UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ |
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2015
☐ |
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the
transition period from __________ to ___________
Commission file number: 333-82580
GROWBLOX SCIENCES, INC.
(Exact name of registrant as specified in
its charter)
Delaware
(State or other Jurisdiction of
Incorporation
or organization) |
|
59-3733133
(IRS Employer I.D. No.) |
6450 Cameron Street #110A
Las Vegas, Nevada 89118
Phone: (844) 843-2569
(Address and telephone number of
principal executive offices)
N/A
(Former name, former address and former
fiscal year, if changed since last report)
Indicate by check mark
whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark
whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ 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 ☐
(Do not check if a smaller
Reporting Company) |
Smaller reporting company ☒ |
Indicate by check mark whether the registrant is a shell company
(as defined by Rule 12b-2 of the Act). ☐ Yes ☒ No
There were 46,750,647 shares of common stock, par value $0.0001
per share, outstanding as of November 17, 2015.
GROWBLOX SCIENCES, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER
30, 2015
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
GROWBLOX SCIENCES, INC. AND SUBSIDIARIES |
CONSOLIDATED CONDENSED BALANCE SHEETS |
(unaudited) |
| |
| | | |
| | |
| |
September 30, 2015 | | |
March 31, 2015 | |
| |
| | | |
| | |
CURRENT ASSETS: | |
| | | |
| | |
Cash and cash equivalents | |
$ | 345,044 | | |
$ | — | |
Accounts receivable, net | |
| 10,000 | | |
| 50,000 | |
Prepaid expenses | |
| 73,937 | | |
| 190,374 | |
TOTAL CURRENT ASSETS | |
| 428,981 | | |
| 240,374 | |
Property and Equipment, Net | |
| 1,587,364 | | |
| 913,642 | |
Intangible Assets | |
| 3,555 | | |
| 3,555 | |
Deposits and Prepayments | |
| 264,406 | | |
| 293,920 | |
TOTAL ASSETS | |
$ | 2,284,306 | | |
$ | 1,451,491 | |
CURRENT LIABILITIES: | |
| | | |
| | |
Accounts Payable | |
$ | 1,096,447 | | |
$ | 677,230 | |
Accrued Interest | |
| 10,572 | | |
| 230 | |
Accrued Liabilities | |
| 145,062 | | |
| 72,776 | |
Notes Payable | |
| 1,588,858 | | |
| 180,000 | |
Deferred Revenue | |
| — | | |
| 54,409 | |
Deferred Compensation | |
| — | | |
| 1,522,537 | |
TOTAL CURRENT LIABILITIES | |
| 2,840,939 | | |
| 2,507,182 | |
Deferred Revenue | |
| — | | |
| 220,506 | |
Other Liabilities | |
| — | | |
| 654,968 | |
TOTAL LIABILITIES | |
| 2,840,939 | | |
| 875,474 | |
Commitments and Contingencies (Note 6) | |
| | | |
| | |
STOCKHOLDERS’ (DEFICIT)/EQUITY: | |
| | | |
| | |
Common Stock, $0.0001 par value, 250,000,000 shares authorized, 46,310,814 and 35,972,929 shares issued and outstanding at September 30, 2015 and March 31, 2015 | |
| 4,631 | | |
| 3,597 | |
Deferred Stock Compensation | |
| 4,102,752 | | |
| 1,573,033 | |
Additional Paid In Capital | |
| 13,522,374 | | |
| 10,751,690 | |
Accumulated Deficit | |
| (18,031,270 | ) | |
| (14,008,525 | ) |
TOTAL GROWBLOX SCIENCES, INC. STOCKHOLDERS’ (DEFICIT)/EQUITY | |
| (401,513 | ) | |
| (1,680,205 | ) |
Non-controlling interest | |
| (155,120 | ) | |
| (250,960 | ) |
TOTAL (DEFICIT)/EQUITY | |
| (556,633 | ) | |
| (1,931,165 | ) |
TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT)/EQUITY | |
$ | 2,284,306 | | |
$ | 1,451,491 | |
The accompanying notes
are an integral part of these consolidated financial statements
GROWBLOX SCIENCES, INC. AND SUBSIDIARIES |
STATEMENTS OF OPERATIONS |
(unaudited) |
| |
For the Three Months Ended
September 30, | | |
For the Six Months Ended
September 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
|
NET REVENUE | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | |
GENERAL AND ADMINISTRATIVE EXPENSES | |
| 2,693,145 | | |
| 1,780,161 | | |
| 4,215,910 | | |
| 3,275,358 | |
LOSS FROM OPERATIONS | |
| (2,693,145 | ) | |
| (1,780,161 | ) | |
| (4,215,910 | ) | |
| (3,275,358 | ) |
OTHER INCOME (EXPENSE) | |
| | | |
| | | |
| | | |
| | |
Interest Income | |
| — | | |
| 160 | | |
| 1,218 | | |
| 334 | |
Interest Expense | |
| (10,571 | ) | |
| — | | |
| (11,229 | ) | |
| — | |
Other | |
| (985 | ) | |
| — | | |
| (985 | ) | |
| — | |
Total other expense | |
| (11,556 | ) | |
| 160 | | |
| (10,996 | ) | |
| 334 | |
NET LOSS | |
| (2,704,701 | ) | |
| (1,780,001 | ) | |
| (4,226,906 | ) | |
| (3,275,024 | ) |
Net income/(loss) attributable to non-controlling interest | |
| (23,704 | ) | |
| (109,902 | ) | |
| (204,160 | ) | |
| (159,707 | ) |
NET LOSS ATTRIBUTABLE TO GROWBLOX
SCIENCES, INC. | |
$ | (2,680,997 | ) | |
$ | (1,670,099 | ) | |
$ | (4,022,746 | ) | |
$ | (3,115,317 | ) |
Net loss per share - basic and diluted | |
$ | (0.06 | ) | |
$ | (0.07 | ) | |
$ | (0.09 | ) | |
$ | (0.12 | ) |
Weighted average common shares outstanding - basic
and diluted | |
| 46,104,790 | | |
| 34,046,111 | | |
| 43,331,875 | | |
| 25,515,847 | |
The accompanying notes are an integral part of these consolidated financial statements
GROWBLOX SCIENCES, INC. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
(unaudited) |
| |
Six Months Ended September 30, | |
| |
2015 | | |
2014 | |
OPERATING ACTIVITIES: | |
| | | |
| | |
Net income (loss) | |
$ | (4,226,906 | ) | |
$ | (3,275,024 | ) |
| |
| | | |
| | |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
Depreciation and amortization | |
| 88,072 | | |
| 1,468 | |
Stock-based compensation | |
| 1,751,264 | | |
| 1,033,258 | |
Deferred Compensation | |
| (5,998 | ) | |
| — | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Accounts receivable | |
| 40,000 | | |
| — | |
Prepaid expenses | |
| 116,437 | | |
| (152,490 | ) |
Accounts payable | |
| 586,770 | | |
| (314 | ) |
Accrued expenses | |
| 84,627 | | |
| — | |
Net cash used in operating activities | |
| (1,565,734 | ) | |
| (2,393,102 | ) |
INVESTING ACTIVITIES: | |
| | | |
| | |
Purchase of property and equipment | |
| (761,793 | ) | |
| (97,865 | ) |
Change in deposits | |
| 29,514 | | |
| (77,483 | ) |
Net cash used in investing activities | |
| (732,279 | ) | |
| (175,348 | ) |
FINANCING ACTIVITIES: | |
| | | |
| | |
Net proceeds from the issuance of common stock and warrants | |
| 1,229,057 | | |
| 3,579,612 | |
Proceeds from non-controlling interest | |
| 300,000 | | |
| 112,500 | |
Proceeds from notes payable | |
| 1,200,000 | | |
| — | |
Repayment of debt | |
| (30,000 | ) | |
| — | |
Cash used to purchase warrants | |
| (56,000 | ) | |
| — | |
Other financing activities | |
| — | | |
| 150,000 | |
Stock subscription payable | |
| — | | |
| 25,250 | |
Net cash provided by financing activities | |
| 2,643,057 | | |
| 3,867,362 | |
Net change in cash and cash equivalent | |
| 345,044 | | |
| 1,298,912 | |
CASH AND CASH EQUIVALENT AT BEGINNING OF PERIOD | |
| — | | |
| 339,327 | |
CASH AND CASH EQUIVALENT AT END OF PERIOD | |
$ | 345,044 | | |
$ | 1,638,239 | |
Non-cash transactions: | |
| | | |
| | |
Stock issued to satisfy debt | |
$ | 167,451 | | |
$ | 1,262,411 | |
Stock issued to settle interest expense | |
$ | — | | |
$ | 252,304 | |
GROWBLOX SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
Note 1 – Basis of Presentation and Significant Accounting
Policies
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial
statements of Growblox Sciences, Inc. (the “Company,” “We” or “Us”) have been prepared in accordance
with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulations S-X. Accordingly, they do not include all of the information and footnotes required
by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating results for the periods presented are not necessarily
indicative of the results that may be expected for the year ending March 31, 2016. The balance sheet at March 31, 2015 has been
derived from the audited financial statements at that date but does not include all of the information and footnotes required by
U.S. GAAP for complete financial statements. For further information, refer to the consolidated financial statements and footnotes
thereto included in the Company’s annual report on Form 10-K for the year ended March 31, 2015.
Principles of Consolidation
The consolidated financial statements include all operating
divisions and majority owned subsidiaries, reported as a single operating segment, for which we maintain controlling interests.
Intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates.
Reclassifications
Certain reclassifications have been made to the comparative
period amounts in order to conform to the current period presentation. These reclassifications had no effect on the reported financial
position, results of operations or cash flows of the entity.
Significant Accounting Policies
A description of the Company’s significant accounting
policies is included in Item 15 of its Annual Report on Form 10–K/A (Amendment No. 1) for the fiscal year ended March 31,
2015.
Recent Accounting Pronouncements
Management does not believe that any recently issued but not
yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements.
Note 2 – Going Concern
The Company’s financial statements have been prepared
assuming the Company will continue as a going concern. The Company has sustained net losses since April 4, 2001, which have caused
an accumulated deficit of approximately $18 million at September 30, 2015. In addition, the Company has consumed cash in its operating
activities of approximately $1.6 million for the six months ended September 30, 2015 compared to $2.4 million for the same period
last year. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.
Management has been able, thus far, to finance the losses through
a public offering, private placements and obtaining operating funds from stockholders. The Company is continuing to seek sources
of financing. There are no assurances that the Company will be successful in achieving its goals.
In view of these conditions, the Company’s ability to
continue as a going concern is dependent upon its ability to obtain additional financing or capital sources, to meet its financing
requirements, and ultimately to achieve profitable operations. Management believes that its current and future plans provide an
opportunity to continue as a going concern. The accompanying financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts and classification of liabilities that may be necessary in
the event the Company is unable to continue as a going concern.
Note 3 – License Fee
On December 16, 2014, the Company entered into an agreement
to license certain proprietary equipment to an entity that intends to market the service of isolating particular cannabis strains
for the purpose of developing tissue from those strains so as to create a consistent, brandable product of the customer’s
choosing from any such strain. The agreement was conditional upon approval from the appropriate regulatory body. During the quarter
ended September 30, 2015, the approval was not granted. The Company is obligated to return the fee amount received. Thus, the $0.3
million initial license fee received from licensor was reclassified to notes payable.
Note 4 – Note Payable
We entered into a Note Purchase Agreement, dated May 12,
2015 and effective as of June 8, 2015, with Pacific Leaf Ventures, LP (“Pacific Leaf”), pursuant to which Pacific Leaf
has made installment loans (the “Loans”) to us in the aggregate amount of $1.5 million and is required to make $250,000
in additional Loans. To evidence the Loans, we issued to Pacific Leaf a 6% senior secured convertible promissory note (the “Note”),
bearing interest at the rate of 6% per annum, payable quarterly. All outstanding principal and interest due under the Note is due
and payable on May 12, 2020. We are required to prepay the outstanding principal amount of the Note on a quarterly basis in an
amount equal to 50% of the cash flow (accrued EBITDA) of GBS Nevada attributable to our percentage interest in GBS Nevada no later
than the earlier to occur of (a) the fifth (5th) business day following receipt of a distribution of the Company’s Share of GBS
Nevada EBITDA for the calendar quarter in question, or (b) thirty (30) days following the end of the calendar quarter in question,
with the first such prepayment to be made not later than July 31, 2015 with respect to the quarter ending June 30, 2015. In order
to induce the Pacific Leaf to extend the loan to the Company, the Grantors have agreed to grant Secured Party security and assurance
in order to secure the payment and performance of all of the Secured Obligations, and to that effect to grant Secured Party a security
interest in certain of their assets and enter into the lending agreement. The purpose of the financing is to provide for the acquisition
and installation of an operating facility, equipment and other tangible assets by GBS Nevada. Such facility and equipment will
be dedicated to the cultivation of cannabis and the extraction of oils and other constituents present in cannabis, subject at all
times to Nevada legal requirements. The note is convertible at the option of the holder into common shares at a conversion price
of $0.50, subject to anti-dilution adjustments. As of September 30, 2015, the total amount of installments received is $1.2 million.
