Forward-Looking Statements
Except for the historical information presented in this document, the matters
discussed in this Form 10-Q for the quarter ended November 30, 2019, contain
forward-looking statements which involve assumptions and our future plans,
strategies, and expectations. These statements are generally identified by the
use of words such as "may," "will," "should," "expect," "anticipate,"
"estimate," "believe," "intend," or "project," or the negative of these words or
other variations on these words or comparable terminology. These statements are
expressed in good faith and based upon a reasonable basis when made, but there
can be no assurance that these expectations will be achieved or accomplished.
Such forward-looking statements include statements regarding, among other
things, (a) our potential profitability and cash flows, (b) our growth
strategies, (c) our future financing plans, and (d) our anticipated needs for
working capital. This information may involve known and unknown risks,
uncertainties, and other factors that may cause our actual results, performance,
or achievements to be materially different from the future results, performance,
or achievements expressed or implied by any forward-looking statements. These
statements may be found under "Management's Discussion and Analysis of Financial
Condition and Results of Operations" as well as in this Form 10-Q generally.
Actual events or results may differ materially from those discussed in
forward-looking statements as a result of various factors, including, without
limitation, the matters described in this Form 10-Q generally. In light of these
risks and uncertainties, there can be no assurance that the forward-looking
statements contained in this filing will in fact occur. In addition to the
information expressly required to be included in this filing, we will provide
such further material information, if any, as may be necessary to make the
required statements, in light of the circumstances under which they are made,
not misleading.
Although forward-looking statements in this report reflect the good faith
judgment of our management, forward-looking statements are inherently subject to
known and unknown risks, business, economic and other risks and uncertainties
that may cause actual results to be materially different from those discussed in
these forward-looking statements. Readers are urged not to place undue reliance
on these forward-looking statements, which speak only as of the date of this
report. We assume no obligation to update any forward-looking statements in
order to reflect any event or circumstance that may arise after the date of this
report, other than as may be required by applicable law or regulation. Readers
are urged to carefully review and consider the various disclosures made by us in
our reports filed with the Securities and Exchange Commission which attempt to
advise interested parties of the risks and factors that may affect our business,
financial condition, results of operation and cash flows. If one or more of
these risks or uncertainties materialize, or if the underlying assumptions prove
incorrect, our actual results may vary materially from those expected or
projected.
Except where the context otherwise requires and for purposes of this Form 10-Q
only, "we," "us," "our," "Company," "our Company," and "MCTC" refer to "MCTC
Holdings, Inc.".
Overview
The following discussion and analysis of our financial condition and results of
operations ("MD&A") should be read in conjunction with our financial statements
and the accompanying notes to the financial statements included in this Form
10-Q.
The MD&A is based on our financial statements, which have been prepared in
accordance with U.S. GAAP. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities and expenses and related disclosure of contingent assets and
liabilities. Management bases its estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions .
Description of Business
Our principal executive office is located at 520 S Grand Avenue, Suite 320, Los
Angeles, California 90071. Our telephone number is (310) 986-4929 and our
website is accessible at www.cannabisglobalinc.com. Unless expressly noted, none
of the information on our website is part of this filing or any filing
supplement.
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Our shares of Common Stock are quoted on the OTC Markets Pink, operated by OTC
Markets Group, Inc. As of the filing date, the Company's shares trade under the
symbol MCTC. On September 30, 2019 there was a one for 15 stock split.
We are a fully operational research and development company focused on
cannabinoid research.
Our aim is to create and commercialize engineered technologies to deliver hemp
extracts and cannabinoids to the human body. Additionally, we plan to develop
consumer products, based on these and other technologies.
Our R&D programs included the following;
1) Development of new routes and vehicles for hemp extract and
cannabinoid delivery to the human body.
2) Production of unique polymeric nanoparticles and fibers for use in
oral and dermal cannabinoid delivery.
3) Research and commercialization of new methodologies to isolate and/or
concentrate various cannabinoids and other substances that comprise
industrial hemp oil and other extracts.
4) Establishment of new methods to increase the bioavailability of
cannabinoids to the human body through utilization of proven
bioenhancers, including d-?-Tocopherol polyethylene glycol 1000
succinate (TPGS), which is widely used as a water-soluble vitamin E
formulation.
5) Development of other novel inventions for the delivery of
cannabinoids to the human body, which at this time are considered
trade secrets by the Company.
It is the Company's strategy to develop a growing portfolio of intellectual
property relating to the processing of hemp extracts and cannabinoids into forms
that are easily and efficiently delivered to the human body and to companion
animals.
