10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

________________________

FORM 10-Q

__________________________

(Mark One)

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2019

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to ___________

Commission file number:   000-55462

GB SCIENCES, INC.

(Exact name of registrant as specified in its charter)

Nevada (State or other Jurisdiction of Incorporation or organization) 59-3733133 (IRS Employer I.D. No.)

3550 W. Teco Avenue

Las Vegas, Nevada 89118

Phone: (866) 721-0297

(Address and telephone number of

principal executive offices)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  ☒  Yes     ☐  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   ☒  Yes     ☐  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. 

Large accelerated filer ☐    Accelerated filer ☐        Non-accelerated filer ☐ (Do not check if a smaller Reporting Company) Smaller reporting company  ☒   Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act).  ☐  Yes     ☒  No  

There were 272,767,352 shares of common stock, par value $0.0001 per share, outstanding as of February 14, 2020. 

GB SCIENCES, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED December 31, 2019

INDEX

	Page
PART I. FINANCIAL INFORMATION	3
ITEM 1. Financial Statements	3
ITEM 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
ITEM 3.  Quantitative and Qualitative Disclosures About Market Risk	42
ITEM 4.  Controls and Procedures	42
PART II – OTHER INFORMATION	44
ITEM 1.  Legal Proceedings	44
ITEM 1A.  Risk Factors	44
ITEM 2.  Unregistered Sales of Equity Securities and Use of Proceeds	44
ITEM 3.  Defaults Upon Senior Securities	44
ITEM 4.  Mine Safety Disclosures	45
ITEM 5.  Other Information	45
ITEM 6.  Exhibits	45

2

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

3

GB SCIENCES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	December 31, 2019			March 31, 2019
	(unaudited)
CURRENT ASSETS:
Cash and cash equivalents	$	37,300		$	182,055
Accounts receivable, net of allowance for doubtful accounts of $91,536 and $66,748 at December 31, 2019 and March 31, 2019, respectively		80,436			488,329
Inventory, net		1,560,048			1,533,792
Prepaid expenses and other current assets		83,240			262,208
Note receivable, net of unamortized discount of $884,958 and $0 at December 31, 2019 and March 31, 2019, respectively		1,365,042			-
Current assets from discontinued operations		-			1,000,387
TOTAL CURRENT ASSETS		3,126,066			3,466,771
Property and equipment, net		10,097,430			10,481,706
Intangible assets, net of accumulated amortization of $3,745 at December 31, 2019 and March 31, 2019		2,073,839			1,818,802
Note receivable, net of unamortized discount of $383,867 and $0 at December 31, 2019 and March 31, 2019, respectively		5,366,133			-
Deposits and other noncurrent assets		95,504			230,651
Operating lease right-of-use assets, net		144,146			-
Non-current assets from discontinued operations		-			14,025,372
TOTAL ASSETS	$	20,903,118		$	30,023,302
CURRENT LIABILITIES:
Accounts payable	$	1,998,994		$	1,374,771
Accrued interest		429,064			142,112
Accrued liabilities		469,053			244,931
Notes and convertible notes payable, net of unamortized discount of $1,008,086 and $799,410 at December 31, 2019 and March 31, 2019, respectively		4,860,221			2,229,812
Indebtedness to related parties		324,738			-
Note payable to related party		151,923
Income tax payable		506,145			506,145
Operating lease obligations, current		47,084			-
Finance lease obligations, current		134,239			80,132
Current liabilities from discontinued operations		-			2,134,277
TOTAL CURRENT LIABILITIES		8,921,461			6,712,180
Note payable, net of unamortized discount of $0 and $13,929 at December 31, 2019 and March 31, 2019, respectively		-			161,072
Operating lease obligations, long term		114,052			-
Finance lease obligations, long term		3,565,622			3,646,540
Long term liabilities from discontinued operations		-			2,347,511
TOTAL LIABILITIES		12,601,135			12,867,303
Commitments and contingencies (Note 8)
STOCKHOLDERS' EQUITY:
Common Stock, $0.0001 par value, 600,000,000 shares authorized, 270,553,352 and 240,627,102 shares issued and outstanding at December 31, 2019 and March 31, 2019, respectively		27,056			24,063
Additional paid-in capital		97,039,072			93,020,015
Accumulated deficit		(88,764,145	)		(84,743,836	)
TOTAL GB SCIENCES, INC. STOCKHOLDERS' EQUITY		8,301,983			8,300,242
Non-controlling interest in discontinued operations		-			8,855,757
TOTAL EQUITY		8,301,983			17,155,999
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	20,903,118		$	30,023,302

The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements

4

GB SCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	For the Three Months Ended December 31,						For the Nine Months Ended December 31,
	2019			2018			2019			2018
Sales revenue	$	254,131		$	695,764		$	2,336,505		$	2,728,277
Cost of goods sold		(675,933	)		(302,569	)		(3,157,452	)		(1,185,878	)
Gross profit (loss)		(421,802	)		393,195			(820,947	)		1,542,399
General and administrative expenses		1,744,699			2,456,411			5,213,561			10,079,767
LOSS FROM OPERATIONS		(2,166,501	)		(2,063,216	)		(6,034,508	)		(8,537,368	)
OTHER INCOME (EXPENSE)
Interest expense, net		(419,264	)		(258,522	)		(1,332,637	)		(4,681,235	)
Other expense		(118,695	)		(402,504	)		74,920			(3,352,311	)
Loss on extinguishment		(92,795	)		-			(216,954	)		-
Gain on deconsolidation of subsidiary		4,502,058			-			4,502,058			-
Total other income/(expense)		3,871,304			(661,026	)		3,027,387			(8,033,546	)
NET INCOME/(LOSS) BEFORE INCOME TAXES		1,704,803			(2,724,242	)		(3,007,121	)		(16,570,914	)
Income tax expense		-			(737,568	)		-			(737,568	)
INCOME/(LOSS) FROM CONTINUING OPERATIONS		1,704,803			(3,461,810	)		(3,007,121	)		(17,308,482	)
Loss from discontinued operations		(720,656	)		(588,837	)		(1,476,220	)		(2,124,713	)
NET INCOME/(LOSS)		984,147			(4,050,647	)		(4,483,341	)		(19,433,195	)
Net loss attributable to non-controlling interest		(360,327	)		(287,406	)		(738,107	)		(762,966	)
NET INCOME/(LOSS) ATTRIBUTABLE TO GB SCIENCES, INC.	$	1,344,474		$	(3,763,241	)	$	(3,745,234	)	$	(18,670,229	)
Net income/(loss) attributable to common stockholders of GB Sciences, Inc. - basic
Continuing operations	$	1,704,803		$	(3,461,810	)	$	(3,007,121	)	$	(17,308,482	)
Discontinued operations		(360,329	)		(301,431	)		(738,113	)		(1,361,747	)
Net income/(loss)	$	1,344,474		$	(3,763,241	)	$	(3,745,234	)	$	(18,670,229	)
Net income/(loss) attributable to common stockholders of GB Sciences, Inc. - diluted
Continuing operations	$	1,756,411		$	(3,461,810	)	$	(3,007,121	)	$	(17,308,482	)
Discontinued operations		(360,329	)		(301,431	)		(738,113	)		(1,361,747	)
Net income/(loss)	$	1,396,082		$	(3,763,241	)	$	(3,745,234	)	$	(18,670,229	)
Net income/(loss) per common share – basic
Continuing operations	$	0.01		$	(0.02	)	$	(0.01	)	$	(0.08	)
Discontinued operations		-			-			-			(0.01	)
Net income/(loss)	$	0.01		$	(0.02	)	$	(0.01	)	$	(0.09	)
Net income/(loss) per common share – diluted
Continuing operations	$	0.01		$	(0.02	)	$	(0.01	)	$	(0.08	)
Discontinued operations		-			-			-			(0.01	)
Net income/(loss)	$	-		$	(0.02	)	$	(0.01	)	$	(0.09	)
Weighted average common shares outstanding - basic		263,055,254			222,856,453			253,297,660			200,971,724
Weighted average common shares outstanding - diluted		325,790,554			222,856,453			253,297,660			200,971,724

The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements

5

GB SCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	For the Nine Months Ended December 31,
	2019			2018
OPERATING ACTIVITIES:
Net loss	$	(4,483,341	)	$	(19,433,195	)
Loss from discontinued operations	$	(1,476,220	)	$	(2,124,713	)
Net loss from continuing operations	$	(3,007,121	)	$	(17,308,482	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		223,249			389,813
Stock-based compensation		588,156			2,322,629
Bad debt expense/(recoveries)		64,522			(18,175	)
Amortization of debt discount and beneficial conversion feature		741,912			685,766
Interest expense on conversion of notes payable		93,931			3,464,187
Noncash expense recorded for settlement of royalty agreement (Note 5)		-			2,140,925
Loss on extinguishment of debt and disposal of assets		224,089			113,623
Loss on induced conversion of note payable		127,059			-
Gain on deconsolidation of subsidiary		(4,502,058	)		-
Interest income receivable and amortization of discount on note receivable		(170,994	)		-
Changes in operating assets and liabilities:
Accounts receivable		520,565			255,442
Prepaid expenses and other current assets		178,968			1,074,985
Decrease in deposits and other noncurrent assets		-			131,026
Inventory		343,911			(1,401,906	)
Accounts payable		477,913			(155,164	)
Accrued expenses		615,667			905,432
Indebtedness to related parties		476,661			-
Net cash used in operating activities of continuing operations		(3,003,570	)		(7,399,899	)
Net cash used in operating activities of discontinued operations		(1,244,721	)		(447,852	)
Net cash used in operating activities		(4,248,291	)		(7,847,751	)
INVESTING ACTIVITIES:
Purchase of property and equipment		(186,297	)		(897,087	)
Acquisition of intangible assets		(91,862	)		(248,116	)
Net cash used in investing activities of continuing operations		(278,159	)		(1,145,203	)
Net cash used in investing activities of discontinued operations		(260,625	)		(8,946,434	)
Net cash used in investing activities		(538,784	)		(10,091,637	)
FINANCING ACTIVITIES:
Proceeds from issuance of common stock and warrant exercises		1,860,200			8,823,555
Proceeds from notes payable and line of credit		2,960,000			-
Brokerage fees for issuance of common stock and warrants		(175,628	)		-
Fees for issuance of convertible note		(175,000	)		-
Principal payments on debt and finance lease obligations		(110,087	)		(318,968	)
Cash paid to settle royalty agreement		-			(1,000,000	)
Net cash provided by financing activities of continuing operations		4,359,485			7,504,587
Net cash provided by financing activities of discontinued operations		282,835			7,179,156
Net cash provided by financing activities		4,642,320			14,683,743
Net change in cash and cash equivalents		(144,755	)		(3,255,645	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		182,055			3,579,700
CASH AND CASH EQUIVALENTS AT END OF PERIOD		37,300			324,055
Less: cash and cash equivalents classified as discontinued operations		-			(236,283	)
CASH AND CASH EQUIVALENTS AT END OF PERIOD FROM CONTINUING OPERATIONS	$	37,300		$	87,772

The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements

6

GB SCIENCES, INC.

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

For the Nine Months Ended December 31, 2019 and 2018

(unaudited)

	For the Nine Months Ended December 31,
	2019		2018
Cash paid for interest	$	451,040	$	539,242
Cash paid for income tax	$	-	$	-
Non-cash transactions:
Stock issued upon conversion of long-term note payable	$	525,000	$	4,640,971
Stock issued to settle royalty agreement	$	-	$	131,000
Depreciation capitalized in inventory	$	370,167	$	104,481
Induced dividend from warrant exercises	$	267,525	$	2,861,436
Beneficial conversion feature on notes payable	$	829,736	$	-
Property capitalized under operating leases	$	182,624	$	-
Cumulative effect of the new lease standard	$	7,550	$	-

The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements

7

GB SCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

For the Three Months Ended December 31, 2019 and 2018

(unaudited)

	Shares		Amount		Additional Paid-In Capital		Accumulated Deficit			Non-Controlling Interest			Total
Balance at September 30, 2018		221,760,237	$	22,176	$	88,860,249	$	(75,997,660	)	$	9,122,287		$	22,007,052
Issuance of stock for services		2,341,568		234		489,671		-			-			489,905
Share based compensation expense		-		-		170,725		-			-			170,725
Issuance of stock for cash, net of issuance costs		3,470,000		347		452,488		-			-			452,835
Contributions from non-controlling interest		-		-		-		-			206,000			206,000
Stock issued to settle royalty agreement		500,000		50		94,950		-			-			95,000
Net Loss		-		-		-		(3,763,240	)		(287,407	)		(4,050,647	)
Balance at December 31, 2018		228,071,805	$	22,807	$	90,068,083	$	(79,760,900	)	$	9,040,880		$	19,370,870

	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 Income/(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

8

GB SCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

For the Nine Months Ended December 31, 2019 and 2018

(unaudited)

	Shares		Amount		Additional Paid-In Capital		Accumulated Deficit			Non-Controlling Interest			Total
Balance at March 31, 2018		168,616,855	$	16,862	$	70,961,104	$	(58,229,235	)	$	2,882,990		$	15,631,721
Issuance of stock for debt conversion		18,563,885		1,856		4,639,115		-			-			4,640,971
Exercise of warrants for stock		12,657,875		1,266		3,919,454		-			-			3,920,720
Issuance of stock for services		3,885,412		388		1,231,207		-			-			1,231,595
Share based compensation expense		-		-		831,729		-			-			831,729
Issuance of stock for cash, net of issuance costs		23,747,778		2,375		4,900,460		-			-			4,902,835
Contributions from non-controlling interest		-		-		-		-			6,920,856			6,920,856
Stock issued to settle royalty agreement		600,000		60		130,940		-			-			131,000
Compensation warrants		-		-		592,638		-			-			592,638
Inducement dividend from warrant exercises		-		-		2,861,436		(2,861,436	)		-			-
Net Loss		-		-		-		(18,670,229	)		(762,966	)		(19,433,195	)
Balance at December 31, 2018		228,071,805	$	22,807	$	90,068,083	$	(79,760,900	)	$	9,040,880		$	19,370,870

	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
Cancellation of 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

9

GB SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(unaudited)

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 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 cannabinoid medicines with virtual operations in North America and Europe. GBSGB assets include cannabinoid medicine intellectual property, research contracts and key supplier arrangements. GBSGB’s intellectual property covers a range of conditions and several programs are in 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 four USPTO & WIPO patent applications, four provisional USPTO patent applications, and three patent applications that we anticipate filing by June 30, 2020, as well as licenses for three additional patents covering novel cannabinoid delivery systems.

We currently hold 100% membership interests in cultivation and extraction facilities in Nevada under our subsidiaries GB Sciences Nevada, LLC ("GBSN") and GB Sciences Las Vegas, LLC ("GBLV"). On November 15, 2019, we entered into a Binding Letter of Intent (the "LOI") to sell 75% of the Company's membership interest interests in GBSN and GBLV for $3 million cash upon close and up to an additional $3 million in earn-out payments after close. In connection with the 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. 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 is presently subject to an indefinite moratorium, and while the moratorium is expected to be lifted shortly, we cannot provide any assurances as to the timing of the close of the sale.

We recently completed the sale of the Company's controlling interest in GB Sciences Louisiana, LLC, which has partnered with Louisiana State University to operate a cultivation and extraction facility to produce products for the medical cannabis market. As consideration for the sale of our controlling membership interest in GB Sciences Louisiana, LLC, we received an $8 million promissory note and may receive up to an additional $8 million in earn out payments. The Company retained its 50% interest in the research relationship with Louisiana State University ("LSU") and will retain an interest in rights to the intellectual property developed through the relationship with LSU.

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, 2020. The balance sheet at March 31, 2019 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. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended March 31, 2019.

10

GB SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(unaudited)

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, 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 in order to conform to the current period presentation. The current and long-term capital lease obligations recorded in the consolidated balance sheet as of March 31, 2019 have been reclassified to conform to the current period presentation as finance lease obligations, current, and finance lease obligations, long term. Certain items on the unaudited statements of cash flows have been reclassified to confirm with current period presentation. In addition, the assets, liabilities, income, and cash flows of GB Sciences Louisiana, LLC have been separated from the comparative period amounts to confirm to the current period presentation as discontinued operations as the result of the sale of the Company’s interest in GB Sciences Louisiana, LLC (Note 10). The reclassifications had no effect on the reported financial position, results of operations or cash flows of the Company.

