inflammation and shows no antinociceptive tolerance as compared to morphine.

CIPN procedure:Experiments are designed to test the efficacy of novel CBD analogues in attenuating established mechanical sensitivity and inflammation associated with CIPN. Dr. Ward’s laboratory has been using the CIPN procedure for eight years and has demonstrated that CBD treatment can both prevent the development of (Ward et al 2011, 2014) and reverse established (King et al in revision,British Journal of Pharmacology) CIPN in mouse models. CBD and KLS-13019 and their vehicle controls will be tested in groups of mice treated with paclitaxel (8.0 mg/kg IP, days 1, 3, 5 and 7). Testing of each dose for each molecule will require a final sample size of 8. Molecules will be administered daily for three weeks, starting on Day 11 when peak mechanical allodynia has already been achieved. In the initial study, CBD (0.05 - 5 mg/kg ip) will be compared with three doses of KLS-13019 (e.g., 0.05, 0.5 and 5 mg/kg ip) and three doses of morphine (1.0 – 10 mg/kg ip; Neelakantan et al 2016). This will be followed by a study in which KLS-13019 will be assessed at three oral doses. In preliminary studies, we have dosed the mice with KLS-13019 (2.5 - 5 mg/kg ip) with no adverse effects. In addition, KLS-13019 was shown to produce no impairment in the mouse rotorod test at 100 mg/kg po in studies conducted at the Anticonvulsant Screening Program (NIH).

Neuroinflammation assessment:Immunohistochemistry and flow cytometry will run in the PIs laboratory to evaluate markers of pain and inflammation associated with neuropathic pain, including astrocytic and microglial activation, CGRP, and T cell infiltration. Given the fact that we are observing CNS infiltration of T cells that is reversed by treatment with KLS-13019, cranial windows will be surgically implanted (as described in Ni, Tuma et al 2004) in additional groups of vehicle or KLS-13019 + paclitaxel treated mice prior to treatment to longitudinally assess the effect of paclitaxel with or without cannabinoid treatment on leukocyte rolling and adhesion across the development of CIPN.

E2. Aim 3.Assess KLS-13019 and CBD against reinstatement of morphine seeking.At the conclusion of Aim 3, we will have demonstrated that KLS-13019 attenuates opioid-seeking behavior as well as CBD.

Morphine Reinstatement:The Principal Investigator has 20 years of experience with behavioral assays with specific expertise in rodent models of substance abuse, including opioid self-administration. A standard rat model of morphine seeking will be used (Vassoler et al 2017) wherein rats make lever presses to receive infusions of morphine. Rats will be surgically implanted with chronically indwelling jugular catheters and trained to self-administer morphine (0.75 mg/kg/inf) in the presence of auditory and visual cues daily for 20 days, followed by 10 days of extinction wherein the morphine is replaced with saline and the conditioned cues are eliminated. During the last three days of extinction, rats will be treated with vehicle, CBD (5.0 mg/kg IP), or KLS-13019 (0.5 – 5.0 mg/kg IP). The following day rats will be exposed to a single reinstatement session wherein lever presses are again paired with auditory and visual cues but saline is delivered instead of morphine. This experimental design is based on Ren et al 2009 results with CBD on cue-induced reinstatement of heroin seeking in rats.

Status of Phase 1 STTR Grant Research

On January 4, 2017, the Company applied for a Phase 1 Small Business Technology Transfer (“STTR”) grant from the National Institutes of Health. This grant application was made in collaboration with Temple University and titled “Development of KLS-13019 for Chemotherapy Induced Peripheral Neuropathy and Drug Dependence”. In December 2017, the Company was informed that the Phase 1 grant was awarded.

The Company has completed all of its work related to the aforementioned grant and is currently in a peer review submission of its research results to the Journal of Molecular Neuroscience. Temple University has completed two of the three aims outlined in the grant proposal and is currently in the process of completing the third and final aim, morphine reinstatement. The Company believes that the grant study will be completed on or about June 2019 and the results will be published by Temple University. 

The Company and Temple University believe that there is strong potential for a follow on Phase 2 STTR grant to further the research and development of the Company’s treatment for CIPN.  Phase 2 is focused on the development, demonstration and delivery of the innovation. Only Phase 2 contract awardees are eligible to submit a proposal for a Phase II funding agreement.

Reduction in Addiction Based Opiate Dependency

The abuse of and addiction to opioids such as heroin, morphine, and prescription pain relievers is a serious global problem that affects the health, social, and economic welfare of all societies. It is estimated that between 26.4 million and 36 million people abuse opioids worldwide, with an estimated 2.1 million people in the United States suffering from substance use disorders related to prescription opioid pain relievers in 2012 and an estimated 467,000 addicted to heroin. The consequences of this abuse have been devastating and are on the rise. For example, the number of unintentional overdose deaths from prescription pain relievers has soared in the United States, more than quadrupling since 1999. There is also growing evidence to suggest a relationship between increased non-medical use of opioid analgesics and heroin abuse in the United States. SeeAmerica’s Addiction to Opioids: Heroin and Prescription Drug Abuse – N.D. Volkow, MD, Senate Caucus on International Narcotics Control, May 14, 2014.

NIDA Activities to Stem the Tide of Prescription Opioid and Heroin Abuse

The National Institute on Drug Abuse (“NIDA”) first launched its prescription drug abuse public health initiative in 2001. Our evidence-based strategy calls for a comprehensive three-pronged approach consisting of (1) enhancing our understanding of pain and its management; (2) preventing overdose deaths; and (3) effectively treating opioid addiction.

Research on Pain and Next Generation Analgesics

Although opioid medications effectively treat acute pain and help relieve chronic pain for some patients, their addiction risk presents a dilemma for healthcare providers who seek to relieve suffering while preventing drug abuse and addiction. Little is yet known about the risk for addiction among those being treated for chronic pain or about how basic pain mechanisms interact with prescription opioids to influence addiction potential. To better understand this, NIDA launched a research initiative on "Prescription Opioid Use and Abuse in the Treatment of Pain." This initiative encourages a multidisciplinary approach using both human and animal studies to examine factors (including pain itself) that predispose or protect against opioid abuse and addiction. Funded grants cover clinical neurobiology, genetics, molecular biology, prevention, treatment, and services research. This type of information will help develop screening and diagnostic tools that physicians can use to assess the potential for prescription drug abuse in their patients. Because opioid medications are prescribed for all ages and populations, NIDA is also encouraging research that assesses the effects of prescription opioid abuse by pregnant women, children, and adolescents, and how such abuse in these vulnerable populations might increase the lifetime risk of substance abuse and addiction.

Another important initiative pertains to the development of new approaches to treat pain. This includes research to identify new pain relievers with reduced abuse, tolerance, and dependence risk, as well as devising alternative delivery systems and formulations for existing drugs that minimize diversion and abuse (e.g., by preventing tampering and/or releasing the drug over a longer period of time) and reduce the risk of overdose deaths. New molecules are being developed that exhibit novel properties as a result of their combined activity on two different opioid receptors (i.e.,mu and delta). Pre-clinical studies show that these molecules can induce strong analgesia but fail to produce tolerance or dependence. Researchers are also getting closer to developing a new generation of non–opioid-based medications for severe pain that would circumvent the brain reward pathways, thereby greatly reducing abuse potential. This includes molecules that work through a type of cannabinoid receptor found primarily in the peripheral nervous system. NIDA is also exploring the use of non-medication strategies for managing pain.

An example is the use of “neurofeedback,” a novel modality of the general biofeedback approach, in which patients learn to regulate specific regions in their brains by getting feedback from real-time brain images. This technique has shown promising results for altering the perception of pain in healthy adults and chronic pain patients and could even evolve into a powerful psychotherapeutic intervention capable of rescuing the circuits and behaviors impaired by addiction.

PRIMARY TARGETS FOR TOPICAL MEDICAMENTS AND MARKET SIZE

The Company plans on screening and conducting preliminary research and development of some of its patented, proprietary cannabidiol-derived new chemical entities (“NCEs”), for use as topical solutions, ointments, and creams for disorders such as diabetic neuropathies, diabetic ulcers, and for use as an anti-pruritic. (see: Business – Kannalife Intellectual Properties) 

In preclinical testing, certain molecules under Pat. 9,611,213 were screened for neuroprotection and may have the potential mechanism of action for reducing inflammation and neuropathic pain. These molecules indicate that they are more soluble than cannabidiol, also deemed a neuroprotectant with potential anti-inflammatory properties. A molecule that is potentially more water soluble than cannabidiol in this regard may be good candidate(s) for use in topical applications.

Neuropathic Pain, Anti-Inflammation, Anti-Pruritic & Skin Ulcers

Target 1:Anti-Puritics (Anti-Itch) – $16+ Billion Market in U.S.

Global Pruritus Therapeutics Market is expected to reach USD 16.38 Billion by 2025, according to a new study by Grand View Research, Inc. Growing worldwide prevalence of atopic dermatitis, allergic contact dermatitis and urticaria is expected to drive market growth during the forecast period. Introduction of new products based on scientific mechanistic understanding such as the identification of new T-cell subsets, particularly Th17, and Th22 and the patent expiration of PROTOPIC (tacrolimus) is expected to open up new avenues for manufacturers to capitalize on over the forecast period.

Corticosteroids were the leading product segment in 2013 owing to high efficacy exhibited by this class of drugs in treating pruritic conditions by reducing inflammation and itching. Topical applications of corticosteroids have been found to be extremely effective in the treatment and maintenance therapies pertaining to pruritus.

Itching is a sensation that, if sufficiently strong, will provoke scratching or the desire to scratch. It is a frequent and distressing symptom of various dermatological and systemic diseases. It can also occur in some patients without any skin symptoms. Knowledge has accumulated about the initiation of itch by external stimuli, but the neuronal substrate in the skin has not been completely identified. This has fortunately changed to some degree since a group of histamine-sensitive C-fibers were recently identified, which probably represent the afferent units that mediate itch sensations. Histamine, derived from mast cells, is the best known pruritogen. It induces different degrees of itching when applied in different concentrations into the skin. In most dermatological and systemic diseases, except urticaria, histamine is not the main mediator. There are other proinflammatory mediators to consider such as substance P, proteases, interleukin-2, acetylcholine, vasoactive intestinal peptide (VIP) and opioid peptides. The different types of pruritus (see Table 2) have different etiological factors, which in most cases have not yet been clarified. As well, the mechanisms of excitatory and inhibitory processing in the central nervous system are not defined. SeeSystemic Drugs with Antipruritic Potency – E. Weisshar, MD, H. Gollnick, MD, PhD., Departments of Dermatology and Venerology, Otto-von-Guericke-University, Magdeburg, Germany, Skin Therapy Letter, Vol. 5 Number 5

Calcineurin inhibitor is identified as the most lucrative segment of the market on account of high usage rate of these drugs in combination therapy for the treatment of pruritus in patients suffering from chronic pruritus and growing market penetration rates. Moreover, the introduction of new products such as Pimecrolimus cream and Tacrolimus ointment is expected to further drive this market. 

Anti-histamines owing to its growing use as a first line treatment and presence of drugs in pipeline with expected commercialization is also expected to grow at a healthy rate during the forecast period. 

North America led the overall market in terms of revenue in 2013 majorly on account of the presence of high prevalence of diseases associated with pruritus, introduction of new products targeting the unmet medical needs and growing patient awareness levels. 

The Asia Pacific pruritus therapeutics market is expected to grow at a CAGR of over 5.0% during the forecast period. Presence of high unmet healthcare needs and increasing prevalence of allergic contact dermatitis and urticaria in this region are some factors attributing to its rapid growth rate. 

Some key participants of the pruritus therapeutics market include Sanofi, Pfizer, Tai Guk Pharmaceutical Company, Actavis, Trevi Therapeutics, Cara Therapeutics, Ocera Therapeutics Inc. and NeRRe Therapeutics. 

Manufacturers adhere to rigorous R&D in an attempt to develop cost effective products and avoid barriers such as product recalls. In addition, this strategy is implemented keeping the unmet needs in consideration. For Instance, Creabilis has a molecule in the pipeline – CT327, which caters to the unmet needs associated with pruritus in patients suffering from psoriasis.  

Target 2:Anti Inflammatory– $80+ Billion Market in U.S.

Anti-Inflammatory Therapeutics Market is expected to garner $106.1 billion by 2020, registering a CAGR of 5.9% during the forecast period 2015-2020. Inflammation is triggered by the defense system of the body in response to harmful stimuli, damaged cells, irritants and microorganisms. Inflammation is the mechanism of innate immunity, which seeks to eliminate the cause of injury, clear dead and necrotic cells and heal injured tissues. Sometimes, the body defense system inappropriately triggers inflammation against its own cells, resulting in incurable inflammatory autoimmune diseases such as arthritis, asthma and chronic obstructive pulmonary disease (COPD). SeeAnti-Inflammatory Therapeutics Market by Indication (Arthritis, Respiratory Diseases, Multiple Sclerosis, Psoriasis, Inflammatory Bowel Disease) and Drug Class (Anti-Inflammatory Biologics, Non-Steroidal Anti-Inflammatory Drugs (NSAIDs), Corticosterioids) – Global Opportunity Analysis and Industry Forecast, 2014-2020 – O. Sumant, Allied Market Research – September 2015.

