CBIH 10-Q/A
Cannabis Bioscience International Holdings, Inc. (CBIH)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
(Amendment No. 1)
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____________ to _______________
Commission File Number:
(Exact name of Registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
| (Address of Principal Executive Office) | (ZIP Code) |
(
(Registrant’s telephone number, including area code)
____________________________
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| N/A | N/A | N/A |
Indicate by check mark whether the Registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. ☒
Indicate by check mark whether the Registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). ☒
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | |
| Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check
mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the Registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of January 21, 2025: shares of common stock, without par value.
EXPLANATORY NOTE
This Amendment No. 1 to the Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 2024, is filed solely to furnish interactive data files as Exhibit 101, in accordance with Rule 405 of Regulation S-T and to correct errors in the first paragraph of Note 3 of the Notes to Consolidated Financial Statement and the last paragraph of Note 5 thereof. No other amendments have been made to said quarterly report.
CANNABIS BIOSCIENCE INTERNATIONAL HOLDINGS, INC.
QUARTERLY REPORT ON FORM 10-Q
for the Quarterly Period Ended November 30, 2024
TABLE OF CONTENTS
| Page | |||
| PART I - FINANCIAL INFORMATION | |||
| Item 1. | Financial Statements | 3 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 18 | |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 21 | |
| Item 4. | Controls and Procedures | 22 | |
| PART II - OTHER INFORMATION | |||
| Item 1. | Legal Proceedings | 23 | |
| Item 1A. | Risk Factors | 23 | |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 23 | |
| Item 3. | Defaults upon Senior Securities | 23 | |
| Item 4. | Mine Safety Disclosures | 23 | |
| Item 5. | Other Information | 23 | |
| Item 6. | Exhibits | 24 | |
| SIGNATURES | 25 | ||
| 3 |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
CANNABIS BIOSCIENCE INTERNATIONAL HOLDINGS, INC.
(formerly named China Infrastructure Construction Corp.)
CONSOLIDATED BALANCE SHEETS
| November 30, 2024 | May 31, 2024 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Other current assets | ||||||||
| TOTAL CURRENT ASSETS | ||||||||
| Right-of-use asset | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Bank overdraft | ||||||||
| Related party payables | ||||||||
| Short-term loans (net of amortization of loan fees) | ||||||||
| SBA loan - current | ||||||||
| Lease liabilities - current | ||||||||
| TOTAL CURRENT LIABILITIES | ||||||||
| LONG-TERM LIABILITIES | ||||||||
| Notes payable | ||||||||
| SBA loan | ||||||||
| Lease liabilities | ||||||||
| TOTAL LONG-TERM LIABILITIES | ||||||||
| TOTAL LIABILITIES | ||||||||
| STOCKHOLDERS’ DEFICIENCY | ||||||||
| Authorized shares of preferred stock, without par value, of which shares have been designated Series A Convertible Preferred Stock and shares have been designated Series B Preferred Stock ( and shares outstanding at November 30, 2024, and May 31, 2024, respectively | ||||||||
| Common Stock, without par value: shares authorized; and shares issued and outstanding at November 30, 2024, and May 31, 2024, respectively. | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ DEFICIENCY | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 4 |
CANNABIS BIOSCIENCE INTERNATIONAL HOLDINGS, INC.
(formerly named China Infrastructure Construction Corp.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended November 30, | Six Months Ended November 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Cost and expenses | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Contract labor | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Officer compensation | ||||||||||||||||
| Rent and lease | ||||||||||||||||
| Travel | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Note Discount Expense | ( | ) | ( | ) | ||||||||||||
| Forgiveness of debt | ||||||||||||||||
| Interest | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other income | ( | ) | ( | ) | ) | ( | ) | |||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Average common stock outstanding | ||||||||||||||||
| Average earnings (loss) per share | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 5 |
CANNABIS BIOSCIENCE INTERNATIONAL HOLDINGS, INC.
(formerly named China Infrastructure Construction Corp.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Six Months Ended November 30, | ||||||||
| 2024 | 2023 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net income: | ||||||||
| Adjustment for issuance of common stock for service | ||||||||
| Amortization of right-of-use-asset and liability | ( | ) | ||||||
| Changes in assets and liabilities | ||||||||
| Accounts receivable | ( | ) | ||||||
| Bank overdraft | ( | ) | ||||||
| Accounts payable and accrued expenses | ( | ) | ) | |||||
| Lease liability | ( | ) | ( | ) | ||||
| NET CASH USED IN OPERATIONS | ( | ) | ( | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Proceeds from issuance of common stock | ||||||||
| Rescission of shareholder stock purchase | ( | ) | ||||||
| Proceeds from (repayments of) short-term loans | ( | ) | ||||||
| Proceeds from shareholder loans | ||||||||
| Change in notes payable | ||||||||
| Change in lease liability | ||||||||
| Payments to SBA loan | ( | ) | ||||||
| Proceeds from related party loan | ||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | ||||||||
| NET DECREASE IN CASH | ( | ) | ||||||
| CASH AT BEGINNING OF PERIOD | ||||||||
| CASH AT END OF PERIOD | $ | $ | ||||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for taxes | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 6 |
CANNABIS BIOSCIENCE INTERNATIONAL HOLDINGS, INC.