11

GB SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(unaudited)

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 assets and liabilities associated with discontinued operations included in our condensed consolidated balance sheets are as follows:

Discontinued Operations – (continued)	December 31, 2019						March 31, 2019
	Continuing		Discontinued		Total		Continuing		Discontinued		Total
ASSETS
CURRENT ASSETS
Cash	$	37,300	$	-	$	37,300	$	182,055	$	45,703	$	227,758
Accounts receivable, net		80,436		-		80,436		488,329		-		488,329
Inventory, net		1,560,048		-		1,560,048		1,533,792		602,714		2,136,506
Prepaid and other current assets		83,240		-		83,240		262,208		351,970		614,178
Note receivable		1,365,042		-		1,365,042		-		-		-
TOTAL CURRENT ASSETS		3,126,066		-		3,126,066		2,466,384		1,000,387		3,466,771
Property and equipment, net		10,097,430		-		10,097,430		10,481,706		13,022,996		23,504,702
Intangible assets, net		2,073,839		-		2,073,839		1,818,802		-		1,818,802
Note receivable		5,366,133		-		5,366,133		-		-		-
Deposits and other noncurrent assets		95,504		-		95,504		230,651		1,002,376		1,233,027
Operating lease right-of-use assets, net		144,146		-		144,146		-		-		-
TOTAL ASSETS	$	20,903,118	$	-	$	20,903,118	$	14,997,543	$	15,025,759	$	30,023,302
LIABILITIES
CURRENT LIABILITIES
Accounts payable	$	1,998,994	$	-	$	1,998,994	$	1,374,771	$	1,695,985	$	3,070,756
Accrued interest		429,064		-		429,064		142,112		-		142,112
Accrued expenses		469,053		-		469,053		244,931		76,415		321,346
Notes payable, net		4,860,221		-		4,860,221		2,229,812		300,000		2,529,812
Indebtedness to related parties		476,661		-		476,661		-		-		-
Income tax payable		506,145		-		506,145		506,145		-		506,145
Operating lease obligations, current		47,084		-		47,084		-		-		-
Finance lease obligations, current		134,239		-		134,239		80,132		61,877		142,009
TOTAL CURRENT LIABILITIES		8,921,461		-		8,921,461		4,577,903		2,134,277		6,712,180
Note payable, net		-		-		-		161,072				161,072
Operating lease obligations, long term		114,052		-		114,052		-				-
Finance lease obligations, long term		3,565,622		-		3,565,622		3,646,540		2,347,511		5,994,051
TOTAL LIABILITIES	$	12,601,135	$	-	$	12,601,135	$	8,385,515	$	4,481,788	$	12,867,303

12

GB SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(unaudited)

Discontinued Operations – (continued)

The revenues and expenses associated with discontinued operations included in our condensed consolidated statements of operations were as follows:

	For the Three Months Ended December 31,
	2019									2018
	Continuing			Discontinued			Total			Continuing			Discontinued			Total
Sales revenue	$	254,131		$	192,070		$	446,201		$	695,764		$	-		$	695,764
Cost of goods sold		(675,933	)		(193,915	)		(869,848	)		(302,569	)		-			(302,569	)
Gross profit (loss)		(421,802	)		(1,845	)		(423,647	)		393,195			-			393,195
General and administrative expenses		1,744,699			666,042			2,410,741			2,456,411			526,210			2,982,621
LOSS FROM OPERATIONS		(2,166,501	)		(667,887	)		(2,834,388	)		(2,063,216	)		(526,210	)		(2,589,426	)
OTHER INCOME/(EXPENSE)
Interest expense		(419,264	)		(52,769	)		(472,033	)		(258,522	)		(62,627	)		(321,149	)
Other income/(expense)		(118,695	)		-			(118,695	)		(402,504	)					(402,504	)
Loss on extinguishment		(92,795	)		-			(92,795	)		-			-			-
Gain on deconsolidation of subsidiary		4,502,058			-			4,502,058			-			-			-
Total other expense		3,871,304			(52,769	)		3,818,535			(661,026	)		(62,627	)		(723,653	)
NET LOSS BEFORE INCOME TAXES		1,704,803			(720,656	)		984,147			(2,724,242	)		(588,837	)		(3,313,079	)
Income tax expense		-			-			-			(737,568	)		-			(737,568	)
NET INCOME/(LOSS)	$	1,704,803		$	(720,656	)	$	984,147		$	(3,461,810	)	$	(588,837	)	$	(4,050,647	)

13

GB SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(unaudited)

Discontinued Operations – (continued)

	For the Nine Months Ended December 31,
	2019									2018
	Continuing			Discontinued			Total			Continuing			Discontinued			Total
Sales revenue	$	2,336,505		$	569,077		$	2,905,582		$	2,728,277		$	-		$	2,728,277
Cost of goods sold		(3,157,452	)		(574,544	)		(3,731,996	)		(1,185,878	)		-			(1,185,878	)
Gross profit (loss)		(820,947	)		(5,467	)		(826,414	)		1,542,399			-			1,542,399
General and administrative expenses		5,213,561			1,292,613			6,506,174			10,079,767			1,935,766			12,015,533
LOSS FROM OPERATIONS		(6,034,508	)		(1,298,080	)		(7,332,588	)		(8,537,368	)		(1,935,766	)		(10,473,134	)
OTHER INCOME/(EXPENSE)
Interest expense		(1,332,637	)		(178,140	)		(1,510,777	)		(4,681,235	)		(188,947	)		(4,870,182	)
Other income/(expense)		74,920			-			74,920			(3,352,311	)		-			(3,352,311	)
Loss on extinguishment		(216,954	)		-			(216,954	)		-			-			-
Gain on deconsolidation of subsidiary		4,502,058			-			4,502,058			-			-			-
Total other expense		3,027,387			(178,140	)		2,849,247			(8,033,546	)		(188,947	)		(8,222,493	)
NET LOSS BEFORE INCOME TAXES		(3,007,121	)		(1,476,220	)		(4,483,341	)		(16,570,914	)		(2,124,713	)		(18,695,627	)
Income tax expense		-			-			-			(737,568	)		-			(737,568	)
NET LOSS	$	(3,007,121	)	$	(1,476,220	)	$	(4,483,341	)	$	(17,308,482	)	$	(2,124,713	)	$	(19,433,195	)

14

GB SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(unaudited)

Long-Lived Assets

Property and equipment comprise a significant portion of our total 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 March 31, 2019.

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 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.

15

GB SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(unaudited)

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 158,728,095 and 108,999,521 potentially dilutive common shares at December 31, 2019 and 2018, respectively. However, for the nine months ended December 31, 2019 and the three and nine months ended December 31, 2018, such common stock equivalents were not included in the computation of diluted net loss per share as their inclusion would have been anti-dilutive. The computation of diluted earnings per share for the three months ended December 31, 2019, is presented in the following table:

	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	$	1,704,803
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		1,756,411
Net loss from discontinued operations available to common stockholders		(360,329	)
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	$	1,756,411			325,790,554	$	0.01
Net loss from discontinued operations	$	(360,329	)		325,790,554	$	(0.00	)
Net loss	$	1,396,082			325,790,554	$	0.00

16

Recent Accounting Pronouncements

Recently Adopted Standards

In February 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-02, Leases (Topic 842), (the "New Lease Standard"). This standard requires leases, other than short-term, to be recognized on the balance sheet as a lease liability and a corresponding right-of-use asset.

Lease payments include fixed payments, variable payments based on an index or rate, reasonably certain purchase options, termination penalties, and others as required by the standard. Lease payments do not include variable lease payments other than those that depend on an index or rate, any guarantee by the lessee of the lessor’s debt, or any amount allocated to non-lease components. This standard is effective for interim and annual reporting periods beginning after December 15, 2018 and the Company adopted the standard as of April 1, 2019. The Company also elected the package of practical expedients, which among other things, does not require reassessment of lease classification.

The Company adopted the New Lease Standard using the modified retrospective transition approach as of the effective date as permitted by the amendments in ASU 2018-11, "Targeted Improvements - Leases (Topic 842)." Under this method, the cumulative effect adjustment to the opening balance of retained earnings is recognized at the adoption date. As a result, the Company was not required to adjust its comparative period financial information for effects of the standard or make the new required lease disclosures for periods before the date of adoption on April 1, 2019.

The Company's consolidated balance sheet was affected by this standard, but the consolidated statement of operations and consolidated statement of cash flows were not significantly impacted. The most significant change to the consolidated balance sheet upon adoption on April 1, 2019 relates to the recognition of new right-of-use (ROU) assets of $182,624, net of accumulated amortizations, and operating liabilities of $190,173 at the date of adoption. The Company's accounting for finance leases remains substantially unchanged.

In June 2018, the FASB issued ASU 2018-07, “Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting” (“ASU 2018-07”). ASU No 2018-07 expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The guidance also specifies that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and is effective for the Company as of April 1, 2019. The Company determined that all share-based payments were settled as of the date of the adoption, so there was no impact on the Company's consolidated financial statements.

All other newly issued accounting pronouncements but not yet effective have been deemed either immaterial or not applicable.

17

GB SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(unaudited)

Note 2 – Going Concern

The Company’s condensed consolidated 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 $ (88,764,145) at December 31, 2019. The Company had a working capital deficit of  $ (5,795,395) at December 31, 2019, compared to $ (3,245,409) including a deficit of  $ (1,133,890) from discontinued operations at March 31, 2019. In addition, the Company has consumed cash in its operating activities of $ (4,248,291) including $ (1,244,721) from discontinued operations for the nine months ended December 31, 2019, compared to $ (7,847,751) including $ (447,852) from discontinued operations for the same period last year. 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 securing capital necessary to achieve its goals.

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 consolidated 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.

Note 3 – 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, extracts, and vapes in bulk and packaged forms.

	December 31, 2019			March 31, 2019
Raw materials	$	299,740		$	440,414
Work in progress		1,495,301			676,341
Finished goods		257,995			579,604
Allowance to reduce inventory to NRV		(492,988	)		(162,567	)
Total inventory	$	1,560,048		$	1,533,792

Note 4 – 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 2021 to 2032.

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, date of adoption. Accounting for finance leases is substantially unchanged.

18

GB SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(unaudited)

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.

During the nine months ended December 31, 2019, finance lease costs recorded in the consolidated financial statements were $ 790,666, of which $ 474,686 represents interest expense and $ 315,980 represents amortization of the right-of-use assets. Operating lease costs were $ 61,144, of which $ 22,667 represents interest expense and $ 38,477 represents amortization of the right-of-use assets.

Discontinued operations includes $ 280,227 in finance lease costs, of which $ 153,977 represents interest expense and $ 126,250 represents amortization of right-of-use assets.

Amortization of lease assets is included in general and administrative expenses. The future minimum lease payments of lease liabilities as of December 31, 2019, from continuing operations are as follows:

	Year Ending				Operating
	March 31,	Finance Leases			Leases
	2020 (3 months)	$	185,871		$	17,547
	2021		528,443			71,548
	2022		544,296			73,939
	2023		560,625			38,101
	2024		577,444			3,926
	Thereafter		4,375,869			-
Total undiscounted lease payments			6,772,548			205,061
Less: Amount representing interest			(3,072,687	)		(43,925	)
Present value of minimum lease payments			3,699,861			161,136
Less: Current maturities of lease obligations			(134,239	)		(47,084	)
Long-term lease obligations		$	3,565,622		$	114,052

19

GB SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(unaudited)

Note 5 – Notes Payable and Line of Credit

6% Note Payable due November 30, 2018

On July 28, 2018, the Company entered into the Amendment and Termination Agreement (“Amendment and Termination Agreement”) with Pacific Leaf Ventures, L.P (“Pacific Leaf”). Pursuant to that agreement, the Pacific Leaf Royalty Agreement and all other agreements with Pacific Leaf were terminated in their entirety, and the Company would make payments totaling $1 million of the $1.5 million balance due to Pacific Leaf by August 31, 2018. Contemporaneously with the Amendment and Termination Agreement, the Company issued a Promissory Note (“Promissory Note”) for the remaining $0.5 million due to Pacific Leaf. The Promissory Note accrued interest at a rate of 6% per annum and matured on November 30, 2018. The Company recorded interest expense of $5,425 related to the Promissory Note for the three months ended December 31, 2018.

In consideration for deferring the payment of the amounts due to Pacific Leaf, the Company issued 100,000 shares of its common stock to Pacific Leaf on July 31, 2018 having a fair market value of $36,000. The Company made cash payments totaling $1.0 million to Pacific Leaf in August 2018 related to the Amendment and Termination Agreement. Both the $36,000 fair value of shares issued to Pacific Leaf and the $1,000,000 in cash payments made to Pacific Leaf in August 2018 are recorded in the Company’s Condensed Consolidated Statement of Operations for the Three and Six Months Ended September 31, 2018, under the other expense caption.

On December 21, 2018, the Company made a $100,000 payment on the promissory note. The payment was applied to interest accrued to date of $12,164 and the remaining $87,836 was applied to the principal balance of the Note.

On December 21, 2018, the Company also issued 500,000 shares of its common stock to Pacific Leaf in consideration for further deferral of repayment of the Note. The Company recorded $ 95,000 in expense related to the shares issued, which is recorded in the Company’s Consolidated Statement of Operations for the year ended March 31, 2019, under the other expense caption.

The Company made additional payments on the promissory note of $100,000 on January 16, 2019, $100,000 on February 6, 2019, and a final payment of $210,000 on March 4, 2019 which paid the note off in full.

Because the Amendment and Termination Agreement irrevocably terminated the Pacific Leaf Royalty Agreement Royalty Agreement, the Company recorded an expense of $1,530,000 in the quarter ended December 31, 2018 related to the prepaid royalties previously recorded on the Condensed Consolidated Balance Sheet in connection with the February 2018 Agreement. The expense is included in the Other Expense caption of the Company’s Condensed Consolidated Statement of Operations for the nine months ended December 31, 2018. In total, the Company recorded $3.1 million in Other Expense in its Condensed Consolidated Statement of Operations for the nine months ended December 31, 2018, as summarized in the table below:

Amounts Recorded in Other Expense Related to Royalty Settlement	For the Nine Months Ended December 31, 2018
Prepaid royalties expensed during the quarter	$	1,530,000
Promissory note issued to Pacific Leaf, due on or before November 30, 2018		500,000
600,000 shares common stock issued to Pacific Leaf		131,000
Long-term note payable and accrued interest terminated		(20,075	)
Total non-cash expense		2,140,925
Cash payments made in August 2018		1,000,000
Total	$	3,140,925

20

GB SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(unaudited)

0% Note Payable dated October 23, 2017

On October 23, 2017, the Company amended the existing Nevada Medical Marijuana Production License Agreement (“Amended Production License Agreement”). Per the terms of the Amended Production License Agreement, GB Sciences purchased the remaining percentage of the production license resulting in the 100% ownership of the license. GB Sciences also received 100% ownership of the cultivation license included in the original Nevada Medical Marijuana Production License Agreement. In exchange, GB Sciences made a one-time payment of $500,000 and issued a 0% Promissory Note in the amount of $700,000 payable in equal monthly payments over a three-year period commencing on January 1, 2018.

The present value of the note was $521,067 on the date of its issuance based on an imputed interest rate of 20.3% and the Company recorded a discount on notes payable of $178,933. During the nine months ended December 31, 2019, the Company recorded $31,092 in interest expense related to amortization of the note discount.

The Company has been in default on this note since June of 2019, and as of the date of this report, eight monthly payments on the note totaling $155,555 are unpaid. If the Company is unable to cure the default within ten days of receiving a written notice, 483 Management will have the option to accelerate the remaining balance owed of $369,444 and impose a penalty interest rate of 10%, but must notify the Company in writing should it choose to do so. The Company is currently in the process of negotiating a settlement and/or forbearance agreement with the lender.

Line of Credit dated November 27, 2019

In connection with the Binding Letter of Intent dated November 27, 2019, the Company entered into a promissory note and received a line of credit for up to $470,000 from the purchaser of 75% interest in its Nevada facilities. The note matures upon the close of the sale of membership interests. During the nine months ended December 31, 2019, the Company received $330,000 in advances under the line of credit. Subsequent to December 31, 2019, the Company received an additional $150,000 in advances under the line of credit, bringing total proceeds to $480,000 as of the date of this report and reflecting an informal agreement with the lender to increase the Line of Credit limit by $10,000. The balance at December 31, 2019 was $330,000.

Note payable to BCM MED, LLC

On December 20, 2018, GB Sciences Louisiana, LLC (“GBSLA") entered into a $300,000 Loan Agreement with BCM MED, LLC (“BCM MED”). BCM MED is a related party to Wellcana Group, LLC, the minority member in GBSLA. The purpose of the financing is to fund operating expenses incurred by or on behalf of medical marijuana operations of GBSLA.

Pursuant to the Loan Agreement, GBSLA began making eight (8) monthly installment payments in the amount of $33,333 on or before the 10^th business day of each month commencing in April 2019. The aggregate amount of the installment payments from GBSLA to BCM MED are equal to the loan amount. Through November 15, 2019, GBSLA made $266,667 in payments towards the loan and reduced the loan balance to $33,333. The remaining balance was deconsolidated upon close of the sale of the Company's controlling membership interest (Note 10).

21

GB SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(unaudited)

Summary of Notes Payable and Convertible Notes

As of December 31, 2019, the following notes payable were recorded in the Company’s consolidated balance sheet:

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

Note 6 – Convertible Notes

March 2017 Convertible Note Offering

In March 2017, the Company issued short-term Promissory Notes (“Notes”) to various holders with combined face value of $965,500. The Notes are payable within three years of issuance and are convertible into 3,862,000 shares of the Company’s common stock. The Company also issued 3,862,000 common stock warrants to the Note holders. 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 beneficial conversion feature resulting from the discounted conversion price compared to the market price was calculated based on the date of issuance to be $416,733 after adjusting the effective conversion price for the relative fair value of the note proceeds compared to the fair value of the attached warrants and note. In addition to this discount related to the beneficial conversion feature, an additional discount of $548,767 was recorded based on the fair value of the warrants attached to the note. This value was derived using the Black-Scholes valuation model.

During the three months ended June 30, 2017, the Company issued short-term Promissory Notes (“Notes”) to various holders with combined face value of $1,034,500. The Notes are payable within three years of issuance and are convertible into 4,138,000 shares of the Company’s common stock. The Company also issued 4,138,000 common stock warrants to the Note holders. 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 beneficial conversion feature resulting from the discounted conversion price compared to the market price was calculated based on the date of issuance to be $487,957 after adjusting the effective conversion price for the relative fair value of the note proceeds compared to the fair value of the attached warrants and note. In addition to this discount related to the beneficial conversion feature, an additional discount of $480,236 was recorded based on the fair value of the warrants attached to the note. This value was derived using the Black-Scholes valuation model.

22

GB SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(unaudited)

July 2017 Convertible Note Offering

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.

