Item 1. Description of Business
General
Allied (or “Allied” or “the Company”) is a public Nevada corporation focused on bringing to market medical cannabis in Canada initially, via our wholly-owned subsidiary AM (Advanced Micro) Biosciences, Inc. that has end stage national license applications.
References in this section to “Allied” or the “Company” also include references to the operations of our subsidiary AM (Advanced Micro) Biosciences, Inc. which occurred prior to closing of the reorganization agreement.
Allied has plans for international expansion into South America via acquisitions of national license holders. As a research and development company, Allied’s focus is on creating and providing targeted cannabinoid health solutions for today’s medical issues. One of our top R&D priorities is developing effective Post Traumatic Stress Disorder (PTSD)/Post Traumatic Stress Injury (PTSI) solutions.
Led by a team of experienced Industry experts, Allied will use that valuable data to properly select and secure the appropriate products and business activities to ensure the company’s success.
The Company’s vertically integrated approach focuses on sufferers of PTSD. This market includes:
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Canadian Veterans, with initially an approximate 6,000 veterans available for first contact and onboarding, and a veteran base of approximately 650,000 in Canada from the War Service and Canadian Armed Forces
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An additional 2,000,000+ Canadian veterans who also suffer in certain numbers from PTSD, including estimates of:
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740,000 RCMP/Police Officers
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925,000 Correctional Services Canada/Canadian Border Services Agency/Canadian Peace Officers
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280,000 Firefighters (not including volunteers)
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75,000 Paramedics
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Potential South American market
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Potential United States market: approximately 15 million veterans.
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The Company’s additional focus is on neutraceutical products for veterans and general public through bringing hemp derived nano-technology products to market in the United States. Differentiators from our competitors potentially include the low cost, high margin production that Allied has available via Colombian Production.
Recent Developments
During the period May 7, 2019 through June 15, 2019, a total of $1,325,000 in proceeds was raised in a private placement to 11 accredited investors at a price of $0.50 per share. In connection with the offering, the Company issued 2,650,000 shares of common stock.
During July 2019, a total of $3,000,000 in proceeds was raised in a private placement to one accredited investor at a price of $0.75 per share. In connection with the offering, the Company issued 4,000,000 shares of common stock.
Since receiving the funds from the private placements, the Company’s management team has utilized these funds to expedite several key corporate milestones.
On July 25, 2019, as amended effective August 27, 2019, the Company entered into a Reorganization and Stock Purchase Agreement (the “Reorganization Agreement”) to acquire 100% of the issued and outstanding equity of AM (Advanced Micro) Biosciences, Inc (“AM Biosciences”). Effective September 10, 2019, the parties closed the Reorganization Agreement. As part of the transaction, the majority shareholder of the Company (the “Allied Shareholder”) delivered 55,700,714 of common stock, representing approximately 73.2% of the outstanding equity of the Company to SECFAC Exchange Corp. on behalf of the prior shareholders of AM Biosciences and certain other designees of AM Biosciences. Further, as part of the transaction, the Allied Shareholder submitted for cancellation and return to treasury 10,459,317 shares of common stock. As a consequence, immediately subsequent to the close of the Reorganization Agreement, the Company had 76,046,680 shares of common stock outstanding.
Pursuant to the Reorganization Agreement, effective on September 10, 2019, the Company acquired 100% of the issued and outstanding equity of AM Biosciences. As consideration for the equity of AM Biosciences, the Allied Shareholder issued and delivered 55,700,014 shares of common stock, representing approximately 73.2% of the outstanding equity of the Company to SECFAC Exchange Corp. on behalf of the previous shareholders of AM Biosciences and other designees of AM Biosciences.
MediColombias Acquisition (Colombia Licensed Producer)
In May 2019, the Company entered into an agreement to acquire a company called Medi Colombias SAS. This company is based in Colombia with a full set of licenses and a lease agreement in place to begin production on a 5 hectare parcel of land. We have the ability to scale production to over hundreds of hectares. This is located in the area of Bucamaranga, Colombia.
This acquisition includes a high level scientific team of experts and significant capital expenditures spent on an irrigation holding pond, security towers, fencing, etc. to meet the Colombia minister of justice and minister of agriculture requirements.
The total acquisition price is $5,200,000. That price is payable (a) $185,000 USD within 5 days of signing the acquisition (this has been completed from the private placement funds); (b) $200,000 USD within 30 days of signing the acquisition (this has also been completed from private placement funds); (c) $315,000 USD within three months of signing the acquisition and (d) 4,500,000 shares of common stock valued at $1.00 USD per share.
