$GBLX Form 10-K

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q of Growblox Sciences, Inc., a Delaware corporation (the “Company”), contains “forward-looking statements,” as defined in the United States Private Securities Litigation Reform Act of 10/995. 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 Growblox 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”).

Overview

Growblox’s business pursuit is to be a pioneer and leader in the medical marijuana industry by combining state of the art cultivation and extraction techniques with biotechnology. The Company’s cultivation, curing and extraction technology provide for the production of consistent medical-grade cannabis and cannabinoid therapies. These cannabis strains and therapies will be developed and targeted to specific medical conditions, including pancreatic cancer, Parkinson’s disease, Alzheimer’s disease and epilepsy, as well as pain therapies. The Company has compiled a data base of the significant cannabinoid research being conducted around the world and is designing and implementing its own research and development which has, and will continue to be, peer reviewed. The Company believes that its suite of proprietary technology that includes tissue culture, cultivation, curing and extraction of cannabis and cannabinoids, combined with specific strain selection, will allow it to provide the highest quality, consistent and efficacious cannabinoid therapies to patients.

Our mission is to create a trusted brand of technology that empowers patients with access to the benefits of medicinal-grade cannabis, and to become the trusted producer of consistent and efficacious medicinal cannabis strains and product lines. Our focus is to bring to market, cutting-edge technologies to commercially cultivate and produce medical-grade cannabis and cannabis concentrates. We believe that these medical-grade products will provide patients with valuable medicines that make a real difference to their quality of life. Please note however that our beliefs in the medical viability of cannabis related products are contrary to the position taken by the United States federal government and its agencies that cannabis has no medical benefit.

Plan of Operations

The Company’s current and short term business plan involves research and development in the growing and processing of cannabis products for medicinal purposes and in obtaining state licenses for the

Nevada Licenses

On November 3, 2104, our majority owned subsidiary obtained a provisional license from Clark County, Nevada and the City of Las Vegas to grow and process cannabis products for medicinal purposes within such areas. Our license applications to distribute cannabis were denied. Accordingly, in Nevada the Company is currently completing the licensing process to cultivate cannabis. Distribution of the cultivated cannabis will have to be conducted be through retailers who have received cannabis distribution licenses. We intend to go forward with cultivation operations in Clark County utilizing our proprietary GrowBLOXTM technology, and will reapply for a separate license to establish dispensary operations. Although we believe that a dispensary license will ultimately be granted to the Company by Clark County and the City of Las Vegas, there can be no assurance that such efforts will be successful.

Cash Requirements

We estimate that we will require an additional $3,150,000 to fund our currently anticipated requirements for ongoing operations and build out of our grow facility and extraction operations for our existing business for the next twelve-month period.

Based upon our cash position, we will need to raise additional capital prior by the end of fiscal 2015 in order to fund current operations. These factors raise substantial doubt about our ability to continue as a going concern. We are pursuing several alternatives to address this situation, including the raising of additional funding through equity or debt financings. We are in discussions with our existing stockholders to provide additional funding in exchange for notes or equity. In order to finance existing operations and pay current liabilities over the next twelve months, we will need to raise $3,150,000 of capital. However, there can be no assurance that the requisite financing will be consummated in the necessary time frame or on terms acceptable to us. Should we be unable to raise sufficient funds, we may be required to curtail our operating plans or possibly cease operations. No assurance can be given that we will be able to operate profitably on a consistent basis, or at all, in the future.

 Results of Operations

FINANCIAL INFORMATION

                                            For the Three Months Ended          For the Nine Months Ended
                                                   December 31,                       December 31,
                                              2014              2013             2014               2013
Revenue                                    $         -       $         -     $           -       $         -
General and administrative                     677,737            12,801         3,953,095            56,271
Other income/(expense)                            (283 )        (170,247 )              51          (104,971 )
Net income/(loss)                          $  (621,622 )     $  (183,408 )   $  (3,953,044 )     $   (48,700 )

General and Administrative. General and administrative expenses increased by $677,737 in 2014 primarily due to an increase in wages, investor relations, compensation expense, professional and consulting fees relating to our licensing process, and the addition of employees.

Other Income/(Expense). Other income decrease by $169,717 in 2014 due to the change in the fair value of convertible notes and warrants that were settled.

Comparison of the Nine Months Ended December 31, 2014 and December 31, 2013

Revenue. Revenue was generated from a one-time non-refundable fee and licensing agreement for the sale of a prototype TBlox machine as designed by Growblox Sciences, Inc. The amortization of the licensing fees will begin in January 2015.

General and Administrative. General and administrative expenses increased by $3,953,044 in the nine months ended December 2014 due to an increase in stock compensation, investor relations, professional and consulting fees relating to our licensing process, and the addition of employees. Travel expenses have also increased due to the licensing process in multiple states.

Other Income/(Expense). Other income decrease by $104,949 in 2014 due to the change in the fair value of convertible notes and warrants that were settled.