During the three months ended September 30, 2017, the Company issued short-term Promissory Notes (“Notes”) to various holders with combined face value of $3,085,000. The Notes are payable within three years of issuance and are convertible into 12,340,000 shares of the Company’s common stock. The Company also issued 12,340,000 common stock warrants to the Note holders. 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 $0.65 per share for a period of three years.  The beneficial conversion feature resulting from the discounted conversion price compared to the market price was calculated based on the date of issuance to be $1,541,797 after adjusting the effective conversion price for the relative fair value of the note proceeds compared to the fair value of the attached warrants and note. In addition to this discount related to the beneficial conversion feature, an additional discount of $1,532,335 recorded based on the fair value of the warrants attached to the note. This value was derived using the Black-Scholes valuation model.

During the three months ended December 31, 2017, the Company issued short-term Promissory Notes (“Notes”) to various holders with combined face value of $4,116,000. The Notes are payable within three years of issuance and are convertible into 16,464,000 shares of the Company’s common stock. The Company also issued 16,464,000 common stock warrants to the Note holders. 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 $0.65 per share for a period of three years.  The beneficial conversion feature resulting from the discounted conversion price compared to the market price was calculated based on the date of issuance to be $1,600,808 after adjusting the effective conversion price for the relative fair value of the note proceeds compared to the fair value of the attached warrants and note. In addition to this discount related to the beneficial conversion feature, an additional discount of $2,417,856 was recorded based on the fair value of the warrants attached to the note. This value was derived using the Black-Scholes valuation model.

As of December 31, 2019, convertible notes having a carrying value of $ 999,823, net of unamortized discount of $ (257,177) remained outstanding from the March 2017 and July 2017 note offerings, and accrued interest on the notes was $ 178,381. Interest expense for the nine months ended December 31, 2019, was $ 364,575, of which $ 307,752 was amortization of the note discount.

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, LP (together, “CSW Note”). The note matures on August 28, 2020 and is 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 its 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. During the nine months ended December 31, 2019, the Company recorded accrued interest on the CSW Note of $32,186 and recorded an additional $61,286 in interest expense as the result of amortization of the note discount.

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.

23

GB SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(unaudited)

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, 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.

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 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.

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.

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.

24

GB SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(unaudited)

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 carrrying amount of the note was $687,021, net of $584,842 in unamortized discount from the beneficial conversion feature.

During the nine months ended December 31, 2019, we recorded interest expense of $ 89,624 related to the CSW Note and its amendments consisting of $ 27,270 in accrued interest and $ 62,354 related to amortization of the note discount.

The Company is in default on the amended CSW Note due to non-payment of the quarterly interest payments due on October 1, 2019, and January 1, 2020, and nonpayment of an income tax liability related to the March 31, 2018 tax year. The terms of the note provide that the Company has 5 days to cure a default caused by nonpayment of interest and ten days to cure a default caused by noncompliance with affirmative or negative debt covenants. As of the date of this report, the lender has not provided formal notice of the default and the Company anticipates that the CSW Note will be settled in full upon close of the sale of 75% of the Company's interests in its Nevada operations to an entity affiliated with CSW Ventures, LP (Note 10). Upon written notice of default to the Company, the lender may accelerate the payment of principal and interest, impose a penalty interest rate of 10%, and enforce its remedies under the Security Agreement.

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. 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 matures 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 nine months ended December 31, 2019, interest expense related to the note was $ 164,150, of which $ 109,870 was amortization of the note discount.

The Company may be in default on the Iliad Note due to nonpayment of an income tax liability related to the March 31, 2018 tax year. In addition, the note includes cross-default and cross-acceleration clauses that may be triggered by the defaults on the Company’s other debts described above in Note 5 and Note 6. The Company has not received formal notice of default from the lender and intends to work with the lender to negotiate terms of a forbearance arrangement. In the event of default, the lender's rights under the promissory note include enforcing a penalty interest rate of 15% and increasing the balance outstanding under the note by 10%.

As inducement for the temporary forbearance of formal default proceedings, the Company has honored the conversion of a total of a total of $125,000 of debt owed under 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 expense in that amount. 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. The fair value of the shares issued exceeded the fair value of the shares issuable under the original terms of the Note by $62,353, and the Company recorded an expense in that amount. In total, the Company recorded $127,059 in noncash expense for the two conversions of the Iliad note at below contractual conversion rates for the three and nine months ended December 31, 2019.

25

GB SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(unaudited)

Note 7 – Capital Transactions

Increase in Authorized Capital

Effective April 8, 2018, Shareholders of the Company approved the change in corporate domicile from the State of Delaware to the State of Nevada and an increase in the number of authorized capital shares from 250,000,000 to 400,000,000. On August 15, 2019, Shareholders of the Company approved an increase in authorized capital shares from 400,000,000 to 600,000,000.

Sale of Common Stock and Exercise of Warrants

Stock Issued for Debt Conversions

During the nine months ended December 31, 2019,the Company issued a total of 7,583,333 shares of common stock for the conversion of notes payable:

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 (See Note 6). 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 has reduced the carrying amount of convertible notes payable by $152,775.

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 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 carrrying amount of the note was $687,021, net of $584,842 in unamortized discount from the beneficial conversion feature.

As inducement for the temporary forbearance of formal default proceedings, the Company has honored the conversion of a total of a total of $125,000 of debt owed under 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 expense in that amount. 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. The fair value of the shares issued exceeded the fair value of the shares issuable under the original terms of the Note by $62,353, and the Company recorded an expense in that amount. In total, the Company recorded $127,059 in noncash expense for the two conversions of the Iliad note at below contractual conversion rates for the three and nine months ended December 31, 2019.

26

GB SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(unaudited)

Exercise of Warrants for Stock

During the nine months ended December 31, 2019, the Company issued 12,574,750 shares of common stock for exercises of warrants:

In order to encourage the exercise of approximately 70.5 million warrants issued to investors in private placements of convertible notes and common stock having exercise prices ranging between $0.65 and $0.30, the Company effected a temporary decrease in the exercise price of the warrants to $0.10 per share until July 11, 2019. On July 12, 2019, the Company extended the repricing of the warrants through August 30, 2019, and on July 31, 2019, the Company extended the repricing of the warrants to December 31, 2019. As a result of the price reduction, the Company received notice of the exercise of 9,449,750 warrants and received proceeds of $850,478, net of brokerage fees of $94,498. In connection with the induced exercise of the warrants, the Company recorded an inducement dividend of $230,025.

In order to encourage the further exercise of the same warrants, the Company effected a temporary decrease in the exercise price of the warrants to $0.04 per share beginning in December 2019. As a result of the price reduction, the Company received notice of the exercise of an additional 3,125,000 warrants and received proceeds of $112,500, net of brokerage fees of $12,500. In connection with the induced exercise of the warrants, the Company recorded an inducement dividend of $37,499.

Issuance of Stock for Services

During the nine months ended December 31, 2019, the Company issued 2,500,000 shares of common stock for consulting services and recorded related expense of $214,000 based on the fair value of the stock on the date of the related consulting agreements.

Issuance of Stock for Cash

During the nine months ended December 31, 2019, the company issued 7,668,167 shares of common stock for cash as follows:

On December 4, 2018, the Company entered into a Placement Agent’s Agreement to offer a total of 15,000,000 units at the price of $0.20 per unit up to a total of $3 million. Each unit consisted of one share of the Company’s common stock and one warrant to purchase one share of the Company’s common stock at the price of $0.60 for a period of five years. On January 15, 2019, the Placement Agent’s Agreement was amended to decrease the unit price from $0.20 per unit to $0.15 per unit for a total of 20,000,000 units and decrease the exercise price of the warrants included in each unit from $0.60 to $0.30, applied retroactively to funds raised prior to the date of the amendment, with no other changes to the agreement. During the nine months ended December 31, 2019, the Company received a total of $478,696 in proceeds from the private placement, net of $71,529 in brokerage fees and issued 3,668,167 shares of its common stock and 3,668,167 warrants to purchase one share of its common stock at $0.30 per share.

On October 10, 2019, the Company issued 4,000,000 shares of common stock and 2,000,000 warrants to purchase one share of common stock at $0.08 per share for a period of three years to an investor for $240,000 cash. The warrants were valued at $110,000 on the date of issuance using the Black-Scholes model.

Cancellation of Shares Issued to Consultant

During the nine months ended December 31, 2019, the Company cancelled 400,000 shares of common stock issued to a consultant as compensation for services rendered during the year ended March 31, 2019, that were initially issued as part of the consulting agreement. During the quarter ended June 30, 2019, the Company agreed to amend the consulting agreement to issue options instead of shares of common stock. The amendment has not yet been executed nor has the option agreement as of December 31, 2019.

27

GB SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(unaudited)

Options and Warrants

At the conclusion of the December 2018 private placement on December 31, 2019, the Company issued 1,954,613 compensation warrants to the broker participating in the private placement. The warrants are exercisable at $0.30 per share until expiration on June 15, 2024 and are eligible for cashless exercise. The Company recorded a $132,914 expense related to the issuance of the warrants.

As of December 31, 2019, there were 87,526,411 warrants outstanding at exercise prices ranging from $0.30 to $1.00 per share.

For the nine months ended December 31, 2019, the Company recorded $241,242 in share-based compensation expense relating to options granted to employees and consultants in prior periods. As of December 31, 2019, the Company had $15,131 of remaining unrecognized option expense related to options vesting at a future date. As of December 31, 2019, there were 10,383,334 options outstanding from grants to employees and 2,383,000 options outstanding from grants to consultants.

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 the 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 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 remains obligated for $250,000 of the $500,000 annual research investment for three years, or a total commitment of $750,000. The research investment is paid annually in September and amortized over a one-year period.

The monetary contributions will be used to conduct research on plant varieties, compounds, extraction techniques and delivery methods that could generate additional revenue through discoveries that are subject to intellectual property rights, of which AgCenter would retain 50% of those rights with the other 50% retained 25% each by the Company and by GB Sciences Louisiana, LLC.

On December 6, 2018, the Company entered into an agreement for business advisory and consulting services. In consideration for the services, the Company issued warrants to purchase 2 million shares of the Company’s common stock at $0.1125 per share. The Company valued the warrants at $244,000 using the Black-Scholes valuation model. The fair value of the warrants was recognized as consulting expense over the term of the agreement. The company recorded $162,667 in expense related to the warrants for the nine months ended December 31, 2019. The Company also agreed to pay the consultant a $10,000 monthly fee for 12 months and to issue 4 million restricted shares of the Company’s common stock. The Company issued 2 million shares on the date of the contract, with the remaining 2 million due nine months after the date of the agreement.

On June 6, 2019, the Company entered into a Cancellation and Settlement with the consultant and terminated the December 6, 2018 agreement. In consideration for terminating the agreement, the Company will pay $135,000 as a one-time cancellation fee and will not issue the remaining two million shares due under the agreement. This amount is accrued in accounts payable as of December 31, 2019.

On October 1, 2019, the Company entered into a new agreement for business advisory and consulting services. In connection with the agreement, the Company issued 2 million shares of its common stock and agreed to pay a monthly service fee of $50,000 beginning December 1, 2019, plus a quarterly stock fee of 2 million shares 90, 180, and 270 days after the agreement. The company recorded $180,000 expense related to the common stock payments and $50,000 expense related to the cash payments, which is accrued in accounts payable at December 31, 2019.

During the year ended March 31, 2019, the Company recorded a $200,000 charge related to seizure of cash by local law enforcement during a routine traffic stop while transporting the cash to one of our subsidiaries. The charge was recorded in other expense as the Company believed it was more likely than not that the cash would not be returned. After appealing the seizure of the cash through appropriate channels, the cash was returned to the Company on September 6, 2019, and the Company recorded other income on that date.

28

GB SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(unaudited)

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.

Note 9 – Related Party Transactions

As of December 31, 2019, the Company is indebted to its officers for a total of $324,738, consisting of $142,637 in unpaid wages, $75,747 in unpaid bonuses, and $106,354 of reimbursements for business expenses.

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 matures upon receipt of the first payment from the Wellcana Note Receivable (Note 10).

During the fiscal year ended March 31, 2017, the Company entered into a consulting contract with Quantum Shop, a Company owned by a relative of one of the Company’s executives. Quantum Shop provided GB Sciences with research, design, development, fabrication, and production services. During the nine months ended December 31, 2018, the Company made payments totaling $1.1 million to Quantum Shop primarily related to the build-out of the cultivation and production facility in Baton Rouge, Louisiana owned by GB Sciences Louisiana, LLC.

During the year ended March 31, 2017, the Company entered into an advisory agreement with Electrum Partners, LLC, a company whose President resides on GB Sciences’ Board of Directors and serves as a Chair of the Audit Committee. The agreement has a term of one year and was renewed for a successive one-year period on March 31, 2018.  During the nine months ended December 31, 2018, the Company made payments totaling $73,904 to Electrum Partners, LLC and issued 285,412 shares of its restricted stock at an expense of $99,596. Subsequent to December 31, 2018, the Company terminated the advisory agreement.

On November 1, 2017, the Company entered into an Edibles Production Agreement (the “EPA”) with The Happy Confections, L.L.C. (“THCLLC”) through the Company’s wholly-owned subsidiary, GB Sciences Las Vegas, LLC (“GBLV”). A member of GB Science’s Board of Directors is a Co-Managing Member of THCLLC. Under the EPA, THCLLC was to produce cannabis-infused baked goods and other edibles in GBLV’s production facility. The Company will receive a royalty of between 20% and 25% on all sales of edibles produced by THCLLC.

Contemporaneously with the EPA, the Company entered into a Non-Revolving Credit Line Agreement and Non-Revolving Credit Line Promissory Note (together, the “THC Note” or “Note”) to advance up to $300,000 to THCLLC for the purpose of expanding THCLLC’s operations. Beginning 90 days after the sale of its first product, THCLLC was to make repayment of its advances under the Note in an amount equal to 25% of its gross sales revenue.

As of December 31, 2018, the Company had advanced $253,034 under the THC Note. The Company terminated the Edibles Production Agreement and all other related agreements with THC LLC effective October 19, 2018 and took possession of all tangible assets owned by THCLLC on October 22, 2018, as collateral for the balance owed under the Note. These assets included kitchen and production equipment, leasehold improvements, and inventory used in Company’s production operations at the Teco Facility.

The Company assessed the fair value of the machinery and equipment received at $139,411 and capitalized that amount in fixed assets during the quarter ended December 31, 2018. All of the machinery and equipment received from THC LLC was placed in service for use in the Company’s production facility. The Company recorded $113,623 as other expense in its Condensed Consolidated Statement of Operations for the three and nine months ended December 31, 2018, which represents the remaining balance of the outstanding note receivable from THC LLC.

29

GB SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(unaudited)

Note 10 – Sale of 50% Membership Interest in GB Sciences Louisiana, LLC

On February 12, 2018, the Company’s wholly-owned subsidiary, GB Sciences Louisiana, LLC (“GBSLA"), issued members’ equity interests equal to 15% in GBSLA to Wellcana Group, LLC (“Wellcana”) for $3 million. Under the GBSLA operating agreement, Wellcana had an option to make additional capital contributions for the purchase of up to an additional 35% membership interest in GBSLA, at the rate of 5% membership interest per $1 million contributed. To date, Wellcana has made additional cash contributions of $7.0 million and its non-controlling interest in GBSLA increased to 49.99%. The capital contributions have been used to fund the buildout of the Petroleum Drive facility and to pay for the operating costs of GBSLA.

On November 15, 2019, the Company entered into the Membership Interest Purchase Agreement ("MIPA") with Wellcana Plus, LLC ("Purchaser"), an affiliate of Wellcana Group, LLC. In consideration for the sale of its 50.01% membership interest in GBSLA, the Company received the $8,000,000 Promissory Note  ("Wellcana Note") and may receive up to an additional $8,000,000 in earn-out payments.

The Wellcana note bears interest at a rate of 5% per annum and payments are due beginning June 1, 2020, and ending December 1, 2021. The Company recorded a $1,389,408 discount on the note receivable based on an imputed interest rate of 17.0%, and the carrying amount of the note was $6,610,592 as of November 15, 2019:

Wellcana Note Receivable	Note Payments
June 1, 2020	$	500,000
September 1, 2020		750,000
December 1, 2020		1,000,000
March 1, 2020		1,250,000
June 1, 2021		1,500,000
September 1, 2021		1,500,000
December 1, 2021		1,500,000
TOTAL PAYMENTS		8,000,000
DISCOUNT ON NOTE RECEIVABLE		(1,389,408	)
NET PRESENT VALUE	$	6,610,592

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GB SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(unaudited)

The Company may also receive up to $8,000,000 in earn-out payments under the MIPA. Earn-out payments are calculated as 25% of the distributions made by GBSLA to Purchaser through September 30, 2022, and 10% of distributions made thereafter under any extension or renewal of the relationship with LSU. The Company accounts for contingent consideration under a loss recovery approach. Under a loss recovery approach, the Company records a contingent consideration asset only to the extent of the lesser of, 1) the amount that the non-contingent consideration received is exceeded by the net assets deconsolidated, or 2) the amount of contingent consideration that it is probable will be received. As of the transaction date, the Company was unable to determine that it was probable that any of the contingent consideration would be received, and accordingly no asset was recorded for contingent consideration. Subsequent measurement of contingent consideration will be based on the guidance for gain contingencies, and any gain from contingent consideration will be recorded at the time the consideration is received.

Based on the foregoing assessment of the consideration received, the Company recorded a gain on deconsolidation of $4,502,058 related to the sale of its membership interest in GBSLA, calculated as follows:

	As of
	November 15, 2019
Present value of promissory note	$	6,610,592
Carrying amount of non-controlling interest		8,707,651
TOTAL		15,318,243
Carrying amount of assets		14,715,798
Carrying amount of liabilities		(3,899,613	)
Net assets deconsolidated		10,816,185
GAIN ON DECONSOLIDATION	$	4,502,058

For all periods presented in the unaudited financial statements, the assets, liabilities, income, and cash flows of GBSLA have been reclassified to discontinued operations. The losses and cash flows from discontinued operations for the three and nine months ended December 31, 2019 represent activity through the close of the sale on November 15, 2019.

