SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q








(Mark
One)





[ X
]QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the
quarterly period ended March 31, 2009





OR





[    ]TRANSITION REPORT UNDER SECTION 13 OF
15(d) OF THE EXCHANGE ACT OF 1934





From the
transition period from ___________ to ____________.





Commission
File Number 000-51750





CANNABIS
SCIENCE, INC.


(Exact
name of small business issuer as specified in its charter)





Nevada
            
            91-1869677(State
      or other jurisdiction of incorporation or organization)
            
            (IRS
      Employer Identification No.)




4310 Wiley Post Road, Suite
201


Addison, Texas
75001


(Address of principal executive
offices)





(972)
788-4500


(Issuer's telephone
number)





GULF
ONSHORE, INC.


(Former name, former address and
former fiscal year, if changed since last report)





Indicate
by check mark whether the registrant (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 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:.  Yes [ X ]   No
[     ].





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act:







Large
      Accelerated Filer [  ]
            
            Accelerated
      Filer [  ]Non-Accelerated
      Filer [   ].
            
            Smaller
      Reporting Company [X]








Indicate
by a check mark whether the company is a shell company (as defined by Rule 12b-2
of the Exchange Act:  Yes [   ]   No [ X
].





As of May
15, 2009, there were 14,687,279shares of Common Stock of
the issuer outstanding.








TABLE OF
CONTENTS


PART I FINANCIAL STATEMENTSItem
      1
                  Financial
      Statements
                  3Item
      2
                  Management's
      Discussion and Analysis or Plan of Operation
                  17PART II OTHER INFORMATIONItem
      1
                  Legal
      Proceedings
                  20Item
      2
                  Changes
      in Securities
                  20Item
      3
                  Default
      upon Senior Securities
                  20Item
      4
                  Submission
      of Matters to a Vote of Security Holders
                  20Item
      5
                  Other
      Information
                  20Item
      6
                  Exhibits
      and Reports on Form 8-K
                  20











2








CANNABIS
      SCIENCE, INC.
              (A
      Development Stage Company)
              Consolidated
      Balance Sheets




March
      31,
                              2009
                              (Unaudited)
                            
                            
                            December
      31,
                              2008
                              (Audited)AssetsCurrent
      Assets:Cash
                            
                            $
                            849
                            
                            
                            $
                            580-Total
      Current Assets
                            
                            
                            849
                            
                            
                            
                            580Fixed
      assets:Equipment
                            
                            
                            3,000
                            
                            
                            
                            2,000Less:
      Accumulated Depreciation
                            
                            
                            (533
                            )
                            
                            
                            (433
                            )Total
      Fixed Assets
                            
                            
                            2,467
                            
                            
                            
                            1,567Other
      Assets:Goodwill
      (Note 11)
                            
                            
                            524,000
                            
                            
                            
                            --Total
      Other Assets
                            
                            
                            524,000
                            
                            
                            
                            -Total
      Assets
                            
                            $
                            527,316
                            
                            
                            $
                            2,147Liabilities
      and Shareholders’ Equity/(Deficit)Current
      Liabilities:Accounts
      Payable
                            
                            $
                            339,166
                            
                            
                            $
                            359,179Accrued
      Expenses
                            
                            
                            41,914
                            
                            
                            
                            45,415Accrued
      Interest Payable to Affiliate
                            
                            
                            156,005
                            
                            
                            
                            136,346Loan
      Payable to Affiliate
                            
                            
                            814,742
                            
                            
                            
                            814,742Line-of-Credit
      to Affiliate
                            
                            
                            45,438
                            
                            
                            
                            (3,031
                            )Total Liabilities (All
      Current)
                            
                            
                            1,397,265
                            
                            
                            
                            1,352,651Commitments
      and Contigencies (Note 8)
                            
                            
                            -
                            
                            
                            
                            -Shareholders’
      Equity/(Deficit):Common
      Stock, $.001 par value, 30,000,000 shares
                              authorized,
      14,687,279 and 12,597,279 shares issued
                              and
      outstanding respectively
                            
                            
                            14,687
                            
                            
                            
                            12,597Additional
      Paid in Capital
                            
                            
                            48,671,693
                            
                            
                            
                            48,148,783Accumulated
      Deficit
                            
                            
                            (49,556,329
                            )
                            
                            
                            (49,511,884
                            )Total
      Shareholders’ Equity/(Deficit)
                            
                            
                            (869,949
                            )
                            
                            
                            (1,350,504
                            )Total
      Liabilities and Shareholder’ Equity/(Deficit)
                            
                            $
                            527,316
                            
                            
                            $
                            2,147





See
accompanying summary of accounting policies and notes to consolidated financial
statements.








3




CANNABIS
      SCIENCE, INC.
                (A
      Development Stage Company)
                Consolidated
      Statements of Operations
                For
      the Three Ended March 31, 2009 and 2008
                And
      the Period from January 27, 2005 (inception) to March 31,
2009
                (Unaudited)


Three
      Months Ended
                    
                    
                    Period
      from JanuaryMarch
      31,
                      2009
                    
                    
                    March
      31,
                      2008
                    
                    
                    January
      27, 2005 (inception) to March 31, 2009OIL
      & GAS OPERATIONS:Oil
      & Gas Revenues
                    
                    $
                    0
                    
                    
                    $
                    46,689
                    
                    
                    $
                    459,652Lease
      Operating Expenses
                    
                    
                    0
                    
                    
                    
                    13,884
                    
                    
                    
                    230,164Gross
      Profit
                    
                    
                    0
                    
                    
                    
                    32,805
                    
                    
                    
                    229,488OTHER
      EXPENSES:Professional
      Fees
                    
                    
                    24,123
                    
                    
                    
                    52,116
                    
                    
                    
                    31,215,085Technology
      License Royalties
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    160,417Impairment
      of Oil & Gas Leases
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    7,486,000Net
      Gain on Settlement ofLiabilities
                    
                    
                    0
                    
                    
                    
                    (6,285,651
                    )
                    
                    
                    (5,935,451
                    )General
      and Administrative
                    
                    
                    663
                    
                    
                    
                    67,847
                    
                    
                    
                    15,789,018Total
      Operating Expenses
                    
                    
                    24,786
                    
                    
                    
                    (6,165,688
                    )
                    
                    
                    48,715,069OPERATING
      INCOME (LOSS)
                    
                    
                    (24,786
                    )
                    
                    
                    6,198,493
                    
                    
                    
                    (48,485,581
                    )Other
      Income (Expense):Other
      Income
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    1,439Beneficial
      Conversion Feature
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    (1,098,992
                    )Gain
      on Settlement of Debt
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    117,950Interest
      Expense
                    
                    
                    (19,659
                    )
                    
                    
                    0
                    
                    
                    
                    (91,145
                    )Total
      Other Income (Expense)
                    
                    
                    (19,659
                    )
                    
                    
                    0
                    
                    
                    
                    (1,070,748
                    )NET
      INCOME (LOSS)
                    
                    $
                    (44,445
                    )
                    
                    $
                    6,198,493
                    
                    
                    $
                    (49,556,329
                    )Basic
      and Diluted Earnings  per Share
                    
                    $
                    (0.00
                    )
                    
                    $
                    4.67Basic
      and Diluted Earnings  per Share
                    
                    $
                    (0.00
                    )
                    
                    $
                    4.61Weighted
      Average Shares Outstanding: Basic
                    
                    
                    14,687,261
                    
                    
                    
                    1,327,261Weighted
      Average Shares Outstanding: Diluted
                    
                    NA
                    
                    
                    
                    1,345,261








See
accompanying summary of accounting policies and notes to consolidated financial
statements.