(formerly named China Infrastructure Construction Corp.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY
(Unaudited)
| Series
A Convertible Preferred Stock | Series B Convertible Preferred Stock | Common
Stock | Additional Paid-In | Accumulated | ||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Capital | Deficit | Total | |||||||||||||||||||||||||
| Balance - May 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||
| Issuance of common stock for services | – | – | ||||||||||||||||||||||||||||||
| Issuance of Series B Preferred Shares | – | – | ||||||||||||||||||||||||||||||
| Net loss for the quarter | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance - August 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||
| Return of common stock issued for services | – | – | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net loss for the quarter | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance – November 30, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||
| Series
A Convertible Preferred Stock | Series B Convertible Preferred Stock | Common
Stock | Additional Paid-In | Accumulated | ||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Capital | Deficit | Total | |||||||||||||||||||||||||
| Balance - May 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||
| Sales of common stock for cash | – | – | ||||||||||||||||||||||||||||||
| Rescission of share sale | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||
| Net loss for the quarter | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance - August 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||
| Net loss for the quarter | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance – November 30, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 7 |
CANNABIS BIOSCIENCE INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2024
(Unaudited)
Note 1 – Organization and Business
Organization and Operations
Cannabis Bioscience International Holdings, Inc., a Colorado corporation (the “Company”), was formed on February 28, 2003, as a limited liability company under the name Fidelity Aircraft Partners LLC. On December 16, 2009, it converted to a corporation under the name Fidelity Aviation Corporation, and on August 24, 2009, it changed its name to China Infrastructure Construction Corp. On February 28, 2018, the Company changed its name to Hippocrates Direct Healthcare, Inc.; on July 4, 2018, it resumed the name China Infrastructure Construction Corp. On December 6, 2022, it changed its name to its present name. The Company provides educational systems focused on medical cannabis in cities throughout the United States and six countries in Latin America. The Company provides services to third parties in therapeutic areas of clinical trials and conducts clinical trials relating to cannabinoids for its own account. The Company has one non-operating subsidiary, Alpha Fertility and Sleep Center, LLC, a Texas limited liability company, through which it conducted its sleep center business until April 30, 2023.
Note 2 – Summary of Significant Accounting Policies
Accounting Principles
The accompanying unaudited consolidated financial statements have been prepared by management using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial statements and with the instructions to Article 10 of Regulation S-X of the U.S. Securities and Exchange Commission (the “SEC”). Accordingly, they do not contain all of the information and footnotes required by U.S. GAAP for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company at November 30, 2024, and the results of operations and cash flows for the periods presented. The results of operations for the six months ended November 30, 2024, are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited consolidated financial statements should be read in conjunction with the audited financial statements and related notes thereto for the year ended May 31, 2024.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Making estimates requires management to exercise significant judgment. Certain of these estimates could be affected by external conditions, including those unique to the Company’s businesses, and general economic conditions. These external conditions could have an effect on the Company’s estimates that could cause actual results to differ materially from its estimates. Actual results could differ from those estimates. The Company re-evaluates all of its accounting estimates at least quarterly based on these conditions and records adjustments when necessary. Significant estimates relied upon in preparing these statements include revenue recognition, accounts receivable reserves, accrued expenses, share-based compensation and the recoverability of the Company’s net deferred tax assets and any related valuation allowance.
| 8 |
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Cash and Cash Equivalents
Cash equivalents are short-term, highly liquid investments that are readily convertible to cash with original maturities of three months or less at the date acquired. The Company had investment securities that were deemed cash equivalents at November 30, 2024, and May 31, 2024, respectively.
Accounts Receivable
Included in accounts receivable on the balance
sheets are amounts primarily related to customers. The Company estimates losses on receivables based on known troubled accounts and historical
experience of losses incurred. Receivables are considered impaired and written off when it is probable that all contractual payments
due will not be collected in accordance with the terms of the related agreement. Based on experience and the judgment of management,
there was
Revenue Recognition
The Company follows the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), as amended. This standard requires a company to recognize revenues when it transfers goods or services to customers in an amount that reflects the consideration that it expects to receive for them.