According to World Health Organization (WHO), approximately 235 million people suffer from asthma in the world. Symptomatic relief during the inflammation provides relief to the patients suffering from inflammatory autoimmune diseases. Although there are multiple anti-inflammatory drugs approved in the market, there is an indispensable need for better and novel anti-inflammatory therapeutics with lesser side effects and better efficacy.

In addition, they are also difficult to imitate due to their complex molecular structure and origin. The global anti-inflammatory market has been driven by factors such as increasing autoimmune and respiratory conditions, new drugs in pipeline and increasing adoption of anti-inflammatory drugs.

Moreover, increasing awareness of anti-inflammatory therapeutics and attractive government initiatives in the Asia-Pacific and LAMEA region are expected to drive the market during the analysis period. Factors, such as side effects of anti-inflammatory drugs and patent expiry issues of blockbuster drugs (such as Remicade), are known to impede the market growth.

The global anti-inflammatory therapeutics market is segmented on the basis of indication, drug class and geography. The indications considered in this report include arthritis, respiratory diseases, multiple sclerosis, psoriasis, inflammatory bowel disease and other inflammatory diseases. Among indications, arthritis holds tremendous potential for growth accounting for 38.2% of the global anti-inflammatory therapeutics market. Anti-inflammatory biologics are the most preferred drugs for treatment of arthritis. On the basis of drug class, the market is segmented into anti-inflammatory biologics, non-steroidal anti-inflammatory drugs (NSAIDs) and corticosteroids. Anti-inflammatory biologics holds the largest share among drug classes accounting for 54.8% share of the global anti-inflammatory therapeutics market, and is expected grow rapidly during the forecast period.

Geographically, the market is segmented into four regions namely North America, Europe, Asia-Pacific and LAMEA. Among regions, North America holds the largest share accounting for 45.7% share of the global anti-inflammatory therapeutics market; however, the Asia-Pacific region is expected to exhibit the fastest growth during the forecast period. Major market players have adopted innovative strategies such novel drug development and product launch (novel and indication expansion) to increase their market presence. In 2014, AstraZeneca had five anti-inflammatory drugs in the final stages of drug development. These drugs are lesinurad, sifalimumab, anifrolumab, mavrilimumab and brodalumab. The companies have filed new patents to overcome the issues of patent expiries of their existing drugs, and to gain a prominent market share. The key companies profiled in this report include Pfizer, Inc., Abbvie, Inc., Johnson & Johnson, GlaxoSmithKline, Merck & CO., Inc., Novartis, F. Hoffman, La Roche AG, Eli Lily and Company, AstraZeneca PLC, and Amgen.

Target 3:Eczema – $3+ Billion Market in U.S.

They estimated the global eczema therapeutics market to value $2.035 billion in 2010. It is expected to grow a Molecule Annual Growth Rate (CAGR) of 8.2% to $3.834 billion by 2018. This growth is primarily attributed to an increased prevalence rate and increased patient awareness of the disease pattern. In 2010, the prevalence of eczema reported in seven major geographies (the US, the UK, Germany, France, Spain, Italy and Japan), was between 10-20%. GlobalData expects that the number of eczema patients will increase, along with an increase in prevalence. SeeEczema Therapeutics Market is Forecast to Show Significant Growth Until 2018 – February 23, 2012, ASDMedia BV, Amsterdam.

Some factors associated with an increased risk of eczema include environmental factors, hygiene conditions, lack of awareness and levels of education. In the pipeline, presence of novel molecules with improved safety, efficacy and tolerability is expected to further drive the market during the forecast period. However, an increase in product competition due to genericization is a barrier for the market which will decrease the growth over the forecast period in comparison to historic growth.

Another factor that could restrain the market is that patients are opting for alternative therapies over conventional therapies. Different forms of complementary or alternative treatment options for eczema are meant to compliment drug treatment, not replace them. Complementary or alternative medicine can be classified as herbal therapies (treatments using plant species), and nonherbal therapies, such as homeopathy, acupuncture and aromatherapy. The most commonly used herbal formulations are based on Traditional Chinese Medicines (TCM). Increasing acceptance of these therapies is proving to be a negative growth factor for existing therapeutics products. Globally, the US is the major contributor to the overall eczema therapeutics market, followed by Japan.

The Eczema Therapeutics Market is Dominated by Topical Corticosteroids (TCSs)

Current competition in the eczema therapeutics market is weak. The market contains conventional forms of therapy such as topical corticosteroids, topical immunomodulators and emollients as the most prominent therapies. Among all the available treatment options, topical corticosteroids hold a large share and dominate the market. Topical corticosteroids are available in various strengths (mild, moderate, potent and very potent) and formulations (ointment, cream, lotion and many more), so that they can be used according to the severity of eczema. Calceurin inhibitors (Protopic (tacrolimus) and Elidel (pimecrolimus)) showed higher efficacy in comparison to corticosteroids and these products were widely used after their respective launches. However, in 2005 the FDA issued black box warnings for the calceurin inhibitors (Protopic and Elidel), this has resulted in declining sales of these products. Emollients have good efficacy as well as good safety. They hydrate, moisturize and repair the skin. These products do not offer first line treatment but they are useful as maintenance therapy in eczema patients.

Strong Pipeline Molecules Would Lead to a Significant Impact in the Eczema Therapeutics Market in Forecast Period

The analyze that the eczema therapeutics pipeline is strong; with 65 molecules in various stages of clinical development. Out of these molecules, one molecule is in filed stage, four molecules are in Phase III. 32 molecules are in Phase II, seven in Phase I and 21 molecules are in preclinical stage. There are 41 FIC, six me-too, one product extension and one generic molecule in the total pipeline. Research is prominent in Phase II, which contains 19 FIC, five me-too and one product extension. Only one molecule is in filed stage; the LAS41002, which belongs to me-too class. These novel molecules target unmet need through the provision of better safety and efficacy profiles.

Significant Unmet Need in Eczema Therapeutics Market Could Drive Market

Eczema is a chronic condition characterized by frequent relapses known as flare-ups. The market has various products which are effective, but their safety profile is not always satisfactory, leaving a significant unmet need in the market. The unmet need is also a result of the lack of effective treatment options for severe conditions; the need for a controlled and targeted drug delivery system; low patience compliance and the black box warnings issued to Elidel and Protopic. The unmet need in eczema therapeutics could be filled by a new entrant with a better safety profile; enhanced patient compliance and competitive pricing with respect to the available products.

TNF-α inhibitors were the first class of biologics that succeeded in delivering clinical improvements to moderate to severe psoriasis patients while still having manageable safety profiles. Enbrel was the first TNF-α inhibitor to be approved (2004), followed by Remicade (2006) and Humira (2008). Within a span of five years before the next biologic with a new mode of action became available in the United States, the psoriasis market skyrocketed from $700 M (2003) to $2 B (2009). In 2009, biologics accounted for 70% of total sales in psoriasis.

This was primarily driven by these agents’ potent efficacy, and increasing physician familiarity and comfort with the use of biologics, which elevated the overall biologic treatment rate. Among the TNF-α inhibitors approved for psoriasis, Remicade is the most effective as measured by PASI 75 response rates at 3 months, while Enbrel is slightly weaker than the rest of the agents in this class. Although Humira was the third TNF-α inhibitor approved for psoriasis in the United States, it quickly gained market share on the strengths of its positive clinical profile, subcutaneous formulation compared with intravenous formulation for Remicade, and more-convenient dosing schedule compared with Enbrel (every other week instead of once or twice weekly).

On the safety side, Enbrel is generally considered the safest TNF-α inhibitor, which has helped maintain its preferred first-line biologic position among some dermatologists.

In a 2008 study titled “Mediation of Cannabidiol Anti-inflammation in the Retina by Equilibrative Nucleoside Transporter and A2A Adenosine Receptor”, published in Investigative Ophthalmology & Visual Science, cannabidiol was evaluated for adenosine signaling and the release of TNF-α.

Target 4:Psoriasis – $5+ Billion Market in U.S.

Psoriasis is a common chronic skin disorder affecting approximately 9.3 million Americans. It is also associated with several comorbidities such as obesity, hypertension, psoriatic arthritis, depression, and diabetes. Psoriasis is characterized by skin flares and inflammation that vary in severity, from minor localized patches to substantial body surface involvement. Around 20% of diagnosed patients have moderate to severe psoriasis. Currently, in the United States, psoriasis is a $5 billion market, of which 90% are from drugs targeting moderate to severe psoriasis patients where the skin manifestation affects more than 3% of the body. SeeTreatment of Psoriasis in Adults – Steven R. Feldman, MD, PhD, August 24, 2018. For such patients, psoriasis is often a debilitating condition impacting their quality of life and psychological well-being. Over the past decade, biologics have altered the landscape in the management of moderate to severe psoriasis by achieving improved skin clearance, control of symptoms and quality of life for hundreds of thousands of individuals affected.

Psoriasis is linked to pathogenesis caused by dysregulation of T-cell-dependent immune response, as well as hyperproliferation of keratinocytes, the predominant cell type on the outer layer of skin. Biologics target the cytokines usually upregulated as a result of the abnormal immune response. Currently, there are six FDA-approved biologics for the treatment of psoriasis belonging to three separate drug classes: TNF-α inhibitors including Humira (adalimumab, AbbVie), Enbrel (etanercept, Amgen), and Remicade (infliximab, Janssen Biotech), the IL-12/23 inhibitor Stelara (ustekinumab, Janssen Biotech), and the IL-17 inhibitors Cosentyx (secukinumab, Novartis) and Taltz (ixekizumab, Elli Lilly). Two biologics, Amevive (alefacept, Astellas Pharma) and Raptiva (efalizumab, Merck Serono), initially approved for psoriasis in 2003 were withdrawn from the market in 2011 and 2009 respectively due to insufficient response in patients on Amevive and safety concerns with Raptiva. SeeBiologics continue to flare up the psoriasis market, indicating opportunities in the larger dermatology space – Decision Resources Group – DRG Blog.

Target 5:Diabetic Foot Ulcers – $3+ Billion Market in U.S.

The market for Diabetic Foot Ulcers in the U.S. is $3+ billion and growing. There are 29 million people living with diabetes and 86 million pre-diabetics in the U.S. Approximately 25% of diabetics will acquire a non-healing ulcer in their lifetime which equates to approximately 3 million diabetic ulcers annually. Diabetic foot ulcers lead to over 73,000 amputations annually at a cost that is estimated to exceed $5 billion annually. Hospitalization costs are approximately $20,000 per patient with diabetic foot ulcers and $70,000 for an amputation. The global numbers are more startling. 400 million people are currently living with diabetes worldwide and that number is expected to increase to approximately 600 million by 2035.

The current approach to treating diabetic foot ulcers requires offloading the wound by using appropriate therapeutic footwear,daily saline or similar dressings to provide a moist wound environment,debridement when necessary, antibiotic therapy if osteomyelitis or cellulitis is present,optimal control of blood glucose, and evaluation and correction of peripheral arterial insufficiency. Wound coverage by cultured human cellsor heterogeneic dressings/grafts, application of recombinant growth factors,and hyperbaric oxygen treatments also may be beneficial at times, but only if arterial insufficiency is not present. Among people with diabetes, most severe foot infections that ultimately require some part of the toe, foot or lower leg to be amputated start as a foot ulcer. SeeDiabetic Ulcers Treatment & Management, V.L. Rowe, MD, R. Khardori MD, PhD, FACP, Medscape, March 12, 2018.

Foot ulcers are especially common in people who have one or more of the following health problems:

Peripheral neuropathy. This is nerve damage in the feet or lower legs. Diabetes is the most common cause of peripheral neuropathy. When nerves in the feet are damaged, they can no longer warn about pain or discomfort. When this happens, tight-fitting shoes can trigger a foot ulcer by rubbing on a part of the foot that has become numb. People with peripheral neuropathy may not be able to feel when they've stepped on something sharp or when they have an irritating pebble in their shoes. They can injure their feet significantly and never know it, unless they examine their feet routinely for injury. 

Many elderly people and diabetics with vision problems also can't see their feet well enough to examine them for problems.

Circulatory problems. Any illness that decreases circulation to the feet can cause foot ulcers. Less blood reaches the feet, which deprives cells of oxygen. This makes the skin more vulnerable to injury. And it slows the foot's ability to heal. 

Poor circulation in the leg arteries is called peripheral artery disease. It also causes pain in the leg or buttock during walking. It is caused by atherosclerosis. This is a disease in which fatty deposits of cholesterol build up inside arteries.

Abnormalities in the bones or muscles of the feet. Any condition that distorts the normal anatomy of the foot can lead to foot ulcers. This is particularly true if the foot is forced into shoes that don't fit the foot's altered shape. Examples are claw feet, feet with fractures, and cases of severe arthritis. 

More than any other group, people with diabetes have a particularly high risk of developing foot ulcers. This is because the long-term complications of diabetes often include neuropathy and circulatory problems. Without prompt and proper treatment, a foot ulcer may require hospital treatment. Or, it may lead to deep infection or gangrene and amputation. 

Governmental Regulations

Manufacturing

Although the Company would be reliant upon the manufacturing of its target drug candidate and API from well-established manufacturers, manufacturers of therapeutic products and their facilities are subject to continual review and periodic inspections by the FDA, the EMA and other comparable foreign regulatory authorities for compliance with current good manufacturing practices (“cGMP”) regulations.