4










CANNABIS
      SCIENCE, INC.
              (A
      Development Stage Company)
              Consolidated
      Statements of Shareholders' Equity
              For
      the Three Months Ended March 31, 2009 and 2008
              and
      the Period from January 27, 2005 (inception) to March 31,
      2009
              (Unaudited)







Additional
                                          
                                          
                                          
                                          
                                          
                                          Deficit
      AccumulatedCommon
      Stock
                                          
                                          
                                          Paid-in
                                          
                                          
                                          Prepaid
                                          
                                          
                                          During
      TheShares
                                          
                                          
                                          Par
                                          
                                          
                                          Capital
                                          
                                          
                                          Consulting
                                          
                                          
                                          Development
      Stage
                                          
                                          
                                          TotalsBalance
      at January 27, 2005 (inception)
                                          
                                          
                                          0
                                          
                                          
                                          $
                                          0
                                          
                                          
                                          $
                                          0
                                          
                                          
                                          $
                                          0
                                          
                                          
                                          $
                                          0
                                          
                                          
                                          $
                                          0Founder’s
      Stock Issued
                                          
                                          
                                          83,800
                                          
                                          
                                          
                                          84
                                          
                                          
                                          
                                          (84
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          0Shares
      Issued for Debt
                                          
                                          
                                          8,000
                                          
                                          
                                          
                                          8
                                          
                                          
                                          
                                          399,992
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          400,000Shares
      issued for License Agreement
                                          
                                          
                                          86,188
                                          
                                          
                                          
                                          86
                                          
                                          
                                          
                                          (86
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          0Effect
      of Reverse Merger
                                          
                                          
                                          13,840
                                          
                                          
                                          
                                          14
                                          
                                          
                                          
                                          (200,014
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (200,000
                                          )Divestiture
      of Subsidiary to Related Party
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          544,340
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          544,340Net
      loss
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          (807,600
                                          )
                                          
                                          
                                          (807,600
                                          )Balance
      at December 31, 2005
                                          
                                          
                                          191,828
                                          
                                          
                                          
                                          192
                                          
                                          
                                          
                                          744,148
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (807,600
                                          )
                                          
                                          
                                          (63,260
                                          )Shares
      Issued for Employment
                                          
                                          
                                          45,500
                                          
                                          
                                          
                                          45
                                          
                                          
                                          
                                          8,487,455
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          8,487,500Shares
      Issued for Services
                                          
                                          
                                          171,080
                                          
                                          
                                          
                                          171
                                          
                                          
                                          
                                          28,798,329
                                          
                                          
                                          
                                          (7,633,750
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          21,164,750Shares
      Issued for Lease Agreement
                                          
                                          
                                          6,770
                                          
                                          
                                          
                                          7
                                          
                                          
                                          
                                          406,193
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (350,200
                                          )
                                          
                                          
                                          56,000Net
      loss
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          (36,906,584
                                          )
                                          
                                          
                                          (36,906,584
                                          )Balance
      at December 31, 2006
                                          
                                          
                                          415,178
                                          
                                          
                                          $
                                          415
                                          
                                          
                                          $
                                          38,436,125
                                          
                                          
                                          $
                                          (7,633,750
                                          )
                                          
                                          $
                                          (38,064,384
                                          )
                                          
                                          $
                                          (7,261,594
                                          )Shares
      Issued For Services
                                          
                                          
                                          63,021
                                          
                                          
                                          
                                          63
                                          
                                          
                                          
                                          528,285
                                          
                                          
                                          
                                          (387,500
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          140,848Shares
      Issued for Debt Conversion
                                          
                                          
                                          350,000
                                          
                                          
                                          
                                          350
                                          
                                          
                                          
                                          349,650
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          350,000Amortization
      of Beneficial Conversion Feature
                                          
                                          
                                          0
                                          
                                          
                                          
                                          0
                                          
                                          
                                          
                                          1,066,657
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          1,066,657Amortization
      of shares issued for services
                                          
                                          
                                          0
                                          
                                          
                                          
                                          0
                                          
                                          
                                          
                                          0
                                          
                                          
                                          
                                          8,021,250
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          8,021,250Shares
      Issued for Properties
                                          
                                          
                                          500,000
                                          
                                          
                                          
                                          500
                                          
                                          
                                          
                                          4,999,500
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          5,000,000Net
      loss
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          (15,007,117
                                          )
                                          
                                          
                                          (15,007,117
                                          )Balance
      at December 31, 2007
                                          
                                          
                                          1,328,198
                                          
                                          
                                          
                                          1,328
                                          
                                          
                                          
                                          45,380,217
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (53,071,501
                                          )
                                          
                                          
                                          (7,689,956
                                          )Amortization
      of Beneficial Conversion Feature
                                          
                                          
                                          0
                                          
                                          
                                          
                                          0
                                          
                                          
                                          
                                          32,335
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          32,335Cancellation
      and Amortization of Shares
                                          
                                          
                                          (919
                                          )
                                          
                                          
                                          (1
                                          )
                                          
                                          
                                          1
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          0Issuance
      of Shares for Cash
                                          
                                          
                                          10,000
                                          
                                          
                                          
                                          10
                                          
                                          
                                          
                                          19,990
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          20,000Shares
      Issued for Debt Conversion
                                          
                                          
                                          990,000
                                          
                                          
                                          
                                          990
                                          
                                          
                                          
                                          98,010
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          99,000Purchase
      of Subsidiary with Stock
                                          
                                          
                                          10,000,000
                                          
                                          
                                          
                                          10,000
                                          
                                          
                                          
                                          2,490,000
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          2,500,000Issuance
      of Stock for Services
                                          
                                          
                                          270,000
                                          
                                          
                                          
                                          270
                                          
                                          
                                          
                                          128,230
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          128,500Net
      Income
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          3,559,617
                                          
                                          
                                          
                                          3,559,617Balance
      at December 31, 2008
                                          
                                          
                                          12,597,279
                                          
                                          
                                          $
                                          12,597
                                          
                                          
                                          $
                                          48,148,783
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          (49,511,884
                                          )
                                          
                                          $
                                          (1,350,504
                                          )Issuance
      of Shares for Assets
                                          
                                          
                                          2,100,000
                                          
                                          
                                          
                                          2,100
                                          
                                          
                                          
                                          522,900
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          525,000Cancellation
      of Stock Previously Issued
                                          
                                          
                                          (10,000
                                          )
                                          
                                          
                                          (10
                                          )
                                          
                                          
                                          10Net
      Loss
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          (44,445
                                          )
                                          
                                          
                                          (44,445
                                          )Balance
      at March 31, 2009
                                          
                                          
                                          14,687,279
                                          
                                          
                                          $
                                          14,687
                                          
                                          
                                          $
                                          48,671,693
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          (49,556,329
                                          )
                                          
                                          $
                                          (869,949
                                          )





See
accompanying summary of accounting policies and notes to consolidated financial
statements.