An additional $700,000 USD will be paid to MediColombias in the form of Advanced Micro or Allied shares at a 30 day moving average market share price, once the terms noted in the following table are achieved. All of these performance-based production volumes are based upon product produced from MediColombias.
Colombian National Ministry of Agriculture approval for seed evaluation
In May 2019, we received notice from the National Ministry of Agriculture (ICA) that our seeds are successfully registered and we can begin what they call the “seed evaluation” process of production. This involves planting 60 plants of each strain. We have plants going into the ground during the third and/or fourth quarters of 2019.
After the harvesting of these plants, ICA will conduct an on-site inspection and may authorize the large scale initiation of production. The approval for “seed evaluation” came 6 months ahead of our anticipated timeline. We are consequently on pace for first harvest during first two quarters of 2020. We had originally anticipated this within third and fourth quarters of 2020.
In addition to this, to adhere to strict production regulations around seed approval and strain-acclimatization, in Canada we have created research and development environments (under personal production licenses approved by the Canada Regulators) that mimic the micro-climates in Suesca, Ibague and Bucamaranaga. Our strains have performed very well in all three of these micro-climates. We have stressed the strains with very high temperatures and humidity levels to mimic the natural weather patterns in the areas in which we will be cultivating. This is designed to mitigate the acclimatization risk that many peer companies are experiencing in Colombia.
Falcon Ridge Acquisition (Canadian end-stage Licensed Producer applicant).
In May 2019, the Company closed a share purchase agreement and made the first installment payments for the acquisition of late stage Canadian Licensed Producer applicant: Falcon Ridge (the “Falcon Ridge Acquisition”).
The purchase is for a total of $2,150,000. Consideration for this purchase was as follows: (a) $250,000 CDN paid May 31, 2019 (this has been paid out of the proceeds of the $0.50 cent private placement); (b) $250,000 CDN due on or before July 01, 2019 (this has also been paid out of the proceeds of the $0.50 cent private placement); (c) $700,000 CDN due within five days of receiving full license (which we anticipate in the first quarter of 2020); and (d) 950,000 shares in AM Biosciences with as assigned valued at $1.00 CDN per share.
We were given the approval from Health Canada as “Confirmation of Readiness” for this application.
Assumption of contract of purchase and sale of 8999 Jim Bailey Rd.
In May 2019, AM Biosciences assumed the contract of purchase and sale of real property located at 8999 Jim Bailey Rd. This is for the purchase of two real lots of approximately 1.1 acres each. This contract of purchase and sale is set to close in the first quarter of 2020. This land will be where the Canadian Licensed Producer and product processing and extraction facility will be located. Land preparation is well underway and is expected to be ready for when the modular building arrives in the first quarter of 2020.
Natural Health Products Acquisition
In May 2019, as a part of the Falcon Ridge Acquisition, the management team of AM Biosciences were able to negotiate the inclusion of a natural health products catalogue of products. This includes 50 products in the natural health vertical market. Three of these products are of particular interest as they have Natural Health Products registration numbers with Health Canada. AM Biosciences can add these to the product offerings both in Canada and the United States.
Allied Foundation Healing Retreats
In May 2019, AM Biosciences hosted the first inaugural healing retreat for veterans and first responders. A total of 29 people attended this retreat. This involved offering the participants healing activities such as education of the nature of PTSD, how to process through an event that is triggering to the individual, and activities to reset the nervous system. A full evaluation was done and planning has been initiated to host ongoing quarterly retreats into 2020.
Natural health vertical run of first product: “Tactical Relief ™ “
In June 2019, AM Biosciences was able to source, negotiate and execute and agreement to do the first packaging run of the “Tactical Relief” product that is targeted at veterans in the United States. This product is not based on THC, but rather a Hemp-derived CBD product that is targeted at the veteran community. We anticipate selling through a small 500 product launch in the fourth quarter of 2019. We have been able to secure distribution in Indiana, Kentucky, Tennessee and Illinois. The management and sales of this product is handled through a licensing deal with a company called Savage Consulting, LLC. Due to the national legislation in the United Sates, Allied has licensed the management of the hemp derived CBD product, Tactical Relief™ to Savage Consulting, LLC.
