Note 5 - Notes Payable

6 Months Ended

Sep. 30, 2019

Disclosure Text Block [Abstract]

Note 5 - Notes Payable

Note 5 – Notes Payable

6% Note Payable due November 30, 2018

On 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 $1 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 6% 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 September 30, 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.

On 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.

On 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 recognized $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 on January 16, 2019, $100,000 on February 6, 2019, and a final payment of $210,000 on 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 September 30, 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 three and six months ended September 30, 2018. In total, the Company recorded $3.0 million in Other Expense in its Condensed Consolidated Statement of Operations for the three and six months ended September 30, 2018, as summarized in the table below:

Amounts Recorded in Other Expense	For the Three and Six Months Ended September 30, 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
100,000 shares common stock issued to Pacific Leaf	36,000
Long-term note payable and accrued interest terminated	(20,075)
Total non-cash expense	2,045,925
Cash payments made in August 2018	1,000,000
Total	$          2,045,925

0% Note Payable dated October 23, 2017

On 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 0% 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 six months ended September 30, 2019, the Company recorded $31,092 in interest expense related to amortization of the note discount.

As of the date of this report, five monthly payments on the note totaling $97,222 are unpaid. The terms of the note provide the Company ten days to cure any breach upon written notification of default received from the lender. To date, 483 Management has not provided the Company with written notification of default and we are in the process of negotiating a forbearance agreement. 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.

Note payable to BCM MED, LLC

On 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 will began making eight (8) monthly installment payments in the amount of $33,333 on or before the 10^th business day of each month commencing in April 2019. GBSLA will make the 9^th and final installment payment in the amount of $33,333 on or before the 10^th business day of December 2019. The aggregate amount of the installment payments from GBSLA to BCM MED are equal to the loan amount. During the six months ended September 30, 2019, GBSLA made $100,000 in payments towards the loan and reduced the loan balance to $100,000. The balance is included in current liabilities from discontinued operations on the Company’s September 30, 2019 unaudited condensed consolidated balance sheet. 

Summary of Notes Payable

As of September 30, 2019, the following notes payable were recorded in the Company’s consolidated balance sheet:

	As of September 30, 2019
Short-Term Notes Payable	Face Value	Discount	Carrying Value
6% Convertible promissory notes payable (Note 6)	$ 1,257,000	$ (360,134)	$ 896,866
8% Convertible Secured Promissory Note dated February 28, 2019, as amended (Note 6)	$ 1,361,863	$ (101,611)	$ 1,260,252
8% Convertible Promissory Note dated April 23, 2019	$ 2,765,000	$ (261,760)	$ 2,503,240
0% Note Payable dated October 23, 2017, current portion	$ 311,111	$ (53,816)	$ 257,295
Total Short-Term Notes Payable	$ 5,694,974	$ (777,321)	$ 4,917,653
Long-Term Notes Payable
0% Note Payable dated October 23, 2017	$ 58,333	$ (1,919)	$ 56,414
Total Long-Term Notes Payable	$ 58,333	$ (1,919)	$ 56,414
Discontinued Operations
0% Note Payable dated December 20, 2018	$ 100,000	$ -	$ 100,000