UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM
__________________________
(Mark One)
| | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended |
| | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to ___________
| Commission file number: |
GB SCIENCES, INC.
(Exact name of registrant as specified in its charter)
| (State or other Jurisdiction of Incorporation or organization) |
| (IRS Employer I.D. No.) |
Phone: (
(Address and telephone number of
principal executive offices)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each Class | Trading Symbol(s) | Name of exchange on which registered |
| None | N/A | N/A |
Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | | Smaller reporting company | Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act).
There were
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED December 31, 2021
INDEX
ITEM 1. Financial Statements (Unaudited)
GB SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| As of December 31, | As of March 31, | |||||||
| 2021 | 2021 | |||||||
| CURRENT ASSETS: | (unaudited) | |||||||
| Cash and cash equivalents | $ | $ | ||||||
| Prepaid expenses and other current assets | ||||||||
| Current assets from discontinued operations | ||||||||
| TOTAL CURRENT ASSETS | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets, net of accumulated amortization of $ and $ at December 31, 2021 and March 31, 2021, respectively | ||||||||
| Note receivable | ||||||||
| Long term assets from discontinued operations | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued interest | ||||||||
| Accrued liabilities | ||||||||
| Notes and convertible notes payable and line of credit, net of unamortized discount of $ and $ at December 31, 2021 and March 31, 2021, respectively | ||||||||
| Indebtedness to related parties | ||||||||
| Income taxes payable from discontinued operations | ||||||||
| Current liabilities from discontinued operations exclusive of income taxes | ||||||||
| TOTAL CURRENT LIABILITIES | ||||||||
| Convertible notes payable, net of unamortized discount of $ and $ at December 31, 2021 and March 31, 2021, respectively | ||||||||
| Long term liabilities from discontinued operations | ||||||||
| TOTAL LIABILITIES | ||||||||
| Commitments and contingencies (Note 7) | ||||||||
| STOCKHOLDERS' EQUITY/(DEFICIT): | ||||||||
| Common Stock, $ par value, shares authorized, and outstanding at December 31, 2021 and March 31, 2021, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS' EQUITY/(DEFICIT) | ( | ) | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | $ | ||||||
The accompanying unaudited 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 December 31, |
For the Nine Months Ended December 31, |
|||||||||||||||
| 2021 |
2020 |
2021 |
2020 |
|||||||||||||
| Sales revenue |
$ | $ | $ | $ | ||||||||||||
| Cost of goods sold |
||||||||||||||||
| Gross profit |
||||||||||||||||
| General and administrative expenses |
||||||||||||||||
| LOSS FROM OPERATIONS |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| OTHER INCOME/(EXPENSE) |
||||||||||||||||
| Interest expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Gain on extinguishment |
||||||||||||||||
| Gain on deconsolidation |
||||||||||||||||
| Gain on settlement of accounts payable |
||||||||||||||||
| Loss on amendment to line of credit |
( |
) | ( |
) | ||||||||||||
| Debt default penalty |
( |
) | ||||||||||||||
| Other income/(expense) |
( |
) | ( |
) | ||||||||||||
| Total other income/(expense) |
( |
) | ||||||||||||||
| INCOME/(LOSS) BEFORE INCOME TAXES |
( |
) | ( |
) | ||||||||||||
| Income tax expense |
||||||||||||||||
| INCOME/(LOSS) FROM CONTINUING OPERATIONS |
( |
) | ( |
) | ||||||||||||
| Income/(loss) from discontinued operations |
( |
) | ( |
) | ( |
) | ||||||||||
| NET INCOME/(LOSS) |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
| Net income/(loss) attributable to common stockholders of GB Sciences, Inc. - basic |
||||||||||||||||
| Continuing operations |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
| Discontinued operations |
( |
) | ) | ) | ||||||||||||
| Net income/(loss) |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
| Net income/(loss) attributable to common stockholders of GB Sciences, Inc. - diluted |
||||||||||||||||
| Continuing operations |
$ | $ | ( |
) | $ | $ | ) | |||||||||
| Discontinued operations |
( |
) | ) | ) | ||||||||||||
| Net income/(loss) |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
| Net income/(loss) per common share – basic |
||||||||||||||||
| Continuing operations |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
| Discontinued operations |
( |
) | ( |
) | ( |
) | ||||||||||
| Net income/(loss) |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
| Net income/(loss) per common share – diluted |
||||||||||||||||
| Continuing operations |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
| Discontinued operations |
( |
) | ( |
) | ( |
) | ||||||||||
| Net income/(loss) |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
| Weighted average common shares outstanding - basic |
||||||||||||||||
| Weighted average common shares outstanding - diluted |
||||||||||||||||
The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements
GB SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| Nine Months Ended December 31, |
||||||||
| 2021 |
2020 |
|||||||
| OPERATING ACTIVITIES: |
||||||||
| Net income/(loss) |
$ | $ | ( |
) | ||||
| Loss from discontinued operations |
( |
) | ( |
) | ||||
| Net income/(loss) from continuing operations |
( |
) | ||||||
| Adjustments to reconcile net income/(loss) to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
||||||||
| Stock-based compensation and warrant modification expense |
||||||||
| Amortization of debt discount and beneficial conversion feature |
||||||||
| Gain on deconsolidation |
( |
) | ||||||
| Gain on extinguishment |
( |
) | ||||||
| Loss on disposal |
||||||||
| Gain on settlement of accounts payable |
( |
) | ||||||
| Loss on amendment to line of credit |
||||||||
| Debt default penalty |
||||||||
| Changes in operating assets and liabilities: |
||||||||
| Prepaid expenses and other current assets |
( |
) | ||||||
| Accounts payable |
||||||||
| Accrued expenses |
( |
) | ||||||
| Accrued interest |
||||||||
| Indebtedness to related parties |
( |
) | ||||||
| Net cash used in operating activities of continuing operations |
( |
) | ( |
) | ||||
| Net cash provided by/(used in) operating activities of discontinued operations |
( |
) | ||||||
| Net cash used in operating activities |
( |
) | ( |
) | ||||
| INVESTING ACTIVITIES: |
||||||||
| Proceeds from sale of Nevada subsidiaries |
||||||||
| Acquisition of intangible assets |
( |
) | ( |
) | ||||
| Proceeds from note receivable |
||||||||
| Net cash provided by investing activities of continuing operations |
||||||||
| Net cash provided by/(used in) investing activities of discontinued operations |
( |
) | ||||||
| Net cash provided by investing activities |
||||||||
| FINANCING ACTIVITIES: |
||||||||
| Gross proceeds from warrant exercises |
||||||||
| Proceeds from convertible notes payable |
||||||||
| Proceeds from line of credit |
||||||||
| Principal payment on notes and convertible notes payable |
( |
) | ||||||
| Principal payment on note payable to related party |
( |
) | ||||||
| Fees for issuance of notes and convertible notes payable |
( |
) | ||||||
| Brokerage fees for issuance of common stock and warrants |
( |
) | ||||||
| Net cash provided by/(used in) financing activities of continuing operations |
( |
) | ||||||
| Net cash used in financing activities of discontinued operations |
( |
) | ( |
) | ||||
| Net cash provided by/(used in) financing activities |
( |
) | ||||||
| Net change in cash and cash equivalents |
||||||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
||||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD |
||||||||
| Less: cash and cash equivalents classified as discontinued operations |
( |
) | ||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD FROM CONTINUING OPERATIONS |
$ | $ | ||||||
The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements
GB SCIENCES, INC. AND SUBSIDIARIES
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
For the Nine Months Ended December 31, 2021 and 2020
(unaudited)
| Nine Months Ended December 31, |
||||||||
| 2021 |
2020 |
|||||||
| Cash paid for interest |
$ | $ | ||||||
| Cash paid for income tax |
$ | $ | ||||||
| Non-cash investing and financing transactions: |
||||||||
| Note receivable from sale of Nevada subsidiaries |
$ | $ | ||||||
| Extinguishment of debt and accrued interest owed to the purchasers of Nevada subsidiaries and purchasers' affiliates |
$ | $ | ||||||
| Extinguishment of accrued management fees payable to purchaser of Nevada subsidiaries |
$ | $ | ||||||
| Depreciation capitalized in inventory (discontinued operations) |
$ | $ | ||||||
| Patent drafting and filing costs capitalized in intangible assets |
$ | $ | ||||||
| Accrued liabilities forgiven in connection with Wellcana letter agreement |
$ | $ | ||||||
| Brokerage fees for convertible notes |
$ | $ | ||||||
| Brokerage fees for warrant exercises |
$ | $ | ||||||
| Stock options issued as compensation for drafting and filing patent applications |
$ | $ | ||||||
| Induced dividend from warrant exercises |
$ | $ | ||||||
| Accrued interest capitalized in convertible note principal |
$ | $ | ||||||
| Beneficial conversion feature on notes payable |
$ | $ | ||||||
The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements
GB SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY/(DEFICIT)
For the Three Months Ended December 31, 2021 and 2020
(unaudited)
| Shares |
Amount |
Additional Paid-In Capital |
Accumulated Deficit |
Total |
||||||||||||||||
| Balance at September 30, 2021 |
$ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||
| Adjustment to prior period warrant exercise |
( |
) | - | - | ||||||||||||||||
| Share based compensation expense |
- | - | - | |||||||||||||||||
| Net income |
- | - | - | |||||||||||||||||
| Balance at December 31, 2021 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
| Shares |
Amount |
Additional Paid-In Capital |
Accumulated Deficit |
Total |
||||||||||||||||
| Balance at September 30, 2020 |
$ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||
| Exercise of warrants for stock, net of issuance costs |
- | |||||||||||||||||||
| Share based compensation |
- | - | - | |||||||||||||||||
| Modification of employee options and warrants |
- | - | - | |||||||||||||||||
| Beneficial conversion feature on notes payable |
- | - | - | |||||||||||||||||
| Stock options issued as compensation for drafting and filing patents |
- | - | - | |||||||||||||||||
| Net loss |
- | - | - | ( |
) | ( |
) | |||||||||||||
| Balance at December 31, 2020 |
$ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||
The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements
GB SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY/(DEFICIT)
For the Nine months ended December 31, 2021 and 2020
(unaudited)
| Shares |
Amount |
Additional Paid-In Capital |
Accumulated Deficit |
Total |
||||||||||||||||
| Balance at March 31, 2021 |
$ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||
| Exercise of warrants for stock, net of issuance costs |
- | |||||||||||||||||||
| Share based compensation expense |
- | - | - | 54,167 | ||||||||||||||||
| Stock options issued as compensation for drafting and filing patents |
- | - | - | |||||||||||||||||
| Inducement dividend from warrant exercises |
- | - | ( |
) | - | |||||||||||||||
| Net income |
- | - | - | |||||||||||||||||
| Balance at December 31, 2021 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
| Shares |
Amount |
Additional Paid-In Capital |
Accumulated Deficit |
Total |
||||||||||||||||
| Balance at March 31, 2020 |
$ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||
| Exercise of warrants for stock, net of issuance costs |
- | |||||||||||||||||||
| Share based compensation |
- | - | - | |||||||||||||||||
| Modification of employee options and warrants |
- | - | - | |||||||||||||||||
| Beneficial conversion feature on notes payable |
- | - | - | |||||||||||||||||
| Stock options issued as compensation for drafting and filing patents |
- | - | - | |||||||||||||||||
| Inducement dividend from warrant exercises |
- | - | ( |
) | - | |||||||||||||||
| Net loss |
- | - | - | ( |
) | ( |
) | |||||||||||||
| Balance at December 31, 2020 |
$ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||
The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements
Note 1 – Background and Significant Accounting Policies
GB Sciences, Inc. (“the Company”, “GB Sciences”, “we”, “us”, or “our”) is a plant-based research and biopharmaceutical drug development company whose goal is to create patented formulations of plant-inspired, minimum essential 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, minimum essential 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-inspired medicines, with virtual operations in North America and Europe. GBSGB’s assets include a portfolio of intellectual property containing both proprietary plant-inspired 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 five programs are in the pre-clinical animal stage of development including Parkinson’s disease ("PD"), chronic pain, COVID-related cytokine release syndrome, depression/anxiety, and cardiovascular therapeutic programs. GBSGB is assertively preparing its PD therapeutics for a first-in-human trial. Depending on the results of ongoing preclinical studies, the Company intends to move forward with clinical trials for its chronic pain and COVID-related cytokine release syndrome therapies after PD. 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, fourteen USPTO nonprovisional patent applications pending in the US, and seven provisional patent applications in the US. In addition to the USPTO patents and patent applications, the company has filed 41 patent applications internationally to protect its proprietary technology and formulations. In October 2021, we filed the nonprovisional USPTO patent application to further protect aspects of our proprietary drug discovery engine, “Phytomedical Analytics for Research Optimization at Scale," or PhAROS™.
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements of GB Sciences, Inc. have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulations S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ending March 31, 2022. The balance sheet at March 31, 2021 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended March 31, 2021.
Principles of Consolidation
We prepare our consolidated financial statements in accordance with generally accepted accounting principles (GAAP) for the United States of America. Our consolidated financial statements include all operating divisions and majority-owned subsidiaries, reported as a operating segment, for which we maintain controlling interests. Intercompany accounts and transactions have been eliminated in consolidation. All subsidiaries were wholly owned by the Company for the periods presented.
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to allowances for doubtful accounts, inventory valuation and standard cost allocations, valuation of initial right-of-use assets and corresponding lease liabilities, valuation of beneficial conversion features in convertible debt, valuation of the assets and liabilities of discontinued operations, stock-based compensation expense, purchased intangible asset valuations, deferred income tax asset valuation allowances, uncertain tax positions, litigation, other loss contingencies, and impairment of long lived assets. These estimates and assumptions are based on current facts, historical experience and various other factors that the Company believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of costs and expenses that are not readily apparent from other sources. The actual results the Company experiences may differ materially and adversely from these estimates.
Reclassifications
Certain reclassifications have been made to the comparative period amounts in order to conform to the current period presentation. In particular, income tax expense and income tax payable have been separated from the comparative period amounts to conform to the current period presentation as income taxes payable from discontinued operations, as the result of the sale of the Company's Nevada operations. The reclassifications had no effect on the reported financial position, results of operations or cash flows of the Company.
Discontinued Operations
See Note 3.
Long-Lived Assets
We evaluate the carrying value of property and equipment if impairment indicators are present or if other circumstances indicate that impairment may exist under authoritative guidance. The annual testing date is March 31. When management believes impairment indicators may exist, projections of the undiscounted future cash flows associated with the use of and eventual disposition of property and equipment are prepared. If the projections indicate that the carrying value of the property and equipment are not recoverable, we reduce the carrying values to fair value. These impairment tests are heavily influenced by assumptions and estimates that are subject to change as additional information becomes available.
Inventory
We value our inventory at the lower of the actual cost of our inventory, as determined using the first-in, first-out method, or its current estimated market value. We periodically review our physical inventory for excess, obsolete, and potentially impaired items and reserve accordingly. Our reserve estimate for excess and obsolete inventory is based on expected future use. Indirect costs, which primarily relate to the lease and operation costs of the Teco Facility, which are included in discontinued operations as of March 31, 2021, are allocated based on square footage of the facility used in the production of inventory. There is
Beneficial Conversion Feature of Convertible Notes Payable
The Company accounts for convertible notes payable in accordance with the guidelines established by the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 470-20, Debt with Conversion and Other Options and Emerging Issues Task Force (“EITF”) 00-27, “Application of Issue No. 98-5 to Certain Convertible Instruments”. A beneficial conversion feature (“BCF”) exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of any attached equity instruments, if any related equity instruments were granted with the debt. In accordance with this guidance, the BCF of a convertible note is measured by allocating a portion of the note's proceeds to the warrants, if applicable, and as a reduction of the carrying amount of the convertible note equal to the intrinsic value of the conversion feature, both of which are credited to additional paid-in-capital. The Company calculates the fair value of warrants issued with the convertible notes using the Black-Scholes valuation model and uses the same assumptions for valuing any employee options in accordance with ASC Topic 718 Compensation – Stock Compensation. The only difference is that the contractual life of the warrants is used.
The value of the proceeds received from a convertible note is then allocated between the conversion features and warrants on a relative fair value basis. The allocated fair value is recorded in the financial statements as a debt discount (premium) from the face amount of the note and such discount is amortized over the expected term of the convertible note (or to the conversion date of the note, if sooner) and is charged to interest expense.
Revenue Recognition
The FASB issued Accounting Standards Codification (“ASC”) 606 as guidance on the recognition of revenue from contracts with customers. Revenue recognition depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented, or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition method). The Company adopted the guidance on April 1, 2018 and applied the cumulative catch-up transition method.
The Company’s only material revenue source was part of discontinued operations prior to the sale of the Nevada Subsidiaries (Note 9), and was derived from sales of cannabis and cannabis products, distinct physical goods. Under ASC 606, the Company is required to separately identify each performance obligation resulting from its contracts from customers, which may be a good or a service. A contract may contain one or more performance obligations. All of the Company’s contracts with customers contained only a single performance obligation, the delivery of distinct physical goods. Because fulfillment of the company’s performance obligation to the customer under ASC 606 results in the same timing of revenue recognition as under the previous guidance (i.e. revenue is recognized upon delivery of physical goods), the Company did not record any material adjustment to report the cumulative effect of initial application of the guidance.