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GB SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(unaudited)

Note 11 – Sale of Membership Interests in Nevada Subsidiaries

The Company operates cannabis cultivation and extraction facilities located at 3550 W. Teco Ave., Las Vegas, NV 89118. The facilities operate under two wholly-owned subsidiaries, GB Sciences, Nevada, LLC and GB Sciences Las Vegas, LLC (together, "Teco"), which hold the Company’s Nevada Licenses for the State-regulated cultivation and production of cannabis and cannabis products, respectively (the "Teco Licenses").

On November 27, 2019, the Company entered into a Binding Letter of Intent (the “Teco LOI”) to sell 75% of its interests in Teco to AJE Management, LLC, with the transaction closing upon transfer of the Licenses. As consideration for the transfer of membership interests, the Company will receive $3,000,000 upon closing and up to an additional $3,000,000 in earn-out payments. The transaction closes upon the approval of the transfer of the Teco Licenses by Nevada regulatory authorities. As of the date of this report, the State of Nevada has imposed a temporary moratorium on cannabis license transfers. The Company anticipates that the moratorium will be lifted in the near future but we are unable to say when the timing of the close may be.

In connection with the Teco LOI, on December 6, 2019, the Company entered into a Management Agreement with AJE Management whereby AJE Management will manage the operations of Teco until the closing of the sale of membership interests. Under the management agreement, AJE Management is entitled to receive a $75,000 monthly management fee for the duration of the management contract, to be paid out of available cash flow from Teco or no later than the close of the sale of membership interests. The management fee is accrued in the unaudited consolidated balance sheets under accrued liabilities.

In connection with the Teco LOI, the Company also entered into a Line of Credit of up to $470,000 with AJE Management (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 facilites as collateral for the note, subject to the preexisting lien for collateralization of the CSW Ventures Note (Note 6). 

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 to The Moore Group, Inc. (the “Nopah LOI”), with the transaction closing upon transfer of the Nopah License. As consideration for the transfer of the license, the Company will receive $300,000. The transfer of the Nopah License is subject to the same restrictions on license transfers currently in effect in the State of Nevada.

Note 12 – Subsequent Events

Capital Transactions

Subsequent to December 31, 2019, the Company received notices of the exercise of 2,214,000 warrants at the discounted exercise price of $0.04 (Note 7) and received proceeds of $79,704, net of brokerage fees of $8,856.

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ITEM 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis contains “forward-looking statements,” as defined in the United States Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “could”, “expects”, “plans”, “intends”, “anticipates”, “believes”, “estimates”, “predicts” or “continue” , which list is not meant to be all-inclusive and other such negative terms and comparable technology.  These forward-looking statements, include, without limitation, statements about our market opportunity, our strategies, competition, expected activities and expenditures as we pursue our business plan, and the adequacy of our available cash resources. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Actual results may differ materially from the predictions discussed in these forward-looking statements.  The economic environment within which we operate could materially affect our actual results. Additional factors that could materially affect these forward-looking statements and/or predictions include among other things: (1)product demand, market and customer acceptance of GB Sciences products, equipment and other goods, (ii) ability to obtain financing to expand its operations, (iii) ability to attract qualified personnel, (iv)competition pricing and development difficulties, (v) general industry and market conditions and growth rates, unexpected natural disasters, and other factors, which we have little or no control: and other factors discussed in the Company’s filings with the Securities and Exchange Commission (“SEC”). The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this report.

The following discussion highlights the Company’s results of operations and the principal factors that have affected our financial condition, as well as our liquidity and capital resources for the periods described and provides information that management believes is relevant for an assessment and understanding of the statements of financial condition and results of operations presented herein. The following discussion and analysis is based on the Company’s unaudited financial statements contained in this Quarterly Report, which we have prepared in accordance with United States generally accepted accounting principles. You should read this discussion and analysis together with such financial statements and the related notes thereto.

Overview

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. 

We were incorporated in the State of Delaware on April 4, 2001, under the name “Flagstick Ventures, Inc.” On March 28, 2008, stockholders owning a majority of our outstanding common stock approved changing our then name “Signature Exploration and Production Corp.” as our business model had changed.

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On March 13, 2014, we entered into a definitive assets purchase agreement for the acquisition of assets, including the Growblox™ cultivation technology which resulted in a change in our corporate name on April 4, 2014, from Signature Exploration and Production Corporation to Growblox Sciences, Inc.

Effective December 12, 2016, the Company amended its Certificate of Corporation pursuant to shareholder approval as reported in the Form 8-K filed on October 14, 2016.  Pursuant to the amendment the Company’s name was changed from Growblox Sciences, Inc. to GB Sciences, Inc.  

Effective April 8, 2018, Shareholders of the Company approved the change in corporate domicile from the State of Delaware to the State of Nevada and increase in the number of authorized capital shares from 250,000,000 to 400,000,000. Effective August 15, 2019, Shareholders of the Company approved an increase in authorized capital shares from 400,000,000 to 600,000,000.

On September 21, 2018, the Company formed a wholly owned subsidiary, GBS Global Biopharma, Inc. (“GBSGB”), in the province of Ontario, Canada with plans to license and/or transfer some of Growblox Life Sciences LLC’s intellectual property to the newly formed entity. On March 15, 2019, the Company entered into the Asset Purchase Agreement with GBSGB, whereby all of the assets and certain liabilities held by Growblox Life Sciences, LLC, a wholly-owned subsidiary of  GB Sciences, Inc., were transferred to GBSGB in exchange for a promissory note in the amount of $1,435,700. The assets transferred include all intellectual property and intangible assets owned by the Company, consisting primarily of patents in process and research contracts with universities and researchers. GBSGB is currently pursuing clinical development of the intellectual property, including clinical trials.

Through its wholly owned Canadian subsidiary, GBS Global Biopharma, Inc. (“GBSGB”), the Company is engaged in the research and development of cannabinoid medicines with virtual operations in North America and Europe. GBSGB assets include cannabinoid medicine intellectual property, research contracts and key supplier arrangements. GBSGB’s intellectual property covers a range of conditions and several programs are in 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 four USPTO & WIPO patent applications, four provisional USPTO patent applications, and three patent applications that we anticipate filing by June 30, 2020, as well as licenses for three additional patents covering novel cannabinoid delivery systems.

We currently hold 100% membership interests in cultivation and extraction facilities in Nevada under our subsidiaries GB Sciences Nevada, LLC ("GBSN") and GB Sciences Las Vegas, LLC ("GBLV"). On November 15, 2019, we entered into a Binding Letter of Intent (the "LOI") to sell 75% of the Company's membership interest interests in GBSN and GBLV for $3 million cash upon close and up to an additional $3 million in earn-out payments after close. In connection with the 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. 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 is presently subject to an indefinite moratorium, and while the moratorium is expected to be lifted shortly, we cannot provide any assurances as to the timing of the close of the sale.

We recently completed the sale of the Company's controlling interest in GB Sciences Louisiana, LLC, which has partnered with Louisiana State University to operate a cultivation and extraction facility to produce products for the medical cannabis market. As consideration for the sale of our controlling membership interest in GB Sciences Louisiana, LLC, we received an $8 million promissory note and may receive up to an additional $8 million in earn out payments. The Company retained its 50% interest in the research relationship with Louisiana State University ("LSU") and will retain an interest in rights to the intellectual property developed through the relationship with LSU.

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Plan of Operation

Drug Discovery and Development of Novel Cannabis-Based Therapies 

Through GBSGB, the Company has conducted ground-breaking research embracing the complexity of the whole plant led by Dr. Andrea Small-Howard, the Company’s Chief Science Officer, and Dr. Helen Turner, Vice President of Innovation and Dean of the Science and Technology Department at Chaminade University.  Small-Howard and Turner posited that complex mixtures of cannabinoids and terpenes that are derived from native mixtures in the cannabis plant, but with precise optimizations, would provide more targeted and effective treatments for specific disease conditions than either single cannabinoids or whole plant formulations.  They developed a rapid screening and assaying system which tested thousands of combinations of cannabinoids and terpenes in vitro against cell-based models of disease.  This process identified precise mixtures of cannabinoids and terpenes, many of which contained no THC, to treat categories of disease conditions, including neurological disorders, inflammation, heart disease, metabolic syndrome, chronic and neuropathic pain. 

GBSGB’s drug discovery process combines: 1) HTS: high throughput screening of tens of thousands of combinations of compounds derived from specific chemovars of the cannabis plant in well-established cellular models of diseases, and 2) NPP: a proprietary Network Pharmacology Platform algorithm for the prediction of complex therapeutic mixtures that the Company spent two-and-a-half-years training and testing against cell assay data. This combined approach to drug discovery increases research efficiency and accuracy reducing the time from ideation to patenting from 7 years to 1.5 years. Screening of cannabis-based mixtures for drug discovery involves the testing of specific combinations of plant chemicals from many naturally occurring cannabis chemovars and the use of live models for these diseases that have been well established by other researchers. First, the Company finds chemovars that show some therapeutic activity, and then refines these natural mixtures to optimize their effectiveness in cellular assays by removing compounds that do not act synergistically with the others in the mixtures.  The Company also use its internally-validated Network Pharmacology Platform to prioritize and eliminate some potential combinations, which reduces the time in the discovery period.

The U.S. Patent and Trademark Office allows complex mixtures to be claimed as Active Pharmaceutical Ingredients, and GBSGB has a series of pending patents containing cannabis-derived complex mixtures that act as therapeutic agents for specific disease categories, as described below. GBSGB’s pending patents are protected whether the individual compounds are derived from the cannabis plant, another plant, synthetically produced, or derived from a combination of sources for the individual chemical compounds in these mixtures.

GBS Global Biopharma, Inc. has made significant strides in the past year with respect to both discovery research and product development programs. Both lead Rx programs in Parkinson’s disease and chronic neuropathic pain are now in preclinical animal studies with Dr. Lee Ellis of the NRC in Halifax. GBSGB recently announced that it has obtained the statistically significant reduction of Parkinson’s-disease like symptoms using its proprietary complex mixtures in an animal model of Parkinson’s disease (PD). Several of GBSGB’s PD formulations significantly reduced the symptoms, while the most effective formula reduced the symptoms back to the baseline activity of normal animals. In addition, the toxicity studies for the PD formulas came back without any significant negative findings. For Parkinson’s disease, the initial clinical prototypes of GBSGB Cannabinoid-Containing Complex Mixtures (CCCM) are being formulated by Catalent Pharma using Catalent’s Zydis® Orally Disintegrating Tablet technology.

For chronic neuropathic pain, GBSGB is testing its Cannabinoid-Containing Complex Mixtures (CCCM) both as encapsulated, time-released nanoparticles, as well as in non-encapsulated forms of these therapeutic mixtures in an animal model at the NRC in Halifax.

Three new patent applications were filed, three new patent applications are being prepared for filings, and we have licensed another patented delivery method, oral thin films. We are also raising awareness of our work through six peer-reviewed journal articles and a dozen presentations at national and international meetings. Favorable Research Updates from our university collaborators reveal the promise in our discovery programs with Michigan State University (HIV-Associated Neurodegenerative Disorder), Chaminade University (Neuropathic Pain, Metabolic Syndrome), the University of Athens, Greece (Cannabis Metabolomics), and the University of Seville, Spain (Time-Released Nanoparticles). The University of Seville has completed functional testing on nanoparticles containing myrcene, nerolidol, and beta-caryophyllene. In these cell-based assays, the effectiveness and kinetics of the nanoparticle-forms of these terpenes were compared with the “naked” terpenes both individually and in mixtures. In all cases, the effectiveness of the nanoparticles were superior to the naked terpenes, however, the mixtures were dramatically more effective than the individuals. These results from Seville are very promising as these nanoparticles are now entering the animal testing phase at the NRC in Halifax.

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Intellectual Property Portfolio

The Company has filed four USPTO & WIPO patent applications, four provisional USPTO patent applications, and anticipates filing three additional patent applications during the fiscal year ended March 31, 2020. We have licensed three more patents for our intellectual property portfolio. Refer to the Company’s 10-K for the year ended March 31, 2019, for a complete list of patent filings and licensed patents in our intellectual property portfolio.

Partnering Strategy 

GBSGB runs a lean drug development program and minimizes expenses, including personnel, overhead, and fixed capital expenses (such as lab and diagnostic equipment), through strategic partnerships with Universities and Contract Research Organizations (“CROs”). Through these research and development agreements, GBSGB has created a virtual pipeline for the further development of novel medicines extracted from the cannabis plant. The partners bring both expertise and infrastructure at a reasonable cost to the life sciences program. GBSGB has also negotiated with these partners to keep 100% of the ownership of the IP within GBSGB for original patent filings.

GBSGB currently has active and on-going research agreements with the following institutions covering the indicated areas of research:

●    Chaminade University: Broad-based research program to support the drug discovery platform that has yielded most of GBSGB’s original patents to date in the areas of neurodegenerative diseases, heart disease, inflammatory diseases, neuropathic pain and chronic pain.

●    Michigan State University: Discovery work using a cutting-edge, multi-cellular model of the human immune system and a multi-cell model of the brain to explore CCCM™s for use as an adjunctive therapy to anti-retroviral cocktails for HIV/AIDS patients and to define CCCM™s for use in the prevention of HIV-Associated Neurocognitive Disorders (HAND). The initial screens are producing positive results.

●    University of Athens: Broad-based metabolomics analysis of over 100 cannabis genotypes including both hemp and THC-producing cannabis varieties, in combination with GBSGB’s bioassay data linking genotypes and potential disease-remediations. This project has the potential to define active ingredients from plant-derived mixtures beyond the standard cannabinoids and terpenoids. The discovery potential is huge.

●    The National Research Center (NRC) of Canada, Halifax, Nova Scotia: Two animal-phase studies are being performed by Dr. Lee Ellis’ group at the NRC. An animal safety and efficacy study was initiated in Q4 of 2018 for GBSGB’s Parkinson’s disease therapies, and a safety and efficacy study in animals for GBSGB’s Chronic Neuropathic Pain (NP) formulas was initiated in Q1 of 2019.

●    The University of Seville: Development and functional testing of time-released and disease-targeted nanoparticles of cannabis-based complex mixtures for oral administration.

●    The University of Cadiz: Testing the safety and efficacy of the above-mentioned polymeric nanoparticles in rodent models.

●    University of Hawaii: Validating the efficacy of a complex cannabis-based mixture for the treatment of cardiac hypertrophy and cardiac disease in a rodent model.

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The Company also has a consulting agreement with Dr. Zoltan Mari, Section Head, Nevada Movement Disorders Program & Lee Pascal Parkinson's Disease Scholar at Cleveland Clinic, who will oversee the phase 0 human Parkinson’s disease trial and protocols.

Path to Market: Drug Development Stages and Proposed Clinical Trials

GBSGB has cannabis-based therapeutic products in the following stages of drug development: Discovery, Pre-Clinical, and entering the Clinical Phase. It has also licensed therapeutic products that the Company intends to develop through partners, labeled Partner Programs.

The completion of pre-clinical studies, clinical trials, and obtaining FDA-approvals for pharmaceutical products is traditionally a long and expensive process. However, GBSGB asserts that its drug development program, novel regulatory strategy, experienced development partners, and aggressive licensing of these products at early clinical stages can mitigate some of the risks. The Company uses a combination of in silico discovery methods and automated screening of cellular models of disease to decrease the time in Discovery prior to filing novel patent applications for disease-specific therapeutics. GBSGB’s original patent applications cover new chemical entities (“NCE”) based on complex combinations of plant-derived compounds. Its Exploratory IND/Phase 0 Program gets the Company to First-in-Man sooner than traditional programs, which reduces translational risks, and includes preliminary efficacy measures for responsible development decisions. In contrast, a traditional phased-development path would not provide any efficacy measures until Phase II. After the completion of our Phase 0 study, which compares the efficacies of multiple related cannabis-based formulations, the Company plans to advance the lead drug candidate using an adaptive trial design that is more efficient than the traditional phased-development pathway. GBSGB has entered into research contracts, partnerships, and/or joint ventures with several respected, independent contract research organizations, medical schools, universities, and other scientific researchers to increase developmental efficiencies. If and when one or more of GBSGB’s drugs, therapies or treatments are approved by the FDA, GBSGB will seek to market them under licensing arrangements with major biotechnology or pharmaceutical companies.

GBSGB plans to use a combination of FDA-registered human clinical trials, as described in detail above, and pilot human studies in the development of its therapeutic product portfolio. Early in product development, human pilot studies that are fully-compliant with state medical cannabis programs will be used to gather early data on safety and efficacy that can later be referenced in the next phase of product development. GBSGB may be able to produce and sell the early products that prove efficacious, through licensing agreements with cannabis companies in other US states and countries that have legalized cannabis programs.  GBSGB believes that these pilot studies will provide significant value by reducing the cost of commercialization, more rapidly putting effective drugs in the hands of patients, and accelerating by years the monetization of research. GBSGB’s goal is to be the perfect partner to those companies with greater resources and experience in the marketing and distribution of medications worldwide.

There can be no assurance that we will ever be able to enter into any joint ventures or other arrangements with third parties to finance our drug development program or that if we are able to do so, that any of our projected therapies will ever be approved by the FDA. Even if we obtain FDA approval for a therapy, there can be no assurance that it could be successfully marketed or would not be superseded by another cannabis-based therapy produced by one or more of our competitors. It also may be anticipated that even if we enter into a joint venture development with a financially stable pharmaceutical or institutional partner, we will still be required to raise significant additional capital in the future to achieve the strategic goals of GBSGB. There can be no assurance that we will be able to obtain such additional capital on reasonable terms, if at all. If GBSGB fails to achieve its goal of producing one or more cannabis-based pharmaceuticals or therapies, it would have a material adverse effect on our future financial condition and business prospects.

