The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements
GB SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
|
|
For the Three Months Ended December 31,
|
|
|
For the Nine Months Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Cost of goods sold
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Gross profit
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
General and administrative expenses
|
|
|
670,311
|
|
|
|
1,472,937
|
|
|
|
1,677,482
|
|
|
|
4,555,633
|
|
LOSS FROM OPERATIONS
|
|
|
(670,311
|
)
|
|
|
(1,472,937
|
)
|
|
|
(1,677,482
|
)
|
|
|
(4,555,633
|
)
|
OTHER INCOME/(EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(167,120
|
)
|
|
|
(277,813
|
)
|
|
|
(1,249,994
|
)
|
|
|
(942,750
|
)
|
Loss on amendment to line of credit
|
|
|
(650,000
|
)
|
|
|
-
|
|
|
|
(650,000
|
)
|
|
|
-
|
|
Gain/(loss) on extinguishment
|
|
|
467,872
|
|
|
|
(92,796
|
)
|
|
|
467,872
|
|
|
|
(216,954
|
)
|
Gain on settlement of accounts payable
|
|
|
372,415
|
|
|
|
-
|
|
|
|
372,415
|
|
|
|
-
|
|
Gain on deconsolidation
|
|
|
-
|
|
|
|
4,502,058
|
|
|
|
-
|
|
|
|
4,502,058
|
|
Debt default penalty
|
|
|
-
|
|
|
|
-
|
|
|
|
(286,059
|
)
|
|
|
-
|
|
Other income/(expense)
|
|
|
17,523
|
|
|
|
(127,059
|
)
|
|
|
14,149
|
|
|
|
89,806
|
|
Total other income/(expense)
|
|
|
40,690
|
|
|
|
4,004,390
|
|
|
|
(1,331,617
|
)
|
|
|
3,432,160
|
|
INCOME/(LOSS) BEFORE INCOME TAXES
|
|
|
(629,621
|
)
|
|
|
2,531,453
|
|
|
|
(3,009,099
|
)
|
|
|
(1,123,473
|
)
|
Income tax expense
|
|
|
(206,690
|
)
|
|
|
-
|
|
|
|
(234,564
|
)
|
|
|
-
|
|
INCOME/(LOSS) FROM CONTINUING OPERATIONS
|
|
|
(836,311
|
)
|
|
|
2,531,453
|
|
|
|
(3,243,663
|
)
|
|
|
(1,123,473
|
)
|
Gain/(loss) from discontinued operations
|
|
|
242,327
|
|
|
|
(1,547,306
|
)
|
|
|
(2,479
|
)
|
|
|
(3,359,868
|
)
|
NET INCOME/(LOSS)
|
|
|
(593,984
|
)
|
|
|
984,147
|
|
|
|
(3,246,142
|
)
|
|
|
(4,483,341
|
)
|
Net loss attributable to non-controlling interest
|
|
|
-
|
|
|
|
(360,327
|
)
|
|
|
-
|
|
|
|
(738,107
|
)
|
NET INCOME/(LOSS) ATTRIBUTABLE TO GB SCIENCES, INC.
|
|
$
|
(593,984
|
)
|
|
$
|
1,344,474
|
|
|
$
|
(3,246,142
|
)
|
|
$
|
(3,745,234
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss) attributable to common stockholders of GB Sciences, Inc. - basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(836,311
|
)
|
|
$
|
2,531,453
|
|
|
$
|
(3,243,663
|
)
|
|
$
|
(1,123,473
|
)
|
Discontinued operations, net of non-controlling interest
|
|
|
242,327
|
|
|
|
(1,186,979
|
)
|
|
|
(2,479
|
)
|
|
|
(2,621,761
|
)
|
Net income/(loss)
|
|
$
|
(593,984
|
)
|
|
$
|
1,344,474
|
|
|
$
|
(3,246,142
|
)
|
|
$
|
(3,745,234
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss) attributable to common stockholders of GB Sciences, Inc. - diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(836,311
|
)
|
|
$
|
2,583,061
|
|
|
$
|
(3,243,663
|
)
|
|
$
|
(1,123,473
|
)
|
Discontinued operations, net of non-controlling interest
|
|
|
242,327
|
|
|
|
(1,186,979
|
)
|
|
|
(2,479
|
)
|
|
|
(2,621,761
|
)
|
Net income/(loss)
|
|
$
|
(593,984
|
)
|
|
$
|
1,396,082
|
|
|
$
|
(3,246,142
|
)
|
|
$
|
(3,745,234
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss) per common share – basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(0.00
|
)
|
|
$
|
0.01
|
|
|
$
|
(0.01
|
)
|
|
$
|
(0.00
|
)
|
Discontinued operations, net of non-controlling interest
|
|
|
0.00
|
|
|
|
(0.00
|
)
|
|
|
(0.00
|
)
|
|
|
(0.01
|
)
|
Net income/(loss)
|
|
$
|
(0.00
|
)
|
|
$
|
0.01
|
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss) per common share – diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(0.00
|
)
|
|
$
|
0.00
|
|
|
$
|
(0.01
|
)
|
|
$
|
(0.00
|
)
|
Discontinued operations, net of non-controlling interest
|
|
|
0.00
|
|
|
|
(0.00
|
)
|
|
|
(0.00
|
)
|
|
|
(0.01
|
)
|
Net income/(loss)
|
|
$
|
(0.00
|
)
|
|
$
|
0.00
|
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - basic
|
|
|
280,967,623
|
|
|
|
263,055,254
|
|
|
|
280,119,116
|
|
|
|
253,297,660
|
|
Weighted average common shares outstanding - diluted
|
|
|
280,967,623
|
|
|
|
325,790,554
|
|
|
|
280,119,116
|
|
|
|
253,297,660
|
|
The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements
GB SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
|
|
Nine Months Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(3,246,142
|
)
|
|
$
|
(4,483,341
|
)
|
Loss from discontinued operations
|
|
|
(2,479
|
)
|
|
|
(3,359,868
|
)
|
Net loss from continuing operations
|
|
|
(3,243,663
|
)
|
|
|
(1,123,473
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
30,097
|
|
|
|
100,877
|
|
Stock-based compensation and modification expense
|
|
|
248,850
|
|
|
|
455,242
|
|
Compensation warrants issued
|
|
|
-
|
|
|
|
132,914
|
|
Amortization of debt discount and beneficial conversion feature
|
|
|
776,908
|
|
|
|
698,615
|
|
Interest expense on conversion of notes payable
|
|
|
-
|
|
|
|
93,931
|
|
Loss on induced conversion
|
|
|
-
|
|
|
|
127,059
|
|
Amortization of discount on note receivable
|
|
|
-
|
|
|
|
(120,583
|
)
|
Accrued interest income
|
|
|
-
|
|
|
|
(50,411
|
)
|
ASC 842 Adjustment
|
|
|
-
|
|
|
|
(1,227
|
)
|
Loss on amendment to line of credit
|
|
|
650,000
|
|
|
|
-
|
|
Loss/(gain) on extinguishment
|
|
|
(467,872
|
)
|
|
|
216,954
|
|
Gain on settlement of accounts payable
|
|
|
(372,415
|
)
|
|
|
-
|
|
Gain on deconsolidation
|
|
|
-
|
|
|
|
(4,502,058
|
)
|
Debt default penalty
|
|
|
286,059
|
|
|
|
-
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
(21,449
|
)
|
|
|
204,699
|
|
Accounts payable
|
|
|
20,961
|
|
|
|
485,774
|
|
Accrued expenses
|
|
|
319,407
|
|
|
|
169,096
|
|
Accrued interest
|
|
|
518,892
|
|
|
|
291,256
|
|
Deposits and other noncurrent assets
|
|
|
-
|
|
|
|
106,385
|
|
Income tax payable
|
|
|
234,564
|
|
|
|
-
|
|
Indebtedness to related parties
|
|
|
(254,617
|
)
|
|
|
-
|
|
Net cash used in operating activities of continuing operations
|
|
|
(1,274,278
|
)
|
|
|
(2,714,950
|
)
|
Net cash provided by/(used in) operating activities of discontinued operations
|
|
|
21,098
|
|
|
|
(1,533,341
|
)
|
Net cash used in operating activities
|
|
|
(1,253,180
|
)
|
|
|
(4,248,291
|
)
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from note receivable
|
|
|
5,051,923
|
|
|
|
-
|
|
Acquisition of intangible assets
|
|
|
(326,000
|
)
|
|
|
(91,862
|
)
|
Net cash provided by/(used in) investing activities of continuing operations
|
|
|
4,725,923
|
|
|
|
(91,862
|
)
|
Net cash used in investing activities of discontinued operations
|
|
|
(131,302
|
)
|
|
|
(446,922
|
)
|
Net cash provided by/(used in) investing activities
|
|
|
4,594,621
|
|
|
|
(538,784
|
)
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock
|
|
|
-
|
|
|
|
790,225
|
|
Gross proceeds from warrant exercises
|
|
|
249,807
|
|
|
|
1,069,975
|
|
Gross proceeds from convertible notes payable
|
|
|
300,000
|
|
|
|
2,630,000
|
|
Proceeds from Line of Credit
|
|
|
375,000
|
|
|
|
-
|
|
Principal payment of notes and convertible notes payable
|
|
|
(3,156,014
|
)
|
|
|
(26,664
|
)
|
Principal payment of note payable to related party
|
|
|
(151,923
|
)
|
|
|
-
|
|
Fees for issuance of note payable and convertible note payable
|
|
|
(34,500
|
)
|
|
|
(175,000
|
)
|
Brokerage fees for issuance of common stock and warrants
|
|
|
(24,983
|
)
|
|
|
(175,628
|
)
|
Net cash provided by/(used in) financing activities of continuing operations
|
|
|
(2,442,613
|
)
|
|
|
4,112,908
|
|
Net cash provided by/(used in) financing activities of discontinued operations
|
|
|
(129,237
|
)
|
|
|
529,412
|
|
Net cash provided by/(used in) financing activities
|
|
|
(2,571,850
|
)
|
|
|
4,642,320
|
|
Net change in cash and cash equivalents
|
|
|
769,591
|
|
|
|
(144,755
|
)
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
|
|
151,766
|
|
|
|
182,055
|
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
|
|
921,357
|
|
|
|
37,300
|
|
Less: cash and cash equivalents classified as discontinued operations
|
|
|
(150,293
|
)
|
|
|
(17,782
|
)
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD FROM CONTINUING OPERATIONS
|
|
$
|
771,064
|
|
|
$
|
19,518
|
|
The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements
GB SCIENCES, INC.