Further, manufacturers of controlled substances must obtain and maintain necessary DEA and state registrations and registrations with applicable foreign regulatory authorities and must establish and maintain processes to ensure compliance with DEA and state requirements and requirements of applicable foreign regulatory authorities governing, among other things, the storage, handling, security, recordkeeping and reporting for controlled substances.

If we or a regulatory agency discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory agency may impose restrictions on that product, the manufacturing facility or us, including requiring recall or withdrawal of the product from the market or suspension of manufacturing. If we, our product candidates or the manufacturing facilities for our product candidates fail to comply with applicable regulatory requirements, a regulatory agency may, among other things:

issue untitled letters or warning letters;  

mandate modifications to promotional materials or require us to provide corrective information to healthcare practitioners;  

require us to enter into a consent decree, which can include imposition of various fines, reimbursements for inspection costs, required due dates for specific actions and penalties for noncompliance;  

seek an injunction or impose civil or criminal penalties or monetary fines;  

suspend or withdraw regulatory approval;  

suspend any ongoing clinical trials;  

refuse to approve pending applications or supplements to applications filed by us; or  

require us to initiate a product recall.

The occurrence of any event or penalty described above may inhibit our ability to commercialize our product candidates and may otherwise have a material adverse effect on our business, financial condition and results of operations.

Regulation of CBD

KLS-13023 contains controlled substances as defined in the CSA. Controlled substances that are pharmaceutical products are subject to a high degree of regulation under the CSA, which establishes, among other things, certain registration, manufacturing quotas, security, recordkeeping, reporting, import, export and other requirements administered by the DEA. The DEA classifies controlled substances into five schedules: Schedule I, II, III, IV or V substances. Schedule I substances by definition have a high potential for abuse, have no currently “accepted medical use” in the United States, lack accepted safety for use under medical supervision, and may not be prescribed, marketed or sold in the United States. Pharmaceutical products approved for use in the United States may be listed as Schedule II, III, IV or V, with Schedule II substances considered to present the highest potential for abuse or dependence and Schedule V substances the lowest relative risk of abuse among such substances. Schedule I and II drugs are subject to the strictest controls under the CSA, including manufacturing and procurement quotas, security requirements and criteria for importation. In addition, dispensing of Schedule II drugs is further restricted. For example, they may not be refilled without a new prescription.

While Cannabis is a Schedule I controlled substance, products approved for medical use in the United States that contain Cannabis or Cannabis extracts must be placed in Schedules II - V, since approval by the FDA satisfies the “accepted medical use” requirement. If and when KLS-13023 receives FDA approval, the DEA will make a scheduling determination and place it in a schedule other than Schedule I in order for it to be prescribed to patients in the United States. If approved by the FDA, we expect the finished dosage forms of KLS-13023 to be listed by the DEA as a Schedule II or III controlled substance. Consequently, their manufacture, importation, exportation, domestic distribution, storage, sale and legitimate use will be subject to a significant degree of regulation by the DEA. The scheduling process may take one or more years beyond FDA approval, thereby significantly delaying the launch of KLS-13023. Furthermore, if the FDA, DEA or any foreign regulatory authority determines that KLS-13023 may have potential for abuse, it may require us to generate more clinical data than that which is currently anticipated, which could increase the cost and/or delay the launch of KLS-13023.

Because KLS-13023 contains active ingredients of Cannabis, which are Schedule I substances, to conduct pre-clinical studies and clinical trials with KLS-13023 in the United States prior to approval, each of our research sites must submit a research protocol to the DEA and obtain and maintain a DEA researcher registration that will allow those sites to handle and dispense KLS-13023 and to obtain the product from our manufacturer. If the DEA delays or denies the grant of a research registration to one or more research sites, the pre-clinical studies or clinical trials could be significantly delayed, and we could lose and be required to replace clinical trial sites, resulting in additional costs.

We expect that KLS-13023 will be scheduled as Schedule II or III, as a result of which we will also need to identify wholesale distributors with the appropriate DEA registrations and authority to distribute the products to pharmacies and other healthcare providers, and these distributors would need to obtain Schedule II or III distribution registrations. The failure to obtain, or delay in obtaining, or the loss of any of those registrations could result in increased costs to us. If KLS-13023 is a Schedule II drug, pharmacies would have to maintain enhanced security with alarms and monitoring systems and they must adhere to recordkeeping and inventory requirements. This may discourage some pharmacies from carrying the product. Furthermore, state and federal enforcement actions, regulatory requirements, and legislation intended to reduce prescription drug abuse, such as the requirement that physicians consult a state prescription drug monitoring program, may make physicians less willing to prescribe, and pharmacies to dispense, Schedule II products.

We may manufacture the commercial supply of KLS-13023 outside of the United States. If KLS-13023 is approved by the FDA and classified as a Schedule II or III substance, an importer can import for commercial purposes if it obtains from the DEA an importer registration and files an application with the DEA for an import permit for each import. The DEA provides annual assessments/estimates to the International Narcotics Control Board which guides the DEA in the amounts of controlled substances that the DEA authorizes to be imported. The failure to identify an importer or obtain the necessary import authority, including specific quantities, could affect the availability of KLS-13023 and have a material adverse effect on our business, results of operations and financial condition. In addition, an application for a Schedule II importer registration must be published in the Federal Register, and there is a waiting period for third party comments to be submitted.

Individual states have also established controlled substance laws and regulations. Though state-controlled substance laws often mirror federal law, because the states are separate jurisdictions, they may separately schedule our product candidates as well. While some states automatically schedule a drug based on federal action, other states schedule drugs through rulemaking or a legislative action. State scheduling may delay commercial sale of any product for which we obtain federal regulatory approval and adverse scheduling could have a material adverse effect on the commercial attractiveness of such product. We or our partners must also obtain separate state registrations, permits or licenses in order to be able to obtain, handle, and distribute controlled substances for clinical trials or commercial sale, and failure to meet applicable regulatory requirements could lead to enforcement and sanctions by the states in addition to those from the DEA or otherwise arising under federal law.

We currently obtain the API for KLS-13023 from a bulk manufacturer of pharmaceutical grade API in Switzerland. For KLS-13023, we plan to conduct Phase 1 clinical trials in Australia, subject to applicable regulatory approval. In addition, we may decide to develop, manufacture or commercialize our product candidates in additional countries. As a result, KLS-13023 will also be subject to controlled substance laws and regulations from the Therapeutic Goods Administration in Australia, Health Canada’s Office of Controlled Substances in Canada, and from other regulatory agencies in other countries where we may develop, manufacture or commercialize KLS-13023 in the future. We plan to submit NDA for KLS-13023 to the FDA upon completion of all requisite clinical trials and will require additional DEA approvals at such time as well.

September 27, 2018,the Department of Justice and Drug Enforcement Administration announced that Epidiolex, the newly approved medication by the Food & Drug Administration, is being placed in Schedule V of the Controlled Substances Act, the least restrictive schedule of the CSA. On June 26 2018, the FDA announced it approved Epidiolex for the treatment of seizures associated with two rare and severe forms of epilepsy, Lennox-Gastaut syndrome and Dravet syndrome, in patients two years of age and older.Epidiolex contains cannabidiol (CBD), a chemical constituent of the cannabis plant (commonly referred to as marijuana).

The CBD in Epidiolex is extracted from the cannabis plant and is the first FDA-approved drug to contain a purified extract from the plant. Schedule V drugs represents the least potential for abuse.Schedule V drugs, substances, or chemicals are defined as drugs with lower potential for abuse than Schedule IV and consist of preparations containing limited quantities of certain narcotics. Schedule V drugs are generally used for antidiarrheal, antitussive, and analgesic purposes. Some examples of Schedule V drugs are: cough preparations with less than 200 milligrams of codeine or per 100 milliliters (Robitussin AC), Lomotil, Motofen, Lyrica, Parepectolin.

Despite the approvals by the FDA and DEA for Epidiolex, any of these foregoing factors, many of which are beyond our control, could jeopardize our ability to obtain regulatory approval for and successfully market KLS-13019 or KLS-13023. Moreover, because our business is almost entirely dependent upon these two product candidates, any such setback in our pursuit of regulatory approval would have a material adverse effect on our business and prospects. 

KLS-13019 does not contain cannabidiol and is a new chemical entity that would not fall under the Controlled Substances Act (“CSA”) or be deemed a Schedule 1 controlled substance. 

KLS-13023 is a formulation that does contain cannabidiol. At present, cannabidiol is deemed a Schedule 1 controlled substance by the U.S. Drug Enforcement Agency under the Controlled Substances Act. And like the drug molecule EpidiolexÒ, which was recently approved by the FDA for marketing and sale for use in treating Dravet’s Syndrome and Lennox-Gasteau Syndrome (forms of child epilepsy), KLS-13023 would need to follow the guidance set forth by the CSA, complete a successful human clinical trial and apply for rescheduling, as was the case with EpidiolexÒ, now a Schedule 5 drug.

On January 14, 2019, the Company received written notice from the Drug Enforcement Administration (“DEA”) Drug and Chemical Evaluation Section, as follows: “Please be advised that your material meets the definition of ‘Hemp’ and is not regulated under the CSA, as long as it consists of high purity Cannabidiol (CBD) that contains approximately 0.1% delta-9- THC. (However, if it contains more than 0.3% delta-9 THC, it is considered ‘Marihuana’ and would be in Schedule 1 of the CSA).” While this notice is an official notice from the DEA regarding the scheduling of high purity CBD, the Company will continue to abide by the CSA in all respects with regards to its treatment and handling of CBD.

Foreign Regulatory Agencies

EMA

In order to market and sell our products in jurisdictions other than the United States and the European Union, we must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The regulatory approval process outside the United States and the European Union generally includes all of the risks associated with obtaining FDA and EMA approval, but can involve additional testing. We may need to partner with third parties in order to obtain approvals outside the United States and the European Union. In addition, in many countries worldwide, it is required that the product be approved for reimbursement before the product can be approved for sale in that country. We may not obtain approvals from regulatory authorities outside the United States and the European Union on a timely basis, if at all. Even if we were to receive approval in the United States or the European Union, approval by the FDA or the EMA does not ensure approval by regulatory authorities in other countries or jurisdictions. Similarly, approval by one regulatory authority outside the United States and the European Union would not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA or the EMA. We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our products in any market. If we are unable to obtain approval of our product candidates by regulatory authorities in other foreign jurisdictions, the commercial prospects of those product candidates may be significantly diminished and our business prospects could decline.

Therapeutic Goods Administration (TGA)

Clinical trials conducted in Australia are subject to various regulatory controls to ensure the safety of participants. The TGA regulates the use of therapeutic goods supplied in clinical trials in Australia under the therapeutic goods legislation. 

Clinical trial sponsors must be aware of the requirements to import, export, manufacture and supply therapeutic goods in Australia. The following avenues provide for the importation into and/or supply in Australia of 'unapproved' therapeutic goods for use in a clinical trial: 

Clinical Trial Notification (CTN) scheme; and 

Clinical Trial Exemption (CTX) scheme. 

The CTN Scheme is a notification process involving the following:

The Australian clinical trial sponsor must notify us of the intent to sponsor a clinical trial involving an 'unapproved' therapeutic good. This must take place before starting to use the goods. The notification form must be submitted online and accompanied by the relevant fee. 

We may give the sponsor of the trial written notice to provide specified information relating to goods notified in the CTN form. 

We do not evaluate any data relating to the clinical trial at the time of submission. The Human Research Ethics Committee (HREC) reviews the scientific validity of the trial design, the balance of risk versus harm of the therapeutic good, the ethical acceptability of the trial process, and approves the trial protocol. The HREC is also responsible for monitoring the conduct of the trial. 

The institution or organization at which the trial will be conducted, referred to as the 'Approving Authority', gives the final approval for the conduct of the trial at the site, having due regard to advice from the HREC. 

It is the responsibility of the sponsor to ensure that all relevant approvals are in place before supplying the 'unapproved' therapeutic goods in the clinical trial. 

The CTX Scheme is anapproval process involving the following:

A sponsor submits an application to us seeking approval to supply 'unapproved' therapeutic goods in a clinical trial. The application must be accompanied by the relevant fee. 

We evaluate summary information about the product including relevant, but limited, scientific data (which may be preclinical and early clinical data) prior to the start of a trial. 

The HREC is responsible for considering the scientific and ethical issues of the proposed trial protocol. 

The sponsor must notify us of each trial conducted using the unapproved therapeutic good(s) approved in the CTX application. 

Clinical trials that do not involve 'unapproved' therapeutic goods are not subject to requirements of the CTN or CTX schemes. It is the responsibility of the Australian clinical trial sponsor to determine whether a product is considered an 'unapproved' therapeutic good. 

Clinical trials that do not involve 'unapproved' therapeutic goods are not subject to requirements of the CTN or CTX schemes. It is the responsibility of the Australian clinical trial sponsor to determine whether a product is considered an 'unapproved' therapeutic good. 