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RESULTS OF OPERATIONS

The following table sets forth certain of our Statements of Operations data:

	For the Three Months Ended December 31,						For the Nine Months Ended December 31,
	2019			2018			2019			2018
SALES REVENUE	$	254,131		$	695,764		$	2,336,505		$	2,728,277
COST OF GOODS SOLD		(675,933	)		(302,569	)		(3,157,452	)		(1,185,878	)
GROSS PROFIT/(LOSS)		(421,802	)		393,195			(820,947	)		1,542,399
GENERAL AND ADMINISTRATIVE EXPENSES		1,744,699			2,456,411			5,213,561			10,079,767
LOSS FROM OPERATIONS		(2,166,501	)		(2,063,216	)		(6,034,508	)		(8,537,368	)
OTHER EXPENSE		(537,959	)		(661,026	)		(1,257,717	)		(8,033,546	)
GAIN ON DECONSOLIDATION OF SUBSIDIARY		4,502,058			-			4,502,058			-
NET INCOME/(LOSS) BEFORE INCOME TAX EXPENSE		1,797,598			(2,724,242	)		(2,790,167	)		(16,570,914	)
INCOME TAX EXPENSE		-			(737,568	)		-			(737,568	)
NET INCOME/(LOSS) FROM CONTINUING OPERATIONS		1,797,598			(3,461,810	)		(2,790,167	)		(17,308,482	)
DISCONTINUED OPERATIONS		(720,656	)		(588,837	)		(1,476,220	)		(2,124,713	)
NET INCOME/(LOSS)		1,076,942			(4,050,647	)		(4,266,387	)		(19,433,195	)
NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST		(360,327	)		(287,406	)		(738,107	)		(762,966	)
NET INCOME/(LOSS) ATTRIBUTABLE TO GB SCIENCES, INC.	$	1,437,269		$	(3,763,241	)	$	(3,528,280	)	$	(18,670,229	)

Comparison of the Three and Nine Months Ended December 31, 2019 and 2018

Sales revenue

The Company recorded sales revenue of $0.3 million for the three months ended December 31, 2019, as compared to $0.7 million for the same period in the prior year. The decrease in sales is largely attributable to a sale of hemp in the prior year quarter of $0.3 million compared to $0 in the current quarter. the remaining $0.1M decrease is attributable to 137 pounds of finished cultivation product sold in the prior year quarter compared to 78 pounds in the current quarter, offset by sales of extracts in the current quarter of 3,390 grams compared to none in the prior quarter. Sales revenue was approximately $2.3 million for the nine months ended December 31, 2019, as compared to sales revenue of $2.7 million for the same period in the prior year. The decrease in sales is attributable to $0.3 million hemp sales in the prior year compared to $0 in the current quarter.

Cost of goods sold

Cost of goods sold increased to $0.7 million for the three months ended December 31, 2019, compared to $0.3 million for the nine months ended December 31, 2018. The decrease is attributable to an allowance to reduce inventory to its net realizable value of $0.4 million in the current quarter.

Cost of goods sold increased by $2.0 million to $3.2 million for the nine months ended December 31, 2019, compared to $1.2 million for the nine months ended December 31, 2018. The increase is largely attributable to the quarters ended June 30, 2019, and September 30, 2019, including an increase in the costs to cultivate cannabis from approximately $1.98 and $2.24 per gram for the three and six months ended September 30, 2019, respectively, compared to approximately $3.64 and $5.60 per gram for the three and six months ended September 30, 2019, respectively. The increase in the cost of cultivation is largely attributable to adjustments of $0.5 million and $0.4 million, to reduce inventory to its estimated net realizable value at September 30, 2019, and December 31, 2019, respectively. Another factor affecting the increase in costs of cultivation was a decrease in yield per plant from 153 grams per plant in in the quarter ended June 30, 2018 to 105 grams per plant in the quarter ended June 30, 2019, and from 114 grams per plant in the quarter ended September 30, 2018, compared to 108 grams per plant in the quarter ended September 30, 2019.

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General and administrative expenses

General and administrative expenses decreased $0.8 million to $1.7 million for the three months ended December 31, 2019, compared to $2.5 million for the three months ended December 31, 2018. The decrease in general and administrative expense is primarily the result of a Company-wide effort to cut administrative costs.

General and administrative expenses decreased to $5.2 million for the nine months ended December 31, 2019, compared to $10.1 million for the nine months ended December 31, 2018. The decrease in general and administrative expense is primarily related to the Company-wide effort to reduce administrative expense and reductions in noncash charges of $1.7 million for share-based compensation expense.

Interest expense

Total interest expense increased by $0.4 million to $0.6 million for the three months ended December 31, 2019, compared to $0.2 million in the prior year quarter. The increase is primarily due to increases in the carrying amount of debt outstanding from $2.4 million as of December 31, 2018, compared to $5.0 million as of December 31, 2019. The increase in interest expense is offset by $0.2 million in interest income from a note receivable in the current quarter, for net interest expense of $0.4 million.

Total interest expense decreased by $3.4 million to $1.3 million for the nine months ended December 31, 2019, compared to $4.7 million for the nine months ended December 31, 2018. The decrease is primarily due to $3.5 million of unamortized discount recorded as interest expense upon the conversion of convertible notes in the prior year compared to $0.1 million in the current year.

Other expense

Other expense was $0.2 million for the three months ended December 31, 2019, compared to other expense of $0.4 million for the three months ended December 31, 2018. Other expense for the current quarter consists primarily of a loss on extinguishment of debt of $0.1 million (Note 5) and a $0.1 million expense related to the induced conversion of notes payable (Note 5). Other expense in the prior year quarter consists primarily of a loss on the disposition of a note receivable of $0.1 million (Note 9), expense related to the settlement of a royalty agreement of $0.1 million (Note 5), and a $0.2 million charge related to cash seized during transportation (Note 8).

Other expense was $0.1 million for the nine months ended December 31, 2019 and $3.4 million for the nine months ended December 31, 2018. Other expense in the current year consists primarily of $0.2 million of losses on the extinguishment of debt (Note 5) and a $0.1 million expense related to the induced conversion of notes payable (Note 5), offset by $0.2 million related to the return of cash seized during transportation (Note 8). Other expense in the prior year consists primarily of $3.1 million related to stock and cash payments made to settle a royalty agreement (Note 5), a $0.2 million charge related to cash seized during transportation (Note 8), and a $0.1 million loss on the disposition of a note receivable (Note 9).

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LIQUIDITY AND CAPITAL RESOURCES

Current Liquidity

The Company will need additional capital to implement its strategies. There is no assurance that it will be able to raise the amount of capital needed for future growth plans. Even if financing is available, it may not be on terms that are acceptable. If unable to raise the necessary capital at the times required, the Company may have to materially change the business plan, including delaying implementation of aspects of the business plan or curtailing or abandoning the business plan. The Company represents a speculative investment and investors may lose all of their investment. In order to be able to achieve the strategic goals, the Company needs to further expand its business and financing activities. Based on the Company's cash position, it is necessary to raise additional capital by the end of the next quarter in order to continue to fund current operations. These factors raise substantial doubt about the ability to continue as a going concern.  The Company is pursuing several alternatives to address this situation, including the raising of additional funding through equity or debt financings. In order to finance existing operations and pay current liabilities over the next twelve months, the Company will need to raise additional capital. No assurance can be given that the Company will be able to operate profitably on a consistent basis, or at all, in the future.

The principal sources of liquidity to date have been cash generated from sales of debt and equity securities and loans.

At December 31, 2019, cash was $ 37,300, other current assets excluding cash were $ 3,088,766, and our working capital deficit was $ (5,795,395). At the same time, current liabilities were $ 8,921,461 and consisted principally of $ 1,998,994 in accounts payable, $1,087,837 in accrued liabilities, $ 4,860,221 in notes payable, net of  $ (1,008,086) in discounts, $ 506,145 in income tax payable, and $ 134,239 in current finance lease obligations. At March 31, 2019, the Company had a cash balance of  $ 182,055, other current assets excluding cash were $ 3,284,716 including $1,000,387 from discontinued operations, and our working capital deficit was $ (3,245,409), including $ (1,133,890) from discontinued operations. Current liabilities were $6,712,180, which consisted principally of $ 1,374,771 in accounts payable, $ 387,043 in accrued liabilities, $ 2,229,812 in notes payable, $ 506,145 in income taxes payable, and $2,134,277 of current liabilities from discontinued operations.

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Sources and Uses of Cash

Operating Activities

Net cash used in operating activities was $ (4,248,291) for the nine months ended December 31, 2019, including $ (1,244,721) used in discontinued operations, as compared to net cash used of $ (7,847,751) for the nine months ended December 31, 2018, including $ (447,852) used in discontinued operations. We anticipate that cash flows from operations may be insufficient to fund business operations for the next twelve-month period. Accordingly, we will have to generate additional liquidity or cash flow to fund our current and anticipated operations. This will likely require the sale of additional common stock or other securities. There is no assurance that we will be able to realize any significant proceeds from such sales, if at all.

Investing Activities

During the nine months ended December 31, 2019, the Company used $ (538,784) in investing activities, including $ (260,625) used in discontinued operations, compared to (10,091,637) during the nine months ended December 31, 2018, including $ (8,946,434) used in discontinued operations. The cash used in investing activities during the nine months ended December 31, 2019 and 2018 was primarily for the purchase of property and equipment and the acquisition of intangible assets.

Financing Activities

During the nine months ended December 31, 2019 and 2018, cash flows provided by financing activities totaled $ 4,642,320 and $ 14,683,743, respectively. Cash flows from financing activities for the nine months ended December 31, 2019, related primarily to $ 2,960,000 in proceeds from the issuance of notes and convertible notes payable, $ 1,860,200 in proceeds from the sale of common stock and warrant exercises, and $  282,835 in net cash flows from discontinued operations, offset by $ (110,087) of principal payments on debt and finance lease obligations and $ 350,628 in brokerage fees. Cash flows from financing activities for the nine months ended December 31, 2018 related primarily to $ 8,823,555 in proceeds from the sale of common stock and warrants in private placements and $ 7,179,156 of net cash flows provided by discontinued operations, offset by $ (1,000,000) paid to settle the Pacific Leaf Royalty Agreement and $ (318,968) of principal payments on debt and finance lease obligations.

GOING CONCERN

The Company’s condensed consolidated 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 $(88,764,145) at December 31, 2019. The Company had a working capital deficit of  $ (5,795,395) at December 31, 2019, compared to $ (3,245,409) including a deficit of  $ (1,133,890) from discontinued operations at March 31, 2019. In addition, the Company has consumed cash in its operating activities of $ (4,248,291) including $ (1,244,721) from discontinued operations for the nine months ended December 31, 2019, compared to $ (7,847,751) including $ (447,852) from discontinued operations for the same period last year. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

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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 securing capital necessary to achieve its goals.

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 consolidated 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.

VARIABLES AND TRENDS

In the event the Company is able to obtain the necessary financing to progress with its business plan, the Company expects expenses to increase significantly to grow the business. Accordingly, the comparison of the financial data for the periods presented may not be a meaningful indicator of future performance and must be considered in light of these circumstances.

CRITICAL ACCOUNTING POLICIES

A description of the Company's significant accounting policies is included in Note 3 of its Annual Report on Form 10–K for the fiscal year ended March 31, 2019.

ITEM 3.  Quantitative and Qualitative Disclosures About Market Risk

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

ITEM 4.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company  maintains disclosure controls and procedures that are designed to ensure that material information required to be disclosed in the periodic reports filed under the Securities Exchange Act of 1934, as amended, or 1934 Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to ensure that such information is accumulated and communicated to management, including the chief executive officer and chief financial officer as appropriate, to allow timely decisions regarding required disclosure. At the end of the quarter ended December 31, 2019, the Company carried out an evaluation, under the supervision and with the participation of management, including the principal executive officer and the principal financial officer, of the effectiveness of the design and operation of disclosure controls and procedures, as defined in Rule 13(a)-15(e) and Rule 15d-15(e) under the 1934 Act. Based on this evaluation, management concluded that as of December 31, 2019, the disclosure controls and procedures were not effective due to material weaknesses as no member of our board of directors qualifies as an “audit committee financial expert” as defined in Item 407(d)(5) of Regulation S-K promulgated under the Securities Act.

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Limitations on Effectiveness of Controls and Procedures

Management, including the Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), does not expect that disclosure controls and procedures will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Changes in Internal Controls

During the fiscal quarter ended December 31, 2019, there have been no changes in the internal controls over financial reporting that have materially affected or are reasonably likely to materially affect the internal controls over financial reporting. 

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PART II – OTHER INFORMATION

ITEM 1.  Legal Proceedings

From time to time, the Company becomes involved in certain legal proceedings and claims which arise in the ordinary course of business. In our 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, we will record a reserve for the claim in question. If and when we record such a reserve is recorded, it could be material and could adversely impact our results of operations, financial condition, and cash flows.

ITEM 1A.  Risk Factors

There are no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2019, as filed with the SEC.

ITEM 2.  Unregistered Sales of Equity Securities and Use of Proceeds

On December 4, 2018, the Company entered into a Placement Agent’s Agreement to offer a total of 15,000,000 units at the price of $0.20 per unit up to a total of $3 million. Each unit consisted of one share of the Company’s common stock and one warrant to purchase one share of the Company’s common stock at the price of $0.60 for a period of five years. On January 15, 2019, the Placement Agent’s Agreement was amended to decrease the unit price from $0.20 per unit to $0.15 per unit for a total of 20,000,000 units and decrease the exercise price of the warrants included in each unit from $0.60 to $0.30, applied retroactively to funds raised prior to the date of the amendment, with no other changes to the agreement. During the nine months ended December 31, 2019, the Company received a total of $478,696 in proceeds from the private placement, net of $71,529 in brokerage fees and issued 3,668,167 shares of its common stock and 3,668,167 warrants to purchase one share of its common stock at $0.30 per share.

On October 10, 2019, the Company issued 4,000,000 shares of common stock and 2,000,000 warrants to purchase one share of common stock at $0.08 per share for a period of three years to an investor for $240,000 cash.

ITEM 3. Defaults Upon Senior Securities

As of the date of this report, the Company is in default on the 8% Senior Secured Convertible Promissory Note dated February 28, 2019 due to CSW Ventures, L.P. due to nonpayment of the quarterly interest payments due on October 1, 2019 and December 31, 2020, and nonpayment of an income tax liability related to the March 31, 2018 tax year (Note 5). The terms of the note provide that the Company has 5 days to cure a default caused by nonpayment of interest and ten days to cure a default caused by noncompliance with affirmative or negative debt covenants. As of the date of this report, the lender has not provided formal notice of the default and the Company anticipates that the Note will be settled upon close of the Teco sale (Note 10). Upon written notice of default to the Company, the lender may accelerate the payment of principal and interest and enforce its remedies under the Security Agreement.

The Company is in default on the Iliad Note due to nonpayment of an income tax liability related to the March 31, 2018 tax year (Note 5). In addition, the note includes cross-default and cross-acceleration clauses that may be triggered by the defaults on the Company’s other debts described above and in Notes 5 and 6. The Company has not received formal notice of default from the lender and intends to work with the lender to negotiate terms of a forbearance arrangement.

As inducement for the temporary forbearance of formal default proceedings, the Company has honored the conversion of a total of a total of $125,000 of debt owed under 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 expense in that amount. 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. The fair value of the shares issued exceeded the fair value of the shares issuable under the original terms of the Note by $62,353, and the Company recorded an expense in that amount. In total, the Company recorded $127,059 in noncash expense for the two conversions of the Iliad note at below contractual conversion rates for the three and nine months ended December 31, 2019.

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ITEM 4.  Mine Safety Disclosures

Not Applicable.

ITEM 5.  Other Information

None.

ITEM 6.  Exhibits

In reviewing the agreements included as exhibits to this Form 10-Q, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company or the other parties to the agreements. The agreements may contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the parties to the applicable agreement and:

●should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; 

●have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement; 

●may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and 

●were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments. 

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about the Company may be found elsewhere in this Form 10-Q and the Company’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov.

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The following exhibits are included as part of this report:

Exhibit Number	Description of Exhibit
3.1	Articles of Incorporation (Incorporated by reference to an exhibit to Form SB-2 No. 333-82580 filed with the Commission on February 12, 2002)
3.2	Amendment to Articles of Incorporation (Incorporated by reference to Exhibit 3.2 to Form S-1/A No. 333-82580 filed with the Commission on October 6, 2014 and Exhibit 3.2 to Form 10-K No. 333-82580 filed with the Commission on June 27, 2014)
3.3	Bylaws (Incorporated by reference to an exhibit to Form SB-2 No. 333-82580 filed with the Commission on February 12, 2002)
10.1	Membership Interest Purchase Agreement dated November 15, 2019
31.1	Certification of Principal Executive Officer and Pursuant to Rule 13a-14
31.2	Certification of Principal Financial Officer Pursuant to Rule 13a-14
32.1*	CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act
32.2*	CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Labels Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

* This certification is being furnished and shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

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SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	GB SCIENCES, INC.
February 18, 2020	By:	/s/ John Poss
	John Poss, Chief Executive Officer (Principal Executive Officer)
	GB SCIENCES, INC.
February 18, 2020	By:	/s/ Zach Swarts
	Zach Swarts, Chief Financial Officer (Principal Financial Officer)

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EX-10.1

CONFIDENTIAL






 

MEMBERSHIP INTEREST PURCHASE AGREEMENT

among

GB SCIENCES, INC.