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
For the Nine Months Ended December 31, 2020 and 2019
(unaudited)
|
|
Nine Months Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Cash paid for interest
|
|
$
|
241,014
|
|
|
$
|
451,040
|
|
Cash paid for income tax
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Non-cash transactions:
|
|
|
|
|
|
|
|
|
Accrued liabilities forgiven in connection with Wellcana Note settlement
|
|
$
|
172,500
|
|
|
$
|
-
|
|
Depreciation capitalized in inventory (discontinued operations)
|
|
$
|
417,616
|
|
|
$
|
370,167
|
|
Accrued interest capitalized in convertible note principal
|
|
$
|
223,094
|
|
|
$
|
-
|
|
Property capitalized under operating leases
|
|
$
|
-
|
|
|
$
|
182,624
|
|
Patent acquisition costs capitalized in intangible assets
|
|
$
|
45,100
|
|
|
$
|
163,174
|
|
Stock options issued for services
|
|
$
|
168,000
|
|
|
$
|
-
|
|
Stock issued upon conversion of notes payable
|
|
$
|
-
|
|
|
$
|
525,000
|
|
Induced dividend from warrant exercises
|
|
$
|
17,263
|
|
|
$
|
267,525
|
|
Beneficial conversion feature on notes payable
|
|
$
|
196,886
|
|
|
$
|
829,736
|
|
Cumulative effect of the new lease standard
|
|
$
|
-
|
|
|
$
|
7,550
|
|
The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements
GB SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY/(DEFICIT)
For the Three Months Ended December 31, 2020 and 2019
(unaudited)
|
|
Shares
|
|
|
Amount
|
|
|
Additional Paid-In Capital
|
|
|
Accumulated Deficit
|
|
|
Non-Controlling Interest
|
|
|
Total
|
|
Balance at September 30, 2020
|
|
|
280,532,686
|
|
|
$
|
28,054
|
|
|
$
|
97,679,001
|
|
|
$
|
(100,056,626
|
)
|
|
$
|
-
|
|
|
$
|
(2,349,571
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of warrants for stock
|
|
|
3,286,767
|
|
|
|
328
|
|
|
|
88,415
|
|
|
|
-
|
|
|
|
-
|
|
|
|
88,743
|
|
Share based compensation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
191,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
191,500
|
|
Modification of employee options and warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
57,350
|
|
|
|
-
|
|
|
|
-
|
|
|
|
57,350
|
|
Beneficial conversion feature on notes payable
|
|
|
|
|
|
|
|
|
|
|
46,886
|
|
|
|
-
|
|
|
|
-
|
|
|
|
46,886
|
|
Stock options issued for services
|
|
|
|
|
|
|
|
|
|
|
63,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
63,000
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(593,984
|
)
|
|
|
-
|
|
|
|
(593,984
|
)
|
Balance at December 31, 2020
|
|
|
283,819,453
|
|
|
$
|
28,382
|
|
|
$
|
98,126,152
|
|
|
$
|
(100,650,610
|
)
|
|
$
|
-
|
|
|
$
|
(2,496,076
|
)
|
|
|
Shares
|
|
|
Amount
|
|
|
Additional Paid-In Capital
|
|
|
Accumulated Deficit
|
|
|
Non-Controlling Interest
|
|
|
Total
|
|
Balance at September 30, 2019
|
|
|
255,345,019
|
|
|
$
|
25,535
|
|
|
$
|
95,333,271
|
|
|
$
|
(90,071,120
|
)
|
|
$
|
9,027,977
|
|
|
$
|
14,315,663
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of stock for debt conversion
|
|
|
5,583,333
|
|
|
|
558
|
|
|
|
244,442
|
|
|
|
-
|
|
|
|
-
|
|
|
|
245,000
|
|
Exercise of warrants for stock
|
|
|
3,125,000
|
|
|
|
313
|
|
|
|
115,088
|
|
|
|
-
|
|
|
|
-
|
|
|
|
115,401
|
|
Issuance of stock for services
|
|
|
2,500,000
|
|
|
|
250
|
|
|
|
213,750
|
|
|
|
-
|
|
|
|
-
|
|
|
|
214,000
|
|
Share based compensation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
32,431
|
|
|
|
-
|
|
|
|
-
|
|
|
|
32,431
|
|
Issuance of stock for cash, net of issuance costs
|
|
|
4,000,000
|
|
|
|
400
|
|
|
|
239,600
|
|
|
|
-
|
|
|
|
-
|
|
|
|
240,000
|
|
Beneficial conversion feature on notes payable
|
|
|
-
|
|
|
|
-
|
|
|
|
695,932
|
|
|
|
-
|
|
|
|
-
|
|
|
|
695,932
|
|
Contributions from non-controlling interest
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
40,000
|
|
|
|
40,000
|
|
Inducement dividend from warrant exercises
|
|
|
-
|
|
|
|
-
|
|
|
|
37,499
|
|
|
|
(37,499
|
)
|
|
|
-
|
|
|
|
-
|
|
Induced note conversions
|
|
|
-
|
|
|
|
-
|
|
|
|
127,059
|
|
|
|
-
|
|
|
|
-
|
|
|
|
127,059
|
|
Deconsolidation of subsidiary
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(8,707,650
|
)
|
|
|
(8,707,650
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,344,474
|
|
|
|
(360,327
|
)
|
|
|
984,147
|
|
Balance at December 31, 2019
|
|
|
270,553,352
|
|
|
$
|
27,056
|
|
|
$
|
97,039,072
|
|
|
$
|
(88,764,145
|
)
|
|
$
|
-
|
|
|
$
|
8,301,983
|
|
The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements
GB SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY/(DEFICIT)
For the Nine Months Ended December 31, 2020 and 2019
(unaudited)
|
|
Shares
|
|
|
Amount
|
|
|
Additional Paid-In Capital
|
|
|
Accumulated Deficit
|
|
|
Non-Controlling Interest
|
|
|
Total
|
|
Balance at March 31, 2020
|
|
|
275,541,602
|
|
|
$
|
27,554
|
|
|
$
|
97,271,157
|
|
|
$
|
(97,387,205
|
)
|
|
$
|
-
|
|
|
$
|
(88,494
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of warrants for stock, net of issuance costs
|
|
|
8,277,851
|
|
|
|
828
|
|
|
|
223,996
|
|
|
|
-
|
|
|
|
-
|
|
|
|
224,824
|
|
Share based compensation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
191,500
|
|
|
|
|
|
|
|
|
|
|
|
191,500
|
|
Modification of employee options and warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
57,350
|
|
|
|
-
|
|
|
|
-
|
|
|
|
57,350
|
|
Beneficial conversion feature on notes payable
|
|
|
-
|
|
|
|
-
|
|
|
|
196,886
|
|
|
|
-
|
|
|
|
-
|
|
|
|
196,886
|
|
Stock options issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
168,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
168,000
|
|
Inducement dividend from warrant exercises
|
|
|
-
|
|
|
|
-
|
|
|
|
17,263
|
|
|
|
(17,263
|
)
|
|
|
-
|
|
|
|
-
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,246,142
|
)
|
|
|
-
|
|
|
|
(3,246,142
|
)
|
Balance at December 31, 2020
|
|
|
283,819,453
|
|
|
$
|
28,382
|
|
|
$
|
98,126,152
|
|
|
$
|
(100,650,610
|
)
|
|
$
|
-
|
|
|
$
|
(2,496,076
|
)
|
|
|
Shares
|
|
|
Amount
|
|
|
Additional Paid-In Capital
|
|
|
Accumulated Deficit
|
|
|
Non-Controlling Interest
|
|
|
Total
|
|
Balance at March 31, 2019
|
|
|
240,627,102
|
|
|
$
|
24,063
|
|
|
$
|
93,020,015
|
|
|
$
|
(84,743,836
|
)
|
|
$
|
8,855,757
|
|
|
$
|
17,155,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of stock for debt conversion
|
|
|
7,583,333
|
|
|
|
758
|
|
|
|
524,242
|
|
|
|
-
|
|
|
|
-
|
|
|
|
525,000
|
|
Exercise of warrants for stock
|
|
|
12,574,750
|
|
|
|
1,257
|
|
|
|
964,620
|
|
|
|
-
|
|
|
|
-
|
|
|
|
965,877
|
|
Issuance of stock for services
|
|
|
2,500,000
|
|
|
|
250
|
|
|
|
213,750
|
|
|
|
-
|
|
|
|
-
|
|
|
|
214,000
|
|
Share based compensation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
241,242
|
|
|
|
-
|
|
|
|
-
|
|
|
|
241,242
|
|
Issuance of stock for cash, net of issuance costs
|
|
|
7,668,167
|
|
|
|
768
|
|
|
|
717,929
|
|
|
|
-
|
|
|
|
-
|
|
|
|
718,697
|
|
Beneficial conversion feature on notes payable
|
|
|
-
|
|
|
|
-
|
|
|
|
829,736
|
|
|
|
-
|
|
|
|
-
|
|
|
|
829,736
|
|
Contributions from non-controlling interest
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
590,000
|
|
|
|
590,000
|
|
Compensation warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
132,914
|
|
|
|
-
|
|
|
|
-
|
|
|
|
132,914
|
|
Cancelled shares issued to consultant
|
|
|
(400,000
|
)
|
|
|
(40
|
)
|
|
|
40
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Inducement dividend from warrant exercises
|
|
|
-
|
|
|
|
-
|
|
|
|
267,525
|
|
|
|
(267,525
|
)
|
|
|
-
|
|
|
|
-
|
|
Induced note conversions
|
|
|
-
|
|
|
|
-
|
|
|
|
127,059
|
|
|
|
-
|
|
|
|
-
|
|
|
|
127,059
|
|
Cumulative effect of the new lease standard
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(7,550
|
)
|
|
|
-
|
|
|
|
(7,550
|
)
|
Deconsolidation of subsidiary
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(8,707,650
|
)
|
|
|
(8,707,650
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,745,234
|
)
|
|
|
(738,107
|
)
|
|
|
(4,483,341
|
)
|
Balance at December 31, 2019
|
|
|
270,553,352
|
|
|
$
|
27,056
|
|
|
$
|
97,039,072
|
|
|
$
|
(88,764,145
|
)
|
|
$
|
-
|
|
|
$
|
8,301,983
|
|
The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Background and Significant Accounting Policies
GB Sciences, Inc. (“the Company”, “GB Sciences”, “we”, “us”, or “our”) seeks to be a biopharmaceutical research and cannabinoid-based drug development company whose goal is to create patented formulations for safe, standardized, cannabinoid therapies that target a variety of medical conditions in both the pharmaceutical and wellness markets. The Company is engaged in the research and development of cannabinoid medicines and plans to produce cannabinoid therapies for the wellness markets based on its portfolio of intellectual property.
Through its wholly owned Canadian subsidiary, GBS Global Biopharma, Inc. (“GBSGB”), the Company is engaged in the research and development of plant-based medicines, primarily cannabinoid medicines, with virtual operations in North America and Europe. GBSGB’s assets include a portfolio of cannabinoid medicine intellectual property, critical research contracts, and key supplier arrangements. GBSGB’s intellectual property covers a range of conditions and several programs are in the pre-clinical animal stage of development including Parkinson’s disease, neuropathic pain, and cardiovascular therapeutic programs. GBSGB runs a lean drug development program and takes effort to minimize expenses, including personnel, overhead, and fixed capital expenses through strategic partnerships with Universities and Contract Research Organizations (“CROs”). GBSGB’s intellectual property portfolio includes five USPTO issued patents, seven USPTO nonprovisional patent applications pending in the US, and three provisional patent applications in the US. In addition to the USPTO patents and patent applications, the company has filed 29 patent applications internationally to protect its proprietary technology.
