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 GB 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
GB Sciences, Inc. ("the Company", "GB Sciences", "we", "us", or "our") is a
phytomedical research and biopharmaceutical drug development company whose goal
is to create patented formulations of plant-inspired, complex therapeutic
mixtures for the prescription drug market that target a variety of medical
conditions. The Company is engaged in the research and development of
plant-based medicines and plans to produce plant-inspired, complex therapeutic
mixtures based on its portfolio of intellectual property.
Through its wholly owned Canadian subsidiary, GBS Global Biopharma, Inc.
("GBSGB"), the Company is engaged in the research and development of plant-based
medicines, primarily cannabinoid medicines, with virtual operations in North
America and Europe. GBSGB's assets include a portfolio of intellectual property
containing both proprietary cannabinoid-containing formulations and our
AI-enabled drug discovery platform, as well as critical research contracts and
key supplier arrangements. GBSGB's intellectual property covers a range of
medical conditions and several programs are in the pre-clinical animal stage of
development including Parkinson's disease, neuropathic pain, and cardiovascular
therapeutic programs. GBSGB runs a lean drug development program and takes
effort to minimize expenses, including personnel, overhead, and fixed capital
expenses through strategic partnerships with Universities and Contract Research
Organizations ("CROs"). GBSGB's intellectual property portfolio includes five
USPTO issued patents, nine USPTO nonprovisional patent applications pending in
the US, and one provisional patent application in the US. In addition to the
USPTO patents and patent applications, the company has filed 35 patent
applications internationally to protect its proprietary technology. We recently
filed a provisional USPTO patent application to further protect aspects of our
proprietary drug discovery engine, "Phytomedical Analytics for Research
Optimization at Scale," or PhAROS™.
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.
On April 4, 2014, we changed our name from Signature Exploration and Production
Corporation to Growblox Sciences, Inc. Effective December 12, 2016, the Company
amended its Certificate of Corporation pursuant to shareholder approval, and the
Company's name was changed from Growblox Sciences, Inc. to GB Sciences, Inc.
Effective April 8, 2018, Shareholders of the Company approved the change in
corporate domicile from the State of Delaware to the State of Nevada and
increase in the number of authorized capital shares from 250,000,000 to
400,000,000. Effective August 15, 2019, Shareholders of the Company approved an
increase in authorized capital shares from 400,000,000 to 600,000,000.
29
--------------------------------------------------------------------------------
Table of Contents
Plan of Operation
Drug Discovery and Development of Novel Cannabis-Based Therapies
Through its wholly owned Canadian subsidiary, GBS Global Biopharma, Inc.
("GBSGB"), the Company has conducted ground-breaking research embracing the
rational design of plant-based medicines led by Dr. Andrea Small-Howard, the
Company's Chief Science Officer and Director, and Dr. Helen Turner, Vice
President of Innovation and Dean of the Natural Sciences and Mathematics
Department at Chaminade University. Small-Howard and Turner posited that
complex mixtures of plant-based ingredients would provide more targeted and
effective treatments for specific disease conditions than either single
ingredient or whole plant formulations. They developed a rapid screening and
assaying system which tested thousands of combinations of cannabinoids and
terpenes in vitro against cell-based models of disease. This process identified
precise mixtures of cannabinoids and terpenes, many of which contained no THC,
to treat categories of disease conditions, including neurological disorders,
inflammation, heart disease, metabolic syndrome, chronic and neuropathic pain.
GBSGB's drug discovery engine involves both high throughput screening of cell
models of disease and a data analytics/machine learning tool to expedite drug
discovery. Initially, GBSGB explored the potential medical uses of specific
mixtures derived from cannabis-based raw materials, but these tools are also
effective for investigating the medical applications of complex therapeutic
mixtures from any plant-derived starting material. In 2014, GBSGB developed its
first rapid screening and assaying system which tested thousands of combinations
of cannabinoids and terpenes against cell-based models of diseases. This process
has been refined over the years and now has identified precise mixtures of
cannabinoids and terpenes, many of which contained no THC, to treat categories
of disease conditions, including neurological disorders, inflammation, heart
disease, metabolic syndrome, chronic and neuropathic pain. GBSGB has filed for
patent protection on these plant-inspired, complex therapeutic mixtures, and
they are testing them in disease-specific animal models in preparation for human
trials.