Seller,

WELLCANA PLUS, LLC

PURCHASER,

GB SCIENCES LOUISIANA, LLC,

and

WELLCANA GROUP, LLC

Dated as of November 15, 2019

MEMBERSHIP INTEREST PURCHASE AGREEMENT

This Membership Interest Purchase Agreement (“Agreement”) is made as of November 15, 2019, among Wellcana Plus, LLC, a Louisiana limited liability company (“Purchaser”), GB Sciences, Inc. a Nevada corporation (“Seller”), GB Sciences Louisiana, LLC, a Louisiana limited liability company (the “Company”), and Wellcana Group, LLC, a Louisiana limited liability company (“WGC”).

R E C I T A L S

A. Seller owns 50% of the membership interests (“Interests”) in the Company.

B.     WGC, an affiliate of Purchaser, owns the remaining 50% of outstanding membership interests in the Company.

C.     Seller has made, in addition to the capital contributions set forth in the Company’s Operating Agreement, additional capital contributions of $2,002,997.00.

D.     Company is engaged in the cultivation, extraction, processing, and production of therapeutic cannabis (the “Business”).

E.     Purchaser desires to acquire 100% of the Seller’s Interests in the Company, and Seller desires to sell 100% of Seller’s Interests in the Company, on the terms contained herein.

F.     In exchange for the Purchase Price, Seller has agreed to sell and transfer to the Purchaser, and the Purchaser has agreed to purchase and acquire from Seller, 100% of the Interest owned by Seller, on the terms and subject to the conditions set forth in this Agreement so that Purchaser will become the owner of 50% of the Interests in the Company, and together with WGC, will own all of the outstanding Interests in the Company.

G.      The Company is a party to a Master Research and Development Agreement (the “Research Agreement”), dated November 19, 2018, with the Board of Supervisors of Louisiana State University and Agricultural and Mechanical College (“LSU”), pursuant to which the Company may be granted rights in certain intellectual property. The Company has agreed to provide the Seller with an interest in such intellectual property on the terms and conditions set forth in this Agreement.

H.      Capitalized terms used in this Agreement shall have their respective definitions as set forth in Section 6.21 or otherwise in the various sections or recitals of this Agreement.

A G R E E M E N T S

Now, Therefore, in consideration of the premises, representations, warranties and agreements contained herein and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

ARTICLE I      

Purchase and Sale of Interests

1.1     Purchase and Sale of Interests.

On the terms contained in this Agreement, Purchaser is hereby purchasing from Seller, and Seller is hereby selling to Purchaser, the Interests, free and clear of all encumbrances, liens, claims, options, pledges, rights of first refusal or security interests whatsoever (collectively, “Claims”).

1.2     Purchase Price.

The aggregate purchase price of the Interests (the “Purchase Price”) shall be equal to Sixteen Million Dollars ($16,000,000) payable as follows: (i) a Secured Promissory Note substantially in the form attached hereto in the principal amount of $8,000,000 (the “Promissory Note”) shall be issued by Purchaser to Seller, and (ii) additional consideration of up to $8,000,000 of “Earn-Out Payments” shall be paid to Seller in immediately available funds by wire transfer as provided below. The Purchaser’s obligations under the Promissory Note will be secured by a pledge of Purchaser’s rights and title in and to the Interests pursuant to a Pledge Agreement substantially in the form attached hereto to be delivered by Purchaser to Seller (the “Pledge Agreement”).

1.3     Earn-Out Payments.

(a)     The Purchaser shall pay to Seller an amount equal to (i) 25% of the distributions made by the Company to Purchaser, or its successors, in connection with the services provided by the Company under that certain Agreement for Services, as it may be amended, modified, extended or replaced from time to time (the “Services Agreement”) with LSU, derived from the sales of therapeutic cannabis cultivated at the current Petroleum Drive facility in Baton Rouge, Louisiana (the “Petroleum Drive Facility”) through September 14, 2022, and (ii) 10% of the distributions made by the Company to Purchaser, or its successors, in connection with the services provided by the Company under the Services Agreement, derived from the sales of therapeutic cannabis cultivated at the Petroleum Drive Facility after September 14, 2022 (together, the “Earn-Out Payments”). Earn-Out Payments shall be payable to Seller in arrears 30 days from the date of the distribution to Purchaser from the Company. The Earn-Out Payments will continue in perpetuity until such time as (i) the Earn-Out Payments equal, in the aggregate, Eight Million Dollars ($8,000,000), or (ii) the issuing of licensing or permitting to more than two cultivators (other than to the Company, its members or any of their Affiliates beneficially owning (directly or indirectly) an aggregate of 10% or more of the Company) by the Louisiana Legislature or any other Louisiana governing bodies, (iii) the termination of the Services Agreement (the “Earn-Out Period”).

(b)     The Company, the Purchaser and WGC shall use commercially reasonable efforts to maximize the Earn-Out Payments. In furtherance of the foregoing, the Company, the Purchaser and WGC agree, during the Earn-Out Period (i) not to terminate the Services Agreement or agree to any amendment or modification thereto that could be expected to result in a reduction in the Earn-Out Payments, (ii) to cause the Company to make distributions to the Purchaser on a quarterly basis, of its pro-rata share of the Company’s available cash (subject to a reasonable reserve for the payment of the Company’s obligations in the ordinary course), and (iii) not to amend the Company’s Operating Agreement in a manner that could reasonably be expected to result in a reduction in the Earn-Out Payments. In addition, the Earn-Out Payments shall not be reduced by any management fees or any other similar compensatory fees paid by the Company to any of the Company’s members or their Affiliates.

(c)     Purchaser will deliver to Seller within 30 days following the end of each calendar quarter a statement setting forth in reasonable detail (i) the net income and cash flows of the Company for the preceding quarter; (ii) all distributions made by the Company to Purchaser during the preceding quarter, and (iii) the Purchaser’s determination of the Earn-Out Payments payable to Seller with respect to the preceding quarter (the “Quarterly Earn-Out Statement”).

(d)     The Purchaser shall require that any successor or transferee of the Interest purchased by it hereunder shall agree in writing to accept the obligations of Purchaser hereunder with respect to the Earn-Out Payments as if such successor or transferee were a party hereto.

(e)     The Company and Purchaser shall provide Seller and its representatives with reasonable access with respect to the computations, business and accounting records and work papers relevant to the determination of the Earn-Out Payments during normal business hours every fiscal quarter to assist the Seller in calculating and verifying the Earn-Out Payments and any other matter relating thereto, and in seeking to resolve any outstanding dispute with respect thereto.

(f)     Upon receipt of a Quarterly Earn-Out Statement, Seller shall have thirty (30) days to object in writing to Purchaser’s determination of the amount of the Earn-Out Payment set forth therein. If Seller does not agree with the Purchaser’s determination of the applicable Earn-Out Payment, Seller shall within said second thirty (30) day period, prepare and deliver to Purchaser a list of disputed adjustments (the “Disputed Items”). Purchaser and Seller shall attempt to resolve the Disputed Items. If Purchaser and Seller resolve the Disputed Items, such Quarterly Earn-Out Statement shall be amended to reflect such resolution and the determination of the Earn-Out Payment for such quarter shall become final and any additional Earn-Out Payment above the amount paid in Section 1.3(a) shall be paid to Seller within five (5) business days.

(g)     If Purchaser and Seller are unable to resolve the Disputed Items within thirty (30) days after receipt by Purchaser of the Disputed Items, then the Disputed Items shall be resolved by a firm of certified public accountants mutually acceptable to Purchaser and Seller (the “Accounting Referee”). The parties shall attempt to cause the Accounting Referee to promptly review the Disputed Items and determine the final value of each of the Disputed Items. Such determination shall be made within thirty (30) days after the date on which the Accounting Referee receives notice of the Disputed Items. The calculation of the Earn-Out Payment shall then be amended to reflect the determination of the final value of the Disputed Items and shall become final and binding upon the parties for the purposes of determining the amount of the Earn-Out Payment payable pursuant to Section 1.3(a) of the Agreement, and any additional Earn-Out Payment above the amount paid in Section 1.3(a) shall be paid to Seller within five (5) business days. The fees, costs and expenses of the Accounting Referee in conducting such review shall be shared equally by Purchaser and Seller.

1.4     Sale and Transfer of Intellectual Property Rights.

(a)     Seller is hereby provided with all of Purchaser’s direct and indirect rights, title and interest in and to the “Developed Intellectual Property” (as defined in the Research Agreement) which the Company obtains under the Research Agreement (the “Research Agreement IP”), which rights shall terminate on September 14, 2022 or, subject to Section 1.4(b), such later date as the Services Agreement shall terminate upon amendment or renewal thereof, in consideration of the payments to be made by the Seller to the Purchaser under this Section 1.4. Upon the receipt of any payments or distributions by the Purchaser relating to or in connection with the Company’s or Purchaser’s sale, licensing or other transfer of the Research Agreement IP, the Purchaser shall immediately pay to the Seller the amount of such payment. In addition, the Company and Purchaser shall execute such further documents, and perform such further acts, as may be necessary to transfer, convey and vest in the Seller, all of Purchaser’s rights to the Research Agreement IP, subject to the terms and provisions of the Research Agreement.

(b)     In consideration of its rights to the Research Agreement IP pursuant to Section 1.4(a) above, Seller shall be responsible for the funding of (i) 50% of the $500,000 annual payment due from the Company to LSU under Section 3.1 of the Services Agreement for each of 2019, 2020 and 2021 (i.e., a total obligation for Seller in the amount of $750,000), and (ii) $433,500 of payments due from the Company to LSU with respect to certain equipment purchased under the Services Agreement (collectively, the “IP Payments”). Upon amendment or renewal of the Services Agreement which extends the term thereof, Seller shall have the option to elect by written notice to Purchaser, to continue to retain its rights to the Research Agreement IP during the extended term, in consideration of Seller’s obligation to fund 50% of the payments due from the Company to LSU pursuant to the terms and conditions of the amended or renewed Research Agreement.

(c)     During the term of the Services Agreement terminating on September 14, 2022, the sole recourse by the Purchaser to the IP Payments shall be by offset against amounts otherwise due to Seller under the Promissory Note, as provided for therein. Upon amendment or renewal of the Services Agreement that extends the term thereof, if Seller elects to retain its rights in the Research Agreement IP during the extended term as provided in Section 1.4(b), Seller shall be responsible for the IP Payments pursuant to the terms and conditions of the amended or renewed Research Agreement. In the event that any IP Payment is not paid in full within thirty days following demand therefor, Purchaser at its option may; (i) offset or recoup payments for the IP Payment from any amounts due to Seller from Earn Out Payments, (ii) demand payment and seek available legal remedies or (iii) terminate Seller’s rights and interest in and to the Research Agreement IP.

1.5     Closing and Time and Place of Closing.

The closing of the purchase and sale of the Interest (the “Closing”) shall occur on November 15, 2019, or on such other date the parties may agree, at prevailing business time remotely by mail, e-mail and/or wire transfer, in each case to the extent acceptable to the parties hereto, on the date hereof (the “Closing Date”)

1.6     Closing Deliveries.

(a)     By Seller. At the Closing, Seller shall deliver to Purchaser all of the following: (i) if applicable, certificates representing 100% of the Interests duly endorsed in blank or with duly executed membership interest powers, or if the Interests are not certificated, an appropriate instrument pursuant to which the Interests are fully assigned and transferred to Purchaser in the form of Exhibit A hereto; (ii) resignations of the Seller’s designees set forth on Schedule 1.6 hereto that are serving as officers or managers of the Company at the Closing; (iii)  a certificate of good standing of the Seller, issued not earlier than ten (10) days prior to the Closing Date by the Secretary of State of Nevada; (iv) a copy of all consents required to be obtained by the Seller in connection with the sale of the Interests; and (v) such other documents as reasonably requested by Purchaser.

(b)     By Purchaser. At the Closing, Purchaser shall deliver to Seller: (i) the Promissory Note and Pledge Agreement, executed by Purchaser; (ii) a certificate of good standing of Purchaser, issued not earlier than ten (10) days prior to the Closing Date by the Secretary of State of Louisiana; (iii) copies of resolutions of Purchaser’s managers authorizing the execution and delivery of this Agreement and all other documents executed pursuant hereto to which Purchaser is a party and the consummation of the transactions contemplated hereby and thereby, certified as of the Closing Date by an officer of Purchaser; (iv) a certificate of the Secretary or other appropriate officer of Purchaser, dated as of the Closing Date and certifying as to the incumbency of the officers executing this Agreement and the other documents executed pursuant hereto to which Purchaser is a party and including specimen signatures; and (v) such other documents as reasonably requested by Seller.

1.7     Consent to Sale of the Interest. WGC hereby consents to the sale of the Interest to Purchaser.

1.8     Seller’s Assistance with Business Operations Transition. Following the Closing Date, Seller shall take all reasonable actions requested by the Company or the Purchaser so that Purchaser and WGC shall be able to operate the Business following the Closing as the sole members of the Company, including, without, limitation, by:

(a)     Providing Purchaser with all passwords to access the Company’s email data and accounts, to the extent available to Seller;

(b)     Providing Purchaser with all Company financial and accounting data and records (including but not limited to journal entries, transaction data, bank records, invoices, balance sheets, profit and loss statements), to the extent available to Seller;

(c)     Reasonably cooperating and assisting Company with any requests by or requirements of the Louisiana Department of Agriculture and Forestry, Louisiana Department of Health, Louisiana State Police, LSU, Louisiana State University Agricultural Center, or any other Governmental Authority or entity including but not limited to the filing of any necessary forms, reports, or other necessary actions, in each case, to the extent relating to periods prior to the Closing;

(d)     Performing such further acts and executing such further documents as may be reasonably necessary to ensure the business operations of the Company continue without cessation or disruption following the Closing.

1.9     Excluded Liabilities. Notwithstanding anything in this Agreement to the contrary the Purchaser and Company shall not assume, and shall not be deemed to have assumed any liability or obligations of Seller or its affiliates not expressly included, including without limitation, the following:

(a)     any liabilities and/or obligations of Seller, including obligations to CSW Ventures, LP, Iliad Research and Trading, LP, Quantum Shop LLC or Network 1 Financial Securities, Inc., or any of their affiliates or subsidiaries;

(b)     any liability or obligations for intercompany transfers from Seller to the Company;

(c)     any trade payables of Seller unrelated to the operations of the Company, it being acknowledged and agreed that the Company shall be liable for all accounts payable listed on the GB Sciences Louisiana, LLC Vendor Aging Report dated as of November 7, 2019, a copy of which is attached hereto as Schedule 1.9, as well as any other trade payables generated by the Company following such date in the ordinary course of the Company’s business.

ARTICLE II      

Representations and Warranties

2.1     Representations and Warranties of Purchaser.

Purchaser represents and warrants to Seller that:

(a)     Organization and Standing. Purchaser is a limited liability company duly organized, existing and in good standing under the Laws of the State of Louisiana. Purchaser has all necessary power and authority to conduct its business as its business is now being conducted.

(b)     Power and Authority. Purchaser has full power and authority to enter into and perform (i) this Agreement, and (ii) the Promissory Note, the Pledge Agreement and all other documents and instruments executed or to be executed by Purchaser in connection with this Agreement (“Purchaser’s Ancillary Documents”). This Agreement and Purchaser’s Ancillary Documents have been duly executed and delivered by Purchaser. Neither the execution and delivery of this Agreement and Purchaser’s Ancillary Documents by Purchaser, nor the consummation by Purchaser of the transactions contemplated hereby or thereby, will conflict with or result in a breach of any of the terms, conditions or provisions of Purchaser’s Governing Documents or of any statute or administrative regulation, or of any order, writ, injunction, judgment or decree of any court or Governmental Authority or of any arbitration award.

(c)     Consents. No consent, authorization, order or approval of, or notice to or filing or registration with, any Governmental Authority or other person, organization or association is required for the execution and delivery by Purchaser of this Agreement and Purchaser’s Ancillary Documents, and the consummation by Purchaser of the transactions contemplated by this Agreement and Purchaser’s Ancillary Documents.

(d)     Litigation and Claims. There is no litigation or proceeding, in law or in equity, pending or, to Purchaser’s knowledge, threatened, against Purchaser or its officers or directors, either (i) with respect to or affecting Purchaser’s ability to perform its obligations hereunder, or (ii) that is reasonably likely to prohibit, restrict or delay the performance of this Agreement by Purchaser.

(e)     Brokers and Finders. Neither Purchaser nor any of its Affiliates has retained, engaged or entered into any contract, agreement or commitment (whether written or oral) with any Person who is or will be entitled to a broker’s commission, finder’s fee, or investment banker’s fee in connection with (i) the negotiation, execution or performance of this Agreement, or (ii) introducing the parties hereto to each other.

(f)     Complete Disclosure. Neither the Purchaser, WGC nor any of their respective Affiliates is a party to any agreement or understanding with LSU (other than the Services Agreement) that has not been disclosed in writing to the Seller. The representations and warranties of Purchaser in this Agreement (including the schedules and exhibits hereto) do not omit to state a material fact necessary in order to make the representations, warranties or statements contained herein not misleading.

2.2     Representations and Warranties of Seller.

Seller represents and warrants to Purchaser as follows:

(a)     Organization and Standing. The Seller is a corporation duly organized, existing and in good standing, under the Laws of the State of Nevada.

(b)     Power and Authority. The Seller has full power and authority to enter into and perform (i) this Agreement and (ii) all documents and instruments executed by Seller in connection with this Agreement (“Seller’s Ancillary Documents”). This Agreement and Seller’s Ancillary Documents have been duly executed and delivered by Seller. Neither the execution and delivery of this Agreement and Seller’s Ancillary Documents by Seller, nor the consummation by Seller of the transactions contemplated hereby or thereby, will conflict with or result in a breach of any of the terms, conditions or provisions of Company and Seller’s Governing Documents or of any statute or administrative regulation, or of any order, writ, injunction, judgment or decree of any court or Governmental Authority or of any arbitration award.