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements of GB Sciences, Inc. (the “Company,” “We” or “Us”) have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulations S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ending March 31, 2021. The balance sheet at March 31, 2020 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended March 31, 2020.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Principles of Consolidation
We prepare our consolidated financial statements in accordance with generally accepted accounting principles (GAAP) for the United States of America. Our consolidated financial statements include all operating divisions and majority-owned subsidiaries, reported as a single operating segment, for which we maintain controlling interests. Intercompany accounts and transactions have been eliminated in consolidation. The ownership interest of non-controlling participants in subsidiaries that are not wholly owned is included as a separate component of equity. The non-controlling participants’ share of the net loss is included as “Net loss attributable to non-controlling interest” on the unaudited consolidated statements of operations.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to allowances for doubtful accounts, inventory valuation and standard cost allocations, valuation of initial right-of-use assets and corresponding lease liabilities, valuation of beneficial conversion features in convertible debt, valuation of the assets and liabilities of discontinued operations, stock-based compensation expense, purchased intangible asset valuations, deferred income tax asset valuation allowances, uncertain tax positions, litigation and other loss contingencies. These estimates and assumptions are based on current facts, historical experience and various other factors that the Company believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of costs and expenses that are not readily apparent from other sources. The actual results the Company experiences may differ materially and adversely from these estimates.
Reclassifications
Certain reclassifications have been made to the comparative period amounts to conform to the current period presentation. Certain items on the unaudited balance sheets and statements of operations and cash flows have been reclassified to conform with current period presentation. The assets, liabilities, income/(loss), and cash flows of GB Sciences Louisiana, LLC, GB Sciences Nevada, LLC, GB Sciences Las Vegas, LLC, and GB Sciences Nopah, LLC have been reclassified to discontinued operations due to the sale of the Company's Louisiana cultivation and extraction facility (Note 10) and the pending sale of the Company's Nevada cultivation and extraction facilities (Note 11).
Discontinued Operations
Refer to Note 3.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Long-Lived Assets
We evaluate the carrying value of property and equipment if impairment indicators are present or if other circumstances indicate that impairment may exist under authoritative guidance. The annual testing date is March 31. When management believes impairment indicators may exist, projections of the undiscounted future cash flows associated with the use of and eventual disposition of property and equipment are prepared. If the projections indicate that the carrying value of the property and equipment are not recoverable, we reduce the carrying values to fair value. These impairment tests are heavily influenced by assumptions and estimates that are subject to change as additional information becomes available. No indicators of impairment were identified by the Company as of December 31, 2020.
Inventory
We value our inventory at the lower of the actual cost of our inventory, as determined using the first-in, first-out method, or its current estimated net realizable value. We periodically review our physical inventory for excess, obsolete, and potentially impaired items and reserve accordingly. Our reserve estimate for excess and obsolete inventory is based on expected future use.
Beneficial Conversion Feature of Convertible Notes Payable
The Company accounts for convertible notes payable in accordance with the guidelines established by the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 470-20, Debt with Conversion and Other Options and Emerging Issues Task Force (“EITF”) 00-27, “Application of Issue No. 98-5 to Certain Convertible Instruments”. A beneficial conversion feature (“BCF”) exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of any attached equity instruments, if any related equity instruments were granted with the debt. In accordance with this guidance, the BCF of a convertible note is measured by allocating a portion of the note's proceeds to the warrants, if applicable, and as a reduction of the carrying amount of the convertible note equal to the intrinsic value of the conversion feature, both of which are credited to additional paid-in-capital. The Company calculates the fair value of warrants issued with the convertible notes using the Black-Scholes valuation model and uses the same assumptions for valuing any employee options in accordance with ASC Topic 718 Compensation – Stock Compensation. The only difference is that the contractual life of the warrants is used.
The value of the proceeds received from a convertible note is then allocated between the conversion features and warrants on a relative fair value basis. The allocated fair value is recorded in the financial statements as a debt discount (premium) from the face amount of the note and such discount is amortized over the expected term of the convertible note (or to the conversion date of the note, if sooner) and is charged to interest expense.
Revenue Recognition
The FASB issued Accounting Standards Codification (“ASC”) 606 as guidance on the recognition of revenue from contracts with customers. Revenue recognition depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented, or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition method). The Company adopted the guidance on April 1, 2018 and applied the cumulative catch-up transition method.
The Company’s only current revenue source (classified as discontinued operations) is from sales of cannabis, a distinct physical good. Under ASC 606, the Company is required to separately identify each performance obligation resulting from its contracts from customers, which may be a good or a service. A contract may contain one or more performance obligations. All of the Company’s contracts with customers, past and present, contain only a single performance obligation, the delivery of distinct physical goods. Because fulfillment of the company’s performance obligation to the customer under ASC 606 results in the same timing of revenue recognition as under the previous guidance (i.e. revenue is recognized upon delivery of physical goods), the Company did not record any material adjustment to report the cumulative effect of initial application of the guidance.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Earnings/(loss) per Share
The Company’s basic loss per share has been calculated using the weighted average number of common shares outstanding during the period. The Company had 131,886,787 and 158,728,095 potentially dilutive common shares at December 31, 2020 and March 31, 2020, respectively. However, such common stock equivalents were not included in the computation of diluted net loss per share for the three and nine months ended December 31, 2020, and the nine months ended December 31, 2019, as their inclusion would have been anti-dilutive. The computation of diluted earnings per share for the three months ended December 31, 2019, is as follows:
|
|
For the Three Months Ended December 31, 2019
|
|
Diluted EPS Computation
|
|
Income (Numerator)
|
|
|
Shares (Denominator)
|
|
|
Per-Share Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations available to common stockholders
|
|
$
|
2,531,453
|
|
|
|
|
|
|
|
|
|
Plus: Income impact of assumed conversions
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense on convertible notes payable
|
|
|
51,608
|
|
|
|
|
|
|
|
|
|
Effect of assumed conversions
|
|
|
51,608
|
|
|
|
|
|
|
|
|
|
Income from continuing operations plus assumed conversions
|
|
|
2,583,061
|
|
|
|
|
|
|
|
|
|
Net loss from discontinued operations available to common stockholders
|
|
|
(1,186,979
|
)
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
1,396,082
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding
|
|
|
|
|
|
|
263,055,254
|
|
|
|
|
|
Plus: incremental shares from assumed conversions
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
|
|
|
|
|
|
|
26,648,530
|
|
|
|
|
|
Convertible notes payable
|
|
|
|
|
|
|
36,086,770
|
|
|
|
|
|
Dilutive potential common shares
|
|
|
|
|
|
|
62,735,300
|
|
|
|
|
|
Adjusted weighted-average shares
|
|
|
|
|
|
|
325,790,554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations
|
|
$
|
2,583,061
|
|
|
|
325,790,554
|
|
|
$
|
0.00
|
|
Net loss from discontinued operations
|
|
$
|
(1,186,979
|
)
|
|
|
325,790,554
|
|
|
$
|
(0.00
|
)
|
Net income
|
|
$
|
1,396,082
|
|
|
|
325,790,554
|
|
|
$
|
0.00
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Recent Accounting Pronouncements
Recently Adopted Standards
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-13, "Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"). Financial Instruments—Credit Losses (Topic 326) amends guideline on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available-for-sale debt securities, credit losses should be measured in a manner similar to current GAAP, however Topic 326 will require that credit losses be presented as an allowance rather than as a write-down. ASU 2016-13 affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The amendments in this ASU are effective for smaller reporting companies for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is currently evaluating the impact of this guidance on its financial statements.
In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement.” This ASU eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project. The standard is effective for all entities for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company adopted the standard on April 1, 2020. The adoption of this guidance did not have a material impact on the Company’s financial statements.
All other newly issued but not yet effective accounting pronouncements have been deemed either immaterial or not applicable.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 – Going Concern
The Company’s financial statements have been prepared assuming the Company will continue as a going concern. The Company has sustained net losses since inception, which have caused an accumulated deficit of $(100,650,610) at December 31, 2020. The Company had a working capital deficit of $(6,135,112) at December 31, 2020, net of working capital of $969,498 classified as discontinued operations, compared to $(3,884,877) at March 31, 2020, net of working capital of $349,195 classified as discontinued operations. In addition, the Company has consumed cash in its operating activities of $(1,253,180) for the nine months ended December 31, 2020, including $21,098 provided by discontinued operations, compared to $(4,248,291) including $(1,533,341) used in discontinued operations for the nine months ended December 31, 2019. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.
Management has been able, thus far, to finance the losses through a public offering, private placements and obtaining operating funds from stockholders. The Company is continuing to seek sources of financing. There are no assurances that the Company will be successful in achieving its goals.
Furthermore, Management believes the COVID-19 pandemic may have a significant impact on the Company's business. The pandemic presents a risk to the global economy, and it is possible that it could have an impact on the operations of the Company in the near term that could materially impact the Company’s financials and ability to continue as a going concern. Management has not been able to measure the potential financial impact on the Company and continues to monitor the impact of the pandemic closely, although the extent to which the COVID-19 outbreak will impact our operations, financing ability or future financial results is uncertain.
In view of these conditions, the Company’s ability to continue as a going concern is dependent upon its ability to obtain additional financing or capital sources, to meet its financing requirements, and ultimately to achieve profitable operations. Management believes that its current and future plans provide an opportunity to continue as a going concern. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that may be necessary in the event the Company is unable to continue as a going concern.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 3 – Discontinued Operations
Discontinued operations comprise those activities that were disposed of during the period or which were classified as held for sale at the end of the period and represent a separate major line of business or geographical area that can be clearly distinguished for operational and financial reporting purposes. The Company has included its subsidiaries GB Sciences Louisiana, LLC, GB Sciences Nevada, LLC, GB Sciences Las Vegas, LLC, and GB Sciences Nopah, LLC in discontinued operations due to the sale of the Company's Louisiana cultivation and extraction facility (Note 10) and the pending sale of the Company's Nevada cultivation and extraction facilities (Note 11).