GBSGB's drug discovery process combines: 1) HTS: high throughput screening of
tens of thousands of combinations of compounds derived from plants in
well-established cellular models of diseases, and 2) PhAROS™: Phytomedical
Analytics for Research Optimization at Scale for the prediction of complex
therapeutic mixtures from plant-based materials. This combined approach to drug
discovery increases research efficiency and accuracy reducing the time from
ideation to patenting from 7 years to 1.5 years. Screening of plant-based
mixtures for drug discovery involves the testing of specific combinations of
plant chemicals from many naturally occurring plants and the use of live models
for these diseases that have been well established by other researchers. First,
the Company finds plant materials that show some therapeutic activity, and then
refines these natural mixtures to optimize their effectiveness in cellular
assays by removing compounds that do not act synergistically with the others in
the mixtures. The Company also use its PhAROS™ Platform to prioritize and
eliminate some potential combinations, which reduces the time in the discovery
period. PhAROS™ can also be used to identify and predict the efficacy of
plant-derived, complex therapeutic mixtures for specific diseases in silico,
which are then tested in the cell models.
The U.S. Patent and Trademark Office allows complex mixtures to be claimed as
Active Pharmaceutical Ingredients ("APIs"). GBSGB has three issued patents and a
series of pending patents containing cannabis-derived complex mixtures that act
as therapeutic agents for specific disease categories, as described below.
GBSGB's pending patents are protected whether the individual compounds are
derived from the cannabis plant, another plant, synthetically produced, or
derived from a combination of sources for the individual chemical compounds in
these mixtures.
30
--------------------------------------------------------------------------------
Table of Contents
Drug Development Progress
GBS Global Biopharma, Inc. has made significant strides in the past year with
respect to both its drug discovery research and product development programs.
Our lead pharmaceutical programs in both Parkinson's disease and chronic
neuropathic pain are now in preclinical animal studies with Dr. Lee Ellis of the
National Research Council ("NRC") Canada in Halifax, Nova Scotia. Our complex
therapeutic mixtures for the treatment of Cytokine Release Syndrome in COVID-19
and other severe hyperinflammatory conditions are now being tested in
preclinical studies with Dr. Norbert Kaminski at Michigan State University. In
addition, the two patents which protect GBSGB's formulations in our lead
development programs have been issued by the US Patent and Trademark Office
("USPTO"). On December 8, 2020, our third US patent was issued on complex
therapeutic mixtures for the treatment of the hyper inflammatory condition, Mast
Cell Activation Syndrome ("MCAS"). Achieving these significant milestones is
driving interest in these novel therapeutic programs.
For its lead program in PD therapeutics, GBSGB announced that it has obtained
the statistically significant reduction of Parkinson's-disease like symptoms
using its proprietary complex mixtures in an animal model of Parkinson's disease
("PD"). Several of GBSGB's PD formulations significantly reduced the symptoms,
while the most effective formula reduced the symptoms back to the baseline
activity of normal animals. In addition, the toxicity studies for these PD
formulas came back without any significant negative findings. These important
preclinical results will be included in GBS' Investigational New Drug ("IND")
application with the US FDA to enter human clinical trials as soon as possible.
New therapies to address Parkinson's disease symptoms are needed to help those
afflicted with this debilitating disease. The combined direct and indirect costs
associated with Parkinson's disease are estimated at $52 billion in the U.S.
alone.
For Parkinson's disease, the initial clinical prototypes of GBSGB's
Cannabinoid-Containing Complex Mixtures ("CCCM™") are being formulated by
Catalent Pharma using Catalent's Zydis® Orally Disintegrating Tablet ("ODT")
technology. This ODT format was selected for the PD formulas because it
dissolves on the tongues of patients without the need to swallow for ease of use
in patients with PD, who often have difficulties with swallowing. GBSGB selected
Catalent as its development partner for the PD therapies due to Catalent's prior
experience in working on US FDA-approved, cannabinoid-containing drugs, their
Schedule I drug manufacturing facilities, their familiarity with US FDA and
international regulatory and manufacturing requirements, their expertise in
tackling formulation challenges, and their ability to achieve the stability and
dosing necessary for these novel complex mixtures. In addition to its Zydis®
technology, Catalent has early drug development services and additional oral
drug delivery solutions available for the efficient delivery of GBSGB's
proprietary APIs.
