As noted in Note 8 to the Company’s consolidated financial statements, in January 2017, the Company entered into Amendment #2 to the Iliad Note (the “Iliad Amendment 2”). In accordance with the Iliad Amendment 2, during the period between January 27, 2017 and February 24, 2017, the Company agrees to allow the Lender to convert up to $500,000 (the “Additional Redemption Amount”) in Redemption Conversions under the Note, provided that the Lender shall not effectuate a Redemption Conversion of any Maximum Monthly Redemption Amount between January 27, 2017 and March 1, 2017. During this time period, the Company is not allowed to pay any of the Additional Redemption Amount in cash and all such amounts must be converted into Redemption Conversion Shares of the Company’s common stock. In addition, the Lender agrees that the sale of any Redemption Conversion Shares between January 27, 2017 and April 30, 2017 (the “Limitation Period”) shall be subject to the Volume Limitation. Immediately following the expiration of the Volume Period, the Volume Limitation will be cancelled.

As also noted in Note 8 to the Company’s consolidated financial statements, in March 2017, the Company entered into Amendment #3 to the Iliad Note (the “Iliad Amendment 3”). In accordance with the Iliad Amendment 3, during the period from March 1, 2017 to March 31, 2017, the Company agrees to allow the Lender to convert up to $500,000 (the “Additional Redemption Amount 2”) in Redemption (the “Additional Redemption Amount 2”) in Redemption Conversions under the Note, provided that the Lender shall not effectuate a Redemption Conversion of any Maximum Monthly Redemption Amount from March 1, 2017 until April 1, 2017. During this time period, the Company shall not be allowed to pay any of the Additional Redemption Amount 2 in cash and all such amounts must be converted into Redemption Conversion Shares of the Company’s common stock. In addition, the Lender agrees that the sale of any Redemption Conversion Shares between March 1, 2017 and May 31, 2017 (the “Limitation Period 2”) shall be subject to the Volume Limitation. Immediately following the expiration of the Volume Period, the Volume Limitation will be cancelled.

Furthermore, as noted in Note 8 to the Company’s consolidated financial statements, on March 1, 2017, the Company entered into Iliad SPA 2 pursuant to which the Lender loaned the Company $750,000. On the Purchase Price Date, the Company issued to Lender a Secured Convertible Promissory Note (the “Iliad Note 2”) in the principal amount of $770,000 in exchange for payment by Lender of $750,000. The principal sum of the Iliad Note reflects the amount invested, plus a $15,000 OID and a $5,000 reimbursement of Lender’s legal fees. The Company received net proceeds of $750,000 in exchange for the Iliad Note 2. The Iliad Note 2 requires the repayment of all principal and any interest, fees, charges and late fees on the date that is fourteen months after the Purchase Price Date (the “Maturity Date”). Interest is to be paid on the outstanding balance at a rate of eight percent (8%) per annum from the Purchase Price Date until the Iliad Note 2 is paid in full. Interest is accrued during the term of the Iliad Note 2 and all interest calculations shall be computed on the basis of a 360-day year comprised of twelve (12) thirty (30)-day months and shall compound daily. Subject to adjustment as set forth in the Iliad Note 2, the conversion price for each Lender conversion shall be the Lender Conversion Price, convertible into shares of fully paid and non-assessable common stock. Beginning on the date that is six months after the Purchase Price Date and continuing until the Maturity Date, Iliad shall have the right to redeem a portion of the Iliad Note 2 in any amount up to the Maximum Monthly Redemption Amount, for which payments may be made in cash or by converting the redemption amount into shares of Company common stock at a conversion price which is the lesser of (a) the Lender Conversion Price of $0.50 and (b) the Market Price, defined as 70% (“the Conversion Factor”), subject to adjustment as follows: if at any time (1) the average of the three lowest closing bid prices in the previous twenty (20) trading days is below $0.25 per share then the Conversion Factor will be reduced by 10%, (2) the Company is not Deposit/Withdrawal At Custodian eligible, then the Conversion Factor will be reduced by an additional 5%, (3) the Company is not Depository Trust Company eligible, then the Conversion Factor will be reduced by an additional 5% or (4) there has occurred a “Major Default” then the Conversion Factor will be reduced by an additional 5% for each of the first three Major Defaults that occur after the effective date. The Company may prepay the Iliad Note 2 at any time by payment to Lender of 125% of the principal, interest and other amounts then due under the Note. The Company may prepay the Iliad Note notwithstanding an earlier notice of conversion from the Lender, provided that in such event the Lender may convert an amount not to exceed $200,000 under the Iliad Note 2. In connection with the Iliad Note 2, as set forth above, the Company incurred an original issue discount of $15,000 and $5,000 of other debt issuance costs, which will be amortized over the Iliad Note 2 term. The Iliad Note 2 is securitized by the Company’s accounts receivable, inventory and equipment.

On December 28, 2016, a redemption notice of $75,000 was received for the conversion of 398,053 shares of common stock issued subsequent to December 31, 2016. On January 5, 2017, a redemption notice of $100,000 was received for the conversion of 520,616 shares of common stock. On January 17, 2017, a redemption notice of $150,000 was received for the conversion of 780,925 shares of common stock. On January 27, 2017, a redemption notice of $75,000 was received for the conversion of 275,078 shares of common stock. On February 1, 2017, a redemption notice of $125,000 was received for the conversion of 547,837 shares of common stock. On February 13,2017, a redemption notice of $100,000 was received for the conversion of 332,458 shares of common stock. On February 16, 2017, a redemption notice of $100,000 was received for the conversion of 332,200 shares of common stock. On February 22, 2017, a redemption notice of $100,000 was received for the conversion of 332,200 shares of common stock. On March 2, 2017, a redemption notice of $100,000 was received for the conversion of 345,622 shares of common stock. On March 9, 2017, a redemption notice of $100,000 was received for the conversion of 357,083 shares of common stock. On March 28, 2017, a redemption notice of $100,000 was received for the conversion of 397,156 shares of common stock.