There were no assets and liabilities from discontinued operations attributable to GB Sciences Louisiana, LLC at December 31, 2020 and March 31, 2020. The assets and liabilities associated with discontinued operations included in our condensed consolidated balance sheets as of December 31, 2020 and March 31, 2020 were as follows:
|
|
December 31, 2020
|
|
|
March 31, 2020
|
|
|
|
Continuing
|
|
|
Discontinued Nevada Subsidiaries
|
|
|
Total
|
|
|
Continuing
|
|
|
Discontinued Nevada Subsidiaries
|
|
|
Total
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
771,064
|
|
|
$
|
150,293
|
|
|
$
|
921,357
|
|
|
$
|
2,406
|
|
|
$
|
149,360
|
|
|
$
|
151,766
|
|
Accounts receivable, net
|
|
|
-
|
|
|
|
233,039
|
|
|
|
233,039
|
|
|
|
-
|
|
|
|
117,967
|
|
|
|
117,967
|
|
Inventory, net
|
|
|
-
|
|
|
|
1,662,473
|
|
|
|
1,662,473
|
|
|
|
-
|
|
|
|
1,445,839
|
|
|
|
1,445,839
|
|
Prepaid and other current assets
|
|
|
40,225
|
|
|
|
39,072
|
|
|
|
79,297
|
|
|
|
18,776
|
|
|
|
42,109
|
|
|
|
60,885
|
|
Note receivable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,224,423
|
|
|
|
-
|
|
|
|
5,224,423
|
|
TOTAL CURRENT ASSETS
|
|
|
811,289
|
|
|
|
2,084,877
|
|
|
|
2,896,166
|
|
|
|
5,245,605
|
|
|
|
1,755,275
|
|
|
|
7,000,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
28,150
|
|
|
|
5,022,987
|
|
|
|
5,051,137
|
|
|
|
37,821
|
|
|
|
5,496,012
|
|
|
|
5,533,833
|
|
Intangible assets, net
|
|
|
1,647,376
|
|
|
|
571,265
|
|
|
|
2,218,641
|
|
|
|
1,128,702
|
|
|
|
571,264
|
|
|
|
1,699,966
|
|
Deposits and other noncurrent assets
|
|
|
-
|
|
|
|
82,904
|
|
|
|
82,904
|
|
|
|
-
|
|
|
|
91,504
|
|
|
|
91,504
|
|
Operating lease right-of-use assets, net
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
26,685
|
|
|
|
26,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
2,486,815
|
|
|
$
|
7,762,033
|
|
|
$
|
10,248,848
|
|
|
$
|
6,412,128
|
|
|
$
|
7,940,740
|
|
|
$
|
14,352,868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
1,456,695
|
|
|
$
|
351,258
|
|
|
$
|
1,807,953
|
|
|
$
|
1,913,049
|
|
|
$
|
646,865
|
|
|
$
|
2,559,914
|
|
Accrued interest
|
|
|
462,930
|
|
|
|
39,644
|
|
|
|
502,574
|
|
|
|
366,865
|
|
|
|
30,787
|
|
|
|
397,652
|
|
Accrued expenses
|
|
|
1,110,525
|
|
|
|
103,559
|
|
|
|
1,214,084
|
|
|
|
813,618
|
|
|
|
74,394
|
|
|
|
888,012
|
|
Notes payable, net
|
|
|
3,726,308
|
|
|
|
485,000
|
|
|
|
4,211,308
|
|
|
|
5,054,728
|
|
|
|
480,000
|
|
|
|
5,534,728
|
|
Indebtedness to related parties
|
|
|
331,895
|
|
|
|
-
|
|
|
|
331,895
|
|
|
|
586,512
|
|
|
|
-
|
|
|
|
586,512
|
|
Note payable to related party
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
151,923
|
|
|
|
-
|
|
|
|
151,923
|
|
Income tax payable
|
|
|
827,546
|
|
|
|
-
|
|
|
|
827,546
|
|
|
|
592,982
|
|
|
|
-
|
|
|
|
592,982
|
|
Finance lease obligations, current
|
|
|
-
|
|
|
|
135,918
|
|
|
|
135,918
|
|
|
|
-
|
|
|
|
166,769
|
|
|
|
166,769
|
|
Operating lease obligations, current
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,265
|
|
|
|
7,265
|
|
TOTAL CURRENT LIABILITIES
|
|
|
7,915,899
|
|
|
|
1,115,379
|
|
|
|
9,031,278
|
|
|
|
9,479,677
|
|
|
|
1,406,080
|
|
|
|
10,885,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes payable
|
|
|
283,942
|
|
|
|
-
|
|
|
|
283,942
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Operating lease obligations, long term
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
22,515
|
|
|
|
22,515
|
|
Finance lease obligations, long term
|
|
|
-
|
|
|
|
3,429,704
|
|
|
|
3,429,704
|
|
|
|
-
|
|
|
|
3,533,090
|
|
|
|
3,533,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
$
|
8,199,841
|
|
|
$
|
4,545,083
|
|
|
$
|
12,744,924
|
|
|
$
|
9,479,677
|
|
|
$
|
4,961,685
|
|
|
$
|
14,441,362
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Discontinued Operations - Revenues and Expenses
The revenues and expenses associated with discontinued operations included in our condensed consolidated statements of operations for the three and nine months ended December 31, 2020 and 2019 were as follows:
|
|
For the Three Months Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
Continuing
|
|
|
Discontinued
|
|
|
Total
|
|
|
Continuing
|
|
|
Discontinued
|
|
|
Total
|
|
Sales revenue
|
|
$
|
-
|
|
|
$
|
1,015,464
|
|
|
$
|
1,015,464
|
|
|
$
|
-
|
|
|
$
|
446,201
|
|
|
$
|
446,201
|
|
Cost of goods sold
|
|
|
-
|
|
|
|
(596,362
|
)
|
|
|
(596,362
|
)
|
|
|
-
|
|
|
|
(869,848
|
)
|
|
|
(869,848
|
)
|
Gross profit/(loss)
|
|
|
-
|
|
|
|
419,102
|
|
|
|
419,102
|
|
|
|
-
|
|
|
|
(423,647
|
)
|
|
|
(423,647
|
)
|
General and administrative expenses
|
|
|
670,311
|
|
|
|
77,064
|
|
|
|
747,375
|
|
|
|
1,472,937
|
|
|
|
937,804
|
|
|
|
2,410,741
|
|
INCOME/(LOSS) FROM OPERATIONS
|
|
|
(670,311
|
)
|
|
|
342,038
|
|
|
|
(328,273
|
)
|
|
|
(1,472,937
|
)
|
|
|
(1,361,451
|
)
|
|
|
(2,834,388
|
)
|
OTHER INCOME/(EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(167,120
|
)
|
|
|
(113,241
|
)
|
|
|
(280,361
|
)
|
|
|
(277,813
|
)
|
|
|
(194,219
|
)
|
|
|
(472,032
|
)
|
Loss on amendment to line of credit
|
|
|
(650,000
|
)
|
|
|
-
|
|
|
|
(650,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Gain/(loss) on extinguishment
|
|
|
467,872
|
|
|
|
-
|
|
|
|
467,872
|
|
|
|
(92,796
|
)
|
|
|
-
|
|
|
|
(92,796
|
)
|
Gain on settlement of accounts payable
|
|
|
372,415
|
|
|
|
15,972
|
|
|
|
388,387
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Gain on deconsolidation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,502,058
|
|
|
|
-
|
|
|
|
4,502,058
|
|
Debt default penalty
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other income/(expense)
|
|
|
17,523
|
|
|
|
(2,442
|
)
|
|
|
15,081
|
|
|
|
(127,059
|
)
|
|
|
8,364
|
|
|
|
(118,695
|
)
|
Total other income/(expense)
|
|
|
40,690
|
|
|
|
(99,711
|
)
|
|
|
(59,021
|
)
|
|
|
4,004,390
|
|
|
|
(185,855
|
)
|
|
|
3,818,535
|
|
INCOME/(LOSS) BEFORE INCOME TAXES
|
|
|
(629,621
|
)
|
|
|
242,327
|
|
|
|
(387,294
|
)
|
|
|
2,531,453
|
|
|
|
(1,547,306
|
)
|
|
|
984,147
|
|
Income tax expense
|
|
|
(206,690
|
)
|
|
|
-
|
|
|
|
(206,690
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
NET INCOME/(LOSS)
|
|
$
|
(836,311
|
)
|
|
$
|
242,327
|
|
|
$
|
(593,984
|
)
|
|
$
|
2,531,453
|
|
|
$
|
(1,547,306
|
)
|
|
$
|
984,147
|
|
|
|
For the Nine Months Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
Continuing
|
|
|
Discontinued
|
|
|
Total
|
|
|
Continuing
|
|
|
Discontinued
|
|
|
Total
|
|
Sales revenue
|
|
$
|
-
|
|
|
$
|
2,830,932
|
|
|
$
|
2,830,932
|
|
|
$
|
-
|
|
|
$
|
2,905,582
|
|
|
$
|
2,905,582
|
|
Cost of goods sold
|
|
|
-
|
|
|
|
(1,947,225
|
)
|
|
|
(1,947,225
|
)
|
|
|
-
|
|
|
|
(3,731,996
|
)
|
|
|
(3,731,996
|
)
|
Gross profit/(loss)
|
|
|
-
|
|
|
|
883,707
|
|
|
|
883,707
|
|
|
|
-
|
|
|
|
(826,414
|
)
|
|
|
(826,414
|
)
|
General and administrative expenses
|
|
|
1,677,482
|
|
|
|
447,885
|
|
|
|
2,125,367
|
|
|
|
4,555,633
|
|
|
|
1,950,541
|
|
|
|
6,506,174
|
|
INCOME/(LOSS) FROM OPERATIONS
|
|
|
(1,677,482
|
)
|
|
|
435,822
|
|
|
|
(1,241,660
|
)
|
|
|
(4,555,633
|
)
|
|
|
(2,776,955
|
)
|
|
|
(7,332,588
|
)
|
OTHER INCOME/(EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(1,249,994
|
)
|
|
|
(374,383
|
)
|
|
|
(1,624,377
|
)
|
|
|
(942,750
|
)
|
|
|
(568,027
|
)
|
|
|
(1,510,777
|
)
|
Loss on amendment to line of credit
|
|
|
(650,000
|
)
|
|
|
-
|
|
|
|
(650,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Gain/(loss) on extinguishment
|
|
|
467,872
|
|
|
|
-
|
|
|
|
467,872
|
|
|
|
(216,954
|
)
|
|
|
-
|
|
|
|
(216,954
|
)
|
Gain on settlement of accounts payable
|
|
|
372,415
|
|
|
|
15,972
|
|
|
|
388,387
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Gain on deconsolidation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,502,058
|
|
|
|
-
|
|
|
|
4,502,058
|
|
Debt default penalty
|
|
|
(286,059
|
)
|
|
|
-
|
|
|
|
(286,059
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other income/(expense)
|
|
|
14,149
|
|
|
|
(79,890
|
)
|
|
|
(65,741
|
)
|
|
|
89,806
|
|
|
|
(14,886
|
)
|
|
|
74,920
|
|
Total other income/(expense)
|
|
|
(1,331,617
|
)
|
|
|
(438,301
|
)
|
|
|
(1,769,918
|
)
|
|
|
3,432,160
|
|
|
|
(582,913
|
)
|
|
|
2,849,247
|
|
INCOME/(LOSS) BEFORE INCOME TAXES
|
|
|
(3,009,099
|
)
|
|
|
(2,479
|
)
|
|
|
(3,011,578
|
)
|
|
|
(1,123,473
|
)
|
|
|
(3,359,868
|
)
|
|
|
(4,483,341
|
)
|
Income tax expense
|
|
|
(234,564
|
)
|
|
|
-
|
|
|
|
(234,564
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
NET INCOME/(LOSS)
|
|
$
|
(3,243,663
|
)
|
|
$
|
(2,479
|
)
|
|
$
|
(3,246,142
|
)
|
|
$
|
(1,123,473
|
)
|
|
$
|
(3,359,868
|
)
|
|
$
|
(4,483,341
|
)
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Discontinued Operations - Revenues and Expenses (continued)
The components of revenues and expenses associated with discontinued operations included in our condensed consolidated statements of operations for the three and nine months ended December 31, 2020 and 2019 were as follows:
|
|
For the Three Months Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
GB Sciences Louisiana, LLC
|
|
|
Nevada Subsidiaries
|
|
|
Total Discontinued Operations
|
|
|
GB Sciences Louisiana, LLC
|
|
|
Nevada Subsidiaries
|
|
|
Total Discontinued Operations
|
|
Sales revenue
|
|
$
|
-
|
|
|
$
|
1,015,464
|
|
|
$
|
1,015,464
|
|
|
$
|
192,070
|
|
|
$
|
254,131
|
|
|
$
|
446,201
|
|
Cost of goods sold
|
|
|
-
|
|
|
|
(596,362
|
)
|
|
|
(596,362
|
)
|
|
|
(193,915
|
)
|
|
|
(675,933
|
)
|
|
|
(869,848
|
)
|
Gross profit/(loss)
|
|
|
-
|
|
|
|
419,102
|
|
|
|
419,102
|
|
|
|
(1,845
|
)
|
|
|
(421,802
|
)
|
|
|
(423,647
|
)
|
General and administrative expenses
|
|
|
-
|
|
|
|
77,064
|
|
|
|
77,064
|
|
|
|
666,042
|
|
|
|
271,762
|
|
|
|
937,804
|
|
INCOME/(LOSS) FROM OPERATIONS
|
|
|
-
|
|
|
|
342,038
|
|
|
|
342,038
|
|
|
|
(667,887
|
)
|
|
|
(693,564
|
)
|
|
|
(1,361,451
|
)
|
OTHER EXPENSE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
-
|
|
|
|
(113,241
|
)
|
|
|
(113,241
|
)
|
|
|
(52,769
|
)
|
|
|
(141,450
|
)
|
|
|
(194,219
|
)
|
Gain on settlement of accounts payable
|
|
|
-
|
|
|
|
15,972
|
|
|
|
15,972
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
Other income/(expense)
|
|
|
-
|
|
|
|
(2,442
|
)
|
|
|
(2,442
|
)
|
|
|
-
|
|
|
|
8,364
|
|
|
|
8,364