5










CANNABIS
      SCIENCE, INC.
              (A
      Development Stage Company)
              Consolidated
      Statements of Cash Flows
              For
      the Three Month Periods Ended March 31, 2009 and 2008
              And
      the Cumulative Period from January 27, 2005 (inception) to March 31,
      2009
              (Unaudited)




Three
      Months Ended March 31, 2009
                  
                  
                  Three
      Months Ended March 31, 2008
                  
                  
                  Period
      from January 27, 2005 (inception) to March 31, 2009CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      Income (Loss)
                  
                  $
                  (44,445
                  )
                  
                  $
                  6,198,493
                  
                  
                  $
                  (49,556,329
                  )Adjustments
      to reconcile net income (loss) to cash from (used
                    in)
      operating activities:Depreciation
      and Depletion
                  
                  
                  100
                  
                  
                  
                  100
                  
                  
                  
                  6,282Impairment
      on Oil Lease Investments
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  7,486,000Write-off
      of oil & gas properties
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  100,000Stock
      Issued for Services
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  29,442,8118Amortization
      of Prepaid Consulting Fees
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  8,021,250Amortization
      of Beneficial Conversion Feature
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  1,098,992Loss
      on disposition of subsidiary
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  97,0505Change
      in assets and liabilities:(Decrease)
      in Shares to be Issued
                  
                  
                  0
                  
                  
                  
                  (5,000,000
                  )
                  
                  
                  0(Increase)
      in Accounts Receivable
                  
                  
                  0
                  
                  
                  
                  11,675
                  0
                  
                  
                  0 0(Increase)
      Decrease in Other Assets
                  
                  
                  0
                  
                  
                  
                  (3,269
                  )     0
                  
                  
                  3,110Increase
      in Accrued Interest Payable to Affiliates
                  
                  
                  19,659
                  
                  
                  
                  17,872 0
                  
                  
                  
                  967,716Increase
      (Decrease) in Accounts Payable
                  
                  
                  (20,013
                  )
                  
                  
                  32,467
                  
                  
                  
                  339,166Increase
      in Line-of-Credit to Affiliate
                  
                  
                  48,469
                  
                  
                  
                  0 0
                  
                  
                  
                  45,438Increase
      (Decrease)  in Accrued Expenses
                  
                  
                  (3,501
                  )
                  
                  
                  (1,306,151
                  )
                  
                  
                  41,914CASH
      FLOWS PROVDED BY (USED IN) OPERATING ACTIVITIES
                  
                  
                  269
                  
                  
                  
                  (48,813
                  )
                  
                  
                  (1,906,000
                  )CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of oil & gas lease
                  
                  
                  0
                  
                  
                  
                  
                  
                  
                  
                  (30,000
                  )Purchase
      of plant, property & equipment
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  (42,890
                  )CASH
      FLOWS USED IN INVESTING ACTIVITIES
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  (72,890
                  )CASH
      FLOWS FROM FINANCING ACTIVITIESProceeds
      from Convertible Note – Related Party
                  
                  
                  0
                  
                  
                  
                  23,060
                  
                  
                  
                  951,342Proceeds
      from sale of common stock
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  20,000Loan
      Payable to Affiliates
                  
                  
                  0
                  
                  
                  
                  23,060
                  
                  
                  
                  1,008,997CASH
      FLOWS PROVIDED BY FINANCING ACTIVITIES
                  
                  
                  0
                  
                  
                  
                  46,120
                  
                  
                  
                  1,980,339NET
      INCREASE (DECREASE) IN CASH
                  
                  
                  269
                  
                  
                  
                  (2,693
                  )
                  
                  
                  849Cash,
      beginning of period
                  
                  
                  580
                  
                  
                  
                  4,769
                  
                  
                  
                  0Cash,
      end of period
                  
                  $
                  849
                  
                  
                  $
                  2,076
                  
                  
                  $
                  849SUPPLEMENTAL
      CASH FLOW INFORMATIONIssuance
      of common stock for services
                  
                  $
                  0
                  
                  
                  $
                  0
                  
                  
                  $
                  9,502,629Issuance
      of common stock for assets
                  
                  $
                  525,000
                  
                  
                  $
                  0
                  
                  
                  $
                  525,000Related
      Party note payable
                  
                  $
                  0
                  
                  
                  $
                  0
                  
                  
                  $
                  250,000Net
      liabilities assumed with recapitalization
                  
                  $
                  0
                  
                  
                  $
                  0
                  
                  
                  $
                  200,000Divestiture
      of subsidiary to related party
                  
                  $
                  0
                  
                  
                  $
                  0
                  
                  
                  $
                  200,000Issuance
      of common stock for debt
                  
                  $
                  0
                  
                  
                  $
                  0
                  
                  
                  $
                  1,100,000Issuance
      of common stock for oil & gas leases
                  
                  $
                  0
                  
                  
                  $
                  0
                  
                  
                  $
                  907,200








See
accompanying summary of accounting policies and notes to consolidated financial
statements.





6


CANNABIS
      SCIENCE, INC.
                (A
      DEVELOPMENT STAGE COMPANY)
                NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS
                March
      31, 2009





NOTE 1 – NATURE OF
ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES





Organization and Description
of Business:





Cannabis
Science, Inc.  (“We” or “the Company”), was incorporated under the
laws of the State of Colorado, on February 29, 1996, as Patriot Holdings,
Inc..  On August 26, 1999, the Company changed its name to National
Healthcare Technology, Inc., and commenced a business plan to develop Magkelate,
a patented intravenous drug developed to re-establish normal electrolyte balance
in ischemic tissue and certain other patents for medical instruments and medical
instrument technology.  On January 14, 2000, the Company filed its
Form 10SB12G.  In 2002, the Company ceased its medical technology
business following the death of Magkelate’s inventor.  The Company
conducted no substantial business until 2005.





In
July 2005, the Company acquired Es3, Inc., a Nevada Corporation ("Es3"),
pursuant to the terms of an Exchange Agreement (the "Exchange Agreement") by and
among the Company, Crown Partners, Inc., a Nevada corporation ("Crown
Partners"), Es3, and certain stockholders of Es3 (the "Es3 Stockholders"). Under
the terms of the Exchange Agreement, the Company acquired all of the outstanding
capital stock of Es3 in exchange for the issuance of 191,828 shares of the
Company's common stock (adjusted for splits) to the Es3 Stockholders, Crown
Partners and certain consultants. The transactions effected by the Exchange
Agreement were accounted for as a reverse merger, and recapitalization. In
addition, the Company changed its accounting year-end from September 30 to
December 31, which was Es3's accounting year-end.  The Company then
commenced business manufacturing and marketing products under the name Special
Stone Surfaces.  The Company sold its shares in Es3 in October 2005,
and thereafter conducted no substantial business until 2006,





On April
3, 2006, the Company acquired a group of oil and gas leases in Oklahoma in
exchange for issuance of common stock and commenced the business of oil and gas
exploration and production, mineral lease purchasing and all activities
associated with acquiring, operating and maintaining the assets of such
operations.  On June 6, 2007, the Company changed its name from
National Healthcare Technology, Inc., to Brighton Oil & Gas, Inc., and
converted to a Nevada corporation.  The Company acquired additional
oil and gas leases during 2007, all for issuance of common stock; in October
2007, the Company acquired leases from K & D Equity Investments, Inc., a
Texas corporation in a transaction that effected a change of control, with K
& D acquiring a majority stake in the Company.   The Company
also entered into a Line of Credit Agreement with South Beach Live, Inc., a
Florida corporation, to provide it with working capital of up to $100,000 on a
revolving credit line. The Agreement permitted South Beach the right to
repayment on demand, or to convert amounts owed for shares.