On September 27, 2013, the TGA approved Nabiximols (Sativex®), a pharmaceutical manufactured by GW Pharmaceuticals for its collaborator Novartis Pharmaceuticals Australia Pty Limited in the treatment for symptom improvement in patients with moderate to severe spasticity due to multiple sclerosis (MS) who have not responded adequately to other anti-spasticity medication and who demonstrated clinically significant improvement in spasticity related symptoms during the initial trial of therapy. 

In Australia, in 2014, the Advisory Council on Medicines Scheduling recommended rescheduling cannabidiol from a prohibited substance to being a prescription medicine because, according to the Advisory Council on Medicines Scheduling, “there is a low risk of misuse or abuse as cannabidiol does not possess psychoactive properties”. The TGA accepted this recommendation and the decision took effect in July 2015. 

Cannabidiol (CBD) is one of the cannabinoids which may be extracted as a therapeutic good from cannabis. From 1 June 2015, cannabidiol has been included under Schedule 4 (S4) Prescription Only Medicine of the Poisons Standard (/publication/poisonsstandard-susmp) when preparations for therapeutic use contain 2% or less of other cannabinoids found in cannabis. 

In February 2016, the Australian Federal Government passed legislation that amended the Narcotic Drugs Act, allowing the supply of suitable medicinal cannabis products for the management of painful and chronic conditions⁸. This legislation does not relate to the decriminalization of cannabis for general cultivation or recreational use and it does not include the provision of medicinal grade herbal cannabis, only processed, non-smokable medicinal grade products^.

Much of the detail remains unclear. For example, the legislation does not specify which products will be covered under the amendment, and it does not specify which particular conditions or symptoms will be eligible for treatment with cannabis-based products. Before products can be prescribed, they must be registered with the Therapeutic Goods Administration (TGA) or, in rare circumstances, receive special approval from the TGA. The registration process requires evidence of testing and efficacy and it is therefore unlikely Australia will see a TGA registered medicinal cannabis product that GPs can prescribe any time soon. Whilst there are currently no cannabis-based products that are lawfully produced in Australia, the medicinal use of pharmaceutical products containing cannabinoids is not prohibited, as long as authorization for prescribing is granted from the Commonwealth Therapeutic Goods Administration and at this point in time, NSW Health. 

Facilities

Our principal executive offices are located at 3805 Old Easton Road, Doylestown, PA 18902. Our telephone number at that address is (858) 883-2642. We have additional offices located at 4 Knoll Court, Lloyd Harbor, N.Y. 11743. On April 1, 2014, the Company entered into an Application Development Agreementa one year lease arrangement for office space, with a client, whereby the client agreedoption to payrenew the Company to develop a Photo Viewer app.lease annually. The total price we charged the client for our services was $15,000. The Company completed the apps and delivered the files to client. The client paid the company the full amount. A copy of the Application Development Agreementsmonthly rent payment is attached hereto as Exhibit 10.3.

 On February 24, 2015 the Company entered into an Application Development Agreement with a client, whereby the client agreed to pay the company to develop certain iPhone and Android that include a Video editor app, Group chat app, Video surveillance app$5,000 and a Trivia game. The total price we charged the client was $24,000. The Company completed the apps and delivered the files to client. A copysecurity deposit of the Application Development Agreements is attached hereto as Exhibit 10.4.

$15,000. On November 19, 2015 the Company entered into an Application Development Agreements with a client, whereby the client agreed to pay the Company to develop certain iPhone and Android applications. The Company is in the process of developing the apps for clients. The client has paid a down payment of $20,000 and will pay an additional $10,000 once the apps are completed and delivered to the client and they are satisfied. A copy of the Application Development Agreements is attached hereto as Exhibit 10.5.

On DecemberSeptember 15, 2015, the Company entered into a one year lease arrangement for office space. The Company has amended this lease to extend the term through September 30, 2018. The monthly rent payment is $229 and a security deposit of $183.

Employees

We currently have five full time employees and two part time employees. We plan to increase the number of employees in the areas of regulatory affairs, clinical research and testing, and marketing in 2019. There are no collective-bargaining agreements with our employees, and we have not experienced work interruptions or strikes. We believe our relationship with employees is good and we provide health and life insurance for all employees.

LEGAL PROCEEDINGS

On or about September 18, 2013, a lawsuit was filed by two individuals against the Company and the Company’s CEO. The plaintiffs allege that they provided business services to Kannalife Sciences, Inc. (“Kannalife”) in the amount of $150,000, including but not limited to providing strategic introductions to Kannalife and Mr. Petkanas and were seeking 17% of the issued and outstanding stock of Kannalife. The Company believed, at all times, that the allegations to be without merit and vigorously defended itself.

On or about September 30, 2013, Kannalife and Mr. Petkanas filed a motion to dismiss all five causes of action alleged against Kannalife and Mr. Petkanas.

On May 12, 2014, the court dismissed all five causes of action alleged by one plaintiff against Kannalife and Mr. Petkanas.

On March 27, 2015, the court granted permission to this plaintiff to replead his complaint (the “Repleading Plaintiff”).

On July 14, 2015, the court denied the Repleading Plaintiff’s motion to reargue, affirming the dismissal of all of the Repleading Plaintiff’s causes of action, which left, three causes of action remain open relating to the remaining plaintiff (the “Remaining Plaintiff”).

In December 2016, Kannalife and Mr. Petkanas filed a motion for summary judgment to seek the court’s decision in dismissing the remainder of the claims alleged by the Remaining Plaintiff.

On June 30, 2017, the motion for summary judgment made by Kannalife and Mr. Petkanas was granted. All remaining causes of action by the Remaining Plaintiff were dismissed.

On February 7, 2018, the Remaining Plaintiff, (the “Plaintiff-Appellant”) appealed from the June 30, 2017 decision and order of the lower court, which granted the Kannalife’s and Mr. Petkanas’ (Defendants-Respondents) motion for summary judgment dismissing all of Plaintiff-Appellant’s claims. In his amended complaint, Plaintiff-Appellant alleged the existence of an Application Development Agreementoral agreement between himself and Kannalife and Mr. Petkanas for the exchange of investments (including both money and services) from Plaintiff-Appellant in return for the transfer of 17% of Kannalife’s shares. However, Plaintiff-Appellant’s allegations consisted of nothing more than vague statements regarding what he promised to provide to Kannalife and to Mr. Petkanas in exchange for nearly one-fifth of Kannalife’s shares. And after years of litigation, including extensive depositions and document exchanges, the evidence elicited by both parties failed to clarify either the precise terms of the alleged oral agreement or that Plaintiff-Appellant actually made any investments as he allegedly promised to do. In the lower court, Kannalife and Mr. Petkanas moved for summary judgment dismissing Plaintiff-Appellant’s claims based on certain undisputed facts: that no evidence existed to show that Plaintiff-Appellant–or Stone Engineering, P.C., which is Plaintiff-Appellant’s S Corporation–made any investment at all in Kannalife; that even if Plaintiff-Appellant did make any investments, the alleged agreement is unenforceable pursuant to General Obligations Law § 5-701(a)(1) (the Statue of Frauds) because the terms cannot be completed within one year; and the contract is unenforceable as a matter of hornbook law because Plaintiff-Appellant’s own testimony establishes that he and Kannalife and Mr. Petkanas never reached a “meeting of the minds” with respect to the contours of Plaintiff-Appellant’s supposed offer of investments or the time period for transferring the shares to Plaintiff-Appellant.

On appeal, Plaintiff-Appellant argues the lower court’s decision was wrong because: (1) it was based upon an erroneous finding that Plaintiff-Appellant lacks standing to recover his shares in Kannalife; and (2) enforcement of the alleged contract is not barred by the Statute of Frauds because (a) its terms were capable of being performed within one year and (b) the alleged agreement constitutes a client, wherebysecurities contract under UCC § 8-113 that does not require a writing to be enforceable. However, in Opposition Kannalife and Mr. Petkanas argued that the client agreedlower court’s decision should primarily be affirmed based upon an argument raised by Kannalife and Mr. Petkanas in their motion: the undisputed evidence shows that there was no meeting of the minds between Plaintiff-Appellant, and Kannalife and Mr. Petkanas regarding the terms of the alleged oral agreement. Moreover, the terms of the alleged agreement that Plaintiff-Appellant himself asserted–if they are assumed to be true for purposes of the motion and appeal–indicate that it was impossible for him to perform his obligations within one year; and a review of UCC § 8-113 along with interpretive case law requires a conclusion that the alleged agreement in this case does not constitute the type of securities contract that does not require a writing to be enforceable. Thus, to the extent an oral agreement between Plaintiff-Appellant, and Kannalife and Mr. Petkanas was ever actually created, then its enforcement is barred by the Statute of Frauds—and the lower court’s decision to dismiss Plaintiff-Appellant’s claim seeking enforcement of the alleged oral agreement was properly reached for these reasons. Accordingly, Kannalife and Mr. Petkanas believe that the 2nd Department will affirm the lower court’s decision and order entirely.

On September 28, 2018, in an attempt to correct fatal flaws in the Plaintiff-Appellant’s original case dismissed on June 30, 2017. the Plaintiff-Appellant filed a new lawsuit against Kannalife and Mr. Petkanas, alleging much, if not all of the same claims as in the original case filed by the Plaintiff-Appellant, a case which was dismissed on June 30, 2017. This new lawsuit now seeks, instead of the relief sought in the case previously dismissed, a sum of no less than $21,250,000.

Kannalife and Mr. Petkanas believe that this new case is without merit and will be ultimately dismissed in the fullness of time.

Other than aforementioned, there are no pending legal proceeding relating to our company and its CEO to which we are a party, and to our knowledge there are no material proceedings to which any of our directors, executive officers or affiliates is a party adverse to us or which have a material interest adverse to us.

MARKET PRICE OF AND DIVIDENDS ON OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock is quoted on the OTC Pink Marketplace operated by the OTC Markets Group, Inc., or “OTC Pink,” under the ticker symbol “KLFE,” but there is no  trading volume in our securities at this time nor has there been since our initial public offering went effective on July 15, 2016.

On November 9, 2018, the Company filed an amendment to its certificate of incorporation with the Delaware Secretary of State to change its name to Kannalife, Inc. The Company concurrently submitted a request to FINRA for approval of the name change as well as a ticker symbol change to “KLFE” and such action went effective on January 17, 2019.

Holders

As of April 1, 2019, there were approximately 81 holders of our common stock.

Dividends

We have not paid, nor declared, any cash dividends since our inception and do not intend to declare or pay any such dividends in the foreseeable future. Our ability to pay cash dividends is subject to limitations imposed by state law.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and operating results together with our consolidated financial statements and related notes included elsewhere in this prospectus. This discussion and analysis and other parts of this prospectus contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” or in other parts of this prospectus. The last day of our fiscal year is December 31. Our fiscal quarters end on March 31, June 30, September 30, and December 31, and our current fiscal year ended on December 31, 2018 .

Business Developments

The Company was originally incorporated in the State of Delaware on March 25, 2013 under the name TYG Solutions Corp. Our original business plan was to develop certain iPhone and Android applications. smartphone apps for companies who need an app for their internal and external operations. We subsequently expanded our operations to offering corporate website design services.

On July 25, 2018, the Company entered into a Share Exchange Agreement with Kannalife Sciences, Inc., a Delaware corporation (“Kannalife Sciences”) and certain stockholders of KannalifeSciences (the “KannalifeSciences Stockholders”). Pursuant to the terms of the Share Exchange Agreement,the Company acquired approximately nearly all of the issued and outstanding shares of KannalifeSciences by means of a share exchange with the KannalifeSciences Stockholders in exchange for newly issued shares of the common stock ofthe Company (the “Share Exchange”). As a result of the Share Exchange, KannalifeSciences became a99.7% owned subsidiary ofthe Company. The business operations of the Company regarding iPhone and Android smartphone apps shall be reduced significantly to focus efforts on target therapeutics and drug discovery, and accordingly, by virtue of the Share Exchange,theCompany acquired the business of KannalifeSciences including all of its assets. The Share Exchange was accounted for as a reverse acquisition and change in reporting entity, whereby KannalifeSciences was the accounting acquirer.

On November 9, 2018, the Company filed an amendment to its certificate of incorporation with the Delaware Secretary of State to change its name to Kannalife, Inc. The Company concurrently submitted a request to FINRA for approval of the name change as well as a ticker symbol chang to “KLFE” and such action went effective on January 17, 2019.

Kannalife Sciences was incorporated in the State of Delaware on August 11, 2010. KannalifeSciences is a developmental stage phyto-medical/pharmaceutical and drug discovery company that specializes in the research, development of cannabinoid and cannabinoid-based therapeutic products derived from synthetic and botanical sources, including the Cannabis “taxa” (the word “taxa” is the plural of “taxon” which defines a group of one or more populations of an organism or organisms to form a unit.)

Business Overview

As a result of the Share Exchange, the Company’s core businesses are comprised of the following:

A drug development company focused on the research and development (R&D) of synthetic and phyto-medical products from: 

onaturally recurring sources, including but not limited to cannabis, hemp, and other similar species of plantae; 

osemi-synthetic sources; and  

osynthetic and bio-synthetic sources. 

