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CBIS > SEC Filings for CBIS > Form 10-K/A on 23-Apr-2014All Recent SEC Filings

Show all filings for CANNABIS SCIENCE, INC.



Annual Report


This report contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. When used in this Form 10-K, the words "anticipate", "estimate", "expect", "project" and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks, uncertainties and assumptions including the possibility that the Company's proposed plan of operation will fail to generate projected revenues.
Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. The Company's actual results could differ materially from those set forth on the forward looking statements as a result of the risks set forth in the Company's filings with the Securities and Exchange Commission, general economic conditions, and changes in the assumptions used in making such forward looking statements.


In Q1 of 2008, the Company acquired all of the assets of Cannex Therapeutics, LLC from Cannex and Steven W. Kubby, and committed to the research and development of cannabis based medical products. The Company owns intellectual property related to a whole cannabis extract lozenge, which has demonstrated some efficacy in non-blind informal testing. Other research indicates that cannabis extracts available in non-smoked forms, including lozenges and topical creams, may have medicinal uses in treating a variety of diseases, the symptoms of those diseases, and for analgesic purposes.

The Company is committed to research and development of cannabis extract medicines ("product") and intends to pursue Independent New Drug certification, possibly under the Orphan Drug Act, for such treatments but faces two significant challenges in accomplishing this business objective, namely financing and government regulation.

The Company is undercapitalized, and will be reliant on outside financing from sales of securities or issuance of debt instruments. Management expects many traditional lenders will be reluctant to provide the Company with capital in light of its financial condition and the nature of its expected business; so that any financing activities will likely be expensive and result in dilution to stockholders of the Company. In this regard, it should be noted that the Asset Acquisition Agreement among Cannex, the Company and K & D Equity Investments, Inc. contains non-dilution provisions that provided additional shares to K & D in the event our shares are sold privately for less than $1.00 per share. The Company can make no representation that financing for its business will be available, regardless of cost.

Furthermore, although cannabis has been used for medicinal purposes for over 5,000 years, there is a significant prejudice against development of smoked cannabis medical products amongst the medical and law enforcement communities.
In spite of recent statements by the current administration that indicate a softening of these views, marijuana is still classified as a controlled substance. The Company can provide no assurances that it can develop and market its intended product, or how long government approval, if obtained, will take.

Recent Developments

Cannabis Science has added several experts to its scientific advisor board and other offices to enable it to progress towards FDA trials with its two key drugs under development, namely CS-TATI-1 targeting both newly diagnosed and treatment-experienced patients with drug-resistant HIV strains, as well as those intolerant of currently available therapies and CS-S/BCC-1 targeting basal and squamous cell carcinomas.

The Company is laying a solid foundation for entrance into the FDA and other government regulatory agencies for developing medicines for cancer, autism, Influenza, PTSD and other ailments.

The Company's goal is the development of FDA-approved pharmaceuticals, including the aforementioned CS-TATI1 and CS-S/BCC-1 currently under development. The Company faces not only the challenges of other business at an early stage of development, but special problems arising from the nature of its own business.
Notwithstanding, stockholders and prospective stockholders should recognize that any investment in our Company is risky and speculative, and could result in a total loss.

Results of Operations

Limited Revenues

Since our inception on January 27, 2005 to December 31, 2012, we have earned limited revenues of $126,682. During the fiscal year ended December 31, 2012 we generated license revenues of $25,000 and educational and consulting revenue of $11,575 compared to $73,702 in license and other revenues for the year ended December 31, 2011. As of December 31, 2012, we had an accumulated deficit of $87,345,113. At this time, our ability to generate any significant revenues continues to be uncertain. There is substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustment that might result from the outcome of this uncertainty.

Net Loss

We incurred a net loss of $86,574,241 since January 27, 2005 (date of inception) to December 31, 2012. Our net loss increased, from $8,339,044 for the fiscal year ended December 31, 2011 to $16,037,572 at the fiscal year ended December 31, 2012, an increase of $7,698,528. For the fiscal year ended December 31, 2012, our net loss per share was $0.03, compared to a net loss per share of $0.05 per share for the fiscal year ended December 31, 2011.


Our total operating expenses from January 27, 2005 (date of inception) to December 31, 2012 were $83,683,095 and consisted of $1,330,443 in investor relations, $33,031,781 in professional fees, $160,417 in technology license royalties, $5,089,811 in impairment of oil and gas well lease, $405,858 in impairment losses on goodwill, $15,395,087 in net loss on settlement of liabilities, $52,243 in net loss on disposal of assets, $50,235 in write-down of inventory, $140,656 in depreciation and amortization and $28,026,385 in general and administrative fees. Total operating expenses increased $8,256,964 to $16,669,122 for the fiscal year ended December 31, 2012 from total expenses of $8,412,158 for the same period in 2011.

Our investor relations expenses increased $25,452 to $111,634 for the fiscal year ended December 31, 2012 from $86,182 for the same period in 2011. This was due to increased stock related compensation for investor relations engagements in 2012 from 2011.

Our professional fees increased $143,103 to $261,852 for the fiscal year ended December 31, 2012 from $118,749 for the same period in 2011 due to increased legal services under agreements and other legal associated with increase securities filing activity and business ventures.

The loss on settlement of liabilities increased $5,529,800 to $10,659,600 for the year ended December 31, 2012 from $5,129,800 in 2011. This increase was due to increased settlement of debt through stock and resulting losses on the settlements.