Note 5 – Capital Transactions
During the six months ended September 30, 2015, the Board of
Directors passed a resolution to temporarily reduce the exercise price of such B warrants from $2.00 per share to $0.20 per
share in order to encourage the exercise of its B warrants, and the holders of the B warrants were notified of such temporary exercise
price reduction. As a result of this incentive, B warrants to purchase 2,160,112 shares of common stock were exercised
at $0.20 per share, resulting in net proceeds of $0.4 million.
On April 22, 2015, the Chief Executive Officer of Growblox Sciences
Puerto Rico LLC, purchased 2,820,000 shares of common stock for $0.6 million or $0.21 per share. The Company
agreed to register such common stock for resale under the Securities Act pursuant to a registration rights agreement. In addition,
the Company sold 1,995,833 shares of common stock to investors for $0.21 per share, resulting in total proceeds of $0.4
million. The Company issued 476,190 shares of common stock during the current period, the warrants of which were purchased
in March 2015 for $0.21 per share, or $100,000.
Between February, 2015 and May 15, 2015, certain holders of B Warrants
sold back to the Company for $0.01 each, B warrants to purchase an aggregate of 1,600,000 shares of common stock. On
April 27, 2015, two limited partnerships sold back to the Company for $0.01 each, warrants to purchase a total of 4,000,000 warrants
for a total of $56,000.
In May 2015, the Company issued 1,000,000 shares of common stock
in connection with a cashless exercise of B warrants.
During the six months ended September 30, 2015, the Company issued
an aggregate of 2,252,000 shares of common stock in settlement and release of certain obligations owed by the Company to various
persons and recorded related expenses of $1.7 million, as follows:
The Company issued 150,000 and 95,250 shares of restricted common
stock in connection with the conversions of $30,000 and $19,025 in indebtedness owed by us at a conversion price of $0.20 per share.
The Company issued 796,000 shares of restricted common stock as
compensation for consulting services. The Company recorded approximately $295,000 of compensation or $0.37 per share.
The Company issued 19,500 shares of restricted common stock pursuant
to the terms of a July 23, 2015 Investor Relations Consulting Agreement (the “IRCA”). The IRCA has a term of 12 months
under which the Company is obligated to pay 6,500 shares per month to the consultant. The 19,500 shares represent payment for the
first three months of the IRCA.
The Company issued 424,400 shares of common stock to certain persons
and employees and recorded an expense of $0.1 million.
During the current period, the Company cancelled 892,400 shares
of common stock of which 392,400 of the cancelled shares represented shares erroneously issued associated with unexercised options,
100,000 shares erroneously issued under an employment agreement, and 400,000 shares issued under an employment agreement which
were subject to forfeiture.
During the three months ended September 30, 2015, the Company modified
and restructured certain employee agreements which resulted in a reclassification of previously recognized compensation obligations
previously recorded as current and noncurrent obligations to equity. A portion of the related expense was recognized in the prior
periods.
Subsequent to September 30, 2015, the Company issued 333,333
shares of restricted common stock for aggregate consideration of $100,000, or $0.30 per share.
Note 6 – Commitments and Contingencies
On April 2, 2014, the Company commenced an action in the United
States District Court for the Southern District of New York captioned Signature Exploration and Production Corporation v. GCM Administrative
Services, LLC, Strategic Turnaround Equity Partners, L.P. (Cayman), Seth M. Lukash, and Gary Herman, 14 Civ. 02280 (ER) (the “Action”).
After the change of name of Signature Exploration and Production Corporation, the caption was amended to substitute Growblox Sciences,
Inc. as the plaintiff. The complaint in the Action sought a declaratory judgment that neither Lukash nor Herman was entitled to
receive any interest in, including any shares of stock of, Growblox Sciences, Inc. pursuant to certain share conversion rights
held under promissory notes in the aggregate amount of $75,000, given by a related party of ours to the entity defendants GCM and
Strategic.
On May 9, 2014, defendants filed an answer denying the complaint’s
material allegations, and asserted a counterclaim against us, against persons identified as certain of our officers or directors,
and against GrowOpp, LLC and Tumbleweed Holdings, Inc. On November 19, 2014, defendants filed an amended counterclaim, including
a prayer for monetary relief or damages in the sum of $9 million. The Company moved to dismiss the counterclaim and by opinion
dated June 2, 2015, the Court granted the motion in part and dismissed counts one and two (for declaratory judgment as to an alleged
partnership or joint venture, and for breach of fiduciary duty predicated upon those allegations), and denied the motion in part,
leaving counts three and four of the counterclaim standing. The Court viewed the third and fourth claims as a single claim for
unjust enrichment, in which recovery would be based on quantum merit, that is, upon the alleged value of any benefit conferred
by defendants to us through alleged work and services rendered. In view of the fact that the pleading did not assign a particular
value to that claim we are unable at present to advise what specific sum of money damages is sought. The Company did not challenge
the fifth count of the counterclaim at this stage that seeks damages of $75,000 for alleged non-payment of the above-referenced
promissory notes.
On August 19, 2015, Cathryn Kennedy, our former Chief Financial
Officer, filed a Complaint against us in the District Court in Clark County, Nevada alleging that she was assigned new duties by
us which constituted a termination without cause effective July 24, 2015, and that as a consequence thereof she is entitled to
severance, vacation pay and stock compensation from us pursuant to her Employment Agreement dated November 18, 2014. The Company
intends to vigorously defend itself against these allegations.
From time to time, the Company also becomes involved in certain legal proceedings and claims which arise in
the ordinary course of business. In our opinion, based on consultations with outside counsel, the results of any of these ordinary
course matters, individually and in the aggregate, are not expected to have a material effect on our results of operations, financial
condition, or cash flows. As more information becomes available, if management should determine that an unfavorable outcome is
probable on such a claim and that the amount of such probable loss that it will incur on that claim is reasonably estimable, we
will record a reserve for the claim in question. If and when we record such a reserve is recorded, it could be material and could
adversely impact our results of operations, financial condition, and cash flows.
Note 7 – Loss per Share
The Company’s basic loss per share
has been calculated using the weighted average number of common shares outstanding during the period. The Company had 46,104,790
and 29,520,288 potentially dilutive common shares at September 30, 2015 and March 31, 2015, respectively. However, such common
stock equivalents were not included in the computation of diluted net loss per share as their inclusion would have been anti-dilutive.
ITEM 2. Management’s
Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis contains “forward-looking
statements,” as defined in the United States Private Securities Litigation Reform Act of 1995. In some cases, you can identify
forward-looking statements by terminology such as “may”, “will”, “should”, “could”,
“expects”, “plans”, “intends”, “anticipates”, “believes”, “estimates”,
“predicts” or “continue” , which list is not meant to be all-inclusive and other such negative terms and
comparable technology. These forward-looking statements, include, without limitation, statements about our market opportunity,
our strategies, competition, expected activities and expenditures as we pursue our business plan, and the adequacy of our available
cash resources. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements. Actual results may differ materially from the predictions discussed
in these forward-looking statements. The economic environment within which we operate could materially affect our actual
results. Additional factors that could materially affect these forward-looking statements and/or predictions include among other
things: (1)product demand, market and customer acceptance of Growblox Sciences products, equipment and other goods, (ii) ability
to obtain financing to expand its operations, (iii) ability to attract qualified personnel, (iv)competition pricing and development
difficulties, (v) general industry and market conditions and growth rates, unexpected natural disasters, and other factors, which
we have little or no control: and other factors discussed in the Company’s filings with the Securities and Exchange Commission
(“SEC”). The Company does not undertake any obligation to update forward-looking statements to reflect events
or circumstances occurring after the date of this report.
The following discussion highlights the Company’s results
of operations and the principal factors that have affected our financial condition, as well as our liquidity and capital resources
for the periods described, and provides information that management believes is relevant for an assessment and understanding of
the statements of financial condition and results of operations presented herein. The following discussion and analysis is based
on the Company’s unaudited financial statements contained in this Quarterly Report, which we have prepared in accordance
with United States generally accepted accounting principles. You should read this discussion and analysis together with such financial
statements and the related notes thereto.
Overview
The Company is an innovative technology and solution company
that converts the cannabis plant into medicines, therapies and treatments for a variety of ailments. The Company is developing
and utilizing state of the art technologies in plant biology, cultivation and extraction techniques, combined with biotechnology,
to produce consistent and measurable medical-grade cannabis, cannabis concentrates and cannabinoid therapies.
We seek to become a trusted producer of consistent and efficacious
medicinal strains and products, combining both cannabinoids and terpenes, which we intend to market in those states within the
United States and in other countries where the sale of medical cannabis products are permitted. In addition, subject to obtaining
Food and Drug Administrative (FDA) certification, we intend to market our cannabinoid based drug discoveries on a world-wide basis.
On March 18, 2014, we purchased assets, including the Growblox™
cultivation technology, from our current Chief Executive Officer, Mr. Craig Ellins and his affiliated companies which resulted
in a change in our corporate name on April 4, 2014, from Signature Exploration and Production Corporation to Growblox Sciences,
Inc.
We were incorporated in the State of Delaware on April 4, 2001,
under the name “Flagstick Venture, Inc.” On March 28, 2008, stockholders owning a majority of our outstanding common
stock approved changing our then name “Signature Exploration and Production Corp.” as our business model had changed.
Plan of Operation
The Company believes that it is a leader in developing innovative
technologies and solutions to convert the cannabis plant into medicines, therapies and treatments for a variety of ailments. We
intend to conduct our business operations primarily through subsidiaries in three distinct operating units which we designate as
our “Solutions,” “Sciences” and “Products” divisions.
Our Solutions division involves the development and use of our
proprietary suite of controlled-climate indoor agricultural technology growing and cultivation Suites, which we call “TissueBLOX”,
“GrowBLOX,” TM”CureBLOX” and
“ExtractionLAB” (collectively, the “GrowBLOX Suites”). Our GrowBLOX
Suites are engineered and designed to cultivate medical grade cannabis and create cGMP-certified plant extracts, and thereafter
to enable us to process and manufacture a variety of pharmaceutical, nutraceutical and cosmeceutical formulations and products
based on these certified raw ingredients.
Our Science division will seek to create and validate the effectiveness
of proprietary formulations of active ingredients derived from the cannabis plant, in combination with “big data” driven
clinical research and development programs to bring pain relief and potential cures to patients suffering from a variety of neurological
and other diseases. Our Science division is currently engaged in preclinical testing of its biopharmaceutical cannabinoid product
prototypes to begin future human clinical trials. In addition, we are seeking co-development partners to assist us with growing
a phytocannabinoid-based biopharmaceutical product pipeline.
Our Products division will market the pharmaceutical, nutraceutical
and cosmeceutical drugs and therapies produced by our Science division. In addition, our Products division will seek to dispense
medical-grade cannabis solutions and products in states within the United States and in other countries where the sale and use
of such products are permitted. We will operate our Products division and market its solutions and products through existing and
future subsidiaries to be located in permitted jurisdictions.
Subsidiaries
Our majority owned subsidiary GB Sciences Nevada, LLC (“GBS
Nevada”) leases a warehouse facility at 3550 W. Teco Avenue, Las Vegas Nevada. GBS Nevada holds a provisional certificate
from the Division of Public & Behavioral Health of the Nevada Department of Health and Human Services to operate an establishment
to cultivate medical cannabis at its Las Vegas location. The certificate is considered provisional until the establishment is in
compliance with applicable local government requirements and has received a state business operating license. Granted in November
2014, the provisional certificate is subject to revocation if a medical marijuana establishment is not fully operational within
18 months from receipt.
GBS Nevada has applied for a permit or certificate to dispense
medical cannabis at two locations in Clark County, Nevada, including one location within the City of Las Vegas, and a certificate
to deliver medical grade cannabis throughout the State of Nevada. GBS Nevada is waiting for approval of such dispensary and delivery
certificates by the State of Nevada. There can be no assurance that such certificates or permits will be issued, or if issued,
that we or GBS Nevada will derive any significant revenues or profits from the cultivation, dispensing and delivery of medical
cannabis within such County or City.
In March 2015, the Company and GBS Nevada entered into a binding
memorandum (the “Memorandum”) with GBS Nevada Partners, LLC (“GBS Partners”), the local minority members
of GBS Nevada. Under the terms of such agreement, our equity in GBS Nevada was to increase from 55% to 65%, GBS Nevada was to retain
its existing certification to cultivate and grow cannabis and, if and when issued by Clark County and/or Las Vegas, Nevada, the
delivery certification. If and when issued, the dispensary certification was to be assigned to an entity to be wholly-owned by
the minority owners of GBS Nevada. In consideration for such assignment, the entity operating the dispensaries was to agree to
purchase a minimum of 20% of its inventory of cannabis from GBS Nevada and pay to us 10% of all profits derived from its dispensary
business. In addition, GBS Nevada was to retain the delivery certificate and the exclusive right to provide all delivery services
on behalf of the dispensaries that are permitted by applicable state and local Nevada law. The delivery and dispensary certifications
have yet to be issued and none of the actions contemplated by the Memorandum have been taken. Further to the determination to separate
the business activities of GBS Nevada and ownership rights therein, on August 17, 2015, we entered into an agreement (the “Separation
Agreement”) with GBS Partners, pursuant to which the rights and obligations of the parties contemplated by the Memorandum
were expanded upon. Pursuant thereto, we will become the sole shareholder of GBS Nevada which will retain the Clark County cultivation
license together with all related Supplemental Use Permits (“SUPs”) and state certificates. GBS Partners will receive
the Clark County and City of Las Vegas dispensary location licenses together with related SUPs and state certificates. In connection
therewith, the parties intend to enter into a ten year Consignment and Delivery Agreement (the “CDA”). For a more detailed
description of the Separation Agreement and CDA see Part II, Item 5 of this Form 10-Q.