For its lead chronic neuropathic pain program, GBSGB is testing its
Cannabinoid-Containing Complex Mixtures and Myrcene-Containing Complex Mixtures
("MCCM") both as encapsulated, time-released nanoparticles, as well as in
non-encapsulated forms of these therapeutic mixtures in an animal model at the
NRC in Halifax, Nova Scotia. In preparation for human clinical trials, our
standard MCCM and the time-released MCCM are currently being compared in an
animal model that demonstrates their potential effectiveness at treating chronic
pain. The early results from this preclinical research project look very
promising.
The three patents which protect formulations in the Company's lead therapeutic
programs have been issued by the USPTO. The issuance of U.S. Patent No.
10,653,640 entitled "Cannabinoid-Containing Complex Mixtures for the Treatment
of Neurodegenerative Diseases" on May 19, 2020 protects methods of using GBSGB's
proprietary cannabinoid-containing complex mixtures (CCCM™) for treating
Parkinson's Disease. This was an important milestone in the development of these
vitally-important therapies and validates GBSGB's drug discovery platform. In
the US alone, the combined direct and indirect costs associated with Parkinson's
disease are estimated at $52 billion, and new therapies to address Parkinson's
disease symptoms are greatly needed. This was also the first time that a US
patent has been awarded for a cannabis-based complex mixture defined using this
type of drug discovery method. The first US patent for PD therapies validated
our drug discovery platform and strengthened our intellectual property portfolio
of unique CCCM's™, each targeting one of up to 60 specific clinical
applications.
The issuance of GBSGB's second US patent for active pharmaceutical ingredients
that are complex mixtures identified by our biotech platform further confirms
that GBSGB's pharmaceutical compositions can be patent-protected for use as
biopharmaceutical and nutraceutical products. The US Patent entitled
"Myrcene-Containing Complex Mixtures Targeting TRPV1" protects methods of using
GBSGB's proprietary Myrcene-Containing Complex Mixtures for the treatment of
pain disorders related to arthritis, shingles, irritable bowel syndrome, sickle
cell disease, and endometriosis. In the US alone, chronic pain represents an
estimated health burden of between $560 and $650 billion dollars, and an
estimated 20.4% of U.S. adults suffer from chronic pain that significantly
decreases their quality of life. Despite the widespread rates of addiction and
death, opioids remain the standard of care treatment for most people with
chronic pain. The Company believes that it is important to create safer, less
addictive alternatives to opioids for the treatment of chronic pain disorders,
like GBSGB's myrcene-containing complex mixtures.
Favorable Research Updates from our university collaborators reveal the promise
in our discovery programs with Michigan State University (HIV-Associated
Neurodegenerative Disorder and COVID-19 therapies), Chaminade University
(Chronic Neuropathic Pain, Metabolic Syndrome, Cannabis Metabolomics with the
University of Athens), the University of Athens, Greece (Cannabis Metabolomics),
the University of Seville, Spain (Time-Released Nanoparticles), and the National
Research Council of Canada (Parkinson's Disease, Chronic Neuropathic Pain).
31
--------------------------------------------------------------------------------
Table of Contents
Intellectual Property Portfolio
GBSGB retained Fenwick & West, a Silicon Valley based law firm focusing on life
sciences and high technology companies with a nationally top-ranked intellectual
property practice, to develop strategies for the protection of the Company's
intellectual property. The status of the intellectual property portfolio is as
follows. Unless otherwise indicated, all patents listed below are assigned to
the Company's wholly-owned subsidiary, GBS Global Biopharma, Inc.
Issued Patents
Title: CANNABINOID-CONTAINING COMPLEX MIXTURES FOR THE TREATMENT OF NEURODEGENERATIVE DISEASES
U.S. Patent
Number: 10,653,640 Expiration date: October 23, 2038
Issued: May 19,
2020 Inventors: Andrea Small-Howard et al.
U.S. Patent protection was granted for GBSGB's Cannabinoid-Containing Complex Mixtures for the treatment
of Parkinson's disease.
Title: MYRCENE-CONTAINING COMPLEX MIXTURES TARGETING TRPV1
U.S. Patent
Number: 10,709,670 Expiration date: May 22, 2038
Issued: July 14,
2020 Inventors: Andrea
Small-Howard, et al.
