Title of Each Class of Securities To Be Registered | Amount to be Registered | Proposed Maximum Offering Price Per Share | Proposed Maximum Aggregate Offering Price | Amount of Registration Fee | ||||
Common stock, par value $.001 per share | 65,016,312 shares(1) | $0.28(2) | $18,204,567 | $2,266.47 |
Balance Sheet Summary | September 30, 2018 | March 31, 2018 | ||||||
Cash and cash equivalents | $ | 2,929,015 | $ | 3,579,700 | ||||
Total assets | 30,406,120 | 24,049,754 | ||||||
Notes payable and capital lease obligations | 6,342,812 | 6,497,839 | ||||||
Total equity | 22,007,052 | 15,631,721 |
Statement of Operations Summary | September 30, 2018 | September 30, 2017 | |||||||
Revenue | $ | 2,032,513 | $ | 360,135 | |||||
Cost of goods sold | (883,309 | ) | (169,390 | ) | |||||
Gross profit | 1,149,204 | 190,745 | |||||||
General and administrative expenses | 9,032,913 | 5,660,035 | |||||||
Other expense | (7,498,839 | ) | (831,980 | ) | |||||
Net loss attributable to non-controlling interest | (475,559 | ) | (68,025 | ) | |||||
Net loss | $ | (14,906,989 | ) | $ | (6,233,245 | ) | |||
Net loss per share – basic and diluted | $ | (0.08 | ) | $ | (0.05 | ) |
The tables and information below are derived from the Company's audited consolidated financial statements for the years ended March 31, 2018 and 2017.
Balance Sheet Summary | March 31, 2018 | March 31, 2017 | ||||||
Cash and cash equivalents | $ | 3,579,700 | $ | 2,692,953 | ||||
Total assets | 24,049,754 | 13,006,879 | ||||||
Long-term debt (including capital leases) | 6,497,839 | 3,926,633 | ||||||
Stockholders' equity | 15,631,721 | 8,404,681 |
Statement of Operations Summary | March 31, 2018 | March 31, 2017 | ||||||
Revenue | $ | 2,510,364 | $ | - | ||||
Cost of goods sold | (782,727 | ) | - | |||||
Gross profit | 1,727,637 | - | ||||||
General and administrative expenses | 19,552,288 | 8,933,111 | ||||||
Other expense | (5,334,574 | ) | (1,149,992 | ) | ||||
Net loss attributable to non-controlling interest | (185,035 | ) | (173,273 | ) | ||||
Net loss | $ | (22,974,190 | ) | $ | (9,909,830 | ) | ||
Net loss per share – basic and diluted | $ | (0.17 | ) | $ | (0.13 | ) |
· | The need for continued development of our financial and information management systems; |
· | The need to manage strategic relationships and agreements with manufacturers, customers and partners; and |
· | Difficulties in hiring and retaining skilled management, technical, and other personnel necessary to support and manage our business. |
Fiscal Year 2019 | High ($) | Low ($) | ||
First Quarter | .82 | .41 | ||
Fiscal Year 2018 | ||||
Fourth Quarter | 1.56 | 0.46 | ||
Third Quarter | 0.90 | 0.21 | ||
Second Quarter | 0.30 | 0.21 | ||
First Quarter | 0.37 | 0.21 | ||
Fiscal Year 2017 | ||||
Fourth Quarter | 0.56 | 0.3 | ||
Third Quarter | 0.65 | 0.28 | ||
Second Quarter | 0.4 | 0.24 | ||
First Quarter | 0.45 | 0.15 |
Description | Number of Warrants | Number of shares issuable on exercise | Conversion price ($) | Material Terms |
Warrants related to $2 million Convertible Notes | 5,224,000 | 5,224,000 | 0.60 | See below (1) |
Warrants related to $7.2 million Convertible Notes | 22,952,000 | 22,952,000 | 0.65 | See below (2) |
$7.2 million Private Placement Warrants | 7,296,250 | 7,296,250 | 0.90 | See below (3) |
Compensation Warrants | 18,565,125 | 18,565,125 | See below (4) | See below (4) |
Warrant B | 1,666,108 | 1,666,108 | 2.00 | See below (5) |
Warrant D | 2,199,000 | 2,199,000 | 0.50 | See below (6) |
Warrant E | 7,113,829 | 7,113,829 | 0.60 | See below (7) |
For the Six Months Ended September 30, | ||||||||
2018 | 2017 | |||||||
Revenue | $ | 2,032,513 | $ | 360,135 | ||||
Cost of goods sold | (883,309 | ) | (169,390 | ) | ||||
Gross profit | 1,149,204 | 190,745 | ||||||
General and administrative expenses | 9,032,913 | 5,660,035 | ||||||
Other Income/(Expense) | (7,498,839 | ) | (831,980 | ) | ||||
Net loss attributable to non-controlling interest | (475,559 | ) | (68,025 | ) | ||||
Net Loss | $ | (14,906,989 | ) | $ | (6,233,245 | ) |
During the three months ended September 30, 2017, the Company had additional inventory available for sale due to harvests that occurred subsequent to the initial harvest in May 2017. During the quarter, the Company sold 106lb of flower, 155lb of untrimmed flower, and 32lb of trim resulting in $0.3 million in sales revenue.
During the three months ended September 30, 2018, the Company sold approximately 206lb of flower and 77lb of pre-rolls in addition to small amounts of trim, for a total of $0.7 million in sales revenue. The increase in revenue compared to the three months ended September 30, 2017, is attributable to the fact that sales during the three months ended September 30, 2018, consisted primarily of finished flower and pre-rolls, while sales during the three months ended September 30, 2017, consisted primarily of untrimmed flower and trim. Finished flower and pre-rolls commanded a significantly higher selling price of approximately $2,500 per pound for flower and pre-rolls during the three months ended September 30, 2018, compared to approximately $840 per pound for untrimmed flower and $620 per pound for trim during the three months ended September 30, 2017.
All revenue recorded is attributable to the sales of cannabis produced by the Company's cultivation facility. Although the Company has additional agreements with the third-party vendors to produce cannabis-infused goods and edibles, those agreements did not result in any revenue for the three months ended September 30, 2018 and September 30, 2017.
General and administrative expenses increased $3.4 million to $9.0 million for the six months ended September 30, 2018, compared to $5.7 million for the six months ended September 30, 2017. The increase is attributable in part to a $0.7 million increase in taxes and licenses expense due to an increase in cultivation sales and costs related to securing additional licenses for the cultivation and production of cannabis. Payroll and related expenses increased by $0.7 million due to an increased number of employees compared to the same period in the prior year. The increase is also due in part to noncash expenses of $0.6 million for the issuance of compensation warrants to the brokers involved in the August 2018 private placement and $0.6 million related to common stock issued to consultants. The remaining increase is attributable to increased operating costs related to new business activities at our Nevada and Louisiana facilities.
Interest expense
Total interest expense increased by $3.8 million compared to the same period in the prior year. The increase is primarily due to $2.4 million of unamortized discount recognized as interest expense upon the conversion of convertible notes.
Other expense
Total other expense increased by $2.9 million compared to the same period in the prior year. The increase is primarily due to $1.0 million paid to Pacific Leaf in connection with the July 2018 Amendment and Termination Agreement and $2.0 million in noncash expense related to that agreement.