To achieve this goal, our research and development efforts are primarily focused
on these areas: 1) polymeric cannabinoid nanoparticles, 2) polymeric cannabinoid
nanofibers, 3) devices for the delivery of cannabinoids and other active
ingredients and 4) unique formulations of hemp extracts and cannabinoids
utilizing d-?-Tocopheryl Polyethylene Glycol 1000 Succinate (TPGS), a water
soluble form of vitamin E, for oral and dermal delivery. The Company plans to
continue such research efforts in order to develop technologies, methods of
manufacturing and products that are novel and to possibly protect such
technologies, methods of manufacturing and products via U.S. and international
patents and trademarks, and other forms of intellectual property protection.
The Company has begun to file for intellectual property protection for several
of its developed technologies and products.
These include:
? Provisional Patent Filing - Sub-micron and micro-sized particles combining
cannabinoids and d-?-tocopheryl polyethylene glycol 1000 succinate (TPGS)
produced via an electrosprayed apparatus.
? Provisional Patent Filing - Edible cannabinoid delivery and packaging
technology enhanced with solid polymeric nanoparticles and d-?-tocopheryl
polyethylene glycol 1000 (TPGS) succinate containing nanoparticles produced via
an electrosprayed apparatus.
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? Provisional Patent Filing - Edible, 4D printed thermal, moisture or
environmental induced shape-changing device for delivery of cannabinoids or
other active ingredients to beverages or foods.
? Provision Patent - Nanoparticles and nanofibers of cannabinoids.
? Provision Patent Filing - Powdered formations of cannabinoids.
? Trade Mark - Hemp You Can Feel™
? Trade Mark - Gummies You Can Feel™
Employees
As of November 30, 2019, we had one employee, who is our CEO. The Company relies
on the services of contractors and service providers who perform various
operational and financial related services for the organization.
Results of Operations
For the Three months Ended November 30, 2019 and November 30, 2018
The Company began recognizing revenues from business operations during the
quarterly financial period ending November 30, 2019. Product revenues for the
quarterly financial period ending November 30, 2019, were $5,003 compared to
zero reported during the quarterly financial period ending November 30, 2018.
The increase was attributable to the Company receiving orders from a new
customer. Consulting Revenues for the quarterly financial period ending November
30, 2019, were $5,000, which was associated with a Related Party, Edward
Manolos. Mr. Manolos is a Related Party by way of his position as a director of
the Company and due to his partial ownership of the contracted consulting
organization to which services have been offered.
Total Revenues for the quarterly financial period ending November 30, 2019, were
$10,003 compared to zero revenues for the year earlier period. The increase was
a result of a customer order and a Related Party consulting contract.
During the financial period ending November 30, 2019, cost of goods sold was
$2,900 compared to zero for the years earlier period. The increase was
attributable to the Company receiving orders from new customers.
Accounts receivable rose to $10,003 for the period ending November 30, 2019, as
a result of the Company signing an initial order for products and due to an
increase in consulting revenues. Of this $10,003 accounts receivable, $5,000 is
a Related Party transaction. During the quarterly financial period ending
November 30, 2019, the Company book $5,000 in consulting revenue associated with
a Related Party, Edward Manolos. Mr. Manolos is a Related Party by way of his
position as a director of the Company and due to his partial ownership of the
contracted consulting organization to which services have been offered.
During the financial period ending November 30, 2019, the Company began to incur
operating expense as it organized the production of new products. Advertising
expense during the period was $1,423 and consulting services were $35,883.
Professional fees and General and Administrative Fees were $148,955 and
$187,521, respectively. Total operating expenses were $373,793. For the period
ending November 30, 2018, the Company incurred only $17,283 in operating
expenses. The increase in operating expenses for the period ending 2019 versus
2018 was attributable to the reorganization of the business, the hiring of
consultants and preparation to accept customer orders for new products
developed.
Interest expenses for the financial period ending November 30, 2019 were $31,250
compared to $2,522 for the financial period ending November 30, 2018. The
decrease was attributable to notes sold during the 2019.
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During the financial period ending November 30, 2019, net loss was $385,437
compared to $17,283 for the financial period ending November 30, 2018. The
increase in net loss was attributable mainly to increased spending associated
with the reorganization of the business, expenses relating to hiring consultants
and general costs associated with the design of new product in preparation of
customer orders. The net loss financial period ending November 30, 2019, results
in a loss per share of $0.02, compared to a negligible loss per share ($0.00)
during the year ago period.
Liquidity and Capital Resources
As of the end of the quarterly financial period ending November 30, 2019, we had
an accumulated deficit of $1,513,038 and cash and cash equivalents of $64,702.
In January 2014, we received funding by issuing a $70,000 note payable to a
shareholder. The $70,000 note payable was due on January 9, 2016 and has not
been repaid as of the date of this filing and is thus in default as of May 31,
2019. As of May 31, 2019, $70,000 remained outstanding.
Our primary internal sources of liquidity were provided by proceeds from the
sale of unregistered common shares and warrants of the Company as follows:
On July 3, 2019, we sold 2,000,000 restricted shares at $0.025 a share for the
amount of $50,000 to an accredited investor. The investor also received
2,000,000 warrants to purchase 2,000,000 shares at a price of $0.15 per share.