GBSGB's MCCMs are protected in the U.S. for use in the treatment of pain related to arthritis,
shingles, irritable bowel syndrome, sickle cell disease, and endometriosis.
Title: CANNABINOID-CONTAINING COMPLEX MIXTURES FOR THE TREATMENT OF MAST CELL-ASSOCIATED OR
BASOPHIL-MEDIATED INFLAMMATORY DISORDERS
U.S. Patent
Number: 10,857,107 Expiration date: January 31, 2038
Issued: December
8, 2020 Inventors: Andrea Small-Howard et al.
U.S. Patent protection was granted for GBSGB's Cannabinoid-Containing Complex Mixtures for the
treatment of Mast Cell Activation Syndrome (MCAS).
Title: METHODS AND COMPOSITIONS FOR PREVENTION AND TREATMENT OF CARDIAC HYPERTROPHY
Inventor: Alexander
Stokes Assignee: University of Hawai'i
U.S. Patent
Number: 9,084,786 Issued: July 21, 2015
U.S. Patent
Number: 10,137,123 Issued: November 27, 2018
E.U. Patent
Number: 2,635,281 Issued: March 14, 2018
Hong Kong
Patent Number: 14102182.8 Issued: March 14, 2018
GBSGB has sublicensed from Makai Biotechnology, LLC these two issued USPTO patents and two issued
international patents for the prevention and treatment of heart failure due to cardiac
hypertrophy through therapeutic regulation of TRPV1.
Title: METHOD FOR PRODUCING A PHARMACEUTICAL COMPOSITION OF POLYMERIC NANOPARTICLES FOR
TREATING NEUROPATHIC PAIN CAUSED BY PERIPHERAL NERVE COMPRESSION
Spain Patent ES2582287 Inventors: Lucia Martin Banderas, Mercedes
Number: Fernandez Arevalo, Esther Berrocoso
Dominguez, Juan Antonio Mico Segura
Issued: September Assignees: Universidad de
Sevilla, Universidad de
29, 2017 Cadiz, Centro de
Investigacion
Biomedica En Red
Exclusive worldwide license held by GBS Global Biopharma, Inc. Claims benefit of Spanish
Patent Application No. P201500129 (Pub. No. ES 2582287). GBSGB holds the exclusive rights to
commercialize these cannabinoid-containing, time-released, oral nanoparticles for the
treatment of neuropathic pain.
32
--------------------------------------------------------------------------------
Table of Contents
Ten USPTO and Thirty-Five International Patent Applications Pending
In addition to the issued patents listed above, GBSGB's intellectual property
portfolio includes a total of ten USPTO and thirty-five international patents
pending:
Other
International
Application Applications
Title Jurisdiction Number Filed
CANNABINOID-CONTAINING COMPLEX MIXTURES FOR US USPTO 16/844,713 AU, CA, CN, EP,
THE TREATMENT OF NEURODEGENERATIVE DISEASES PCT/US2017/055989 HK, IL, JP
MYRCENE-CONTAINING COMPLEX MIXTURES US USPTO 16/878,295 AU, CA, CN, EP,
TARGETING TRPV1 PCT/US2018/033956 HK, IL, JP
CANNABINOID-CONTAINING COMPLEX MIXTURES FOR US USPTO 17/065,400 AU, CA, CN, EP,
THE TREATMENT OF MAST CELL-ASSOCIATED OR PCT/US2018/016296 HK, IL, JP
BASOPHIL-MEDIATED INFLAMMATORY DISORDERS
TRPV1 ACTIVATION-MODULATING COMPLEX US USPTO 16/420,004 AU, CA, CN, EP,
MIXTURES OF CANNABINOIDS AND/OR TERPENES PCT/US2019/033618 HK, IL, JP
THERAPEUTIC NANOPARTICLES ENCAPSULATING US USPTO 16/686,069
TERPENOIDS AND/OR CANNABINOIDS PCT/ES2019/070765
TREATMENT OF PAIN USING ALLOSTERIC US USPTO 16/914,205
MODULATOR OF TRPV1 PCT/US2020/039989
CANNABINOID-CONTAINING COMPLEX MIXTURES FOR US USPTO 63/067,269
THE TREATMENT OF CHRONIC INFLAMMATORY (provisional)
DISORDERS
CANNABINOID-CONTAINING COMPLEX MIXTURES FOR US USPTO 63/067,269
THE TREATMENT OF CYTOKINE RELEASE SYNDROME (provisional)
WHILE PRESERVING KEY ANTI-VIRAL IMMUNE
REACTIONS
IN SILICO META-PHARMACOPEIA ASSEMBLY FROM US USPTO 63/091,816
NON-WESTERN MEDICAL SYSTEMS USING ADVANCED (provisional)
DATA ANALYTIC TECHNIQUES TO IDENTIFY AND
DESIGN PHYTOTHERAPEUTIC STRATEGIES
METHODS AND COMPOSITIONS FOR PREVENTION AND EU EPO 3,348,267 IN, CN
TREATMENT OF CARDIAC HYPERTROPHY
METHOD FOR PRODUCING A PHARMACEUTICAL WIPO/PCT WIPO 2016/128591 EU, CA
COMPOSITION OF POLYMERIC NANOPARTICLES FOR PCT/ES2016/000016
TREATING NEUROPATHIC PAIN CAUSED BY
PERIPHERAL NERVE COMPRESSION
33