For the Twelve Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
Revenue | $ | 2,510,364 | $ | - | ||||
Cost of goods sold | (782,727 | ) | - | |||||
Gross Profit | 1,727,637 | - | ||||||
General and administrative expenses | 19,552,288 | 8,933,111 | ||||||
Other Expense | (5,334,574 | ) | (1,149,992 | ) | ||||
Net loss attributable to non-controlling interest | (185,035 | ) | (173,273 | ) | ||||
Net Loss | $ | (22,974,190 | ) | $ | (9,909,830 | ) |
· | Chaminade University: Broad-based research program to support the drug discovery platform that has yielded all of GBLS's original patents to date in the areas of neurodegenerative diseases, heart disease, inflammatory diseases, neuropathic pain and chronic pain. |
· | Michigan State University: Evaluation of the Company's Neuroprotective and Anti-inflammatory Panel of Compounds for Immunomodulatory Activity Employing Human Primary Leukocytes. |
· | The University of Seville: Development of polymeric nanoparticles of cannabis-based terpene-mixtures for oral administration in pain treatments. |
· | The University of Cadiz: Testing the safety and efficacy of the above mentioned polymeric nanoparticles in a rodent model. |
· | University of Hawaii: Validating the efficacy of a complex cannabis-based mixture for the treatment of cardiac hypertrophy and cardiac disease in a rodent model. |
· | Dr. Zoltan Mari, Section Head, Nevada Movement Disorders Program & Lee Pascal Parkinson's Disease Scholar at Cleveland Clinic. |
· | Dr. Ziva Cooper, Columbia University, Associate Professor of Clinical Neurobiology, will design GBLS's human neuropathic and chronic pain trials and provide strategic guidance on clinical development of these products. For nearly a decade, Dr. Cooper has been building on her training in preclinical models of drug dependence and developing an expertise in human laboratory studies on cannabis, cannabinoids, opioids, and cocaine while maintaining research projects in animal models of substance use. Her current research investigates the direct neurobiological effects of emerging drugs of abuse, including synthetic cannabinoids in laboratory animals and the direct physiological and behavioral effects of cannabinoids as they pertain to both their abuse potential and potential therapeutic effects in double-blind, placebo controlled human laboratory studies. Dr. Cooper's research is funded by the National Institute on Drug Abuse. |
October 1, 2017 | ||||
Cash and cash equivalents | $ | 19,417 | ||
Long term deposits | 112,134 | |||
Property and equipment | 45,752 | |||
Less: | ||||
Accrued liabilities | 405,000 | |||
Other liabilities | 875 | |||
Net liabilities deconsolidated | $ | (228,572 | ) |
October 1, 2017 | ||||
Consideration received | $ | - | ||
Fair value of retained noncontrolling interest | - | |||
Carrying value of noncontrolling interest | 129,396 | |||
Net liabilities deconsolidated | 228,572 | |||
Gain on sale of membership interest in GB Sciences Puerto Rico, LLC | $ | 357,968 |
• | Distribution of cannabis to children; |
• | Revenue from the sale of cannabis going to criminals; |
• | Diversion of medical cannabis from states where it is legal to states where it is not; |
• | Using state authorized cannabis activity as a pretext of another illegal drug activity; |
• | Preventing violence in the cultivation and distribution of cannabis; |
• | Preventing drugged driving; |
• | Growing cannabis on federal property; and |
• | Preventing possession or use of cannabis on federal property. |
Name | Age | Position | ||
John Poss | 70 | Chief Executive Officer and Chairman of the Board of Directors | ||
Dr. Andrea Small-Howard | 49 | Chief Science Officer and Director | ||
Ksenia Griswold | 36 | Chief Financial Officer | ||
Kevin Kuethe | 34 | Chief Operating Officer | ||
Leslie Bocskor | 53 | Chairman of the Audit and Compensation Committees and Vice Chairman of the Board of Directors | ||
Shane Terry | 39 | Member of the Audit and Compensation Committees and Director |
Name and Position | Year | Salary | Bonus | Stock Awards (1) | Option Awards (2) | Total | ||||||
John Poss, CEO and Chairman of the Board | 2018 | $120,000 | $221,028 | $ - | $351,217 | $692,245 | ||||||
2017 | 147,692 | 32,000 | 41,250 | 399,866 | 620,808 | |||||||
Dr. Andrea Small-Howard, CSO and Director | 2018 | 125,385 | 10,000 | - | 117,072 | 252,457 | ||||||
2017 | 84,659 | 5,500 | 23,200 | 342,693 | 456,052 | |||||||
Ksenia Griswold, CFO | 2018 | 156,154 | 70,000 | - | 105,365 | 331,519 | ||||||
2017 | 103,574 | 5,500 | 5,000 | 139,576 | 253,650 | |||||||
Kevin Kuethe, COO | 2018 | 144,923 | 101,190 | - | 234,144 | 480,257 | ||||||
Name | Number of shares underlying exercisable options/warrants (2) | Number of shares underlying unexercised options/warrants | Option exercise price ($) | Option expiration date | Market value of shares not vested ($) (1) | |||||
Andrea Small-Howard | 477,083 | 22,917 | 0.17 | 3/27/2025 | 11,000 | |||||
1,100,000 | (3) | 100,000 | 0.30 | 6/1/2026 | 48,000 | |||||
270,834 | 229,166 | 0.24 | 11/26/2027 | 110,000 | ||||||
John Poss | 520,000 | 80,000 | 0.30 | 8/10/2025 | 38,400 | |||||
1,322,222 | 77,778 | 0.30 | 6/1/2023 | 37,333 | ||||||
812,500 | 687,500 | 0.24 | 11/26/2027 | 330,000 | ||||||
Ksenia Griswold | 76,667 | 23,333 | 0.29 | 11/4/2025 | 11,200 | |||||
61,111 | 38,889 | 0.30 | 6/1/2023 | 18,667 | ||||||
291,667 | 58,333 | 0.32 | 10/7/2026 | 28,000 | ||||||
243,750 | 206,250 | 0.24 | 11/26/2027 | 99,000 | ||||||
Kevin Kuethe | 416,667 | 83,333 | 0.32 | 10/7/2026 | 40,000 | |||||
541,667 | 458,333 | 0.24 | 11/26/2027 | 220,000 | ||||||
Leslie Bocskor | 425,000 | 25,000 | 0.16 | 6/1/2023 | 12,000 | |||||
243,750 | 206,250 | 0.24 | 11/26/2027 | 99,000 | ||||||
Shane Terry | 425,000 | 25,000 | 0.16 | 6/1/2023 | 12,000 |
Name of Beneficial Owner (1) | No. of Shares Owned | Percentage of Total Shares Owned | ||
Officers and Directors | ||||
John Poss | 3,022,500 | (2) | 1.64% | |
Dr. Andrea Small-Howard | 2,109,750 | (3) | 1.15% | |
Ksenia Griswold | 767,361 | (4) | * (12) | |
Kevin Kuethe | 1,069,445 | (5) | * (12) | |
Leslie Bocskor | 731,250 | (6) | * (12) | |
Shane Terry | 450,000 | (7) | * (12) | |
Directors and officers as a group (six) persons | 8,150,306 | 4.29% | ||
5% Holders: | ||||
Lawrence D. Ordower | 16,915,484 | (8) | 8.51% | |
Dave Ruggieri | 12,956,335 | (9) | 6.65% | |
Robert Moody, Jr. | 14,005,000 | (10) | 7.15% | |
Edward Pershing | 11,443,490 | (11) | 5.92% |
· | the names of the Selling Stockholders; |
· | the number of shares of common stock that can be acquired by each of the Selling Stockholders through the exercise of warrants before the offering; |
· | the number of shares of common stock being registered with respect to each Selling Stockholder; |