Our general and administrative expenses increased by $1,249,595 from $3,055,065 for the fiscal year ended December 31, 2011 to $4,304,660 for the same period ended December 31, 2012. The increase in general and administrative expenses was mainly due to an increase in management and consulting fees relating to stock issued pursuant to agreements with management and consultants of the Company. Other general and administrative expenses consist of advertising, office supplies, transfer agent costs, travel expenses, rent, communication expenses (cellular, internet, fax, and telephone), office maintenance, courier and postage costs and office equipment.

Liquidity and Capital Resources

As of December 31, 2012, our current assets totaled $713,240 which was comprised of $23,560 in cash and cash equivalents, $25,000 in accounts receivable-related party, $116,943 in advances to related party, $22,627 in loans receivable-related party, $525,000 in marketable securities, and $110 in prepaid expenses and deposits. As of December 31, 2012, we had $333,538 in intangible assets, net of accumulated amortization, $44,274 in goodwill, and $16,412 in property and equipment, net of accumulated depreciation. As of December 31, 2012 we had a working capital deficit of $2,563,189.

Our net loss of $85,810,455 from January 27, 2005 (date of inception) to December 31, 2012 was mostly funded by debt financing. We expect to incur substantial losses over the next two years. During the fiscal year ended December 31, 2012 our cash position increased by $21,363.

During the fiscal year ended December 31, 2012, we received net cash of $813,445 from financing activities for the fiscal year ended December 31, 2012 compared to $343,437 for the same period in 2011. We used net cash of $640,342 in operating activities for the fiscal year ended December 31, 2012 compared to $341,876 for the same period in 2011. And we used net cash of $151,740 in investing activities compared for the fiscal year ended December 31, 2012 compared to $614 for the same period in 2011.

We are currently not in good short-term financial standing. We anticipate that we may only generate any limited revenues in the near future and we will not have enough positive internal operating cash flow until we can generate substantial revenues, which may take the next two years to fully realize. There is no assurance we will achieve profitable operations. We have historically financed our operations primarily by cash flows generated from the sale of our equity securities and through cash infusions from officers and outside investors in exchange for debt and/or common stock.

Business Development

Our business and product development will follow two parallel paths. We will create cannabis pharmaceuticals with and without psychoactive properties. Both of these lines will have numerous proven health benefits for treating autism, blood pressure, cancer and cancer side effects, along with other illnesses, including for general health maintenance.

We are positioned to pursue the development of phytocannabinoid-based pharmaceutical grade products. The endocannabinoid system normally regulates blood pressure through its capacity to dilate blood vessels and reduce adrenergic stimuli. Additionally, there is a developing body of evidence that shows both the tumor killing properties of endo- and phyto- cannabinoids, and their ability to inhibit metastasis in a variety of cancers.

The Company is working to navigate the regulatory framework for its phytocannabinoid science towards developing cannabis-based therapeutics that will holistically promote health by restoring biochemical balance. By adhering to underlying scientific principles, the Company will manipulate all-pervasive phytocannabinoid processes to target a variety of disparate illnesses.

Cannabis Science is also positioning to explore insights that indicate an intrinsic link between novel cancer and HIV technologies and the cannabinoid system; with the goal of demonstrating that our pharmaceuticals will enhance biochemical markers that are indicative of a successful HIV therapy based on recent paradigm breaking discoveries.

The Company is currently focused on FDA approval of its first medical cannabis product targeted for veterans. Many veterans are already using herbal cannabis to self-medicate to relieve the symptoms of PTSD. Consequently, there is a clear need for standardized, FDA approved, oral cannabis products which can, and should be, provided to veterans and others who can benefit from its use.
Medical cannabis has far fewer and milder side effects than most currently prescribed pharmaceutical products do. We are working hard to have one or more products ready for FDA clinical trials as soon as possible.

On February 9, 2012, the Company signed a license agreement with Apothecary to produce several Cannabis Science Brand Formulations for the California medical cannabis market. As well, Apothecary will provide research and development facilities with full circle operations including a California laboratory facility for internal research and development, along with 16 unique genetic strains specifically generated and maintained by a cancer survivor who recognizes the importance of proper growth and breeding in addition to investing $250,000 in research and development in the first 24 months.

On February 9, 2012, the Company acquired GGECO University, Inc. ("GGECO"), an online video-based medical cannabis education system, offering courses dealing with medical cannabis law, the benefits of medical marijuana, cooking, horticulture, and bud tending. Following the university's name change to Cannabis Science University, the Company hopes to use this platform to educate the general public, patients, and even those who have already been involved in the medical cannabis industry on the medical benefits of cannabis, how it is grown, how to use it safely, and the many applications or ways to administer the medication. In consideration of this agreement, the Company issued 25,000,000 common shares to the principals of GGECO.

On March 21, 2012, the Company acquired Cannabis Consulting Inc. ("CCI Group"), which consists of a group of businesses operated by Robert J. Kane, including:
all contracted rights, properties, patents, trademarks, and distribution rights and agreements pertaining to Cannabis Consulting Inc., Robert Kane Partners, Kaneabis Consulting, Kaneabis Fund, Kaneabis Report, and Kaneabis Radio. In conjunction with the acquisitions, Robert Kane was promoted to V.P. of Investor Relations for the Company. Consideration paid for the CCI Group was 1,000,000 common shares with a fair market value of $147,000 issued to the principal, Mr. Robert Kane.

The Company anticipates having to raise additional capital to fund operations over the next 12 months. To the extent that it is required to raise additional funds to acquire properties, and to cover costs of operations, the Company intends to do so through additional public or private offerings of debt or equity securities.

As of December 31, 2012 the Company had two full-time executive employees.

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