We are finalizing the production and testing of the Growblox™
Suites system, primarily at our Growblox Sciences, Puerto Rico, LLC, (GBSPR) facility which we opened in San Juan in April 2015.
We shipped our first Growblox Suites from third party contractor production facilities located in China during November 2014. After
testing and revisions are made, GBSPR intends to produce an initial round of demonstration production Suites in the second quarter
of fiscal 2016.
Installment Loan Financing – Convertible Debenture
On May 12, 2015, we entered into a note purchase agreement,
(the “NPA”) effective as of June 9, 2015, with Pacific Leaf Ventures, LP ( “Pacific Leaf”), pursuant to
which Pacific Leaf agreed to make installment loans to us in the aggregate amount of $1.75 million (the “Loans”). The
purpose of the financing is to provide for the acquisition and installation of an operating facility, equipment and other tangible
assets by GBS Nevada. Such facility and equipment will be dedicated to the cultivation of cannabis and the extraction of oils and
other constituents present in cannabis, subject at all times to Nevada legal requirements. Currently, the Company expects to achieve
operating revenues in March or April 2016.
Under the NPA, Pacific Leaf made advances detailed in the table
below resulting in total Loans to date of $1.5 million.
| | |
Advance amount | | |
Cumulative amount | |
June 9, 2015 | | |
$ | 100,000 | | |
$ | 100,000 | |
July 3, 2015 | | |
$ | 200,000 | | |
$ | 300,000 | |
July 22, 2015 | | |
$ | 200,000 | | |
$ | 500,000 | |
August 3, 2015 | | |
$ | 190,000 | | |
$ | 690,000 | |
August 19, 2015 | | |
$ | 95,000 | | |
$ | 785,000 | |
August 21, 2015 | | |
$ | 15,000 | | |
$ | 800,000 | |
September 2, 2015 | | |
$ | 200,000 | | |
$ | 1,000,000 | |
September 30, 2015 | | |
$ | 200,000 | | |
$ | 1,200,000 | |
October 8, 2015 | | |
$ | 200,000 | | |
$ | 1,400,000 | |
October 27, 2015 | | |
$ | 100,000 | | |
$ | 1,500,000 | |
Pursuant to the NPA, the Company was to receive an initial installment of $0.1 million on June 9, 2015, a
second installment of $0.6 million on July 9, 2015, a third installment of $0.7 million on August 9, 2015 and a fourth and final
installment of $0.35 million on September 9, 2015. The installment advances were designed to coincide with the Company’s
construction and implementation needs for the cultivation facility for GBS Nevada. The note is convertible at the option
of the holder into common shares of the Company at a conversion price of $0.50, subject to anti-dilution adjustments.
RESULTS OF OPERATIONS
The following table sets forth certain of our Statements of
Operations data:
|
| |
Three months ended | | |
Six months ended | |
|
| |
September 30, | | |
September 30, | |
|
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
|
| |
| | |
| | |
| | |
| |
|
Revenue | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | |
|
General and administrative expenses | |
| 2,693,145 | | |
| 1,780,161 | | |
| 4,132,531 | | |
| 3,275,358 | |
|
Other income/(expense) | |
| (10,571 | ) | |
| 160 | | |
| (10,011 | ) | |
| 334 | |
|
Other | |
| (985 | ) | |
| — | | |
| (985 | ) | |
| — | |
|
Loss attributable to non-controlling interest | |
| (23,704 | ) | |
| (109,902 | ) | |
| (204,160 | ) | |
| (159,707 | ) |
|
Net income/(loss) | |
| (2,680,997 | ) | |
| (1,670,099 | ) | |
| (4,022,746 | ) | |
| (3,115,317 | ) |
Comparison of the Three Months Ended September 30, 2015 and
September 30, 2014
Revenues
The Company had no operating revenues for the three months ended
September 30, 2015, and September 30, 2014, and has not achieved any operating revenues to date.
General and administrative expenses
General and administrative expenses increased $0.9 million
to $2.7 million for the three months ended September 30, 2015 compared to $1.8 million for the three months ended September 30,
2014. The increase in primarily attributable to increases in professional fees, consulting, and advisory services related to our
licensing procedures.
Other expense
Total other expense increased by $0.01 million compared to the
same period in prior year primarily due to the recognition of accrued interest at September 30, 2015 pertaining to the loan proceeds
received from Pacific Leaf.
Comparison of the Six Months Ended September 30, 2015 and
September 30, 2014
Revenues
The Company had no operating revenues for the six months ended
September 30, 2015, and September 30, 2014, and has not achieved any operating revenues to date.
General and administrative expenses
General and administrative expenses increased $0.9 million to
$4.1 million for the six months ended September 30, 2015 compared to $3.3 million for the six months ended September 30, 2014.
The increase in primarily attributable to increases in professional fees, consulting, and advisory services related to our licensing
procedures combined with increase in utilities and facilities expenses due to additional facilities leased during the six months
ended September 30, 2015.
Other expense
Total other expense increased by $0.01 million compared to the
same period in prior year primarily due to the recognition of accrued interest at September 30, 2015 pertaining to the loan proceeds
received from Pacific Leaf.
LIQUIDITY AND CAPITAL RESOURCES
Current Liquidity
The Company will need additional capital to implement our strategies.
There is no assurance that it will be able to raise the amount of capital needed for future growth plans. Even if financing is
available, it may not be on terms that are acceptable. If unable to raise the necessary capital at the times required, the Company
may have to materially change the business plan, including delaying implementation of aspects of the business plan or curtailing
or abandoning the business plan. The Company represents a speculative investment and investors may lose all of their investment.
In order to be able to achieve the strategic goals, the Company needs to further expand its business and financing activities.
Based upon the cash position, it is necessary to raise additional capital by the end of the next quarter in order to continue to
fund current operations. These factors raise substantial doubt about the ability to continue as a going concern. The Company
is pursuing several alternatives to address this situation, including the raising of additional funding through equity or debt
financings. In order to finance existing operations and pay current liabilities over the next twelve months, the Company will need
to raise approximately $4-5 million of capital depending upon license status. No assurance can be given that the Company will be
able to operate profitably on a consistent basis, or at all, in the future.
The principal sources of liquidity to date have been cash generated
from sales of debt and equity securities and loans.
At September 30, 2015, cash was $0.3 million,
other current assets excluding cash were $0.1 million and our working capital deficit was $2.4 million. At the same time, current
liabilities were approximately $1.6 million, which consisted principally of $1.1 million in accounts payable, $1.6 million in
notes payable, and $0.1 million in accrued liabilities. At March 31, 2015, cash was $0, and other current assets, excluding cash
was $0.2 million. At the same time, current liabilities were $2.5 million, which consisted principally of $1.5 million in deferred
compensation, $0.7 million in accounts payable, and $0.2 million in notes payable. The working capital deficit at March 31, 2015
was $2.3 million. The improvement in our liquidity position at September 30, 2015 compared to March 31, 2015 is primarily attributable
to the decrease in deferred compensation.
Sources and Uses of Cash
Operating Activities
Net cash used in operating activities was $1.6 million for the six months ended September 30, 2015, as compared
to net cash used of $2.4 million for the six months ended September 30, 2014. The decrease in net cash used in operations was primarily
due to the increase in stock based compensation offset by an increase in net loss when compared to the prior period due to increase
in general and administrative expenses.
Investing Activities
During the six months ended September 30, 2015 and 2014, the Company used $0.7 million and $0.2 million, respectively,
of cash in investing activities. The cash used in investing activities during the six months ended September 30, 2015 was primarily
for the purchase of property and equipment.
Financing Activities
During the six months ended September 30, 2015 and 2014, cash flows from financing activities totaled $2.6
million and $3.8 million, respectively. Cash flows from financing activities for the six months ended September 30, 2015 relate
primarily to $1.2 million in proceeds from the issuance of debt securities, $1.2 million in proceeds from the issuance of common
stock and warrants, and $0.3 million in proceeds from non-controlling interests.
GOING CONCERN
The unaudited interim financial statements have been prepared
on a going concern basis which assumes that the Company will be able to realize assets and discharge liabilities in the normal
course of business for the foreseeable future. The Company has incurred losses since inception resulting in an accumulated deficit
of approximately $18 million as of September 30, 2015, and further losses are anticipated in the development of the business raising
substantial doubt about the ability to continue as a going concern. The ability to continue as a going concern is dependent upon
generating profitable operations in the future and/or obtaining the necessary financing to meet obligations and repay liabilities
arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve
months with existing cash on hand and/or private placements of debt and equity securities. The financials do not include any adjustments
relating to the recoverability and reclassification of recorded asset amounts, or amounts and classifications of liabilities that
might result from this uncertainty.
VARIABLES AND TRENDS
In the event the Company is able to obtain the necessary financing to progress with its business plan, the
Company expects expenses to increase significantly to grow the business. Accordingly, the comparison of the financial data for
the periods presented may not be a meaningful indicator of future performance and must be considered in light of these circumstances.
CRITICAL ACCOUNTING POLICIES
A description of the Company’s significant
accounting policies is included in Item 15 of its Annual Report on Form 10–K/A (Amendment No. 1) for the fiscal year ended
March 31, 2015, as filed with the SEC.
ITEM 3. Quantitative and Qualitative Disclosures About
Market Risk
As a “smaller reporting company” as defined by Item
10 of Regulation S-K, the Company is not required to provide information required by this Item.
ITEM 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures
that are designed to ensure that material information required to be disclosed in the periodic reports filed under the Securities
Exchange Act of 1934, as amended, or 1934 Act, is recorded, processed, summarized, and reported within the time periods specified
in the SEC’s rules and forms and to ensure that such information is accumulated and communicated to management, including
the chief executive officer and chief financial officer as appropriate, to allow timely decisions regarding required disclosure.
At the end of the quarter ended September 30, 2015, the Company carried out an evaluation, under the supervision and with the participation
of management, including the principal executive officer and the principal financial officer, of the effectiveness of the design
and operation of disclosure controls and procedures, as defined in Rule 13(a)-15(e) and Rule 15d-15(e) under the 1934 Act. Based
on this evaluation, management concluded that as of September 30, 2015 the disclosure controls and procedures were not effective
due to material weaknesses resulting from not having a functioning audit committee consisting of independent board members.
Limitations on Effectiveness of Controls and Procedures
Management, including the Chief Executive Officer (Principal
Executive Officer) and Chief Financial Officer (Principal Financial Officer), does not expect that disclosure controls and procedures
will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect
the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of
the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within the Company have been detected. These inherent limitations include, but are not limited
to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management
override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood
of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future
conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies
or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error
or fraud may occur and not be detected.
Changes in Internal Controls
During the fiscal quarter ended September 30, 2015, there have
been no changes in the internal controls over financial reporting that have materially affected or are reasonably likely to materially
affect the internal controls over financial reporting.
PART II – OTHER INFORMATION
ITEM 1. Legal Proceedings
On April 2, 2014, we commenced an action in the United States
District Court for the Southern District of New York captioned Signature Exploration and Production Corporation v. GCM Administrative
Services, LLC, Strategic Turnaround Equity Partners, L.P. (Cayman), Seth M. Lukash, and Gary Herman, 14 Civ. 02280 (ER) (the
“Action”). After the change of name of Signature Exploration and Production Corporation, the caption was amended to
substitute GrowBlox Sciences, Inc. as the plaintiff. The complaint in the Action sought a declaratory judgment that neither Lukash
nor Herman was entitled to receive any interest in, including any shares of stock of, Growblox pursuant to certain share conversion
rights held under promissory notes in the aggregate amount of $75,000, given by a related party of ours to the entity defendants
GCM and Strategic.
On May 9, 2014, defendants filed an answer denying the complaint’s
material allegations, and asserted a counterclaim against us, against persons identified as certain of our officers or directors,
and against GrowOpp, LLC and Tumbleweed Holdings, Inc. On November 19, 2014, defendants filed an amended counterclaim, including
a prayer for monetary relief or damages in the sum of $9 million. We moved to dismiss the counterclaim and by opinion dated June
2, 2015, the Court granted the motion in part and dismissed counts one and two (for declaratory judgment as to an alleged partnership
or joint venture, and for breach of fiduciary duty predicated upon those allegations), and denied the motion in part, leaving counts
three and four of the counterclaim standing. The Court viewed the third and fourth claims as a single claim for unjust enrichment,
in which recovery would be based on quantum meruit, that is, upon the alleged value of any benefit conferred by defendants
to us through alleged work and services rendered. In view of the fact that the pleading did not assign a particular value to that
claim we are unable at present to advise what specific sum of money damages is sought. We did not challenge the fifth count of
the counterclaim at this stage that seeks damages of $75,000 for alleged non-payment of the above-referenced promissory notes.
We intend we vigorously contest the remaining claim of the defendants
as we do not believe that the defendants provided any benefit or value to us or GrowOpp, LLC and Tumbleweed Holdings, Inc., the
predecessor entities affiliated with Craig Ellins.
On August 19, 2015, Cathryn Kennedy, our former Chief Financial
Officer, filed a Complaint against us in the District Court in Clark County, Nevada alleging that she was assigned new duties by
us which constituted a termination without cause effective July 24, 2015, and that as a consequence thereof she is entitled to
severance, vacation pay and stock compensation from us pursuant to her Employment Agreement dated November 18, 2014. We intend
to vigorously contest the claims of Ms. Kennedy as we believe them to be wholly without merit.