· | the number of shares of common stock owned by each of the Selling Stockholders after the offering assuming all warrants are exercised and all common shares acquired upon the exercise of warrants are sold; and |
· | the person with voting or investment control if the stockholder is not a natural person. |
Selling Stockholders | Shares Acquireble upon Exercise of Warrants | Shares Being Registered | Shares Owned After the Offering Assuming all Warrants are Exercised and all Shares Sold | Person with Voting or Investment Control |
Abraham, David and Joann | 2,047,500 | 2,047,500 | 0 | |
Adkins Family Partnership LTD | 153,750 | 153,750 | 0 | |
Airmont Trust | 50,000 | 50,000 | 0 | |
Sperling, Alice | 251,500 | 251,500 | 0 | |
Apfelbaum, Alan | 200,000 | 200,000 | 0 | |
Asticher-Winzenried, Tarsilla | 412,500 | 412,500 | 0 | |
Barash, Andrew | 80,000 | 80,000 | 0 | |
Bates, James and Beverly | 1,190,000 | 1,190,000 | 0 | |
Beuchat, Melissa L Trust | 177,777 | 177,777 | 0 | |
Bilcik, Anton and Maria | 995,000 | 995,000 | 0 | |
Bilcik, Anton | 150,000 | 150,000 | 0 | |
Bost, Brent | 40,000 | 40,000 | 0 | |
Brin, Ed | 55,000 | 55,000 | 0 | |
Burnett, Joe & Jeff Tegrotonhuis | 95,000 | 95,000 | 0 | |
Cagney, Lawrence & Barbara | 250,000 | 250,000 | 0 | |
Cantara, Gary | 400,000 | 400,000 | 0 | |
Ciano, Thomas & Theresa | 10,000 | 10,000 | 0 | |
Ciolli, Frank | 146,375 | 146,375 | 0 | |
Coghlan, Patrick | 80,000 | 80,000 | 0 | |
Descendants Trust/Moody Jr. TTEE | 1,080,000 | 1,080,000 | 0 | |
Devito, John | 1,140,000 | 1,140,000 | 0 | |
Dinicalantonio, Stephen | 40,000 | 40,000 | 0 | |
Division St Investment Club | 15,000 | 15,000 | 0 | |
Dorf, Harriet and Jerry | 25,000 | 25,000 | 0 | |
Dorf, Stan and Suzanne | 31,250 | 31,250 | 0 | |
Doubinskaia, Rimma | 1,212,500 | 1,212,500 | 0 | |
Duling, Cletus | 40,000 | 40,000 | 0 | |
Elbaum, Oscar | 102,500 | 102,500 | 0 | |
ELGJO LLC | 1,324,000 | 1,324,000 | 0 | |
Elsas, Scott | 155,000 | 155,000 | 0 | |
EMLI Group, LLC | 6,000,000 | 6,000,000 | 0 | Dwain Brannon |
Famalian, Bruce Family Trust | 88,500 | 88,500 | 0 | |
Famalian, Bruce IRR Trust | 88,500 | 88,500 | 0 | |
Figler, Michael | 150,000 | 150,000 | 0 | |
Fouch, Billy | 98,000 | 98,000 | 0 | |
Fulton, Peter | 945,000 | 945,000 | 0 | |
Fune, Jose | 31,250 | 31,250 | 0 | |
Galatt, David | 40,000 | 40,000 | 0 |
Gates, Stuart Anthony | 232,500 | 232,500 | 0 | |
Gismondi, John | 58,500 | 58,500 | 0 | |
Gleason, Gregory James | 25,000 | 25,000 | 0 | |
Halprin, Robert | 1,125,000 | 1,125,000 | 0 | |
Halvorsen, Glen | 40,000 | 40,000 | 0 | |
Hammer Family Trust | 177,777 | 177,777 | 0 | |
Heming, William | 875,825 | 875,825 | 0 | |
Herskowitz, Julian | 100,000 | 100,000 | 0 | |
Hoffman, Michael & Sheila | 15,000 | 15,000 | 0 | |
Homyak, Michael | 76,500 | 76,500 | 0 | |
Hrzich, James | 100,000 | 100,000 | 0 | |
Hunt, Richard | 62,500 | 62,500 | 0 | |
Hunt, William | 62,500 | 62,500 | 0 | |
Hutchins, Cleve | 19,000 | 19,000 | 0 | |
James & Joan Family Partnership | 50,000 | 50,000 | 0 | |
Jem Living Trust | 100,000 | 100,000 | 0 | |
Jirschefske, Steven | 54,000 | 54,000 | 0 | |
Jones, Andrew | 120,000 | 120,000 | 0 | |
Katz, Stanley | 292,500 | 292,500 | 0 | |
Knapp, Charles W and Kathryn J | 15,000 | 15,000 | 0 | |
Kodsi, Michael | 40,000 | 40,000 | 0 | |
Kramer Trust | 25,000 | 25,000 | 0 | |
Kuzmanovski, Dimo | 168,500 | 168,500 | 0 | |
Lacey, Monte | 120,000 | 120,000 | 0 | |
Lahaie, Robert | 40,000 | 40,000 | 0 | |
Lawrence B Ordower Marital Trust | 2,400,000 | 2,400,000 | 0 | |
LDP Family Partnersip, LP | 100,000 | 100,000 | 0 | |
Loricco, Carol | 121,250 | 121,250 | 0 | |
Lunde, Dennis | 138,500 | 138,500 | 0 | |
Mair, Joel | 93,750 | 93,750 | 0 | |
Malcheski, Joe & K | 68,000 | 68,000 | 0 | |
Marcus, Joel | 40,000 | 40,000 | 0 | |
Sperling, Maryam | 195,750 | 195,750 | 0 | |
Mast, Robert | 80,000 | 80,000 | 0 | |
McKalson, Bruce | 40,000 | 40,000 | 0 | |
McNamee, Timothy | 20,000 | 20,000 | 0 | |
Meservery Family Trust | 177,777 | 177,777 | 0 | |
MH Life, LLC | 177,777 | 177,777 | 0 | |
Miller, Cletus | 87,500 | 87,500 | 0 | |
Moody, Robert Jr. | 3,922,500 | 3,922,500 | 0 | |
Morris, Kristen | 1,000 | 1,000 | 0 | |
Mullecker & Toth | 25,000 | 25,000 | 0 | |
Nelson, Jeff & Susan | 40,000 | 40,000 | 0 | |
Network 1 Financial Securities, Inc. | 1,096,000 | 1,096,000 | 0 |
O'Leary, Tara | 97,500 | 97,500 | 0 | |
Olson, Martha | 246,750 | 246,750 | 0 | |
Oniscenko, Tarras G | 12,500 | 12,500 | 0 | |
Ordower, Lawrence B | 3,558,000 | 3,558,000 | 0 | |
Palmieri, John F | 12,500 | 12,500 | 0 | |
Pasholk, Adam | 85,000 | 85,000 | 0 | |
Peltz, Alan & Ronald | 40,000 | 40,000 | 0 | |
Pershing, Edward | 3,912,500 | 3,912,500 | 0 | |
Pettit, William | 280,000 | 280,000 | 0 | |
Pierno, Christina Tadross | 62,500 | 62,500 | 0 | |
Pieternelle, J. Coffy | 64,000 | 64,000 | 0 | |
Plaza Services, LLC | 45,000 | 45,000 | 0 | |
Postman, Warren | 150,000 | 150,000 | 0 | |
Puma, Joseph | 42,500 | 42,500 | 0 | |
Raben Family Foundation | 100,000 | 100,000 | 0 | |
Regina, Michael | 72,500 | 72,500 | 0 | |
Robinson, James and Jennifer | 1,000,000 | 1,000,000 | 0 | |
Roschwalb, Arthur and Meryl | 263,329 | 263,329 | 0 | |
Rosenbaum, Maj-Brit | 1,638,000 | 1,638,000 | 0 | |
Rowan Restaurants | 55,750 | 55,750 | 0 | |
Ruggieri, Dave | 5,847,500 | 5,847,500 | 0 | |
Salvemini, Domenick | 40,000 | 40,000 | 0 | |
Sayeed, Syed and Shazia | 102,500 | 102,500 | 0 | |
Schermacher, Chris A | 92,500 | 92,500 | 0 | |
Schiler, Leonard M Revocable Trust Dtd. 10/3/1997 | 17,500 | 17,500 | 0 | |
Schmitt, Donald | 1,230,000 | 1,230,000 | 0 | |
Schroeder, Troy | 40,000 | 40,000 | 0 | |
Schwartz, Cheryl L | 20,000 | 20,000 | 0 | |
Schwimmer, Steve & Diane | 50,000 | 50,000 | 0 | |
Sharkey, Kenneth | 160,500 | 160,500 | 0 | |
Sylva International LLC | 4,000,000 | 4,000,000 | Ross Silver | |
Simon, Jeffrey B | 12,500 | 12,500 | 0 | |
Simpson, Anne | 112,500 | 112,500 | 0 | |
Sivaslian, Peter K and Lillian | 644,250 | 644,250 | 0 | |
Sperling, Adam 2000 Trust | 250,500 | 250,500 | 0 | |
Sperling, Hana Rose Trust | 215,000 | 215,000 | 0 | |
Sperling, Noah Karam Irrev Trust | 194,375 | 194,375 | 0 | |
Sperling, William | 224,500 | 224,500 | 0 | |
Spillane, Sue | 174,000 | 174,000 | 0 | |
Testaverde, Damon | 4,403,300 | 4,403,300 | 0 | |
Testaverde, Damon IRA | 50,000 | 50,000 | 0 | |
Testaverde, Keith | 180,000 | 180,000 | 0 | |
Teutonico, Patrick | 72,500 | 72,500 | 0 | |
Thorpe, Daniel | 65,000 | 65,000 | 0 | |
Torrice, Franco | 64,000 | 64,000 | 0 | |
Tovar, Sonia | 56,250 | 56,250 | 0 | |
Trotter, Peter and Joanne | 80,000 | 80,000 | 0 | |
Tuckel, Elliott | 10,000 | 10,000 | 0 |
Tung, Gerald | 125,000 | 125,000 | 0 | |
Venable, Scott & Lohman, John | 200,000 | 200,000 | 0 | |
Vogel, Kevin | 40,000 | 40,000 | 0 | |
White, Clarence | 250,000 | 250,000 | 0 | |
Woodyard, Maureen | 31,250 | 31,250 | 0 | |