Under ASU No. 2014-09, the Company recognizes revenue when a customer obtains control of promised goods or services, or when they are shipped to a customer, in an amount that reflects the consideration that it expects to receive in exchange for them. The Company recognizes revenues following the five-step model prescribed under ASU No. 2014-09: (a) it identifies a contract with a customer; (b) it identifies the performance obligations in the contract; (c) it determines the transaction price; (d) it allocates the transaction price to the performance obligations in the contract; and (e) it recognizes revenues when (or as) it satisfies its performance obligation.
The Company generates revenue from multiple streams, namely, clinical trials, consulting fees, seminars and merchandise sales. Revenues from product sales are recognized when a customer obtains control of the Company’s product, which occurs at a point in time or over time, typically upon shipment to the customer or when services are fulfilled and the customer receives benefit from such services. Revenue is deferred and a liability is established to the extent that the Company receives payments from customers in advance of goods being shipped or services being rendered.
The Company expenses incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset in which it would have been recognized is one year or less or the amount is immaterial.
A performance obligation is a contractual promise to transfer a distinct product or service to a customer and is the unit of account in the new revenue standard. The contract transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Each contract has a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct. Revenue from contracts that satisfy the criteria for overtime recognition is recognized as the work progresses. The majority of the Company’s revenue is derived from services provided to customers and is executed typically over a period that is typically between 1 to 12 months, based on evaluation of when these services are rendered. Contracts will continue to be recognized over time because of the continuous transfer of control to the customer as services are rendered to customers. Payments made by customers in advance of services being rendered are recorded as deferred revenue.
| 9 |
Our significant payment terms for customer contracts vary based on the revenue stream. Franchising business clients are required to advance a percentage of the franchise fee upon acceptance of the contract. These advances, when received, are accounted for as contract liabilities on the consolidated balance sheet and are subsequently recognized in revenue when they are earned. Contracts for clinical trials typically provide for progress payments based on the number of patients seen, with final payments generally due within 30 days upon completion of work or the termination of the contract. Revenue is recognized when all performance obligations under the terms of a contract are satisfied. The Company requires advance payments from its consulting customers and these payments are recorded as contract liabilities on the consolidated balance sheet until service is performed and revenue is recognized. These advance payments are not treated as financing component based on the guidance in ASC 606-10-32-196-16 and -17, whereby the timing of when services are provided are at the discretion of the customers or a substantial amount of the consideration promised by the customer is variable and not in the control of the customer or the Company. There is no significant financing component to any of the Company’s contracts.
Contracts for educational services require nonrefundable payment in advance and are recorded as revenue when received.
There is no significant financing component to any contracts.
Contract Modifications
Contracts for the Company’s clinical trial business are subject to modification. These modifications may create new, or change existing, enforceable rights and obligations of the parties thereto. Modifications are generally effected pursuant to an amendment or addendum to the original contract. A contract modification is accounted for as a new contract if it reflects an increase in scope that is regarded as distinct from the original contract and is priced in line with the standalone price for the related services. If a contract modification is not considered a new contract, the modification is combined with the original contract and the impact on revenue recognition will depend on whether the remaining services are distinct from the original contract. If they are distinct from those in the original contract, all remaining performance obligations will be accounted for on a prospective basis, with unrecognized consideration allocated to the remaining performance obligations. If the remaining goods or services are not distinct, the modification will be treated as if it were a part of the existing contract and the effect that the contract modification has on the transaction price and the measure of progress toward satisfaction of the performance obligations are recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) at the date of the contract modification on a cumulative catch-up basis.
Remaining Performance Obligations
The Company follows ASC 606, which requires the
allocation of the transaction price to the remaining performance obligations of a contract and applies a practical expedient allowing
it not to disclose the amount of the transaction price allocated to the remaining performance obligations for contracts with an original
expected duration of one year or less. At November 30, 2024, and May 31, 2024, the Company had
ASC 718, “Compensation – Stock Compensation,” prescribes accounting and reporting standards for all share-based payment transactions. In June 2018, FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which aligns accounting for share-based payments issued to non-employees to that of employees under the existing guidance of Topic 718, with certain exceptions. This update supersedes previous guidance for share-based payments to non-employees under Subtopic 505-50, Equity – Equity-Based Payments to Non-Employees. This guidance became effective for the Company on January 1, 2019. Based on its completed analysis, the Company has determined that adopting this guidance will not have a material impact on its financial statements. The Company follows FASB guidance related to equity-based payments, which requires that equity-based compensation be accounted for using a fair value method and recognized as expense in the accompanying statements of operations. Equity-based compensation expense will be recognized as compensation expense.
| 10 |
Leases
The Company has adopted ASU 2016-02, Leases (Topic 842), along with related clarifications and improvements, under which lessees are required to recognize a lease liability, which represents the discounted obligation to make future minimum lease payments and a corresponding right-of-use asset on the balance sheet for most leases. The guidance retains the historical accounting for lessors and does not make significant changes to the recognition, measurement, and presentation of expenses and cash flows by a lessee. Enhanced disclosures are also required to give financial statement users the ability to assess the amount, timing and uncertainty of cash flows arising from leases.