Drug discovery platform to evaluate and potentially treat neurological and oxidative stress related disorders such as Overt Hepatic Encephalopathy (“OHE”), Chronic Traumatic Encephalopathy (“CTE”) and Chemotherapy Induced Peripheral Neuropathy (“CIPN ”) with high quality assured, quality controlled cGMP pharmaceutical grade semi-synthetic and synthetic cannabinoids, cannabidiol (“CBD”), and cannabidiol-like molecules.

Topical skin care pre-clinical program designed to some of its patented, proprietary cannabidiol-derived new chemical entities (“NCEs”), for use as topical solutions, ointments, and creams for disorders such as diabetic neuropathies, diabetic ulcers, and for use as an anti-pruritic. Anti-pruritics are known as anti-itch drugs and medications that inhibit the itching often associated with a variety of disorders and diseases. 

The Company is primarily involved in the processresearch and development of developingnovel therapeutic agents for use in and as U.S. Food and Drug Administration (“FDA”) approved ethical pharmaceuticals (available by doctor prescription); FDA Monograph topical solutions; Personal Care Products Council (“PCPC”) / International Nomenclature of Cosmetic Ingredients (“INCI”) registered. The primary focus of the appsCompany’s research and development revolves around its patented, proprietary cannabidiol-derived new chemical entities and cannabidiol. In preclinical testing, certain molecules under Pat. 9,611,213 were screened for clients. neuroprotection and may have the potential mechanism of action for reducing inflammation and neuropathic pain. These molecules indicate that they are more soluble than cannabidiol, also deemed a neuroprotectant with potential anti-inflammatory properties. A molecule that is potentially more water soluble than cannabidiol in this regard may be good candidate(s) for use in topical applications.

The clientCompany has paid a down paymentbeen the only licensee from the National Institutes of $5,000Health (“NIH”) for the licensed use of the U.S. Government’s patent 6,630,507 – “Cannabinoids as Antioxidants and will pay an additional $10,000 onceNeuroprotectants” (the “’507 Patent”) in the apps are completeddisease indications of hepatic encephalopathy (“HE”) and deliveredChronic Traumatic Encephalopathy (“CTE”). Having been the only licensee to the client‘507 Patent has given the Company an early start in the research and they are satisfied. A copydevelopment of cannabinoid therapeutics within this emerging market. The Company is the only company that has had use of the Application‘507 Patent and corresponding licenses from NIH-OTT.

The jurisdictions in which the ‘507 Patent is valid are: the U.S., the U.K., Ireland, the E.U., and Australia. The patent life in these jurisdictions are good until April 21, 2019.

The Company believes that these licenses with the NIH have given the Company, through the years, the preclinical lead time to evaluate both HE and CTE without stress of competition. The Company also believes that such advances in preclinical have led to a drug development program regarding cannabidiol based therapeutics that focuses on neurodegenerative and oxidative stress related diseases described in the ‘507 Patent, and also the development of the Company’s own intellectual property underlying U.S. Patents 9,611,213 and 10,004,722.

Furthermore, it is on the Company’s belief and knowledge that while the U.S. Government patent 6,630,507 is due to expire on April 21, 2019, there may be additional opportunities related to the original licensing of the ‘507 Patent in which the Company may engage with the NIH and certain collaborators of the aforementioned patent to enter into a Cooperative Research and Development AgreementsAgreement (“CRADA”) with the NIH for one or more disease indications underlying the ‘507 Patent, including but not limited to HE and CTE. Moreover, the weight of the Company’s future success, drug development program regarding cannabidiol based therapeutics is attached hereto as Exhibit 10.6.not centered on the ‘507 Patent, but rather its own intellectual property underlying U.S. Patents 9,611,213 and 10,004,722.

We charge a flat fee of $5,000intend to study KLS-13019 in patients with chemotherapy induced neuropathic pain, and we intend to study KLS-13023 in patients with mild traumatic brain injury.

We believe these product candidates will provide new treatment options for patients, as a basewell as additional treatment options for any proposed app that we are asked to develop.  If, however, the app is a more sophisticated app then we may charge more depending on the complexity of the app.patients not currently receiving adequate relief from current treatment regimens.

We are still conducting pre - clinical studies and have not yet commenced our clinical program or tested KLS-13019 or KLS-13023 in humans. For KLS-13019, we plan to conduct Phase 1, and possibly Phase 2, clinical trials in Australia, subject to applicable regulatory approval. We plan to conduct our Phase 1 clinical trials for KLS-13023 in Australia, subject to applicable regulatory approval. We plan to submit NDAs for KLS-13019 and KLS-13023 to the FDA upon completion of all requisite clinical trials. We expect to initiate clinical trials for KLS-13019 and KLS-13023 in the second half of 2019.

For KLS-13019, we plan to conduct Phase 1, and possibly Phase 2, clinical trials in Australia, subject to applicable regulatory approval. We plan to conduct our Phase 1 clinical trials for KLS-13023 in Australia, subject to applicable regulatory approval. We plan to submit NDAs for KLS-13019 and KLS-13023 to the FDA upon completion of all requisite clinical trials.

We plan to conduct our Phase 1, and possibly Phase 2, clinical trials for KLS-13019 in Australia, subject to applicable regulatory approval, and do not expect at this time to file an investigational new drug application, or IND, with the U.S. Food and Drug Administration, or the FDA, prior to the commencement of those clinical trials. We must file an IND with the FDA and receive approval from the U.S. Drug Enforcement Agency, or DEA, prior to commencement of any clinical trials in the United States.

We plan to conduct our Phase 1 clinical trials for KLS-13023 in Australia, subject to applicable regulatory approval. We plan to submit New Drug Applications, or NDAs, for KLS-13019 and KLS-13023 to the FDA upon completion of all requisite clinical trials.

We plan to seek orphan drug designation for KLS-13023 in Overt Hepatic Encephalopathy.

Cannabinoids are a blank checkclass of molecules derived from Cannabis plants. The two primary cannabinoids contained in Cannabis are cannabidiol, or CBD, and D9-tetrahydrocannabinol, or THC. Clinical and preclinical data suggest that CBD has positive effects on treating refractory epilepsy, FXS and arthritis and THC has positive effects on treating pain. Interest in cannabinoid therapeutics has increased significantly over the past several years as preclinical and clinical data has emerged highlighting the potential efficacy and safety benefits of cannabinoid therapeutics. The cannabinoid therapeutics market is expected to grow significantly due to the potential benefits these products may provide over existing therapies. In addition to KLS-13019 and KLS-13023 potentially offering first-line therapies to patients suffering from chemotherapy induced peripheral neuropathy and mild traumatic brain injury, respectively.

KLS-13023 is target drug candidate that includes a synthetic CBD formulated in a gel capsule designed for potential use in humans. The formulation of this product is proprietary and currently held as a trade secret of the company. CBD is the primary non-psychoactive component of Cannabis. KLS-13023 has undergone a manufacturing feasibility study to improve some of the limitations associated with CBD, including but not limited to CBD’s low bioavailability and limited drug like properties and improvement of the delivery of CBD through the first pass in the gut and into the circulatory system.

In addition to KLS-13023, the Company has developed a proprietary patented new chemical entity (NCE), KLS-13019. This NCE is a cannabidiol derived molecule which has undergone pre - clinical studies for the treatment of overt hepatic encephalopathy and chemotherapy induced peripheral neuropathy.

In pre - clinical studies, KLS-13019's advanced formulation is designed to improve on some of the limitations associated with CBD, including but not limited to CBD’s low bioavailability and limited drug like properties.

These pre - clinical studies suggest increased bioavailability, consistent plasma levels and the avoidance of first-pass liver metabolism. In addition, anin vitrostudy performed by us demonstrated that CBD is degraded to THC in an acidic environment such as the stomach.

The Company has filed for orphan designation with the U.S. Food and Drug Administration (“FDA”) for the use of CBD in the treatment overt hepatic encephalopathy (“OHE”). The Company has received notice from the FDA that its current application qualifies for a patient population of less than 200,000, but is currently in abeyance to resolve clinical use of CBD in this sub-set of hepatic encephalopathy. The Companyhas retained Coté Orphan to continue the process of responding to the FDA’s abeyance letter. On November 5, 2018, the FDA has granted the Company a one year extension to respond to the abeyance letter until November 30, 2019.

KLS-13023 is aproprietary formulation containing CBD thatintends to enable more effective deliveryof CBD via a gel capsule. The use of CBD in this form remains patent-protectedvia the ‘507 Patent through 2019. In addition, we expect that KLS-13023 will be classified by the FDA as a new chemical entity, or NCE. In our preclinical animal studies, KLS-13023 demonstrated effective intervention of neurodegeneration in the OHE disease state. Our key development programs and expected timelines for the development of KLS-13019 and KLS-13023 are shown in the table below:

With respect to certain other proprietary compounds underlying Pat. 9,611,213, the Company plans on pursuing topical solutions as potential relief creams and/or ointments for neuropathic pain, anti-inflammation, anti-pruritic and skin ulcers. The Company is considering commercialization routes that include, but are not limited to, filing and FDA Monograph and/or pursing a path to the marketplace through INCI certification and registration with the PCPC. In preclinical testing, certain molecules under Pat. 9,611,213 were screened for neuroprotection and may have the potential mechanism of action for reducing inflammation and neuropathic pain. These molecules indicate that they are more soluble than cannabidiol, also deemed a neuroprotectant with potential anti-inflammatory properties. A molecule that is potentially more water soluble than cannabidiol in this regard may be good candidate(s) for use in topical applications. 

The Company believes it has the sufficient capital to proceed forth with a Phase 1 human safety trial for the treatment of Chemotherapy Induced Peripheral Neuropathy. All preclinical work in this indication, including animal toxicity studies, are expected to be completed before the end of the third quarter 2019. The Company plans on entering into clinical trials sometime in the first quarter 2020. Additionally, the Company believes it has the sufficient capital to proceed forth with a Phase 1 human safety trial for the treatment of Overt Hepatic Encephalopathy. All preclinical work in this indication, including animal toxicity studies, are expected to be completed before the end of the fourth quarter 2019.

The Company intends on seeking additional capital to proceed forth with its business plan regarding additional drug pipeline opportunities.

Through the year end 2017 we have not been profitable and have incurred net losses from operations since inception. Our net loss was $1,643,255 for the year ended December 31, 2017. Our loss from operations was $1,061,808 for the year ended December 31, 2018. Our net income, due to a gain in investment, was $931,059 for the year ended December 31, 2018. We expect to incur losses for the foreseeable future, and we expect these losses to increase as we continue our development of, and seek regulatory approvals for, our product candidates. Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when, or if, we will be able to achieve or maintain profitability.

Financial Operations Overview

The following discussion sets forth certain components of our statements of operations as well as factors that impact those items.

Revenues

Our revenues consist of state and federal research grants and fees received from research services for third-party product development. These revenues are recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and collectability is reasonably assured.

Research and Development Expenses

Our research and development expenses consist of expenses incurred in development and preclinical studies relating to our product candidates, including:

 expenses associated with preclinical development;  

 personnel-related expenses, such as salaries, benefits, travel and other related expenses, including stock-based compensation;  

 payments to third-party contract research organizations, or CROs, contractor laboratories and independent contractors; and  

 depreciation, maintenance and other facility-related expenses.  

We expense all research and development costs as incurred. Preclinical development expenses for our product candidates are a significant component of our current research and development expenses. Product candidates in later stage clinical development generally have higher research and development expenses than those in earlier stages of development, primarily due to increased size and duration of the clinical trials. We track and record information regarding external research and development expenses for each grant, study or trial that we conduct. From time to time, we intend to use third-party CROs, and have used contractor laboratories and independent contractors in preclinical studies. We recognize the expenses associated with third parties performing these services for us in our preclinical studies based on the percentage of each study completed at the end of each reporting period.

We incurred research and development expenses of $224,933 and $4,000 for the years ended December 31, 2018 and 2017, respectively.

We expect that our research and development expenses in 2019 and for the next several years will be higher than in 2018 as a result of the work needed for our expected initiation of our Phase 1 clinical trials of KLS-13019 in the second half of 2019 and KLS-13023 by early 2020. These expenditures are subject to numerous uncertainties regarding timing and cost to completion. Completion of our preclinical development and clinical trials may take several years or more and the length of time generally varies according to the type, complexity, novelty and intended use of a product candidate. The cost of clinical trials may vary significantly over the life of a project as a result of differences arising during clinical development, including, among others:

 the number of sites included in the clinical trials;  

 the length of time required to enroll suitable patients;  

 the size of patient populations participating in the clinical trials;  

 the duration of patient follow-ups;  

 the development stage of the product candidates; and  

 the efficacy and safety profile of the product candidates.  

Due to the early stages of our research and development, we are unable to determine the duration or completion costs of our development of KLS-13019 and KLS-13023. As a result of the difficulties of forecasting research and development costs of KLS-13019 and KLS-13023 as well as the other uncertainties discussed above, we are unable to determine when and to what extent we will generate revenues from the commercialization and sale of an approved product candidate.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries, benefits and other related costs, including stock-based compensation, for personnel serving in our executive, finance, accounting, legal and human resource functions. Our general and administrative expenses also include facility and related costs not included in research and development expenses, professional fees for legal services, including patent-related expenses, consulting, tax and accounting services, insurance and general corporate expenses. We expect that our general and administrative expenses will increase with the continued development and potential commercialization of our product candidates.