Income Taxes
The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in financial statements or tax returns. Deferred tax items are reflected at the enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Due to the uncertainty regarding the success of future operations, management has valued the deferred tax asset allowance at 100% of the related deferred tax assets.
Because the Company previously operated in the State-licensed cannabis industry through its now-deconsolidated Nevada Subsidiaries, gross profits from those subsidiaries has is subject to the limitations of Internal Revenue Code Section 280E (“280E”) for U.S. income tax purposes. Under 280E, the Company is allowed to deduct expenses that are directly related to the production of its products, i.e. cost of goods sold, but is allowed no further deductions for ordinary and necessary business expenses from its gross profit. The Company believes that the deductions disallowed include the deduction of net operatign loss carryforwards ("NOLs"). The unused NOLs will continue to carry forward and may be used by the Company to offset future taxable income that is not subject to the limitations of 280E.
Earnings and loss per Share
The Company’s basic earnings and loss per share has been calculated using the weighted average number of common shares outstanding during the period. The Company had
| For the Three Months Ended December 31, 2021 | ||||||||||||
| Diluted EPS Computation | Income | Shares | Per-Share | |||||||||
| Net income from continuing operations available to common stockholders | $ | |||||||||||
| Plus: Income impact of assumed conversions | ||||||||||||
| Interest expense on convertible notes payable | ( | ) | ||||||||||
| Effect of assumed conversions | ( | ) | ||||||||||
| Income from continuing operations plus assumed conversions | ||||||||||||
| Net loss from discontinued operations available to common stockholders | ( | ) | ||||||||||
| Net income available to common stockholders | $ | |||||||||||
| Weighted-average common shares outstanding | ||||||||||||
| Plus: incremental shares from assumed conversions | ||||||||||||
| Warrants | ||||||||||||
| Convertible notes payable | ||||||||||||
| Dilutive potential common shares | ||||||||||||
| Adjusted weighted-average shares | ||||||||||||
| Diluted EPS | ||||||||||||
| Net income from continuing operations | $ | $ | ||||||||||
| Net loss from discontinued operations | $ | ( | ) | $ | ( | ) | ||||||
| Net income | $ | $ | ||||||||||
Earnings and loss per Share (continued)
| For the Nine Months Ended December 31, 2021 | ||||||||||||
| Diluted EPS Computation | Income | Shares | Per-Share | |||||||||
| Net income from continuing operations available to common stockholders | $ | |||||||||||
| Plus: Income impact of assumed conversions | ||||||||||||
| Interest expense on convertible notes payable | ( | ) | ||||||||||
| Effect of assumed conversions | ( | ) | ||||||||||
| Income from continuing operations plus assumed conversions | ||||||||||||
| Net loss from discontinued operations available to common stockholders | ( | ) | ||||||||||
| Net income available to common stockholders | $ | |||||||||||
| Weighted-average common shares outstanding | ||||||||||||
| Plus: incremental shares from assumed conversions | ||||||||||||
| Warrants | ||||||||||||
| Options | ||||||||||||
| Convertible notes payable | ||||||||||||
| Dilutive potential common shares | ||||||||||||
| Adjusted weighted-average shares | ||||||||||||
| Diluted EPS | ||||||||||||
| Net income from continuing operations | $ | $ | ||||||||||
| Net loss from discontinued operations | $ | ( | ) | $ | ( | ) | ||||||
| Net income | $ | $ | ||||||||||
Recent Accounting Pronouncements
Standards Not Yet Adopted
In May 2021, the FASB issued ASU No. 2021-04, Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. This guidance clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options due to a lack of explicit guidance in the FASB Codification. The ASU 2021-04 is effective for The Company's fiscal year beginning April 1, 2022. Early adoption is permitted. The Company is evaluating the impact of adopting ASU 2021-04 and does not expect the adoption of this ASU to materially impact its consolidated financial statements.
On June 16, 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments. The standard requires the use of an “expected loss” model on certain types of financial instruments. The standard also amends the impairment model for available-for-sale debt securities and requires estimated credit losses to be recorded as allowances instead of reductions to amortized cost of the securities. The amendments in this ASU are effective for the Company's fiscal year beginning April 1, 2023. The Company is currently evaluating the impact of ASU 2016-13 on its financial statements.
In June 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. The guidance simplifies the current guidance for convertible instruments and the derivatives scope exception for contracts in an entity’s own equity. Additionally, the amendments affect the diluted EPS calculation for instruments that may be settled in cash or shares and for convertible instruments. This ASU will be effective for the Company's fiscal year beginning April 1, 2024. Early adoption is permitted. The amendments in this update must be applied on either full retrospective basis or modified retrospective basis through a cumulative-effect adjustment to retained earnings/(deficit) in the period of adoption. The Company is currently evaluating the impact of ASU 2020-06 on its consolidated financial statements and related disclosures, as well as the timing of adoption.
All other newly issued accounting pronouncements have been deemed either immaterial or not applicable.
Note 2 – Going Concern
The Company’s consolidated 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 $
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, it is possible that 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 future impact on the Company's financial statements 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.
Note 3 – Discontinued Operations
Discontinued operations comprise those activities that were disposed of during the period or which were classified as held for sale at the end of the period and represent a separate major line of business or geographical area that can be clearly distinguished for operational and financial reporting purposes. The Company has included its subsidiaries GB Sciences Nevada, LLC, GB Sciences Las Vegas, LLC, and GB Sciences Nopah, LLC (the "Nevada Subsidiaries") in discontinued operations due to the sale of the Company's Nevada cultivation and extraction facilities. The assets and liabilities of the Nevada Subsidiaries were deconsolidated at December 31, 2021 due to the completion of the sale on that date (Note 9).
The assets and liabilities associated with discontinued operations included in our condensed consolidated balance sheets as of December 31, 2021 and March 31, 2021 were as follows:
| December 31, 2021 |
March 31, 2021 |
|||||||||||||||||||||||
| Continuing |
Discontinued |
Total |
Continuing |
Discontinued |
Total |
|||||||||||||||||||
| ASSETS |
||||||||||||||||||||||||
| CURRENT ASSETS |
||||||||||||||||||||||||
| Cash |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Accounts receivable, net |
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| Inventory, net |
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| Prepaid and other current assets |
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| TOTAL CURRENT ASSETS |
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| Property and equipment, net |
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| Intangible assets, net |
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| Note receivable |
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| Deposits and other noncurrent assets |
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| TOTAL ASSETS |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
| LIABILITIES |
||||||||||||||||||||||||
| CURRENT LIABILITIES |
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| Accounts payable |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Accrued interest |
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| Accrued expenses |
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| Notes payable, net |
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| Indebtedness to related parties |
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| Income taxes payable |
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| Finance lease obligations, current |
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| TOTAL CURRENT LIABILITIES |
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| Convertible notes payable |
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| Finance lease obligations, long term |
||||||||||||||||||||||||
| TOTAL LIABILITIES |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
Discontinued Operations - Revenues and Expenses
The revenues and expenses associated with discontinued operations included in our condensed consolidated statements of operations for the three and nine months ended December 31, 2021 and 2020 were as follows:
| For the Three Months Ended December 31, |
||||||||||||||||||||||||
| 2021 |
2020 |
|||||||||||||||||||||||
| Continuing |
Discontinued |
Total |
Continuing |
Discontinued |
Total |
|||||||||||||||||||
| Sales revenue |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Cost of goods sold |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
| Gross profit/(loss) |
( |
) | ( |
) | ||||||||||||||||||||
| General and administrative expenses |
||||||||||||||||||||||||
| INCOME/(LOSS) FROM OPERATIONS |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||
| OTHER INCOME/(EXPENSE) |
||||||||||||||||||||||||
| Interest expense |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
| Gain on extinguishment |
||||||||||||||||||||||||
| Gain on deconsolidation |
||||||||||||||||||||||||
| Gain on settlement of accounts payable |
||||||||||||||||||||||||
| Loss on amendment to line of credit |
( |
) | ( |
) | ||||||||||||||||||||
| Other income/(expense) |
( |
) | ( |
) | ( |
) | ||||||||||||||||||
| Total other income/(expense) |
( |
) | ( |
) | ( |
) | ||||||||||||||||||
| INCOME/(LOSS) BEFORE INCOME TAXES |
( |
) | ( |
) | ( |
) | ||||||||||||||||||
| Income tax expense |
( |
) | ( |
) | ||||||||||||||||||||
| NET INCOME/(LOSS) |
$ | $ | ( |
) | $ | $ | ( |
) | $ | $ | ( |
) | ||||||||||||
| For the Nine Months Ended December 31, |
||||||||||||||||||||||||
| 2021 |
2020 |
|||||||||||||||||||||||
| Continuing |
Discontinued |
Total |
Continuing |
Discontinued |
Total |
|||||||||||||||||||
| Sales revenue |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Cost of goods sold |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
| Gross profit |
||||||||||||||||||||||||
| General and administrative expenses |
||||||||||||||||||||||||
| INCOME/(LOSS) FROM OPERATIONS |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
| OTHER INCOME/(EXPENSE) |
||||||||||||||||||||||||
| Interest expense |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
| Gain on extinguishment |
||||||||||||||||||||||||
| Gain on deconsolidation |
||||||||||||||||||||||||
| Gain on settlement of accounts payable |
||||||||||||||||||||||||
| Loss on amendment to line of credit |
( |
) | ( |
) | ||||||||||||||||||||
| Debt default penalty |
( |
) | ( |
) | ||||||||||||||||||||
| Other income/(expense) |
( |
) | ( |
) | ( |
) | ||||||||||||||||||
| Total other income/(expense) |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
| INCOME/(LOSS) BEFORE INCOME TAXES |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
| Income tax expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
| NET INCOME/(LOSS) |
$ | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||
Discontinued Operations - Inventory
Raw materials consist of supplies, materials, and consumables used in the cultivation and extraction processes. Work-in-progress includes live plants and cannabis in the drying, curing, and trimming processes. Finished goods includes completed cannabis flower, trim, and extracts in bulk and packaged forms. Inventory is included in current assets from discontinued operations in the Company's March 31, 2021 balance sheet. There is
| March 31, 2021 |
||||
| Raw materials |
$ | |||
| Work in progress |
||||
| Finished goods |
||||
| Subtotal |
||||
| Allowance to reduce inventory to net realizable value |
( |
) | ||
| Total inventory, net |
$ | |||
Discontinued Operations - Leases
The Company evaluates all finance and operating leases, and they are measured on the balance sheet with a lease liability and right-of-use asset (“ROU”) at inception. ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make scheduled lease payments. Lease terms include options to extend when it is reasonably certain that the option will be exercised. Leases with a term of 12 months or less are not recorded on the consolidated balance sheet. The present value of lease payments is calculated using the incremental borrowing rate at lease commencement, which takes into consideration recent debt issuances as well as other applicable market data available.
The Company's only remaining lease commitment was a finance lease for the Nevada Subsidiaries, which is classified as discontinued operations in the Company's unaudited condensed consolidated balance sheet at March 31, 2021. This lease had a remaining non-cancelable term ending December 31, 2025 with an option to extend through December 31, 2030. The rate used to discount this lease was
Finance leases are included in property and equipment (long term assets from discontinued operations), finance lease obligations, short term (current liabilities from discontinued operations), and finance lease obligations, long term (long term liabilities from discontinued operations), on the balance sheet as of March 31, 2021.
During the nine months ended December 31, 2021, finance lease costs included in discontinued operations were $
Discontinued Operations -
In connection with the Binding Letter of Intent dated November 27, 2019 (Note 9), the Teco Subsidiaries entered into a promissory note and line of credit for up to $
Note 4 – Notes Payable and Line of Credit
0% Note Payable dated October 23, 2017
On October 23, 2017, the Company amended the existing Nevada Medical Marijuana Production License Agreement (“Amended Production License Agreement”). Per the terms of the Amended Production License Agreement, GB Sciences purchased the remaining percentage of the production license resulting in the
On August 10, 2020, the Company entered into the Membership Interest Purchase Agreement ("Nopah MIPA") for the sale of its interest in GB Sciences Nopah, LLC. The Nopah sale was closed December 31, 2021 after successful transfer of the Nevada Medical Marijuana Cultivation Facility Registration Certificate on December 14, 2021 (Note 9). At close, the principal balance of the note was reduced from $
8% Line of Credit dated July 24, 2020
On July 24, 2020, the Company entered into the Loan Agreement,
On December 29, 2020, the Company entered into the Omnibus Amendment with the purchaser of the Teco Facility. The Omnibus Amendment reduced the amount of the note receivable that the Company was to receive from the sale of the Teco Facility by $
Summary of Notes and Convertible Notes Payable
As of December 31, 2021, the following notes payable were recorded in the Company’s consolidated balance sheet:
| As of December 31, 2021 |
||||||||||||
| Short-Term Notes Payable |
Face Value |
Discount |
Carrying Value |
|||||||||
| 0% Note Payable dated October 23, 2017 (Note 4) |
$ | $ | $ | |||||||||
| 6% Convertible promissory notes payable (Note 5) |
||||||||||||
| 6% Convertible notes payable issued December 2020 through July 2021 (Note 5) |
( |
) | ||||||||||
| Total short-term notes payable |
( |
) | ||||||||||
| Long-Term Notes Payable |
||||||||||||
| 6% Convertible promissory notes payable due September 30, 2023 (Note 5) |
( |
) | ||||||||||
| 6% Convertible notes payable due December 31, 2023 (Note 5) |
( |
) | ||||||||||
| Total long-term notes payable |
$ | $ | ( |
) | $ | |||||||
Note 5 – Convertible Notes
March 2017 and July 2017 Convertible Note Offerings
In March 2017, the Company entered into a Placement Agent’s Agreement with a third-party brokerage firm to offer units consisting of a $
In July 2017, the Company entered into a Placement Agent’s Agreement with a third-party brokerage firm to offer units consisting of a $
During fiscal year 2018, notes having a total face value of $
All remaining unconverted notes from the March and July 2017 offerings have passed their maturity dates. During the year ended March 31, 2021, the Company agreed to extensions with the holders of a total of $
Three convertible notes totaling $
8% Senior Secured Convertible Promissory Note dated February 28, 2019
On February 28, 2019, the Company issued a $
On December 29, 2020, the Company entered into the Omnibus Amendment, and the note holder agreed to cease interest accrual on the CSW Note after November 30, 2020. After conversions, the remaining principal balance and carrying amount of the note was $
Upon close of the Teco sale on December 31, 2021, the note and accrued interest balances were extinguished in exchange for a reduction of
8% Convertible Promissory Note dated April 23, 2019
On April 23, 2019, the Company entered into the Note Purchase Agreement with Iliad Research and Trading, L.P. ("Iliad") and issued an
During the year ended March 31, 2020, the Company honored the conversion of a total of a total of $
On April 22, 2020, the Company failed to make payment of the principal and accrued interest due under the Iliad Note, resulting in a default. Upon the occurrence of the default, the principal and accrued interest balances outstanding increased by
On May 20, 2020, Iliad filed a lawsuit against the Company in the Third Judicial District Court of Salt Lake County in the State of Utah demanding repayment of the note. The lawsuit further sought to compel the Company to participate in arbitration pursuant to the arbitration provisions contained within the Note Purchase Agreement and to prohibit the Company to raise funds through the issuance of its common stock unless the note is paid in full simultaneously with such issuance. On July 14, 2020, the Court entered judgment in favor of Iliad in the amount of $
On November 20, 2020, the Company, Iliad, and Wellcana Plus, LLC entered into the Judgment Settlement Agreement, whereby Iliad agreed to discharge all amounts owed to it by the Company upon receipt of payment totaling $
December 2020 $625,000 6% Convertible Note Offering
On December 18, 2020, the Company began an offering of
At December 31, 2021, notes with a carrying amount of $
Note 6 – Capital Transactions
Sale of Common Stock and Exercise of Warrants
On April 1, 2020, the Company entered into the Advisory Agreement with its brokers and effected a temporary decrease in the exercise price of the Company's outstanding warrants to $
During the nine months ended December 31, 2021, the Company issued
During the nine months ended December 31, 2021, the Company recorded $
Note 7 – Commitments and Contingencies
On April 22, 2020, the Company failed to repay any of the outstanding balance of the Convertible Promissory Note Payable to Iliad Research and Trading, L.P., resulting in a default. On May 20, 2020, Iliad filed a lawsuit against the Company in the Third Judicial District Court of Salt Lake County in the State of Utah demanding repayment of the note. On July 14, 2020, the Court entered judgment in favor of Iliad in the amount of $
On April 22, 2020, the Company was served notice of a lawsuit filed in the Eighth Judicial District Court in Clark County, Nevada, filed by a contractor who had been hired to perform architectural and design services. The lawsuit demanded payment of $
From time to time, the Company may become involved in certain legal proceedings and claims which arise in the ordinary course of business. In management’s opinion, based on consultations with outside counsel, the results of any of these ordinary course matters, individually and in the aggregate, are not expected to have a material effect on our results of operations, financial condition, or cash flows. As more information becomes available, if management should determine that an unfavorable outcome is probable on such a claim and that the amount of such probable loss that it will incur on that claim is reasonably estimable, the Company would record a reserve for the claim in question. If and when the Company records such a reserve, it could be material and could adversely impact its results of operations, financial condition, and cash flows.