ITEM 1A. Risk Factors
There are no material changes from the risk factors previously
disclosed in the Company’s Annual Report on Form 10-K/A (Amendment No. 1) for the fiscal year ended March 31, 2015, as filed
with the SEC.
ITEM 2. Unregistered Sales of Equity Securities and Use
of Proceeds
Common Stock
On September 30, 2015, we issued 95,250 shares of our restricted
common stock to one person in connection with the conversion, effective August 15, 2015, of $19,025 in debt owed by us to such
person at a conversion price of $0.20 per share.
On September 30, 2015, we issued 150,000 shares of our restricted
common stock to one person in connection with the conversion, effective May 15, 2015, of $30,000 in debt owed by us to such person
at a conversion price of $0.20 per share.
On September 30, 2015 we issued 796,000 shares of our restricted
common stock to one person in consideration of consulting services.
On September 30, 2015 we issued 19,500 shares of our restricted
common stock to one person pursuant to a July 23, 2015 Investor Relations Consulting Agreement (the “IRCA”). The IRCA
has a term of 12 months under which we are paying to consultant 6,500 shares per month. The 19,500 shares represent payment for
the first three months of the IRCA.
In October 2015, we issued 333,333 shares of our restricted
common stock to one person at a price of $0.30 per share or an aggregate of $100,000.
Options
On August 1, 2015, we issued 300,000 stock options under our
2014 Equity Incentive Plan to Sandra Tiffany. The options are exercisable upon vesting for a period of 10 years from issuance at
an exercise price of $0.34 per share.
On August 10, 2015, we issued 600,000 stock options under our
2014 Equity Incentive plan to John Poss. The options are exercisable upon vesting for a period of 10 years from issuance at an
exercise price of $0.30 per share.
On October 1, 2015 we issued 111,000 stock options under our
2014 Equity Incentive Plan to a consultant. The options are exercisable upon vesting for a period of 10 years from issuance at
an exercise price of $0.30 per share.
Convertible Note
We entered into a Note Purchase Agreement, dated May 12, 2015
and effective as of June 8, 2015, with Pacific Leaf Ventures, LP (“Pacific Leaf”), pursuant to which Pacific Leaf has
made installment loans (the “Loans”) to us in the aggregate amount of $1.5 million and is required to make $250,000
in additional Loans. To evidence the Loans, we issued to Pacific Leaf a 6% senior secured convertible promissory note (the “Note”),
bearing interest at the rate of 6% per annum, payable quarterly. All outstanding principal and interest due under the
Note is due and payable on May 12, 2020. We are required to prepay the outstanding principal amount of the Note on a quarterly
basis in an amount equal to 50% of the cash flow (accrued EBITDA) of GBS Nevada attributable to our percentage interest in GBS
Nevada. Pacific Leaf has the option, at any time and from time to time, prior to the date on which is made the payment in full
of the Note, to convert all or any portion of the outstanding principal amount of the Note into shares of our common stock at an
initial conversion price equal to $0.50 per share.
All of the foregoing securities were issued in reliance on the
exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933 (the “Securities Act”)
and/or Rule 506 of Regulation D under the Securities Act, as amended.
ITEM 3. Defaults Upon Senior Securities
None.
ITEM 4. Mine Safety Disclosures
Not Applicable.
ITEM 5. Other Information
CFO Appointment
Effective July 27, 2015, the board of directors hired John Poss
as our Chief Financial Officer.
Mr. Poss has over 30 years of experience working as a consultant
to companies facing major transitions and transformations. Mr. Poss began his career in the Washington, D.C. office of Arthur Andersen
& Co. and has served as Chief Executive Officer, Chief Operating Officer, Chief Financial Officer and Chief Technology Officer
of both public and private companies in such diverse industries as homebuilding, mining, telecommunications, manufacturing, logistics,
construction lending and mortgage banking. For the past twenty months Mr. Poss served as Chief Executive Officer of Experiential
Teaching Online Corp., an educational content developer and for four years prior thereto owned and operated his own consulting
firm. Mr. Poss has also has worked extensively internationally, successfully negotiating agreements in countries throughout Asia,
Europe and the Americas. Mr. Poss graduated from the University of Texas in 1974 with a degree in accounting.
By letter agreement dated August 10, 2015, we confirmed the
terms of the employment of Mr. Poss as our Chief Financial Officer. The term of employment is one year subject to automatic extensions
for additional one year periods unless either party chooses to terminate such employment. We may terminate the Employment Agreement
at any time with or without cause. If we terminate the Employment Agreement without cause we are required to pay three months’
severance to Mr. Poss if the termination takes place during the first year of employment, four months’ severance if the termination
takes place during the second year of employment and six months’ severance if the termination takes place during the third
year or a subsequent year of employment. No severance payments are due in the case of a termination for cause. Similar severance
provisions apply to a termination by Mr. Poss for good reason but not to a termination by Mr. Poss without good reason. We are
paying Mr. Poss a monthly salary of $10,000 per month. In addition, in August 2015 we issued 600,000 options to Mr. Poss under
our 2014 Equity Incentive Plan. The options are exercisable upon vesting for a period of 10 years from issuance for the purchase
of shares of our common stock at a price of $0.30 per share. The options vest ratably on a monthly basis in equal installments
over the course of 30 months commencing on the seventh month of the employment period. In the event that Mr. Poss’ employment
is terminated by us for cause or by Mr. Poss without good reason, all unvested options at the time of termination will be cancelled.
In the event of a Change of Control, as such term is defined
in the 2014 Equity Incentive Plan, all of the options issued to Mr. Poss shall vest immediately. The number of options issuable
to Mr. Poss is subject to increase within 6 months of the commencement of Mr. Poss’ employment at the discretion of our Board
of Directors. At the end of the third year of employment, the compensation payable to Mr. Poss shall be renegotiated in good faith
by the parties.
Separation Agreement between GBS Sciences Nevada, LLC and
GBS Nevada Partners, LLC
In March 2015, we and GBS Sciences Nevada, LLC (“GBS Nevada”)
entered into a binding memorandum (the “Memorandum”) with GBS Nevada Partners, LLC (“GBS Partners”), the
minority member of GBS Nevada. Under the terms of such agreement, our equity in GBS Nevada was to increase from 55% to 65%, and
GBS Nevada was to retain its existing certification to cultivate and grow cannabis and, if and when issued by Clark County and/or
Las Vegas, Nevada, the delivery certification. It was further agreed that, if and when issued, the dispensary certification would
be assigned to an entity to be wholly-owned by GBS Partners. In consideration for such assignment, the entity operating the dispensaries
was to agree to purchase a minimum of 20% of its inventory of cannabis from GBS Nevada and pay to us 10% of all profits derived
from its dispensary business. In addition, GBS Nevada was to retain the delivery certificate and the exclusive right to provide
all delivery services on behalf of the dispensaries that are permitted by applicable state and local Nevada law. The actions contemplated
by the Memorandum were never taken because the delivery and dispensary certifications have yet to be issued and our ownership of
GBS Nevada remains at 55%.
On August 17, 2015, however, we entered into a letter agreement
with GB Partners to expand on the actions contemplated by the Memorandum and to effect an ownership separation. Pursuant thereto,
we are to become the sole shareholder of GBS Nevada which will retain the Clark County cultivation license and state certificates
together with all related SUPs and state certificates. GBS Partners will receive the Clark County and City of Las Vegas dispensary
location licenses, together with related SUPs and state certificates. In connection with the foregoing, the parties agreed to enter
into a Consignment and Delivery Agreement (“CDA”) with a term of ten years subject to optional extensions for additional
five year periods. The initial extension is automatic assuming neither party is in breach of the CDA. Further extensions thereafter,
will require mutual agreement of the parties.
Pursuant to the CDA, GBS Partners will provide GBS Nevada with
20% of its most prominent in-store retail merchandising shelf space for consignment sales. All after-tax consignment sale proceeds
resulting therefrom will be split equally between GBS Partners and GBS Nevada. The CDA will further provide that GBS Nevada will
establish and bear all expenses of operating and administrating a local delivery service from the dispensary locations. All product
sold through such services will be treated as a consignment sale and as such, all after-tax delivery consignment sale proceeds
will be split between GBS Nevada and GBS Partners on an 80/20 basis. The service may also include non-GBS Nevada product to be
sold through the service from GBS Partners’ county dispensary and in such event, GBS Nevada will retain 20% of the initial
sales price thereof.
The CDA will also provide for GBS Nevada to receive a non-dilutable
10% interest in the distributions, profits and equity of all entities that own or have the right to 100% of all dispensary operations.
GBS Nevada will also have the right to tag along with any sale or transfer of any direct or derivative interest in the dispensary
operation on a pari passu basis.
GBS Partners is required to reimburse GBS Nevada approximately
$307,000 for expenses incurred in connection with the application and issuance of an approved provisional state certificate from
both the Las Vegas and Clark County dispensaries. Approximately $61,000 of such amount is payable upon the governmental approval
of the license transfers. The balance of such amount is payable from the first sale proceeds from dispensary operations and in
all events no later than 2 years from the date the county dispensary receives its final certificate of occupancy (the “County
Certificate”) and opens for business. In the event that the County Certificate is not issued, GBS Partners can defer payment
of approximately $153,000 for a maximum of two additional years. Notwithstanding the foregoing, if GBS Partners finances the dispensary
operations with a third party resulting in the receipt of net proceeds by GBS Partners, then all expense amounts shall become immediately
due and payable.
Management Agreement between Growblox Sciences, Inc. and
Compassionate Team of Las Vegas LLC
On August 17, 2015, the Company entered into a Medical Marijuana
Establishment Management Agreement with Compassionate Team of Las Vegas LLC (“Compassionate Team”) pursuant to the
term of which the Company agreed to manage the operation of the Medical Marijuana Establishment for cultivation, located at 2601
Highland Drive, Las Vegas, Clark County, Nevada (“Real Property”). The responsibility and control of all operations
shall reside with Compassionate Team as licensee. Growblox Sciences agrees to provide all capital funding to the Medical Marijuana
Establishment for cultivation to become fully operational. Growblox Sciences will receive 70% of the total profits in connection
with management services provided which will be distributed on a quarterly basis. The effectiveness of the management agreement
is depended upon Compassionate Team providing Growblox Sciences with written proof of Provisional Medical Marijuana Establishment
Registration Certificate for cultivation and evidence of approved Special Use Permit and a Compliance Permit at the Real Property.
Issuance and Transfer of Provisional Cultivation and Production
Certificates
On August 14, 2015, Sandra Tiffany, the managing member of GWGA,
LLC (“GWGA”), LVIG Holdings LLC (“LVIG”) and LVOP Holdings LLC (“LVOP”) agreed to transfer
the State of Nevada, Division of Public and Behavioral Health (the “Division”) provisional Cultivation Establishment
Registration Certificates to be issued to GWGA and LVIG and the Division’s provisional Production Establishment Registration
Certificate to be issued to LVOP to us at such time that the Division allows for the transfer of such certificates. The certificates
have been issued and transferred to Ms. Tiffany by the respective entities but have yet to be transferred by Ms. Tiffany
to us. In connection with the issuance of such certificates by the Division, in August 2015, we have agreed to issue 125,000 shares
of our restricted common stock to Ms. Tiffany. We have agreed to issue an additional 125,000 shares of our restricted common stock
to Ms. Tiffany at the time that the issued certificates are transferred to us. We further agreed to employ Ms. Tiffany as the General
Manager of GB Sciences Nevada LLC effective as of August 1, 2015.
In connection with the transfers to Ms. Tiffany of the provisional
cultivation and production certificate, Ms. Tiffany has or will make payment to her former partners in the aggregate amount of
$86,500. We have agreed by letter agreement dated September 23, 2015 to reimburse Ms. Tiffany for these payments on or before January
1, 2016 and to pay Ms. Tiffany an additional $10,000 in consideration of her work related to the project.
Tiffany Employment Agreement
On August 1, 2015, we entered into a one-year Executive Employment
Agreement (the “Employment Agreement”) with Sandra Tiffany (the “Executive”) pursuant to which the Executive
serves as the General Manager of our subsidiary, GB Sciences Nevada, LLC. The Employment Agreement extends automatically for additional
one-year terms unless either party notifies the other, at least 15 days prior to the end of the then existing term, of their determination
not to renew. We may terminate the Employment Agreement at any time with or without cause. If we terminate the Employment Agreement
without cause we are required to pay three months’ severance to the Executive if the termination takes place during the first
year of employment, four months’ severance if the termination takes place during the second year of employment and six months’
severance if the termination takes place during the third year or any subsequent year of employment. No severance payments are
due in the case of a termination by us for cause. We must provide the Executive with advance notice in the case of a termination
for cause in which we identify the manner in which we believe the Executive has failed to perform her duties or identify the other
basis for such termination.
The Executive may terminate the Employment Agreement with or
without good reason by providing us with notice at least 10 days prior to the date of termination. If the termination is not for
good reason, we have no severance obligations to the Executive. If the termination is for good reason, the same severance requirements
applicable to a termination by us without cause shall apply.
The Executive’s duties under the Employment Agreement
include finalizing business plans and budgets, communicating and working with governmental agencies to assure compliance with applicable
rules and regulations, coordinating production, overseeing product sale and distribution, and developing operating procedures.