We expect that our general and administrative expenses in 2019 and for the next several years will be higher than in 2018 as we increase our headcount. We also anticipate increased expenses relating to our operations as a public company, including increased costs for the hiring of additional personnel, and for payment to outside consultants, including lawyers and accountants, to comply with additional regulations, corporate governance, internal control and similar requirements applicable to public companies, as well as increased costs for insurance.

Interest Income (Expense), net

Interest expense consists of interest expense on our notes payable that are current and that of certain notes that were converted into common stock in 2018. Interest income consists primarily of interest earned on our money market bank account.

Income Taxes

As of December 31, 2018, we had $862,000 of federal operating loss carryforwards. These operating loss carryforwards will begin to expire in 2031. The Tax Reform Act of 1986, or the Act, provides for limitation on the use of net operating loss and research and development tax credit carryforwards following certain ownership changes (as defined by the Act) that could limit our ability to utilize these carryforwards. We may have experienced various ownership changes, as defined by the Act, as a result of past financings. Accordingly, our ability to utilize the aforementioned carryforwards may be limited. Additionally, U.S. tax laws limit the time during which these carryforwards may be applied against future taxes; therefore, we may not be able to take full advantage of these carryforwards for federal income tax purposes.

The closing of the share exchange transaction, together with private placements and other transactions that have occurred since our inception, may trigger, or may have already triggered, an "ownership change" pursuant to Section 382 of the Internal Revenue Code of 1986. If an ownership change is triggered, it will limit our ability to use some of our net operating loss carryforwards. In addition, since we will need to raise substantial additional funding to finance our operations, we may undergo further ownership changes in the future, which could further limit our ability to use net operating loss carryforwards. As a result, if we generate taxable income, our ability to use some of our net operating loss carryforwards to offset U.S. federal taxable income may be subject to limitations, which could result in increased future tax liability to us.

Critical Accounting Policies and Use of Estimates

We have based our management's discussion and analysis of financial condition and results of operations on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and judgments, including those related to preclinical development expenses and stock-based compensation. We base our estimates on historical experience and on various other factors that we believe to be appropriate under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are more fully discussed in note 2 to our audited consolidated financial statements appearing at the end of this prospectus, we believe that the following accounting policies are critical to the process of making significant judgments and estimates in the preparation of our consolidated financial statements.

Research and Development Expenses

We rely on third parties to conduct our preclinical studies and to provide services, including data management, statistical analysis and electronic compilation. Once our clinical trials begin, at the end of each reporting period, we will compare the payments made to each service provider to the estimated progress towards completion of the related project. Factors that we will consider in preparing these estimates include the number of patients enrolled in studies, milestones achieved and other criteria related to the efforts of our vendors. These estimates will be subject to change as additional information becomes available. Depending on the timing of payments to vendors and estimated services provided, we will record net prepaid or accrued expenses related to these costs.

Fair Value of Common Stock and Stock-Based Compensation

We account for grants of stock options and restricted stock to employees based on their grant date fair value and recognize compensation expense over the vesting periods. We estimate the fair value of stock options as of the date of grant using the Black-Scholes option pricing model, and we estimate the fair value of restricted stock based on the fair value of the underlying common stock as determined by our board of directors or the value of the services provided, whichever is more readily determinable. We account for stock options and restricted stock awards to non-employees using the fair value approach. Stock options and restricted stock awards to non-employees are subject to periodic revaluation over their vesting terms.

In the absence of a public trading market for our common stock, on each grant date, we develop an estimate of the fair value of our common stock for the option and restricted stock grants based in part on input from an independent third-party valuation firm. We determined the fair value of our common stock using methodologies, approaches and assumptions consistent with the AICPA Practice Guide, Valuation of Privately-Held Company Equity Securities Issued as Compensation. In addition, our board of directors considered various objective and subjective factors, along with input from management and an independent third-party valuation firm, to estimate the fair value of our common stock, including external market conditions affecting the pharmaceutical industry, trends within the pharmaceutical industry, the prices at which we sold shares of our different series of preferred stock, the superior rights and preferences of each series of preferred stock relative to our common stock at the time of each grant, our results of operations and financial position, the status of our research and development efforts and progress of our preclinical programs, our stage of development and business strategy, the lack of an active public market for our common and our preferred stock, and the likelihood of achieving a liquidity event.

Common stock, restricted stock and stock options issued during and subsequent to the year ended December 31, 2018

In connection with and subsequent to our recapitalization in 2018, we issued 17,628,870 shares of common stock to certain management in exchange for all unpaid salary accruals, to certain debt holders, certain investors and third-party service providers for services rendered. In addition, our board of directors approved grants of restricted stock and stock options that were issued in 2016 and 2017.

In conducting a negotiated transaction in December 2017 for a share exchange between the Company and management of TYG Solutions (the “KLSI TYG Share Exchange”) and new third party investors to the KLSI TYG Share Exchange, we agreed to an enterprise value of approximately $45 million.

We then allocated the aggregate equity value between the common stock and the preferred stock using a Black-Scholes call option pricing method. Under this method, we estimated the fair value of our common stock as the net value of a series of call options, representing the present value of the expected future returns to the common stockholders. We considered the rights of the common stockholders to be equivalent to a call option on our future value in excess of the aggregate liquidation preferences payable on preferred stock, with adjustments to account for the rights retained by the preferred stockholders related to any value in excess of the applicable liquidation preferences. Using this method, we valued the common stock by estimating the value of a share of common stock in each of these call option rights.

We then reduced the value of the common stock using this approach by applying a lack of control discount and an illiquidity discount to account for the heightened level of risk associated with our shares compared to that of comparable, publicly traded companies.

Results of Operations

Comparison of the Years Ended December 31, 2018 and 2017

Revenues

Revenues for the year ended December 31, 2018, was $173,889 compared to $-0- the year ended December 31, 2017. Revenues in 2018 were entirely related to work performed in connection with grants received.

Research and Development Expenses

Research and development expenses increased by $220,933, or 5,523%, to $224,933 for the year ended December 31, 2018 from $4,000 for the year ended December 31, 2017. The increase was primarily the result of increased consulting and compensation expense related to increased product development activities.

General and Administrative Expenses

General and administrative expenses decreased by $179,598 or -15% to $1,010,764 for the year ended December 31, 2018 from $1,190,362 for the year ended December 31, 2017. This decrease was largely the result of a decrease of personnel cost due to our executive officers ceasing to take salaries for the first seven months of 2018.

Other Income (Expense)

Other income (expense), net was $2,804,851 and $(98,893) for the years ended December 31, 2018 and 2017, respectively.

Liquidity and Capital Resources

Since our inception in 2010, we have devoted most of our cash resources to research and development and general and administrative activities. We have financed our operations primarily with the proceeds from the sale of preferred stock and convertible promissory notes, state and federal grants and research services. To date, we have not generated any revenues from the sale of products, and we do not anticipate generating any revenues from the sales of products for the foreseeable future. We have incurred losses and generated negative cash flows from operations since inception. As of December 31, 2018, our principal sources of liquidity were our cash and cash equivalents, which totaled $307,131. Our working capital was $2,456,560 as of December 31, 2018.

Equity Financings

For the years ended December 31, 2018 and 2017, we received net proceeds of $352,000 and $387,500, respectively, from the sale of convertible notes and promissory notes. Immediately prior to the Share Exchange, the Company received proceeds of $150,000 for the sale of 75 shares of Series A preferred stock and 75 shares of Series B preferred stock. Additionally, the Company received $203,000 for the sale of 2,030,000 shares of common stock.

Debt

We had the following schedule of debt for the years ended December 31, 2018 and 2017:

In January 2018, prior to the Share Exchange, all Convertible Junior Debenture holders and all Senior Convertible Debenture holders accepted the Company’s offer to exchange their debt instruments, including accrued interest thereunder for restricted common stock. The holders of the Convertible Junior Debentures, related parties, accepted a total of 973,946 shares of restricted common stock (on a post-Share Exchange basis) of the Company in exchange for the repayment of a total of $356,176 in debt, inclusive of accrued interest of $67,195. In addition to the conversion of the Convertible Junior Debentures, the holders of the Senior Convertible Debentures accepted a total of 563,063 shares of restricted common stock of the Company (on a post-Share Exchange basis) in exchange for the repayment of a total of $236,104 in debt, inclusive of accrued interest of $51,104.

In January 2018, prior to the Share Exchange, we converted outstanding accrued executive management salaries totaling $2,812,810, which had accrued from September 2014 through December 2017, in exchange for a total of 5,505,200 shares of restricted common stock of the Company (on a post-Share Exchange basis).

Future Capital Requirements

Prior to the Share Exchange, the Company issued a convertible note to an investor, face value $500,000, in exchange for $500,000 in cash. The note is unsecured, bears interest at the rate of 3% per annum and matures on February 16, 2030. The note is convertible into common stock of the Company at $0.10 per share at any time at the option of the holder, subject to a 4.9% blocking provision which prohibits the holder from converting into common stock of the Company if such conversion results in the holder owning greater than 4.9% of the outstanding common stock of the Company after giving effect to the conversion.

We expect that our existing cash and cash equivalents and securities held for sale on the Company’s consolidated balance sheet will be sufficient to fund our operations and capital requirements through December 2019. We believe that these available funds will be sufficient to commence a Phase 1 clinical trials for KLS-13019 for patients with chemotherapy induced peripheral neuropathy. We anticipate, based on current estimates, that costs associated Phase 1 clinical trials for KLS-13019 will be approximately $2.75 million.

Our investment in Medical Marijuana, Inc. (“MJNA”) represents a sizable portion of the total assets of the Company. On June 1, 2018, the Company received 41,583,333 shares of Medical Marijuana, Inc. (“MJNA”) common stock pursuant to a settlement agreement. In 2014, the Company entered into a revenue sharing agreement with Kannaway LLC, whereas, among the considerations and obligations the parties agreed to a share exchange, whereby the Company issued 6,408,980 shares of its common stock in exchange of 4.99% ownership of Kannaway.

A significant shareholder of the Company owned the remaining ownership of Kannaway LLC. Subsequently, Kannaway was sold, by its parent company, to MJNA for 833,333,333 shares of MJNA common stock. The settlement agreement called for the release of all obligations in exchange for the issuance of 41,583,333 shares of common stock in MJNA to the Company. For the year ended December 31, 2018, the Company recorded a realized gain of $3,901,974 upon the settlement and receipt of these shares and an unrealized loss of $873,693 related to the investment in MJNA. The gain was netted against the Company's cost basis investment in Kannaway LLC.

The Company’s shares in MJNA are eligible for re-sale under Rule 419144 of Regulation C under the Securities Act and the Company intends to liquidate its holdings in MJNA in its discretion to help fund its operations. There are no contractual, affiliate or other restrictions on the Company’s ability to re-sell its shares in MJNA. In the event that we are unable to sell our shares in MNA, management believes that it can locate additional sources of 1933 defines a “blank check company” as a (i) development stage company that has no specific business plan or purpose or has indicated thatcapital to facilitate and carry out its business plan and the Company’s ability to conduct its business operations and clinical trials is not dependent on our ability to sell the Company’s shares in MJNA.

Management of the Company believes that it will need to seek additional sources of capital to facilitate and carry out its business plan of proceeding forth with commencing a Phase 2 clinical trial for KLS-13019 for patients with chemotherapy induced peripheral neuropathy; commencing a Phase 1 clinical trial for KLS-13019 for patients suffering from the effects of mild traumatic brain injury; and commencing a Phase 1 clinical trial for KLS-13023 for patients suffering with overt hepatic encephalopathy. The cost of commencing and conducting these trials will likely be in the tens of millions of dollars.

Furthermore, it is difficult to predict our spending for our product candidates prior to obtaining FDA approval. Moreover, changing circumstances may cause us to expend cash significantly faster than we currently anticipate, and we may need to spend more cash than currently expected because of circumstances beyond our control.

Our expectations regarding future cash requirements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments that we make in the future. We have no current understandings, agreements or commitments for any material acquisitions or licenses of any products, businesses or technologies. We may need to raise substantial additional capital in order to engage in any of these types of transactions.

We expect to continue to incur substantial additional operating losses for at least the next several years as we continue to develop our product candidates and seek marketing approval and, subject to obtaining such approval, the eventual commercialization of our product candidates. If we obtain marketing approval for either of our product candidates, we will incur significant sales, marketing and outsourced manufacturing expenses. In addition, we expect to incur additional expenses to add operational, financial and information systems and personnel, including personnel to support our planned product commercialization efforts. We also expect to incur significant costs to comply with corporate governance, internal controls and similar requirements applicable to us as a mergerpublic company.

Our future use of operating cash and capital requirements will depend on many forward-looking factors, including the following:

 the initiation, progress, timing, costs and results of preclinical studies and clinical trials for our product candidates;  

 the clinical development plans we establish for these product candidates;  

 the number and characteristics of product candidates that we develop or acquisition with an unidentified company or companies,may in-license;  

 the terms of any collaboration agreements we may choose to execute;  

 the outcome, timing and cost of meeting regulatory requirements established by the DEA, the FDA, the EMA or other entitycomparable foreign regulatory authorities;  

 the cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights;  

 the cost of defending intellectual property disputes, including patent infringement actions brought by third parties against us;  

 costs and timing of the implementation of commercial scale manufacturing activities; and  

 the cost of establishing, or person,outsourcing, sales, marketing and (ii)distribution capabilities for any product candidates for which we may receive regulatory approval in regions where we choose to commercialize our products on our own.  

