Editor’s note: This story has been updated to clarify the LSU AgCenter’s comments on the announcement.
A newly-formed limited liability company based in Lafayette has agreed to invest at least $3 million in GB Sciences Louisiana, a move that will help finance the firm’s medical marijuana partnership with the LSU AgCenter.
GB Sciences, which LSU selected to run the marijuana operation last year, announced this morning that Wellcana Group LLC will buy 15% of GB Science’s newly-issued equity for $3 million, and possibly an additional 35% for $7 million more.
LSU selected the Nevada-based penny-stock company last year as a private partner to grow cannabis for medical use. The LSU and Southern University agricultural centers were granted the two state licenses to grow the plant under a Louisiana law passed in 2015 and tweaked in 2016.
Wellcana Group was formed last month by K2 Logic LLC, also based in Lafayette. Charles Hohorst III is listed as one of the officers of the LLC. Lafayette business lawyer Charles Rush is listed as the other officer and agent. Neither returned messages seeking comment this morning.
Wellcana will have the right to appoint members to GB Sciences’ board, and two of those members will be Louisiana residents, the company says.
“Our intent has always been to bring Louisiana investors into our project,” GB Sciences CEO John Poss says in a statement. “We are extremely fortunate to be partnering with Wellcana, an organization that shares our commitment to providing the highest quality medical cannabis to the patients of Louisiana.”
The influx of cash will let GB Sciences redirect resources currently earmarked for the Louisiana project to other operations, the firm says in a statement, and will be used to complete construction of the infrastructure for the Louisiana project. LSU AgCenter spokeswoman Frances Gould says the facility should be up and running by next month, with product available by the summer. A recent federal directive from Attorney General Jeff Sessions to crack down on marijuana laws is not expected to impact Louisiana’s narrow program.
GB Sciences will pay LSU $500,000 per year for research, and $1 million in the first year and $600,000 in years two through five, or 10% of gross revenues.
The LSU AgCenter said it was not involved with the “business matter” between GB Sciences and the investor, and didn’t offer further comment on the announcement.
GB Sciences has struggled to become profitable since its inception in 2001, sustaining net losses and racking up a $41.5 million deficit as of last September, according to a recent SEC filing. The firm burned through $5.2 million in cash during the first six months of 2017, a sharp uptick from the $1.7 million spent in the same period the year before. The note said those factors “raise substantial doubt” about the company’s ability to stay operational.
The company has been able to finance those losses so far through a public offering, private placements and obtaining funds from stockholders, and said in the September SEC filing that it would continue to seek sources of financing.
“In view of these conditions, the company’s ability to continue as a going concern is dependent on its ability to obtain additional financing or capital sources, to meet its financing requirements, and ultimately to achieve profitable operations,” reads the company’s filing.