Note 8 – Related Party Transactions
As of December 31, 2021 the Company was indebted to executive officers for unpaid compensation totaling $
Note 9 – Sale of Membership Interests in Nevada Subsidiaries
On March 24, 2020, the Company entered into the Membership Interest Purchase Agreement ("Teco MIPA") with AJE Management, LLC. Pursuant to the Teco MIPA, the Company agreed to sell
On August 10, 2020, the Company entered into the Membership Interest Purchase Agreement ("Nopah MIPA") and Promissory Note Modification Agreement with 483 Management, LLC. Pursuant to the Nopah MIPA, the Company agreed to sell its
The closing of the Teco and Nopah sales was contingent upon the successful transfer of the Nevada cultivation and production licenses. On December 14, 2021, the Company received approval from the Nevada Cannabis Compliance Board for the transfer of cannabis cultivation and extraction licenses held by its subsidiaries GB Sciences Nevada, LLC, GB Sciences Las Vegas, LLC, and GB Sciences Nopah, LLC (the "Nevada Subsidiaries"). Consequently, all conditions to closing the sales of the
As consideration for the membership interests, the Company received cash payments of $
As the result of sale of the Nevada Subsidiaries, the Company recorded a gain on deconsolidation of $
| December 31, 2021 | ||||
| Cash payments received, including advancements of $ | $ | |||
| 8% Note Receivable due December 31, 2024 | ||||
| Extinguishment of debt and accrued interest due to purchasers and purchasers' affiliates | ||||
| Extinguishment of accrued management fees due to purchaser | ||||
| Total consideration | ||||
| Carrying amount of assets | ||||
| Carrying amount of liabilities | ( | ) | ||
| Net assets deconsolidated | ||||
| GAIN ON DECONSOLIDATION | $ | |||
As the result of the sale, the income, assets, and cash flows of GB Sciences Nevada, LLC, GB Sciences Las Vegas, LLC, and GB Sciences Nopah, LLC have been reclassified as discontinued operations for all periods presented in the Company's consolidated financial statements prior to the sale.
Note 10 – Subsequent Events
On January 14, 2022, the Company made a payment of $
On January 20, 2022, the Company repaid all of the deferred compensation totaling $
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis contains “forward-looking statements,” as defined in the United States Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “could”, “expects”, “plans”, “intends”, “anticipates”, “believes”, “estimates”, “predicts” or “continue” , which list is not meant to be all-inclusive and other such negative terms and comparable technology. These forward-looking statements, include, without limitation, statements about our market opportunity, our strategies, competition, expected activities and expenditures as we pursue our business plan, and the adequacy of our available cash resources. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Actual results may differ materially from the predictions discussed in these forward-looking statements. The economic environment within which we operate could materially affect our actual results. Additional factors that could materially affect these forward-looking statements and/or predictions include among other things: (1)product demand, market and customer acceptance of 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 plant-based research and biopharmaceutical drug development company whose goal is to create patented formulations of plant-inspired, minimum essential 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, minimum essential 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-inspired medicines, with virtual operations in North America and Europe. GBSGB’s assets include a portfolio of intellectual property containing both proprietary plant-inspired 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 five programs are in the pre-clinical animal stage of development including Parkinson’s disease ("PD"), chronic pain, COVID-related cytokine release syndrome, depression/anxiety, and cardiovascular therapeutic programs. GBSGB is assertively preparing its PD therapeutics for a first-in-human trial. Depending on the results of ongoing preclinical studies, the Company intends to move forward with clinical trials for its chronic pain and COVID-related cytokine release syndrome therapies after PD. 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, fourteen USPTO nonprovisional patent applications pending in the US, and seven provisional patent applications in the US. In addition to the USPTO patents and patent applications, the company has filed 41 patent applications internationally to protect its proprietary technology and formulations. In October 2021, we filed the nonprovisional 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.
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 minimum essential 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, minimum essential 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 minimum essential 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 goal is to identify minimum essential mixtures (MEM) that retain the efficacy of the whole plant extracts, but with the manufacturing and quality control advantages of single ingredient pharmaceutical products. 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, minimum essential mixtures for specific diseases in silico, which are then tested in cell and animal models.
In October of 2021, GBSGB began its first preclinical animal trial of non-cannabis-based formulations that were discovered and pre-validated using our PhAROS™ drug discovery platform. The National Research Council of Canada (“NRC”) will test GBSGB’ proprietary, psychotropic plant-based formulas for the treatment of depression and anxiety. For these novel psychotropic drug candidates, the GBSGB research team used the PhAROS™ platform to identify new ingredients to improve upon an initial formulation for anxiety based on traditional medicine. The original plant mixture was derived from the kava plant, but some elements of kava are thought to cause liver toxicity. PhAROS™ identified ingredients from the Piper plant family as a substitute for the functionality of the ingredients in question without the potentially adverse safety profiles of those original ingredients. The Piper plant family includes pepper plants that are used worldwide in traditional medicines. GBSGB’s new psychotropic formulations are currently in preclinical trials at the Zebrafish Toxicology, Genomics and Neurobiology Lab at the NRC, led by Dr. Lee Ellis, Research Officer and Team Lead. The ongoing work between the NRC and GBSGB has produced strong and applicable data for the evaluation of its therapies, and this trial could provide novel treatment options for patients with depression and anxiety.
The U.S. Patent and Trademark Office allows complex mixtures to be claimed as Active Pharmaceutical Ingredients ("APIs"). GBSGB has five issued patents, plus a series of pending patents containing plant-derived complex mixtures and minimum essential 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.
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. GBSGB now has five preclinical phase product development programs and is aggressively preparing its lead formulations for the treatment of Parkinson’s disease for a first-in-human clinical trial. GBSGB’s chronic pain, anxiety, and depression formulations are currently in preclinical animal studies with Dr. Lee Ellis of the National Research Council ("NRC") Canada in Halifax, Nova Scotia. Recently, we received positive preclinical, proof-of-concept data supporting our minimum essential mixtures for the treatment of Cytokine Release Syndrome in COVID-19 (COVID-CRS) and other severe hyperinflammatory conditions. GBSGB’s lead COVID-CRS candidates will be optimized based on late-stage preclinical studies with Dr. Norbert Kaminski at Michigan State University. Our growing intellectual property portfolio was augmented with additional patent-protections for our PhAROS™ drug discovery platform, new PhAROS™ discovered, non-cannabis formulations, and improved formulations for our PD therapeutics.
For the Company’s lead program in PD therapeutics, GBSGB has improved upon the efficacy of their original formulations and filed a new patent application family to protect GBSGB’s defined cannabinoid ratio-minimum essential mixtures (DCR-MEMs) for the treatment of Parkinsonian motor symptoms. GBSGB had announced previously that it has obtained the statistically significant reduction of Parkinson’s-disease like symptoms using proprietary cannabinoid-containing MEMs in an animal model of Parkinson’s disease ("PD"). Three of GBSGB’s PD formulations significantly reduced the PD-like motor symptoms. In addition, the toxicity studies for these original PD formulas came back without any significant negative findings. These initial efficacious PD formulations were equimolar minimum essential mixtures (E-MEMs), wherein, each contained three cannabinoids combined at an equimolar ratio (1:1:1). In the past year 2020-2021, GBSGB has screened an additional sixty-three variations of the original three equimolar MEMs and identified a total of twenty-two DCR-MEMs with optimized ratios of cannabinoids that produced a statistically significant reduction in OHDA induced motor symptoms. Five of these twenty-two efficacious MEMs outperformed the original equimolar cannabinoid MEMs. A new patent application has been filed to protect these DCR-MEMs. 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 GBSGB’s Parkinson’s disease therapies, the initial clinical prototypes of GBSGB’s Defined Cannabinoid Ratio (DCR)-MEM 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. Previously, GBSGB has completed two proof-of-concept studies for its MEM. Now, GBSGB is performing a Feasibility Study that will produce and validate the clinical prototypes for its DCR-MEM. 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 therapeutic 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 pain program, GBSGB is testing its MEM for chronic pain 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 MEM and the time-released MEM 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. However, the COVID pandemic adversely affected the progress on this study, but we are happy to report that we are back on track to continue with the testing of these promising chronic pain formulations.
In late summer of 2021, GBSGB received positive proof-of-concept data from a human immune cell model supporting the efficacy of their proprietary MEM designed for the suppression of COVID-related, cytokine release syndromes (CRS) while preserving key anti-viral immune responses. Based on this new positive proof-of-concept data, GBSGB converted their provisional patent application entitled, “CANNABINOID-CONTAINING COMPLEX MIXTURES FOR THE TREATMENT OF CYTOKINE RELEASE SYNDROME WHILE PRESERVING KEY ANTI-VIRAL IMMUNE REACTIONS” to a nonprovisional patent application on August 18, 2021. The best performing MEM will be further developed in preparation for clinical studies to evaluate their anti-inflammatory potential in the treatment of severely ill COVID-19 patients contending with Cytokine Release Syndrome (CRS) and associated hyperinflammatory conditions, such as macrophage activation syndrome (MAS) and acute respiratory distress syndrome (ARDS). CRS, MAS, and ARDS are the leading causes of deaths in COVID-19 patients. GBSGB’s proof-of-concept study was performed at Michigan State University using a state-of-the-science human immune model. In GBSGB’s proof-of-concept study, immune cells from human donors were co-cultured together in one of four treatment groups: untreated (no inflammatory stimulus), inflammatory stimulus, control (inflammatory stimulus + vehicle from cannabinoid mixtures), or pre-treatment with the cannabinoid mixture + inflammatory stimulus. Then a panel of cytokines and inflammatory markers was measured from each of these treatment groups from different immune cell types within the co-cultured cells at four time points to determine whether GBSGB’s MEMs were able to alter the levels of pro-inflammatory cytokines or other inflammatory agents. GBSGB’s COVID-CRS formulations showed potential for the selective inhibition of pro-inflammatory processes in response to viral- and bacterial-triggered hyperinflammation in a human immune cell model. These positive proof-of-concept results support the potential for some of these mixtures to accomplish our therapeutic goals, but, ultimately, clinical trial results will determine whether they are efficacious. GBSGB’s plant-based drug discovery platform is advancing biopharmaceutical research at a time when thousands are dying from COVID-19. The next step is to further develop our plant-inspired drugs and eventually bring them to human trials so that the use of well-defined cannabinoid mixtures in clinical practice can become a reality.
As mentioned above, the Company recently announced that the NRC Canada will test GBSGB’s proprietary, psychotropic plant-based formulas for the treatment of depression and anxiety in preclinical animal studies. GBSGB has leveraged its patent-pending PhAROS™ (Phytomedical Analytics for Research Optimization at Scale) platform to identify these combinations of plant compounds for novel drug candidates to treat depression and anxiety. These are the company’s first non-cannabis formulations to enter preclinical studies. For these novel psychotropic drug candidates, the GBSGB’s research team used the PhAROS™ platform to identify new ingredients to improve upon an initial formulation for anxiety based on traditional medicine. The original plant mixture was derived from the kava plant, but some elements of kava are thought to cause liver toxicity. PhAROS™ identified ingredients from the Piper plant family as a substitute for the functionality of the ingredients in question without the potentially adverse safety profiles of those original ingredients. The Piper plant family includes pepper plants that are used worldwide in traditional medicines. The Global Anxiety Disorder and Depression Treatment Market size is forecast to reach USD 19.81 Billion by 2028 according to Reports & Data.
Favorable Research Updates from our university collaborators reveal the promise in our discovery programs including: 1) Multiple MEM discovery projects using and advancing GBSGB’s proprietary PhAROS™ drug discovery platform in conjunction with Chaminade University, 2) GBSGB’s Cannabis Metabolomics Project with both Chaminade University of Honolulu, Hawai’i and the University of Athens, Greece, and 3) GBSGB’s Applied Time-Released Nanoparticles for Delivery of Cannabis-based Ingredients with the University of Seville, Spain and the University of Cardiz, Spain.
This year, our growing intellectual property portfolio was augmented with additional patent-protections for our PhAROS™ drug discovery platform that were filed in July of 2021 and in October of 2021. GBSGB also filed for protection of new PhAROS™ discovered, non-cannabis formulations in July of 2021. In September of 2021, GBSGB filed a patent application for the Company’s improved DCR-MEM formulations for our PD therapeutic program. These new patent applications expanded upon the solid foundation of intellectual property developed over the past six years. In 2020, the three patents which protect formulations for the Company’s lead therapeutic programs were 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 and third US patents for active pharmaceutical ingredients that are complex mixtures identified by our biotech platform further confirmed 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 MEMs 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 MEMs. The US Patent entitled "Cannabinoid-Containing Complex Mixtures for the Treatment of Mast-Cell-Associated or Basophil-Mediated Inflammatory Disorders" protects methods of using GBSGB’s proprietary MEMs for treating Mast Cell Activation Syndrome (MCAS). MCAS is a severe immunological condition in which mast cells inappropriately and excessively release inflammatory mediators, resulting in a range of severe chronic hyperinflammatory symptoms and life-threatening anaphylaxis attacks. Receiving this patent for the treatment of MCAS using GBSGB’s MEMs is an important milestone in the development of this urgently needed medicine. There is no single recommended treatment for MCAS patients. Instead, they attempt to manage MCAS symptoms primarily by avoiding ‘triggers’ and using rescue medicines for their severe hyperinflammatory attacks. Therefore, MCAS patients need new therapeutic options to control their mast cell related symptoms, and our MEMs were designed to simultaneously control multiple inflammatory pathways within mast cells as a comprehensive treatment option. The Company is strategically targeting MCAS for two additional reasons. By focusing on a rare disease with no known cure, our company can apply for the U.S. Food and Drug Administration’s expedited approval process, which allows clinically successful treatments to get to market both quicker and more cost effectively. Gaining approval from the US FDA for the entire anti-inflammatory market would be extremely time consuming and cost prohibitive. Demonstrating that our MEMs are safe for the treatment of MCAS would favorably position our Company for clinical testing of these MEMs as potential treatments for other related inflammatory disorders, such as inflammatory bowel disease, thereby widening the target market and drastically shortening the development cycle and costs.
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. |
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| 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. | |||||
|
|
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| 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 |
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| U.S. Patent Number: |
10,857,107 |
Expiration date: |
January 31, 2038 |
|||||
| Issued: |
December 8, 2020 |
Inventors: | Andrea Small-Howard et al. | |||||
|
|
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| U.S. Patent protection was granted for GBSGB’s Cannabinoid-Containing Complex Mixtures for the treatment of Mast Cell Activation Syndrome (MCAS). |
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| Title: METHODS AND COMPOSITIONS FOR PREVENTION AND TREATMENT OF CARDIAC HYPERTROPHY |
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| 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 |
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| 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. |
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| Title: METHOD FOR PRODUCING A PHARMACEUTICAL COMPOSITION OF POLYMERIC NANOPARTICLES FOR TREATING NEUROPATHIC PAIN CAUSED BY PERIPHERAL NERVE COMPRESSION |
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| Spain Patent Number: | ES2582287 | Inventors: | Lucia Martin Banderas, Mercedes Fernandez Arevalo, Esther Berrocoso Dominguez, Juan Antonio Mico Segura | |||||
| Issued: | September 29, 2017 | Assignees: | Universidad de Sevilla, Universidad de Cadiz, Centro de Investigacion Biomedica En Red |
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| 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. |
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In addition to the issued patents listed above, GBSGB's intellectual property portfolio includes a total of 14 USPTO and 41 international patents pending:
| Title |
Jurisdiction |
Application Number |
Other International Applications Filed |
Continuation of |
| CANNABINOID-CONTAINING COMPLEX MIXTURES FOR THE TREATMENT OF NEURODEGENERATIVE DISEASES |
US |
USPTO 16/844,713 |
AU, CA, CN, EP, HK, IL, JP |
15/729,565 |
| MYRCENE-CONTAINING COMPLEX MIXTURES TARGETING TRPV1 |
US |
USPTO 16/878,295 |
AU, CA, CN, EP, HK, IL, JP |
15/986,316 |
| CANNABINOID-CONTAINING COMPLEX MIXTURES FOR THE TREATMENT OF MAST CELL-ASSOCIATED OR BASOPHIL-MEDIATED INFLAMMATORY DISORDERS |
US |
USPTO 17/065,400 |
AU, CA, CN, EP, HK, IL, JP |
15/885,620 |
| TRPV1 ACTIVATION-MODULATING COMPLEX MIXTURES OF CANNABINOIDS AND/OR TERPENES |
US |
USPTO 16/420,004 |
AU, CA, CN, EP, HK, IL, JP |
|
| THERAPEUTIC NANOPARTICLES ENCAPSULATING TERPENOIDS AND/OR CANNABINOIDS |
US |
USPTO 16/686,069 |
||
| TREATMENT OF PAIN USING ALLOSTERIC MODULATOR OF TRPV1 |
US |
USPTO 16/914,205 |
||
| CANNABINOID-CONTAINING COMPLEX MIXTURES FOR THE TREATMENT OF CHRONIC INFLAMMATORY DISORDERS |
US |
USPTO 63/067,269 (provisional) |
||
| CANNABINOID-CONTAINING COMPLEX MIXTURES FOR THE TREATMENT OF CYTOKINE RELEASE SYNDROME WHILE PRESERVING KEY ANTI-VIRAL IMMUNE REACTIONS |
US |
USPTO 17/406,035 |
||
| IN SILICO META-PHARMACOPEIA ASSEMBLY FROM NON-WESTERN MEDICAL SYSTEMS USING ADVANCED DATA ANALYTIC TECHNIQUES TO IDENTIFY AND DESIGN PHYTOTHERAPEUTIC STRATEGIES |
US |
USPTO 17/501,498 |
||
| METHODS AND COMPOSITIONS FOR PREVENTION AND TREATMENT OF CARDIAC HYPERTROPHY |
EU |
EPO 3,348,267 |
IN, CN |
|
| METHOD FOR PRODUCING A PHARMACEUTICAL COMPOSITION OF POLYMERIC NANOPARTICLES FOR TREATING NEUROPATHIC PAIN CAUSED BY PERIPHERAL NERVE COMPRESSION |
WIPO/PCT |
WIPO 2016/128591 |
EU, CA |
|
| CANNABINOID-CONTAINING FORMULATIONS FOR PARKINSONIAN MOVEMENT DISORDERS |
US |
USPTO 63/249,482 (provisional) |
||
| METHODS AND COMPOSITIONS FOR THE IDENTIFICATION OF NOVEL THERAPEUTIC APPROACHES TO MIGRAINE USING THE PHAROS IN SILICO DRUG DISCOVERY PLATFORM | US | USPTO 63/221,334 (provisional) | ||
| METHOD AND COMPOSITIONS FOR THE PHYTOMEDICAL COMPONENT SUPPLY CHAIN DECISION SUPPORT USING THE PHAROS IN SILICO DRUG DISCOVERY PLATFORM | US | USPTO 63/221,358 (provisional) | ||
| METHODS AND COMPOSITIONS FOR NOVEL PAIN THERAPIES INCLUDING OPIOID-ALTERNATIVE STRATEGIES IDENTIFIED USING THE PHAROS IN SILICO DRUG DISCOVERY PLATFORM | US | USPTO 63/221,364 (provisional) | ||
| METHODS AND COMPOSITIONS FOR NOVEL PAIN THERAPIES TARGETED TO SPECIFIC PAIN SUBTYPES IDENTIFIED USING THE PHAROS IN SILICO DRUG DISCOVERY PLATFORM | US | USPTO 63/221,366 (provisional) | ||
| METHODS AND COMPOSITIONS DEVELOPMENT OF NOVEL THERAPEUTICS BASED ON PIPER SPECIE-CONTAINING PHYTOMEDICINES FOR ANXIETY AND ASSOCIATED DISORDERS USING THE PHAROS IN SILICO DRUG DISCOVERY PLATFORM | US | USPTO 63/221,367 (provisional) | ||
| METHODS AND COMPOSITIONS FOR DECONVOLUTION OF COMPLEX PHYTOMEDICAL FORMULAE FOR CANCER TO IDENTIFY TARGETED STRATEGIES FOR CANCER PAIN AND CYTOTOXIC THERAPEUTIC CANDIDATES USING THE PHAROS IN SILICO DRUG DISCOVERY PLATFORM | US | USPTO 63/221,371 (provisional) |
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. Our collaborations with Chaminade also led to the development of our PhAROS™ drug discovery platform.