--------------------------------------------------------------------------------
Table of Contents
Partnering Strategy
GBSGB runs a lean drug development program and minimizes expenses, including
personnel, overhead, and fixed capital expenses (such as lab and diagnostic
equipment), through strategic partnerships with Universities and Contract
Research Organizations ("CROs"). Through these research and development
agreements, GBSGB has created a virtual pipeline for the further development of
novel medicines extracted from the cannabis plant. The partners bring both
expertise and infrastructure at a reasonable cost to the life sciences program.
In most instances, GBSGB has also negotiated with these partners to keep 100% of
the ownership of the IP within GBSGB for original patent filings.
GBSGB currently has on-going research agreements with the following institutions
covering the indicated areas of research:
Chaminade University: Broad-based research program to support the drug discovery
platform that has yielded many of GBSGB's original patents to date in the areas
of neurodegenerative diseases, heart disease, inflammatory diseases, neuropathic
and chronic pain. They have also performed the bioassay portion of the Cannabis
Metabolomics study performed with the University of Athens, Greece and GBSGB.
University of Athens: Broad-based metabolomics analysis of over 100 cannabis
genotypes including both hemp and THC-producing cannabis varieties, in
combination with GBSGB's bioassay data linking genotypes and potential
disease-remediations. This project has the potential to define active
ingredients from plant-derived mixtures beyond the standard cannabinoids and
terpenoids. The discovery potential is huge, and novel agents have recently been
discovered.
Michigan State University: Discovery work using a cutting-edge, multi-cellular
model of the human immune system and a multi-cell model of the brain to explore
CCCM™s for use in the prevention of HIV-Associated Neurocognitive Disorders
(HAND). Although combination antiretroviral therapy keeps symptoms for most
HIV-patients well controlled, between 40% and 70% of these well-controlled HIV
patients end up with HAND symptoms that range from movement disorders to
dementia-like symptoms. The results from this work were included in a new patent
application that will be filed in Q3 of 2021. In addition, MSU has performed
experiments using their novel model of the human-immune system that have allowed
GBSGB to prepare cannabis-based formulas for the potential treatment of
virally-induced hyperinflammation/cytokine storm syndrome that has led to the
majority of COVID-19 deaths. The new patent application for our novel,
cannabinoid-containing complex mixtures (CCCM™) for the treatment of
hyperinflammation and cytokine release syndrome in COVID-19 patients was filed
August 18, 2020.
The University of Seville: Bringing their novel expertise to the development and
functional testing of time-released and disease-targeted nanoparticles of
cannabis-based complex mixtures for oral administration. These specialized
nanoparticles are being used for the precise and time-released delivery of
several of our therapies, including GBSGB's MCCM™ and CCCM™'s used in the
preclinical animal testing performed at the NRC Canada. The University of
Seville has completed functional testing on nanoparticles containing myrcene,
nerolidol, and beta-caryophyllene for our Myrcene-Containing Complex Mixtures.
In these cell-based assays, the effectiveness and kinetics of the
nanoparticle-forms of these terpenes were compared with the "naked" terpenes
both individually and in mixtures. In all cases, the effectiveness of the
nanoparticles were superior to the naked terpenes, however, the mixtures were
dramatically more effective than the individuals. These results from Seville are
very promising as these nanoparticles have entered the animal testing phase at
the NRC in Halifax.