Wyatt, Charles | 115,500 | 115,500 | 0 | |
Wyatt, Shane | 12,500 | 12,500 | 0 | |
Yaron, Lior | 1,206,250 | 1,206,250 | 0 | |
Zarraga, Matthew | 12,500 | 12,500 | 0 | |
Zarraga, Miguel | 35,000 | 35,000 | 0 |
· | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
· | block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; |
· | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
· | an exchange distribution in accordance with the rules of the applicable exchange; |
· | privately negotiated transactions; |
· | settlement of short sales entered into after the date of this prospectus; |
· | broker-dealers may agree with the Selling Stockholders to sell a specified number of such shares at a stipulated price per share; |
· | a combination of any such methods of sale; |
· | through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; or |
· | any other method permitted pursuant to applicable law. |
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2018 AND MARCH 31, 2018 (Unaudited) | 50 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - THREE MONTHS AND SIX MONTHS ENDED SEPTEMBER 30, 2018 AND 2017 (Unaudited) | 52 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - SIX MONTHS ENDED SEPTEMBER 30, 2018 AND 2017 (Unaudited) | 53 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) | 55 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 64 |
CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2018 AND MARCH 31, 2017 | 65 |
CONSOLIDATED STATEMENTS OF OPERATIONS - YEARS ENDED MARCH 31, 2018 AND 2017 | 66 |
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY/(DEFICIT) - YEARS ENDED MARCH 31, 2018 AND 2017 | 67 |
CONSOLIDATED STATEMENTS OF CASH FLOWS - YEARS ENDED MARCH 31, 2018 AND 2017 | 69 |
NOTES TO FINANCIAL STATEMENTS | 70 |
GB SCIENCES, INC. AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
(unaudited) | ||||||||
30-Sep-18 | 31-Mar-18 | |||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 2,929,015 | $ | 3,579,700 | ||||
Accounts receivable, net of allowance for doubtful accounts of $41,077 and $74,706 at September 30, 2018 and March 31, 2018, respectively | 654,983 | 667,073 | ||||||
Inventory | 1,707,415 | 1,049,372 | ||||||
Prepaid expenses | 856,494 | 1,956,734 | ||||||
TOTAL CURRENT ASSETS | 6,147,907 | 7,252,879 | ||||||
Property and equipment, Net | 20,873,035 | 13,759,157 | ||||||
Intangible assets, net of accumulated amortization of $5,355 and $4,140 at September 30, 2018 and March 31, 2018, respectively | 1,636,659 | 1,404,366 | ||||||
Deposits and prepayments | 1,440,264 | 1,464,457 | ||||||
Other assets | 308,255 | 168,895 | ||||||
TOTAL ASSETS | $ | 30,406,120 | $ | 24,049,754 | ||||
CURRENT LIABILITIES: | ||||||||
Accounts payable | $ | 471,802 | $ | 371,925 | ||||
Accrued interest | 96,664 | 175,878 | ||||||
Accrued liabilities | 339,150 | 316,090 | ||||||
Notes payable, net of unamortized discount of $0.8 million and $5.0 million at September 30, 2018 and March 31, 2018, respectively | 1,148,640 | 1,056,301 | ||||||
TOTAL CURRENT LIABILITIES | 2,056,256 | 1,920,194 | ||||||
Notes payable, net of unamortized discount of $0.04 million and $0 at September 30, 2018 and March 31, 2018, respectively | 270,575 | 355,233 | ||||||
Capital lease obligations | 6,072,237 | 6,142,606 | ||||||
TOTAL LIABILITIES | 8,399,068 | 8,418,033 | ||||||
Commitments and contingencies (Note 7) | ||||||||
STOCKHOLDERS' EQUITY: | ||||||||
Common Stock, $0.0001 par value, 400,000,000 and 250,000,000 shares authorized, 221,760,237 and 168,616,855 shares issued and outstanding at September 30, 2018 and March 31, 2018, respectively | 22,176 | 16,862 | ||||||
Additional paid-in capital | 88,860,249 | 70,961,104 | ||||||
Accumulated deficit | (75,997,660 | ) | (58,229,235 | ) | ||||
TOTAL GB SCIENCES, INC. STOCKHOLDERS' EQUITY | 12,884,765 | 12,748,731 | ||||||
Non-controlling interest | 9,122,287 | 2,882,990 | ||||||
TOTAL EQUITY | 22,007,052 | 15,631,721 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 30,406,120 | $ | 24,049,754 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements |
GB SCIENCES, INC. AND SUBSIDIARIES | ||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
(unaudited) | ||||||||||||||||
For the Three Months Ended September 30, | For the Six Months Ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
SALES REVENUE | $ | 717,229 | $ | 291,035 | $ | 2,032,513 | $ | 360,135 | ||||||||
COST OF GOODS SOLD | (302,744 | ) | (154,389 | ) | (883,309 | ) | (169,390 | ) | ||||||||
GROSS PROFIT | 414,485 | 136,646 | 1,149,204 | 190,745 | ||||||||||||
GENERAL AND ADMINISTRATIVE EXPENSES | 4,569,032 | 2,779,370 | 9,032,913 | 5,660,035 | ||||||||||||
LOSS FROM OPERATIONS | (4,154,547 | ) | (2,642,724 | ) | (7,883,709 | ) | (5,469,290 | ) | ||||||||
OTHER INCOME (EXPENSE) | ||||||||||||||||
Interest expense | (2,828,851 | ) | (530,082 | ) | (4,549,033 | ) | (786,798 | ) | ||||||||
Other income/(expense) | (3,047,667 | ) | (5,769 | ) | (2,949,806 | ) | (45,182 | ) | ||||||||
Total other expense | (5,876,518 | ) | (535,851 | ) | (7,498,839 | ) | (831,980 | ) | ||||||||
NET LOSS | (10,031,065 | ) | (3,178,575 | ) | (15,382,548 | ) | (6,301,270 | ) | ||||||||
Net loss attributable to non-controlling interest | (291,416 | ) | (33,495 | ) | (475,559 | ) | (68,025 | ) | ||||||||
NET LOSS ATTRIBUTABLE TO GB SCIENCES, INC. | $ | (9,739,649 | ) | $ | (3,145,080 | ) | $ | (14,906,989 | ) | $ | (6,233,245 | ) | ||||
Net loss per share - basic and diluted | $ | (0.05 | ) | $ | (0.02 | ) | $ | (0.08 | ) | $ | (0.05 | ) | ||||
Weighted average common shares outstanding - basic and diluted | 204,143,491 | 127,794,766 | 189,787,747 | 126,724,132 | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements |
GB SCIENCES, INC. AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(unaudited) | ||||||||
Six Months Ended September 30, | ||||||||
2018 | 2017 | |||||||
OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (15,382,548 | ) | $ | (6,301,270 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 399,194 | 385,184 | ||||||
Stock-based compensation | 1,995,332 | 1,211,218 | ||||||
Bad debt expense | 20,740 | - | ||||||
Amortization of debt discount and beneficial conversion feature | 582,809 | 450,983 | ||||||
Interest expense on conversion of notes payable | 3,464,187 | - | ||||||
Stock issued for settlement of Pacific Leaf royalty agreement | 2,045,925 | - | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts Receivable | (8,650 | ) | (248,265 | ) | ||||
Prepaid expenses and other assets | 570,240 | (394,688 | ) | |||||
Inventory | (658,043 | ) | (443,715 | ) | ||||
Accounts payable | 99,877 | (80,917 | ) | |||||
Accrued expenses | 487,015 | 170,050 | ||||||
Net cash used in operating activities | (6,383,922 | ) | (5,251,420 | ) | ||||
INVESTING ACTIVITIES: | ||||||||