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: Preclinical work using a cutting-edge, multi-cellular model of the human immune system and a multi-cell model of the brain to validate our MEMs for use in the treatment of COVID-19-related cytokine release syndromes (COVID-CRS). 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. Positive proof-of-concept results have guided the development of these selectively anti-inflammatory MEM.
The University of Seville: Bringing their novel expertise to the development and functional testing of time-released and disease-targeted nanoparticles of cannabis-based minimum essential 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 chronic pain MEMs 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 chronic pain MEMs. In 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. Our partners at the University of Seville are adding new cannabis-based ingredients into the oral, time-released nanoparticle format for the completion of our maximally effective MEMs for chronic pain. The results from Seville are very promising, and these nanoparticles have entered the animal testing phase at the NRC in Halifax.
The National Research Center (NRC) of Canada, Halifax, Nova Scotia: Four animal-phase studies are being performed by Dr. Lee Ellis’ group at the NRC. 1) Parkinson’s Disease: In Q1 of 2020, an animal safety and efficacy study was completed for GBSGB’s equimolar MEMs for the treatment of the motor symptoms of Parkinson’s disease, 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 in these equimolar MEMs, GBSGB completed a final phase of testing in August of 2021, which identified five defined cannabinoid ratio (DCR)-MEMs that were more effective than the root equimolar MEM. 2) Chronic Pain: In Q1 of 2019, GBSGB started a safety and efficacy study in animals for GBSGB’s Chronic Pain (CP) formulas. The midterm results for these preclinical pain studies were promising, but the study was significantly delayed by the COVID pandemic. 3 & 4) Depression and Anxiety: Minimum essential mixtures of plant-based ingredients from kava and the related Piper plant family are being evaluated now.
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 in rodents, and we are seeking commercialization partners.
Path to Market: Drug Development Stages and Proposed Clinical Trials
GBSGB has plant-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 discovery, preclinical studies, clinical trials, and the required regulatory submissions required for obtaining US FDA pre-market approvals for pharmaceutical products (and equivalent approvals from other corresponding agencies worldwide) is traditionally a long and expensive process. However, GBSGB asserts that its proprietary, PhAROS™, AI-enabled, drug discovery engine; plant-inspired formulations; 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 and animal 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 discovery and validation of minimum essential mixtures derived from complex, plant-based therapeutics. GBSGB plans to use an Exploratory IND/Phase 0 Program that gets the Company to First-in-Human 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 for PD, which compares the efficacies of multiple related cannabinoid-based formulations, the Company plans to advance the lead PD 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 with other scientific consultants 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 US FDA approval to market one of our therapies, there can be no assurance that it could be successfully marketed or would not be superseded by another plant-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 plant-inspired pharmaceuticals or therapies, it would have a material adverse effect on our future financial condition and business prospects.
Other Operations
On March 24, 2020, the Company entered into the Membership Interest Purchase Agreement ("Teco MIPA") with AJE Management, LLC. Pursuant to the Teco MIPA, the Company agreed to sell 100% of its membership interests in GB Sciences Nevada, LLC, and GB Sciences Las Vegas, LLC (the "Teco Subsidiaries") for approximately $8 million, which amount includes a cash payment at closing, the extinguishment of certain liabilities owed to the purchaser and affiliates of the purchaser, and an 8% promissory note.
On August 10, 2020, the Company entered into the Membership Interest Purchase Agreement ("Nopah MIPA") and Promissory Note Modification Agreement with 483 Management, LLC. Pursuant to the Nopah MIPA, the Company agreed to sell its 100% membership interest in GB Sciences Nopah, LLC ("Nopah"), which holds a Nevada medical marijuana cultivation certificate. As consideration, the Company would receive $300,000 as a reduction to the balance of the 0% Note payable dated October 23, 2017 (Note 4) and accounts payable of $74,647, which were owed to an affiliate of the purchaser.
The closing of the Teco and Nopah sales was contingent upon the successful transfer of the Nevada cultivation and production licenses. On December 14, 2021, the Company received approval from the Nevada Cannabis Compliance Board for the transfer of cannabis cultivation and extraction licenses held by its subsidiaries GB Sciences Nevada, LLC, GB Sciences Las Vegas, LLC, and GB Sciences Nopah, LLC (the "Nevada Subsidiaries"). Consequently, all conditions to closing the sales of the 100% membership interests in the Nevada Subsidiaries were satisfied, and the transactions formally closed on December 31, 2021. After the closing date, the Company retains no ownership interest in the Nevada Subsidiaries.
RESULTS OF OPERATIONS
The following table sets forth certain of our Statements of Operations data from continuing operations:
| For the Three Months Ended |
For the Nine Months Ended |
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| December 31, |
December 31, |
|||||||||||||||
| 2021 |
2020 |
2021 |
2020 |
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| General and administrative expenses |
$ | 512,788 | $ | 670,311 | $ | 1,417,738 | $ | 1,677,482 | ||||||||
| LOSS FROM OPERATIONS |
(512,788 | ) | (670,311 | ) | (1,417,738 | ) | (1,677,482 | ) | ||||||||
| OTHER INCOME/(EXPENSE) |
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| Interest expense |
(159,478 | ) | (167,120 | ) | (319,976 | ) | (1,249,994 | ) | ||||||||
| Gain on extinguishment |
- | 467,872 | - | 467,872 | ||||||||||||
| Gain on deconsolidation |
5,206,208 | - | 5,206,208 | - | ||||||||||||
| Gain on settlement of accounts payable |
- | 372,415 | - | 372,415 | ||||||||||||
| Loss on amendment to line of credit |
- | (650,000 | ) | - | (650,000 | ) | ||||||||||
| Debt default penalty |
- | - | - | (286,059 | ) | |||||||||||
| Other income/(expense) |
(15,639 | ) | 17,523 | (6,639 | ) | 14,149 | ||||||||||
| INCOME/(LOSS) BEFORE INCOME TAXES |
4,518,303 | (629,621 | ) | 3,461,855 | (3,009,099 | ) | ||||||||||
| Income tax expense |
- | - | - | - | ||||||||||||
| INCOME/(LOSS) FROM CONTINUING OPERATIONS |
$ | 4,518,303 | $ | (629,621 | ) | $ | 3,461,855 | $ | (3,009,099 | ) | ||||||
Comparison of the Three and Nine Months Ended December 31, 2021 and 2020
General and Administrative Expenses
General and administrative expenses decreased by $(157,523) to $512,788 for the three months ended December 31, 2021, compared to $670,311 for the three months ended December 31, 2020. During the nine months ended December 31, 2021, general and administrative expense decreased by $(259,744) to $1,417,738, compared to $1,677,482 in the prior year. The decreases for the three and six months primarily relate to reduced compensation paid to executives and board members. 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 $(7,642) to $159,478 for the three months ended December 31, 2021, compared to $167,120 in the prior year quarter. Interest expense decreased by $(930,018) to $319,976 for the nine months ended December 31, 2021, compared to $1,249,994 in the prior year six months. The decrease is attributable to substantially less interest-bearing debt outstanding during the current year periods 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 December 31, 2021 stopped 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.
Gain on Extinguishment
During the three and nine months ended December 31, 2020, the Company recorded a gain on extinguishment of $467,872 related to the settlement of the note payable to Iliad Research and Trading, L.P. at a discount.
Gain on Deconsolidation
During the three and nine months ended December 31, 2021, the Company recorded a gain on deconsolidation of $5,206,208 as the result of the sale of the Nevada Subsidiaries.
Gain on Settlement of Accounts Payable
During the three and nine months ended December 31, 2020, the Company recorded gains totaling $372,415 related to the settlement with vendors of accounts payable for less than the full balance owed. The full amount owed to each vendor was accrued in accounts payable during prior periods.
Loss on Amendment to Line of Credit
During the three and nine months ended December 31, 2020, the Company recorded $650,000 in expense related to the December 29, 2020 modification of the July 24, 2020 Line of Credit payable to AJE Management, LLC as the result of the Omnibus Amendment agreement.
Debt Default Penalty
The Company recorded a default penalty of $286,059 for the nine months ended September 30, 2020, 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.
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 along with the sale of our subsidiaries.
At December 31, 2021, cash was $1,504,330, other current assets excluding cash were $112,347, and our working capital deficit was $3,022,261. Current liabilities in continuing operations were $3,802,198 and consisted principally of $1,735,905 in accounts payable, $472,812 in accrued liabilities, $1,508,568 in notes and convertible notes payable, and $84,913 in indebtedness to related parties, and a current liability from discontinued operations of $836,740, which represents a federal income tax liability generated by the Teco Subsidiaries.
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 $761,509, and working capital from discontinued operations was $1,201,488.
Sources and Uses of Cash
Operating Activities
Net cash used in operating activities was $1,200,915, including $87,772 used by discontinued operations for the nine months ended December 31, 2021, compared to cash used of $1,253,180, net of $21,098 provided by operating activities of discontinued operations for the nine months ended December 31, 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 nine months ended December 31, 2021, $1,550,339 was provided by investing activities, including $1,567 provided by discontinued operations. Cash provided by investing activities of continuing operations consisted of $1,648,772 proceeds received from the sale of the Nevada Subsidiaries, and was offset by $100,000 paid to acquire intangible assets. During the nine months ended December 31, 2020, cash provided by investing activities was $4,594,621, which consists of $5,051,923 in proceeds from a note receivable, offset by $326,000 paid to acquire intangible assets and $131,302 used in investing activities of discontinued operations.
Financing Activities
During the nine months ended December 31, 2021, cash flows provided by financing activities totaled $9,273, net of $103,387 used in discontinued operations. Cash flows provided by financing activities of continuing operations related to $62,660 in gross proceeds from warrant exercises and $50,000 proceeds from a convertible note payable. Cash used in financing activities for the nine months ended December 31, 2020 was $2,571,850, including $129,237 used in discontinued operations. Cash used in financing activities of continuing operations for the nine months ended December 31, 2020 consisted of $3,156,014 of principal payments on notes and convertible notes payable, a principal payment of $151,923 on a note payable to a related party, $34,500 fees for issuing convertible notes payable, and $24,983 brokerage fees for issuance of common stock and warrants, offset by $249,807 gross proceeds from warrant exercises, $300,000 proceeds from convertible notes payable, and $375,000 proceeds from a line of credit.
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 $100,911,984 at December 31, 2021. The Company had a working capital deficit of $3,022,261 at December 31, 2021, including a tax liability of $836,740 from discontinued operations, compared to $5,054,593 at March 31, 2021, net of working capital of $1,201,488 classified as discontinued operations. In addition, the Company has consumed cash in its operating activities of $1,200,915 for the nine months ended December 31, 2021, including $87,772 used by discontinued operations, compared to $1,253,180 used in operating activities, net of $21,098 provided by discontinued operations for the nine months ended December 31, 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.
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.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
ITEM 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that material information required to be disclosed in the periodic reports filed under the Securities Exchange Act of 1934, as amended, or 1934 Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to ensure that such information is accumulated and communicated to management, including the chief executive officer and chief financial officer as appropriate, to allow timely decisions regarding required disclosure. At the end of the quarter ended December 31, 2021, the Company carried out an evaluation, under the supervision and with the participation of management, including the principal executive officer and the principal financial officer, of the effectiveness of the design and operation of disclosure controls and procedures, as defined in Rule 13(a)-15(e) and Rule 15d-15(e) under the 1934 Act. Based on this evaluation, management concluded that as of December 31, 2021, the disclosure controls and procedures were not effective due to material weaknesses as no member of our board of directors qualifies as an “audit committee financial expert” as defined in Item 407(d)(5) of Regulation S-K promulgated under the Securities Act.
Limitations on Effectiveness of Controls and Procedures
Management, including the Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), does not expect that disclosure controls and procedures will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Changes in Internal Controls
During the fiscal quarter ended December 31, 2021, there have been no changes in the internal controls over financial reporting that have materially affected or are reasonably likely to materially affect the internal controls over financial reporting.
No new items to disclose.
There are no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2021, as filed with the SEC.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
No new items to disclose.
ITEM 3. Defaults Upon Senior Securities
No new items to disclose.
ITEM 4. Mine Safety Disclosures
Not Applicable.
None.
In reviewing the agreements included as exhibits to this Form 10-Q, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company or the other parties to the agreements. The agreements may contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the parties to the applicable agreement and:
●should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;
●have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;
●may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and
●were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about the Company may be found elsewhere in this Form 10-Q and the Company’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov.
The following exhibits are included as part of this report:
* This certification is being furnished and shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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GB SCIENCES, INC. |
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| Date: February 11, 2022 |
By: |
/s/ John Poss |
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John Poss, Chief Executive Officer (Principal Executive Officer) |
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GB SCIENCES, INC. |
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| Date: February 11, 2022 | By: |
/s/ Zach Swarts |
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Zach Swarts, Chief Financial Officer (Principal Financial Officer) |
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PROMISSORY NOTE
| $3,025,000 | December 31, 2021 |
FOR VALUE RECEIVED, AJE MANAGEMENT, LLC (“Maker”), hereby promises to pay to GB SCIENCES, INC., a Nevada corporation (“Payee”), with an address at 3550 W. Teco Avenue, Las Vegas Nevada 89118, the principal sum of THREE MILLION TWENTY FIVE THOUSAND DOLLARS ($3,025,000), together with all interest that has accrued thereon in accordance with the terms of this Promissory Note (this “Note”).
The outstanding principal amount of this Note shall bear interest at the rate of eight (8%) percent per annum, based on a year of 365 days or 366 days, as applicable, for actual days elapsed, until the date on which the last payment of principal under this Note shall have been paid.
This Note shall be payable as follows: (i) quarterly amortizing payments of principal and interest in the aggregate amount of $201,773.86 each shall be due and payable commencing on March 31, 2023 (the “Amortization Commencement Date”) and on each three-month anniversary of such date, and (ii) a final payment equal to the remaining unpaid principal amount outstanding under this Note, together with all accrued interest thereon, shall be due and payable on December 31, 2024 (the “Maturity Date”).
Prior to the Amortization Commencement Date, payments of interest only in the amount of $60,500 each shall be due and payable quarterly in arrears commencing on March 31, 2022 and on each of the next three three-month anniversaries of such date.
This Note has been issued to Payee under that certain Membership Interest Purchase Agreement (this “Purchase Agreement”), dated as of March 24, 2020, by and among Maker, Payee, GB Sciences Las Vegas, LLC (“GBSLV”), and GB Sciences Nevada LLC (“GBSNV” and, together with GBSLV, the “Teco Subsidiaries”). Maker shall have the right to set off and apply against any and all amounts payable under this Note, in the order of their maturities, any amount owing under the Purchase Agreement from Payee to the Maker.