On March
25, 2008 the Company changed its name to Gulf Onshore, Inc.  On June 6,
2008, the Company entered into an Asset Acquisition Agreement with K & D to
acquire additional leases (the “Leases”) in exchange for common stock and a
Stock Purchase Agreement (“SPA”) with South Beach Live, Inc., a Florida
corporation, to purchase 100% of the common shares of Curado Energy Resources,
Inc., a Texas corporation (“Curado”). Curado is registered with the Texas
Railroad Commission as an oil and gas well operator, and is the operator for the
Leases.   The Company acquired the Leases into Curado, in
exchange for shares issued to K & D.  The Company
issued  South Beach a promissory note for $250,000, payable in 1 year
at 10% interest, which was guaranteed by Curado.   The Company
consolidated the operations of Curado commencing in 3Q 2008.





Throughout
3Q 2008, declining oil prices and increased operating costs made continued oil
and gas operations on the Leases unprofitable, and the Company was continually
drawing down on its Line of Credit Agreement with South Beach. In exchange for
concessions from South Beach regarding further cash advances and future stock
conversions, in August 2008, the Company granted South Beach a security interest
in its Curado shares and the Curado assets.








7







On
October 6, 2008, in the face of further oil price declines and general economic
conditions, the Company and South Beach entered into an Accord and Satisfaction
Agreement under which the Company surrendered its interest in the Putnam “M” oil
and gas lease in Throckmorton Co., Texas in exchange for a complete release on
the Promissory Note and Line of Credit.  In addition, the Company
waived any claim on the shares of Curado common stock that secured the
Promissory Note or the assets of Curado.  South Beach then made claim
against Curado under the guarantee agreement and then exercised its rights under
the collateral agreement.  As a result, the Company’s 4Q 2008,
financial statements reflected the disposition of Curado and its assets, and
furthermore that the Company has, once again, become a Development Stage Company
seeking a new business partner or acquisition.  A Form 8-K reflecting
this transaction was timely filed.




On March
30, 2009, the Company entered into an agreement with Cannex Therapeutics, LLC,
(“Cannex”) a California limited liability company, and its principal, medical
cannabis pioneer and entrepreneur Steven W. Kubby, to acquire all of their
interest in certain assets used to conduct a cannabis research and development
business.  The asset purchase agreement includes all of Cannex’ and
Kubby’s intellectual property rights, formulas, patents, trademarks, client
base, hardware and software, including the website
www.phytiva.com.  The Company and its largest shareholder, K & D
Equities, Inc., exchanged a total of 10,600,000 shares of common stock for the
assets of Cannex; the Company issued 2,100,000 shares to Cannex, and K & D
transferred 8,500,000 shares to Cannex and others.   A Form 8-K
reflecting this transaction was timely filed.  Please see Note
10.






As part
of the Agreement, on April 1, 2009, the Company appointed Mr. Kubby as President
and CEO, Richard Cowan as Director and CFO, and Robert Melamede Ph. D., as
Director and Chief Science Officer. Each of them was also appointed as a
director.  All of the Company’s current directors then
resigned.  On April 7, 2009, the Company changed its name to Cannabis
Science, Inc., and obtained a new CUSIP number.  Its shares now trade
under the symbol CBIS.OB.  A Form 8-K was timely filed, with a copy of
the Asset Acquisition Agreement and Board Resolution ratifying the Agreement
provided as exhibits thereto.




Unaudited Interim Financial
Statements:





The
accompanying unaudited interim financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
and applicable Securities and Exchange Commission (“SEC”) regulations for
interim financial information. These financial statements for the interim
periods in 2009 and 2008 are unaudited and, in the opinion of management,
include all adjustments (consisting of normal recurring accruals) necessary to
present fairly the balance sheets, statements of operations and statements of
cash flows for the periods presented in accordance with accounting principles
generally accepted in the United States. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States have been
condensed or omitted pursuant to SEC rules and regulations. It is presumed that
users of this interim financial information have read or have access to the
audited financial statements and footnote disclosure for the preceding fiscal
year contained in the Company’s Annual Report on Form 10-K. Operating results
for the interim periods presented are not necessarily indicative of the results
that may be expected for the year ending December 31, 2009.




Significant Accounting
Policies:





The
Company’s management selects accounting principles generally accepted in the
United States of America and adopts methods for their
application.  The application of accounting principles requires the
estimating, matching and timing of revenue and expense. It is also necessary for
management to determine, measure and allocate resources and obligations within
the financial process according to those principles.  The accounting
policies used conform to generally accepted accounting principles which have
been consistently applied in the preparation of these financial
statements.








8





The
financial statements and notes are representations of the Company’s management
which is responsible for their integrity and objectivity. Management further
acknowledges that it is solely responsible for adopting sound accounting
practices, establishing and maintaining a system of internal accounting control
and preventing and detecting fraud.  The Company's system of
internal  accounting control is designed to assure, among other items,
that  1) recorded  transactions  are
valid;  2) valid  transactions  are
recorded;  and  3)
transactions  are  recorded in the proper  period
in a timely  manner to produce financial  statements which
present fairly the financial  condition,  results of
operations  and cash  flows of
the  Company  for
the  respective  periods  being
presented.




Basis of
Presentation:





The
Company prepares its financial statements on the accrual basis of
accounting.  All intercompany balances and transactions are
eliminated.  During a portion of 2008, the financial statements included
the accounts of Curado Energy Resources, Inc.




Reclassification:




Certain
prior year amounts have been reclassified in the consolidated balance sheets,
consolidated statements of operations and consolidated statements of cash flows
to conform to current period presentation.  These reclassifications
were not material to the consolidated financial statements and had no effect on
net earnings reported for any period.




Use of
Estimates:





The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures.  Accordingly, actual
results could differ from those estimates.




Recently Issued Accounting
Pronouncements:





The
Company  does not
expect  the  adoption  of  recently  issued  accounting
pronouncements  to have a significant  impact on the
Company’s  results of  operations, financial position or
cash flow.




Cash and Cash
Equivalents:





Cash and
cash equivalents includes cash in banks with original maturities of three months
or less and are stated at cost which approximates market value, which in the
opinion of management, are subject to an insignificant risk of loss in
value.




Long Lived
Assets:




Effective
January 1, 2005, the Company adopted Statement of Financial Accounting Standards
No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS
144”), which addresses financial accounting and reporting for the impairment or
disposal of long-lived assets and supersedes SFAS No. 121, “Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,”
and the accounting and reporting provisions of APB Opinion No. 30, “Reporting
the Results of Operations for a Disposal of a Segment of a Business.” The
Company periodically evaluates the carrying value of long-lived assets to be
held and used in accordance with SFAS 144. SFAS 144 requires impairment losses
to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets’ carrying amounts. In that event, a
loss is recognized based on the amount by which the carrying amount exceeds the
fair market value of the long-lived assets. Loss on long-lived assets to be
disposed of is determined in a similar manner, except that fair market values
are reduced for the cost of disposal.