Payments on capital lease obligations | (375,140 | ) | - | |||||
Purchase of property and equipment | (7,511,857 | ) | (513,271 | ) | ||||
Change in deposits and other assets | (348,675 | ) | (134,561 | ) | ||||
Net cash used in investing activities | (8,235,672 | ) | (647,832 | ) | ||||
FINANCING ACTIVITIES: | ||||||||
Proceeds from issuance of common stock and warrants | 8,370,720 | 4,550 | ||||||
Proceeds from sale of membership interest in subsidiary | 6,714,856 | 120,000 | ||||||
Proceeds from convertible notes | - | 4,119,500 | ||||||
Payments under long-term obligations | (116,667 | ) | (66,465 | ) | ||||
Payments made to settle Pacific Leaf Royalty Agreement | (1,000,000 | ) | - | |||||
Net cash provided by financing activities | 13,968,909 | 4,177,585 | ||||||
Net change in cash and cash equivalents | (650,685 | ) | (1,721,667 | ) | ||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 3,579,700 | 2,692,953 | ||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 2,929,015 | $ | 971,286 | ||||
Non-cash transactions: | ||||||||
Stock issued upon conversion of long-term note payable | $ | 4,640,971 | $ | 184,731 | ||||
Stock issued to settle Pacific Leaf Royalty Agreement | $ | 36,000 | $ | - | ||||
Capital lease obligation | $ | - | $ | 2,525,000 | ||||
Dividend from warrant exercise inducement | $ | 2,861,436 | $ | - | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements |
Year Ended March 31, 2018 | As of March 31, 2018 | |||||||||||||||
Pacific Leaf Ventures LP February 2018 Agreement | Royalty Expense | Other Expense | Prepaid Expense | Total | ||||||||||||
Payment made on February 26, 2018 | $ | 269,818 | $ | 250,000 | $ | 750,000 | $ | 1,269,818 | ||||||||
1,600,000 shares common stock issued in connection with the February 2018 Agreement | - | 260,000 | 780,000 | 1,040,000 | ||||||||||||
Total recorded in Fiscal Year 2018 related to the February 2018 Agreement | $ | 269,818 | $ | 510,000 | $ | 1,530,000 | $ | 2,309,818 |
Amendment and Termination Agreement - Amounts Recorded in Other Expense | As of September 30, 2018 | |||
Prepaid royalties recorded in February 2018 | $ | 1,530,000 | ||
Cash payments made in August 2018 | 1,000,000 | |||
Promissory note issued to Pacific Leaf, due on or before November 30, 2018 | 500,000 | |||
100,000 shares common stock issued to Pacific Leaf | 36,000 | |||
Settlement of convertible note payable and related accrued interest | (20,075 | ) | ||
Total | $ | 3,045,925 |
As of September 30, 2018 | ||||||||||||
Short-Term Notes Payable | Face Value | Discount | Net | |||||||||
Convertible Notes Payable to various investors | $ | 1,257,000 | $ | (768,605 | ) | $ | 488,395 | |||||
6% Promissory Note due to Pacific Leaf Ventures, LP on or before November 30, 2018 | 500,000 | - | 500,000 | |||||||||
Note Payable to William Moore and Brian Moore, current portion | 233,333 | (73,089 | ) | 160,245 | ||||||||
Total Short-Term Notes Payable | $ | 1,990,333 | $ | (841,693 | ) | $ | 1,148,640 | |||||
Long-Term Notes Payable | ||||||||||||
Note Payable to William Moore and Brian Moore, long-term | $ | 311,111 | $ | (40,536 | ) | $ | 270,575 | |||||
Total Long-Term Notes Payable | $ | 311,111 | $ | (40,536 | ) | $ | 270,575 |
Year Ending March 31, | Total | |||
2019 (6 months) | $ | 363,236 | ||
2020 | 820,107 | |||
2021 | 835,499 | |||
2022 | 851,352 | |||
2023 | 890,712 | |||
Thereafter | 8,246,770 | |||
Total minimum lease payments | 12,007,676 | |||
Less: Amount representing interest | (5,807,069 | ) | ||
Present value of minimum lease payments | 6,200,607 | |||
Less: Current maturities of capital lease obligations | (128,370 | ) | ||
Long-term capital lease obligations | $ | 6,072,237 |
· | During the six months ended September 30, 2018, the Company received notice from convertible note holders of the conversion of notes having a total of $4,470,000 face value and $170,971 in accrued interest. Accordingly, the Company has issued 18,563,885 shares of its common stock based on a $0.25 per share conversion price. In connection with the conversions, $3,464,187 in unamortized discount on the related notes was recognized as interest expense and the Company has reduced the carrying amount of convertible notes payable by $1,005,813. |
· | The Company issued 1,543,844 shares in exchange for consulting services and recorded a related expense of $0.7 million. |
· | In order to encourage the exercise of the 8,000,000 warrants issued to investors in the private offering of convertible notes dated March 2017 and the 28,804,000 warrants issued to investors in the private offering of convertible notes dated July 2017, the Company effected a temporary decrease in the exercise price of the warrants from $0.60 and $0.65, respectively, to $0.30 and $0.325 per share. As a result of the price reduction, the Company issued 12,332,750 shares of its common stock and received net proceeds of approximately $3.9 million. In connection with the induced exercise of the warrants, the Company recorded an inducement dividend of approximately $2.9 million. |
· | The Company issued 325,125 shares of its common stock in connection with the exercise of compensation warrants at $0.01 per share. |
· | On August 10, 2018, the Company entered into a Placement Agent's Agreement to offer a total of 10,000,000 units at the price of $0.25 per unit. Each unit consisted of one share of the Company's common stock and one warrant to purchase one share of the Company's common stock at the price of $0.60 for a period of three years. |
· | On August 23, 2018, the Placement Agent's Agreement was amended to increase the number of units offered by 10,000,000 to 20,000,000 in total, with no other changes to the agreement. Between August 10, 2018 and September 25, 2018, the Company received a total of $4.4 million in proceeds from the private placement, net of $0.6 million in brokerage fees and issued 20 million shares of its common stock and 20 million warrants to purchase one share of its common stock for a period of three years to the investors who participated in the private placement. |
· | During the six months ended September 30, 2018, the Company issued 277,778 shares of its common stock to an investor for the cash purchase of shares at $0.36 per share. |
· | In connection with the Pacific Leaf Amendment and Termination Agreement (Note 4), the Company issued 100,000 shares of its common stock to Pacific Leaf on July 31, 2018 and recorded $36,000 in other expense related to those shares. |
· | The Company issued 41,602 shares of its common stock to Electrum Partners, LLC, a related party, in connection with its advisory agreement. |
· | The Company issued 200,000 shares of its common stock to a third-party consultant under the terms of a consulting agreement. |
Stockholders of GB Sciences, Inc. and Subsidiaries