Notwithstanding any other provision of this Note, Maker shall not be required to make any payment of principal or interest due under this Note prior to the Maturity Date to the extent there is insufficient cash flow from the operations of the Teco Facility, before giving effect to management fees (if any) paid or payable to affiliates of Maker, to make such payment (each, a “Deferred Payment”). Any Deferred Payment not paid when due to the foregoing cash flow limitation shall be deferred to the next applicable payment date under this Note on which the such limitation does not apply.
This Note may be prepaid, in whole or in part, at any time or from time to time, without premium or penalty. All payments made on this Note shall be applied first to interest accrued to the date of the payment and then to the outstanding principal payments due under this Note. All prepayments of the principal due under this Note shall be applied to such maturities as shall be designated by Maker.
All payments or prepayments of principal and interest and other sums due pursuant to this Note shall be made by check to Payee at its address set forth above, or in immediately available funds by wire transfer to Payee’s account at such bank as Payee shall have previously designated to Maker.
Whenever any payment to be made hereunder shall be due on a Saturday, Sunday or legal holiday under the laws of the State of Nevada, such payment may be made on the next succeeding business day, and such extension of time shall be included in the computation of payment of interest hereunder.
The occurrence of any one or more of the following events shall constitute an “Event of Default” under this Note: (i) Maker shall fail to pay when due any amount due under this Note and such failure shall not be cured within fifteen days after the date such payment was due; or (ii) Maker shall commence any case, proceeding or other action under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to Maker, or seeking to adjudicate Maker a bankrupt or insolvent, or seeking reorganization, arrangement or other relief with respect to Maker or any of its debts, or seeking appointment of a receiver, trustee, custodian or other similar official for Maker or for all or any part of its assets, or Maker shall make a general assignment for the benefit of creditors, or there shall be commenced against Maker any case, proceeding or other action of a nature referred to in this clause (ii), or there shall be commenced against Maker any case, proceeding or other action seeking issuance of a warrant of attachment, execution, restraint or similar process against all or any substantial part of the assets of Maker which results in the entry of an order for any such relief, or Maker shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in this clause (ii), or Maker shall generally not, or shall be unable to, or shall admit in writing its inability to, pay his debts as they become due.
Upon the occurrence and during the continuance of an Event of Default, the holder of this Note may, at its option, by notice in writing to Maker, declare this Note to be, and this Note shall forthwith become, due and payable; provided, however, that upon the occurrence of an Event of Default specified in clause (ii) above, the principal balance of and all accrued interest on this Note shall automatically become due and payable forthwith, without demand or notice of any kind. If an Event of Default occurs, Maker shall pay to the holder of this Note all expenses (including, without limitation, reasonable attorneys’ fees and expenses and court fees and court costs) incurred by the holder in connection with obtaining advice as to its rights and remedies in connection with such default and in connection with enforcing and collecting this Note.
Maker hereby waives presentment, demand for payment, notice of dishonor, protest and notice of protest of this Note. No waiver of any provision of this Note, or any agreement or instrument evidencing or providing security for this Note, made by agreement of Payee and any other person or party, shall constitute a waiver of any other terms hereof, or otherwise release or discharge the liability of Maker under this Note. No failure to exercise and no delay in exercising, on the part of Payee, any right, power or privilege under this Note shall operate as a waiver thereof nor shall simple or partial exercise of any right, power or privilege preclude any other or further exercise thereof, or the exercise of any other power, right or
privilege. The rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies provided by law.
In case any provision contained in this Note should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby and shall remain in full force and effect.
This Note may not be amended except by an instrument in writing signed by the Maker and the holder of this Note.
This Note shall be governed by and construed in accordance with the laws of the State of Nevada without regard to its doctrine of conflict of laws. Maker, by its execution hereof, and Payee by its acceptance hereof (I) AGREE THAT ANY LEGAL SUIT, ACTION OR PROCEEDING ARISING FROM OR RELATED TO THIS NOTE MAY BE INSTITUTED ONLY IN A STATE OR FEDERAL COURT LOCATED IN CLARK COUNTY, NEVADA; (II) WAIVE ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING OR BASED ON FORUM NON CONVENIENS; AND (III) CONSENT TO AND SUBMITS TO THE EXERCISE OF JURISDICTION OVER ITS PERSON BY ANY SUCH COURT HAVING JURISDICTION OVER THE SUBJECT MATTER.
This Note shall be binding upon the successors and assigns of the Maker and shall inure to the benefit of the successors and assigns of the Payee.
Any notice from the holder of this Note to the Maker shall be deemed given when delivered to the Maker by hand or when deposited in the United States mail and addressed to the Maker at the address of the Maker set forth in the first paragraph of this Note.
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AJE MANAGEMENT, LLC |
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/s/ David Weiner |
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David Weiner |
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Manager |
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3
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE AND FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, John Poss, certify that:
1.I have reviewed this quarterly report on Form 10-Q of GB Sciences, Inc.;
2.Based on my knowledge, the quarterly report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of and for the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures; and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls.
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Date: February 11, 2022 |
/s/ John Poss |
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John Poss, Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL EXECUTIVE AND FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Zach Swarts, certify that:
1.I have reviewed this quarterly report on Form 10-Q of GB Sciences, Inc.;
2.Based on my knowledge, the quarterly report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of and for the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures; and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls.
| Date: February 11, 2022 |
/s/ Zach Swarts |
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Zach Swarts, Chief Financial Officer (Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of GB Sciences, Inc. (the “Company”) on Form 10-Q for the quarter ended December 31, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John Poss, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
| Date: February 11, 2022 |
/s/ John Poss |
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John Poss, Chief Executive Officer |
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of GB Sciences, Inc. (the “Company”) on Form 10-Q for the quarter ended December 31, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Zach Swarts, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
| Date: February 11, 2022 |
/s/ Zach Swarts |
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Zach Swarts, Chief Financial Officer |
Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) |
Dec. 31, 2021 |
Mar. 31, 2021 |
|---|---|---|
| Intangible assets, accumulated amortization | $ 87,137 | $ 43,096 |
| Unamortized discount, current | 116,704 | 296,504 |
| Unamortized discount, noncurrent | $ 113,252 | $ 154,590 |
| Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
| Common stock, shares authorized (in shares) | 600,000,000 | 600,000,000 |
| Common stock, shares outstanding (in shares) | 317,435,744 | 315,340,411 |
Note 1 - Background and Significant Accounting Policies |
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| Business Description and Basis of Presentation [Text Block] |
Note 1 – Background and Significant Accounting Policies
GB Sciences, Inc. (“the Company”, “GB Sciences”, “we”, “us”, or “our”) is a plant-based research and biopharmaceutical drug development company whose goal is to create patented formulations of plant-inspired, minimum essential 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, minimum essential 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-inspired medicines, with virtual operations in North America and Europe. GBSGB’s assets include a portfolio of intellectual property containing both proprietary plant-inspired 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 five programs are in the pre-clinical animal stage of development including Parkinson’s disease ("PD"), chronic pain, COVID-related cytokine release syndrome, depression/anxiety, and cardiovascular therapeutic programs. GBSGB is assertively preparing its PD therapeutics for a first-in-human trial. Depending on the results of ongoing preclinical studies, the Company intends to move forward with clinical trials for its chronic pain and COVID-related cytokine release syndrome therapies after PD. 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, fourteen USPTO nonprovisional patent applications pending in the US, and seven provisional patent applications in the US. In addition to the USPTO patents and patent applications, the company has filed 41 patent applications internationally to protect its proprietary technology and formulations. In October 2021, we filed the nonprovisional USPTO patent application to further protect aspects of our proprietary drug discovery engine, “Phytomedical Analytics for Research Optimization at Scale," or PhAROS™.
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements of GB Sciences, Inc. have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulations S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ending March 31, 2022. The balance sheet at March 31, 2021 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended March 31, 2021.
Principles of Consolidation
We prepare our consolidated financial statements in accordance with generally accepted accounting principles (GAAP) for the United States of America. Our consolidated financial statements include all operating divisions and majority-owned subsidiaries, reported as a operating segment, for which we maintain controlling interests. Intercompany accounts and transactions have been eliminated in consolidation. All subsidiaries were wholly owned by the Company for the periods presented.
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to allowances for doubtful accounts, inventory valuation and standard cost allocations, valuation of initial right-of-use assets and corresponding lease liabilities, valuation of beneficial conversion features in convertible debt, valuation of the assets and liabilities of discontinued operations, stock-based compensation expense, purchased intangible asset valuations, deferred income tax asset valuation allowances, uncertain tax positions, litigation, other loss contingencies, and impairment of long lived assets. These estimates and assumptions are based on current facts, historical experience and various other factors that the Company believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of costs and expenses that are not readily apparent from other sources. The actual results the Company experiences may differ materially and adversely from these estimates.
Reclassifications
Certain reclassifications have been made to the comparative period amounts in order to conform to the current period presentation. In particular, income tax expense and income tax payable have been separated from the comparative period amounts to conform to the current period presentation as income taxes payable from discontinued operations, as the result of the sale of the Company's Nevada operations. The reclassifications had no effect on the reported financial position, results of operations or cash flows of the Company.
Discontinued Operations
See Note 3.
Long-Lived Assets
We evaluate the carrying value of property and equipment if impairment indicators are present or if other circumstances indicate that impairment may exist under authoritative guidance. The annual testing date is March 31. When management believes impairment indicators may exist, projections of the undiscounted future cash flows associated with the use of and eventual disposition of property and equipment are prepared. If the projections indicate that the carrying value of the property and equipment are not recoverable, we reduce the carrying values to fair value. These impairment tests are heavily influenced by assumptions and estimates that are subject to change as additional information becomes available. No indicators of impairment were identified by the Company as of December 31, 2021.
Inventory
We value our inventory at the lower of the actual cost of our inventory, as determined using the first-in, first-out method, or its current estimated market value. We periodically review our physical inventory for excess, obsolete, and potentially impaired items and reserve accordingly. Our reserve estimate for excess and obsolete inventory is based on expected future use. Indirect costs, which primarily relate to the lease and operation costs of the Teco Facility, which are included in discontinued operations as of March 31, 2021, are allocated based on square footage of the facility used in the production of inventory. There is no remaining inventory on the Company's unaudited condensed consolidated balance sheet as of December 31, 2021, due to the sale and deconsolidation of the Nevada Subsidiairies (Note 9).
Beneficial Conversion Feature of Convertible Notes Payable
The Company accounts for convertible notes payable in accordance with the guidelines established by the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 470-20, Debt with Conversion and Other Options and Emerging Issues Task Force (“EITF”) 00-27, “Application of Issue No. 98-5 to Certain Convertible Instruments”. A beneficial conversion feature (“BCF”) exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of any attached equity instruments, if any related equity instruments were granted with the debt. In accordance with this guidance, the BCF of a convertible note is measured by allocating a portion of the note's proceeds to the warrants, if applicable, and as a reduction of the carrying amount of the convertible note equal to the intrinsic value of the conversion feature, both of which are credited to additional paid-in-capital. The Company calculates the fair value of warrants issued with the convertible notes using the Black-Scholes valuation model and uses the same assumptions for valuing any employee options in accordance with ASC Topic 718 Compensation – Stock Compensation. The only difference is that the contractual life of the warrants is used.
The value of the proceeds received from a convertible note is then allocated between the conversion features and warrants on a relative fair value basis. The allocated fair value is recorded in the financial statements as a debt discount (premium) from the face amount of the note and such discount is amortized over the expected term of the convertible note (or to the conversion date of the note, if sooner) and is charged to interest expense.
Revenue Recognition
The FASB issued Accounting Standards Codification (“ASC”) 606 as guidance on the recognition of revenue from contracts with customers. Revenue recognition depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented, or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition method). The Company adopted the guidance on April 1, 2018 and applied the cumulative catch-up transition method.
The Company’s only material revenue source was part of discontinued operations prior to the sale of the Nevada Subsidiaries (Note 9), and was derived from sales of cannabis and cannabis products, distinct physical goods. Under ASC 606, the Company is required to separately identify each performance obligation resulting from its contracts from customers, which may be a good or a service. A contract may contain one or more performance obligations. All of the Company’s contracts with customers contained only a single performance obligation, the delivery of distinct physical goods. Because fulfillment of the company’s performance obligation to the customer under ASC 606 results in the same timing of revenue recognition as under the previous guidance (i.e. revenue is recognized upon delivery of physical goods), the Company did not record any material adjustment to report the cumulative effect of initial application of the guidance.
Income Taxes
The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in financial statements or tax returns. Deferred tax items are reflected at the enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Due to the uncertainty regarding the success of future operations, management has valued the deferred tax asset allowance at 100% of the related deferred tax assets.
Because the Company previously operated in the State-licensed cannabis industry through its now-deconsolidated Nevada Subsidiaries, gross profits from those subsidiaries has is subject to the limitations of Internal Revenue Code Section 280E (“280E”) for U.S. income tax purposes. Under 280E, the Company is allowed to deduct expenses that are directly related to the production of its products, i.e. cost of goods sold, but is allowed no further deductions for ordinary and necessary business expenses from its gross profit. The Company believes that the deductions disallowed include the deduction of net operatign loss carryforwards ("NOLs"). The unused NOLs will continue to carry forward and may be used by the Company to offset future taxable income that is not subject to the limitations of 280E.
Earnings and loss per Share
The Company’s basic earnings and loss per share has been calculated using the weighted average number of common shares outstanding during the period. The Company had 131,059,194 and 131,866,787 potentially dilutive common shares at December 31, 2021 and December 31, 2020, respectively. Potentially dilutive shares at December 31, 2020 were not included in the computation of diluted net loss per share for the three and nine months ended December 31, 2020, as their inclusion would have been antidilutive. Of the potentially dilutive shares at December 31, 2021, 106,174,448 and 104,447,872 were not included in the computation of diluted EPS for the three and nine months ended December 31, 2021, respectively, as their inclusion would have been antidilutive. The computation of diluted EPS for the three and nine months ended December 31, 2021 is as follows:
Earnings and loss per Share (continued)
Recent Accounting Pronouncements
Standards Not Yet Adopted
In May 2021, the FASB issued ASU No. 2021-04, Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. This guidance clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options due to a lack of explicit guidance in the FASB Codification. The ASU 2021-04 is effective for The Company's fiscal year beginning April 1, 2022. Early adoption is permitted. The Company is evaluating the impact of adopting ASU 2021-04 and does not expect the adoption of this ASU to materially impact its consolidated financial statements.
On June 16, 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments. The standard requires the use of an “expected loss” model on certain types of financial instruments. The standard also amends the impairment model for available-for-sale debt securities and requires estimated credit losses to be recorded as allowances instead of reductions to amortized cost of the securities. The amendments in this ASU are effective for the Company's fiscal year beginning April 1, 2023. The Company is currently evaluating the impact of ASU 2016-13 on its financial statements.
In June 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. The guidance simplifies the current guidance for convertible instruments and the derivatives scope exception for contracts in an entity’s own equity. Additionally, the amendments affect the diluted EPS calculation for instruments that may be settled in cash or shares and for convertible instruments. This ASU will be effective for the Company's fiscal year beginning April 1, 2024. Early adoption is permitted. The amendments in this update must be applied on either full retrospective basis or modified retrospective basis through a cumulative-effect adjustment to retained earnings/(deficit) in the period of adoption. The Company is currently evaluating the impact of ASU 2020-06 on its consolidated financial statements and related disclosures, as well as the timing of adoption.
All other newly issued accounting pronouncements have been deemed either immaterial or not applicable.
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Note 2 - Going Concern |
9 Months Ended |
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Dec. 31, 2021 | |
| Notes to Financial Statements | |
| Substantial Doubt about Going Concern [Text Block] |
Note 2 – Going Concern
The Company’s consolidated 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 $100,911,984 at December 31, 2021. The Company had a working capital deficit of $3,022,261 at December 31, 2021, including an income tax liability related to discontinued operations of $836,740, compared to a deficit of $5,054,593 at March 31, 2021, net of working capital of $1,201,488 classified as discontinued operations. In addition, the Company has consumed cash in its operating activities of $1,200,915 for the nine months ended December 31, 2021, including $87,772 used by discontinued operations, compared to $1,253,180 used in operating activities, net of $21,098 provided by discontinued operations for the nine months ended December 31, 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, it is possible that 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 future impact on the Company's financial statements 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.
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Note 3 - Discontinued Operations |
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| Disposal Groups, Including Discontinued Operations, Disclosure [Text Block] |
Note 3 – Discontinued Operations
Discontinued operations comprise those activities that were disposed of during the period or which were classified as held for sale at the end of the period and represent a separate major line of business or geographical area that can be clearly distinguished for operational and financial reporting purposes. The Company has included its subsidiaries GB Sciences Nevada, LLC, GB Sciences Las Vegas, LLC, and GB Sciences Nopah, LLC (the "Nevada Subsidiaries") in discontinued operations due to the sale of the Company's Nevada cultivation and extraction facilities. The assets and liabilities of the Nevada Subsidiaries were deconsolidated at December 31, 2021 due to the completion of the sale on that date (Note 9).
