By Pat Anson, Editor

A Las Vegas company that is developing a new cannabis-based treatment for chronic pain has lost money since its inception and there is “substantial doubt” about its ability to survive, according to reports filed with the Securities and Exchange Commission (SEC).

But don’t give up on GB Sciences just yet, says its new chairman and CEO.

“We’re not as financially lame as you might suspect,” John Poss told PNN. “We’ve really done some interesting and groundbreaking research into cannabis.”

Last week GB Sciences issued a press release touting an application by its subsidiary, Growblox Life Sciences, for a patent on new treatments for chronic pain and heart conditions. The company claims to be developing “novel pain formulations” that are substantially free of delta-9 tetrahydrocannabinol (THC), the psychoactive ingredient in cannabis.

"These new chronic pain and heart formulas adhere to GB Science's strategy of commercializing complex mixtures of cannabis-derived compounds whose pharmaceutical activity does not require THC,” Poss said in the news release.

But a review of GB Sciences’ most recent quarterly report with the SEC could raise some doubts among pain patients and investors about whether the company has the resources to develop a cannabis medication. At the end of 2016, GB Sciences had no revenue and over $28 million in debt and liabilities.

“These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern,” the quarterly report says.

But Poss maintains GB Sciences turned a corner in March after raising $9 million from investors. A marijuana grow facility in Las Vegas has also come on line and will soon be producing revenue. Poss thinks the company will be breakeven in cash flow by early next year and could launch a small pilot study of its cannabis medication.  

“Either we have something or we don’t. And we’ll find out within a year. If we have something or at least a strong indication that we have something, then our ability to raise money to do a formal clinical trial is greatly enhanced,” said Poss, who hopes to eventually partner GB Sciences with another larger company.

“Before we make bold statements about spending $100 million, we need to spend half a million and find out if it works, which not everyone can do. And we can do that.”   

GB Sciences’ stock (GBLX) trades on the over-the-counter “Pink Sheet” market for about 26 cents a share. Historically, the company paid its executives, creditors, and partners with millions of new shares, stock options and warrants, which diluted the value of existing shares. It also gave the company a reputation as a “pump and dump” operation, which Poss says he is working hard to change.

Where is Cannabis Science’s Pain Patch?

Another financially challenged company is California-based Cannabis Science, which claims to be developing a variety of cannabis-based pain therapies. When we first told you about this “fundamentally unsound company” last November, it had just released a press release announcing plans to develop a cannabis-based skin patch to treat fibromyalgia and diabetic neuropathy. 

In February, another press release was issued by Cannabis Science saying the company was working on the “final packaging” of the pain patch and would be distributing it to marijuana dispensaries in California “very soon.”

In March, a third press release said the pain patches “are about to hit the market.”

There’s been no further word from Cannabis Science about the pain patch, although the internet is full of stories about the “revolutionary” pain patch “that delivers powerful pain-fighting medicine through the skin and into the bloodstream.” There’s even a creepy video on YouTube in which a robotic computer-generated voice claims “there’s a strong possibility that the patches even cure these health problems.”

Which would be terrific news – if the patches actually existed. Calls and emails to the company asking for an update on the patch were not returned. 

At the time of its first press release on the pain patch, Cannabis Science stock (CBIS) was trading for less than six cents a share. Three months later – no doubt fueled by the hype over its pain patch -- the stock doubled in value to nearly 13 cents a share. During that time, company insiders sold over 12,000,000 shares for over $500,000.  

That’s not a bad take for executives working for a company that generated only $9,263 in revenue during all of 2016 and posted an operating loss of nearly $10 million.

“At this time, our ability to generate any significant revenues continues to be uncertain.  There is substantial doubt about our ability to continue as a going concern,” Cannabis Science says in its annual report to the SEC, which was filed last month.

“The Company is undercapitalized, and will be reliant on outside financing from sales of securities or issuance of debt instruments.  Management expects many traditional lenders will be reluctant to provide the Company with capital in light of its financial condition and the nature of its expected business; so that any financing activities will likely be expensive and result in dilution to stockholders of the Company.”

All of this should be no surprise to people familiar with Cannabis Science CEO Raymond Dabney, who is no stranger to accusations of stock manipulation. In 2005, Dabney admitted issuing 22 bogus news releases to promote another penny stock in Canada. For that he received a five year trading ban from British Columbia’s Securities Commission, according to Forbes and the Vancouver Sun.

At various times in its history, Cannabis Science has gone under the name Patriot Holdings, National Healthcare Technology, Brighton Oil & Gas, and Gulf Onshore.

“I'm not sure if Cannabis Science is a biotech firm, an oil and gas exploration company, an educational university or a pot distributor, the only thing I am certain of is that Cannabis Science is in the business of moving money from public investors to executives' pockets,” wrote John Brody Gay in a lengthy analysis published by Seeking Alpha, an investing website.

Gay and other analysts say Cannabis Science is a classic pump and dump penny stock that produces little revenue, only a steady stream of press releases to promote its business activities, which never seem to come to fruition.

Often other websites are hired by pump and dumpers to publish their press releases or write glowing reviews about a company known as “advertorials.” The publicity generates a flurry of interest in the company’s stock, which is when executives and other insiders often sell their shares.

In 2014, the SEC issued an investor alert about marijuana stock scams, warning specifically about false and exaggerated claims made in press releases. The advice still holds true today for investors, as well as pain patients.

“Fraudsters often exploit the latest innovation, technology, product, or growth industry – in this case, marijuana – to lure investors with the promise of high returns.  Also, for marijuana-related companies that are not required to report with the SEC, investors may have limited information about the company’s management, products, services, and finances.  When publicly-available information is scarce, fraudsters can more easily spread false information about a company, making profits for themselves while creating losses for unsuspecting investors,” the SEC said.

In March, the SEC charged the founder of a California--based marijuana company with fraud for falsely touting “record” revenue numbers in press releases.

Medbox founder Vincent Mehdizadeh bragged in a text message that “the only thing we are really good at is public company publicity and stock awareness.  We get an A+ for creating revenue off sheer will but that won’t continue.” 

Mehdizadeh settled the SEC charges by agreeing to pay $12 million in penalties.