9






During
the year ended December 31, 2007, the Company had acquired two oil & gas
leases in two separate transactions. One lease was acquired for cash
consideration of $30,000 and the other lease was acquired in exchange of 500,000
shares. The lease was valued at the fair market value of the shares which was
$5,000,000.




As of
December 31, 2007, the Company estimated the future cash flows expected to
result from the use and eventual disposition of the two oil & well gas
leases. Based on its review, the Company determined that the carrying value of
the assets is not recoverable and hence the leases were determined to be
impaired as of December 31, 2007. The Company recorded an impairment loss of
$5,030,000 for the year ended December 31, 2007.





In June
2008 the Company acquired eleven oil well leases in a related party transaction
with the majority shareholder, K&D Investments, for 10,000,000
shares.  The value of the stock at the time of the transaction was
$2,500,000 and the predecessor cost was $100,000.  Therefore, an
impairment of $2,400,000 was recorded related to the transaction and the net
cost recorded on the Company’s balance sheet is $100,000.  The Leases
were acquired into Curado Energy Resources, Inc., the operator of the Leases,
which the Company acquired from South Beach Live, Inc., its most significant
creditor.





Throughout
3Q 2007, declining oil prices and increased operating costs made continued oil
and gas operations on the Leases unprofitable, and the Company was continually
drawing down on its Line of Credit Agreement with South Beach. In exchange for
concessions from South Beach regarding further cash advances and future stock
conversions, in August 2007, the Company agreed to grant South Beach a security
interest in its South Beach shares.





On
October 6, 2008, in the face of further oil price declines and general economic
conditions, the Company and South Beach entered into an Accord and Satisfaction
Agreement under which the Company surrendered its interest in the Putnam “M” oil
and gas lease in Throckmorton Co., Texas in exchange for a complete release on
the Promissory Note and Line of Credit.  In addition, the Company
waived any claim on the shares of Curado common stock that secured the
Promissory Note or the assets of Curado.  As a result, the Company’s
4Q 2007, financial statements will reflect the disposition of Curado and its
assets, and furthermore that the Company has, once again, become a Development
Stage Company seeking a new business partner or acquisition.  A Form
8-K reflecting this transaction was timely filed.




Fair Value of Financial
Instruments:





Statement
of financial accounting standard No. 107, Disclosures about fair value of
financial instruments, requires that the Company disclose estimated fair values
of financial instruments. The carrying amounts reported in the consolidated
balance sheet for current assets and current liabilities qualifying as financial
instruments are a reasonable estimate of fair value.




Stock-Based
Compensation:





In December 2004, the FASB issued
SFAS No. 123 (revised 2004), ‘‘Share-Based Payment’’ (‘‘SFAS 123R’’), which
requires the measurement of all employee share-based payments to employees,
including grants of employee stock options, using a fair-value-based method and
the recording of such expense in the consolidated statements of operations. In
March 2005, the SEC issued Staff Accounting Bulletin No. 107 (“SAB 107”)
regarding the SEC’s interpretation of SFAS 123R and the valuation of share-based
payments for public companies. The Company has adopted SFAS 123R and related
FASB Staff Positions (“FSPs”) as ofJanuary1, 2006and will recognize stock-based
compensation expense using the modified prospective method.








10







Income
Taxes:




The
Company accounts for its income taxes using SFAS No. 109, "Accounting for Income
Taxes," which requires the establishment of a deferred tax asset or liability
for the recognition of future deductible or taxable amounts and operating loss
and tax credit carry forwards. Deferred tax expense or benefit is recognized as
a result of timing differences between the recognition of assets and liabilities
for book and tax purposes during the year.




Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. Deferred tax assets are recognized for
deductible temporary differences and operating loss, and tax credit carry
forwards. A valuation allowance is established to reduce that deferred tax asset
if it is "more likely than not" that the related tax benefits will not be
realized.





Property and
Equipment:




Property
and equipment are stated at cost less accumulated depreciation.  Major
renewals and improvements are capitalized; minor replacements, maintenance and
repairs are charged to current operations.  Depreciation is computed by
applying the straight-line method over the estimated useful lives which are
generally five to seven years.





Earnings per Share
(Loss):





The
Company adopted the provisions of SFAS No. 128, "Earnings Per Share" ("EPS").
SFAS No. 128 provides for the calculation of basic and diluted earnings per
share. Basic EPS includes no dilution and is computed by dividing income or loss
available to common shareholders by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution of
securities that could share in the earnings or losses of the entity. For the
three month period ended March 31, 2009, basic and diluted earnings per share is
the same ($0.00) since the calculation of diluted per share amounts would result
in an anti-dilutive calculation.  For the three month period ended
March 31, 2008, basic and diluted loss per share are $4.67 and $4.61,
respectively.





Comprehensive
Income:





SFAS No.
130 “Reporting Comprehensive Income”, establishes standards for reporting and
display of comprehensive income and its components in a full set of general
purpose financial statements.  For the quarters ended March 31, 2009
and 2008, the Company had no items of other comprehensive
income.  Therefore, the net loss equals the comprehensive loss for the
periods then ended.







NOTE 2 – GOING
      CONCERN




The
accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate the continuation of
the Company as a going concern. The Company reported a cumulative deficit of
$49,556,329 and had a stockholders’ deficit of $869,949 at March 31,
2009.  The information included in this Form 10-Q should be read in
conjunction with Management’s Discussion and Analysis and Financial Statements
and notes thereto included in the Company’s December 31, 2008 Form
10-K.






11






NOTE3– FIXED
ASSETS





Fixed
assets at March 31, 2009 and December 31, 2008 are as follows:





March 31,
      2009
                
                
                Dec
      31, 2008Equipment
                
                $
                3,000
                
                
                $
                2,000Less:
      Accumulated Depreciation
                
                
                (
      533
                )
                
                
                (
      433
                )Total
      Fixed Assets
                
                $
                2,467
                
                
                $
                1,567





Depreciation
expense for the three month periods ended March 31, 2009 and 2008 was $100 and
$100 respectively.





The
Company acquired Cannex’s website, which has an estimated value of $1,000 based
on the original cost of the asset.








NOTE4– INCOME
TAXES





The
Company utilizes SFAS No. 109, "Accounting for Income Taxes," which requires
the  recognition of deferred tax assets and  liabilities for
the expected future tax  consequences of events that have been
included in the financial  statements or tax returns. Under this
method, deferred income taxes are recognized for the tax consequences in future
years of differences between the tax bases of assets and liabilities and their
financial reporting amounts at each period end based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are
expected to affect taxable income.  Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized.





The
following table sets forth the significant components of the net deferred tax
assets as of March 31, 2009:





March
      31, 2009
                
                
                December
      31, 2008Net
      operating loss carry forward
                
                $
                49,556,329
                
                
                $
                49,511,884Total
      deferred tax assets
                
                
                16,445,147
                
                
                
                16,440,389Less:
      valuation allowance
                
                
                (16,445,147
                )
                
                
                (16,440,389
                )Net
      deferred tax assets
                
                $
                -
                
                
                $
                -





For the
quarter ended March 31, 2009, income taxes were offset by the utilization of a
portion of the net operating loss carryforward.