(c)     Ownership of Interest. Seller owns beneficially and of record 50% of the Interest in the Company. Seller has not previously assigned, transferred or otherwise disposed of the Interest, and the Interest will be transferred to the Purchaser at the Closing, free and clear of all Claims.     

(d)     Consents. No consent, authorization, order or approval of, or notice to or filing or registration with, any Governmental Authority or other Person, organization or association is required for the execution and delivery by Seller of this Agreement and Seller’s Ancillary Documents, and the consummation by Seller of the transactions contemplated by this Agreement and Seller’s Ancillary Documents, except for such consents that will be obtained by Seller at or prior to the Closing.

(e)     Litigation and Claims. There is no litigation or proceeding, in law or in equity, pending or, to Seller’s knowledge, threatened, against Seller or its officers or directors, either (i) with respect to or affecting Seller’s ability to perform its obligations hereunder, or (ii) that is reasonably likely to prohibit, restrict or delay the performance of this Agreement by Seller.

(f)     Brokers and Finders. Neither Seller nor any of its Affiliates has retained, engaged or entered into any contract, agreement or commitment (whether written or oral) with any Person who is or will be entitled to a broker’s commission, finder’s fee, or investment banker’s fee in connection with (i) the negotiation, execution or performance of this Agreement, or (ii) introducing the parties hereto to each other.

(g)     Taxes. All applicable transfer taxes and similar charges, fees that may be due or payable by Seller as a result of the conveyance, assignment, transfer, assumption or delivery of the Membership Interest as contemplated by this Agreement shall be paid by Seller.

(h)     Conflicts. Except as set forth on Schedule 2.2(h), the Seller is not a party to, or bound by, any unexpired, undischarged or unsatisfied contract that is material to the Seller (“Material Contract”) under the terms of which the execution of, or the performance by Seller according to the terms of this Agreement would (i) be a default or an event of acceleration, (ii) prohibit, prevent or delay timely performance by Seller according to the terms of this Agreement; or (iii) require the consent of or otherwise give any other party to such Material Contract the right to refuse to give consent to the consummation of the transactions contemplated hereby or to elect to terminate such Material Contract, require Seller or the Company to give notice to any other party of the transactions contemplated hereby, or provide that, or give any other party the right to declare that, as a result of the consummation of the transactions contemplated hereby, the Material Contract shall be null and void.

(i)     Employees. Except as set forth on Schedule 2.2(i):

(i)     With respect to any current or former employees of the Seller who was employed by Company, there is not now, nor has there been within the twenty four (24) months before Closing, any pending or, to Seller’s Knowledge, threatened: (A) unfair labor practice charge, employment discrimination or other charge with any governmental entity responsible for equal employment opportunity, or employee grievance; (B) labor-related organizational effort, election activities, or request or demand for negotiations, recognition or representation; (C) labor strike, dispute, slowdown, stoppage, picketing, interruption of work, lockout, or other dispute or controversy with or involving a labor organization or with respect to unionization or collective bargaining; or (D) grievance or arbitration proceeding arising out of or under any collective bargaining agreement. To the Seller’s Knowledge, the Company is not, and has not been, a party to or bound by any collective bargaining agreement, other agreement or understanding, work rules or practice, or arbitration award with any labor union or any other similar organization.

(ii)     As of the Closing, the Seller has timely paid or accrued, and is not and has not been liable for any arrears of, any and all salaries, wages, bonus, sales commission, vacation and sick pay, profit sharing obligations, other compensation amounts, and Taxes and penalties (if any) due and owing to or with respect to Seller’s current and former employees who performed services on behalf of the Company. To the Seller’s Knowledge, no employee or former employee of Seller has any right to be rehired by the Company prior to the Company’s hiring a person not previously employed by the Company. The Seller has not taken any actions which were calculated to dissuade any of the Company’s present employees, representatives or agents from becoming associated with Purchaser.

(j)     Company Litigation. Seller is not a party to or subject to any pending claim, litigation or proceeding, in law or in equity, and there are no proceedings or governmental or other investigations, penalties for corrective or remedial action, or other compliance or enforcement action, before any commission or other Governmental Authority, pending, or, to Seller’s Knowledge, threatened, (i) relating to the Company or the Company’s officers, employees or members, (ii) with respect to or affecting the Company’s operations, business, employees or financial condition, or (iii) related to the consummation of the transactions contemplated hereby. Schedule 2.2(j) contains a complete and accurate list and description (and any settlement terms) of all claims, actions, suits and proceedings filed within the last three (3) years, or threatened in the last twelve (12) months by or against the Seller and: (i) relating to the Company or affecting the Company’s operations, business, employees or financial condition or prospects, or by or against the Company’s officers or members, or (ii) related to the consummation of the transactions contemplated hereby.

(k)     Complete Disclosure. The representations and warranties of Seller in this Agreement (including the schedules and exhibits hereto) do not omit to state a material fact necessary in order to make the representations, warranties or statements contained herein not misleading. The information contained in the Disclosure Statement is complete and accurate in all material respects.

ARTICLE III      

Post-Closing Agreements

3.1     Post-Closing Agreements. From and after the Closing:

(a)     Further Assurances. The parties hereto shall execute such further documents, and perform such further acts, as may be necessary to transfer and convey the Interests to Purchaser, on the terms herein contained, and to otherwise comply with the terms of this Agreement and to consummate the transactions contemplated hereby.

(b)     Seller Covenants. As an inducement for Purchaser to enter into this Agreement, Seller agrees that from and after the Closing and continuing for the lesser of two (2) years from the Closing Date or the longest time permitted by applicable Law, Seller shall not and shall cause its Affiliates to not do any one or more of the following, directly or indirectly:

(i)     engage or participate as of the date hereof in the State of Louisiana (the “Territory”), as an owner, partner, member, shareholder, independent contractor, employee, consultant, agent, advisor or (without limitation by the specific enumeration of the foregoing) otherwise, in the Business, as conducted on the Closing Date or as contemplated on the Closing Date to be conducted;

(ii)     solicit or attempt to solicit any Person who is or has been a customer, supplier, manufacturer, licensor, licensee or any other business relation of the Company or the Business within the past three (3) calendar years to cease doing business with, or to alter or limit its business relationship with Purchaser, the Company or the Business;

(iii)     take any actions which are calculated to persuade any employees, representatives or agents of the Company to terminate their association with the Company or, other than on the Company’s behalf, hire or otherwise retain the services of any employees, representatives or agents of the Company (whether on a full-time basis, part-time basis or otherwise and whether as an employee, independent contractor, consultant, advisor or in another capacity) who is acting in such capacity or has acted in such capacity at any time within the twelve (12) month period immediately preceding such proposed date of hire or retention; or

(iv)     make (or cause to be made) to any Person any disparaging or derogatory or otherwise negative or false comments or statements concerning the Company or Purchaser, or any of their respective officers, directors, employees, partners, shareholders or agents (or any of their products or services).

To “engage” in a business means (X) to render services in (or with respect to) the Territory for that business, or (Y) to own, manage, operate or control (or participate in the ownership, management, operation or control of) an enterprise engaged in that business in the Territory. Seller hereby acknowledges and agrees that the foregoing covenants are commercially reasonable and reasonably necessary to protect Purchaser and its subsidiaries. Nothing contained herein shall restrict the Seller from owning, as a passive investment, five percent or less of the equity securities of any Person in competition with Purchaser or any of its subsidiaries, which securities are listed on any national securities exchange or authorized for quotation on the Automated Quotations System of the National Association of Securities Dealers, Inc., as long as such party has no other business relationship, direct or indirect, with the issuer of such securities.

(c)     Purchaser Covenants. As an inducement for Seller to enter into this Agreement, Purchaser, WGC and the Company agree that from and after the Closing and continuing for the lesser of two (2) years from the Closing Date or the longest time permitted by applicable Law, Purchaser, WGC and the Company shall not and shall cause their Affiliates to not do any one or more of the following, directly or indirectly:

(i)     take any actions which are calculated to persuade any employees, representatives or agents of the Seller to terminate their association with the Seller or hire or otherwise retain the services of any employees, representatives or agents of the Seller (whether on a full-time basis, part-time basis or otherwise and whether as an employee, independent contractor, consultant, advisor or in another capacity) who is acting in such capacity or has acted in such capacity at any time within the twelve (12) month period immediately preceding such proposed date of hire or retention; or

(ii)     make (or cause to be made) to any Person any disparaging or derogatory or otherwise negative or false comments or statements concerning the Seller or any of its officers, directors, employees, partners, shareholders or agents (or any of their products or services).

(d)     Disclosure of Company Confidential Information. As an inducement for Purchaser to enter into this Agreement, Seller agrees that for a period of two (2) years following the Closing Date, Seller shall, and shall cause Seller’s Affiliates to, maintain all Company Confidential Information in confidence and shall not, directly or indirectly, disclose any Company Confidential Information to any Person other than the Company or Purchaser, and Seller shall, and shall cause Seller’s Affiliates to, not, directly or indirectly, use any Company Confidential Information for its own benefit, the benefit of any Person or to the detriment of the Company or its Affiliates. Nothing in this Agreement, however, shall prohibit such party from using or disclosing Company Confidential Information to the extent required by Law. If such party is required by applicable Law to disclose any Company Confidential Information, such party shall (a) provide Purchaser with prompt notice before such disclosure in order that Purchaser may attempt to obtain a protective order or other assurance that confidential treatment will be accorded such information and (b) cooperate with Purchaser in attempting to obtain such order or assurance. “Company Confidential Information” means information relating specifically to the Company or the Business to the extent it is Confidential, including the following: (i) information regarding the Company’s business, operations, assets, liabilities or financial condition; (ii) information regarding the Company’s pricing, sales, merchandising, marketing, capital expenditures, costs, joint ventures, business alliances, purchasing or manufacturing; (iii) information regarding the Company’s other employees or sales representatives, including their identities, responsibilities, competence and compensation; (iv) customer lists or other information regarding the Company’s current or prospective customers, including information regarding their identities, contact persons and purchasing patterns; (v) information regarding the Company’s current or prospective vendors, suppliers, distributors or other business partners; (vi) forecasts, projections, budgets and business plans regarding the Company; (vii) information regarding the Company’s planned or pending acquisitions, divestitures or other business combinations; (viii) the Company’s trade secrets and proprietary information; (ix) the Company’s technical information, patent disclosures and applications, copyright applications, sketches, drawings, blueprints, models, know-how, discoveries, inventions, improvements, techniques, processes, business methods, equipment, algorithms, software programs, software source documents and formulae, in each case regarding the Company’s current, future or proposed products or services (including information concerning the Company’s research, experimental work, development, design details and specifications, and engineering); and (x) the Company’s website designs, website content, proposed domain names, and data bases. “Confidential” means not generally available to the public. “Confidential Information” shall not, however, include (i) information which was in the possession of the Seller prior to the formation of the Company, or (ii) information developed or obtained by the Seller or its agents or affiliates in connection with Seller’s own business. Information shall not be considered to be generally available to the public if it is made public by Seller in violation of this Agreement or by a third party who has no lawful right to disclose the information or who does so in violation of any contractual, legal or fiduciary obligation to Purchaser.

(e)     Disclosure of Seller Confidential Information. As an inducement for Seller to enter into this Agreement, each of Purchaser, WGC and the Company agree that for a period of two (2) years following the Closing Date, that they shall and cause their respective Affiliates to, maintain all Seller Confidential Information in confidence and shall not, directly or indirectly, disclose any Seller Confidential Information to any Person, and shall, and shall cause their respective Affiliates to, not, directly or indirectly, use any Seller Confidential Information for its own benefit, the benefit of any Person or to the detriment of the Seller or its Affiliates. Nothing in this Agreement, however, shall prohibit such party from using or disclosing Seller Confidential Information to the extent required by Law. If such party is required by applicable Law to disclose any Confidential Information, such party shall (a) provide Seller with prompt notice before such disclosure in order that Seller may attempt to obtain a protective order or other assurance that confidential treatment will be accorded such information and (b) cooperate with Seller in attempting to obtain such order or assurance. “Seller Confidential Information” means information relating specifically to the Seller or the Seller’s business to the extent it is Confidential and not currently used in connection with the Business or its current operations, including the following: (i) information regarding the Seller’s business, operations, assets, liabilities or financial condition; (ii) information regarding the Seller’s pricing, sales, merchandising, marketing, capital expenditures, costs, joint ventures, business alliances, purchasing or manufacturing; (iii) information regarding the Seller’s employees or sales representatives, including their identities, responsibilities, competence and compensation; (iv) customer lists or other information regarding the Seller’s current or prospective customers, including information regarding their identities, contact persons and purchasing patterns; (v) information regarding the Seller’s current or prospective vendors, suppliers, distributors or other business partners; (vi) forecasts, projections, budgets and business plans regarding the Seller; (vii) information regarding the Seller’s planned or pending acquisitions, divestitures or other business combinations; (viii) the Seller’s trade secrets and proprietary information; (ix) the Seller’s technical information, patent disclosures and applications, copyright applications, sketches, drawings, blueprints, models, know-how, discoveries, inventions, improvements, techniques, processes, business methods, equipment, algorithms, software programs, software source documents and formulae, in each case regarding the Seller’s current, future or proposed products or services (including information concerning the Seller’s research, experimental work, development, design details and specifications, and engineering); and (x) the Seller’s website designs, website content, proposed domain names, and data bases. “Seller Confidential Information” shall not, however, include information developed or obtained by the Purchaser, WGC, the Company or their agents or affiliates in connection with the Company’s or their own businesses. Information shall not be considered to be generally available to the public if it is made public by Purchaser, WGC or the Company in violation of this Agreement or by a third party who has no lawful right to disclose the information or who does so in violation of any contractual, legal or fiduciary obligation to Seller.

(f)     Name Change. Within ten (10) Business Days following the Closing Date, the Company shall change its name to a name which has no reference to “GB Sciences” or any derivative or variation thereof, which it is reasonably capable and shall make all filings necessary to effect such name change, and shall thereafter cease using such name.

(g)     Injunctive Relief. Each party specifically recognizes that any breach of Sections 3.1 (b) though (f) of this Agreement will cause irreparable injury and that actual damages may be difficult to ascertain, and in any event, may be inadequate. Accordingly, each party agrees that in the event of any such breach, the non-breaching party shall be entitled to injunctive relief in addition to such other legal and equitable remedies that may be available. The parties hereto recognize that the territorial, time and scope limitation in Sections 3.1 (b) through (f) hereof are reasonable and properly required for the protection of the respective parties and in the event that such limitations (or lack thereof) are deemed to be unreasonable by a court of competent jurisdiction, the parties agree and submit to the imposition of such limitations as said court shall deem reasonable.

ARTICLE IV.

Taxes

4.1     Liability for Taxes

(a)     Seller shall be liable for and pay and shall indemnify and hold harmless each Indemnitee from and against any and all Losses incurred by such Purchaser Indemnitee in connection with or arising from (i) any Taxes imposed on the Seller, or for which the Seller may otherwise be liable, for Seller’s share of pass-through taxable income related to any Pre-Closing Tax Period and any Pre-Closing Straddle Period and (ii) any real property transfer or gains Tax, sales Tax, use Tax, value added Tax, stamp Tax, documentary Tax, stock transfer Tax, or other similar Tax imposed on the sale of the Interests contemplated by this Agreement.

(b)     For purposes of Section 4.1(a), the pass-through taxable income of the Company for the Pre-Closing Straddle Period shall be determined by assuming that the Straddle Period consisted of two taxable years or periods, one which ended at the close of business on the Closing Date and the other which began at the beginning of business on the day following the Closing Date and items of income, gain, deduction, loss or credit of the Company for the Straddle Period shall be allocated between such two taxable years or periods on a “closing of the books basis” by assuming that the books of the Company were closed at the close of the Closing Date, provided, however, that exemptions, allowances, deductions or Taxes that are calculated on an annual basis, such as property Taxes and depreciation deductions, shall be apportioned between such two taxable years or periods on a daily basis.

4.2     Assistance and Cooperation.

After the Closing Date, each of Seller and Purchaser shall (and shall cause their respective Affiliates to):

(a)     timely sign and deliver such certificates or forms as may be necessary or appropriate to establish an exemption from (or otherwise reduce), or file Tax Returns or other reports relating to any Pre-Closing Tax Period or Pre-Closing Straddle Period;

(b)     cooperate fully in preparing for and defending any audits of, or disputes with taxing authorities regarding, any Tax Returns of the Company relating to any Pre-Closing Tax Period or Pre-Closing Straddle Period;

(c)     make available to the other and to any Tax Authority as reasonably requested all information, records, and documents relating to Taxes of the Company to the extent in the possession of such party; and

(d)     furnish the other with copies of all correspondence received from any Tax Authority in connection with any Tax audit or information request relating to any Pre-Closing Tax Period or Pre-Closing Straddle Period.

ARTICLE V

Indemnification

5.1     General. From and after the Closing, the parties shall indemnify each other as provided in this ARTICLE V. As used in this Agreement:

(a)     “Damages” means all liabilities, demands, claims, actions or causes of action, regulatory, legislative or judicial proceedings or investigations, assessments, levies, losses, taxes, fines, penalties, damages, costs and expenses, including reasonable attorneys’, accountants’, investigators’, experts’ fees and expenses, sustained or incurred in connection with the defense, investigation, adjudication, settlement or other resolution of any indemnification claim;

(b)      “Indemnified Party” means, with respect to a particular matter, a party hereto who is entitled to indemnification from another party hereto pursuant to this ARTICLE V;

(c)     “Indemnifying Party” means, with respect to a particular matter, a party hereto who is required to provide indemnification under this ARTICLE V to another party hereto;

(d)     “Third Party Claim” means any action, suit, proceeding, investigation, or like matter, which is asserted or threatened by a party other than the parties hereto, their successors and permitted assigns against any Indemnified Party or to which any Indemnified Party is subject, and with respect to which the Indemnified Party is entitled to indemnification from an Indemnifying Party under this Agreement.