To the extent that our capital resources are insufficient to meet our future operating and capital requirements, we will need to finance our cash needs through public or private equity offerings, debt financings, collaboration and licensing arrangements or other financing alternatives. We have no committed external sources of funds. Additional equity or debt financing or collaboration and licensing arrangements may not be available on acceptable terms, if at all.

If we raise additional funds by issuing equity securities, our stockholders will experience dilution. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Any debt financing or additional equity that we raise may contain terms, such as liquidation and other preferences that are not favorable to us or our stockholders. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish valuable rights to our technologies, future revenue streams or product candidates or to grant licenses on terms that may not be favorable to us.

Cash Flows

Years ended December 31, 2018 and 2017 — The following table summarizes our cash flows from operating, investing and financing activities for the years ended December 31, 2018 and 2017:

Operating Activities

Net cash used in operating activities for the year ended December 31, 2018 was $1,210,907, including net income of $931,059, partly offset by $2,017,355 of net non-cash expenses and a $124,611 net change in operating assets and liabilities. The net noncash expenses were predominantly related to the gain on settlement of $3,901,974. The change in operating assets and liabilities was primarily due to a $99,291 increase in other receivables.

Net cash used in operating activities was $392,360 for the year ended December 31, 2017 including a net loss of $1,643,255, partly offset by deferred tax asset of $350,000 and changes in operating assets and liabilities of $882,387 primarily related to payroll expense.

We expect cash used in operating activities to continue to increase in 2019 as compared to 2018 due to an expected increase in our operating losses associated with ongoing development of our product candidates.

Investing Activities

Net cash provided by investing activities for the year ended December 31, 2018 was $824,546. Cash provided by investing activities from the cash received from the reverse acquisition and the sale of marketable securities was $289,654 and $537,966, respectively, for the year ended December 31, 2018. Cash used for purchase of equipment was $3,074 for the year ended December 31, 2018.

There was no cashed used in investing activities for the year ended December 31, 2017.

Financing Activities

Cash provided by financing activities of $689,166 for the year ended December 31, 2018 was primarily due to $352,500 in net proceeds received on the issuance of certain debt instruments and $353,000 of proceeds for issuance of preferred and common stock.

Cash provided by financing activities for the year ended December 31, 2017 was $363,672, reflecting $387,500 of proceeds on the issuance of certain debt instruments and offset by payments to certain debt instruments.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, except for operating leases, or relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities.

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“Topic 606”), which is issuing a penny stock.  Accordingly,new comprehensive revenue recognition model that will supersede all existing revenue recognition guidance under U.S. GAAP. The standard requires a company to recognize revenue when it transfers goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. This standard is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, with early adoption permitted for interim and annual periods beginning after December 15, 2016. Entities will have the option of using either a full retrospective approach or a modified approach to adopt the guidance in the ASU. The Company is currently evaluating the impact of adopting this guidance, but expects the adoption will not have a material impact on the consolidated financial statements.

In November 2015, the FASB issued Accounting Standards Update (ASU) 2015-17, Balance Sheet Classification of Deferred Taxes, intended to improve how deferred taxes are classified on organizations' balance sheets. The ASU eliminates the current requirement for organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, organizations will now be required to classify all deferred tax assets and liabilities as noncurrent. The pronouncement is effective for reporting periods beginning after December 15, 2016. Early adoption is permitted as of the beginning of an interim or annual period. The adoption of ASU 2015-17 did not have any material impact on the Company's consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09). Under ASU 2016-09, the tax effects of stock compensation will be recognized as income tax expense or benefit to the Company’s income statement and the tax effects of exercised or vested awards will be treated as discrete items in the reporting period in which they occur. Along with other income tax cash flows, excess tax benefits will be classified as operating activities, and cash paid by the Company when directly withholding shares for tax withholding purposes will be classified as financing activities. The Company has elected to continue to account for forfeitures when they occur. The adoption of ASU 2016-09 on January 1, 2017, did not have a material impact to the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), requiring lessees to recognize for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and (2) a right-of-use (“ROU”) asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The update is effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. The Company currently anticipates that upon adoption of the new standard, ROU assets and lease liabilities will be recognized in amounts that will be immaterial to the consolidated balance sheets.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40), which requires management to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern for each annual and interim reporting period. If substantial doubt exists, additional disclosure is required. This new standard was effective for the Company for annual and interim periods beginning after December 15, 2016. The Company has elected early adoption effective January 1, 2017, and continues to assess the impact of the adoption on its consolidated financial statements.

Quantitative and Qualitative Disclosures about Market Risk

We are exposed to various market risks, which may result in potential losses arising from adverse changes in market rates, such as interest rates and foreign exchange rates. We do not enter into derivatives or other financial instruments for trading or speculative purposes and do not believe we are exposed to material market risk with respect to our cash and cash equivalents.

We currently have no operations outside the United States, but we have contracted with third parties to manufacture our product candidates and conduct clinical trials outside of the United States. At this time, such manufacturing and research costs are paid for in U.S. dollars and, therefore, are not subject to fluctuations in exchange rates. If we conduct additional clinical trials outside of the United States in the future, we may be required or may choose to pay for those clinical trials in a local foreign currency and could incur foreign currency exchange rate risk.

As of December 31, 2018, we had cash balances of approximately $3 0 0,000. Additionally, we had approximately $ 2,570,000 in marketable securities (available for sale) as of December 31 , 2018. We do not engage in any hedging activities against changes in interest rates or foreign currency exchange rates. Because of the short-term maturities of our cash and cash equivalents, we do not believe that an immediate 10% increase in interest rates would have any significant impact on the realized value of our Company may be classified as a “blank check company” because we engage in a specific business plan and do not intend to engage in any merger or acquisition with an unidentified company or other entity.investments.

Where You Can Find UsEmerging Growth Company

We presently maintain our principal offices at 202 Avenue F, Brooklyn, New York 11218. Our telephone number is 718-407-2059.

Implications of Being an Emerging Growth Company

We qualify as an emerging growth company as that term is used in the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:

We have already taken advantage of these reduced reporting burdens in this prospectus,our initial public offering, which are also available to us as a smaller reporting company as defined under Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

In addition, Section 107 of the JOBS Act also provides that an emerging growth company cantake advantage of the extended transition periodprovided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”) for complyingwith new or revised accounting standards.standards. We have elected to use the extended transition period provided above and therefore our financial statements may not be comparable to companies that comply with public company effective dates.

We could remain an emerging growth company for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

For more details regarding this exemption, see “Management’s DiscussionCHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

We have had no disagreements with our independent auditors on accounting or financial disclosures.

On March 5, 2018, the Company received notification from the Securities and AnalysisExchange Commission (the “Commission”) that its independent registered public accounting firm, Weinberg & Baer, LLC (“Weinberg”), had been suspended from appearing or practicing before the Commission. Weinberg audited the Company’s financial statements for the years ended December 31, 2015 and December 31, 2016.

Thereafter, the Company engaged PLS CPA, A Professional Corp. (“PLS CPA”) as its independent registered public accounting firm for the Company’s fiscal years ended December 31, 2016 and December 31, 2017. The decision to engage PLS CPA as the Company’s independent registered public accounting firm was approved by the Company’s Board of Directors. On April 12, 2018, the Company received a letter from PLS CPA stating that PLS CPA had resigned as the Company’s independent registered public accounting firm. PLS CPA did not perform any audits of the Company’s Financial ConditionStatements and Results of Operations – Critical Accounting Policies.”did not prepare any reports with any going concern language.

On April 23, 2018, the Board of Directors of the Company approved the engagement of Accell Audit and Compliance, P.A., 4806 West Gandy Boulevard, Tampa, FL 33611, Phone: (813) 440-6380 (“Accell”) as its independent registered public accounting firm for the fiscal years ended December 31, 2017 and December 31, 2016. During the fiscal years ended December 31, 2017 and December 31, 2016, and the subsequent interim period through April 23, 2018, the date of engagement of Accell, the Company did not consult with Accell regarding either (i) the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, or (ii) any matter that was either the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K and the related instructions thereto) or a reportable event (as described in paragraph (a)(1)(v) of Item 304 of Regulation S-K).

On October 4, 2018, the Company’s Board of Directors approved the engagement of dbbmckennon, 16959 Bernardo Center Drive, San Diego, CA 92128, Phone: (858) 217-4035 (“dbbmckennon”) as its independent registered public accounting firm for the fiscal years ended December 31, 2018. During the fiscal years ended December 31, 2017 and December 31, 2016, and the subsequent interim period through October 4, 2018, the date of engagement of dbbmckennon, the Company did not consult with dbbmckennon regarding either (i) the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, or (ii) any matter that was either the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K and the related instructions thereto) or a reportable event (as described in paragraph (a)(1)(v) of Item 304 of Regulation S-K).

DIRECTORS AND EXECUTIVE OFFICERS

The Offeringfollowing table sets forth the names, ages, and positions of our executive officers and directors:

Executive Officers

Dean Petkanas was appointed as our Chief Executive Officer and Chairman of the Board of Directors on July 25, 2018. Mr. Petkanas is a corporate finance and executive management professional with over 25 years of investment banking and capital markets experience. In 2010 Mr. Petkanas co-founded Kannalife Sciences, Inc. and for the past 8 years was principally responsible for the creation and execution of the Company’s business model, including the licensing of US Patent #6630507 from the National Institutes of Health for disease indications Hepatic Encephalopathy (HE) and Chronic Traumatic Encephalopathy (CTE). Mr. Petkanas is a co-inventor of US Patent #9611213 “Novel Functionalized 1,3 Benzene Diols and Their Method of Use for the Treatment of Hepatic Encephalopathy.” Mr. Petkanas’ background in pharmaceutical extends to his work as investment banker and subsequently V.P. of Business Development for Xechem International, Inc. where he was principally responsible for Xechem’s IPO and EXIM Bank rounds of financing. Mr. Petkanas was involved with Xechem from 1992 to 2007. While at Xechem, he was involved in the financing of Xechem’s lead target drug candidate (generic paclitaxel) and later on from 2003 to 2007, was the lead petitioner for Xechem International in steering their federal anti-trust lawsuit against Bristol-Myers-Squibb for their illegal monopoly of the drug market for the anti-cancer drug, Taxol®. Mr. Petkanas also was an integral part of the development team that named, trademarked and commercialized Hemoxin (Nicosan), a phyto-pharmaceutical molecule for the treatment of Sickle Cell disease.Mr. Petkanas brings his extensive business and industry experience to the board of directors as its chairman.

Mark Corraowas appointed as our Chief Financial Officer on July 25, 2018. Prior to joining the Company, Mr. Corrao served as the CFO of Kannalife Sciences, Inc. beginning in January 2012. Mr. Corrao currently serves as the Managing Director of The CFO Squad LLC, a CFO and accounting consulting business, and as CFO of Generex Biotechnologies, Inc. beginning in January 2017. Mr. Corrao was formerly a founder and CFO of Strikeforce Technologies, Inc., a publicly traded software development and services company specializing in the development of a suite of integrated computer network security products. In addition to the ten years of his service at Strikeforce, Mr. Corrao has spent numerous years in the public accounting arena specializing in certified auditing, SEC accounting, corporate taxation and financial planning. Mr. Corrao’s background also includes numerous years on Wall Street with Merrill Lynch, Spear Leeds & Kellogg and Greenfield Arbitrage Partners. While on Wall Street, Mr. Corrao was involved in several initial public offerings and has been a guiding influence in several startup companies. Prior to joining StrikeForce, he was the Director of Sales at Applied Digital Solutions from December 2000 through December 2001. Mr. Corrao was the Vice President of Sales at Advanced Communications Sciences from March 1997 through December 2000. Mr. Corrao has a B.S. in Accounting from The City University of New York. Mr. Corrao’s business and public company financial reporting experience is invaluable to the board of directors 

Thomas Kikis was appointed as our Chief Communications Officer and a director on July 25, 2018. Prior to his appointment, Mr. Kikis co-founded Kannalife Sciences, Inc. in August 2010. Since co-founding Kannalife Sciences, Mr. Kikis handled all communications and marketing efforts of Kannalife Sciences serving in various executive roles and as a member of its board of directors. Mr. Kikis also designed and helped formulate Kannactiv – a skincare product line designed by Kannalife Sciences, Inc. on behalf of Kannaway LLC. Mr. Kikis is an entrepreneur who has a passion for great stories, new ideas, groundbreaking technologies, popular culture and their collective point of impact. Most recently, Mr. Kikis has designed dozens of commercial typographical software distributed for web, print and mobile applications and has produced several films and documentaries available on movie streaming platforms. Mr. Kikis holds a Bachelor of Science in Communications Management from New York University.Mr. Kikis’ broad industry knowledge and strategic communication experience make him an asset to the board of directors.