NOTE5–NOTE
PAYABLE





On
January 11, 2007 the Company entered into an agreement with Camden Holdings,
Inc., also an affiliate of the Company, wherein the Company memorialized its
obligation to pay Camden Holdings, Inc $650,000 by December 31, 2007 for monies
owed to Camden. The Company also gave Camden the right to convert all or part of
this debt into shares of the Company's common stock at $.01 per share. The
Company recorded a beneficial conversion of $650,000 on the note which is being
amortized over the life of the note. During the three month period ended March
31, 2007, the Company amortized $162,500 of this unamortized discount as
interest expense.  The Company recorded an interest payable of $19,659
for the three month period ended March 31, 2009.








12






On March
25, 2009 Summitt Oil & Gas, Inc. and Melissa 364 CR, Ltd. entered into a
purchase and sale agreement by which Summitt assigned its rights with respect to
debt of $814,742 plus accrued interest, and sold 400,000 shares of restricted
stock.




NOTE6-EQUITY
TRANSACTIONS





The
Company is authorized to issue 30,000,000 shares of common shares with a par
value of $.001 per share.  These shares have full voting
rights.  There were 14,687,279 and 12,597,279 issued and outstanding
as of March 31, 2009 and December 31, 2008.




The
Company is also authorized to issue 1,000,000 shares of preferred
stock.  To date, the Company has not filed any manner of designation
rights with the State of Nevada and has no preferred shares
outstanding.




A.
            Issuance
      of Common Stock





On June
6, 2008, the Company entered into an Asset Purchase Agreement (the “Agreement”)
with K&D Equity Investments, Inc., a Texas corporation (“K&D”). Under
the terms of the Agreement, the Company acquired, though Curado Energy
Resources, Inc., working interests in ten (10) oil, gas and mineral leases (the
“Leases”) located in Texas, with Net Revenue Interests (N.R.I.) in these leases
ranging from 75% to 84.76%.  Gulf paid K&D 10,000,000 shares of
its $.001 par value common stock for the Leases. K&D was  the
owner of 500,000 shares of the Company’s common stock and became its largest
single shareholder, owning  approximately 88% of the Company’s issued
and outstanding shares.





On June
13, 2008, the Company issued 500,000 shares of its $.001 par value common stock
to South Beach Live, Inc., a Florida corporation, pursuant to the terms of an
October 4, 2007, Promissory Note.  Under the terms of the Note, the
Company was released from $50,000 of the principal obligation under the Note in
exchange for issuance of these shares.  Provisions of the Note are
fully disclosed in the Company’s Form 10-KSB, filed on April 10,
2008.




On March
30, 2009, the Company entered into an agreement with Cannex Therapeutics, LLC, a
California limited liability company, and its principal, medical cannabis
pioneer and entrepreneur Steven W. Kubby, to acquire all of their interest in
certain assets used to conduct a cannabis research and development
business.  The asset purchase agreement included all of Cannex’ and
Kubby’s intellectual property rights, formulas, patents, trademarks, client
base, hardware and software, including the website
www.phytiva.com.  The Company and its largest shareholder, K & D
Equity Investments, Inc., paid a total of 10,600,000 shares of common stock for
the assets of Cannex; the Company issued 2,100,000 shares to Cannex, and K &
D transferred 8,500,000 shares to Cannex and others.






B.
            Warrants




No
warrants were granted during the three month period ended March 31,
2009.




The weighted average remaining contractual life of
warrants outstanding is 0.25 years at March 31, 2009.





Outstanding
      Warrants
            
            
            Exercisable
      WarrantsRange
      of Exercise Price
            Number
            Average
      Remaining Contractual Life
            Average
      Intrinsic Value
            Number$67.00
            18,000
            0.25
            -
            18,000







13






The
current Exercise Price of $67.00 per share reflects the impact of the two 1:10
stock splits.  Prior to the splits the Exercise price was $0.67 per
share.




The
Company estimated the fair value of each stock warrant at the grant date by
using the Black-Scholes option-pricing mode.




The
weighted-average assumptions used in estimating the fair value of warrants
outstanding as of March 31, 2009, along with the weighted-average grant date
fair values, were as follows.





2009Expected
      volatility
              80.0%Expected
      life in years
              5
      yearsRisk
      free interest rate
              5.07%Dividend
      yield
              0%





C.
            Employee
      Options




On April
3, 2006, the Board of Directors of the Company authorized and approved the
adoption of the 2006 Stock Option Plan effective April 3, 2006 (the
"Plan").  The Plan is administered by the duly appointed compensation
committee.  The Plan is authorized to grant stock options of up to
25,000,000 shares of the Company's common stock.  At the time a
stock  option  is  granted  under  the  Plan,  the
compensation  committee  shall fix and determine the
exercise  price and vesting schedules  at which such shares
of common  stock of the Company may be acquired.  As of
March 31, 2009, no options to purchase the Company's common stock have been
granted under the Plan.  There were no options outstanding at March
31, 2009.







In
September, 2006, the Board of Directors of the Company authorized and approved
the adoption of the 2006-1 Consultants and Employees Service Plan effective
September 7, 2006 (the "Consultants Plan").  The Plan is administered
by the duly appointed compensation committee.  The Plan is authorized
to grant stock options and make stock awards of up to 38,000 shares of the
Company's common stock.  At the time a
stock  option  is  granted  under  the  Plan,  the
compensation  committee  shall fix and determine the
exercise  price and vesting schedules  at which such shares
of common  stock of the Company may be acquired. The Consultants Plan
was registered on September 15, 2006 and as of December 31, 2006 a total of
37,990 shares had been issued and granted under the Consultants
Plan.  During 2008 and 2009 no additional shares have been
issued.




NOTE7–RELATED
PARTY





On June
6, 2008, the Company entered into an Asset Purchase Agreement (the “Agreement”)
with K&D Equity Investments, Inc., a Texas corporation (“K&D”). Under
the terms of the Agreement, the Company acquired, though Curado Energy
Resources, Inc., working interests in ten (10) oil, gas and mineral leases (the
“Leases”) located in Texas, with Net Revenue Interests (N.R.I.) in these leases
ranging from 75% to 84.76%.  Gulf paid K&D 10,000,000 shares of
its $.001 par value common stock for the Leases. K&D was the owner of
500,000 shares of the Company’s common stock, and as a result of the Agreement
owned approximately 88% of the Company’s issued and outstanding
shares.  K & D’s president, Jeffrey Joyce, was an officer of the
Company at the time of the transaction.








14





On June
6, 2008, the Company entered into a Stock Purchase Agreement (“SPA”) with South
Beach Live, Inc., a Florida corporation, to purchase 100% of the common shares
of Curado Energy Resources, Inc., a Texas corporation (“Curado”). Curado is
registered with the Texas Railroad Commission as an oil and gas well operator,
and is the operator for the Leases. The Company has agreed to issue South Beach
a promissory note for $250,000, payable in 1 year at 10% interest. The Company
will close the SPA at the same time it closes the Agreement.  The Fair
Market Value (“FMV”) of net assets of Curado at the time of the transaction were
$157,040.  This generated an amount of Goodwill of $92,960 which is
reflected in the consolidated financial statements.  At the time of
the transaction, Michele Sheriff, who was a director and Secretary of the
Company, was also an officer and the sole director of South Beach.