The assets and liabilities associated with discontinued operations included in our condensed consolidated balance sheets as of December 31, 2021 and March 31, 2021 were as follows:
Discontinued Operations - Revenues and Expenses
The revenues and expenses associated with discontinued operations included in our condensed consolidated statements of operations for the three and nine months ended December 31, 2021 and 2020 were as follows:
Discontinued Operations - Inventory
Raw materials consist of supplies, materials, and consumables used in the cultivation and extraction processes. Work-in-progress includes live plants and cannabis in the drying, curing, and trimming processes. Finished goods includes completed cannabis flower, trim, and extracts in bulk and packaged forms. Inventory is included in current assets from discontinued operations in the Company's March 31, 2021 balance sheet. There is no remaining inventory at December 31, 2021, due to the completion of the sale of the Nevada Subsidiaries (Note 9).
Discontinued Operations - Leases
The Company evaluates all finance and operating leases, and they are measured on the balance sheet with a lease liability and right-of-use asset (“ROU”) at inception. ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make scheduled lease payments. Lease terms include options to extend when it is reasonably certain that the option will be exercised. Leases with a term of 12 months or less are not recorded on the consolidated balance sheet. The present value of lease payments is calculated using the incremental borrowing rate at lease commencement, which takes into consideration recent debt issuances as well as other applicable market data available.
The Company's only remaining lease commitment was a finance lease for the Nevada Subsidiaries, which is classified as discontinued operations in the Company's unaudited condensed consolidated balance sheet at March 31, 2021. This lease had a remaining non-cancelable term ending December 31, 2025 with an option to extend through December 31, 2030. The rate used to discount this lease was 11.5%.
Finance leases are included in property and equipment (long term assets from discontinued operations), finance lease obligations, short term (current liabilities from discontinued operations), and finance lease obligations, long term (long term liabilities from discontinued operations), on the balance sheet as of March 31, 2021.
During the nine months ended December 31, 2021, finance lease costs included in discontinued operations were $417,820, of which $301,796 represents interest expense and $116,024 represents amortization of the right-of-use asset, which is inculded in inventory and cost of goods sold. The right-of-use asset and lease liability were deconsolidated at December 31, 2021 due to the close of the sale of the Nevada Subsidiaries (Note 9).
Discontinued Operations - 8% Line of Credit dated November 27, 2019
In connection with the Binding Letter of Intent dated November 27, 2019 (Note 9), the Teco Subsidiaries entered into a promissory note and line of credit for up to $470,000 from the purchaser of the membership interests in the Teco Subsidiaries. The purpose of the line of credit was to supply working capital for the Teco Subsidiaries, and the note matures upon the close of the sale of the Teco Subsidiaries. The principal and accrued interest balances outstanding at the time of closing will be considered paid in full upon closing and will not reduce the purchase price received by GB Sciences. In total, the Teco Subsidiaries received $485,000 in advances under the line of credit, reflecting an informal agreement with the lender to increase the line of credit by $15,000. On December 29, 2020, the Company entered into the Omnibus Amendment with the purchaser of the Teco Facility, which provided that no further interest would accrue on the line of credit after November 30, 2020. The balance of the line of credit was $485,000 at December 31, 2021 and accrued interest was $49,211, prior to deconsolidation. The note and related interest expense are included in current liabilities from discontinued operations and loss from discontinued operations on the Company's March 31, 2021 balance sheet. |
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Note 4 - Notes Payable and Line of Credit |
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| Debt Disclosure [Text Block] |
Note 4 – Notes Payable and Line of Credit
0% Note Payable dated October 23, 2017
On October 23, 2017, the Company amended the existing Nevada Medical Marijuana Production License Agreement (“Amended Production License Agreement”). Per the terms of the Amended Production License Agreement, GB Sciences purchased the remaining percentage of the production license resulting in the 100% ownership of the license. GB Sciences also received 100% ownership of the cultivation license included in the original Nevada Medical Marijuana Production License Agreement. In exchange, GB Sciences made one-time payment of $500,000 and issued a 0% Promissory Note in the amount of $700,000 payable in equal monthly payments over a -year period commencing on January 1, 2018. The present value of the note was $521,067 on the date of its issuance based on an imputed interest rate of 20.3% and the Company recorded a discount on notes payable of $178,933 related to the difference between the face value and present value of the note.
On August 10, 2020, the Company entered into the Membership Interest Purchase Agreement ("Nopah MIPA") for the sale of its interest in GB Sciences Nopah, LLC. The Nopah sale was closed December 31, 2021 after successful transfer of the Nevada Medical Marijuana Cultivation Facility Registration Certificate on December 14, 2021 (Note 9). At close, the principal balance of the note was reduced from $369,445 to $190,272 and accounts payable totaling $74,647 to an affiliate of the purchaser were extinguished. The Nopah MIPA extended the maturity date of the note to July 31, 2021. As that date has passed prior to the close of the Nopah sale, the Company is currently negotiating terms of an extension to the note with the note holder.
8% Line of Credit dated July 24, 2020
On July 24, 2020, the Company entered into the Loan Agreement, 8% Secured Promissory Note, and Security Agreement (together, the "July 24 Note") with AJE Management, LLC, which established a revolving loan of up to $500,000 that the Company may draw on from time to time. The loan was collateralized by the Teco Facility, subject to the pre-existing lien held by CSW Ventures, L.P. in connection with the 8% Senior Secured Convertible Promissory Note dated February 28, 2019. Contemporaneously with the Loan Agreement, the Company and AJE Management entered into the Amendment to the Membership Interest Purchase Agreement with AJE Management. The amendment provides that any balances outstanding under the July 24 Note at the time of the close of the sale of the Teco Facility would be forgiven in exchange for a reduction to the $4,000,000 note receivable that the Company will receive as consideration for the sale of the Teco Facility. The reduction to the note receivable would be equal to 3 times the balance outstanding under the July 24 Note on the date of the close of the sale of the Teco Facility. The balance outstanding under the note plus accrued interest were permitted to be repaid at any time prior to the close of the sale of the Teco facility (Note 9).
On December 29, 2020, the Company entered into the Omnibus Amendment with the purchaser of the Teco Facility. The Omnibus Amendment reduced the amount of the note receivable that the Company was to receive from the sale of the Teco Facility by $975,000 (three times $325,000 in advances made under the July 24 Note) to $3,025,000. Any advances made to the Company under the July 24 Note in excess of $325,000 were to reduce the amount of cash received upon close of the sale of Teco one-for-one, i.e., such advances would be considered advance payments of the $4,000,000 cash purchase price. No interest would accrue after November 30, 2020. The Company also agreed that it would not repay the balances outstanding under the July 24 Note prior to the closing of the Teco sale. As a result of the Omnibus Amendment, the Company accrued a modification expense of $650,000 during the year ended March 31, 2021. Prior to December 31, 2021, the Company received $50,000 in additional advances above $325,000 during the fiscal year ended March 31, 2021, bringing the total balance to $1,025,000, and accrued interest was $12,510. Upon close of the Teco sale on December 31, 2021, the note and accrued interest balances were forgiven and the Company has no further obligations related to the line of credit (Note 9).
Summary of Notes and Convertible Notes Payable
As of December 31, 2021, the following notes payable were recorded in the Company’s consolidated balance sheet:
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Note 5 - Convertible Notes |
9 Months Ended |
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Dec. 31, 2021 | |
| Notes to Financial Statements | |
| Convertible Debt [Text Block] |
Note 5 – Convertible Notes
March 2017 and July 2017 Convertible Note Offerings
In March 2017, the Company entered into a Placement Agent’s Agreement with a third-party brokerage firm to offer units consisting of a $1,000 6% promissory note convertible into 4,000 shares of the Company’s common stock at $0.25 per share and 4,000 warrants to purchase shares of the Company’s’ common stock at an exercise price of $0.60 per share for the period of years. Between March 2017 and May 2017, the Company issued short-term Promissory Notes (“Notes”) to various holders with combined face value of $2,000,000. The Notes are payable within years of issuance and are convertible into 8,000,000 shares of the Company’s common stock. The Company also issued 8,000,000 common stock warrants to the Noteholders. The warrants are exercisable at any time and from time to time before maturity at the option of the holder. Each warrant gives the Noteholder the right to purchase one share of common stock of the Company at an exercise price of $0.60 per share for a period of years. The Company recorded an aggregate discount on convertible notes of $1,933,693, which included $904,690 related to the relative fair value of beneficial conversion features and $1,029,003 for the relative fair value of the warrants issued with each note. The fair value of warrants was derived using the Black-Scholes valuation model.
In July 2017, the Company entered into a Placement Agent’s Agreement with a third-party brokerage firm to offer units consisting of a $1,000 6% promissory note convertible into 4,000 shares of the Company’s common stock at $0.25 per share and 4,000 warrants to purchase shares of the Company’s’ common stock at an exercise price of $0.65 per share for the period of years. Between July 2017 and December 2017, the Company issued short-term Promissory Notes (“Notes”) to various holders with combined face value of $7,201,000. The Notes are payable within years of issuance and are convertible into 28,804,000 shares of the Company’s common stock. The Company also issued 28,804,000 common stock warrants to the Note holders. The warrants are exercisable at any time and from time to time before maturity at the option of the holder. Each warrant gives the Noteholder the right to purchase one share of common stock of the Company at an exercise price of $0.60 per share for a period of years. The Company recorded an aggregate discount on convertible notes of $7,092,796, which included $3,142,605 related to the relative fair value of beneficial conversion features and $3,950,191 for the relative fair value of the warrants issued with each note. The fair value of warrants was derived using the Black-Scholes valuation model.
During fiscal year 2018, notes having a total face value of $7,944,000 were converted into the Company's common stock. At December 31, 2021, notes having a face value of $1,257,000 remained outstanding.
All remaining unconverted notes from the March and July 2017 offerings have passed their maturity dates. During the year ended March 31, 2021, the Company agreed to extensions with the holders of a total of $197,000 of the $1,257,000 that remains outstanding. For the $197,000 of extended notes, the Company agreed to reduce the conversion price to $0.10 per share and issued a total of 788,000 additional warrants to the holders of the notes with a term of years and an exercise price of $0.10 per share. In exchange, the maturity date of the notes was extended to September 30, 2023. Using the Black-Scholes model, the Company valued the warrants at $13,396 and the change in the fair value of the conversion feature at $33,490. Because the change in the fair value of the conversion feature exceeded 10% of the carrying amount of the notes, the Company accounted for the modification of the notes as an extinguishment and recorded a discount on the new convertible notes of $46,886 related to the fair value of the new warrants and the change in the fair value of the conversion feature. The Company recorded interest expense of $19,470 on the new notes during the nine months ended December 31, 2021, of which $10,564 represented amortization of the note discounts. Accrued interest on the $197,000 extended notes is $53,238 at December 31, 2021, which includes $38,438 accrued prior to the extinguishments.
Three convertible notes totaling $1,060,000 held by the same investor are past maturity and are currently in default. The Company is negotiating the terms of an extension with the note holder. The notes do not provide for a default penalty or penalty interest rate. Interest expense during the nine months ended December 31, 2021 was $47,918 and there is no remaining unamortized discount. Accrued interest on the $1,060,000 notes was $276,191 at December 31, 2021.
8% Senior Secured Convertible Promissory Note dated February 28, 2019
On February 28, 2019, the Company issued a $1,500,000 8% Senior Secured Convertible Promissory Note and entered into the Note Purchase Agreement and Security Agreement with CSW Ventures, L.P. (together, “CSW Note”). The note matured on August 28, 2020, and was convertible at any time until maturity into 8,823,529 shares of the Company’s common stock at $0.17 per share. Collateral pledged as security for the note includes all of the Company’s 100% membership interests in GB Sciences, Nevada, LLC and GB Sciences Las Vegas, LLC, which together represent substantially all of the Company’s cannabis cultivation and production operations and assets located at the Teco facility in Las Vegas, Nevada.
On December 29, 2020, the Company entered into the Omnibus Amendment, and the note holder agreed to cease interest accrual on the CSW Note after November 30, 2020. After conversions, the remaining principal balance and carrying amount of the note was $1,111,863 as of December 31, 2021. Accrued interest was $144,994.
Upon close of the Teco sale on December 31, 2021, the note and accrued interest balances were extinguished in exchange for a reduction of 110% of the balances of accrued interest and principal outstanding to the $4 million cash payment (Note 9). The 10% increase to the balances owed under the note totaled $125,686, and the Company recorded the amount as a reduction to the gain on deconsolidation.
8% Convertible Promissory Note dated April 23, 2019
On April 23, 2019, the Company entered into the Note Purchase Agreement with Iliad Research and Trading, L.P. ("Iliad") and issued an 8% Convertible Promissory Note with a face value of $2,765,000. The Note was issued with original issue discount of $265,000 and is convertible into shares of the Company’s common stock at a price of $0.17 per share at the option of the note holder at any time until the Note is repaid. The Note matured on April 22, 2020. A total discount of $440,000 was recorded on the note, which includes $265,000 of original issue discount and $175,000 in fees paid to brokers.
During the year ended March 31, 2020, the Company honored the conversion of a total of a total of $125,000 of accrued interest on the Iliad Note at reduced conversion rates. On October 30, 2019, the Company received notice of the conversion of $75,000 at $0.06 per share and issued 1,250,000 shares of its common stock. The fair value of the shares issued exceeded the fair value of the shares issuable under the original terms of the Note by $64,706, and the Company recorded an induced conversion expense. On November 18, 2019, the Company received notice of the conversion of $50,000 of the note balance at $0.0375 per share and issued 1,333,333 shares of its common stock.
On April 22, 2020, the Company failed to make payment of the principal and accrued interest due under the Iliad Note, resulting in a default. Upon the occurrence of the default, the principal and accrued interest balances outstanding increased by 10%. As the result of the default, Company recorded an expense of $9,559 related to a 10% increase in the accrued interest balance and $276,500 related to the 10% increase in the principal balance, totaling $286,059 which is recorded as debt default penalty on the unaudited statements of operations for the six months ended September 30, 2020.
On May 20, 2020, Iliad filed a lawsuit against the Company in the Third Judicial District Court of Salt Lake County in the State of Utah demanding repayment of the note. The lawsuit further sought to compel the Company to participate in arbitration pursuant to the arbitration provisions contained within the Note Purchase Agreement and to prohibit the Company to raise funds through the issuance of its common stock unless the note is paid in full simultaneously with such issuance. On July 14, 2020, the Court entered judgment in favor of Iliad in the amount of $3,264,594 plus reasonable attorney's fees and costs and accrued post-judgment interest at the default rate of 15% per annum.
On November 20, 2020, the Company, Iliad, and Wellcana Plus, LLC entered into the Judgment Settlement Agreement, whereby Iliad agreed to discharge all amounts owed to it by the Company upon receipt of payment totaling $3,006,015 directly from the proceeds of the Wellcana Note Receivable on or before December 8, 2020. On December 8, 2020, Wellcana failed to make payment to the Company. On December 9, 2020, the Company entered into a letter agreement with Iliad extending the Judgment Settlement agreement in exchange for payment of $25,000 plus $25,000 per week until the payment totaling $3,006,015 is received by Iliad, with such payments not reducing the amount owed under the Judgment Settlement Agreement. On December 16, 2020, Wellcana made payment of the full amount owed to the Company, of which $3,006,015 was paid directly to Iliad in full satisfaction of the Judgment Settlement Agreement. On December 18, 2020, Iliad filed a Satisfaction of Judgment in the Third Judicial District Court of Salt Lake County in the State of Utah, and the lawsuit was dismissed. The Company has no further obligations to Iliad.
December 2020 $625,000 6% Convertible Note Offering
On December 18, 2020, the Company began an offering of 6.0% convertible notes for the purpose of funding a pre-clinical study of the Company's patent-pending Cannabinoid-Containing Complex Mixtures for the treatment of Cytokine Release Syndromes, including Acute Respiratory Distress Syndrome, in COVID-19 patients. The Company pledged the related intellectual property as security for the notes. The notes are convertible at a rate of $0.05 per share at the lender's request. To date, the Company has issued $625,000 in convertible notes under the offering to three investors. $375,000 of the notes mature between January 31, 2021 and July 1, 2022, and $250,000 mature in December 2023. Payment of accrued interest and principal is due at maturity. The Company received cash of $543,750, net of brokerage fees, and recorded discounts on the convertible notes totaling $81,250 related to the issuance costs. Notes totaling $425,000 were issued with in-the-money conversion features, and the Company recorded beneficial conversion feature discounts totaling $347,000 on the related notes. During the nine months ended December 31, 2021, the Company received $50,000 related to the note offering and recorded a discount on convertible notes payable of $6,500 related to issuance costs which were accrued but unpaid as of December 31, 2021.
At December 31, 2021, notes with a carrying amount of $258,296 were included in short term notes and convertible notes payable, net of unamortized discounts of $(116,704). Notes with a carrying amount of $166,645 were included in long term notes and convertible notes payable, net of unamortized discounts of $(83,355). Interest expense related to the notes was $244,471 for the nine months ended December 31, 2021, which includes $216,974 from amortization of the note discounts.
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Note 6 - Capital Transactions |
9 Months Ended |
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Dec. 31, 2021 | |
| Notes to Financial Statements | |
| Stockholders' Equity Note Disclosure [Text Block] |
Note 6 – Capital Transactions
Sale of Common Stock and Exercise of Warrants
On April 1, 2020, the Company entered into the Advisory Agreement with its brokers and effected a temporary decrease in the exercise price of the Company's outstanding warrants to $0.03- per share. On July 18, 2021, the Company entered into an amendment to the Advisory Agreement extending the temporary decrease through September 30, 2021 and agreed that each exercising warrant holder will receive an equal number of replacement warrants to purchase one share of the Company's common stock at $0.10 for years. During the nine months ended December 31, 2021,the Company received notice of the exercise of 2,095,333 warrants at $0.03 per share and received proceeds of $56,394, net of brokerage fees of $6,266. As the result of the exercises, the Company recorded an inducement dividend of $163,017, which includes $62,660 related to the intrinsic value of the exercised warrants at the dates of exercise and $100,357 related to the Black-Scholes fair value of the 2,088,667 replacement warrants issued to the exercising investors.