|
|
Total other expense
|
|
|
-
|
|
|
|
(99,711
|
)
|
|
|
(99,711
|
)
|
|
|
(52,769
|
)
|
|
|
(133,086
|
)
|
|
|
(185,855
|
)
|
INCOME/(LOSS) BEFORE INCOME TAXES
|
|
|
-
|
|
|
|
242,327
|
|
|
|
242,327
|
|
|
|
(720,656
|
)
|
|
|
(826,650
|
)
|
|
|
(1,547,306
|
)
|
Income tax expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
NET INCOME/(LOSS)
|
|
$
|
-
|
|
|
$
|
242,327
|
|
|
$
|
242,327
|
|
|
$
|
(720,656
|
)
|
|
$
|
(826,650
|
)
|
|
$
|
(1,547,306
|
)
|
|
|
For the Nine Months Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
GB Sciences Louisiana, LLC
|
|
|
Nevada Subsidiaries
|
|
|
Total Discontinued Operations
|
|
|
GB Sciences Louisiana, LLC
|
|
|
Nevada Subsidiaries
|
|
|
Total Discontinued Operations
|
|
Sales revenue
|
|
$
|
-
|
|
|
$
|
2,830,932
|
|
|
$
|
2,830,932
|
|
|
$
|
569,077
|
|
|
$
|
2,336,505
|
|
|
$
|
2,905,582
|
|
Cost of goods sold
|
|
|
-
|
|
|
|
(1,947,225
|
)
|
|
|
(1,947,225
|
)
|
|
|
(574,544
|
)
|
|
|
(3,157,452
|
)
|
|
|
(3,731,996
|
)
|
Gross profit/(loss)
|
|
|
-
|
|
|
|
883,707
|
|
|
|
883,707
|
|
|
|
(5,467
|
)
|
|
|
(820,947
|
)
|
|
|
(826,414
|
)
|
General and administrative expenses
|
|
|
-
|
|
|
|
447,885
|
|
|
|
447,885
|
|
|
|
1,292,613
|
|
|
|
657,928
|
|
|
|
1,950,541
|
|
INCOME/(LOSS) FROM OPERATIONS
|
|
|
-
|
|
|
|
435,822
|
|
|
|
435,822
|
|
|
|
(1,298,080
|
)
|
|
|
(1,478,875
|
)
|
|
|
(2,776,955
|
)
|
OTHER EXPENSE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
-
|
|
|
|
(374,383
|
)
|
|
|
(374,383
|
)
|
|
|
(178,140
|
)
|
|
|
(389,887
|
)
|
|
|
(568,027
|
)
|
Gain on settlement of accounts payable
|
|
|
-
|
|
|
|
15,972
|
|
|
|
15,972
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other expense
|
|
|
-
|
|
|
|
(79,890
|
)
|
|
|
(79,890
|
)
|
|
|
-
|
|
|
|
(14,886
|
)
|
|
|
(14,886
|
)
|
Total other expense
|
|
|
-
|
|
|
|
(438,301
|
)
|
|
|
(438,301
|
)
|
|
|
(178,140
|
)
|
|
|
(404,773
|
)
|
|
|
(582,913
|
)
|
INCOME/(LOSS) BEFORE INCOME TAXES
|
|
|
-
|
|
|
|
(2,479
|
)
|
|
|
(2,479
|
)
|
|
|
(1,476,220
|
)
|
|
|
(1,883,648
|
)
|
|
|
(3,359,868
|
)
|
Income tax expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
NET INCOME/(LOSS)
|
|
$
|
-
|
|
|
$
|
(2,479
|
)
|
|
$
|
(2,479
|
)
|
|
$
|
(1,476,220
|
)
|
|
$
|
(1,883,648
|
)
|
|
$
|
(3,359,868
|
)
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Discontinued Operations - Inventory
Raw materials consist of supplies, materials, and consumables used in the cultivation and extraction processes. Work-in-progress includes live plants and cannabis in the drying, curing, and trimming processes. Finished goods includes completed cannabis flower, trim, and extracts in bulk and packaged forms. Inventory is included in current assets from discontinued operations in the Company's unaudited condensed consolidated balance sheets at December 31, 2020 and March 31, 2020.
|
|
December 31, 2020
|
|
|
March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
Raw materials
|
|
$
|
2,573
|
|
|
$
|
91,465
|
|
Work in progress
|
|
|
1,008,164
|
|
|
|
1,166,511
|
|
Finished goods
|
|
|
651,736
|
|
|
|
466,319
|
|
Subtotal
|
|
|
1,662,473
|
|
|
|
1,724,295
|
|
Allowance to reduce inventory to net realizable value
|
|
|
-
|
|
|
|
(278,456
|
)
|
Total inventory, net
|
|
$
|
1,662,473
|
|
|
$
|
1,445,839
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Discontinued Operations - Leases
The Company determines if an arrangement is a lease at inception and has lease agreements for warehouses, office facilities, and equipment. These commitments have remaining non-cancelable lease terms, with lease expirations which range from 2024 to 2025.
As a result of the adoption of ASC 842, certain real estate and equipment operating leases have been recorded on the balance sheet with a lease liability and right-of-use asset ("ROU"). Application of this standard resulted in the recognition of ROU assets of $182,624, net of accumulated amortization, and a corresponding lease liability of $190,173 at the April 1, 2019, the date of adoption. Accounting for finance leases is substantially unchanged.
Operating leases are included in other current assets , accrued liabilities, and operating lease obligations, long term on the unaudited condensed consolidated balance sheets. Finance leases are included in property and equipment, finance lease obligations, short term, and finance lease obligations, long term, on the unaudited condensed consolidated balance sheets. ROU assets represent the Company's right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make scheduled lease payments. ROU assets and liabilities are recognized on the lease commencement date based on the present value of lease payments over the lease term. The present value of lease payments is calculated using the incremental borrowing rate at lease commencement, which takes into consideration recent debt issuances as well as other applicable market data available. The rates used to discount finance leases previously recorded as capital leases range from 10.2% to 11.5%. Operating leases were discounted at a rate of 17.0%.
Lease terms include options to extend when it is reasonably certain that the option will be exercised. Leases with a term of 12 months or less are not recorded on the consolidated balance sheet.
All finance lease costs recorded in the Company's unaudited condensed consolidated financial statements for the three and nine months ended December 31, 2020 and 2019 relate to discontinued operations. During the nine months ended December 31, 2020, finance lease costs included in discontinued operations were $428,487, of which $312,463 represents interest expense and $116,024 represents amortization of the right-of-use assets.
Amortization of lease assets is included in income/(loss) from discontinued operations. As of December 31, 2020, there are no operating or finance lease obligations included in continuing operations. The future minimum lease payments of lease liabilities as of December 31, 2020, from discontinued operations are as follows:
Year Ending
|
|
|
|
|
March 31,
|
|
Finance Leases
|
|
|
|
|
|
|
2021 (3 months)
|
|
$
|
135,061
|
|
2022
|
|
|
544,296
|
|
2023
|
|
|
560,625
|
|
2024
|
|
|
577,444
|
|
2025
|
|
|
594,767
|
|
Thereafter
|
|
|
3,781,102
|
|
Total minimum lease payments
|
|
|
6,193,295
|
|
Less: Amount representing interest
|
|
|
(2,627,673
|
)
|
Present value of minimum lease payments
|
|
|
3,565,622
|
|
Less: Current maturities of capital lease obligations
|
|
|
(135,918
|
)
|
Long-term capital lease obligations
|
|
$
|
3,429,704
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 4 – Leases (Continuing Operations)
As a result of the adoption of ASC 842, certain real estate and equipment operating leases were recorded on the balance sheet with a lease liability and right-of-use asset ("ROU"). Application of this standard resulted in the recognition of ROU assets of $182,624, net of accumulated amortization, and a corresponding lease liability of $190,173 at the April 1, 2019, the date of adoption. Accounting for finance leases is substantially unchanged.
Operating leases are included in discontinued operations under operating right-of-use assets, net and operating lease obligations, short and long term on the unaudited condensed consolidated balance sheets. Lease terms include options to extend when it is reasonably certain that the option will be exercised. Leases with a term of 12 months or less are not recorded on the consolidated balance sheet.
There are no finance leases included in continuing operations. Operating lease costs included in continuing operations were $3,243, of which $1,242 represents interest expense and $2,001 represents amortization of the right-of-use assets. As of December 31, 2020, all of the Company's operating leases have terminated, and there are no right-of-use assets or operating or finance lease obligations included in continuing operations.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 5 – Notes Payable and Line of Credit
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 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 related to the difference between the face value and present value of the note.
To date, the company has made principal payments totaling $330,555 and the principal balance of the note was $369,445 at December 31, 2020. During the nine months ended December 31, 2020, the Company recorded interest expense of $13,929 related to amortization of the note discount. The remaining unamortized discount as of December 31, 2020 was $0.
On August 10, 2020, the Company entered into the Membership Interest Purchase Agreement ("Nopah MIPA") for the sale of its interest in GB Sciences Nopah, LLC (Note 11). The Nopah MIPA will close upon successful transfer of the Nevada Medical Marijuana Cultivation Facility Registration Certificate. Upon close, the principal balance of the note will be reduced to $190,272 and the maturity date of the note will be extended to July 31, 2021, with no payments of principal or interest due until maturity. In addition, the note will no longer bear interest at the penalty rate of 15% unless there is a new event of default.
8% Line of Credit dated November 27, 2019
In connection with the Binding Letter of Intent dated November 27, 2019 (Note 11), the Company entered into a promissory note and received a line of credit for up to $470,000 from the purchaser of the Company's membership interest in its Nevada facilities. The purpose of the line of credit is to supply working capital for the Nevada operations. The note matures upon the close of the sale of membership interests. As of December 31, 2020, the Company has received $485,000 in advances under the line of credit, reflecting an informal agreement with the lender to increase the Line of Credit limit by $15,000. The Company accrued interest of $29,200 on the line of credit for the nine months ended December 31, 2020, and the balance of the line of credit was $485,000 at December 31, 2020. The note and related interest expense are included in discontinued operations. Upon the close of the sale of the Teco Facility all principal and interest due under the line of credit will be considered satisfied in full.