In
October 2008, the Company and SBL entered into an Accord and Satisfaction
Agreement.  Under the terms of the Agreement, South Beach released the
Company from any further obligation under the parties’ $250,000 Promissory Note
in exchange for an assignment of the Company’s interest in a (currently)
non-producing oil well, the Putnam M, located in Throckmorton Co., Texas, and a
surrender of any claim to shares of Curado Energy Resources, Inc., the Company’s
wholly-owned subsidiary, currently held by South Beach under a Security
Agreement.  The Company is advised that South Beach has exercised its
rights to these shares and requested re-registration thereof.




On March
25, 2009 Summitt Oil & Gas, Inc.. and Melissa 364 CR, Ltd. entered into a
purchase and sale agreement under which Summitt agreed to assign  its
rights with respect to debt of $814,742 plus accrued interest, and to sell
400,000 shares of restricted stock to Melissa.  The debt comprises the
Secured Convertible Note issued on January 5, 2007, in the amount of $650,000,
further advances of $164,742 (total $814,742) and accrued interest of
$136,346.  South Beach Live is the General Partner of
Melissa.




On March
30, 2009, the Company entered into an agreement with Cannex Therapeutics, LLC, a
California limited liability company, and its principal, medical cannabis
pioneer and entrepreneur Steven W. Kubby, to acquire all of their interest in
certain assets used to conduct a cannabis research and development
business.  The asset purchase agreement includes all of Cannex’ and
Kubby’s intellectual property rights, formulas, patents, trademarks, client
base, hardware and software, including the website
www.phytiva.com.  The Company and its largest shareholder, K & D
Equities, Inc., exchanged a total of 10,600,000 shares of common stock for the
assets of Cannex; the Company issued 2,100,000 shares to Cannex, and K & D
transferred 8,500,000 shares to Cannex and others.




NOTE8– COMMITMENTS AND
CONTINGENCIES




A.
            Legal




The
Company is periodically involved in legal actions and claims that arise as a
result of events that occur in the normal course of operations. The Company is
not currently aware of any formal legal proceedings or claims that the Company
believes will have, individually or in the aggregate, a material adverse effect
on the Company's financial position or results of operations.




B.
            Operating
      Leases




The
Company currently leases office space at 4310 Wiley Post Road, Addison, Texas
75001. The lease is a one year lease for $1,000 per month and expires on May 31,
2009.  The Company is not committed to any additional lease
obligations.




C.
            Liabilities




The
Company had a collection notice for $87,183 related to legal billings in 2006
that had not been booked.  The amount was recorded in the third
quarter of 2007.  The billings were related to acquisition work that
was never completed.  The Company contends that the agreement was not
with Gulf Onshore, Inc. but with a potential acquirer and therefore believes
that the accrual is not necessary.






15






On
December 19, 2006, Empire Relations Group Inc. (“Empire”) filed an arbitration
claim against the Company in connection with a consulting agreement entered into
by and between the Company and Empire on September 28, 2006. An arbitration
award in the amount of $13,000 was issued against the Company on March 9, 2007,
which also provided for interest at the rate of nine percent per annum,
commencing 30 days after the date of the award and continuing until paid in
full. The amount has been accrued in the accompanying financials.




Included
in “Accounts payable” on the consolidated balance sheet at March 31, 2009 and
December 31, 2008, the Company has payables totaling $250,000 to two former
directors and one attorney, that were incurred in 2006 and 2005,
respectively.




·
            The
      attorney represented a former related party when it was in negotiations to
      acquire the Company in 2005.  The Company’s position is that
      this is not its liability as it did not contract the attorney and will
      pursue a legal opinion in 2009 to reverse the
  liability.


·
            The
      former directors were awarded severance agreements in June 2006 shortly
      before resigning from the Company.  The severance and other fees
      totaled $81,250 for each director for a total of $162,500.  The
      severance was not immediately paid and there has been no correspondence
      concerning payment since they resigned.  The states statute of
      limitations expires in June 2010 and the Company, at that time, will
      accordingly adjust the liabilities to $0 if no demand is
      received.




Included
in “Accounts payable” on the consolidated balance sheet at March 31, 2009 and
December 31, 2008, the Company also has payables totaling $70,000 to various
vendors incurred in 2005 through 2007.




·
            There
      is $30,000 balance to a former related party that has not been
      resolved.  This liability was incurred in 2005 and there has
      been no correspondence with the vendor since the signing of the contract
      and unless the vendor contacts the Company, we will accordingly adjust the
      liability to $0 in compliance with the state statutes of limitations of
      four years, in October of 2009.


·
            There
      is $12,175 to a former consultant that is unresolved.  This
      liability was incurred in 2005 and there has been no correspondence with
      the vendor since the liability was incurred.  In the event the
      vendor does not contact the Company, we will accordingly adjust the
      liability to $0 in compliance with the state statutes of limitations of
      four years, in December of 2009.


·
            There
      is approximately $28,000 of other smaller and aged payables that the
      Company will also write-off in future periods using the applicable stature
      of limitations as a guide.





NOTE9– EXTINGUISHMENT OF
DEBT




On March
21, 2008 the Board of Directors determined that it was in the best interest of
the Company and its shareholders to void the contracts of two former directors
and extinguish the associated liability and related accrued payroll
taxes.  The contracts originated in 2006 and called for the issuance
of restricted common stock in the amount of $5,000,000.  During 2006 a
liability for $5,000,000 and $1,285,651 of related accrued payroll taxes was
recorded.  Accordingly, during the nine months ended March 31, 2009,
management has recorded a nonrecurring gain in the amount of
$6,285,651.




NOTE 10 – ASSET
VALUATION




On March
30, 2009, the Company entered into an agreement with Cannex Therapeutics, LLC, a
California limited liability company, and its principal, to acquire all of their
interest in certain assets used to conduct a cannabis research and development
business.  The asset appraisal to determine the value to be assigned
to the assets included in the transaction is planned to be conducted by the end
of the third quarter of 2009 and therefore will require amended disclosure
pertaining to the assets of the Company. The transaction, where 2,100,000 shares
were exchanged by the Company was valued at $525,000 based on the price of the
stock on March 30, 2009.




NOTE 11 –
GOODWILL
  Goodwill
of $524,000 is a result of the transaction referenced in both Note 3 and Note 10
with Cannex Thereapeutics, LLC, (“Cannex”).   Identified and
estimated assets at the time of this filing was $1,000 for the Company website
and the balance was allocated to goodwill.  Once the asset valuation
referenced in Note 10 is completed it is more than likely that this balance will
be adjusted.








The
Company has become aware of a potential lawsuit that has been initiated by K
& D Equity Investments, Inc. (“K & D”), a shareholder of the Company and
a party to the Asset Purchase Agreement that the Company entered into and
disclosed on a Form 8-K filed with the SEC on April 7, 2009 (the “Asset Purchase
Agreement”).  K & D filed suit against Cannex Therapeutics, LLC,
another party to the Asset Purchase Agreement, two of our directors and our
transfer agent.  K & D is alleging fraud, breach of contract and is
seeking rescission of the Asset Purchase Agreement. Management has reviewed the
suit and believes that it is without merit.


16


Item
2.  MANAGEMENT’S DISCUSSION AND ANALYSIS





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. 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.