During the nine months ended December 31, 2021, the Company issued 600,000 options to purchase one share of common stock at $0.05 per share for years to a researcher as compensation for drafting and filing six provisional USPTO patent applications related to the Company's PhAROS platform. The options were valued at $0.048 per share using the Black-Scholes model, and the Company recorded an addition of $28,800 to the related patent assets and equity.
During the nine months ended December 31, 2021, the Company recorded $54,167 expense related to unvested employee options issued in prior periods. Remaining unrecognized compensation expense related to the options was $28,833 at December 31, 2021.
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Note 7 - Commitments and Contingencies |
9 Months Ended |
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Dec. 31, 2021 | |
| Notes to Financial Statements | |
| Commitments and Contingencies Disclosure [Text Block] |
Note 7 – Commitments and Contingencies
On April 22, 2020, the Company failed to repay any of the outstanding balance of the Convertible Promissory Note Payable to Iliad Research and Trading, L.P., resulting in a default. On May 20, 2020, Iliad filed a lawsuit against the Company in the Third Judicial District Court of Salt Lake County in the State of Utah demanding repayment of the note. On July 14, 2020, the Court entered judgment in favor of Iliad in the amount of $3,264,594. The Company's obligation to Iliad was satisfied in full on December 16, 2020 upon payment of $3,006,015 pursuant to the Judgment Settlement Agreement (Note 5).
On April 22, 2020, the Company was served notice of a lawsuit filed in the Eighth Judicial District Court in Clark County, Nevada, filed by a contractor who had been hired to perform architectural and design services. The lawsuit demanded payment of $73,050 for the services provided. On September 17, 2020, the Company entered into a Mutual Compromise, Settlement, and Release Agreement with the contractor and made payment of $25,000 in full satisfaction of the alleged debt and reduced the cost of the related fixed asset by $48,050.
From time to time, the Company may become involved in certain legal proceedings and claims which arise in the ordinary course of business. In management’s opinion, based on consultations with outside counsel, the results of any of these ordinary course matters, individually and in the aggregate, are not expected to have a material effect on our results of operations, financial condition, or cash flows. As more information becomes available, if management should determine that an unfavorable outcome is probable on such a claim and that the amount of such probable loss that it will incur on that claim is reasonably estimable, the Company would record a reserve for the claim in question. If and when the Company records such a reserve, it could be material and could adversely impact its results of operations, financial condition, and cash flows.
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Note 8 - Related Party Transactions |
9 Months Ended |
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Dec. 31, 2021 | |
| Notes to Financial Statements | |
| Related Party Transactions Disclosure [Text Block] |
Note 8 – Related Party Transactions
As of December 31, 2021 the Company was indebted to executive officers for unpaid compensation totaling $84,913, which is presented as indebtedness to related parties in the accompanying unaudited condensed consolidated balance sheet.
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Note 9 - Sale of Membership Interests in Nevada Subsidiaries |
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| Noncontrolling Interest Disclosure [Text Block] |
Note 9 – Sale of Membership Interests in Nevada Subsidiaries
On March 24, 2020, the Company entered into the Membership Interest Purchase Agreement ("Teco MIPA") with AJE Management, LLC. Pursuant to the Teco MIPA, the Company agreed to sell 100% of its membership interests in GB Sciences Nevada, LLC, and GB Sciences Las Vegas, LLC (the "Teco Subsidiaries") for approximately $8 million, which amount includes a cash payment at closing, the extinguishment and/or repayments of certain liabilities owed to the purchaser and affiliates of the purchaser, and an 8% promissory note.
On August 10, 2020, the Company entered into the Membership Interest Purchase Agreement ("Nopah MIPA") and Promissory Note Modification Agreement with 483 Management, LLC. Pursuant to the Nopah MIPA, the Company agreed to sell its 100% membership interest in GB Sciences Nopah, LLC ("Nopah"), which holds a Nevada medical marijuana cultivation certificate. As consideration, the Company would receive $312,315 in consideration in the form of a $237,668 reduction to the outstanding principal and accrued interest balances of the 0% Note payable dated October 23, 2017 (Note 4), and extinguishment of accounts payable of $74,647, which were owed to an affiliate of the purchaser.
The closing of the Teco and Nopah sales was contingent upon the successful transfer of the Nevada cultivation and production licenses. On December 14, 2021, the Company received approval from the Nevada Cannabis Compliance Board for the transfer of cannabis cultivation and extraction licenses held by its subsidiaries GB Sciences Nevada, LLC, GB Sciences Las Vegas, LLC, and GB Sciences Nopah, LLC (the "Nevada Subsidiaries"). Consequently, all conditions to closing the sales of the 100% membership interests in the Nevada Subsidiaries were satisfied, and the transactions formally closed on December 31, 2021. After the closing date, the Company retains no ownership interest in the Nevada Subsidiaries.
As consideration for the membership interests, the Company received cash payments of $1,648,772 (including $400,000 in advance payments received during the nine months ended December 31, 2021), the extinguishment $3,588,540 of debt and current liabilities owed to affiliates of the purchaser, and a $3,025,000 8% note receivable. The note receivable is payable as quarterly, interest only payments of $60,500 for the year, followed by seven quarterly payments of interest and principal of $201,774 beginning March 31, 2023, with a final payment of principal and interest totaling $2,014,225 on December 31, 2024.
As the result of sale of the Nevada Subsidiaries, the Company recorded a gain on deconsolidation of $5,206,208, calculated as follows:
As the result of the sale, the income, assets, and cash flows of GB Sciences Nevada, LLC, GB Sciences Las Vegas, LLC, and GB Sciences Nopah, LLC have been reclassified as discontinued operations for all periods presented in the Company's consolidated financial statements prior to the sale.
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Note 10 - Subsequent Events |
9 Months Ended |
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Dec. 31, 2021 | |
| Notes to Financial Statements | |
| Subsequent Events [Text Block] |
Note 10 – Subsequent Events
On January 14, 2022, the Company made a payment of $500,000 toward the $1,060,000 principal balance outstanding under the 2017 6% convertible note offerings (Note 5).
On January 20, 2022, the Company repaid all of the deferred compensation totaling $84,913 owed to officers and directors of the Company.
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Significant Accounting Policies (Policies) |
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| Basis of Accounting, Policy [Policy Text Block] | Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements of GB Sciences, Inc. have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulations S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ending March 31, 2022. The balance sheet at March 31, 2021 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended March 31, 2021.
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| Consolidation, Policy [Policy Text Block] | Principles of Consolidation
We prepare our consolidated financial statements in accordance with generally accepted accounting principles (GAAP) for the United States of America. Our consolidated financial statements include all operating divisions and majority-owned subsidiaries, reported as a operating segment, for which we maintain controlling interests. Intercompany accounts and transactions have been eliminated in consolidation. All subsidiaries were wholly owned by the Company for the periods presented.
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| Use of Estimates, Policy [Policy Text Block] | Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to allowances for doubtful accounts, inventory valuation and standard cost allocations, valuation of initial right-of-use assets and corresponding lease liabilities, valuation of beneficial conversion features in convertible debt, valuation of the assets and liabilities of discontinued operations, stock-based compensation expense, purchased intangible asset valuations, deferred income tax asset valuation allowances, uncertain tax positions, litigation, other loss contingencies, and impairment of long lived assets. These estimates and assumptions are based on current facts, historical experience and various other factors that the Company believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of costs and expenses that are not readily apparent from other sources. The actual results the Company experiences may differ materially and adversely from these estimates.
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| Reclassification, Comparability Adjustment [Policy Text Block] | Reclassifications
Certain reclassifications have been made to the comparative period amounts in order to conform to the current period presentation. In particular, income tax expense and income tax payable have been separated from the comparative period amounts to conform to the current period presentation as income taxes payable from discontinued operations, as the result of the sale of the Company's Nevada operations. The reclassifications had no effect on the reported financial position, results of operations or cash flows of the Company.
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| Discontinued Operations, Policy [Policy Text Block] | Discontinued Operations
See Note 3.
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| Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block] | Long-Lived Assets
We evaluate the carrying value of property and equipment if impairment indicators are present or if other circumstances indicate that impairment may exist under authoritative guidance. The annual testing date is March 31. When management believes impairment indicators may exist, projections of the undiscounted future cash flows associated with the use of and eventual disposition of property and equipment are prepared. If the projections indicate that the carrying value of the property and equipment are not recoverable, we reduce the carrying values to fair value. These impairment tests are heavily influenced by assumptions and estimates that are subject to change as additional information becomes available. No indicators of impairment were identified by the Company as of December 31, 2021.
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| Inventory, Policy [Policy Text Block] | Inventory
We value our inventory at the lower of the actual cost of our inventory, as determined using the first-in, first-out method, or its current estimated market value. We periodically review our physical inventory for excess, obsolete, and potentially impaired items and reserve accordingly. Our reserve estimate for excess and obsolete inventory is based on expected future use. Indirect costs, which primarily relate to the lease and operation costs of the Teco Facility, which are included in discontinued operations as of March 31, 2021, are allocated based on square footage of the facility used in the production of inventory. There is no remaining inventory on the Company's unaudited condensed consolidated balance sheet as of December 31, 2021, due to the sale and deconsolidation of the Nevada Subsidiairies (Note 9).
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| Debt, Policy [Policy Text Block] | Beneficial Conversion Feature of Convertible Notes Payable
The Company accounts for convertible notes payable in accordance with the guidelines established by the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 470-20, Debt with Conversion and Other Options and Emerging Issues Task Force (“EITF”) 00-27, “Application of Issue No. 98-5 to Certain Convertible Instruments”. A beneficial conversion feature (“BCF”) exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of any attached equity instruments, if any related equity instruments were granted with the debt. In accordance with this guidance, the BCF of a convertible note is measured by allocating a portion of the note's proceeds to the warrants, if applicable, and as a reduction of the carrying amount of the convertible note equal to the intrinsic value of the conversion feature, both of which are credited to additional paid-in-capital. The Company calculates the fair value of warrants issued with the convertible notes using the Black-Scholes valuation model and uses the same assumptions for valuing any employee options in accordance with ASC Topic 718 Compensation – Stock Compensation. The only difference is that the contractual life of the warrants is used.
The value of the proceeds received from a convertible note is then allocated between the conversion features and warrants on a relative fair value basis. The allocated fair value is recorded in the financial statements as a debt discount (premium) from the face amount of the note and such discount is amortized over the expected term of the convertible note (or to the conversion date of the note, if sooner) and is charged to interest expense.
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| Revenue from Contract with Customer [Policy Text Block] | Revenue Recognition
The FASB issued Accounting Standards Codification (“ASC”) 606 as guidance on the recognition of revenue from contracts with customers. Revenue recognition depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented, or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition method). The Company adopted the guidance on April 1, 2018 and applied the cumulative catch-up transition method.
The Company’s only material revenue source was part of discontinued operations prior to the sale of the Nevada Subsidiaries (Note 9), and was derived from sales of cannabis and cannabis products, distinct physical goods. Under ASC 606, the Company is required to separately identify each performance obligation resulting from its contracts from customers, which may be a good or a service. A contract may contain one or more performance obligations. All of the Company’s contracts with customers contained only a single performance obligation, the delivery of distinct physical goods. Because fulfillment of the company’s performance obligation to the customer under ASC 606 results in the same timing of revenue recognition as under the previous guidance (i.e. revenue is recognized upon delivery of physical goods), the Company did not record any material adjustment to report the cumulative effect of initial application of the guidance.
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| Income Tax, Policy [Policy Text Block] | Income Taxes
The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in financial statements or tax returns. Deferred tax items are reflected at the enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Due to the uncertainty regarding the success of future operations, management has valued the deferred tax asset allowance at 100% of the related deferred tax assets.
Because the Company previously operated in the State-licensed cannabis industry through its now-deconsolidated Nevada Subsidiaries, gross profits from those subsidiaries has is subject to the limitations of Internal Revenue Code Section 280E (“280E”) for U.S. income tax purposes. Under 280E, the Company is allowed to deduct expenses that are directly related to the production of its products, i.e. cost of goods sold, but is allowed no further deductions for ordinary and necessary business expenses from its gross profit. The Company believes that the deductions disallowed include the deduction of net operatign loss carryforwards ("NOLs"). The unused NOLs will continue to carry forward and may be used by the Company to offset future taxable income that is not subject to the limitations of 280E.
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| Earnings Per Share, Policy [Policy Text Block] | Earnings and loss per Share
The Company’s basic earnings and loss per share has been calculated using the weighted average number of common shares outstanding during the period. The Company had 131,059,194 and 131,866,787 potentially dilutive common shares at December 31, 2021 and December 31, 2020, respectively. Potentially dilutive shares at December 31, 2020 were not included in the computation of diluted net loss per share for the three and nine months ended December 31, 2020, as their inclusion would have been antidilutive. Of the potentially dilutive shares at December 31, 2021, 106,174,448 and 104,447,872 were not included in the computation of diluted EPS for the three and nine months ended December 31, 2021, respectively, as their inclusion would have been antidilutive. The computation of diluted EPS for the three and nine months ended December 31, 2021 is as follows:
Earnings and loss per Share (continued)
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| New Accounting Pronouncements, Policy [Policy Text Block] | Recent Accounting Pronouncements
Standards Not Yet Adopted
In May 2021, the FASB issued ASU No. 2021-04, Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. This guidance clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options due to a lack of explicit guidance in the FASB Codification. The ASU 2021-04 is effective for The Company's fiscal year beginning April 1, 2022. Early adoption is permitted. The Company is evaluating the impact of adopting ASU 2021-04 and does not expect the adoption of this ASU to materially impact its consolidated financial statements.
On June 16, 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments. The standard requires the use of an “expected loss” model on certain types of financial instruments. The standard also amends the impairment model for available-for-sale debt securities and requires estimated credit losses to be recorded as allowances instead of reductions to amortized cost of the securities. The amendments in this ASU are effective for the Company's fiscal year beginning April 1, 2023. The Company is currently evaluating the impact of ASU 2016-13 on its financial statements.
In June 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. The guidance simplifies the current guidance for convertible instruments and the derivatives scope exception for contracts in an entity’s own equity. Additionally, the amendments affect the diluted EPS calculation for instruments that may be settled in cash or shares and for convertible instruments. This ASU will be effective for the Company's fiscal year beginning April 1, 2024. Early adoption is permitted. The amendments in this update must be applied on either full retrospective basis or modified retrospective basis through a cumulative-effect adjustment to retained earnings/(deficit) in the period of adoption. The Company is currently evaluating the impact of ASU 2020-06 on its consolidated financial statements and related disclosures, as well as the timing of adoption.
All other newly issued accounting pronouncements have been deemed either immaterial or not applicable.