/s/ Soles, Heyn & Company, LLP Soles, Heyn & Company, LLP | |
We have served as the Company's auditor since the year ended March 31, 2014. | |
West Palm Beach, Florida | |
June 29, 2018 |
GB SCIENCES, INC. AND SUBSIDIARIES | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
31-Mar-18 | 31-Mar-17 | |||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 3,579,700 | $ | 2,692,953 | ||||
Accounts receivable, net of allowance for doubtful accounts of $74,706 and $0 at March 31, 2018 and March 31, 2017, respectively | 667,073 | - | ||||||
Inventory | 1,049,372 | 89,037 | ||||||
Prepaid expenses | 1,956,734 | 166,378 | ||||||
TOTAL CURRENT ASSETS | 7,252,879 | 2,948,368 | ||||||
Property and equipment, net | 13,759,157 | 8,642,677 | ||||||
Intangible assets, net of accumulated amortization of $4,140 and $3,420 at March 31, 2018 and March 31, 2017, respectively | 1,404,366 | 154,786 | ||||||
Deposits and prepayments | 1,464,457 | 1,203,305 | ||||||
Other assets | 168,895 | 57,743 | ||||||
TOTAL ASSETS | $ | 24,049,754 | $ | 13,006,879 | ||||
CURRENT LIABILITIES: | ||||||||
Accounts payable | $ | 371,925 | $ | 176,152 | ||||
Accrued interest | 175,878 | 48,969 | ||||||
Accrued liabilities | 316,090 | 447,710 | ||||||
Notes payable, net of unamortized discount of $5.0 million and $1.0 million at March 31, 2018 and March 31, 2017, respectively | 1,056,301 | 2,734 | ||||||
TOTAL CURRENT LIABILITIES | 1,920,194 | 675,565 | ||||||
Note payable | 355,233 | 155,312 | ||||||
Capital lease obligations | 6,142,606 | 3,771,321 | ||||||
TOTAL LIABILITIES | 8,418,033 | 4,602,198 | ||||||
Commitments and contingencies (Note 11) | ||||||||
STOCKHOLDERS' EQUITY: | ||||||||
Common stock, $0.0001 par value, 200,000,000 shares authorized, 168,616,855 and 124,406,818 shares issued and outstanding at March 31, 2018 and March 31, 2017, respectively | 16,862 | 12,441 | ||||||
Additional paid in capital | 70,961,104 | 43,569,864 | ||||||
Accumulated Deficit | (58,229,235 | ) | (35,255,045 | ) | ||||
TOTAL GB SCIENCES,INC.STOCKHOLDERS' EQUITY | 12,748,731 | 8,327,260 | ||||||
Non-controlling interest | 2,882,990 | 77,421 | ||||||
TOTAL(DEFICIT)/EQUITY | 15,631,721 | 8,404,681 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 24,049,754 | $ | 13,006,879 | ||||
The accompanying notes are an integral part of these consolidated financial statements |
GB SCIENCES, INC. AND SUBSIDIARIES | ||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
For the Twelve Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
SALES REVENUE | $ | 2,510,364 | $ | - | ||||
COST OF GOODS SOLD | (782,727 | ) | - | |||||
GROSS PROFIT | 1,727,637 | - | ||||||
GENERAL AND ADMINISTRATIVE EXPENSES | 19,552,288 | 8,933,111 | ||||||
LOSS FROM OPERATIONS | (17,824,651 | ) | (8,933,111 | ) | ||||
OTHER EXPENSE | ||||||||
Interest expense | (5,176,361 | ) | (901,134 | ) | ||||
Other expense | (158,213 | ) | (248,858 | ) | ||||
Total other expense | (5,334,574 | ) | (1,149,992 | ) | ||||
NET LOSS | (23,159,225 | ) | (10,083,103 | ) | ||||
Net loss attributable to non-controlling interest | (185,035 | ) | (173,273 | ) | ||||
NET LOSS ATTRIBUTABLE TO GB SCIENCES, INC. | $ | (22,974,190 | ) | $ | (9,909,830 | ) | ||
Net loss per share - basic and diluted | $ | (0.17 | ) | $ | (0.13 | ) | ||
Weighted average common shares outstanding - basic and diluted | 132,934,141 | 79,002,685 | ||||||
The accompanying notes are an integral part of these consolidated financial statements |
GROWBLOX SCIENCES, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY | ||||||||||||||||||||||||
Shares | Amount | Additional Paid-In Capital | Accumulated Deficit | Non-Controlling Interest | Total | |||||||||||||||||||
Balance at March 31, 2016 | 47,335,147 | 4,733 | 18,878,818 | (20,779,862 | ) | (78,603 | ) | (1,974,914 | ) | |||||||||||||||
Issuance of stock for debt conversion | 15,760,165 | 1,576 | 3,688,319 | - | - | 3,689,895 | ||||||||||||||||||
Exercise of warrants for stock | 25,606,171 | 2,561 | 5,118,673 | - | - | 5,121,234 | ||||||||||||||||||
Issuance of stock for services | 916,300 | 92 | 464,396 | - | - | 464,488 | ||||||||||||||||||
Issuance of common stock to settle payables | 1,991,943 | 199 | 640,763 | - | - | 640,962 | ||||||||||||||||||
Share based compensation expense | - | - | 1,574,145 | - | - | 1,574,145 | ||||||||||||||||||
Issuance of warrants | - | - | 1,824,973 | - | - | 1,824,973 | ||||||||||||||||||
Issuance of stock for cash, net of issuance costs | 29,872,500 | 2,987 | 4,623,084 | - | - | 4,626,071 | ||||||||||||||||||
Beneficial conversion feature on notes payable | - | - | 1,315,500 | - | - | 1,315,500 | ||||||||||||||||||
Contributions from non-controlling interest | - | - | - | - | 329,296 | 329,296 | ||||||||||||||||||
Induced dividend from warrant exercises | - | - | 4,565,353 | (4,565,353 | ) | - | - | |||||||||||||||||
Stock issued to settle legal obligations | 1,600,000 | 160 | 410,840 | - | - | 411,000 | ||||||||||||||||||
Stock issued for modification of notes payable | 1,000,000 | 100 | 359,900 | - | - | 360,000 | ||||||||||||||||||
Stock issued to employees | 266,345 | 27 | 85,853 | - | - | 85,880 | ||||||||||||||||||
Compensation warrants | 58,247 | 6 | 19,247 | - | - | 19,253 | ||||||||||||||||||
Net Loss | - | - | - | (9,909,830 | ) | - | (9,909,830 | ) | ||||||||||||||||
Loss attributable to non-controlling interest | - | - | - | - | (173,272 | ) | (173,272 | ) | ||||||||||||||||
Balance at March 31, 2017 | 124,406,818 | 12,441 | 43,569,864 | (35,255,045 | ) | 77,421 | 8,404,681 | |||||||||||||||||
Issuance of stock for debt conversion | 15,231,828 | 1,523 | 3,804,711 | - | - | 3,806,234 | ||||||||||||||||||
Exercise of warrants for stock | 4,168,940 | 417 | 3,783 | - | - | 4,200 | ||||||||||||||||||
Issuance of stock for services | 1,928,845 | 192 | 667,386 | - | - | 667,578 | ||||||||||||||||||
Share based compensation expense | - | - | 1,821,294 | - | - | 1,821,294 | ||||||||||||||||||
Issuance of stock for cash, net of issuance costs | 18,000,000 | 1,800 | 7,198,200 | - | - | 7,200,000 | ||||||||||||||||||
Beneficial conversion feature on notes payable | - | - | 8,120,988 | - | - | 8,120,988 | ||||||||||||||||||
Contributions from non-controlling interest | - | - | - | - | 3,120,000 | 3,120,000 | ||||||||||||||||||
Deconsolidation of GB Sciences Puerto Rico, LLC | - | - | - | - | (129,396 | ) | (129,396 | ) | ||||||||||||||||
Stock issued to settle Pacific Leaf royalty agreement | 1,600,000 | 160 | 1,039,840 | - | - | 1,040,000 | ||||||||||||||||||
Stock issued to employees | 195,140 | 20 | 33,466 | - | - | 33,486 | ||||||||||||||||||
Compensation warrants | 3,085,284 | 309 | 4,701,572 | - | - | 4,701,881 | ||||||||||||||||||
Net Loss | - | - | - | (22,974,190 | ) | - | (22,974,190 | ) | ||||||||||||||||
