Cannabis Science Inc. (OTCBB:CBIS) ("Cannabis Science, CBIS, or Company"), a pioneering US biotech company developing pharmaceutical cannabis products, reports that Cannabis Science sent an email to Mr. Rick Rosio on July 23, 2010 notifying him that he appeared to be in serious breach of the non-disclosure/non-circumvention agreement ("NDA/NCVA") that he and Montana Pain Management, Inc. ("MPM") had signed with Cannabis Science.
Dr. Robert Melamede, Ph. D., Cannabis Science Inc., President and CEO said, "We are extremely disappointed that the actions taken by Mr. Rosio to deliberately breach a non-disclosure/non-circumvention agreement by contacting and conducting business with a scientific advisor of the Company, Dr. Arturo Morales. For Mr. Rosio to use that breach as the basis for Montana Pain Management to cancel the signed Share Purchase Agreement is even worse. MPM, we have learned, has engaged Dr. Morales as COO and is to invest directly into MPM. This blatant breach not only damages the reputations of Mr. Rosio, MPM, and Dr. Arturo Morales by circumventing binding legal agreements, but it also demonstrates a lack of moral and ethical character in addition to not acting in good faith. The expertise and credibility that Dr. Morales is now bringing to MPM, as asserted by Mr. Rosio, is the same expertise and credibility that would have remained with Cannabis Science but for his breach. While Dr. Morales was not under an exclusive scientific advisory role with the Company, Mr. Rosio and MPM were legally bound to not approach Dr. Morales or enter into any circumventing agreements with him without the express written authorization of Cannabis Science."
Cannabis Science was informed that Mr. Rosio, without Cannabis Science participation or approval, was consummating a complete investment and buyout deal with Dr. Arturo Morales. Cannabis Science, while under the signed non-disclosure/non-circumvention agreement, introduced Mr. Rosio to Dr. Arturo Morales. At the time Dr. Arturo Morales was on the scientific advisory board of Cannabis Science.
On July 22, 2010, the day before Cannabis Science notified Mr. Rosio of his serious and evident breach of the non-disclosure/non-circumvention, Rick Rosio, the principal shareholder of MPM, notified Cannabis Science that he/it was not proceeding with the Share Purchase Agreement to complete the sale of MPM.
The following is excerpted from the email notice received by Dr. Robert Melamede, President and CEO of Cannabis Science, from Mr. Rick Rosio, the principal shareholder of MPM on July 22, 2010:
"Gentlemen: I will not be signing either the Stock certificates or the Stock Power document presented by you to close our transaction… MPM has reached an Agreement with Dr. Morales. The resources he is willing and able to provide today, will take MPM to the exportable clinic model we all envision. His immediate purchase of MPM shares with cash, will pay my employees, build and maintain Darby, and clear out short-term debt. At the same time my company acquires a COO with his expertise and most importantly credibility. I also sincerely hope that CBIS will still be interested in pursuing a new agreement with MPM. I do not know exactly what that looks like, but I would hope that you would now be even more interested in MPM... I am very interested in renegotiating MPM's relationship with CBIS as I still believe that there is much to be gained by our synergies… I reiterate that I sincerely hope to reach a new agreement with CBIS and we should begin those discussions immediately. However, any new agreement will be noticeably different in terms of immediate funding and managerial decision making of MPM's operations."
Per the NDA/NCVA, Mr. Rosio signed on June 11, 2010, Cannabis Science is of the opinion he and MPM breached the following section of the Agreement in negotiating and doing business with Dr. Morales:
"4. Non-Circumvent: Each party agrees not to circumvent each other, or compete with each other. Neither party will attempt to circumvent the other party by contacting any person, company or entity introduced to them by the other party, or any of the other party's customers, distributors, clients, consultants, agents or the like, anywhere in the world without the express authority of, and in the interest of both parties."
On July 23, 2010, Dr. Morales notified the Company via email that his name was to be withdrawn from the Cannabis Science advisory board and that all future communications should be directed through the Bjornson Law Office, which also represented Mr. Rosio and MPM in the Share Purchase Agreement with the Company.
Richard Cowan, Cannabis Science CFO, added, "It is very apparent from Mr. Rosio's actions and communications that he did not act in good faith or adhere to legally binding agreements he had signed. When Mr. Rosio saw the opportunity to secure the expertise, credibility and financial resources of Dr. Morales, who was a scientific advisor of Cannabis Science when he was introduced to him, Mr. Rosio blatantly breached his NDA/NCVA commitments to CBIS. It's extremely disconcerting to learn that Mr. Rosio feels we would be best served by immediately renegotiating a new deal with MPM when he showed blatant disregard for previously existing legal agreements. There are identifiable losses to Cannabis Science because of his actions, one of which is Dr. Morales withdrawing his services as scientific advisor to the Company, and we will now work with our legal team to pursue all legal remedies and to seek restitution for Cannabis Science and its shareholders."
Management of the Company is currently consulting with legal counsel and intends to proceed with legal action against MPM and its principal shareholder, Mr. Rosio, for breach of the NDA/NCVA that was entered into on June 11, 2010.
Legalization of cannabis associated with rising use among adolescents