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Note 1 - Background and Significant Accounting Policies (Tables) |
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| Schedule of Earnings Per Share, Basic and Diluted [Table Text Block] |
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Note 3 - Discontinued Operations (Tables) |
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| Disposal Groups, Including Discontinued Operations [Table Text Block] |
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| Schedule of Inventory, Current [Table Text Block] |
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Note 4 - Notes Payable and Line of Credit (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Debt [Table Text Block] |
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Note 9 - Sale of Membership Interests in Nevada Subsidiaries (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Deconsolidation [Table Text Block] |
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Note 1 - Background and Significant Accounting Policies (Details Textual) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
|
Dec. 31, 2021
USD ($)
shares
|
Dec. 31, 2020
shares
|
Dec. 31, 2021
USD ($)
shares
|
Dec. 31, 2020
shares
|
|
| Impairment, Long-Lived Asset, Held-for-Use, Total | $ 0 | |||
| Inventory, Net, Total | $ 0 | $ 0 | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares) | shares | 106,174,448 | 131,059,194 | 104,447,872 | 131,866,787 |
| Number of Operating Segments | 1 | |||
Note 2 - Going Concern (Details Textual) - USD ($) |
9 Months Ended | ||
|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Mar. 31, 2021 |
|
| Retained Earnings (Accumulated Deficit), Ending Balance | $ (100,911,984) | $ (103,886,232) | |
| Working Capital (Deficit) | (3,022,261) | (5,054,593) | |
| Accrued Income Taxes, Current | 836,740 | 761,509 | |
| Net Cash Provided by (Used in) Operating Activities, Total | (1,200,915) | $ (1,253,180) | |
| Cash Provided by (Used in) Operating Activities, Discontinued Operations | (87,772) | 21,098 | |
| Discontinued Operations [Member] | |||
| Working Capital (Deficit) | 1,201,488 | ||
| Accrued Income Taxes, Current | 836,740 | $ 761,509 | |
| Cash Provided by (Used in) Operating Activities, Discontinued Operations | $ (87,772) | $ 21,098 | |
Note 3 - Discontinued Operations (Details Textual) - USD ($) |
9 Months Ended | 25 Months Ended | |||
|---|---|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2021 |
Mar. 31, 2021 |
Nov. 27, 2019 |
|
| Inventory, Net, Total | $ 0 | $ 0 | |||
| Proceeds from Lines of Credit, Total | 0 | $ 375,000 | |||
| Line of Credit [Member] | |||||
| Debt Instrument, Interest Rate, Stated Percentage | 8.00% | ||||
| Line of Credit Facility, Maximum Borrowing Capacity | $ 470,000 | ||||
| Proceeds from Lines of Credit, Total | 485,000 | ||||
| Line of Credit Facility, Maximum Borrowing Capacity, Increased | 15,000 | ||||
| Long-term Line of Credit, Total | 485,000 | 485,000 | |||
| Interest Payable | 49,211 | 49,211 | |||
| Discontinued Operations [Member] | |||||
| Inventory, Net, Total | 0 | $ 0 | $ 1,689,304 | ||
| Finance Lease Costs | 417,820 | ||||
| Finance Lease, Interest Expense | 301,796 | ||||
| Finance Lease, Right-of-Use Asset, Amortization | $ 116,024 | ||||
| Maximum [Member] | |||||
| Lessee, Finance Lease, Discount Rate | 11.50% | 11.50% | |||
Note 3 - Discontinued Operations - Discontinued Operations (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||||
|---|---|---|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2021 |
Dec. 31, 2020 |
Mar. 31, 2021 |
|
| Cash | $ 1,504,330 | $ 1,504,330 | $ 1,504,330 | $ 793,040 | ||
| Inventory, net | 0 | 0 | 0 | |||
| Prepaid and other current assets | 112,347 | 112,347 | 112,347 | 256,251 | ||
| TOTAL CURRENT ASSETS | 1,616,677 | 1,616,677 | 1,616,677 | 3,543,855 | ||
| Property and equipment, net | 0 | 0 | 0 | 25,022 | ||
| Intangible assets, net | 2,133,607 | 2,133,607 | 2,133,607 | 1,706,762 | ||
| Financing Receivable, after Allowance for Credit Loss, Total | 3,025,000 | 3,025,000 | 3,025,000 | 0 | ||
| TOTAL ASSETS | 6,775,284 | 6,775,284 | 6,775,284 | 10,806,054 | ||
| Accounts payable | 1,735,905 | 1,735,905 | 1,735,905 | 1,412,459 | ||
| Accrued interest | 370,038 | 370,038 | 370,038 | 493,741 | ||
| Accrued expenses | 102,774 | 102,774 | 102,774 | 957,946 | ||
| Indebtedness to related parties | 84,913 | 84,913 | 84,913 | 84,913 | ||
| Income taxes payable | 836,740 | 836,740 | 836,740 | 761,509 | ||
| TOTAL CURRENT LIABILITIES | 4,638,938 | 4,638,938 | 4,638,938 | 8,598,448 | ||
| Convertible notes payable | 333,648 | 333,648 | 333,648 | 292,410 | ||
| TOTAL LIABILITIES | 4,972,586 | 4,972,586 | 4,972,586 | 12,279,982 | ||
| Sales revenue | 0 | $ 0 | 0 | $ 0 | ||
| Cost of goods sold | 0 | 0 | 0 | 0 | ||
| Gross profit | 0 | 0 | 0 | 0 | ||
| General and administrative expenses | 512,788 | 670,311 | 1,417,738 | 1,677,482 | ||
| Interest expense | (159,478) | (167,120) | (319,976) | (1,249,994) | ||
| Gain on extinguishment | 0 | 467,872 | 0 | 467,872 | ||
| Gain on deconsolidation | 5,206,208 | 5,206,208 | 0 | 5,206,208 | 0 | |
| Gain on settlement of accounts payable | 0 | 372,415 | 0 | 372,415 | ||
| Loss on amendment to line of credit | 0 | (650,000) | 0 | (650,000) | ||
| Other income/(expense) | (15,639) | 17,523 | (6,639) | 14,149 | ||
| Total other income/(expense) | 5,031,091 | 40,690 | 4,879,593 | (1,331,617) | ||
| Income tax expense | 0 | 0 | 0 | 0 | ||
| NET INCOME/(LOSS) | (192,766) | 35,637 | (324,590) | (237,043) | ||
| Debt default penalty | 0 | 0 | 0 | (286,059) | ||
| INCOME/(LOSS) BEFORE INCOME TAXES | 4,518,303 | (629,621) | 3,461,855 | (3,009,099) | ||
| NET INCOME/(LOSS) | 3,137,265 | (3,246,142) | ||||
| Continuing Operations [Member] | ||||||
| Cash | 1,504,330 | 1,504,330 | 1,504,330 | 793,040 | ||
| Accounts receivable, net | 0 | 0 | 0 | 0 | ||
| Inventory, net | 0 | 0 | 0 | 0 | ||
| Prepaid and other current assets | 112,347 | 112,347 | 112,347 | 256,251 | ||
| TOTAL CURRENT ASSETS | 1,616,677 | 1,616,677 | 1,616,677 | 1,049,291 | ||
| Property and equipment, net | 0 | 0 | 0 | 25,022 | ||
| Intangible assets, net | 2,133,607 | 2,133,607 | 2,133,607 | 1,706,762 | ||
| Financing Receivable, after Allowance for Credit Loss, Total | 3,025,000 | 3,025,000 | 3,025,000 | 0 | ||
| Deposits and other noncurrent assets | 0 | 0 | 0 | 0 | ||
| TOTAL ASSETS | 6,775,284 | 6,775,284 | 6,775,284 | 2,781,075 | ||
| Accounts payable | 1,735,905 | 1,735,905 | 1,735,905 | 1,412,459 | ||
| Accrued interest | 370,038 | 370,038 | 370,038 | 493,741 | ||
| Accrued expenses | 102,774 | 102,774 | 102,774 | 957,946 | ||
| Notes payable, net | 1,508,568 | 1,508,568 | 1,508,568 | 3,594,804 | ||
| Indebtedness to related parties | 84,913 | 84,913 | 84,913 | 84,913 | ||
| Income taxes payable | 0 | 0 | 0 | 0 | ||
| Finance lease obligations, current | 0 | 0 | 0 | 0 | ||
| TOTAL CURRENT LIABILITIES | 3,802,198 | 3,802,198 | 3,802,198 | 6,543,863 | ||
| Convertible notes payable | 333,648 | 333,648 | 333,648 | 292,410 | ||
| Finance lease obligations, long term | 0 | 0 | 0 | 0 | ||
| TOTAL LIABILITIES | 4,135,846 | 4,135,846 | 4,135,846 | 6,836,273 | ||
| Sales revenue | 0 | 0 | 0 | 0 | ||
| Cost of goods sold | 0 | 0 | 0 | 0 | ||
| Gross profit | 0 | 0 | 0 | 0 | ||
| General and administrative expenses | 512,788 | 670,311 | 1,417,738 | 1,677,482 | ||
| INCOME/(LOSS) FROM OPERATIONS | (512,788) | (670,311) | (1,417,738) | (1,677,482) | ||
| Interest expense | (159,478) | (167,120) | (319,976) | (1,249,994) | ||
| Gain on extinguishment | 0 | 467,872 | 0 | 467,872 | ||
| Gain on deconsolidation | 5,206,208 | 0 | 5,206,208 | 0 | ||
| Gain on settlement of accounts payable | 0 | 372,415 | 0 | 372,415 | ||
| Loss on amendment to line of credit | 0 | (650,000) | 0 | (650,000) | ||
| Other income/(expense) | (15,639) | 17,523 | (6,639) | 14,149 | ||
| Total other income/(expense) | 5,031,091 | 40,690 | 4,879,593 | (1,331,617) | ||
| INCOME/(LOSS) BEFORE INCOME TAXES | 4,518,303 | (629,621) | ||||
| Income tax expense | 0 | 0 | 0 | 0 | ||
| NET INCOME/(LOSS) | 4,518,303 | (629,621) | ||||
| Debt default penalty | 0 | (286,059) | ||||
| INCOME/(LOSS) BEFORE INCOME TAXES | 3,461,855 | (3,009,099) | ||||
| NET INCOME/(LOSS) | 3,461,855 | (3,009,099) | ||||
| Discontinued Operations [Member] | ||||||
| Cash | 0 | 0 | 0 | 352,593 | ||
| Accounts receivable, net | 0 | 0 | 0 | 400,175 | ||
| Inventory, net | 0 | 0 | 0 | 1,689,304 | ||
| Prepaid and other current assets | 0 | 0 | 0 | 52,492 | ||
| TOTAL CURRENT ASSETS | 0 | 0 | 0 | 2,494,564 | ||
| Property and equipment, net | 0 | 0 | 0 | 4,876,247 | ||
| Intangible assets, net | 0 | 0 | 0 | 571,264 | ||
| Financing Receivable, after Allowance for Credit Loss, Total | 0 | 0 | 0 | 0 | ||
| Deposits and other noncurrent assets | 0 | 0 | 0 | 82,904 | ||
| TOTAL ASSETS | 0 | 0 | 0 | 8,024,979 | ||
| Accounts payable | 0 | 0 | 0 | 509,477 | ||
| Accrued interest | 0 | 0 | 0 | 49,211 | ||
| Accrued expenses | (0) | (0) | (0) | 105,421 | ||
| Notes payable, net | 0 | 0 | 0 | 485,000 | ||
| Indebtedness to related parties | 0 | 0 | 0 | 0 | ||
| Income taxes payable | 836,740 | 836,740 | 836,740 | 761,509 | ||
| Finance lease obligations, current | 0 | 0 | 0 | 143,967 | ||
| TOTAL CURRENT LIABILITIES | 836,740 | 836,740 | 836,740 | 2,054,585 | ||
| Convertible notes payable | 0 | 0 | 0 | 0 | ||
| Finance lease obligations, long term | 0 | 0 | 0 | 3,389,124 | ||
| TOTAL LIABILITIES | 836,740 | 836,740 | 836,740 | 5,443,709 | ||
| Sales revenue | 811,231 | 1,015,464 | 3,369,812 | 2,830,932 | ||
| Cost of goods sold | (832,668) | (596,362) | (3,072,622) | (1,947,225) | ||
| Gross profit | (21,437) | 419,102 | 297,190 | 883,707 | ||
| General and administrative expenses | 71,648 | 77,064 | 264,515 | 447,885 | ||
| INCOME/(LOSS) FROM OPERATIONS | (93,085) | 342,038 | 32,675 | 435,822 | ||
| Interest expense | (99,681) | (113,241) | (302,924) | (374,383) | ||
| Gain on extinguishment | 0 | 0 | 0 | 0 | ||
| Gain on deconsolidation | 0 | 0 | 0 | 0 | ||
| Gain on settlement of accounts payable | 0 | 15,972 | 0 | 15,972 | ||
| Loss on amendment to line of credit | 0 | 0 | 0 | 0 | ||
| Other income/(expense) | 0 | (2,442) | 20,890 | (79,890) | ||
| Total other income/(expense) | (99,681) | (99,711) | (282,034) | (438,301) | ||
| INCOME/(LOSS) BEFORE INCOME TAXES | (192,766) | 242,327 | ||||
| Income tax expense | 0 | (206,690) | (75,231) | (234,564) | ||
| NET INCOME/(LOSS) | (192,766) | 35,637 | ||||
| Debt default penalty | 0 | 0 | ||||
| INCOME/(LOSS) BEFORE INCOME TAXES | (249,359) | (2,479) | ||||
| NET INCOME/(LOSS) | (324,590) | (237,043) | ||||
| Segment, Continuing and Discontinued Operations [Member] | ||||||
| Cash | 1,504,330 | 1,504,330 | 1,504,330 | 1,145,633 | ||
| Accounts receivable, net | 0 | 0 | 0 | 400,175 | ||
| Inventory, net | 0 | 0 | 0 | 1,689,304 | ||
| Prepaid and other current assets | 112,347 | 112,347 | 112,347 | 308,743 | ||
| TOTAL CURRENT ASSETS | 1,616,677 | 1,616,677 | 1,616,677 | 3,543,855 | ||
| Property and equipment, net | 0 | 0 | 0 | 4,901,269 | ||
| Intangible assets, net | 2,133,607 | 2,133,607 | 2,133,607 | 2,278,026 | ||
| Financing Receivable, after Allowance for Credit Loss, Total | 3,025,000 | 3,025,000 | 3,025,000 | 0 | ||
| Deposits and other noncurrent assets | 0 | 0 | 0 | 82,904 | ||
| TOTAL ASSETS | 6,775,284 | 6,775,284 | 6,775,284 | 10,806,054 | ||
| Accounts payable | 1,735,905 | 1,735,905 | 1,735,905 | 1,921,936 | ||
| Accrued interest | 370,038 | 370,038 | 370,038 | 542,952 | ||
| Accrued expenses | 102,774 | 102,774 | 102,774 | 1,063,367 | ||
| Notes payable, net | 1,508,568 | 1,508,568 | 1,508,568 | 4,079,804 | ||
| Indebtedness to related parties | 84,913 | 84,913 | 84,913 | 84,913 | ||
| Income taxes payable | 836,740 | 836,740 | 836,740 | 761,509 | ||
| Finance lease obligations, current | 0 | 0 | 0 | 143,967 | ||
| TOTAL CURRENT LIABILITIES | 4,638,938 | 4,638,938 | 4,638,938 | 8,598,448 | ||
| Convertible notes payable | 333,648 | 333,648 | 333,648 | 292,410 | ||
| Finance lease obligations, long term | 0 | 0 | 0 | 3,389,124 | ||
| TOTAL LIABILITIES | $ 4,972,586 | 4,972,586 | 4,972,586 | $ 12,279,982 | ||
| Sales revenue | 811,231 | 1,015,464 | 3,369,812 | 2,830,932 | ||
| Cost of goods sold | (832,668) | (596,362) | (3,072,622) | (1,947,225) | ||
| Gross profit | (21,437) | 419,102 | 297,190 | 883,707 | ||
| General and administrative expenses | 584,436 | 747,375 | 1,682,253 | 2,125,367 | ||
| INCOME/(LOSS) FROM OPERATIONS | (605,873) | (328,273) | (1,385,063) | (1,241,660) | ||
| Interest expense | (259,159) | (280,361) | (622,900) | (1,624,377) | ||
| Gain on extinguishment | 0 | 467,872 | 0 | 467,872 | ||
| Gain on deconsolidation | 5,206,208 | 0 | 5,206,208 | 0 | ||
| Gain on settlement of accounts payable | 0 | 388,387 | 0 | 388,387 | ||
| Loss on amendment to line of credit | 0 | (650,000) | 0 | (650,000) | ||
| Other income/(expense) | (15,639) | 15,081 | 14,251 | (65,741) | ||
| Total other income/(expense) | 4,931,410 | (59,021) | 4,597,559 | (1,769,918) | ||
| INCOME/(LOSS) BEFORE INCOME TAXES | 4,325,537 | (387,294) | ||||
| Income tax expense | 0 | (206,690) | (75,231) | (234,564) | ||
| NET INCOME/(LOSS) | $ 4,325,537 | $ (593,984) | ||||
| Debt default penalty | 0 | (286,059) | ||||
| INCOME/(LOSS) BEFORE INCOME TAXES | 3,212,496 | (3,011,578) | ||||
| NET INCOME/(LOSS) | $ 3,137,265 | $ (3,246,142) | ||||
Note 3 - Discontinued Operations - Schedule of Inventory (Details) |
Dec. 31, 2021
USD ($)
|
|---|---|
| Total inventory, net | $ 0 |
| Discontinued Operations, Held-for-sale or Disposed of by Sale [Member] | |
| Raw materials | 86,076 |
| Work in progress | 743,844 |
| Finished goods | 866,195 |
| Subtotal | 1,696,115 |
| Allowance to reduce inventory to net realizable value | (6,811) |
| Total inventory, net | $ 1,689,304 |
Note 7 - Commitments and Contingencies (Details Textual) - USD ($) |
Dec. 16, 2020 |
Sep. 17, 2020 |
Jul. 14, 2020 |
Apr. 22, 2020 |
|---|---|---|---|---|
| Repayment of Iliad Note [Member] | Judicial Ruling [Member] | ||||
| Litigation Settlement, Amount Awarded to Other Party | $ 3,264,594 | |||
| Litigation Settlement, Payment | $ 3,006,015 | |||
| Payment of Services Provided by Contractor [Member] | Pending Litigation [Member] | ||||
| Loss Contingency, Damages Sought, Value | $ 73,050 | |||
| Payment of Services Provided by Contractor [Member] | Settled Litigation [Member] | ||||
| Payments for Legal Settlements | $ 25,000 | |||
| Reduction in Cost Basis of Fixed Asset Related to Litigation | $ 48,050 |
Note 8 - Related Party Transactions (Details Textual) |
Dec. 31, 2021
USD ($)
|
|---|---|
| Officers and Directors [Member] | |
| Due to Related Parties, Total | $ 84,913 |
Note 9 - Sale of Membership Interests in Nevada Subsidiaries - Gain on Deconsolidation (Details) (Parentheticals) |
Dec. 31, 2021
USD ($)
|
|---|---|
| Nevada Subsidiaries [Member] | |
| Advancements | $ 400,000 |
Note 10 - Subsequent Events (Details Textual) - Subsequent Event [Member] - USD ($) |
Jan. 20, 2022 |
Jan. 14, 2022 |
|---|---|---|
| Payments for Deferred Compensation | $ 84,913 | |
| Convertible Debt [Member] | ||
| Repayments of Convertible Debt | $ 500,000 | |
| Convertible Notes Payable, Total | $ 1,060,000 | |
| Debt Instrument, Interest Rate, Stated Percentage | 6.00% |