Xtreme Cubes construction has begun
In June 2019, AM Biosciences signed the production and manufacturing contract to begin the manufacturing of the full building for the Canada extraction and production facility. This building will be a fully scalable, modular building. This building is expected to come off of the production line in Nevada sometime in the third quarter of 2019. We anticipate being able to extract and produce additional strain development in this building beginning fourth quarter 2019. The Company made an upfront payment of $230,000 USD in June 2019 and an additional payment of $903,385 in August 2019.
Development Timeline
Through its operating subsidiary, the principals of Allied (the “Principals”) commenced development of the Company and its products in 2002 through development of regulatory knowledge, development and collection of over 200 proprietary strains of cannabis targeted at specific diseases and in 2005 obtained production experienced under approved personal production Canadian legislation. Beginning in 2012, the Company’s principals were involved in over 48 Health Canada applications for licensing and were working with Health Canada to inform national cannabis policy. The Company began seeking strategic partners to help veterans, police, fire and ambulance specifically with PTSD issues. During 2014 through 2017, The Company worked with several licensed producers in Canada and development strategic connections, supply and distribution companies into Europe. The Principals also continued to develop novel strains of cannabis for PTSD.
In 2018 the Company acquired its development site for cannabis production and completed an approximate $800,000 round of initial seed funding via AM Advanced Biosciences. The Company set up strategic partnerships in South America for production and in the United States for sales and distribution of hemp derived CBD products. In 2019, the Company is working towards expansion into Colombia and has signed a letter of intent to acquire land in Colombia as well as additional facilities in Canada. The Company will begin distribution of hemp derived CBD products for veterans and first responders into the United States.
The Allied Charitable Foundation
Affiliated with the Company is the Allied Charitable Foundation. The Allied Charitable Foundation has been created in accordance with Allied’s overall mission to help promote healing for as many Veterans and first responders as possible. It is Allied’s vision to create a legacy that will perpetuate the opportunities for those suffering from Post Traumatic Stress to embark on their own healing journey. Allied has a dedicated team working with the Allied Foundation to ensure a broad range of holistic healing modalities are introduced to those in suffering. Through the Foundation, assistance may also be provided to those who truly need help but may not have all the means to achieve it. The powerful legacy created by the Allied Charitable Foundation will ensure that those suffering from Post Traumatic Stress will receive assistance for years and years to come.
Historical Company Information
Allied was incorporated in the State of Nevada on February 3, 2018 under the name “Cosmo Ventures, Inc.” On July 2, 2019 the Company filed a Certificate of Amendment with Nevada changing the name to Allied Corp.
Effective July 25, 2019 the Company entered into a Stock Purchase and Reorganization Agreement with AM (Advanced) Biosciences, Inc., a British Columbia Canada corporation. Upon completion of the closing effective September 10, 2019, AM Advanced Biosciences became a wholly-owned operating subsidiary of the Company.
The Company’s principal office is located at 1405 St. Paul St., Suite 201, Kelowna, BC Canada V1Y 9N2. Our telephone number is (877) 255-4337. The Company email is ir@allied.health.
Legal Status of Cannabis in Canada in 2019
Marijuana was banned in Canada back in 1923, and it took almost 80 years before it became legal to use it for medicinal purposes. Canada finally legalized medicinal cannabis in 2001. Public opinion helped shape the next stage of marijuana law in Canada. In late November 2017, the Cannabis Act, Bill C-45, was passed by the House of Commons. In March 2018, it passed second reading in the Senate and on June 18, 2018, the House passed the bill.
It was passed with almost all of the Senate’s amendments, and the Senate accepted the new version of the bill on June 19, 2018. On October 17, 2018 marijuana in Canada became federally legal around the country.
For medical cannabis use, which is Allied’s target market, those with a prescription are authorized to have up to a five day amount of their prescription. Some patients have 10 grams per day prescriptions. Some patients have 150 grams per days prescriptions.
According to the law, adults are legally permitted to purchase, use, possess, and grow recreational cannabis in Canada. We do not intend to target recreational use. The legal age and cultivation laws vary depending on the province. The minimum legal age is 19 all over Canada except in Alberta and Quebec where it is 18.
The maximum amount one is allowed to possess from a recreational source which we do not intend to target, is 30 grams in all Canadian provinces, but in most locations, one is allowed to have larger amounts at home. In British Columbia for example, a person may possess up to 1,000 grams of marijuana at home. There is no limit to home possession in Manitoba.
Legality of CBD based products in the United States.
In general CBD is legal in the United States, but under very specific conditions.
While the legal status of CBD has become more defined with recent reforms, some laws are still unclear and others may still be needed. Combined with misinformation, many may have a very skewed understanding of what’s legal versus what is not.