8% Note Payable dated May 7, 2020
On May 7, 2020, the Company received $135,000 cash from an investor, net of $15,000 in brokerage fees, and issued a $150,000 promissory note. The note bears interest at a rate of 8.0% per annum. The note was to be repaid upon the first proceeds received from the $8,000,000 promissory note related to the sale of the Company's membership interest in GB Sciences Louisiana, LLC (Note 10), or from the proceeds of the sale of the Teco Facility (Note 11). As inducement to enter into the note transaction, the Company repriced 8,002,500 preexisting warrants held by the investor to an exercise price of $0.04. The repriced warrants were valued at $272,085 on the date of the transaction using the Black-Scholes Model, which exceeded the value of the warrants prior to the price reduction of $49,525 by $222,560. As the result of the increase in the estimated fair value of the warrants, the Company recorded a full discount on notes payable of $150,000. During the nine months ended December 31, 2020, the Company recorded interest expense of $154,964 related to the note consisting of accrued interest of $4,964 and $150,000 related to amortization of the note discount. The Company paid $154,964 on October 5, 2020 in full satisfaction of the note.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
8% Line of Credit dated July 24, 2020
On July 24, 2020, the Company entered into the Loan Agreement, 8% Secured Promissory Note, and Security Agreement (together, the "July 24 Note") with AJE Management, LLC, which established a revolving loan of up to $500,000 that the Company may draw on from time to time. The loan is collateralized by the Teco Facility, subject to the pre-existing lien held by CSW Ventures, L.P. in connection with the 8% Senior Secured Convertible Promissory Note dated February 28, 2019 (Note 6). Any advances will be made at the sole discretion of the lender following a written request made by the Company. Contemporaneously with the Loan Agreement, the Company and AJE Management entered into the Amendment to the Membership Interest Purchase Agreement with AJE Management. The amendment provides that any balances outstanding under the July 24 Note at the time of the close of the sale of the Teco Facility will be forgiven in exchange for a reduction to the $4,000,000 note receivable that the Company will receive as consideration for the sale of the Teco Facility (Note 11). The reduction to the note receivable will be equal to 3 times the balance outstanding under the July 24 Note on the date of the close of the sale of the Teco Facility. The balance outstanding under the note plus accrued interest may be repaid at any time prior to the close of the sale of the Teco facility.
On December 29, 2020, the Company entered into the Omnibus Amendment with the purchaser of the Teco Facility (Note 11). The Omnibus Amendment reduces the amount of the note receivable that the Company will receive from the sale of the Teco Facility by $975,000 (three times $325,000 in advances made under the July 24 Note) to $3,025,000. Any advances made to the Company under the July 24 Note in excess of $325,000 will reduce the amount of cash received upon close of the sale of Teco one-for-one, i.e. such advances will be considered advance payments of the $4,000,000 cash purchase price. The Company also agreed that it will not repay the balances outstanding under the July 24 Note prior to the closing of the Teco sale. As a result of the Omnibus Amendment, the Company accrued a modification expense of $650,000 (two times $325,000 in addition to $325,000 in advances already recorded under the July 24 Note). The Company has received $50,000 in additional advances above $325,000 bringing the total balance to $1,025,000 at December 31, 2020. Interest expense was $5,112 for the nine months ended December 31, 2020.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Summary of Notes and Convertible Notes Payable
As of December 31, 2020, the following notes payable were recorded in the Company’s consolidated balance sheet:
|
|
As of December 31, 2020
|
|
Short-Term Notes Payable
|
|
Face Value
|
|
|
Discount
|
|
|
Carrying Value
|
|
0% Note Payable dated October 23, 2017 (Note 5)
|
|
$
|
369,445
|
|
|
$
|
-
|
|
|
$
|
369,445
|
|
8% Line of Credit dated November 27, 2019 (Note 5)
|
|
|
485,000
|
|
|
|
-
|
|
|
|
485,000
|
|
8% Line of Credit dated July 24, 2020 (Note 5)
|
|
|
1,025,000
|
|
|
|
-
|
|
|
|
1,025,000
|
|
6% Convertible promissory notes payable (Note 6)
|
|
|
1,060,000
|
|
|
|
-
|
|
|
|
1,060,000
|
|
8% Convertible Secured Promissory Note dated February 28, 2019, as amended (Note 6)
|
|
|
1,271,863
|
|
|
|
-
|
|
|
|
1,271,863
|
|
Total short-term notes payable
|
|
|
4,211,308
|
|
|
|
-
|
|
|
|
4,211,308
|
|
Less: Notes payable classified as discontinued operations
|
|
|
(485,000
|
)
|
|
|
-
|
|
|
|
(485,000
|
)
|
Total short-term notes payable classified as continuing operations
|
|
$
|
3,726,308
|
|
|
$
|
-
|
|
|
$
|
3,726,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6% Convertible promissory notes payable due September 30, 2023 (Note 6)
|
|
|
197,000
|
|
|
|
(43,752
|
)
|
|
|
153,248
|
|
6% Convertible note payable due December 31, 2023 (Note 6)
|
|
|
150,000
|
|
|
|
(19,306
|
)
|
|
|
130,694
|
|
Total long-term notes payable classified as continuing operations
|
|
$
|
347,000
|
|
|
$
|
(63,058
|
)
|
|
$
|
283,942
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 6 – Convertible Notes
March 2017 and July 2017 Convertible Note Offerings
In March 2017, the Company entered into a Placement Agent’s Agreement with a third-party brokerage firm to offer units consisting of a $1,000 6% promissory note convertible into 4,000 shares of the Company’s common stock at $0.25 per share and 4,000 warrants to purchase shares of the Company’s’ common stock at an exercise price of $0.60 per share for the period of three years. Between March 2017 and May 2017, the Company issued short-term Promissory Notes (“Notes”) to various holders with combined face value of $2,000,000. The Notes are payable within three years of issuance and are convertible into 8,000,000 shares of the Company’s common stock. The Company also issued 8,000,000 common stock warrants to the Noteholders. The warrants are exercisable at any time and from time to time before maturity at the option of the holder. Each warrant gives the Noteholder the right to purchase one share of common stock of the Company at an exercise price of $0.60 per share for a period of three years. The Company recorded an aggregate discount on convertible notes of $1,933,693, which included $904,690 related to the relative fair value of beneficial conversion features and $1,029,003 for the relative fair value of the warrants issued with each note. The fair value of warrants was derived using the Black-Scholes valuation model.
In July, 2017, the Company entered into a Placement Agent’s Agreement with a third-party brokerage firm to offer units consisting of a $1,000 6% promissory note convertible into 4,000 shares of the Company’s common stock at $0.25 per share and 4,000 warrants to purchase shares of the Company’s’ common stock at an exercise price of $0.65 per share for the period of three years. Between July 2017 and December 2017, the Company issued short-term Promissory Notes (“Notes”) to various holders with combined face value of $7,201,000. The Notes are payable within three years of issuance and are convertible into 28,804,000 shares of the Company’s common stock. The Company also issued 28,804,000 common stock warrants to the Noteholders. The warrants are exercisable at any time and from time to time before maturity at the option of the holder. Each warrant gives the Noteholder the right to purchase one share of common stock of the Company at an exercise price of $0.60 per share for a period of three years.The Company recorded an aggregate discount on convertible notes of $7,092,796, which included $3,142,605 related to the relative fair value of beneficial conversion features and $3,950,191 for the relative fair value of the warrants issued with each note. The fair value of warrants was derived using the Black-Scholes valuation model.
All notes from the March and July 2017 offerings have passed their maturity dates. During the quarter ended December 31, 2020, the Company agreed to extensions with the holders of a total of $197,000 of the $1,257,000 that remains outstanding. For the $197,000 of extended notes, the Company agreed to reduce the conversion price to $0.10 per share and issued a total of 788,000 additional warrants to the holders of the notes with a term of three years and an exercise price of $0.10 per share. In exchange, the maturity date of the notes was extended to September 30, 2023. Using the Black-Scholes model, the Company valued the warrants at $13,396 and the change in the fair value of the conversion feature at $33,490. Because the change in the fair value of the conversion feature exceeded 10% of the carrying amount of the notes, the Company accounted for the modification of the notes as an extinguishment and recorded a discount on the new convertible notes of $46,886 related to the fair value of the new warrants issued and the change in the fair value of the conversion feature. The Company recorded interest expense of $6,114 on the extended notes during the three months ended December 31, 2020, of which $3,134 represented amortization of the note discount. Accrued interest on the $197,000 extended notes is $41,417 at December 31, 2020.
Three convertible notes totaling $1,060,000 held by the same investor are past maturity and are currently in default. The Company is negotiating the terms of an extension with the note holder. The notes do not provide for a default penalty or penalty interest rate. Interest expense during the nine months ended December 31, 2020 was $191,191, of which $143,273 represents amortization of the note discount. Accrued interest on the $1,060,000 notes was $212,591 at December 31, 2020.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
8% Senior Secured Convertible Promissory Note dated February 28, 2019
On February 28, 2019, the Company issued a $1,500,000 8% Senior Secured Convertible Promissory Note and entered into the Note Purchase Agreement and Security Agreement with CSW Ventures, L.P. (together, “CSW Note”). The note matured on August 28, 2020 and was convertible at any time until maturity into 8,823,529 shares of the Company’s common stock at $0.17 per share. Collateral pledged as security for the note includes all of the Company’s 100% membership interests in GB Sciences, Nevada, LLC and GB Sciences Las Vegas, LLC, which together represent substantially all of the Company’s cannabis cultivation and production operations and assets located at the Teco facility in Las Vegas, Nevada. The intrinsic value of the beneficial conversion feature resulting from the market price of the Company’s common stock in excess of the conversion price was $176,471 on the date of issuance, and the Company recorded a discount on the CSW Note in that amount.
On May 28, 2019, the Company received notice from CSW Ventures, L.P. of the conversion of a total of $170,000 of the principal balance of the 8% Senior Secured Promissory Note dated February 28, 2019. Accordingly, the Company issued 1,000,000 shares of its common stock based on a $0.17 per share conversion price. In connection with the conversions, $17,225 in unamortized discount was recorded as interest expense and the Company reduced the carrying amount of convertible notes payable by $152,775. After conversion, the remaining balance outstanding was $1,330,000.
On July 12, 2019, the Company entered into the Amendment to Note Documents and the Amended and Restated 8% Senior Secured Promissory Note (together, “Amended CSW Note”). The Amended CSW Note increased the note balance by $100,000 to reflect an additional $100,000 advanced to the Company on July 12, 2019 and by $41,863 to add accrued interest to date to the principal balance, and decreased the conversion price to $0.11 per share, with the remaining terms substantially unchanged from the original CSW Note.
The Company evaluated the modification under the guidance in ASC 470-50 and determined that the amendment represents an extinguishment because the change in the fair value of the conversion feature exceeded 10% of the carrying value of the CSW Note on the amendment date. The carrying value of the amended note on the date of extinguishment was $1,338,057, net of a beneficial conversion feature discount of $133,806, and we recorded a loss on extinguishment of $124,158.
On August 1, 2019, the Company received notice from CSW Ventures, L.P. of the conversion of a total of $110,000 of the principal balance of the Amended CSW Note at $0.11 per share. Accordingly, the Company issued 1,000,000 shares of its common stock. In connection with the conversions, $9,579 in unamortized discount was recorded as interest expense and the Company has reduced the carrying amount of convertible notes payable by $100,421. After conversion, the remaining balance outstanding was $1,361,863.
On October 23, 2019, the Company entered into the Amendment to Promissory Note. The October 23, 2019 amendment decreased the conversion price to $0.08 per share, with the remaining terms substantially unchanged from the Amended CSW Note.
