The company licensed to produce medical marijuana in Louisiana by the LSU AgCenter has sold a 15 percent stake in the venture for $3 million to a newly formed Lafayette company to help finance its effort.
Las Vegas-based GB Sciences Inc.'s agreement with Wellcana Group LLC also gives it the option to purchase another 35 percent of the equity in subsidiary GB Sciences Louisiana LLC for an additional $7 million investment.
According to information on the Louisiana Secretary of State's website, Wellcana was formed in Lafayette last month. Its registered agent is Lafayette attorney Charles Rush and the officer is K2 Logic LLC, which has an address the same as Rush's law office. K2 Logic's officers are Rush and Charlie Hohorst III, a Lafayette businessman who founded CajunGrocer.com, an online retailer for Louisiana food and specialty items. Rush and Hohorst did not respond to requests for comment.
GB Sciences said the new funds will be used to complete the construction of the Louisiana infrastructure for medical marijuana, and for general corporate purposes. The influx of cash also will enable GB Sciences to redirect financial resources already earmarked for the Louisiana project to other areas of its operation and in other jurisdictions.
Frankie Gould, director of communications for the LSU AgCenter, said the decision by GB Sciences to take on more investors is a business matter that doesn't involve the university. Gould said the production facility should be finished in March and medical marijuana should be available by late summer.
"Our intent has always been to bring Louisiana investors into our project," GB Sciences CEO John Poss said in a statement.
Tom Arcuragi, an executive vice president with GB Sciences, said the company was looking for local investors and Wellcana fit the bill. “This strengthens the deal and makes it more of a homegrown kind of thing,” he said. “It’s always good to have local support wherever you are.”
Arcuragi said while there are no plans to add more local investors “you don’t want to close the door on everything. We don’t have a crystal ball.”
Wellcana will have the right to appoint members to the GB Sciences Louisiana board, of which two will be Louisiana residents. Those board members have not been identified.
GB Sciences Louisiana LLC and Wellcana will work together with the LSU AgCenter on the medical marijuana program. The LSU AgCenter holds one of two licenses granted by the state for medical marijuana.
The other state license is held by Southern University, which has selected Advanced Biomedics of Lafayette, based on a guaranteed $6 million in payments to operate the school's medical marijuana business.
During its application process with the LSU AgCenter, GB Sciences had estimated it would invest up to $6.5 million over two years setting up an office-and-warehouse building and operations. Under the terms of its licensing agreement, the LSU AgCenter will receive $3.4 million or 10 percent of gross revenue, whichever is greater, over five years. GB Sciences also will support LSU AgCenter research through funding for personnel, laboratory research space and equipment, plus an additional monetary contribution for research initiatives.
GB Sciences Inc. is a cannabis company focused on cultivation and production methods, as well as biopharmaceutical research and development, in creating pharmaceutical-grade, cannabis-based therapies that target a variety of medical conditions. Its quarterly report on Sept. 30 shows a $3.1 million net loss on $131,646 in revenue.
State law requires marijuana-based medicine in Louisiana to be in a liquid, such as an oil or spray; capsules or pills; edible dosages; topical applications; trans-dermal patches; or suppositories. The law limits the number of illnesses that can be treated with medical marijuana, including cancer, HIV and AIDS, cachexia or wasting syndrome, seizure disorders, epilepsy, spasticity, Crohn's disease, muscular dystrophy and multiple sclerosis.