The legality of CBD can vary from state to state and federally, but in general, one of the determining factors is whether the CBD is derived from hemp or marijuana. The Company intends to source its CBD cigarettes from hemp. While the two plants are very close relatives, they are classified very differently under the law and understanding the difference is crucial to legally use CBD. Hemp and marijuana are both classifications of plants in the Cannabis genus, and both can produce an abundance of CBD. As members of the same family, hemp and marijuana share many visual similarities, but at a chemical level, the two plants have vastly different amounts of Tetrahydrocannabinol (THC), the intoxicating compound found in Cannabis.
While hemp is characterized by producing a nearly non-existent amount of THC (less than 0.3%), marijuana can produce an abundance of THC (up to 30%). Because of its high THC-content, marijuana may induce severe mind-altering effects when consumed and is federally illegal in the United States and many other countries.
Hemp-derived CBD is legal as long as it is produced within the regulations defined by the law.
In 2018, President Trump passed the Agricultural Improvement Act of 2018 (also known as the 2018 Farm Bill), which removed hemp as a Schedule I substance and reclassified it as an “agricultural commodity.” A common misconception about the 2018 Farm Bill is that it legalized CBD regardless of if it was derived from hemp or marijuana. This is not true. Based on the guidance of the DEA, CBD is a Schedule I substance and is illegal. If, however, the CBD is derived from hemp and adheres to the following regulations set forth in the new farm bill, it is removed as a Schedule I substance and is legal:
The hemp must contain less than 0.3% THC
The hemp must adhere to the shared state-federal regulations
The hemp must be grown by a properly licensed grower
In addition, the 2018 Farm Bill also removed restrictions on the sale, transportation, and possession of hemp-derived CBD products and allowed for the transportation of hemp-derived CBD products across state lines as long as the products follow regulations defined above.
While hemp-derived CBD is federally legal as long as it adheres to the law, marijuana-derived CBD is more complicated because it is derived from a plant that is illegal. In some states, such as California and Colorado, marijuana is legal for recreational usage, and naturally so is marijuana-derived CBD. Others allow marijuana-derived CBD usage under certain conditions, such as a specific medical condition, and some states strictly prohibit it. As of 2019, there are 10 States where Cannabis, including both marijuana and hemp, are completely legal for recreational and medicinal use. These states are Alaska, California, Colorado, Maine, Massachusetts, Michigan, Nevada, Oregon, Vermont, and Washington. In addition, as of 2019, there are a total of 47 states (including the 8 states mentioned above) where marijuana-derived CBD is legal for medicinal usage. The specific regulations for such use vary from state to state with a majority of states allowing medicinal use for a broad range of conditions, while others set specific requirements for approved use (ie, the CBD must contain less than a certain percentage of THC or the patient suffers from a specific condition).
States with regulations that permit the use of marijuana-derived CBD for a broad range of conditions include Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, Vermont, Washington and West Virginia.
States with regulations that permit the use of marijuana-derived CBD under certain circumstances include Alabama, Georgia, Indiana, Iowa, Kentucky, Mississippi, Missouri, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Utah, Virginia, Wisconsin, and Wyoming.
Both hemp-derived and marijuana-derived CBD are legal at varying levels in a majority of the United States; however, there are certain states where marijuana-derived CBD is strictly prohibited and even hemp-derived CBD is a bit of a gray area. There are currently three (3) states that have taken a strong stance against CBD in the US: Idaho, Nebraska, and South Dakota.
The Allied Business Model
The Company’s focus will be on the lowest cost of production with high quality. This is intended to produce the highest margins possible. Given the average cost of production in Canada being approximately $1.52CDN per gram, the Allied anticipated $0.09-0.15 cents per gram will provide a serious competitive advantage.
Products and Services
The company has acquired a catalogue of CBD (Cannabidiol) based products that include a heal-all cream, SPF 30 sun screen, anti-aging cream. Additional products using nano-technology will be produced for the medical and over the counter use.
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We plan on bringing to market a catalogue of nano-encapsulated cannabinoid products. In addition to this, we plan to offer balms, edibles, tinctures and many other products intended to help veterans and first responders
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A mechanical nano-emulsification process is applied to encapsulate the cannabinoids with a nano “micelle”. This molecule is rendered water soluble. This eliminates the need to combust (or smoke) the product, which is the least healthy way of administration
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Patients and customers can enjoy the therapeutic benefits without needing to smoke any plant material
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The onset/offset of therapeutic benefit occurs within a much more predictable timeline:
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3 minute therapeutic titration point
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15 minute maximum effect
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3 hour off set time
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In addition to this, the Company plans to continue to develop solid partnerships for sales and distribution into South America.