We evaluated the modification under the guidance in ASC 470-50 and determined that the amendment represents an extinguishment because the change in the fair value of the conversion feature exceeded 10% of the carrying value of the Amended CSW Note immediately prior to the 2nd Amended CSW Note. The carrying value of the Amended CSW Note on the date of extinguishment was $1,269,067, net of a beneficial conversion feature discount of $92,796, and we recorded a loss on extinguishment of $92,796 during the year ended March 31, 2020.
On November 27, 2019, the Company entered into the Second Amendment to Note Documents and the Second Amended and Restated 8% Senior Secured Promissory Note (together, “2nd Amended CSW Note”). The 2nd Amended CSW Note decreased the conversion price to $0.04 per share and increased the note balance by $30,000 to reflect an advance received on that date, with the remaining terms substantially unchanged from the Amended CSW Note.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
We evaluated the modification under the guidance in ASC 470-50 and determined that the 2nd Amended CSW Note represents an extinguishment because the change in the fair value of the conversion feature exceeded 10% of the carrying value of the Amended CSW Note immediately prior to the 2nd Amended CSW Note; however, no loss on extinguishment was recorded because the net consideration paid for the 2nd Amended CSW Note was equal to the extinguished carrying value of the Amended CSW Note. The carrying value of the Amended CSW Note on the date of extinguishment was $1,361,863.
On December 16, 2019, the Company received notice from CSW Ventures, L.P. of the conversion of a total of $120,000 of the principal balance of the Amended CSW Note at $0.04 per share and we issued 3,000,000 shares of common stock. In connection with the conversions, $57,551 in unamortized discount was recorded as interest expense, and the Company has reduced the carrying amount of convertible notes payable by $62,449. After conversion, the remaining balance outstanding was $1,271,863 and the carrying amount of the note was $687,021, net of $584,842 in unamortized discount from the beneficial conversion feature.
On December 29, 2020, the Company entered into the Omnibus Amendment (Note 11), and the note holder agreed to cease interest accrual on the CSW Note after November 30, 2020. During the nine months ended December 31, 2020, we recorded interest expense of $477,500 related to the CSW Note and its amendments consisting of $68,019 in stated interest and $409,481 related to amortization of the note discount. As of December 31, 2020, the carrying amount of the CSW Note was $1,271,863, and there is no remaining unamortized discount. The total outstanding balance of $1,416,857 principal and accrued interest will reduce the $4,000,000 cash payment received by the Company upon the close of the sale of the Teco Facility (Note 11), and no further interest expense is to be accrued under the CSW Note.
8% Convertible Promissory Note dated April 23, 2019
On April 23, 2019, the Company entered into the Note Purchase Agreement with Iliad Research and Trading, L.P. ("Iliad") and issued an 8% Convertible Promissory Note with a face value of $2,765,000. The Note was issued with original issue discount of $265,000 and is convertible into shares of the Company’s common stock at a price of $0.17 per share at the option of the note holder at any time until the Note is repaid. The Note matured on April 22, 2020. A total discount of $440,000 was recorded on the note, which includes $265,000 of original issue discount and $175,000 in fees paid to brokers.
During the year ended March 31, 2020, the Company honored the conversion of a total of a total of $125,000 of accrued interest on the Iliad Note at reduced conversion rates. On October 30, 2019, the Company received notice of the conversion of $75,000 at $0.06 per share and issued 1,250,000 shares of its common stock. The fair value of the shares issued exceeded the fair value of the shares issuable under the original terms of the Note by $64,706, and the Company recorded an induced conversion expense. On November 18, 2019, the Company received notice of the conversion of $50,000 of the note balance at $0.0375 per share and issued 1,333,333 shares of its common stock.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On April 22, 2020, the Company failed to make payment of the principal and accrued interest due under the Iliad Note, resulting in a default. Upon the occurrence of the default, the principal and accrued interest balances outstanding increased by 10%. As the result of the default, Company recorded an expense of $9,559 related to a 10% increase in the accrued interest balance, which is recorded in interest expense, and $276,500 related to the 10% increase in the principal balance, which is recorded in debt default penalty and other expense.
On May 20, 2020, Iliad filed a lawsuit against the Company in the Third Judicial District Court of Salt Lake County in the State of Utah demanding repayment of the note. The lawsuit further sought to compel the Company to participate in arbitration pursuant to the arbitration provisions contained within the Note Purchase Agreement and to prohibit the Company to raise funds through the issuance of its common stock unless the note is paid in full simultaneously with such issuance. On July 14, 2020, the Court entered judgment in favor of Iliad in the amount of $3,264,594 plus reasonable attorney's fees and costs and accrued post-judgment interest at the default rate of 15% per annum.
On November 20, 2020, the Company, Iliad, and Wellcana Plus, LLC entered into the Judgment Settlement Agreement, whereby Iliad agreed to discharge all amounts owed to it upon receipt of payment totaling $3,006,014 directly from the proceeds of the Wellcana Note Receivable (Note 10) on or before December 8, 2020. On December 8, 2020, Wellcana failed to close the transaction. On December 9, 2020, the Company entered into a letter agreement with Iliad extending the Judgment Settlement agreement in exchange for payment of $25,000 plus $25,000 per week until the payment totaling $3,006,014 is received by Iliad, with such payments not reducing the amount owed under the Judgment Settlement Agreement. On December 16, 2020, Wellcana made payment of the full amount owed to the Company, of which $3,006,014 was paid directly to Iliad in full satisfaction of the Judgment Settlement Agreement. On December 18, 2020, Iliad filed a Satisfaction of Judgment in the Third Judicial District Court of Salt Lake County in the State of Utah, and the Company has no further obligations to Iliad.
During the nine months ended December 31, 2020, interest expense related to the Iliad Note was $379,956, of which $29,831 relates to amortization of the note discount, $140,833 relates to accrued interest prior to the judgment, and $209,292 was accrued post-judgment interest. The Company also recorded $25,000 in other expense as the result of the letter agreement to extend the Judgment Settlement Agreement. As of the date of final payment, the outstanding judgment balance of $3,264,594 plus accrued post-judgment interest of $209,292 totaled $3,473,886, and the Company recorded a gain on extinguishment of $467,872.
December 2020 $500,000 6% Convertible Note Offering
On December 18, 2020, the Company began an offering of up to $500,000 of 6.0% convertible notes for the purpose of funding a pre-clinical study of the Company's patent-pending Cannabinoid-Containing Complex Mixtures for the treatment of Cytokine Release Syndromes, including Acute Respiratory Distress Syndrome, in COVID-19 patients. The Company pledged the related intellectual property as security for the notes. The notes are convertible at a rate of $0.05 per share at the lender's request and will mature on December 31, 2023.
Prior to December 31, 2020, the Company has issued $150,000 in convertible notes under the note raise. The conversion price exceeded the closing stock price on the date of issuance and no beneficial conversion feature was recorded. The Company received cash of $130,500, net of issuance costs, and recorded a discount on convertible notes of $19,500. Interest expense was $514 for the nine months ended December 31, 2020, of which $194 relates to amortization of the note discount. Accrued interest was $320 at December 31, 2020.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 7 – Capital Transactions
Sale of Common Stock and Exercise of Warrants
On April 1, 2020, the Company entered into the Advisory Agreement with its brokers and effected a temporary decrease in the exercise price of the Company's outstanding warrants to $0.03-$.05 per share. As a result of the price reduction, the Company received notice of the exercise of 8,277,851 warrants during the nine months ended December 31, 2020 and received proceeds of $224,824, net of brokerage fees of $(24,983).
During the nine months ended December 31, 2020, the Company granted 3,500,000 immediately-vesting options to purchase one share of the Company's Common Stock at the price of $0.05 per share for a period of ten years as compensation to a scientist and researcher for drafting and filing U.S. and international patents. The options were valued at $168,000 using the Black-Scholes model.
During the nine months ended December 31, 2020, the Company issued a total of 788,000 warrants to convertible note holders with a term of three years and an exercise price of $0.10 per share in exchange for a three-year extension of notes having an aggregate principal balance of $197,000. Using the Black-Scholes model, the Company valued the warrants at $13,396 (Note 6).
On November 16,2020, the Company entered into a Severance Agreement with Leslie Bocskor, a former member of the Board of Directors, and re-priced 450,000 options held by the director to that day's closing share price of $0.03. The term of the options was extended to November 16, 2025 from June 1, 2023. Using the Black-Scholes Model, the Company valued the options at $4,950 immediately prior to the modification and at $11,250 immediately after the modification, and the Company recorded share-based compensation expense of $6,300.
On December 7, 2020, the Board of Directors approved the issuance of warrants to purchase a total of 3,500,000 shares of the Company's common stock at $0.04 per share for a term of ten years to current employees and directors. The Company valued the warrants at $133,000 using the Black-Scholes Model and recorded share-based compensation expense of $133,000 related to the warrants.
On December 15, 2020, the Board of Directors approved the issuance of options to purchase a total of 3,250,000 shares of the Company's common stock at $0.05 per share for a term of ten years to current employees and directors. The options vest one-third upon grant, one-third after one year of service, and one-third after two years of service. The Company valued the options at $156,000 using the Black-Scholes Model and recorded share-based compensation expense of $58,500 related to the options for the nine months ended December 31, 2020. Remaining unrecognized compensation cost related to the options was $97,500 at December 31, 2020.
On December 15, 2020, the Board of Directors approved the re-pricing of 6,050,000 options held by current employees to an exercise price of $0.05, the closing stock price on that date. All of the options subject to the modification were fully vested. Using the Black-Scholes Model, the Company valued the options at $199,600 immediately prior to the modification and at $250,650 immediately after the modification, and the Company recorded share-based compensation expense of $51,050.
At December 31, 2020, 67,074,495 warrants at exercise prices ranging from $0.08 to $1.00 per share and 18,916,334 options with a weighted average exercise price of $0.19 remain outstanding.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 8 – Commitments and Contingencies
On September 18, 2017 GB Sciences finalized its agreement with Louisiana State University (“LSU”) AgCenter to be the sole operator of LSU’s medical marijuana program. The LSU Board of Supervisors entered into a five-year agreement that has an option to renew for two additional five-year terms with GB Sciences.
The contract includes the Company’s commitment to make an annual research investments of $500,000 to the LSU AgCenter. The Company initially retained its 50% interest in the research relationship with LSU after the sale of its membership interest in GB Sciences Louisiana, LLC (Note 10), and accordingly remained obligated for $250,000 of the $500,000 annual research investment for three years, or a total commitment of $750,000. On August 4, 2020, the Company received its first payment under the Wellcana Note Receivable, net of the $250,000 research contribution due for the twelve month period ended September 30, 2020, and our commitment for that twelve month period was paid by the purchaser with the funds withheld from the note payment.
On August 24, 2020, the Company entered into a letter agreement with Wellcana to discount the note receivable in exchange for accelerated payment. Pursuant to the letter of intent, the purchaser assumed the annual $250,000 research contribution commitment to LSU and the Company retains no rights in the intellectual property developed under the research relationship (Note 10).
Tara “Dee” Russell filed a Charge of Discrimination with the Nevada Equal Rights Commission ("NERC") against the Company on April 2, 2019, alleging that she was subjected to sexual harassment and retaliatory discharge. The Company received the Notice of Charge of Discrimination on or about May 15, 2019. The Company submitted its response to the Notice of Discrimination Charge on July 26, 2019. It is the Company's position that Ms. Russell was not an employee of the Company, but rather was an independent contractor. The Company intends to aggressively respond to the charge. To date, the NERC has not issued a ruling regarding the charge.