The Executive is also responsible for managing cultivation and production facilities and the recruiting, hiring and training of
employees.
The Executive is receiving an initial annual base salary of
$72,000 which is subject to review on an annual basis for possible increase as determined by our CEO and/or Board of Directors.
The Executive also received 300,000 stock options under our 2014 Equity Incentive Plan, each exercisable for the purchase of a
share of our common stock at an exercise price of $0.34 per share. The options vest ratably on a monthly basis over the course
of the 30 month period commencing in the seventh month of employment. In the event that the Agreement is terminated by us for cause
or by the Executive without good reason, all unvested options at the time of termination will be cancelled. At the end of the third
year of employment, the compensation payable to the Executive shall be renegotiated in good faith by the parties.
The Employment Agreement also provides for Executive’s
participation in the Company’s Nevada Operations Bonus Pool (the “Bonus Pool”) to be established on or before
December 31, 2015. The Executive’s participation in the Bonus Pool will allow the Executive to receive a bonus in the amount
of her annual salary if our Nevada operations achieve 90% of annual projected earnings. If and when the Nevada operations achieve
100% or more of annual projected earnings, Executive shall be entitled to additional compensation in an amount to be mutually determined
by the Executive and our CEO.
Pacific Leaf Note Purchase Agreement
We entered into a Note Purchase Agreement, dated May 12, 2015
and effective as of June 8, 2015 (the “Effective Date”), with Pacific Leaf Ventures, LP (the “Lender” or
“Pacific Leaf”), pursuant to which the Lender agreed to make installment loans to us in the aggregate amount of $1.75
million (the “Loans”). The purpose of the financing is to provide for the acquisition and installation of
an operating facility, equipment and other tangible assets by GB Nevada. Such facility and equipment will be dedicated to the cultivation
of cannabis and the extraction of oils and other constituents present in cannabis, subject at all times to Nevada legal requirements.
GBS Nevada holds a provisional certificate from the Division
of Public & Behavioral Health of the Nevada Department of Health and Human Services to operate an establishment to cultivate
medical cannabis at 3550 West Teco Avenue, in Clark County Nevada. The certificate is considered provisional until the
establishment is in compliance with applicable local government requirements and has received a state business operating license. Granted
in November 2014, the provisional certificate is subject to revocation if a medical marijuana establishment is not fully operational
within 18 months from receipt.
Pursuant to the terms and conditions of the Note Purchase Agreement
(the “Agreement”), the Lender has made advances to us as of November 6, 2015 in the aggregate amount of $1.5 million
and is required to make additional advances in the amount of $250,000. Currently, the Company expects to achieve operating revenues
in March or April 2016.The obligation of the Lender to make each periodic installment advance in connection with the Agreement
was and is to subject to satisfaction by us of certain conditions, including compliance with certain covenants and with Nevada
legal requirements and no material adverse events. The proceeds of the Agreement can be used only for the purchase of assets,
construction, and leasehold improvements related to the cultivation facility. Part of the assets purchased with the
proceeds of the Agreement will include extraction equipment developed by us in cooperation with Pacific Leaf. The Agreement
is secured by a first lien and security interest on (i) the equipment of GBS Nevada, including the equipment purchased with the
proceeds of the Agreement, and (ii) our equity in GBS Nevada.
To evidence the Agreement, the Company issued to the Lender
a 6% senior secured convertible promissory note, bearing interest at a fixed rate of 6% per annum, payable quarterly (the “Note”). All
outstanding principal and interest due under the Note is due and payable on May 12, 2020. The Company is required to
repay the outstanding principal amount of the Note on a quarterly basis in an amount equal to 50% of the cash flow (accrued EBITDA)
of GBS Nevada attributable to the percentage interest in GBS Nevada.
Pacific Leaf has the option, at any time and from time to time,
prior to the date on which the Company makes payment in full on the Note, to convert all or any portion of the outstanding principal
amount of the Note into shares of common stock at an initial conversion price equal to $0.50. Pacific Leaf and any subsequent
holders of the note have or will be granted rights to piggyback registration on all shares of common stock issuable upon conversion
of the Note.
In a related matter, the Company also entered into an exclusive
perpetual license agreement with Pacific Leaf to make use of Pacific Leaf’s intellectual property for the cultivation of
cannabis and extraction of oils and other strains of cannabis that it has developed or acquired (the “Pacific Leaf Intellectual
Property”) for the sole use of GBS Nevada in its operations within the State of Nevada; it being understood that any other
use of the Pacific Leaf Intellectual Property requires the approval of the licensor.
The Company believes that the rights to the Pacific Leaf Intellectual
Property will give GBS Nevada a significant competitive advantage in the Nevada cannabis market. In consideration for
the license of the Pacific Leaf Intellectual Property, the Company has agreed to pay Pacific Leaf for a period of ten years out
of all periodic distributions received from GBS Nevada (based on the percentage equity in GBS Nevada) a royalty at the rate of
approximately 7.7% of the gross revenue earned by the Company from GBS Nevada for the initial five years, and a royalty at the
rate of approximately 3.85% of gross sales revenues of GBS Nevada in years six through ten.
As part of the Pacific Leaf license, the Company was also granted
the exclusive perpetual right in Nevada to use certain proprietary techniques developed by Pacific Leaf for the extraction of oils
from the product grown in the Nevada facility, using the extraction equipment financed by the proceeds of the Pacific Leaf loan. In
connection therewith, the Company has agreed to pay a royalty of $2.00 per extracted gram for a period of five years.
There can be no assurance that:
| · | the Company will be able to comply with the covenants under the Pacific Leaf Note Purchase Agreement so as to enable the Company
to receive all of the anticipated funding thereunder; |
| · | there will not be cost over-runs in connection with the purchase and/or lease of the
cultivation facility and related equipment resulting in the proceeds of the Loan being insufficient to enable GBS Nevada to complete
the installation and commence production of cannabis for medical purposes; |
| · | a state business license to operate the medical cannabis facility will be issued, or
that the Company or GBS Nevada will not violate existing or newly imposed state, county and city regulations in Nevada that would
significant restrict or prohibit its proposed business activities; or |
| · | the proposed business to be conducted by GBS Nevada with the proceeds of the Loan will
prove profitable to the Company or its subsidiaries. |
A default by the Company under the Note Purchase Agreement could
have a material adverse effect on the business.
Although the proposed and actual business activities of GBS
Nevada are not illegal within the State of Nevada, the production and sale of cannabis products violate federal laws as presently
constituted.
Agreement with Growblox Sciences, Puerto Rico
On May 7, 2015, the Company entered into certain agreements
with Growblox Sciences, Puerto Rico, LLC, a limited liability company organized under the laws of the Commonwealth of Puerto Rico
(“GBSPR”). GBSPR was formed and is being capitalized primarily by Cesar Cordero-Kruger, a prominent
business executive and resident of Puerto Rico.
Under the terms of a commercialization agreement between the
Company and GBSPR, the Company has granted to GBSPR the exclusive world-wide rights to all of our technology and intellectual property
to:
(a) manufacture, produce, lease and license
our indoor series of controlled-climate indoor agricultural technology growing and cultivation chambers engineered and designed
to produce medical grade cannabis and other plant extracts (the “Growblox Chambers”) and provide remote diagnostic
monitoring and servicing of the Growing Chambers to third party growers and processors of hemp, cannabis and other plant extracts;
(b) sell to the Company, for resale and
distribution throughout the world, in all territories and jurisdictions (including states in the United States) where the sale
and use of such products are permitted, any and all pharmaceutical raw materials and products as well as neutraceuticals and cosmeceutical
skin care products derived from medical-grade cannabis and hemp raw materials that were cultivated and grown in Growblox Chambers;
(c) use the trademarks and packaging
developed by the Company to be used to identify all cannabis products grown in Growblox Chambers;
(d) provide technical support for the
licensing, permitting and other requisite applications for the cannabis business in Puerto Rico and related markets;
(e) access all research supporting the
Growblox Chambers and educational materials previously developed or collected in the future by the Company to the extent associated
or used with GBSPR Business; and
(f) access all of the dispensary related
technology, proprietary information and contacts including, without limitation, technology, proprietary information, and contacts.
All rights not granted to GBSPR under the commercialization
agreement are retained by the Company and include the (i) right to conduct pre-clinical and clinical trials and ongoing research
and development to create cannabis-based therapies for specific clinical conditions based on an understanding of how cannabinoids
interact with the natural receptors in the human body; (ii) formulation of targeted combinations of active ingredients to combat
specific conditions and diseases; (iii) use of proprietary cannabinoid formulations, to develop palliative and curative pharmaceutical
treatment options and products for patients with certain critical diseases; (iv) exclusive right to sell, dispense and
market cannabinoid and hemp based pharmaceutical raw materials and products as well as neutraceuticals and cosmeceutical skin care
products throughout the world, either directly, through distributors or under other agreements with third parties; and (iv) right,
directly, or through one or more of our subsidiaries (other than GBSPR), to cultivate, grow, dispense and sell medical-grade cannabis
or marijuana in Nevada and Colorado.
To the extent that GBSPR produces and sells to the Company for
resale or distribution pharmaceutical raw materials and products, neutraceuticals and/or cosmeceutical skin care products derived
from plants cultivated and grown in Growblox Chambers (collectively, the “Finished Products”), the Company has agreed
to establish mutually acceptable transfer pricing between GBSPR and the Company for such Finished Products; failing which agreement,
an independent third party will arbitrate such pricing and pricing policies. In the event that GBSPR is unable to fulfill
100% of the requirements of the customers for Growblox Chambers or Finished Products, GBSPR will subcontract such production to
third parties that are reasonably acceptable to the Company. Neither the Company nor GBSPR may commercially sell (as
opposed to leasing or licensing) Growblox Chambers without the consent of both parties.
The grant of rights under the commercialization agreement was
subject to the condition that GBSPR obtain not less than $1.25 million of equity financing by no later than September 30, 2015;
failing which we could unilaterally terminate the agreement. If we decide to terminate the agreement, Cesar Cordero-Kruger
who has invested the initial $300,000 of capital to GBSPR, will be responsible for obtaining the remaining $950,000 of capital.
Mr. Cordero-Kruger, on behalf of GBSPR, intended to raise the equity financing in Puerto Rico but, due in part to delays in the
development of our business, was not able to do so. We are presently discussing with Mr. Cordero-Kruger an extension of the equity
financing timeline.
Upon consummation of the contemplated $1.25 million capitalization
of GBSPR, the Company will be the majority owner of its equity, owning approximately 66% of the GBSPR membership interests; Mr.
Cordero-Kruger will own approximately 15.9% of such membership interests, Dr. Andrea Small-Howard, a director and chief technology
officer will own approximately 2.1% of such membership interests and Joseph J. Bianco, a GBSPR Board member will own approximately
8.3% of such membership interests. The remaining percentage of ownership of such membership interests will be owned by other non-related
party investors.
Under the terms of the GBSPR operating agreement, Mr. Cordero-Kruger
is the managing member of GBSPR, entitled to designate a majority of the five member board of managers of GBSPR, and is delegated
with the authority to manage the business of GBSPR, subject only to certain major decisions defined in the operating agreement
(dealing primarily with matters of finance, related party transactions and amending agreements among the parties) which require
unanimous approval of the Board or approval by the Company. The Company has designated Craig Ellins, President and CEO,
and Joseph J. Bianco as members of the GBSPR Board.
The operating agreement also provides that the investors (including
Mr. Cordero-Kruger) who have provided the maximum $1.25 million of capital to GBSPR will hold Class A membership interests that
entitle them to exclusive rights to certain research and development tax credits available to residents of the Commonwealth of
Puerto Rico. The Company and its affiliates and associates hold Class B membership interests, which are identical to
the Class A membership interest, other than the right to the research and development tax credits.
Assuming it completes its initial $1.25 million capitalization,
GBSPR may seek to raise an additional $4.75 million of capital in 2015 or thereafter to enable it to expand its business activities. The
operating agreement provides that the terms of such additional financing, if undertaken, have to be unanimously approved by all
members of the GBSPR board, including the Company’s designees. Under certain conditions, after three years, the operating
agreement provides that Mr. Cordero-Kruger or his designated members of the GBSPR board may require the Company to acquire the
remaining equity of GBSPR under a formula or consummate another liquidity event for the members of GBSPR.
There can be no assurance that the proposed initial $1.25 million
capitalization of GBSPR will be consummated, or that the contemplated $4.75 million of additional financing will be undertaken
or completed upon terms and conditions that are acceptable to GBSPR, if at all. There can also be no assurance that:
| · | the proposed business activities of GBSPR will be successful; |
| · | the ongoing research and development will result in pre-clinical trials or clinical trials that will result in the production
of any pharmaceutical or related products that will either be commercially accepted or permitted to be sold by the FDA or any other
state or federal regulatory authority; or |
| · | the Company will ever be able to purchase or be permitted to resell medical grade cannabis or other Finished Products. |
Trenk Consulting Agreement
Effective October 1, 2015 we entered into a 3-year Consulting
Agreement (the “Consulting Agreement”) with Steven Trenk (the “Consultant”) pursuant to which Consultant
will assist us in the development of our Cannaplex project. The Cannaplex project involves the syndication of an 80% interest in
the physical property owned by Consultant and leased to us for purposes of cultivating marijuana to be used for medical purposes
and creating a center for related professional and/or entertainment services. Consultant will assist with arranging for third-party
financing needed for such syndication. The Consulting Agreement can be cancelled by mutual agreement if the parties determine that
the Cannaplex project cannot be funded or is unable to proceed for other reasons. The Consulting Agreement may also be terminated
by us for cause. In connection with the services to be provided by the Consultant under the Consulting Agreement, we are obligated
to issue to Consultant upon execution of the Consulting Agreement and on the first and second anniversaries thereof, options to
purchase 111,000 shares of our common stock at an exercise price of $0.30 per share. The initial 111,000 options were issued by
us on October 1, 2015.