In March 2017, the disinterested members of the Board approved the grant of 5,000,000 performance-based stock options (the “Mona Performance Options”) to purchase shares of the Company’s common stock to one senior management member of the Company. The Mona Performance Options are contingent and vest only upon the Company achieving three specific milestones related to the success of the Company’s drug development program and were granted outside of the Company’s Amended 2013 Plan. Vesting of such options accelerates upon a sale of the Company or change in control.

In March 2017, the disinterested members of the Board approved a grant of an aggregate of 400,000 stock options to purchase shares of the Company’s common stock to three senior management members of the Company (including the two management members of the Board). Vesting of such options accelerates upon a sale of the Company or change in control.

Also in March 2017, the disinterested members of the Board, as the administrator of the Amended 2013 Plan, approved the amendment to certain stock options granted to employees of the Company, including certain options granted to three senior management members of the Company, to reduce the exercise price of such stock options. As a result of the amendment to the stock option grants each of the covered stock options, including those issued to three senior management members of the Company, have been amended to provide for a strike price equal to $0.38 per share, which represents 100% of the fair market value of the Company’s common stock as of March 15, 2017, the date of the amendment to the such stock option grants.

Also in March 2017, the Board amended the Employment Agreements for two members of senior management, such that upon a Liquidity Event (as defined below), Mr. Mona shall receive four percent (4%) and Mr. Mona III shall receive two percent (2%) of the Gross Closing Proceeds (as defined below), subject to an aggregate cap of $750,000,000. A “Liquidity Event” means and include (A) a licensing of the CBD Drug Product or any other intellectual property asset of the Company, or (B) (i) the direct or indirect sale or transfer, in a single transaction or a series of related transactions, by the stockholders of the Company of voting securities, in which the holders of the outstanding voting securities of the Company immediately prior to such transaction or series of transactions hold, as a result of holding Company securities prior to such transaction, in the aggregate, securities possessing less than twenty percent (20%) of the total combined voting power all outstanding voting securities of the Company or of the acquiring entity immediately after such transaction or series of related transactions, (ii) a merger or consolidation in which the Company is not the surviving entity, except for a transaction in which the holders of the outstanding voting securities of the Company immediately prior to such merger or consolidation hold as a result of holding Company securities prior to such transaction, in the aggregate, securities possessing more than fifty percent (50%) of the total combined voting power of all outstanding voting securities of the surviving entity (or the parent of the surviving entity) immediately after such merger or consolidation, (iii) a reverse merger in which the Company is the surviving entity but in which the holders of the outstanding voting securities of the Company immediately prior to such merger hold as a result of holding Company securities prior to such transaction, in the aggregate, securities possessing less than fifty percent (50%) of the total combined voting power of all outstanding voting securities of the Company or of the acquiring entity immediately after such merger, or (iv) the sale, transfer or other disposition (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company, except for a transaction in which the holders of the outstanding voting securities of the Company immediately prior to such transaction(s) receive as a distribution with respect to securities of the Company, in the aggregate, securities possessing more than fifty percent (50%) of the total combined voting power of all outstanding voting securities of the acquiring entity immediately after such transaction(s). “Gross Closing Proceeds” means and include all cash sums payable to the Company or its stockholders in connection with a Liquidity Event at the closing of a transaction constituting a Liquidity Event, and not including any deferred payments, earnouts, ongoing royalty payments or other contingent or deferred compensation.

In March 2017, the Company entered into an amendment to the principal agreement for the CanX Acquisition as more fully set forth in our Current Report on Form 8-K filed with the SEC on March 22, 2017. Pursuant to such amendment, which was approved by the disinterested members of the Board of Directors of the Company (the “Board”), the Company agreed to issue the remaining 15,000,000 shares of contingent consideration to the former CanX shareholders, without the Company having yet achieved the remaining milestones. (See Note 12)

Additionally, pursuant to such amendment, the parties agreed to revise the Company’s buy-out option to allow the Company to buyout the royalty payment by the issuance to the former CanX shareholders of 6,400,000 shares of the Company’s restricted common stock (the “Royalty Buy-Out Shares”). The Company concurrently exercised the buy-out option, as so revised. In the aggregate, and pursuant to the amendment, the Company agreed to issue to the former CanX shareholders a total of 21,400,000 shares of restricted common stock. As disclosed in the January 2016 8-K, James McNulty, a member of the Board, is a former shareholder of CanX and thereby received a pro rata portion of the consideration paid to the former CanX shareholders.

In March 2017, the Company issued 5,000,000 restricted stock units to a consultant in exchange for consulting services. The restricted stock units vest as follows: 1,000,000 vest immediately and 4,000,000 vest according to performance based criteria.

On January 20, 2017, the Company filed for the dissolution of CannaVest Europe, GmbH, an entity that the Company had a 70% interest in prior to its dissolution, with the District Court, Dusseldorf Germany, effective December 31, 2016. CannaVest Europe GmbH had no assets or liabilities as of December 31, 2016.