Cash Flows
The Company follows ASU 2016-18, “Statement of Cash Flows (Topic 230),” requiring that the statement of cash flows explain the change in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The provisions of this guidance are to be applied using a retrospective approach, which requires application of the guidance for all periods presented.
Fair Value Measurements
The Company has adopted ASC Topic 820, Fair Value Measurements, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair-value measurements.
The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, is carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of the Company’s short- and long-term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features, such as concurrent issuances of warrants and/or embedded conversion options, are comparable to rates of returns for instruments of similar credit risk.
ASC Topic 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC Topic 820 also establishes a fair-value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC Topic 820 describes three levels of inputs that may be used to measure fair value:
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Quoted prices for similar assets and liabilities in active markets or inputs that are observable.
Level 3: Inputs that are unobservable (for example, cash flow modeling inputs based on assumptions).
| 11 |
Income Taxes
The Company accounts for income taxes in accordance with Accounting Standards Codification No. 740, “Income Taxes” (“ASC 740”). This codification prescribes the use of the asset and liability method whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and for carryforward tax losses. Deferred taxes are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value if it is more likely than not that some portion or all of the deferred tax asset will not be realized.
Deferred tax liabilities and assets are classified as current or noncurrent based on the classification of the related asset or liability for financial reporting or according to the expected reversal dates of the specific temporary differences, if not related to an asset or liability for financial reporting.
The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740, which provides guidance as to the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in its financial statements, under which a company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.
The tax benefits recognized in financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Accordingly, the Company would report a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. The Company elects to recognize any interest and penalties, if any, related to unrecognized tax benefits in tax expense.
The Company computes basic earnings per share amounts in accordance with Accounting Standards Codification Topic 260, “Earnings per Share.” Basic earnings per share is calculated by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the reporting period. Diluted loss per share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period. At November 30, 2023, and November 30, 2022, the Company had dilutive securities.
Recently Issued Accounting Standards
The Company does not believe there are any other recently issued, but not yet effective, accounting standards that would have a significant impact on the Company’s financial position or results of operations.
| 12 |
Note 3 – Going Concern
The accompanying consolidated financial
statements have been prepared in conformity with U.S. GAAP, which contemplate the Company’s continuation as a going concern in
accordance with ASC 240-40-50. The Company’s history of recurring losses, negative working capital and negative cash flows
from operating activities raises substantial doubt about its ability to continue as a going concern. The Company has not generated
any profits since inception and its current cash balances will not meet its working capital needs. During the six months ended
November 30, 2024, the Company had an operating loss of $
The ability of the Company to continue as a going concern depends on the successful execution of its operating plan, which includes expanding its operations and raising either debt or equity financing. There is no assurance that the Company will be able to expand its operations or obtain such financing on satisfactory terms or at all. If the Company is unsuccessful in these endeavors, it may be required to curtail or cease its operations.
The accompanying financial statements do not include any adjustments related to the recoverability or classification of asset carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.
Note 4 – Debt
PPP Loans
EIDL Loans
In May 2020, the Company received $
In June 2020, the Company received proceeds of
$
The Company’s EIDL loans were recorded in the balance sheet as follows:
| November 30, 2024 (Unaudited) | May 31, 2024 (Audited) | |||||||
| SBA (EIDL) current portion | $ | $ | ||||||
| SBA (EIDL) noncurrent portion | ||||||||
| Total EIDL loans | $ | $ | ||||||
| 13 |
Short-Term Loans
The Company has entered into agreements under which it sold receivables to third parties. In accordance with ASC 470, these transactions are treated as loans encumbering the receivables of the Company in the event of default and are accounted for as a debt, such that payments are allocated to principal and interest expense as they are made. These transactions are as follows:
| · | In May 2022, the Company
entered into a financing agreement with an unrelated party for a loan of $ | |
| · | In January 2023, the Company
entered into a financing agreement with an unrelated party for a loan of $ | |
| · | In April 2023, the Company
entered into a financing agreement with an unrelated party for a loan of $ | |
| · | On August 8, 2022, the
Company entered into a financing agreement (the “AF Agreement”) with an unrelated party for a loan of $ | |
| · | On May 13, 2024, the Company
agreed to settle $ | |
| · | On June 29, 2022, the Company
borrowed $ from an unrelated party at an annual interest rate of %. This loan is payable at the weekly rate of
$ for . On October 13, 2022, an additional loan of $ was obtained with a weekly payment of $ for
. At November 30, 2024, the outstanding balance of this loan, including interest, was $ | |
| · | On August 3, 2022, the
Company borrowed $ |
See Note 11 for information regarding a promissory note made by the Company in favor of a related party and cash advances made during the year ended May 31, 2024, by the officers of the Company.