Share Cancellations
During the three months ended September 30, 2015, the Company
cancelled 892,400 shares of common stock. 392,400 of the cancelled shares represented shares that had been erroneously issued
upon vesting of options that were never exercised. 100,000 of the cancelled shares represented the excess number of shares that
had been erroneously issued under an employment agreement. 400,000 of the shares represented shares issued under an employment
agreement which were subject to forfeiture in the event that the employee (Cathryn Kennedy) ceased to remain in the employment
of the Company on certain specified dates which proved to be the case.
ITEM 6. Exhibits
In reviewing the agreements included as exhibits to this Form
10-Q, please remember that they are included to provide you with information regarding their terms and are not intended to provide
any other factual or disclosure information about the Company or the other parties to the agreements. The agreements may contain
representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been
made solely for the benefit of the parties to the applicable agreement and:
| · | should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one
of the parties if those statements prove to be inaccurate; |
| · | have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement,
which disclosures are not necessarily reflected in the agreement; |
| · | may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors;
and |
| · | were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement
and are subject to more recent developments. |
Accordingly, these representations and warranties may not describe
the actual state of affairs as of the date they were made or at any other time. Additional information about the Company may be
found elsewhere in this Form 10-Q and the Company’s other public filings, which are available without charge through the
SEC’s website at http://www.sec.gov.
The following exhibits are included as part of this report:
Exhibit
Number |
|
Description of Exhibit |
10.1 |
|
Employment Agreement between Registrant and John Poss dated August 10, 2015 |
10.2 |
|
Employment Agreement between Registrant and Sandra Tiffany dated August 14, 2015 |
10.3 |
|
Separation Agreement dated August 17, 2015 between GBS Sciences Nevada, LLC and GBS Nevada Partners, LLC |
10.4 |
|
Medical Marijuana Establishment Management Agreement
|
31.1 |
|
Certification of Principal Executive Officer and Pursuant to Rule 13a-14 |
31.2 |
|
Certification of Principal Financial Officer Pursuant to Rule 13a-14 |
32.1* |
|
CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act |
32.2* |
|
CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley
Act
Contract with Mr. John Poss, Chief Financial Officer |
101.INS |
|
XBRL Instance Document |
101.SCH |
|
XBRL Taxonomy Extension Schema Document |
101.CAL |
|
XBRL Taxonomy Extension Calculation Linkbase Document |
101.LAB |
|
XBRL Taxonomy Extension Labels Linkbase Document |
101.PRE |
|
XBRL Taxonomy Extension Presentation Linkbase Document |
101.DEF |
|
XBRL Taxonomy Extension Definition Linkbase Document |
* This certification is being furnished and shall not be deemed
“filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that
section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act,
except to the extent that the registrant specifically incorporates it by reference
SIGNATURES
In accordance with the requirements of the Securities Exchange
Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
GROWBLOX SCIENCES, INC. |
|
|
November 17, 2015 |
By: |
/s/ Craig Ellins |
|
Craig Ellins, Chief Executive Officer (Principal Executive Officer) |
|
|
|
GROWBLOX SCIENCES, INC. |
|
|
November 17, 2015 |
By: |
/s/ John Poss |
|
John Poss, Chief Financial Officer (Principal Financial Officer) |
EXHIBIT 10.1
August 10,
2015
Mr. John Poss
505 Dallas St.
New Braunfels,
TX 78130
RE:
Offer of Employment
Dear Poss,
The
purpose of this letter is confirm our agreement that Growblox Sciences, Inc. (the “Company”)
will employ you as Chief Financial Officer on the following terms and conditions.
The
term of your employment shall be one year from the date hereof and shall continue from year-to-year unless either of us chooses
to terminate. In the event that the Company chooses to terminate your employment, it may
do so at any time, however you will be entitled to a three month severance if this agreement is terminated during the first year
of your employment, a four month severance if this agreement is terminated
during the second year of your employment, and a six month
severance if this agreement is terminated during the third or any subsequent year of your employment. You will be paid a monthly
salary of $ 10,000 per month, payable in arrears. You will
also be entitled to participate in any benefits programs that The Company provides to its other senior executives;
however you have elected not to participate in the Company’s health insurance program, so the
Company, in addition to your salary, will cover the $700
cost of your existing plan.
In
addition, you will receive stock options pursuant to the
Company’s 2014 Equity Incentive Plan, in the amount of 600,000 options. Duration, exercise price and other ancillary terms will
all be governed by the terms of the Plan pursuant to which the options are issued. These
options will vest monthly in equal amounts over the course of 30 months commencing in the seventh month of your employment pursuant
hereto, but if the Company terminates this agreement at any time any options that remain unvested will be canceled, and all vesting
will cease upon such termination. At the end of the third
year of your employment with the company salary, options, and other compensation will be renegotiated in good faith between the
parties. Notwithstanding the foregoing,
in the event of a “Change in
Control” (as defined in the 2014 Equity Incentive
Plan), all your options will immediately vest. The Company further agrees that the number of options granted to you pursuant hereto
will be reviewed in good faith within 6 months of the date
hereof by the full Board of Directors of the Company.
We all look forward
to your becoming an important member of our team, and it has already been a pleasure working with you.
|
|
|
Sincerely, |
|
|
|
/s/ Craig Ellins |
|
|
|
Craig Ellins |
|
Chief Executive Officer |
|
|
|
Agreed and Accepted: |
|
|
|
/s/ John Poss |
|
John Poss |
|
|
|
Date: |
August 10, 2015 |
|
EXHIBIT 10.2
Executive Employment Agreement
This EMPLOYMENT
AGREEMENT (“Agreement”) is entered into as of the 1st of August, 2015
by and among Growblox Sciences, Inc. a Nevada Corporation (“the Company”) and Sandra Tiffany,
an individual (the “Executive”).
WHERE AS,
The Company desires to employ the Executive as the General Manager of GB Sciences Nevada, LLC;
WHERE AS,
the Executive desires to accept employment as the General Manager of GB
Sciences Nevada, LLC;
NOW,
THEREFORE, in consideration
of the mutual covenants and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency
of which hereby are acknowledged, the parties hereto agree
as follows:
1. Employment Agreement:
On the terms and conditions in this agreement, the Company agrees to employ the Executive and the Executive agrees to continue
to be employed by the Company for the Employment Period (see Term; 2)
and in the position (see Position and Duties; 4).
2. Term: The
initial term of employment under this agreement shall be for a period beginning August 1, 2015
(“Effective Date”)
and shall be one year from the date hereof and shall continue from year-to-year. On each annual anniversary thereafter (such date
and each annual anniversary thereof, a (“Renewal Date”),
the Agreement shall be deemed to be automatically extended for successive periods of one year
unless the Company or the Executive provides notice of its intention not to extend the term of the Agreement at least 15 days prior
to the applicable Renewal date. The period during which the Executive is employed by the Company hereunder is hereinafter referred
to as the “Term” or the “Employment Period.”
3. Termination:
By the
Company: In the event that the Company chooses to terminate it may do so at any time,
however the Executive will be entitled to a three month severance if this agreement is terminated
during the first year of employment. The Executive is entitled
to a four month severance if this agreement is terminated during the second year of executive employment. The Executive is entitled
to a six month severance if this agreement is terminated during the third or any subsequent year of Executive employment.
Cause,
the Company may terminate the Executives’ employment for Cause or without Cause. If the company terminates the Executive’s
employment without Cause, the Company shall not be required to give advance notice. Cause shall be defined as breach of fiduciary
duty, conviction of or plead or guilty or nolo contendere
to a felony that may adversely effect the company’s reputation, breach of a material provision of this Agreement or repeated
failure to perform her material duties hereunder, after
demand or performance is s delivered by the Company that identifies the manner in which the company believes that the Executive
had not performed her material duties.
By the Executive:
The Executive may terminate employment for any reason or for no reason. If
the executive terminates employment without Good Reason, then she shall provide notice to the Company at least 10 days prior
to Date of Termination. Any material diminution of the Executives title, responsibilities,
reporting relations, duties,
status, role authority of responsibilities will be discussed
prior to such diminution occurring.
Any termination
of the Executive’s employment by the Company or the Executive (other than because of the Executive’s death) shall be
communicated by Notice of Termination to the other party in accordance with the requirements of this Agreement. For purposes of
this Agreement, a “Notice of Termination” shall
mean a notice which shall indicate the specific termination provision in this Agreement and shall set forth in reasonable details
the facts and circumstances claimed to provide a basis for termination of the Executives” employment.
4. Positions and Duties
(a) Executive
positions. During the Employment Period, the Executive
shall serve as the General Manager of GB Sciences Nevada, LLC. In
such capacities, the Executive shall report to the Company’s CEO and perform the duties and responsibilities as the CEO from
time to time determine to assign to the Executive. The
Executive’s employment shall be subject to the policies maintained and established
by the Company, as the same may be amended from time to time. The
Executive acknowledges and agrees that the Executive owes a fiduciary duty of loyalty, fidelity and allegiance to act at all times
in the best interests of the Company and to do nothing that would intentionally injure the business, interests,
or reputations of the company or its subsidiaries and affiliates. In keeping with these duties,
the Executive shall make full disclosure to the
all business opportunities pertaining to the business of the company and shall not appropriate
for the Executive’s own benefit business opportunities that fall within the scope of the businesses conducted by the Company.
(b) Duties:
The General Manager’s
duties are to meet or exceed the goals, targets,
performance indicators and objectives set by the organization within a specific time on an
approved budget by utilizing resources available efficiently.
(c) Job:
The General Manager’s works with the CFO,
legal and CEO of the organization. The General Manager works with the CEO to finalize the organizations
business plans and budgets, communicates and works with governmental agencies to assure compliance
is met, helps co-ordinate which products are produced by the various GB Sciences Nevada entities,
over sight regarding sales and distribution of the products produced, works with marketing
and assures Standard Operating Procedures are developed for each entity. Will
manage the cultivation and production facilities for the recruiting, hiring and training of employees. The compliance of the cultivation
and production facilities are the General Manager’s responsibility.
5. Compensations and Benefits
(d) Base
Salary. Commencing on the Effective Date, the Company
shall pay to the Executive a base salary at the initial are of $72,000
per calendar year (‘‘the Base Salary”)
and prorated for any partial year. The Base Salary shall be reviewed
for increase no less frequently than annually and may be increased at the discretion of the CEO and/or Board. Any such increase
in Base Salary shall constitute the “Base Salary”
for purposes of this Agreement. The Base Salary shall be paid in substantially equal installments in accordance with the Company’s
regular payroll procedures and policies in effect from time to time. The Executives Base Salary may not be decreased during the
Employment Period.
(e) Stock
Options. The Executive will receive stock options pursuant to the Company’s
2015 plan, and any subsequent plans, in the amount of 300,000
stock options. The stock options price is set according to the stock price on the day of hire. Duration, exercise price and other
ancillary terms will all be governed by the terms of the Plan pursuant to which the options are issued. These options will vest
monthly in equal amounts over the course of 30 months commencing in the seventh month of the Executive’s
employment pursuant hereto, but if the Company terminates this agreement at any time any options that remain unvested will be canceled,
and all vesting will cease upon such termination. At the end of the third year of employment with the company salary, stock options
and other compensation will be renegotiated in good faith between the parties.
(f) Nevada’s
Operations Bonus Pool. The Executive will be entitled to participate in the Company’s Nevada Operations Bonus Pool, which
will be announced and rendered precise prior to the anticipated commencement of cultivation and productions operations in the fourth
quarter of this year. The Executive’s participation in the bonus pool will be such that if the Nevada Operations achieve
90% of annual projected earnings, the Executive’s bonus will equal the annual salary. When the Nevada Operations achieve
100%+ of annual projected earnings, the bonus pools allows for additional compensation to the Executive. The CEO and General Manager
of GB Sciences Nevada, LLC will define the bonus pool structure
and policies.
(g) Employee
Benefits. During the Employment Period, the Executive
shall be entitled to participate in all employee benefit plans, practices
and programs maintained by the Company, as in effect from
time to time, that are generally made available to Executives
of the Company. The Executive shall be entitled to: (i) 14 working days of vacation per year, (ii) automobile mileage,
(iii) health care insurance, and (iv) expenses.
(h) Business
and Travel Expenses. The Executive is expected and is authorized to incur reasonable expenses in the performance of her duties.
The Company shall reimburse the Executive for all such
expenses and actually incurred in accordance with policies which may be adopted from time to time by the Company. The Executive
will present an itemized account of such expenses to be
submitted for CEO approval.
/s/ Sandra Tiffany |
|
August 14, 2015 |
|
Agreed: |
|
Sandra Tiffany |
|
Date |
|
/s/ Craig Ellins |
|
|
|
|
|
Craig Ellins, CEO |
|
EXHIBIT
10.3
GBS
NEVADA PARTNERS, LLC
6671
Schuster Street
Las
Vegas, Nevada 89118
viellion@gmail.com
702.405.2334 [tel.] |
702.293.4414 [fax] |
|
|
August
17,
2015
Via
EMAIL: craig@gbsciences.com
Craig
Ellins
GB
Sciences Nevada, LLC
6450
Cameron St.