Dr. William Kinney was appointed as our Chief Scientific Officer on July 25, 2018. Mr. Kinney is a medicinal chemist and entrepreneur with more than 25 years of experience in large pharmaceutical (Wyeth, Johnson & Johnson), biotechnology (Magainin), and non-profit (Blumberg Institute) research and development. He has demonstrated expertise in drug design; synthesis; lead optimization and development of peptides, small molecules, and natural products; and is inventor of three molecules that advanced to human clinical trials – Perzinfotel (CNS disorders and pain), Squalamine (oncology, AMD, Parkinson's Disease), and Trodusquemine (obesity). Currently, Dr. Kinney is Senior VP at Enterin, Inc. (July 2016) and Chief Scientific Officer at KannaLife Sciences. His scientific contributions include more than 70 publications and presentations; and inventorship on 38 issued U.S. patents. Dr. Kinney is a co-inventor of Kannalife’s recent US Patent #9611213 “Novel Functionalized 1,3 Benzene Diols and Their Method of Use for the Treatment of Hepatic Encephalopathy.” Dr. Kinney obtained his B.S. (1979) and Ph.D. (1984) degrees from the Ohio State University. Dr. Kinney’s breadth of scientific research and development work and industry knowledge are a great benefit to the board of directors.

Non-Employee Directors

Robert Malasek has served as a director of the Company since June 20, 2017 and previously served as its Chief Executive Officer and Chief Financial Officer from June 20, 2017 to July 25, 2018. Mr. Malasek’s experience includes serving as the Assistant Controller for Starwood Hotel & Resorts Worldwide, Inc. and as Chief Financial Officer for NatureWell, Inc. From 2011 to 2015, Mr. Malasek served as the Chief Financial Officer, Secretary, Treasurer and a Director of Liberty Coal Energy Corp. Since 2015, Mr. Malasek has served as the Chief Financial Officer of Cannalink, Inc. and currently serves as the Chief Financial Officer of AXIM Biotechnologies, Inc. (OTC:AXIM). Mr. Malasek received his Bachelor of Science in Accountancy from San Diego State University.Mr. Malasek’s public company governance and management experience make him a great fit to the board of directors.

Blake Schroeder was appointed as a director on July 25, 2018. Mr. Schroeder's career began as a litigator at a commercial litigation firm in Salt Lake City, UT. Beginning in 2008, Schroeder became involved in the sale and marketing of natural products, and opening international marketplaces to those products. From 2008 to 2015 Mr. Schroeder served in various capacities at MonaVie LLC developing international business plans and growing international businesses. From August 2014 to February 2016, Mr. Schroeder served as the chief operating officer of Forevergreen International, where he was responsible for global operation and sales of the multinational organization, including oversight of a global supply chain. From 2016 to the present, Mr. Schroeder serves as the chief executive officer of Kannaway, LLC, a wholly-owned subsidiary of Medical Marijuana, Inc. Mr. Schroeder is the COO for Medical Marijuana, Inc. and has served on the board of directors of Medical Marijuana, Inc. from March 2016 to the present. Mr. Schroeder holds a B.S. in Finance from Utah State University and a J.D. from Syracuse University’s College of Law.Mr. Schroeder’s blend of industry, legal and business knowledge give him and the board of directors a unique viewpoint that is invaluable to the board of directors.

Dr. Timothy R. Scott was appointed as a director on July 25, 2018. Mr. Scott brings years of enterprise board-level management expertise having served on the board of directors of NatureWell Inc. from 2001-2008. Prior to 2001, Mr. Scott served on the board of directors of ICH Corporation, which owned 265 restaurants with approximately $265M in revenues and 7,800 employees. Dr. Scott currently serves on the board of directors of Medical Marijuana, Inc. (OTC:MJNA) and Axim Biotechnologies, Inc. (OTC:AXIM). Dr. Scott received his Ph.D. in theology from Christian University.Dr. Scott holds decades of experience at senior management and board levels in public and private companies which is a great benefit to the company and its board of directors.  

Scientific Advisory Board

Douglas Brenneman, Ph.D – Chief Biologist and Distinguished Senior Scientist – Scientific Advisory Board

Dr. Brenneman has over 30 years of research experience as a Section Chief within the intramural program at NICHD and as a Senior Research Fellow at Johnson & Johnson. He has more than 170 scientific publications and 15 patents focused on both evaluating neurotoxic and neuroprotective substances with various Central Nervous System preparations. At Johnson & Johnson, he was a team leader of the drug discovery group that advanced three molecules through discovery and preclinical testing. Two of these molecules are currently in clinical trials. As a result of his NIH work, a neuroprotective peptide (davunetide) that he co-discovered is currently in phase III clinical trials. Dr. Brenneman has demonstrated scientific experience to drive an innovative program of drug discovery focused on diseases of the central nervous system. Dr. Brenneman is the founder and Chief Scientific Officer of Advanced Neural Dynamics which is located at the Pennsylvania Biotechnology Center in Doylestown, PA.

Ryan B. Turner, MD – Scientific Advisory Board

Dr. Ryan Turner is a board certified dermatologist practicing general dermatology and has advanced training in Mohs Micrographic Surgery, laser surgery, and light therapies. His clinical interests include skin cancer surgery and cosmetic treatments that enhance and rejuvenate aging skin. He has extensive training in FRAXEL® laser treatments which reduce photodamage, wrinkles, and stimulate new collagen growth. His research interests vary from the treatment and management of skin cancers to the successful placement of injectable dermal fillers. He graduated summa cum laude and valedictorian of the University of Maryland Baltimore County. He received his Doctor of Medicine from Harvard Medical School and was honored with the Henry Asbury Christian Award for his research accomplishments. He completed his internship in medicine and his dermatology residency at the Harvard affiliated Brigham and Women’s Hospital and the Massachusetts General Hospital, respectively. He has also completed an ACGME accredited fellowship in Procedural Dermatology at the Mt. Sinai Medical Center in NY.

Gerasimos Petratos, MD – Scientific Advisory Board

Dr. Gerasimos Petratos currently serves as a teacher in Northwestern’s Masters in Medical Informatics Program and works as Global Head of Healthcare Data Strategy & Analytics at the Roche Group. His pharmaceutical career includes experience in the Development & Medical Affairs Divisions, specifically working for the past seven years on the development and commercialization of molecules in oncology, transplant, multiple sclerosis and rheumatoid arthritis. Prior to pharmaceuticals he conducted clinical research at Intermountain Healthcare and the University of Utah Health Sciences Center as part of a National Institutes of Health Fellowship with the National Library of Medicine in Biomedical Informatics. The research was centered on applied advanced methods of clinical information management to improve patient safety and measure outcomes related to adverse drug event detection capabilities for CNS (Multiple Sclerosis and Alzheimer’s), Oncology, Pain Management, and Antibiotic drugs. Dr. Petratos obtained his bachelor’s degree in Biology from Cornell University. He received his Doctor of Medicine degree from Howard University in Washington, D.C., and obtained a Master’s in Health Service Administration and Medical Informatics from the University of Utah.

Ziva Cooper, PhD – Scientific Advisory Board

Dr. Cooper is currently an Assistant Professor of Clinical Neurobiology in the Department of Psychiatry at the College of Physicians and Surgeons of Columbia University. She completed her PhD in 2007 in Biopsychology from the University of Michigan where she investigated the behavioral and physiological effects of abused substances using animal models of addiction. Her current work focuses on investigating the direct physiological and behavioral effects of cannabinoids (i.e., chemical constituents of Cannabis and structurally similar synthetic molecules) as they pertain to their potential therapeutic effects and abuse liability. Dr. Cooper has published 30 scientific publications and three book chapters on the neurobiology of substance abuse, has received Early Career Investigator awards from prestigious professional societies including the American College of Neuropsychopharmacology and the College on Problems of Drug Dependence, and has been invited to speak at several national and international scientific meetings.

Michael Zelenetz, MD – Scientific Advisory Board

Dr. Michael Zelenetz specializes in the field of gastroenterology and liver diseases. He graduated and obtained his Medical Doctorate from St. George’s University School of Medicine. His internship and residency in internal medicine were completed at SUNY Downstate Medical Center in Brooklyn, New York, where he also completed a subspecialty fellowship in gastroenterology and hepatology. His current practice involves performing colonoscopy and endoscopy examinations along with the treatment of diseases such as reflux, functional gastrointestinal disorders (IBS, functional dyspepsia, etc.), ulcerative colitis, Crohn’s Disease and chronic liver diseases, including Hepatitis B and C, among many other conditions. Dr. Zelenetz is double board certified in internal medicine and gastroenterology. Dr. Zelenetz has authored several publications in American Journal of Gastroenterology. He has a strong clinical interest in colorectal cancer screening, inflammatory bowel diseases and Hepatitis C.

Director Independence

Dr. Timothy R. Scott and Blake Schroeder are independent as that term is defined under Nasdaq Rules.

Committees and Terms

The Board of Directors has not established any committees. Our Board of Directors as a whole acts as our audit committee, compensation committee, and nominating committee.

Code of Ethics

We have not adopted a written code of ethics.

Family Relationships

There are no family relationships between any director or executive officer.

Involvement in Certain Legal Proceedings

During the past ten years, none of our directors and executive officers has been involved in any of the events described in Item 401(f) of Regulation S-K.

Corporate Governance Matters

We have not adopted any material changes to the procedures by which security holders may recommend nominees to our Board of Directors.

EXECUTIVE COMPENSATION

The following table sets forth, for the fiscal years ended December 31, 2018 and 2017, the dollar value of all cash and noncash compensation earned by any person that was our principal executive officer, or PEO, during the preceding fiscal year.

Summary Compensation Table

(1) These amounts represent salaries accrued in the respective years. In January 2018, the Company converted all outstanding accrued salaries into shares of common stock.  

Option Grants Table

There were no individual grants of stock options to purchase our common stock made to the executive officers named in the Summary Compensation Table for the fiscal year ended December 31, 2018 .

Aggregated Option Exercises and Fiscal Year-End Option Value Table

There were no stock options exercised during the fiscal year ended December 31, 2018 , by the executive officers named in the Summary Compensation Table.

Long-Term Incentive Plan (“LTIP”) Awards Table

There were no awards made to a named executive officer in the last completed fiscal year under any LTIP.

Compensation of Directors

Directors are permitted to receive fixed fees and other compensation for their services as directors. The Board of Directors has the authority to fix the compensation of directors. No amounts have been paid to, or accrued to, directors in such capacity.

Executive Employment Agreements

In connection with the Share Exchange with Kannalife Sciences, Inc. on July 25, 2018, the newly-appointed officers entered into executive employment agreements with the Company.

Dean Petkanas

Mr. Petkanas will receive an annual base salary of $240,000 and will be eligible to receive equity awards in the future, as determined by the Board. In addition, Mr. Petkanas will have severance benefits in the form of salary continuation and health benefits through the employment term remaining on the contract. The employment agreement has a two-year term, provided, however, after the end of one year, the agreement will automatically renew for successive one year terms. A copy of Mr. Petkanas’ executive employment agreement is attached hereto as Exhibit 10.4.

Thomas Kikis

Mr. Kikis will receive an annual base salary of $150,000 and will be eligible to receive equity awards in the future, as determined by the Board. In addition, Mr. Kikis will have severance benefits in the form of salary continuation and health benefits through the employment term remaining on the contract. The employment agreement has a one-year term, provided, however, after the end of one year, the agreement will automatically renew for successive six month terms. A copy of Mr. Kikis’ executive employment agreement is attached hereto as Exhibit 10.5.

Mark Corrao

Mr. Corrao will receive an annual base salary of $ 60 ,000 (adjusted from his initial annual base salary of $150,000 as permitted in his agreement) and will be eligible to receive equity awards in the future, as determined by the Board. In addition, Mr. Corrao will have severance benefits in the form of salary continuation and health benefits through the employment term remaining on the contract. The employment agreement has a one-year term, provided, however, after the end of one year, the agreement will automatically renew for successive six month terms. A copy of Mr. Corrao’s executive employment agreement is attached hereto as Exhibit 10.6.

Dr. William Kinney

Dr. Kinney will receive an annual base salary of $ 30 ,000 (adjusted from his initial annual base salary of $150,000 as permitted in his agreement) and will be eligible to receive equity awards in the future, as determined by the Board. In addition, Dr. Kinney will have severance benefits in the form of salary continuation and health benefits through the employment term remaining on the contract. The employment agreement has a one-year term, provided, however, after the end of one year, the agreement will automatically renew for successive six month terms. A copy of Dr. Kinney’s executive employment agreement is attached hereto as Exhibit 10.7.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial ownership of our outstanding Common Stock, as of April 1, 2019 by: (i) each of our directors, (ii) each of our named executive officers (as defined by Item 402(a)(3) of Regulation S-K promulgated under the Exchange Act), (iii) all of our directors and named executive officers as a group, and (iv) each person known to us to beneficially own more than 5% of our outstanding Common Stock.

Beneficial ownership has been determined in accordance with Rule 13d-3 under the Exchange Act. The percentages in the table have been calculated on the basis of treating as outstanding for a particular person, all shares of our common stock outstanding on that date and all shares of our common stock issuable to that holder in the event of exercise of outstanding options, warrants, rights or conversion privileges owned by that person at that date which are exercisable within sixty (60) days of that date. Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of our Common Stock owned by them, except to the extent that power may be shared with a spouse. The Company does not know of any arrangements the operation of which may at a subsequent date result in a change of control of the Company.