| 14 |
Note 5 – Right-of-Use Assets and Lease Liabilities
The Company leases real property from unrelated parties under leases that are classified as operating leases. The right-of-use assets for operating leases are included in right-of-use assets on the balance sheets, with the corresponding lease liability in liabilities. Lease expense is recognized on a straight-line basis over the lease term. Renewals and terminations are included in the calculation of right-of-use assets and lease liabilities when they are considered reasonably certain to be exercised. When the implicit rate is unknown, the incremental borrowing rate, based on the commencement date, is used in determining the present value of lease payments.
The following amounts related to leases were recorded in the balance sheets:
| November 30, 2024 (Unaudited) | May 31, 2024 (Audited) | |||||||
| Right-of-use asset | $ | $ | ||||||
| Less: Accumulated amortization | ( | ) | ( | ) | ||||
| Right-of-use asset, net | $ | $ | ||||||
| Lease liabilities – current | $ | |||||||
| Lease liabilities – noncurrent | ||||||||
| Operating lease liabilities | $ | $ | ||||||
The Company reimburses related parties for an office space operating lease under a month-to-month arrangement, payable at the discretion of management. See Note 10.
The Company’s total operating lease
expense was $
Note 6 -- Revenue
Most of the Company’s revenue is generated by the performance of services to customers and recognized at a point in time based on the evaluation of when the customer obtains control of the products. Revenue is recognized when all performance obligations under the terms of a contract are satisfied, net of certain taxes and gain/loss resulting from changes in foreign currency. Revenue is recorded when customer acceptance is received and all performance obligations have been satisfied. Sales of goods typically do not include multiple products and/or service elements.
The table below summarizes the Company’s disaggregated revenue information:
| Three Months Ended November 30, | Six Months Ended November 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Clinical trials | $ | $ | $ | $ | ||||||||||||
| Consulting fees | ||||||||||||||||
| Seminar fees | ||||||||||||||||
| Royalties | ||||||||||||||||
| Merchandise | ||||||||||||||||
| Total revenue | $ | $ | $ | $ | ||||||||||||
Cost of revenue consists of third-party costs
associated with patient stipends, sleep study fees and audio/video fees. At November 30, 2024, and November 30, 2023, cost of revenues
totaled $
| 15 |
Note 7 – Stockholders’ Deficiency
The Company is authorized to issue
Preferred Stock
The Company has designated shares of preferred stock as Series A Convertible Preferred Stock (the “Series A Stock”). Until July 20, 2022, each share had a par value of $; on that date, the Company amended its articles of incorporation to provide that each such share has par value. Under this amendment, (i) Series A Stock is entitled to receive dividends on the shares of Common Stock into which such shares are convertible, (ii) has the voting power of the number of shares of Common Stock into which such shares are convertible, (iii) is redeemable at the option of the Company for a redemption price equal to the number of shares of Common Stock into which the redeemed shares are convertible and (iv) are senior to the Common Stock and junior to the Series B Convertible Preferred Stock described below. At November 30, 2024, and May 31, 2024, there were shares of Series A Stock issued and outstanding.
On July 20, 2022, the Company designated a series of preferred stock, named Series B Preferred Convertible Preferred Stock, comprising shares (“Series B Preferred”). The shares of this series have par value, are not entitled to dividends, have no liquidation rights, are not redeemable, are not convertible, have 60% of the Company’s voting power and rank senior to the Common Stock and Series A Convertible Preferred Stock. The preferred shares were issued in exchange for Common Stock to an existing common shareholder. The Company has deemed the value of the preferred and common shares to be the same, resulting in no change to additional paid capital.
Common Stock
On August 11, 2024, the Board authorized the issuance of shares of Common Stock to a related party on May 31, 2025, May 31, 2026, May 31, 2027, and May 31, 2028, as compensation for his services as treasurer and a director of the Company during the years then ended, if he is serving as treasurer on those dates. Also, on August 11, 2024, the Board authorized the issuance of, and the Company issued shares of Series B Preferred to this related party as compensation for services to be rendered by him in raising capital.
On August 11, 2024, the Board authorized the issuance of shares of Common Stock to a related party as compensation for his services as secretary the Company for the years ended May 31, 2024, May 31, 2025, May 31, 2026, and May 31, 2027, in compensation for such services during the years then ended, if he is serving as secretary on those dates.
On October 28, 2024, an unrelated party returned shares of Common Stock to the Company in consideration of the termination of a services agreement.
At November 30, 2024, and May 31, 2024, there were respectively and shares of Common Stock issued and outstanding.