Suite
110
Las
Vegas, NV 89118
BINDING
LETTER OF SEPARATION
| RE: | GBS
Nevada Partners, LLC
Consignment & Delivery
Agreements |
Craig:
Pursuant
to our recent discussions and in furtherance of the parties mutual agreement to separate in accordance with the previously executed
Binding Memorandum of Understanding CBMOU’), this letter sets forth and clarifies the binding general terms and conditions upon
which the undersigned
parties agree
to separate:
| 1. | It
is acknowledged by all parties that the BMOU establishes the binding desire and intent
to separate and transfer the
Clark County
cultivation license
and State
certificate and both Clark County and City of Las Vegas dispensary location licenses
and State certificates, with all
rights
and privileges thereto,
currently
held by GB Sciences Nevada LLC as follows (“Transfer”): |
| a. | GB
Sciences
Nevada
LLC (“Public Sub”), to be wholly owned by Growblox Sciences, Inc. after transfer
– Clark County cultivation license and State certificates and related SUP’s
and licenses |
| b. | GBS
Nevada Partners LLC (“Local”)—Both Clark County and City of Las Vegas
dispensary location licenses Clark County and City of Las Vegas dispensary location licenses,
CUP’s and State certificates. |
| | Local shall prepare
appropriate Transfer documents which shall be executed by both parties within two business days of the execution of this Binding
Letter of Separation.
|
| 2. | Local
may, if it so
choses
in its sole and absolute discretion, and if required by the State of Nevada and local
municipalities for Transfer purposes described in Item #1, use the entity and name “GB
Sciences Nevada, LLC only for the purpose of holding the MME certificates and licenses,
using a registered DBA or subsequent licensed name for all other commercial purposes.
|
| 3. | Local
shall prepare and execute a commercially reasonable Consignment and
Delivery
Agreement (“CDA”) to the benefit of GB Sciences Nevada LLC. The CDA
shall be
for an
initial
term of 10 years, with optional extensions
for additional
five-year
periods, the first of which shall
be automatic
assuming neither
party is in breach of the CDA, while remaining extensions shall
require
mutual execution
of the
parties. The final CDA shall be reasonably negotiated between the parties with regard,
inter alia, to Items s #4 and #5,below.
The execution
of the
long’form CDA shall not delay the Transfer pursuant to Item #1. |
| 4. | The
CDA shall
provide Public Sub with slotting of 20% of its most prominent in- store
retail
merchandising shelf space
for consignment
sales.
All product,
other merchandising, stocking, pricing, advertising
and product
diversity will be determined and administered by Public Sub. All after-tax consignment
sale proceeds shall be split
50/50 between
Local and Public Sub. Additionally, Local will work with Public Sub to allow and facilitate
customer ordering by EDI interface
with an
“App”
developed
for that
purpose
by Public Sub, for pickup or delivery of product pursuant to the terms hereof, so long
as such
activity fully comports with applicable
state and
local laws
and regulations. |
| 5. | The
CDA shall
further provide that the Public Sub establish and
bear all expenses of operating and administering a local delivery service (“Service”) within the laws and regulations
of the state of Nevada from the dispensary locations. All Public Sub product sold through the Service shall be treated as a consignment
sale and as such,
all after-tax delivery service consignment sale
proceeds shall be split 80/20 between Public Sub
and Local. TheService shall deliver, at its sole option non- Public Sub product sold through the Service from Local’s
County Dispensary and Public Sub shall receive 20% of the retail sale price thereof.. Public Sub may, in addition at its sole
discretion, charge a commercially reasonable delivery fee to consumer for its Service. Public Sub shall have the sole right to
choose what product will be offered for delivery, how such product shall be advertised, and in general have sole discretion as
to the operation of the Service. Both parties will cooperate so as to ensure that neither disrupts the other’s operations and
that all operations are consistent with all applicable regulations. Each party shall provide to the other any documents, services,
or insurance that may be reasonably required to
effectuate the purposes of this agreement.. All efforts
will be made to coordinate Service and dispensary
operations in a commercially reasonable manner. |
| 6. | Public
Sub shall receive a non-dilutable 10% interest in the distributions,
profits
and equity of any or all entities that own or have the right to 100% of all dispensary
operations, such that, inter alia, Public Sub is an owner of dispensary operations for
the purposes of Nevada state and local regulations.
Public
Sub shall have the right,
but not
the obligation to “tag-along” with any sale or transfer of any direct or derivative
interest in the dispensary
operation on a pari-passu basis. At the option of Local, the voting rights associated
with the interests described herein will be granted to a third party acceptable to the
parties hereto..
These interests will be
fonnally
documented by any and all necessary operating,
management,
and other agreements as may be appropriate.
Such agreements
will further provide for the maximal protection of Public Sub’s minority interests granted
hereby. Any monies payable pursuant hereto will be paid to or at the direction of Public
Sub. |
| 7. | All
obligations of the CDA and the terms hereof shall be assumed in writing by any assignee,
transferee, or successor of Local
in the City and County dispensary licenses prior to any such transfer Local agrees in
furtherance of the Separation Agreement between the parties, to include the terms of
the CDA and the terms hereof
in all
management agreements that pertain to operation of Local’s City and County dispensaries. |
| 8. | Local
shall reimburse Public Sub $307,413.78
for expenses incurred in connection with the application and issuance of an approved
provisional State certificate for
both the
City and County dispensaries.
All monies
included in such sum that were paid as deposits on real estate or otherwise shall be
paid immediately upon the governmental approval of the transfers contemplated herein,
in the minimum amount
of $61,080. The balance of said expenses shall be reimbursed from first sale proceeds of dispensary operations but in any event
no later than 2 years from the date the County Dispensary receives its final certificate of occupancy and opens for business.
In the event Local fails to receive the required State Certificate for the City Dispensary, Local can elect to defer payment of
$153,706.89 for a maximum of an additional 2 years.
Notwithstanding the foregoing, if Local finances the dispensary operations with a third party
such that the principals of local receive net cash proceeds, then all amounts due pursuant hereto shall become immediately due
and payable. In addition, Local shall assume the outstanding legal bills owed to Moran Brandon Bendavid Moran Law Firm
in the amount of $74,764.36 and agrees to indemnify Public Sub regarding payment of same to said firm. Moran Brandon Bendavid
Moran Law Finn acknowledges that Public Sub is not liable for this outstanding bill as evidenced by signature on page 4. Lastly
Local and its principals shall assist Public Sub in recouping any proceeds relating to the once-anticipated “Rainbow”
property. |
| 9. | All
parties recognize that due to the time sensitivity of the subject certificates and licenses
that time is of the essence. The parties therefore agree to cooperate with each other
to complete and execute any government reporting or filing requirements, or any further
documents, necessary to effectuate the purposes of this document and the BMOU in a timely
fashion.
All parties
agree to sign the required Transfer applications, and other documents, within two business
days of presentation to each other. Local warrants that all documents relating to the
CDA and operating or management or other agreements referenced herein will be delivered
to Public Sub in fair and reasonable draft form within 10 days of the execution of this
agreement, and that no transfer of any kind to any third party will be made prior to
the execution of acceptable formal documents implementing the purposes hereof. |
| 10. | In
the event that Local does not raise sufficient capital to timely build out and begin
dispensary operations, Public Sub reserves the right to purchase Local at an agreed upon
appraised price, arrived at by any qualified investment banker of good repute chosen
by the parties together in good faith. |
| 11. | The
parties agree to cooperate with one another to the greatest extent possible in order
to maximize the success of their businesses as are described herein.
To that
end, neither party or any principal or associate thereof will disparage the other party
or any principal or associate thereof. |
|
Best
Regards, |
|
|
|
/s/
James Meservey |
|
|
|
James
Meservey, Manager
GBS Nevada Partners LLC |
Accepted this ___ day of August, 2015: |
|
|
GB Sciences Nevada, LLC |
|
|
/s/ Craig Ellins |
|
By: Craig Ellins Its: Manager |
|
|
Acknowledged Item #8: |
|
|
/s/ J.T. Moran |
|
J.T. Moran III, Managing Partner |
Moran Brandon Bendavid Moran Law Firm |
Exhibit 10.4
MEDICAL MARIJUANA ESTABLISHMENT
MANAGEMENT AGREEMENT
This MEDICAL
MARIJUANA ESTABLISHMENT MANAGEMENT AGREEMENT ("MANAGEMENT
AGREEMENT") is entered into this 17th day of August, 2015, by and between and COMPASSIONATE TEAM OF LAS VEGAS LLC, A
NEVADA LIMITED-LIABILITY COMPANY ("COMPASSIONATE TEAM"), and GROWBLOX SCIENCES, INC., A DELAWARE CORPORATION
("GROWBLOX SCIENCES").
SECTION I
COMPASSIONATE TEAM'S MATERIAL REPRESENTATIONS
AND INITIAL OBLIGATIONS
A. COMPASSIONATE
TEAM was granted a Provisional Medical Marijuana Establishment Registration Certificate pursuant to NRS CHAPTER 453A and NAC CHAPTER
453A for Cultivation on Monday, November 3, 2014 by the State of Nevada Department of Health and Human Services Division
of Public and Behavioral Health relating to the Real Property located at 2601 Highland Drive, Las Vegas, Clark County, Nevada.
Such Real Property is located in the Incorporated Area of the City of Las Vegas, Nevada.
B. COMPASSIONATE
TEAM agrees to provide written proof of A. above to GROWBLOX SCIENCES upon execution hereof.
C. COMPASSIONATE
TEAM was approved for a Special Use Permit and a Compliance Permit for Cultivation on Tuesday, October 28, 2014 by the
City of Las Vegas City Council relating to the Real Property located at 2601 Highland Drive, Las Vegas, Clark County, Nevada.
Such Real Property is located in the Incorporated Area of the City of Las Vegas, Nevada.
D. COMPASSIONATE
TEAM agrees to provide written proof of C. above to GROWBLOX SCIENCES upon the execution hereof.
E. COMPASSIONATE
TEAM desires that GROWBLOX SCIENCES provide management services for the Marijuana Establishment, which is currently only for Cultivation,
located at 2601 Highland Drive, Las Vegas, Clark County, Nevada.
F. COMPASSIONATE
TEAM agrees to cooperate in good faith and within reasonable time periods with GROWBLOX SCIENCES to achieve any and all objectives
of this MANAGEMENT AGREEMENT. In order to confirm such timing COMPASSIONATE TEAM will provide all documents and paperwork regarding
the Licenses and Permits to GROWBLOX SCIENCES as soon as possible.
SECTION II
GROWBLOX SCIENCES' MATERIAL
REPRESENTATIONS
AND INITIAL OBLIGATIONS
A. GROWBLOX
SCIENCES has adequate knowledge and expertise in the Medical Marijuana Industry to manage a Medical Marijuana Establishment for
Cultivation, located at 2601 Highland Drive, Las Vegas, Clark County, Nevada.
B.
GROWBLOX SCIENCES agrees to cooperate in good faith and within reasonable time periods with COMPASSIONATE TEAM to achieve any and
all objectives of this MANAGEMENT AGREEMENT.
SECTION III
INITIAL CAPITALIZATION REFUND
A. The
Parties recognize that COMPASSIONATE TEAM has provided a deposit of TWO HUNDRED FIFTY THOUSAND DOLLARS AND 00/100 ($250,000.00)
for the Medical Marijuana Establishment located at 2601 Highland Drive, Las Vegas, Clark County, Nevada, and that same
will be returned to COMPASSIONATE TEAM as soon as such return is permitted by law.
SECTION IV
ADDITIONAL MATERIAL CONDITIONS, COVENANTS AND TERMS
A. GROWBLOX
SCIENCES will manage the operations of the Medical Marijuana Establishment for Cultivation, located at 2601 Highland
Drive, Las Vegas, Clark County, Nevada. However, responsibility and control of all operations shall reside with COMPASSIONATE
TEAM as licensee. GROWBLOX SCIENCES agrees to conduct all management services of the Medical Marijuana Establishment in good faith
and in compliance with all local and state regulations and laws.
B. GROWBLOX
SCIENCES will provide all capital funding to the Medical Marijuana Establishment for Cultivation, located at 2601 Highland
Drive, Las Vegas, Clark County, Nevada, to become fully operational.
C. "Profits"
as are subsequently defined in this MANAGEMENT AGREEMENT, shall be divided as follows:
GROWBLOX SCIENCES | |
| 70 | % |
COMPASSIONATE TEAM | |
| 30 | % |
| |
| | |
TOTAL | |
| 100 | % |
Profits shall be distributed to the parties on a
quarterly basis and shall be accompanied by a detailed written statement of the amounts due to each party. Such statement shall
be accompanied by a remittance of such amount as shown to be due. Each statement and amount shall be rendered within ten (10) days
following the last business day of the quarter. If either party requires an independent review of the amounts set forth in any
detailed written statement, such will be provided at the challenging party's cost unless the review evidences more than a five
percent (5%) deviation in the amount which should have been paid, then the non-challenging party shall be responsible for the costs
of the audit in addition to payment of any additional amounts owed. The Parties agree that any information, books, records and/or
other documents reviewed during the audit are privileged, confidential and proprietary and cannot be disclosed to any third party
except for an independent professionals.