The National Research Center (NRC) of Canada, Halifax, Nova Scotia: Two
animal-phase studies are being performed by Dr. Lee Ellis' group at the NRC. An
animal safety and efficacy study was initiated in Q4 of 2018 for GBSGB's
Parkinson's disease therapies, and the NRC has demonstrated that the company's
PD formulations were able to reduce behavioral changes associated with the loss
of dopamine-producing neurons, which underlies the pathology of Parkinson's
disease in the animal model. Based on achieving the statistically significant
reduction in Parkinson's disease symptomology, GBSGB has signed an amendment to
include a final phase of testing, which will study the mechanism of action for
these promising formulations. In Q1 of 2019, GBSGB started a safety and efficacy
study in animals for GBSGB's Chronic Neuropathic Pain (CNP) formulas. The
midterm results for these preclinical pain studies are promising.
The University of Cadiz: Testing the safety and efficacy of the above-mentioned
time-released nanoparticles in rodent models of chronic pain. Proof of concept
complete for one formulation.
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. Proof of concept work is complete.
34
--------------------------------------------------------------------------------
Table of Contents
Path to Market: Drug Development Stages and Proposed Clinical Trials
GBSGB has cannabis-based therapeutic products in the following stages of drug
development: Discovery, Pre-Clinical, and entering the Clinical Phase. It has
also licensed therapeutic products that the Company intends to develop through
partners, labeled Partner Programs.
The completion of pre-clinical studies, clinical trials, and obtaining
FDA-approvals for pharmaceutical products is traditionally a long and expensive
process. However, GBSGB asserts that its cannabis-based drug discovery engine,
lean development program, novel regulatory strategy, experienced development
partners, and aggressive licensing of these products at early clinical stages
can mitigate some of the risks. The Company uses a combination of in silico
discovery methods and automated screening of cellular models of disease to
decrease the time in Discovery prior to filing novel patent applications for
disease-specific therapeutics. GBSGB's original patent applications cover new
chemical entities ("NCE") based on complex combinations of plant-derived
compounds. Its Exploratory IND/Phase 0 Program gets the Company to First-in-Man
sooner than traditional programs, which reduces translational risks, and
includes preliminary efficacy measures for responsible development decisions. In
contrast, a traditional phased-development path would not provide any efficacy
measures until Phase II. After the completion of our Phase 0 study, which
compares the efficacies of multiple related cannabis-based formulations, the
Company plans to advance the lead drug candidate using an adaptive trial design
that is more efficient than the traditional phased-development pathway. GBSGB
has entered into research contracts, partnerships, and/or joint ventures with
several respected, independent contract research organizations, medical schools,
universities, and other scientific researchers to increase developmental
efficiencies. If and when one or more of GBSGB's drugs, therapies or treatments
are approved by the FDA, GBSGB will seek to market them under licensing
arrangements with major biotechnology or pharmaceutical companies.
There can be no assurance that we will ever be able to enter into any joint
ventures or other arrangements with third parties to finance our drug
development program or that if we are able to do so, that any of our projected
therapies will ever be approved by the FDA. Even if we obtain FDA approval for a
therapy, there can be no assurance that it could be successfully marketed or
would not be superseded by another cannabis-based therapy produced by one or
more of our competitors. It also may be anticipated that even if we enter into a
joint venture development with a financially stable pharmaceutical or
institutional partner, we will still be required to raise significant
additional capital in the future to achieve the strategic goals of GBSGB. There
can be no assurance that we will be able to obtain such additional capital on
reasonable terms, if at all. If GBSGB fails to achieve its goal of producing one
or more cannabis-based pharmaceuticals or therapies, it would have a material
adverse effect on our future financial condition and business prospects.
35
--------------------------------------------------------------------------------
Table of Contents
Other Operations
In addition to our key biopharmaceutical research and development activities
described in detail above, the Company has operated in the medical and adult-use
cannabis markets under State-issued cultivation and production licenses. Our
wholly owned subsidiary GB Sciences Nevada, LLC ("GBSN") leases a warehouse
facility at 3550 W. Teco Avenue, Las Vegas Nevada (the "Teco Facility") and
operates a cannabis cultivation facility under Nevada licenses for the medical
and adult-use markets. Our wholly owned subsidiary GB Sciences Las Vegas, LLC
("GBLV") holds Nevada certificates for medical and adult-use cannabis production
and produces extracts and concentrates for the wholesale market.
