Note

– Notes Payable and Line of Credit

Note Payable due

November 30, 2018

July 28, 2018,

the Company entered into the Amendment and Termination Agreement (“Amendment and Termination Agreement”) with Pacific Leaf Ventures, L.P (“Pacific Leaf”). Pursuant to that agreement, the Pacific Leaf Royalty Agreement and all other agreements with Pacific Leaf were terminated in their entirety, and the Company would make payments totaling

million of the

$1.5

million balance due to Pacific Leaf by

August 31, 2018.

Contemporaneously with the Amendment and Termination Agreement, the Company issued a Promissory Note (“Promissory Note”) for the remaining

$0.5

million due to Pacific Leaf. The Promissory Note accrued interest at a rate of

per annum and matured on

November 30, 2018.

The Company recorded interest expense of

$5,425

related to the Promissory Note for the

three

months ended

December 31, 2018

In consideration for deferring the payment of the amounts due to Pacific Leaf, the Company issued

100,000

shares of its common stock to Pacific Leaf on

July 31, 2018

having a fair market value of

$36,000.

The Company made cash payments totaling

$1.0

million to Pacific Leaf in

August 2018

related to the Amendment and Termination Agreement. Both the

$36,000

fair value of shares issued to Pacific Leaf and the

1,000,000

in cash payments made to Pacific Leaf in

August 2018

are recorded in the Company’s Condensed Consolidated Statement of Operations for the Three and Six Months Ended

September

31,

2018,

under the other expense caption.

December 21, 2018,

the Company made a

$100,000

payment on the promissory note. The payment was applied to interest accrued to date of

$12,164

and the remaining

$87,836

was applied to the principal balance of the Note.

December 21, 2018,

the Company also issued

500,000

shares of its common stock to Pacific Leaf in consideration for further deferral of repayment of the Note. The Company recorded $

95,000

in expense related to the shares issued, which is recorded in the Company’s Consolidated Statement of Operations for the year ended

March 31, 2019

, under the other expense caption.

The Company made additional payments on the promissory note of

$100,000

January 16, 2019,

$100,000

February 6, 2019,

and a final payment of

$210,000

March 4, 2019

which paid the note off in full.

Because the Amendment and Termination Agreement irrevocably terminated the Pacific Leaf Royalty Agreement Royalty Agreement, the Company recorded an expense of

$1,530,000

in the quarter ended

December 31, 2018

related to the prepaid royalties previously recorded on the Condensed Consolidated Balance Sheet in connection with the

February 2018

Agreement. The expense is included in the Other Expense caption of the Company’s Condensed Consolidated Statement of Operations for the

nine

months ended

December 31, 2018

. In total, the Company recorded

$3.1

million in Other Expense in its Condensed Consolidated Statement of Operations for the

nine

months ended

December 31, 2018

, as summarized in the table below:

Amounts Recorded in Other Expense Related to Royalty Settlement	For the Nine Months Ended December 31, 2018

Prepaid royalties expensed during the quarter	$	1,530,000
Promissory note issued to Pacific Leaf, due on or before November 30, 2018		500,000
600,000 shares common stock issued to Pacific Leaf		131,000
Long-term note payable and accrued interest terminated		(20,075	)
Total non-cash expense		2,140,925
Cash payments made in August 2018		1,000,000
Total	$	3,140,925

Note Payable dated

October 23, 2017

October 23, 2017,

the Company amended the existing Nevada Medical Marijuana Production License Agreement (“Amended Production License Agreement”). Per the terms of the Amended Production License Agreement, GB Sciences purchased the remaining percentage of the production license resulting in the

100%

ownership of the license. GB Sciences also received

100%

ownership of the cultivation license included in the original Nevada Medical Marijuana Production License Agreement. In exchange, GB Sciences made a

one

-time payment of

$500,000

and issued a

Promissory Note in the amount of

$700,000

payable in equal monthly payments over a

three

-year period commencing on

January 1, 2018.

The present value of the note was

$521,067

on the date of its issuance based on an imputed interest rate of

20.3%

and the Company recorded a discount on notes payable of

$178,933.

During the

nine

months ended

December 31, 2019

, the Company recorded

$31,092

in interest expense related to amortization of the note discount.

The Company has been in default on this note since

June

2019,

and as of the date of this report,

eight

monthly payments on the note totaling

$155,555

are unpaid. If the Company is unable to cure the default within

ten

days of receiving a written notice,

483

Management will have the option to accelerate the remaining balance owed of

$369,444

and impose a penalty interest rate of

10%,

but must notify the Company in writing should it choose to do so. The Company is currently in the process of negotiating a settlement and/or forbearance agreement with the lender.

Line of Credit dated

November 27, 2019

In connection with the Binding Letter of Intent dated

November 27, 2019,

the Company entered into a promissory note and received a line of credit for up to

$470,000

from the purchaser of

75%

interest in its Nevada facilities. The note matures upon the close of the sale of membership interests. During the

nine

months ended

December 31, 2019

, the Company received

$330,000

in advances under the line of credit. Subsequent to

December 31, 2019

, the Company received an additional

$150,000

in advances under the line of credit, bringing total proceeds to

$480,000

as of the date of this report and reflecting an informal agreement with the lender to increase the Line of Credit limit by

$10,000.

The balance at

December 31, 2019

was

$330,000.

Note payable to BCM MED, LLC

December 20, 2018,

GB Sciences Louisiana, LLC (“GBSLA") entered into a

$300,000

Loan Agreement with BCM MED, LLC (“BCM MED”). BCM MED is a related party to Wellcana Group, LLC, the minority member in GBSLA. The purpose of the financing is to fund operating expenses incurred by or on behalf of medical marijuana operations of GBSLA.

Pursuant to the Loan Agreement, GBSLA began making

eight

(

) monthly installment payments in the amount of

$33,333

on or before the

business day of each month commencing in

April 2019.

The aggregate amount of the installment payments from GBSLA to BCM MED are equal to the loan amount. Through

November 15, 2019,

GBSLA made

$266,667

in payments towards the loan and reduced the loan balance to

$33,333.

The remaining balance was deconsolidated upon close of the sale of the Company's controlling membership interest (Note

Summary of Notes Payable and Convertible Notes

As of

December 31, 2019

, the following notes payable were recorded in the Company’s consolidated balance sheet:

	As of December 31, 2019
Short-Term Notes Payable	Face Value		Discount			Carrying Value
6% Convertible promissory notes payable (Note 6)	$	1,257,000	$	(257,177	)	$	999,823
8% Convertible Secured Promissory Note dated February 28, 2019, as amended (Note 6)		1,271,863		(584,842	)		687,021
8% Convertible Promissory Note dated April 23, 2019 (Note 6)		2,640,000		(142,314	)		2,497,686
0% Note Payable dated October 23, 2017, current portion		369,444		(23,753	)		345,691
Line of Credit dated November 27, 2019		330,000		-			330,000
Note Payable to John Davis (Note 9)		151,923		-			151,923
Total Short-Term Notes Payable	$	6,020,230	$	(1,008,086	)	$	5,012,144