On July 20, 2022, the Company adopted its 2022 Equity Incentive Plan, which provides for the grant of incentive and non-statutory stock options, stock appreciation rights, restricted stock, unrestricted stock, restricted stock units and performance awards to directors, officers, employees and consultants, as determined by the Board, as plan administrator. The Company will recognize as share-based compensation expense all share-based payments to employees over the requisite service period (generally the vesting period) in its consolidated statements of operations based on the fair values of the awards that are issued.
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Note 9 – Income Taxes
The Company provides for income taxes under ASC 740. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax basis of assets and liabilities and the tax rates in effect when these differences are expected to reverse. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.
On December 22, 2017, the 2017 Tax Cuts and Jobs
Act (the “Tax Act”) was enacted into law, making significant changes to the Code. These changes included a federal corporate
tax rate decrease from
Due to changes in ownership provisions of the
income tax laws of the United States of America, net operating loss carryforwards of approximately $
Income taxes for 2017 to 2024 remain subject to examination.
Note 10 – Commitments and Contingencies
The Company leased premises of approximately
4,500 square feet located at 6201 Bonhomme Road, Suites 460S and 466S, Houston, Texas. The lease provided for a base rent of $
Two of the Company’s officers leased 1,400
square feet in Houston, Texas, at 1625 Main St., Houston, Texas, under a lease the term of which commenced on March 15, 2023, and expired
on
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Note 11 – Related Party Transactions
See Note 7 for information respecting the issuance of the Company’s equity securities to related parties and Note 10 for information respecting the lease of real property to the Company by two of its officers.
During the year ended May 31, 2023, the Company received cash advances from related parties of $101,335 for use as working capital.
At November 30, 2024. and May 31, 2024, the Company
was indebted to related parties for cash advances made by them for use as working capital in the respective amounts of $
On September 1, 2024, the Company entered into a loan agreement with related parties in the principal amount
of $
Note 12 – Off-Balance-Sheet Arrangements
The Company has no off-balance sheet arrangements.
Note 13 – Concentration of Risk
The Company had revenue of $
The Company had two customers that provided
Note 14 – Subsequent Events
On November 7, 2024, the Company entered a loan agreement with a related party in the principal amount of $50,000, at an interest rate of 13% per annum, which will mature on September 15, 2025, and is repayable as follows: on May 15, 2025 , a payment of $37,968; on June 15, 2025, a payment of $9,492; on July 15, 2025, a payment of $9,492; on August 15, 2025, a payment of $9,492; and on September 15, 2025, a payment of $9,492.
On December 27, 2024, the Company issued 250,000,000 shares of Common Stock to a related party for $75,000.
Management has evaluated all other subsequent events when these consolidated financial statements were issued and has determined that none of them requires disclosure herein.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE COMPANY’S UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS, THE NOTES THERETO AND THE OTHER FINANCIAL INFORMATION APPEARING IN THIS REPORT.
Introduction
The financial data discussed below are derived from the unaudited consolidated financial statements of the Company as of November 30, 2024, which were prepared and presented in accordance with United States generally accepted accounting principles for interim financial statements. These financial data are only a summary and should be read in conjunction with the unaudited financial statements and related notes contained herein, which more fully present the Company’s financial condition and operations as at that date, and with its audited financial statements and notes thereto contained in its Annual Report on Form 10-K for the year ended May 31, 2024, filed with the SEC on August 16, 2024. Further, the Company urges caution regarding the forward-looking statements which are contained in this report because they involve risks, uncertainties and other factors affecting its operations, market growth, service, products and licenses that may cause the Company’s actual results and achievements, whether expressed or implied, to differ materially from the expectations the Company describes in its forward-looking statements.
General Statement of Business
The Company, headquartered in Houston, Texas, conducts clinical trials for Sponsors and CROs and as a Sponsor through Alpha Research Institute and cannabis-related education in classrooms, seminars and online through Pharmacology University
Going Concern
As indicated in Note 3 of the notes to the audited consolidated financial statements for the year ended May 31, 2024, and the report thereon of the Company’s independent auditing firm, there is substantial doubt as to the ability of the Company to continue as a going concern. The Company has incurred recurring losses and recurring negative cash flow from operating activities and has an accumulated deficit, and its ability to continue as a going concern depends on the successful execution of its operating plan, increasing sales of existing services and introducing new products and services, as well as raising either debt or equity financing.
The Company needs substantial additional capital to fund its business, including the completion of its business plan and repayment of its debts. No assurance can be given that any additional capital can be obtained or, if obtained, will be adequate to meet its needs, and the Company may need to take measures to remain a going concern. If adequate capital cannot be obtained on a timely basis and satisfactory terms, the Company’s operations could be materially negatively impacted, or it could be forced to terminate its operations.