On March 24, 2020, we entered into the Membership Interest Purchase Agreement
("Teco MIPA") which formalized the sale of the Teco Subsidiaries. Pursuant to
the Teco MIPA, the Company will sell 100% of its membership interests in GBSN
and GBLV for $4.0 million cash upon close and will receive a $4.0 million 8%
promissory note to be paid in monthly installments over 36 months.
The Company also holds a Nevada license for cultivation of medical marijuana
located in Sandy Valley, Nevada (the "Nopah License"). The license is owned by
the Company's wholly owned subsidiary, GB Sciences Nopah, LLC ("Nopah").
Operations have not begun under the Nopah License. On August 10, 2020, the
Company entered into the Membership Interest Purchase Agreement ("Nopah MIPA")
and Promissory Note Modification Agreement with the purchaser of GB Sciences
Nopah, LLC. As consideration for the transfer of the license and membership
interest in GB Sciences Nopah, LLC, the Company will receive $300,000 and the
purchaser will pay all expenses related to the upkeep and maintenance of the
Nopah License. The transfer of the Nopah License is subject to the same
restrictions on license transfers currently in effect in the State of Nevada.
The sales of the Teco Facility and Nopah are expected to close upon the
successful transfer of the Nevada cultivation and production licenses. The
transfer of cannabis licenses in the State of Nevada was subject to an
indefinite moratorium from October 2019 through August of 2020, and the
processing of license transfers has been further delayed by the COVID-19
pandemic. In a meeting held on July 21, 2020, the Nevada Cannabis Compliance
Board lifted the moratorium, however, the board has indicated that there were
over 90 requests pending and it will take up to several months to process the
entire backlog of pending license transfers. Based on this information, we
cannot provide any assurances as to the timing of the close of the sale.
36
--------------------------------------------------------------------------------
Table of Contents
RESULTS OF OPERATIONS
The following table sets forth certain of our Statements of Operations data from
continuing operations:
For the Three Months Ended
June 30,
2021 2020
General and administrative expenses $ 493,405 $ 515,253
LOSS FROM OPERATIONS (493,405 ) (515,253 )
OTHER EXPENSE
Interest expense (65,254 ) (662,370 )
Debt default penalty - (286,059 )
Other expense - (11,182 )
LOSS BEFORE INCOME TAXES (558,659 ) (1,474,864 )
Income tax expense - -
LOSS FROM CONTINUING OPERATIONS $ (558,659 ) $ (1,474,864 )
Comparison of the Three Months Ended June 30, 2021 and 2020
General and Administrative Expenses
General and Administrative Expenses decreased by $(21,848) to $493,405 for the
three months ended June 30, 2021, compared to $515,253 for the three months
ended June 30, 2020. The Company is continuing its efforts to maintain
administrative costs at a minimum and to make the best use of its limited
resources in advancing research & development of the Company's intellectual
property portfolio.
Interest Expense
Interest expense decreased by $(597,116) to $65,254 for the three months ended
June 30, 2021, compared to $662,370 in the prior year quarter. The decrease is
primarily attributable to less interest-bearing debt outstanding during the
current quarter as the result of the payoff of the note payable to Iliad
Research and Trading, L.P. in December 2020. In addition, notes with balances
totaling $2.1 million at June 30, 2021 are no longer accruing interest beginning
December 1, 2020, as the result of the Omnibus Amendment to the agreements
surrounding the sale of the Company's Nevada Subsidiaries.
Debt Default Penalty
The Company recorded a default penalty of $286,059 in the prior year quarter,
related to the Company's failure to timely repay the principal and interest owed
under the note payable to Iliad Research and Trading, L.P. on April 1, 2020. The
penalty was 10% of the principal and accrued interest balances outstanding at
the time of default.
37
--------------------------------------------------------------------------------
Table of Contents
LIQUIDITY AND CAPITAL RESOURCES
Current Liquidity
The Company will need additional capital to implement its 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 on the Company's 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 financing. In order to finance existing operations and pay
current liabilities over the next twelve months, the Company will need to raise
additional capital. 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.