The warrants expire on July 3, 2020. The sale was made pursuant to SEC Rule 506
Section 4(2), which provides exemption from registration for transactions, which
are not public offerings.
On July 10, 2019, we sold 1,000,000 restricted shares at $0.025 a share for the
amount of $25,000 to an accredited investor. The investor also received
1,000,000 warrants to purchase 1,000,000 shares at a price of $0.15 per share.
The warrants expire on July 10, 2020. The sale was made pursuant to SEC Rule 506
Section 4(2), which provides exemption from registration for transactions, which
are not public offerings.
On July 16, 2019, we sold 1,400,000 restricted shares at $0.025 a share for the
amount of $35,000 to an accredited investor. The investor also received
1,400,000 warrants to purchase 1,400,000 shares at a price of $0.15 per share.
The warrants expire on July 16, 2020. The sale was made pursuant to SEC Rule 506
Section 4(2), which provides exemption from registration for transactions, which
are not public offerings. As of the date of this filing, these shares have not
yet been issued to the purchaser.
On July 19, 2019, we sold 1,000,000 restricted shares at $0.025 a share for the
amount of $25,000 to an accredited investor. The investor also received
1,000,000 warrants to purchase 1,000,000 shares at a price of $0.15 per share.
The warrants expire on July 19, 2020. The sale was made pursuant to SEC Rule 506
Section 4(2), which provides exemption from registration for transactions, which
are not public offerings.
On August 15, 2019, we sold 2,000,000 restricted shares at $0.025 a share for
the amount of $50,000 to an accredited investor. The investor also received
2,000,000 warrants to purchase 2,000,000 shares at a price of $0.15 per share.
The warrants expire on August 15, 2020. The sale was made pursuant to SEC Rule
506 Section 4(2), which provides exemption from registration for transactions,
which are not public offerings. As of the date of this filing, these shares have
not yet been issued to the purchaser.
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On August 19, 2019, we sold 1,000,000 restricted shares at $0.025 a share for
the amount of $25,000 to an accredited investor. The investor also received
1,000,000 warrants to purchase 1,000,000 shares at a price of $0.15 per share.
The warrants expire on August 19, 2020. The sale was made pursuant to SEC Rule
506 Section 4(2), which provides exemption from registration for transactions,
which are not public offerings. As of the date of this filing, these shares have
not yet been issued to the purchaser.
On August 27, 2019, we sold 1,000,000 restricted shares at $0.025 a share for
the amount of $25,000 to an accredited investor. The investor also received
1,000,000 warrants to purchase 1,000,000 shares at a price of $0.15 per share.
The warrants expire on August 27, 2020. The sale was made pursuant to SEC Rule
506 Section 4(2), which provides exemption from registration for transactions,
which are not public offerings. As of the date of this filing, these shares have
not yet been issued to the purchaser.
On August 26, 2019, we filed Form S-1 registration for the resale of up to
13,156,667 shares from certain selling holders and for the sale 20,000,000 newly
issued common stock as part of a primary offering from the Company. These shares
amounts are indicated based on pre-split basis not taking into account the 1 for
15 stock split occurring on August 30, 2019. On a post-split basis these share
amounts are adjusted to 877,112 for sales from certain selling shareholders and
1,333,333 newly issued common stock as part of a primary offering from the
Company. The S-1 registration was declared effective by the Commission on
September 16, 2019.
On November 6, 2019, we sold a convertible not to an accredited investor for
$20,000. The terms of the six month note allow 7% annual interest and for the
conversion into common shares at $0.75. Additionally, the investor received a
warrant providing the investor the right to purchase 26,666 common shares at a
price of $3.50.
On November 11, 2019, we sold 83,333 common shares registered in the direct
offering under its From S-1 made effective by the SEC on September 16, 2019, to
an accredited investor in exchange for $25,000.
On November 25, 2019, we sold 120,000 common shares registered in the direct
offering under its From S-1 made effective by the SEC on September 16, 2019, to
an accredited investor in exchange for $50,000.
We plan to use the proceeds from sales of the primary offering to partially
finance our business operations. We also intend to utilize cash on hand, loans
and other forms of financing such as the sale of additional equity and debt
securities and other credit facilities to conduct our ongoing business, and to
also conduct strategic business development and implementation of our business
plans generally. We are not intending to use any off-balance sheet financing
arrangements.
Other Contractual Obligations
Our Company entered into a one year during August of 2019 for a commercial food
production facility located in Los Angeles, California. The one-year lease at a
base rate of $3,600 per month through September of 2020.
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Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Recently Issued Accounting Pronouncements
We review new accounting standards as issued. Although some of these accounting
standards issued or effective after the end of our previous fiscal year may be
applicable to the Company, we have not identified any standards that we believe
merit further discussion. We do not expect the adoption of any recently issued
accounting pronouncements to have a significant impact on our financial
position, results of operations, or cash flows.
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