Through Allied’s products and supply chain, clients will be able to access superior cannabis-related products with a greater level of confidence regarding quality control. The rapid growth of the cannabis sector requires companies to have sophisticated production and customer support systems in order to remain competitive and scalable. Allied is fortunate to have assembled a team of industry veterans and management professionals with the background and experience to enable the Company to build, manage and grow such systems.
Colombia Production
The Company’s Colombia facility is intended to provide the following benefits. Essentially, the site is situated in ideal equatorial climate conditions for growing:
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12 hours of consistent natural sun all year round
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Massive land mass potential for expedient scale
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Steady temperatures with low variance during the year
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Rich fertile soils and plentiful water supply
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Multiple harvests per year of premium quality product
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Large cohort available of economical, experienced farming workforce
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Local farming skills honed over generations
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Sustainable labor costs
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Clear recognition of tax, job and industry benefits
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Environmentally and socially sustainable production
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Natural sunlight minimizes energy usage and carbon footprint
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Water usage not competing with local requirements
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Growing conditions lend well to pest and disease management
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Ability to create jobs and boost local/national economies
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Canadian Operations
The Company does not intend to produce large scale quantities of product in Canada. Our business model will focus on strain development and end-product processing may occur in Canada when possible. Large scale production will occur in South America.
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Advantage for quality assurance and process control.
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National legalization for recreational and medicinal cannabis.
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Located in the region that leads the globe in strain development and production knowledge (British Columbia).
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Ability to produce as “Canadian Made” with source materials produced internationally.
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The premium quality that comes from the controlled environment with the Allied Canadian production facilities has been specifically produced to target the Anandamide and CB1 receptors. This product is directly produced for veterans and first responders living with PTSD
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Extraction of cannabinoids from plant biomass into live resin or to full cannabinoid oil
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Development of novel delivery mechanisms
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Proprietary formulations for cannabinoid disease targets
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Extraction and development of product formulations
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Plant tissue culture propagation
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Breeding and genetics
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Micro-biology
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Plant pathology and pest control
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Analytical testing and plant diagnosis
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Pre-clinical trials of cannabinoid-based therapies
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Competition
We face significant competition in the Cannabis and CBD industry. We compete for business primarily on the basis of size and coverage, location, price, quality, and brand recognition. We may also face competition from new entrants into the cannabis service business.
Significant competition could reduce our operating margins and profitability and lead to a loss of market share. Some of our existing and potential competitors may have competitive advantages such as significantly greater brand recognition, a longer history in development of cannabis products, CBD manufacture and distribution, marketing or other resources, and may be able to mimic and adopt our business model. In addition, several of our competitors have significantly larger networks than we do, which gives them an ability to reach a larger number of overall potential consumers and which may make them less susceptible than we are to downturns. We cannot assure you that we will be able to successfully compete against new or existing competitors, and failure to compete may reduce for existing market share and profits.
Some of our major competitors in the Canadian cannabis production realm include Canopy Growth Corporation, Aurora Cannabis, Inc., Aphria, Inc., MedReleaf Corp., CannTrust Holdings, Inc., The Supreme Cannabis Company, Inc. OrganGram Holdings, Inc., The Hydropothecary Corporation, Mariacann Group, Inc., and Emblem Corp.
Sales and Marketing
The Company plans to undertake a multi-prong approach to marketing, which will include:
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Approaching key Canadian Forces Bases (10 Army, 2 Navy, 11 Air Force) and stations
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Working with Legions Canada and their 1,400 locations across the country
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Working with Veterans Affairs
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Creating a sales force of retired service members
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Utilizing Social Media platforms
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In Canada, South America, Europe and Israel we have several partnerships developing that will mobilize the Allied research and development, sales and marketing approach.
With the legalization of cannabis in Canada, the market share taken up by the illicit market will progressively decline while the adult use market and medical market will progressively expand.
Regulation
For a discussion of the various risk we face from regulation and compliance matters, see “Risk Factors” below.
Employees
As of the date of this filing on Form 10-K, the Company has approximately 16 contracted employees. The Company does not intend to pay a full salary to any of its executives or management at this time. (See “Executive Compensation”). The Company believes that its relations with its employees are good.