D. "Profits"
are defined as net sales receipts after deduction of Operating Expenses, cost of goods sold, and other actual cost or expenses.
E. "Operating
Expenses" shall be defined in a typical manner that is reasonably satisfactory to both COMPASSIONATE TEAM and GROWBLOX SCIENCES
but shall not include any GROWBLOX SCIENCES executive salaries who are not directly employed by COMPASSIONATE TEAM or major expenses
not previously approved by both Parties, which approval shall not be unreasonably withheld.
F. COMPASSIONATE
TEAM shall have the right to terminate this Agreement at any time for cause, which termination shall be effective immediately.
Termination for "Cause" shall include termination for;
(i) any
material breach of this Agreement;
(ii) intentional
nonperformance or misperformance of GROWBLOX SCIENCES management duties, or refusal to abide by or comply with the company's policies
and procedures and/or any local or state laws or regulations;
(iii) A
judicial finding of GROWBLOX SCIENCES' willful dishonesty, fraud or misconduct with respect to the business or affairs of the company,
that materially and adversely affects the company and its licenses;
(iv) The
entry against GROWBLOX SCIENCES AND any affiliate involved in the Management of the Facility by a court of competent jurisdiction
of a decree or order constituting an adjudication of bankruptcy under federal bankruptcy law or of insolvency under any state insolvency
law;
(vi) GROWBLOX
SCIENCES AND any affiliate involved in the management in the facility consent to the filing or a reorganization insolvency, or
bankruptcy proceeding or the appointment of a conservator, custodian, receiver, liquidator, trustee or assignee in bankruptcy under
any applicable federal or state law;
(vii) Conviction
of any of GROWBLOX SCIENCES sitting officers, employees or agents of any felony;
Cause will not, however, include any actions or circumstances
constituting Cause under (i) or (ii) above if GROWBLOX SCIENCES cures such actions or circumstances within thirty (30) days of
receipt of written notice from COMPASSIONATE TEAM or any regulatory authority setting forth the actions or circumstances constituting
Cause. In the event the services rendered under this Agreement are terminated for Cause, GROWBLOX SCIENCES shall thereafter have
no right to receive compensation or other benefits under this Agreement.
The parties acknowledge that GROWBLOX SCIENCES will
arrange secured financing for the construction of the facility, which will be repaid solely from GROWBLOX SCIENCES' share of the
profits. Notwithstanding the foregoing, in the event of any termination, any such debt that is unrepaid at the time of such termination
will be repaid in full according to its terms within 90 days of such termination.
SECTION V
POSSIBLE ADDITIONAL MEDICAL MARIJUANA
ESTABLISHMENTS, AND
RELATED MATERIAL CONDITIONS, COVENANTS AND TERMS
A. If
and until any subsequent Medical Marijuana Establishment Registration Certificate, Special Use Permit, Compliance Permit, Business
License, Certificate of Occupancy, or any other requirement is issued, approved, granted and/or satisfied by the State of Nevada
Department of Health and Human Services Division of Public and Behavioral Health and the City of Las Vegas, the entire premises
located at 2601 Highland Drive, Las Vegas, Clark County, Nevada and consisting of two (2) floors will be used only
for Cultivation.
B. However,
the Parties hereto, or either of them in cooperation with the other, may apply for a Medical Marijuana Establishment Registration
Certificate, Special Use Permit, Compliance Permit, Business License, Certificate of Occupancy, or any other requirement with the
State of Nevada Department of Health and Human Services Division of Public and Behavioral Health and the City of Las Vegas, for
Production and/or a Dispensary at the facility located at 2601 Highland Drive, Las Vegas, Clark County, Nevada.
Neither party shall apply for such licensure without first notifying the other party hereto and providing said party with a right
of first refusal to operate the additional license together.
C. In
the event that a Production and/or a Dispensary License is/are granted, premises space for same will be provided for.
D. GROWBLOX
SCIENCES will provide the necessary capital funding in the form of a Loan and/or Loans. Such Loan and/or Loans will be repaid by
from 100% of First cash receipts from the operations.
E. After
GROWBLOX SCIENCES is repaid pursuant to the foregoing, and receives a reasonable fee for overseeing the management of the operations,
"Profits" as previously defined in this MANAGEMENT AGREEMENT, will be divided as follows:
GROWBLOX SCIENCES | |
| 50 | % |
COMPASSIONATE TEAM | |
| 50 | % |
| |
| | |
TOTAL | |
| 100 | % |
F. In
the event that any Medical Marijuana Establishment Registration Certificate, Special Use Permit, Compliance Permit, Business License,
Certificate of Occupancy, or any other requirement with the State of Nevada Department of Health and Human Services Division of
Public and Behavioral Health and the City of Las Vegas (other than for Production or a Dispensary) regarding 2601 Highland
Drive, Las Vegas, Clark County, Nevada is granted, or in the event that GROWBLOX SCIENCES effects some other use for 2601 Highland
Drive, Las Vegas, Clark County, Nevada property, GROWBLOX SCIENCES warrants that the exploitation of any of such or use will not
compromise the existing or prospective economic advantage(s) for COMPASSIONATE TEAM.
G. The
Parties agree that if GROWBLOX SCIENCES is able to get the facility located at 2601 Highland Drive, Las Vegas, Clark County,
Nevada timely open as a cultivation facility and the facility is able to become profitable within nine (9) months following opening
that GROWBLOX SCIENCES will be entitled to submit an application for approval of a fifty percent (50%) ownership interest in COMPASSIONATE
TEAM and all transfer applications required by any relevant governmental authority necessary to effectuate the purposes hereof
will be expeditiously completed. Upon approval of such transfer all arrangements between these parties, including but not limited
to the provisions of Section IV hereof, will be adjusted to accommodate the effects of such transfer. GROWBLOX SCIENCES shall be
wholly responsible for any and all expenses, professional fees, attorneys fees or costs which are incurred to transfer ownership
and said expenses will not be paid or reimbursed by COMPASSIONATE TEAM.
SECTION VI
OTHER MISCELLANEOUS MATTERS
A. Governing
Law. This MANAGEMENT AGREEMENT shall be governed and construed in accordance with the laws of the State of Nevada.
B. Notices.
Any notice required or permitted to be given regarding this MANAGEMENT AGREEMENT shall be in writing and shall be deemed to have
been given when delivered by hand or when deposited in the United States Mail, by Registered or
Certified Mail, Return Receipt Requested, Postage
Prepaid, addressed as follows:
COMPASSIONATE TEAM OF LAS VEGAS LLC
ATTENTION: SHAHROM P. MASHOUF, MANAGER
810 South Casino Center Boulevard
Las Vegas, Nevada 89101–_______
GROWBLOX SCIENCES, INC.
ATTENTION: Craig Ellins
6450 Cameron Street, Suite 110
Las Vegas, Nevada 89128
C. Assignment.
This MANAGEMENT AGREEMENT shall not be assignable by COMPASSIONATE TEAM. However, this MANAGEMENT AGREEMENT may be assignable to
a Subsidiary and/or Related Entity of GROWBLOX SCIENCES. This MANAGEMENT AGREEMENT shall inure to the benefit of and be binding
upon both COMPASSIONATE TEAM and GROWBLOX SCIENCES, and be binding upon its and/or their successors and/or assignees.
D. Severability.
The invalidity of any one or more of the words, phrases, sentences, clauses or sections contained in this MANAGEMENT AGREEMENT
shall not effect the enforceability of the remaining portions of this MANAGEMENT AGREEMENT or any part thereof, all of which are
inserted conditionally on their being valid in law, and in the event that any one or more of the words, phrases, sentences, clauses
or sections contained in this MANAGEMENT AGREEMENT shall be declared invalid, this MANAGEMENT AGREEMENT shall be construed as if
such invalid word or words, phrase or phrases, sentence or sentences, clause or clauses, or section or sections had not been inserted.
If such invalidity is caused by length of time or size of area or both, the otherwise invalid provision will be considered to be
reduced to a period or area which would cure such invalidity.
E. Waivers.
The waiver by either party hereto of a breach or violation of any term or provision of this MANAGEMENT AGREEMENT shall not operate
nor be construed as a waiver of any subsequent breach or violation. The failure of either Party at any time or times to require
performance of any provision hereof shall in no manner effect the right of such Party at a later time to enforce the same. No waiver
by either Party of the breach of any term or covenant contained in this MANAGEMENTAGREEMENT, whether by conduct or otherwise, in
any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such breach or a waiver
of the breach of any other term of covenant contained in this MANAGEMENT AGREEMENT.
F. Damages.
Nothing contained herein shall be construed to prevent COMPASSIONATE TEAM or GROWBLOX SCIENCES from seeking and recovering from
the other damages sustained by either or both of them as a result of its breach of any term or provision of the MANAGEMENT AGREEMENT.
G. No-Third
Party Beneficiary. Nothing expressed or implied in this MANAGEMENT AGREEMENT is intended or shall be construed to confer upon
or give any person any rights or remedies under or by reason of this MANAGEMENT AGREEMENT, except as set forth herein.
H. Attorney's
Fees. Should any litigation be commenced by either COMPASSIONATE TEAM or GROWBLOX SCIENCES, the prevailing party shall be entitled
to attorney's fees.
I. Jurisdiction
and Venue. Jurisdiction and venue regarding any litigation shall be in the EIGHTH JUDICIAL DISTRICT COURT, CLARK COUNTY, NEVADA.
J.
Modification, Approval and Waiver. This MANAGEMENT AGREEMENT may be amended, modified, superseded or canceled, and the terms
or covenants may be waived only by a written instrument executed by both of the Parties hereto, or in the case of a waiver, by
the Party waiving compliance.
K. Regulatory
Approvals. This MANAGEMENT AGREEMENT and any amendment, modification or other change to it is subject to approval by the State
of Nevada Department of Health and Human Services Division of Public and Behavioral Health Medical Marijuana Division, and also
the City of Las Vegas.
L. Entire
Agreement. This MANAGEMENT AGREEMENT constitutes the entire Agreement of the Parties with respect to the subject matter hereof
and supersedes any and all agreements, understandings, statements, or representations, either oral or in writing.
M. COUNTERPARTS/CONSTRUCTION.
The terms and conditions of this Agreement shall be construed as a whole according to their fair meaning and not strictly for or
against any party. This Agreement may be signed in counterparts. Facsimile signatures shall be binding in addition to original
signatures.
COMPASSIONATE TEAM OF LAS VEGAS LLC |
|
|
|
/s/ Shahrom P. Mashouf |
|
By: SHAHROM P. MASHOUF, MANAGER |
|
9/30/15 |
|
Date |
|
GROWBLOX SCIENCES, INC. |
|
|
|
/s/ Craig Ellins |
|
By: CRAIG ELLINS, CHIEF EXECUTIVE OFFICER |
|
10/2/15 |
|
Date |
|
Exhibit
31.1
CERTIFICATION
OF PRINCIPAL EXECUTIVE AND FINANCIAL OFFICER
PURSUANT
TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I,
Craig Ellins, certify that:
1. I
have reviewed this quarterly report on Form 10-Q of Growblox Sciences, Inc.;
2. Based
on my knowledge, the quarterly report does not contain any untrue statement of material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based
on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of and for the periods
presented in this report;
4. The
registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
(b) Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated
the effectiveness of the registrant’s disclosure controls and procedures; and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
(d) Disclosed
in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5. The
registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent function):
(a) All
significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
(b) any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal controls.
Date: November
17, 2015 |
/s/
Craig Ellins |
|
Craig Ellins,
Chief Executive Officer (Principal Executive Officer) |
Exhibit
31.2
CERTIFICATION
OF PRINCIPAL EXECUTIVE AND FINANCIAL OFFICER
PURSUANT
TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I,
John Poss, certify that:
1. I
have reviewed this quarterly report on Form 10-Q of Growblox Sciences, Inc.;
2. Based
on my knowledge, the quarterly report does not contain any untrue statement of material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based
on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of and for the periods
presented in this report;
4. The
registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
(b) Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated
the effectiveness of the registrant’s disclosure controls and procedures; and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
(d) Disclosed
in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5. The
registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent function):
(a) All
significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
(b) any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal controls.
Date: November 17, 2015 |
/s/ John
Poss |
|
John Poss, Chief Financial Officer (Principal Financial Officer) |
Exhibit
32.1
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Quarterly Report of Growblox Sciences, Inc. (the “Company”) on Form 10-Q for the quarter ended
September 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Craig
Ellin, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that:
(1) The
Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The
information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.
A
signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the
Company and furnished to the Securities and Exchange Commission or its staff upon request.
Date: November 17, 2015 |
/s/
Craig Ellins |
|
Craig Ellins, Chief Executive Officer (Principal Executive Officer) |
Exhibit
32.2
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Quarterly Report of Growblox Sciences, Inc. (the “Company”) on Form 10-Q for the quarter ended
September 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John
Poss, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that:
(1) The
Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The
information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.
A
signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the
Company and furnished to the Securities and Exchange Commission or its staff upon request.
Date: November 17, 2015 |
/s/ John
Poss |
|
John Poss, Chief Financial Officer (Principal Financial Officer) |
GB Sciences (PK) (USOTC:GBLX)
Historical Stock Chart
From Mar 2024 to Apr 2024
GB Sciences (PK) (USOTC:GBLX)
Historical Stock Chart
From Apr 2023 to Apr 2024