Loss attributable to non-controlling interest | - | - | - | - | (185,035 | ) | (185,035 | ) | ||||||||||||||||
Balance at March 31, 2018 | 168,616,855 | 16,862 | 70,961,104 | (58,229,235 | ) | 2,882,990 | 15,631,721 | |||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements |
GB SCIENCES, INC. AND SUBSIDIARIES | ||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
Twelve Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (23,159,225 | ) | $ | (10,083,103 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 804,788 | 415,979 | ||||||
Stock-based compensation | 7,224,239 | 4,328,497 | ||||||
Bad debt expense | 74,706 | - | ||||||
Amortization of debt discount and beneficial conversion feature | 1,620,709 | 530,484 | ||||||
Interest expense on conversion of notes payable | 2,647,445 | 248,858 | ||||||
Loss on disposal | - | 5,572 | ||||||
Gain on sale of membership interest in GB Sciences Puerto Rico, LLC | (357,968 | ) | - | |||||
Stock issued for settlement of Pacific Leaf royalty agreement | (1,269,818 | ) | - | |||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses and other assets | (1,962,470 | ) | (82,702 | ) | ||||
Accounts payable | 975,591 | 61,906 | ||||||
Accrued expenses | 1,154,009 | 105,514 | ||||||
Net cash used in operating activities | (12,247,994 | ) | (4,468,995 | ) | ||||
INVESTING ACTIVITIES: | ||||||||
Cash deconsolidated on sale of membership interest in GB Sciences Puerto Rico, LLC | (19,417 | ) | - | |||||
Payments on capital lease obligations | (740,680 | ) | ||||||
Purchase of property and equipment | (3,429,751 | ) | (3,052,270 | ) | ||||
Change in deposits and other assets | (1,213,671 | ) | (1,144,053 | ) | ||||
Net cash used in investing activities | (5,403,519 | ) | (4,196,323 | ) | ||||
FINANCING ACTIVITIES: | ||||||||
Proceeds from issuance of common stock and warrants | 7,200,000 | 9,749,465 | ||||||
Proceeds from non-controlling interest | 3,120,000 | 329,134 | ||||||
Proceeds from convertible notes | 8,235,500 | 1,620,305 | ||||||
Payments under long-term obligations | (21,440 | ) | (375,457 | ) | ||||
Other financing activities | 4,200 | - | ||||||
Net cash provided by financing activities | 18,538,260 | 11,323,447 | ||||||
Net change in cash and cash equivalent | 886,747 | 2,658,129 | ||||||
CASH AND CASH EQUIVALENT AT BEGINNING OF PERIOD | 2,692,953 | 34,824 | ||||||
CASH AND CASH EQUIVALENT AT END OF PERIOD | $ | 3,579,700 | $ | 2,692,953 | ||||
Non-cash transactions: | ||||||||
Stock issued to settle payables | $ | - | $ | 590,777 | ||||
Stock issued upon conversion of long-term note payable | $ | 3,806,234 | $ | 3,688,319 | ||||
Stock issued to settle legal obligations | $ | - | $ | 460,840 | ||||
Stock issued to settle Pacific Leaf Royalty Agreement | $ | 1,040,000 | $ | - | ||||
Capital lease obligation | $ | 2,525,000 | $ | 3,900,000 | ||||
Stock and warrants issued upon amendment of long-term note payable | $ | - | $ | 875,663 | ||||
Induced dividend from warrant exercises | $ | - | $ | 4,565,192 | ||||
The accompanying notes are an integral part of these consolidated financial statements |
- | Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. |
- | Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. |
- | Level 3 inputs to valuation methodology are unobservable and significant to the fair measurement. |
March 31, | ||||||||
2018 | 2017 | |||||||
Computer and software | $ | 151,748 | $ | 151,748 | ||||
Machinery and equipment | 1,094,472 | 981,130 | ||||||
Leaseholds | 4,357,779 | 4,185,528 | ||||||
Construction in progress | 3,193,767 | 83,812 | ||||||
Capital lease - building | 6,425,000 | 3,900,000 | ||||||
15,222,766 | 9,302,218 | |||||||
Less accumulated depreciation and amortization | (1,463,609 | ) | (659,541 | ) | ||||
Property and Equipment, Net | $ | 13,759,157 | $ | 8,642,677 |
2018 | 2017 | |||||||
Tax benefit computed at U.S. statutory rates | $ | (4,824,580 | ) | $ | (3,377,374 | ) | ||
Increases (decreases) in taxes resulting from: | ||||||||
Non-deductible items | 170,052 | (25,000 | ) | |||||
Stock based compensation | (5,620 | ) | - | |||||
Change in valuation allowance | 4,659,788 | 3,421,580 | ||||||
State taxes | - | (19,206 | ) | |||||
Total | $ | - | $ | - |
2018 | 2017 | |||||||
Deferred tax assets: | ||||||||
Net operating loss carryforward | $ | 9,190,629 | $ | 7,570,014 | ||||
Depreciation and Amortization expense | (286,240 | ) | (391,362 | ) | ||||
Stock based compensation | 752,617 | 792,991 | ||||||
Total deferred tax assets | 9,657,006 | 7,971,643 | ||||||
Less valuation allowance | (9,657,006 | ) | (7,971,643 | ) | ||||
Net deferred tax asset | $ | - | $ | - |
· | The Company issued an aggregate 739,220 shares of its common stock at the conversion price of $0.25 per share to Pacific Leaf as a result of a conversion of $184,805 of debt outstanding pursuant to the Amended and Restated 6% Senior Secured Convertible Promissory. |
· | The Company issued 14,492,608 shares of its common stock as a result of conversions of the following Short-Term Promissory Notes: |
· | During the three months ended December 31, 2017, the Company received notice from convertible note holders of the conversion of a total of $453,500 face value and $18,581 in interest accrued on the related convertible notes. Accordingly, the Company has issued 1,889,048 shares of its common stock based on a $0.25 per share conversion price. In connection with the conversions, $349,956 in unamortized discount on the related notes was recognized as interest expense and the Company has reduced the carrying amount of convertible notes payable by $103,544. |
· | During the three months ended March 31, 2018, the Company received notice from convertible note holders of the conversion of a total of $3,020,500 face value and $128,848 in interest accrued on the related convertible notes. Accordingly, the Company has issued 12,603,560 shares of its common stock based on a $0.25 per share conversion price. In connection with the conversions, $2,297,716 in unamortized discount on the related notes was recognized as interest expense and the Company has reduced the carrying amount of convertible notes payable by $722,784. |
· | In January 2018, the Company received notice from Craig Ellins, our former CEO, of the cashless exercise of warrants to purchase 5,000,000 shares at $0.30 per share. We issued 3,314,607 shares of our common stock to Mr. Ellins as the result of his exercise. |
· | In January 2018, the Company received notice from Pacific Leaf Ventures, LP ("Pacific Leaf") that it had elected to purchase 1,500,000 shares of Company's common stock at $0.36 per share in a cashless exercise of warrants issued pursuant to our Second Omnibus Agreement. As a result, the Company issued 833,333 shares of common stock in a cashless transaction. |