On April 22, 2020, the Company failed to repay any of the outstanding balance of the Convertible Promissory Note Payable to Iliad Research and Trading, L.P., resulting in a default. On May 20, 2020, Iliad filed a lawsuit against the Company in the Third Judicial District Court of Salt Lake County in the State of Utah demanding repayment of the note. On July 14, 2020, the Court entered judgment in favor of Iliad in the amount of $3,264,594. The Company's obligation to Iliad was satisfied in full on December 16, 2020 upon payment of $3,006,014 pursuant to the Judgment Settlement Agreement (Note 6).
On April 22, 2020, the Company was served notice of a lawsuit filed in the Eighth Judicial District Court in Clark County, Nevada, filed by a contractor who had been hired to perform architectural and design services. The lawsuit demanded payment of $73,050 for the services provided. On September 17, 2020, the Company entered into a Mutual Compromise, Settlement, and Release Agreement with the contractor and made payment of $25,000 in full satisfaction of the alleged debt and reduced the cost of the related fixed asset by $48,050.
From time to time, the Company may become involved in certain legal proceedings and claims which arise in the ordinary course of business. In management’s opinion, based on consultations with outside counsel, the results of any of these ordinary course matters, individually and in the aggregate, are not expected to have a material effect on our results of operations, financial condition, or cash flows. As more information becomes available, if management should determine that an unfavorable outcome is probable on such a claim and that the amount of such probable loss that it will incur on that claim is reasonably estimable, the Company would record a reserve for the claim in question. If and when the Company records such a reserve, it could be material and could adversely impact its results of operations, financial condition, and cash flows.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 9 – Related Party Transactions
As of December 31, 2020 the Company was indebted to officers of the Company for a total of $276,484 in unpaid compensation.
On November 16, 2020, the Company entered into a Severance Agreement with Leslie Bocskor, a former member of the Board of Directors and made payment of $20,000 of Mr. Bocskor's unpaid compensation. The Company agreed to pay the remaining balance of $60,411 owed to Mr. Bocskor in installments of $5,000 per month until paid in full. The remaining balance owed to Mr. Bocskor at December 31, 2020 was $55,411.
In connection with the sale of membership interest in GB Sciences Louisiana, LLC, the Company issued a note payable in the amount of $151,923 to John Davis, the Company's former General Counsel and President of GB Sciences Louisiana, LLC, for unpaid fees and bonuses. The note matured upon receipt of the first payment from the Wellcana Note Receivable (Note 10). The note and interest accrued was repaid on August 4, 2020, when the related funds were withheld from the first payment to the Company under the Wellcana Note Receivable.
Note 10 – Sale of Membership Interests in GB Sciences Louisiana, LLC
On November 15, 2019, the Company entered into the Membership Interest Purchase Agreement ("MIPA") with Wellcana Plus, LLC ("Wellcana"). In consideration for the sale of its 50.01% controlling membership interest in GB Sciences Louisiana, LLC (“GBSLA"), the Company received an $8,000,000 Promissory Note ("Wellcana Note") with the potential to receive up to an additional $8,000,000 in earn-out payments.The Company has presented GBSLA as discontinued operations since November 2019.
On August 24, 2020, the Company entered into a letter of intent with Wellcana to discount the note receivable in exchange for accelerated payment. Pursuant to the letter of intent, the Company would receive payments totaling $5,224,423, including the repayment of a note payable to related party of $151,923, the forgiveness by Wellcana of $172,500 in liabilities and the payment of $4,900,000 in cash, on or before October 15, 2020, less any cash payments made by Wellcana up to the date of the final payment. Upon receipt of the payment, all liabilities owed to the Company by Wellcana, including the $8,000,000 note receivable and any potential earn-out payments were to be considered satisfied in full. Wellcana will assume the annual $250,000 research contribution commitment to LSU (Note 8), and the Company will retain no rights in the intellectual property developed under the research relationship. In addition, the Company agreed to reduce the $750,000 note payment due on September 1, 2020 to $500,000. As a result of the August 24, 2020 letter of intent, the Company determined that the amount of the note that was collectible as of March 31, 2020 was $5,224,423 and recorded a loss on modification of note receivable of $1,895,434 for the year ended March 31, 2020.
The Company received payments from Wellcana totaling $550,000 in August and September of 2020, which in combination with the repayment of a note payable to related party of $151,923 and the $172,500 liabilities assumed by Wellcana reduced the final payment owed under the letter agreement to $4,350,000.
On October 15, 2020 the Company was notified that Wellcana would be unable to close the payment of $4,350,000 by October 15, 2020, and the parties entered into a letter agreement, which extended the due date of the final $4,350,000 payment to December 8, 2020. The letter agreement also required Wellcana to provide proof of $4,350,000 in funds and an escrow deposit of $250,000, which was to be released to the Company in the event that Wellcana were unable to make the $4,350,000 payment on or before December 8, 2020. On October 24, 2020, the parties entered into the Escrow Agreement and Wellcana made the $250,000 escrow payment on October 29, 2020.
On December 8, 2020, Wellcana failed to make the payment and the $250,000 escrow deposit was disbursed to the Company. The Company retained $50,000 of the escrow disbursement as compensation for Wellcana's failure to meet the agreed-upon deadline of December 8, 2020, which is recorded in other income, and did not offset that amount against the $4,350,000 balance owed by Wellcana. On December 16, 2020, Wellcana made payment of the remaining balance of $4,150,000, satisfying its obligations to the Company in full.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 11 – Sale of Membership Interests in Nevada Subsidiaries
On November 15, 2019, we entered into a Binding Letter of Intent ("Teco LOI") to sell 75% of the Company's membership interest interests in GB Sciences Nevada, LLC, and GB Sciences Las Vegas, LLC, for $3.0 million cash upon close and up to an additional $3.0 million in earn-out payments after close. In connection with the Teco LOI, we entered into a Management Agreement with the purchaser whereby the facilities will be managed by an affiliate of the purchaser until the close of the sale. As part of the transaction, the Company also entered into a Line of Credit of up to $470,000 with the purchaser (Note 5) to fund the operations of Teco. The line of credit accrues interest at a rate of 8% and the Company pledged its interest in the Teco facilities as collateral for the note, subject to the preexisting lien held by CSW Ventures, L.P. in connection with the 8% Senior Secured Convertible Promissory Note dated February 28, 2019 (Note 6). The Line of Credit will be considered satisfied in full upon close of the sale of the Teco Facility.
On March 24, 2020, we entered into the Membership Interest Purchase Agreement ("Teco MIPA") which formalized the sale of the Teco Subsidiaries and modified the terms of the sale. Pursuant to the Teco MIPA, the Company will sell 100% of its membership interests in GBSN and GBLV for $4,000,000 cash upon close and will receive a $4,000,000 8% promissory note to be paid in monthly installments over 36 months.
On July 24, 2020, the Company entered into the Loan Agreement, 8% Secured Promissory Note, and Security Agreement (together, the "July 24 Note") with AJE Management, LLC, which established a revolving loan of up to $500,000 that the Company may draw on from time to time. The loan is collateralized by the Teco Facility, subject to the preexisting lien held by CSW Ventures, L.P. in connection with the 8% Senior Secured Convertible Promissory Note dated February 28, 2019 (Note 6). Any advances will be made at the sole discretion of the lender following a written request made by the Company. Contemporaneously with the Loan Agreement, the Company and AJE Management entered into the Amendment to the Membership Interest Purchase Agreement with AJE Management. The amendment provides that any balances outstanding under the July 24 Note at the time of the close of the sale of the Teco Facility will be forgiven in exchange for a reduction to the $4,000,000 note receivable that the Company will receive as consideration for the sale of the Teco Facility. The reduction to the note receivable will be equal to 3 times the balance outstanding under the July 24 Note on the date of the close of the sale of the Teco Facility. As of the date of this report, the Company has received advances totaling $375,000 under the July 24 Note (Note 5).
On December 29, 2020, the Company entered into the Omnibus Amendment with the purchaser of the Teco Facility (Note 11). The Omnibus Amendment reduces the amount of the note receivable that the Company will receive from the sale of the Teco Facility by $975,000 to $3,025,000 and any advances made to the Company above $325,000 will reduce the amount of cash received upon close of the sale of Teco one-for-one, rather than reducing the note receivable by three times the amount of the balance outstanding. The Company also agreed that it will not repay the balances outstanding under the July 24 Note prior to the closing of the Teco sale. As a result of the Omnibus Amendment, the Company accrued an expense of $650,000 to increase the balance outstanding under the July 24 Note to three times $325,000, to total $1,025,000, which will offset the $4,000,000 note receivable that the Company will receive upon close of the sale of the Teco Facility.
The Omnibus Amendment also amends the Management Services Agreement to provide that no further management fees will accrue after November 30, 2020. As of December 31, 2020, the Company has accrued $850,000 which will reduce the $4,000,000 in cash proceeds received upon the close of the sale. The form of the note receivable that the Company will receive on close was amended to accelerate payments such that the Company will receive payment in full within three years rather than over 5 1/2 years.
The sale is expected to close upon the successful transfer of the Nevada cultivation and production licenses. The transfer of cannabis licenses in the State of Nevada was subject to an indefinite moratorium beginning in October 2019. In a meeting held on July 21, 2020, the Nevada Cannabis Compliance Board lifted the moratorium, however, the board has indicated that there are over 90 requests pending and it will take up to several months to process the entire backlog of pending license transfers. The lifting of the moratorium and processing of cannabis license transfers have been delayed by the COVID-19 pandemic and could be further delayed if the pandemic continues.
The Company also holds a Nevada license for cultivation of medical marijuana located in Sandy Valley, Nevada (the “Nopah License”). The license is owned by the Company’s wholly owned subsidiary, GB Sciences Nopah, LLC ("Nopah"). Operations have not begun under the Nopah License. On November 27, 2019, the Company entered into a Binding Letter of Intent to sell its 100% interest in GB Sciences Nopah, LLC. On August 10, 2020, the Company entered into the Membership Interest Purchase Agreement ("Nopah MIPA") and Promissory Note Modification Agreement with the purchaser of GB Sciences Nopah, LLC. As consideration for the transfer of the license and membership interest in GB Sciences Nopah, LLC, the Company will receive $300,000 and the purchaser will pay all expenses related to the upkeep and maintenance of the Nopah License. The $300,000 purchase price will be applied as a reduction to the balance of the 0% Note payable dated October 23, 2017, which is held by an affiliate of the purchaser of the Nopah license. The transfer of the Nopah License is subject to the same restrictions on license transfers discussed above.
Because the moratorium on license transfers has been lifted, the Company determined that the Teco Facility and Nopah Facility qualify for presentation as discontinued operations, and the income, assets, and cash flows of the Teco Subsidiaries and GB Sciences Nopah, LLC have been reclassified as discontinued operations for all periods presented in the Company's condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 12 – Subsequent Events
Capital Transactions
Subsequent to December 31, 2020, the Company received warrant exercise notices for 9,701,991 shares at a price of $0.03 per share and received payment totaling $261,938, net of $29,104 in brokerage fees.
Settlement Agreement
On January 2, 2021, the Company entered into the Settlement Agreement with Ksenia Griswold, its former Chief Financial Officer and Chief Operating Officer, and agreed to pay Ms. Griswold $57,000 in full satisfaction of $114,000 of unpaid severance compensation. The Company made the payment of $57,000 on January 4, 2020.