Cash flow from operations. We have been unable to generate either significant liquidity or cash flow to fund our current operations. We anticipate that cash flows from operations will be insufficient to fund our business operations for the next twelve-month period.

Based upon our cash position, we will need to raise additional capital prior by the end of fiscal 2015 in order to fund current operations. These factors raise substantial doubt about our ability to continue as a going concern. We are pursuing several alternatives to address this situation, including the raising of additional funding through equity or debt financings. We are in discussions with our existing stockholders to provide additional funding in exchange for notes or equity. In order to finance existing operations and pay current liabilities over the next twelve months, we will need to raise $3,150,000 of capital. However, there can be no assurance that the requisite financing will be consummated in the necessary time frame or on terms acceptable to us. Should we be unable to raise sufficient funds, we may be required to curtail our operating plans or possibly cease operations. No assurance can be given that we will be able to operate profitably on a consistent basis, or at all, in the future.

Cash flows used in investing activities. There was $655,204 and $0 cash used in investing activities for the nine months ended December 31, 2014 and 2013.

Cash flows from financing activities. Net cash provided by financing activities was generated from the sale of equity that totaled $3,912,817 and $31,000 for the three months ended December 31, 2014 and 2013.

In the event we are able to obtain the necessary financing to move forward with our business plan, we expect our expenses to increase significantly as we grow our business. Accordingly, the comparison of the financial data for the periods presented may not be a meaningful indicator of our future performance and must be considered in light these circumstances.

Critical Accounting Policies

General

The preparation of financial statements requires management to utilize estimates and make judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. These estimates are based on historical experience and on various other assumptions that management believes to be reasonable under the circumstances. The estimates are evaluated by management on an ongoing basis, and the results of these evaluations form a basis for making decisions about the carrying value of assets and liabilities that are not readily apparent from other sources. Although actual results may differ from these estimates under different assumptions or conditions, management believes that the estimates used in the preparation of our financial statements are reasonable. Policies involving the most significant judgments and estimates are summarized below.

Equity-Based Compensation

The computation of the expense associated with stock-based compensation requires the use of a valuation model. The FASB issued accounting guidance requires significant judgment and the use of estimates, particularly surrounding Black-Scholes assumptions such as stock price volatility, expected option lives, and expected option forfeiture rates, to value equity-based compensation. We currently use a Black-Scholes option pricing model to calculate the fair value of our stock options. We primarily use historical data to determine the assumptions to be used in the Black-Scholes model and have no reason to believe that future data is likely to differ materially from historical data. However, changes in the assumptions to reflect future stock price volatility and future stock award exercise experience could result in a change in the assumptions used to value awards in the future and may result in a material change to the fair value calculation of stock-based awards. This accounting guidance requires the recognition of the fair value of stock compensation in net income. Although every effort is made to ensure the accuracy of our estimates and assumptions, significant unanticipated changes in those estimates, interpretations and assumptions may result in recording stock option expense that may materially impact our financial statements for each respective reporting period.

Development Stage Company. The Company is considered to be in the development stage.

Cash and Cash Equivalents. The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.

Accounts Receivable. Accounts receivable are recorded at the time of sale and at the amount realizable from the transaction. An allowance for doubtful accounts is recorded for any amounts deemed uncollectible. The Company does not accrue interest receivable on past due accounts receivable. There was no allowance recorded at December 31, 2014 and March 31, 2014.

Property and Equipment and Depreciation. Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets: 3-8 years for machinery and equipment, 3-5 years for information technology and leasehold improvements are amortized over the shorter of the estimated useful lives or the underlying lease term. Repairs and maintenance expenditures which do not extend the useful lives of related assets are expensed as incurred.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets: 3-8 years for machinery and equipment, leasehold improvements are amortized over the shorter of the estimated useful lives or the underlying lease term. Repairs and maintenance expenditures which do not extend the useful lives of related assets are expensed as incurred.

Intangibles
Intangible assets with definite lives are amortized, but are tested for impairment annually and when an event occurs or circumstances change such that it is more likely than not that an impairment may exist. Our annual testing date is
March 31. We test intangibles for impairment by first comparing the carrying value of net assets to the fair value of the related operations. If the fair value is determined to be less than carrying value, a second step is performed to compute the amount of the impairment. In this process, a fair value for intangibles is estimated, based in part on the fair value of the operations, and is compared to its carrying value. The shortfall of the fair value below carrying value represents the amount of intangible impairment. We test these intangibles for impairment by comparing their carrying value to current projections of discounted cash flows attributable to the customer list. Any excess carrying value over the amount of discounted cash flows represents the amount of the impairment.

Commitments

We did not have any material capital commitments, other than funding our operating losses and repaying outstanding debt. It is anticipated that any capital commitments that may occur will be financed principally through borrowings from stockholders (although such additional financing has not been arranged). However, there can be no assurance that additional capital resources and financings will be available to us on a timely basis, or if available, on acceptable terms.

Off Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.