General





In 4Q
2008, the Company terminated all its oil and gas operations and relinquished all
its rights to oil and gas leases and working interests in oil and gas wells in
exchange for a release of debt.  In 1Q 2008, the Company acquired all
of the assets of Cannex Therapeutics, LLC from Cannex and Steven W. Kubby, and
committed itself to 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 indictates 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
and intends to pursue Independent New Drug certification, possibly under the
Orphan Drug Act, for such treatments.  We face two significant
challenges, financing and government regulation.





The
Company is extremely undercapitalized, and will be reliant on outside financing
from sales of securities or issuance of debt instruments.  We expect
many traditional lenders will be reluctant to provide us with capital in light
of our financial condition and the nature of our expected business, so that any
financing activities will likely be expensive and result in dilution to 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.  We can make no representation that financing for our
business will be available to us, 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 in 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.  We can provide no assurances that we can develop and
market our intended product, or how long government approval, if obtained, will
take.





Our goal
is not the legalization of marijuana, but instead the development of
FDA-approved and legal non-smoked cannabis based medicines.   We
face not only the challenges of other business at an early stage of development,
but special problems arising from the nature of our business.  And
while it should go without saying, shareholders and prospective shareholders
should recognize that any investment in our Company is risky and speculative,
and could result in a total loss.








RESULTS
FOR THE QUARTER ENDED March 31, 2009





Our
quarter ended on March 31, 2009.  Any reference to the end of the
fiscal quarter refers to the end of the second calendar quarter for 2008 for the
period discussed herein.





REVENUE.  Revenue
for the three months ended March 31, 2009, was $0 compared to $46,689 for the
period ended March 31, 2008.   The decrease is attributed to the
oil properties acquired in 2007 and Curado Energy Resources, Inc., (“Curado”)
acquired in June 2008 which were disposed of in October 2008.  In
March 2009 the Company agreed to purchase the assets of Cannex with the intent
to enter the pharmaceutical indutry.








17





GROSS
PROFIT.  Gross profit for the three months ended March 31, 2009, was
$0 compared to $32,805 for the period ended March 31, 2008.  The
decrease in gross profit is due to the disposition of lease properties and
Curado Energy Resources as mentioned above.





OPERATING
EXPENSES. Total operating expenses, net of depreciation expense of $100 and $100
respectively,  for the three months ended March 31, 2009, were $24,686
compared to expenses for the period ended September 30, 2008 of
($6,165,788).  2008 expenses include a one-time nonrecurring gain of
$6,285,651 due to the voiding of former director contracts.  Backing
out the one time charge and 2008 expenses would have been $119,683; 2009
expenses netted a reduction of $95,177 versust his adjusdted
figure.  The reduction is due to reduced professional fees of $28,000
and reduced Other G&A of $67,000 as there were no oil related contract
services and other expenses in 2009.





NET
INCOME (LOSS). Net income for the three months ended March 31, 2009 was
($44,445) compared to the period ended March 31, 2008 of
$6,198,493.  The 2008 balance is impacted by the voiding of former
director contracts and associated payroll taxes of $6,285,651 as mentioned
above.





Employees





As of
March 31, 2009, the Company had two employees: its President and
CFO.







ITEM 3.  N/A







ITEM
4. Controls and Procedures




Evaluation of Disclosure
Controls and Procedures




We
carried out an evaluation of the effectiveness of the design and operation of
our disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) as of March 31, 2009.  This
evaluation was accomplished under the supervision and with the participation of
our chief executive officer / principal executive officer, and chief financial
officer / principal financial officer who concluded that our disclosure controls
and procedures are not effective to ensure that all material information
required to be filed in the annual Form 10-Q/A has been made known to
them.




For
purposes of this section, the term disclosure controls and procedures means
controls and other procedures of an issuer that are designed to ensure that
information required to be disclosed by the issuer in the reports that it files
or submits under the Act (15 U.S.C. 78a et seg.) is recorded, processed,
summarized and reported, within the time periods specified in the Commission’s
rules and forms.  Disclosure, controls and procedures include, without
limitation, controls and procedures designed to ensure that information required
to be disclosed by in our reports filed under the Securities Exchange Act of
1934, as amended (the "Act") is accumulated and communicated to the issuer's
management, including its principal executive and principal financial officers,
or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure.




Based
upon an evaluation conducted for the period ended March 31, 2009, our Chief
Executive and Chief Financial Officer as of March 31, 2009 and as of the date of
this Report, has concluded that as of the end of the periods covered by this
report, we have identified the following material weakness of our internal
controls:




·
            Reliance
      upon independent financial reporting consultants for review of critical
      accounting areas and disclosures and material non-standard
      transaction.




·
            Lack
      of sufficient accounting staff which results in a lack of segregation of
      duties necessary for a good system of internal
  control.








18






In order
to remedy our existing internal control deficiencies, as our finances allow, we
will hire additional accounting staff.




Changes in Internal Controls
over Financial Reporting




We have
not yet made any changes in our internal controls over financial reporting that
occurred during the period covered by this report on Form 10-Q that has
materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.

























19


PART
II





Items No.
1, 2, 3, 4, - Not Applicable.





Item No.
5 – Other Information





In
January 2009, Earl Moore and Mark Smith resigned as officers and directors of
the Company, leaving Jeffrey Joyce, Michele Sheriff and Wayne Duke as officers
and directors.  On March 30, 2009, the Company entered into an
agreement with Cannex Therapeutics, LLC, a California limited liability company,
to acquire all of their interest in certain assets used to conduct a cannabis
research and development business.  As part of the Agreement, the
Company appointed Mr. Kubby as President and CEO, Richard Cowan as Director and
CFO, and Robert Melamede Ph. D., as Director and Chief Science Officer, and each
of them was also appointed as a director.  All of the Company’s
current directors then resigned.




The
Company has become aware of a potential lawsuit that has been initiated by K
& D Equity Investments, Inc. (“K & D”), a shareholder of the Company and
a party to the Asset Purchase Agreement that the Company entered into and
disclosed on a Form 8-K filed with the SEC on April 7, 2009 (the “Asset Purchase
Agreement”).  K & D filed suit against Cannex Therapeutics, LLC,
another party to the Asset Purchase Agreement, two of our directors and our
transfer agent.  K & D is alleging fraud, breach of contract and is
seeking rescission of the Asset Purchase Agreement. Management has reviewed the
suit and believes that it is without merit.





Item No.
6 - Exhibits and Reports on Form 8-K





(a)
            One
      Form 8-K was filed during the three month period ended March 31,
      2009.


a.
            On
      1/29/09 announcing the resignation of E. Moore and M. Smith as officers
      and directors.





(b)
            Exhibits





Exhibit
Number / Name of Exhibit


31.1      Certification
of Chief Executive Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as
enacted by Section 302 of the Sarbanes-Oxley Act of 2002.





31.2      Certification
of Chief Financial Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as
enacted by Section 302 of the Sarbanes-Oxley Act of 2002.





32.1      Certification
of Chief Executive Officer and Chief Financial Officer, pursuant to 18 United
States Code Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of
2002.

















SIGNATURES





In
accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.





CANNABIS
SCIENCE, INC.





By /s/  Steven W.
Kubby





Steven W.
Kubby, President





Date: May
15, 2009

















20