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Results of Operations
Comparison of the Three Months Ended November 30, 2023, and November 30, 2022
The following table sets forth information from the statements of operations for the three months ended November 30, 2023, and November 30, 2022.
| Three Months Ended November 30, | ||||||||
| 2024 | 2023 | |||||||
| Revenues | $ | 74,248 | $ | 63,748 | ||||
| Cost of revenues | 7,803 | 15,092 | ||||||
| Gross profit | 66,445 | 48,656 | ||||||
| Total operating expenses | 126,072 | 143,168 | ) | |||||
| Operating loss | (59,627 | ) | (94,512 | ) | ||||
| Non-operating expense: | ||||||||
| Interest | (8,701 | ) | (29,916 | ) | ||||
| Note discount | (11,200 | ) | – | |||||
| Net loss | $ | (79,528 | ) | $ | (124,428 | ) | ||
Revenues
Revenues were $74,248 and $63,748 for the three months ended November 30, 2024, and November 30, 2023, respectively. The increase was primarily due to a $10,500 increase in revenues from clinical trials sales.
Cost of Revenues
Cost of revenues for the three months ended November 30, 2024, and November 30, 2023, were $7,803 and $15,092, respectively. The difference was primarily due to a reduction in cost of revenues in clinical trials.
Total Operating Expenses
The following table sets forth total operating expenses for the three months ended November 30, 2024, and November 30, 2023:
| Three Months Ended November 30, | ||||||||
| 2024 | 2023 | |||||||
| General and administrative | $ | 40,128 | $ | 8,407 | ||||
| Contract labor | 54,296 | 46,326 | ||||||
| Professional fees | 7,112 | 45,028 | ||||||
| Officer compensation | 6,000 | 12,000 | ||||||
| Rent | 18,439 | 31,210 | ||||||
| Travel | 97 | 197 | ||||||
| Total operating expenses | $ | 126,072 | $ | 143,168 | ||||
Total operating expenses were $126,072 and $143,168 for the three months ended November 30, 2024, and November 30, 2023, respectively. The decrease is attributable to reductions of $37,916, $6,000 and $12,771 in professional fees, officer compensation and rent and lease, respectively, offset by an increase of $31,721 in general and administrative.
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Operating Loss
Operating income/loss increased from a loss of $94,512 for the quarter ended November 30, 2023 to a loss of $59,627 for the three months ended November 30, 2024, primarily due to an increase of revenue from clinical trial of $10,500 and a decrease in total operating expenses of $17,096.
Other Income
For the three months ended November 30, 2024, and November 30, 2023, interest was $8,701 and $29,916, respectively, while the note discount expense was $11,200 for the three months ended November 30, 2024.
Net Loss
Net income for the three months ended November 30, 2024 was $79,528 versus the net loss of $124,428 for the three months ended November 30, 2023, for the reasons described above.
Comparison of the Six Months Ended November 30, 2024, and November 30, 2023
The following table sets forth information from the statements of operations for the six months ended November 30, 2024, and November 30, 2023.
| Six Months Ended November 30, | ||||||||
| 2024 | 2023 | |||||||
| Revenues | $ | 253,135 | $ | 136,569 | ||||
| Cost of revenues | 16,165 | 23,912 | ||||||
| Gross profit | 236,970 | 112,656 | ||||||
| Total operating expenses | 394,201 | 380,839 | ||||||
| Operating loss | (157,231 | ) | (268,182 | ) | ||||
| Non-operating income (expense): | ||||||||
| Interest | (11,040 | ) | (38,035 | ) | ||||
| Forgiveness of debt | 23,638 | – | ||||||
| Note discount | (11,200 | ) | – | |||||
| Net loss | $ | (155,833 | ) | $ | (306,217 | ) | ||
Revenues
Revenues were $253,135 and $136,569 for the six months ended November 30, 2024, and November 30, 2023, respectively. The increase was primarily due to increase in clinical trial and consulting fees amounting to $137,199 and $16,667, respectively.
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Cost of Revenues
Cost of revenues for the six months ended November 30, 2024, and November 30, 2023, were $16,165 and $23,912, respectively. The difference was primarily due to a $7,747 decrease in cost of revenues for clinical trials.
Total Operating Expenses
The following table sets forth total operating expenses for the six months ended November 30, 2023, and November 30, 2022:
| Six Months Ended November 30, | ||||||||
| 2024 | 2023 | |||||||
| General and administrative | $ | 101,424 | $ | 53,376 | ||||
| Contract labor | 100,169 | 141,980 | ||||||
| Professional fees | 143,682 | 107,422 | ||||||
| Officer compensation | 12,000 | 24,000 | ||||||
| Rent | 36,687 | 52,163 | ||||||
| Travel | 239 | 1,898 | ||||||
| Total operating expenses | $ | 394,201 | $ | 380,839 | ||||
Total operating expenses were $394,201 and $380,839 for the six months ended November 30, 2024, and November 30, 2023, respectively. The decrease was primarily attributable to reductions of $41,811, $15,476 and $12,000 in contract labor, rent and lease, and officer compensation, respectively, offset by an increase of $48,048 in general and administrative..