· | The Company issued 21,000 shares of its common stock in connection with the exercise of warrants at $0.20 per share. |
Warrants Outstanding | ||||||||
Number of Shares | Exercise Price | |||||||
Outstanding at April 1, 2016 | 19,315,334 | |||||||
Warrants issued | 40,723,250 | $ | 0.36 $0.60 | |||||
Warrants exercised | (25,606,171 | ) | $ | 0.20 | ||||
Warrants expired/cancelled | (1,500,000 | ) | $ | 1.00 | ||||
Outstanding at March 31, 2017 | 32,932,413 | |||||||
Warrants issued | 51,284,000 | $ | $0.60 1.00 | |||||
Warrants exercised | (9,838,375 | ) | $ | 0.01-0.20 | ||||
Warrants expired/cancelled | (8,494,976 | ) | $ | 1.00 | ||||
Outstanding at March 31, 2018 | 65,883,062 |
Unrecognized Compensation Cost ($) | Weighted Average Period (years) | ||
Stock Options | 1,053,155 | 0.60 | |
Total | 1,053,155 | 0.60 |
Twelve months ended | |||
March 31, 2018 | March 31, 2017 | ||
Weighted-average volatility | 183.55% | 174.57% | |
Expected term (in years) | 10 | 10 | |
Risk-free interest rate | 2.02% | 1.07% |
Options | Weighted Average Exercise Price $ | Weighted Average Remaining Contractual Life (years) | Aggregate Intrinsic Value ($) | |||||||||||||
Outstanding at April 1, 2016 | 2,500,000 | $ | 0.25 | 9.23 | 15,075 | |||||||||||
Granted | 5,050,000 | $ | 0.30 | |||||||||||||
Exercised | - | - | ||||||||||||||
Forfeited | (600,000 | ) | $ | 0.35 | ||||||||||||
Outstanding at March 31, 2017 | 6,950,000 | $ | 0.26 | 8.05 | 627,890 | |||||||||||
Granted | 6,400,000 | $ | 0.28 | |||||||||||||
Exercised | (83,333 | ) | $ | 0.32 | ||||||||||||
Forfeited | (233,333 | ) | $ | 0.28 | ||||||||||||
Outstanding at March 31, 2018 | 13,033,334 | $ | 0.28 | 8.21 | 2,646,723 | |||||||||||
Fully vested and expected to vest at March 31, 2018 | 5,031,671 | $ | 0.27 | 1,047,477 | ||||||||||||
Exercisable at March 31, 2018 | 5,031,671 | $ | 0.27 | 1,047,477 |
Shares | Weighted Average Grant Date Fair Value ($) | |||
Balance at April 1, 2016 | 453,333 | $0.35 | ||
Granted | 565,359 | |||
Vested | (568,692) | |||
Forfeited/Cancelled | (450,000) | |||
Non-vested at March 31, 2017 | - | - | ||
Granted | - | |||
Vested | - | |||
Forfeited/Cancelled | - | |||
Non-vested at March 31, 2018 | - | - | ||
October 1, 2017 | ||||
Cash and cash equivalents | $ | 19,417 | ||
Long term deposits | 112,134 | |||
Property and equipment | 45,752 | |||
Less: | ||||
Accrued liabilities | 405,000 | |||
Other liabilities | 875 | |||
Net liabilities deconsolidated | $ | (228,572 | ) |
October 1, 2017 | ||||
Consideration received | $ | - | ||
Fair value of retained noncontrolling interest | - | |||
Carrying value of noncontrolling interest | 129,396 | |||
Net liabilities deconsolidated | 228,572 | |||
Gain on sale of membership interest in GB Sciences Puerto Rico, LLC | $ | 357,968 |
Securities and Exchange Commission registration fee | $ | 2,266.47 | ||
Miscellaneous expenses | 500.00 | |||
Legal | 10,000.00 | |||
Accounting fees and expenses | 5,000.00 | |||
Total | $ | 17,766.47 |
Fiscal 2018 | Fiscal 2017 | |||||||
Audit Fees(1) | $ | 42,483 | $ | 31,000 | ||||
Audit-Related Fees(2) | - | - | ||||||
Tax Fees(3) | 10,350 | 8,310 | ||||||
Subtotal | $ | 52,833 | 39,310 | |||||
All other Fees(4) | - | - | ||||||
Total | $ | 52,833 | $ | 39,310 |
· | The Company issued an aggregate 739,220 shares of its common stock at the conversion price of $0.25 per share to Pacific Leaf as a result of a conversion of $184,805 of debt outstanding pursuant to the Amended and Restated 6% Senior Secured Convertible Promissory. |
· | The Company issued 14,492,608 shares of its common stock as a result of conversions of the following Short-Term Promissory Notes: |
· | During the three months ended December 31, 2017, the Company received notice from convertible note holders of the conversion of a total of $453,500 face value and $18,581 in interest accrued on the related convertible notes. Accordingly, the Company has issued 1,889,048 shares of its common stock based on a $0.25 per share conversion price. In connection with the conversions, $349,956 in unamortized discount on the related notes was recognized as interest expense and the Company has reduced the carrying amount of convertible notes payable by $103,544. |
· | During the three months ended March 31, 2018, the Company received notice from convertible note holders of the conversion of a total of $3,020,500 face value and $128,848 in interest accrued on the related convertible notes. Accordingly, the Company has issued 12,603,560 shares of its common stock based on a $0.25 per share conversion price. In connection with the conversions, $2,297,716 in unamortized discount on the related notes was recognized as interest expense and the Company has reduced the carrying amount of convertible notes payable by $722,784. |
· | In January 2018, the Company received notice from Craig Ellins, our former CEO, of the cashless exercise of warrants to purchase 5,000,000 shares at $0.30 per share. We issued 3,314,607 shares of our common stock to Mr. Ellins as the result of his exercise. |
· | In January 2018, the Company received notice from Pacific Leaf Ventures, LP ("Pacific Leaf") that it had elected to purchase 1,500,000 shares of Company's common stock at $0.36 per share in a cashless exercise of warrants issued pursuant to our Second Omnibus Agreement. As a result, the Company issued 833,333 shares of common stock in a cashless transaction. |
· | The Company issued 21,000 shares of its common stock in connection with the exercise of warrants at $0.20 per share. |
No. | Description |
3.1 | |
3.2 | |
3.3 | |
4.1 | |
5.1 | |
14.1 | |
21.1 | |
23.1 | |
23.2 | |
23.3 |
(1) | a willful failure to deal fairly with the company or its shareholders in connection with a matter in which the director has a material conflict of interest; |
(2) | a violation of criminal law (unless the director had reasonable cause to believe that his or her conduct was lawful or no reasonable cause to believe that his or her conduct was unlawful); |
(3) | a transaction from which the director derived an improper personal profit; and |
(4) | willful misconduct. |
(1) | such indemnification is expressly required to be made by law; |
(2) | the proceeding was authorized by our Board of Directors; |
(3) | such indemnification is provided by us, in our sole discretion, pursuant to the powers vested us under Nevada law; or |
(4) | such indemnification is required to be made pursuant to the bylaws. |
(a) | To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; |
2. | That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
3. | To remove from registration by means of a post-effective amendment any of the securities being registered hereby, which remain unsold at the termination of the offering. |
GB SCIENCES, INC. | ||||
By: | /s/ John Poss | |||
John Poss | ||||
Chief Executive Officer | ||||