In continuing operations at June 30, 2021, cash was $582,971, other current
assets excluding cash were $296,081, and our working capital deficit was
$5,841,001. Current liabilities in continuing operations were $6,720,053 and
consisted principally of $1,463,806 in accounts payable, $1,552,148 in accrued
liabilities, $3,619,186 in notes and convertible notes payable, and $84,913 in
indebtedness to related parties. At June 30, 2021, current assets from
discontinued operations were $2,248,757, current liabilities from discontinued
operations were $1,987,787, and working capital from discontinued operations was
$260,970.
At March 31, 2021, continuing operations included a cash balance of $793,040,
other current assets excluding cash were $256,251, and our working capital
deficit was $5,494,572. Current liabilities in continuing operations were
$6,543,863, which consisted principally of $1,412,459 in accounts payable,
$1,451,687 in accrued liabilities, $3,594,804 in notes and convertible notes
payable, and $84,913 of indebtedness to related parties. At March 31, 2021,
current assets from discontinued operations were $2,494,564, current liabilities
from discontinued operations were $2,054,585, and working capital from
discontinued operations was $439,979.
38
--------------------------------------------------------------------------------
Table of Contents
Sources and Uses of Cash
Operating Activities
Net cash used in operating activities was $636,583, including $2,954 used by
discontinued operations for the three months ended June 30, 2021, compared to
$323,845 net of $235,779 provided by operating activities of discontinued
operations for the three months ended June 30, 2020. We anticipate that cash
flows from operations will be insufficient to fund business operations for the
next twelve-month period. Accordingly, we will have to generate additional
liquidity or cash flow to fund our current and anticipated operations. This will
likely require the sale of additional common stock or other securities. There is
no assurance that we will be able to realize any significant proceeds from such
sales, if at all.
Investing Activities
During the three months ended June 30, 2021, $157,435 was provided by investing
activities, including $7,435 provided by discontinued operations. Cash provided
by investing activities of continuing operations consisted of $200,000 received
by the Company as an advancement of the purchase price of the Teco facility, and
was offset by $50,000 paid to acquire intangible assets. During the three months
ended June 30, 2020, no cash was used or provided by investing activities.
Financing Activities
During the three months ended June 30, 2021, cash flows provided by financing
activities totaled $29,182 , net of $33,478 used in discontinued operations.
Cash flows provided by financing activities of continuing operations related to
$62,660 in gross proceeds from warrant exercises. Cash provided by financing
activities for the three months ended June 30, 2020 was $273,309, net of $12,772
used in discontinued operations. Cash provided by financing activities for
the three months ended June 30, 2020 related primarily to $151,202 in proceeds
from warrant exercises and $150,000 in proceeds from the sale of a note payable,
offset by $15,121 of brokerage fees for warrant exercises.
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
inception, which have caused an accumulated deficit of $104,681,665 at June 30,
2021. The Company had a working capital deficit of $5,580,031 at June 30, 2021,
net of working capital of $260,970 classified as discontinued operations,
compared to $5,054,593 at March 31, 2021, net of working capital of $439,979
classified as discontinued operations. In addition, the Company has consumed
cash in its operating activities of $636,583 for the three months ended June 30,
2021, including $2,954 used by discontinued operations, compared to $323,845
used in operating activities, net of $235,779 provided by discontinued
operations for the three months ended June 30, 2020. 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.
Furthermore, Management believes the COVID-19 pandemic may have a significant
impact on the Company's business. The pandemic presents a risk to the global
economy, and it is possible that it could have an impact on the operations of
the Company in the near term that could materially impact the Company's
financials and ability to continue as a going concern. Management has not been
able to measure the potential financial impact on the Company and continues to
monitor the impact of the pandemic closely, although the extent to which the
COVID-19 outbreak will impact our operations, financing ability or future
financial results is uncertain.
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.
39
--------------------------------------------------------------------------------
Table of Contents
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
Note 3 of its Annual Report on Form 10-K for the fiscal year ended March 31,
2021.
© Edgar Online, source Glimpses
English (UK)
English (Canada)
Deutsch (Deutschland)
Deutsch (Schweiz)
Español
Français (France)
Italiano
Nederlands (Nederland)
Nederlands (België)