Operating Loss
Operating loss decreased from $268,182 for the six months ended November 30, 2023, to $157,231 for the six months ended November 30, 2024, primarily due to increase in revenue from clinical trial amounting to $137,199 and decrease in operating expense from contract labor of $41,811.
Other Income (Expense)
For the six months ended November 30, 2024, and November 30, 2023, interest was $11,040 and $38,035, respectively. During the six months ended November 30, 2024, the Company recorded income of $23,638 from forgiveness of a loan and an expense from note discount amounting to $11,200. As a result, other income (expense) for the six months ended November 30, 2024, and November 30, 2023, showed income of $1,398 and loss of $38,035, respectively.
Net Loss
The net loss for the six months ended November 30, 2024, was $155,833, versus $306,217 for the six months ended November 30, 2023, for the reasons described above.
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Changes in Financial Condition and Results of Operations
At November 30, 2024, the Company had $1,002 in cash and cash equivalents and accounts receivable of $13,819, negative working capital of $857,255 and no commitments for capital expenditures. At May 31, 2024, the Company had $755 in cash and cash equivalents and accounts receivable of $20,139, negative working capital of $860,416 and no commitments for capital expenditures. The Company had a balance of cash and cash equivalents of $1,002 on the date of this Report.
During the six months ended November 30, 2024, the Company had net cash used in operations of $102,503, while during the quarter ended November 30, 2023, the Company had net cash used in operations of $295,867. On the other hand, during the six months ended November 30, 2024, the Company had net cash provided in financing of $102,750, while during the quarter ended November 30, 2023, the Company had net cash provided in financing of $287,290. During the years ended May 31, 2024, and May 31, 2023, the Company had net cash used in operations of $479,382 and $898,367, respectively, and net cash provided by financing activities of $471,224 and $875,298, respectively. The Company had accumulated deficits of $5,273,234 at November 30, 2024, and $5,334,081 at May 31, 2024.
Off-Balance-Sheet Arrangements
The Company has no off-balance-sheet arrangements.
Recent Accounting Pronouncements
Refer to Note 2 of the accompanying financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and accordingly is not required to provide information under this item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
The Company’s management has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of November 30, 2024. Based on this evaluation, the principal executive officer and the principal accounting officer concluded that these disclosure controls and procedures were not effective as of such date, at a reasonable level of assurance, in ensuring that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is: (i) accumulated and communicated to management (including its principal executive officer and principal accounting officer) in a timely manner and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Changes in Internal Control Over Financial Reporting
There were no changes in internal control over financial reporting during the three months ended November 30, 2024, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
The Company is a smaller reporting company as defined by Rule 12b-2 promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”) and accordingly is not required to provide information under this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities
During the three months that ended November 30, 2024, the Company issued (i) 125,000,000 shares of Common Stock to an officer of the Company as compensation for his services in such capacity during the year ended May 31, 2024, and (ii) 1,000 shares of Series B Preferred Stock to an officer and director of the Company in consideration of services to be rendered in raising capital. These issuances were made in reliance upon the exemptions from registration afforded by Sections 4(a)(2) and/or 4(d) of the Securities Act of 1933 and/or Rule 506(b) or (c) promulgated thereunder.
Use of Proceeds
On December 5, 2023, the Company’s Registration Statement on Form S-1 was declared effective. The Company registered 6,250,000,000 shares of Common Stock for sale for its account, in addition to 3,837,154,885 shares of Common Stock that may be sold by certain selling stockholders. As of the date of the date of this report, the Company has sold no shares and accordingly has received no proceeds of the offering.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Insider Trading Arrangements and Related Disclosure
During the three months ended November 30, 2024,
none of our directors or officers
| 24 |
Item 6. Exhibits.
Exhibit Number |
Title | ||
| 31 | Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer and Principal Accounting Officer * | ||
| 32 | Section 1350 Certification of Principal Executive Officer and Principal Accounting Officer * | ||
| 101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) * | ||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document * | ||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document * | ||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document * | ||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document * | ||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document * | ||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) * | ||
____________
| * | Filed herewith |
| 25 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amended report to be signed on its behalf by the undersigned thereunto duly authorized.
| CANNABIS BIOSCIENCE INTERNATIONAL HOLDINGS, INC. | ||
| Date: January 24, 2025 | By: | /s/ Dante Picazo |
| Dante
Picazo Principal Executive Officer and Principal Accounting Officer | ||
| 26 |