5.2     Indemnification Obligations of Seller. Seller shall defend, indemnify, save and keep harmless Purchaser, Company, and their officers, directors, stockholders, employees, members, partners, advisors, legal counsel, accountants, consultants, agents, lenders, heirs, executors, successors and permitted assigns and Affiliates of any of the foregoing (each a “Purchaser Indemnitee” and collectively, the “Purchaser Indemnitees”) against and from all Damages sustained or incurred by any of them resulting from or arising out of or by virtue of:

(a)     any inaccuracy in or breach of any representation and warranty made by Seller in this Agreement or in any Seller’s Ancillary Document;

(b)     any breach by Seller of, or failure by Seller to comply with, any of its covenants or obligations under this Agreement or any Seller’s Ancillary Document; and

(c)     any fraud or intentional misrepresentations or omissions by Seller.

5.3     Indemnification Obligations of Purchaser. Purchaser shall defend, indemnify, save and keep harmless Seller and its officers, directors, stockholders, employees, members, partners, advisors, legal counsel, accountants, consultants, agents, heirs, executors, successors and permitted assigns and Affiliates of any of the foregoing (each a “Seller Indemnitee” and collectively, the “Seller Indemnitees”) from all Damages sustained or incurred by Seller resulting from or arising out of or by virtue of:

(a)     any inaccuracy in or breach of any representation and warranty made by Purchaser in this Agreement or any Purchaser’s Ancillary Document;

(b)     any breach by Purchaser of, or failure by Purchaser to comply with, any of its covenants or obligations under this Agreement or any Purchaser’s Ancillary Document; and

(c)     except to the extent the facts supporting any such Claim give rise to a Claim for indemnification by a Purchaser Indemnitee pursuant to Section 4.2, any Claim against a Seller Indemnitee on account of the operation of the business of the Company on or subsequent to the Closing Date.

5.4     Limitations on Indemnification Obligations of Seller. Seller’s obligations pursuant to the provisions of ARTICLE V are subject to the following limitations:

(a)     Purchaser Indemnitees shall not be entitled to recover under Section 5.2 unless a claim has been asserted by written notice, setting forth the basis for such claim, delivered to Seller, on or prior to the twelve (12) month anniversary of the Closing Date; provided, however, that the foregoing time limitation shall not apply to recovery for any inaccuracy in a representation or breach of a warranty contained in Section 2.2(a) (Organization and Standing), Section 2.2(b) (Power and Authority), and Section 2.2(c) (Ownership of Interests) Section 2.2(d) (Consents), Section 2.2(e) (Litigation and Claims), Section 2.2(g) (Taxes), (collectively, the “Excluded Representations”), (collectively, the “Excluded Representations”), which shall survive until the expiration of the applicable statute of limitations.

(b)     Notwithstanding anything to the contrary herein contained, the indemnification obligations under Section 4.4 shall not limit a Purchaser Indemnitee’s right to recover Damages which result from or arise out of fraud, intentional misrepresentation or intentional torts of Seller.

5.5     Third Party Claims.

(a)     Promptly following the receipt of notice of a Third Party Claim, the party receiving the notice of the Third Party Claim shall (i) notify the other party of its existence setting forth with reasonable specificity the facts and circumstances of which such party has received notice and (ii) if the party giving such notice is an Indemnified Party, specifying the basis hereunder upon which the Indemnified Party’s claim for indemnification is asserted.

(b)     Except as herein provided, the Indemnified Party shall not, and the Indemnifying Party shall, have the right to contest, defend, litigate or settle such Third Party Claim, if the defense of a Third Party Claim is so tendered and the Indemnifying Party accepts such tender and acknowledges in writing without qualification its indemnification obligation and has paid to the Indemnified Party all expenses (including attorneys’ fees) incurred by the Indemnified Party in connection with such Third Party Claim. The Indemnified Party shall have the right to be represented by counsel at its own expense in any such contest, defense, litigation or settlement conducted by the Indemnifying Party. The Indemnifying Party shall lose its right to contest, defend, litigate and settle the Third Party Claim if it shall fail to diligently contest the Third Party Claim. So long as the Indemnifying Party has not lost its right to contest, defend, litigate and settle as herein provided, the Indemnifying Party shall have the right to contest, defend and litigate the Third Party Claim and shall have the right to enter into any settlement of any Third Party Claim; provided, however, the Indemnifying Party may not enter into any settlement of any Third Party Claim without the prior written consent of the Indemnified Party if pursuant to or as a result of such settlement, (i) injunctive or other equitable relief would be imposed against the Indemnified Party, or (ii) such settlement would create any financial or other obligation on the part of the Indemnified Party. The Indemnifying Party shall not be entitled to assume control of a Third Party Claim and shall pay the reasonable fees and expenses of counsel retained by the Indemnified Party if (A) the Third Party Claim relates to or arises in connection with any criminal proceeding, action, indictment or allegation, or (B) the Third Party Claim seeks injunctive or other equitable relief, or which, if adversely determined, would impair in any material respect the financial condition, business, operations, reputation or prospects of Purchaser or its subsidiaries (including each member of the Company Group). All expenses (including attorneys’ fees) incurred by the Indemnifying Party in connection with the foregoing shall be paid by the Indemnifying Party. If an Indemnified Party is entitled to indemnification against a Third Party Claim, and the Indemnifying Party fails to accept a tender of the defense of a Third Party Claim pursuant to this Section 5.5(b), the Indemnified Party shall have the right, without prejudice to its right of indemnification hereunder, in its discretion exercised in reasonable good faith and upon the advice of counsel, to contest, defend and litigate such Third Party Claim, and may settle such Third Party Claim, either before or after the initiation of litigation, at such time and upon such terms as the Indemnified Party deems fair and reasonable, provided that at least five (5) days prior to any such settlement, written notice of its intention to settle is given to the Indemnifying Party, together with the proposed terms of settlement. If, pursuant to the preceding sentence, the Indemnified Party so contests, defends, litigates or settles a Third Party Claim for which it is entitled to indemnification hereunder, the Indemnified Party shall be reimbursed by the Indemnifying Party for the reasonable attorneys’ fees and other expenses of contesting, defending, litigating and settling the Third Party Claim which are incurred from time to time, promptly following the presentation to the Indemnifying Party of itemized bills for such attorneys’ fees and other expenses.

5.6     Indemnification Payments as an Adjustment to Purchase Price. Purchaser and Seller agree to report each indemnification payment made in respect of any Damages as an adjustment to the Purchase Price for federal income tax purposes unless the Indemnified Party determines in good faith that such reporting position is incorrect (it being understood that if any reporting position is later disallowed in any administrative or court proceedings, the Indemnifying Party shall indemnify the Indemnified Party for the effects of such disallowance, and it being further understood that the obligations under this parenthetical clause shall remain in effect without limitation as to time).

5.7     Indemnification Exclusive Remedy. Each party hereto acknowledges and agrees that, except in the case of fraud or intentional misrepresentation or omission, from and after the Closing, its sole and exclusive remedy with respect to any and all Claims shall be indemnification in accordance with this ARTICLE V and such party shall have no other remedy or recourse.

5.8     No Materiality. For purposes of indemnification under this ARTICLE V, each of the representations and warranties that contain any qualifications as to “materiality,” “material,” “material adverse effect” or words of similar effect shall be deemed to have been made as though there were no such qualifications in determining whether there has been any breach of any representations or warranties hereunder or the amount of Damages relating thereto.

ARTICLE VI

6.1     Termination.     This Agreement may be terminated at any time prior to the Closing:

(a)     by the Seller or the Purchaser in the event that any order of a Governmental Authority restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement shall have become final and non-appealable, through no failure, delay, fault of or breach by the terminating Party;

(b)     by the Purchaser if (i) the Seller shall have breached any of its representations, warranties, covenants or agreements contained in this Agreement, and such breach cannot be or has not been cured within ten (10) days after the giving of written notice by Purchaser to Seller specifying such breach;

(c)     by the Seller if (i) the Purchaser shall have breached any of its representations, warranties, covenants or agreements contained in this Agreement, and such breach cannot be or has not been cured within ten (10) days after the giving of written notice by the Seller to the Purchaser specifying such breach; or

(d)     by the mutual written consent of the Seller and Purchaser.

6.2     Effect of Termination.      In the event of termination of this Agreement as provided in Section 6.1, this Agreement shall become void and there shall be no liability or obligation on the part of any Party.

ARTICLE VII

Miscellaneous

7.1     Publicity. Except as otherwise required by Law, press releases concerning this transaction shall be made only with the prior agreement of LSU, Seller and Purchaser, and no such press releases or other publicity shall state the amount of the Purchase Price. The foregoing shall not apply to restrict the dissemination of information by Purchaser to lenders, investors or prospective investors or lenders.

7.2     Notices. All notices required or permitted to be given hereunder shall be in writing and may be delivered by hand, by email, by facsimile or by nationally recognized private courier. Notices delivered by hand, by facsimile, or by nationally recognized private carrier shall be deemed given on the day of receipt; provided, however, that a notice delivered by facsimile shall only be effective if such notice is also delivered by hand or nationally recognized private courier on or before two (2) business days following its delivery by facsimile. All notices shall be addressed as follows: (a) if to the Seller, then addressed to Seller, GB Sciences, Inc., 3550 W Teco Avenue, Las Vegas NV 89118 Attn: John Poss email j.poss@gbsciences.com, with a copy (which shall not constitute notice) to Gary Henrie, email GRHLaw@yahoo.com (b) if to Purchaser, addressed to Purchaser, Charles M. Rush., Esq., 202 Magnate Drive, Lafayette, Louisiana 70508; Email; cmrush@charlesmrushesq.com; with a copy (which shall not constitute notice) to c/o John Davis 18530 Petroleum Drive, Baton Rouge, Louisiana, 70809; email: john.davis@gbsciences.com, and/or (c) to such other respective addresses and/or addressees as may be designated by notice given in accordance with the provisions of this Section 7.2.

7.3     Fees and Expenses. Except as otherwise provided in this Agreement, each party hereto shall bear all fees and expenses incurred by such party in connection with, relating to or arising out of the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, including attorneys’, accountants’, brokers’ and other professional fees and expenses.

7.4     Entire Agreement. This Agreement and the instruments to be delivered by the parties pursuant to the provisions hereof (a) constitute the entire agreement between the parties and (b) supersede any prior agreements, representations or warranties between the parties regarding the subject matter hereof. Each exhibit, and schedule, shall be considered incorporated into this Agreement.

7.5     Survival; Non-Waiver. All representations, warranties and covenants contained in the Agreement or any agreement or instrument delivered in connection with this Agreement shall survive the Closing regardless of any investigation or lack of investigation by any of the parties hereto (and none shall merge into any instrument of conveyance). The failure in any one or more instances of a party to insist upon performance of any of the terms, covenants or conditions of this Agreement, to exercise any right or privilege in this Agreement conferred, or the waiver by said party of any breach of any of the terms, covenants or conditions of this Agreement, shall not be construed as a subsequent waiver of any such terms, covenants, conditions, right or privileges, but the same shall continue and remain in full force and effect as if no such forbearance or waiver had occurred. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party.

7.6     Applicable Law; Jurisdiction. This Agreement shall be governed and controlled as to validity, enforcement, interpretation, construction, effect and in all other respects by the internal laws of the State of Louisiana are applicable to contracts made in that State, without regard to any conflict of law principles of the State of Louisiana. Each of the parties to this Agreement submits to the exclusive jurisdiction of any state or federal court sitting in Baton Rouge, Louisiana, in any action or proceeding arising out of or relating to this Agreement and agrees that all claims in respect of the action or proceeding may be heard and determined in any such court.

7.7     WAIVER OF TRIAL BY JURY. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF ANY OF THE PARTIES HERETO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.

7.8     Binding Effect. This Agreement shall inure to the benefit of and be binding upon the parties hereto, and their successors and permitted assigns. Nothing in this Agreement, express or implied, is intended to confer on any Person other than the parties hereto, and their respective successors and permitted assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement.

7.9     Assignment. This Agreement shall not be assignable by any party without the prior written consent of the other parties; provided that Purchaser may, in its sole discretion, assign in whole or in part its rights and obligations pursuant to this Agreement (a) to one or more of its Affiliates, (b) to any of its lenders as collateral security and (c) in connection with a sale of all or a portion of its business, provided that in each event, Purchaser shall not be released from its obligations hereunder.

7.10     Amendments. This Agreement shall not be modified or amended except pursuant to an instrument in writing executed and delivered on behalf of each of the parties hereto.

7.11     Governmental Reporting. Anything to the contrary in this Agreement notwithstanding, nothing in this Agreement shall be construed to mean that a party hereto or other Person must make or file, or cooperate in the making or filing of, any return or report to any governmental authority in any manner that such Person or such party reasonably believes or reasonably is advised is not in accordance with Law.

7.12     Headings. The headings contained in this Agreement are for convenience of reference only and shall not affect the meaning or interpretation of this Agreement.

7.13     Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable Law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable Law or rule in any applicable jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, and this Agreement shall be reformed, construed and enforced in such jurisdiction so as to best give effect to the intent of the parties under this Agreement.

7.14     Counterparts. This Agreement may be executed by counterpart signature, each of which signature shall be deemed an original, all of which together shall constitute one in the same instrument. Furthermore, delivery of a copy of such signature by facsimile transmission, email or other electronic exchange methodology shall constitute a valid and binding execution and delivery of this Agreement by such party, and such electronic copy shall constitute an enforceable original document.

7.15     No Strict Construction. The parties hereto jointly participated in the negotiation and drafting of this Agreement. The language used in this Agreement shall be deemed the language chosen by the parties hereto to express their collective mutual intent. This Agreement shall be construed as if drafted jointly by the parties hereto, and no rule of strict construction shall be applied against any Person or entity.

7.16     Gender. As used in this Agreement, the masculine, feminine or neuter gender shall be deemed to include the others whenever the context so indicates or requires.

7.17     Interpretation. Whenever the term “include” or “including” is used in this Agreement, it shall mean “including, without limitation,” (whether or not such language is specifically set forth) and shall not be deemed to limit the range of possibilities to those items specifically enumerated. The words “hereof, “herein” and “hereunder” and words of similar import refer to this Agreement as a whole and not to any particular provision. Terms defined in the singular have a comparable meaning when used in the plural and vice versa.

7.18     Successors and Assigns. This Agreement shall be binding upon and the benefits of it shall inure to the Parties and their respective legal representatives, heirs, successors, and assigns; provided, however, that no Party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of each other Party which shall not be unreasonably withheld, except that the Purchaser may transfer or assign, in whole or from time to time in part, (a) to one or more of its respective Affiliates or (b) to its respective lenders as collateral security, its rights under this Agreement provided Purchaser remains fully responsible to the Company for its obligations under this Agreement.

7.19     No Third Party Beneficiaries.     The Parties shall have the sole right to enforce the performance of the provisions of this Agreement and the sole right to receive any amounts payable by the Parties pursuant to this Agreement, and that no other Person shall be entitled to, or shall have any claim, right, title or interest to or in any such amounts by virtue of this Agreement. This Agreement is personal to the Parties, and is not intended for the benefit of, and is not intended to be relied upon by, any other Person and no such Person (or any other Person acting on its behalf) shall be entitled to the benefit of or to enforce this Agreement.

7.20     Attorney Fees. In the event of any dispute, the prevailing Parties will be entitled to recover, in addition to other remedies, their reasonable attorney fees in prosecuting or defending against any claim.

7.21     Definitions; References.

(a)     An “Affiliate” means, with respect to any Person, any other Person which Controls such Person, which such Person Controls, or which is under common Control with such Person.

(b)      “Control” means the power to direct or cause the direction of the management and policies of a Person, directly or indirectly, through voting securities, contract or otherwise.

(c)     “Governmental Authority” means any United States federal, state, local or other government or political subdivision thereof or any agency or instrumentality of such government or political subdivision or court, arbitration, administrative agency or commission, insurance or securities regulatory or self-regulatory body (including all applicable state insurance regulatory authorities) or securities or commodities exchange.

(d)     “Governing Documents” means the articles of organization or incorporation or formation, bylaws, operating agreement and any other agreements or documents relating to the organization, management or operation of an entity relating to the rights, duties and obligations of the equity holders of such entity.

(e)     “Law” means any statute, law (including common law), ordinance, regulation, rule, code, order, constitution, treaty, common law, judgment, decree, other requirement or rule of law of any Governmental Authority.

(f)     “Person” means any individual, company, firm, business, corporation, partnership, limited liability company, trust, estate, association, governmental authority, or any other entity of any kind.

(g)     “Pre-Closing Straddle Period” means the portion of the Straddle Period that extends before the Closing Date though the Closing Date.

(h)     “Pre-Closing Tax Period” means any taxable period or portion thereof that ends on or before the Closing Date.

(i)     “Straddle Period” means any taxable period that begins on or before the Closing Date and ends on or after the Closing Date.

(j)     “Tax Authority” means any Governmental Authority having jurisdiction over the assessment, determination, collection or other imposition of Taxes.

(k)     “Taxes” means (A) any federal, state, local or foreign net income, gross income, gross receipts, windfall profit, severance, property, production, sales, use, license, excise, franchise, employment, payroll, withholding on amounts paid to or by any Person, alternative or add-on minimum, ad valorem, value-added, transfer, stamp, or environmental tax (including taxes under Code Section 59A), escheat payments or any other tax, custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or penalty, addition to tax or additional amount imposed by any governmental authority and (B) any liability for the payment of amounts determined by reference to amounts described in clause (A) as a result of being or having been a member of any group of corporations that files, will file, or has filed Tax Returns on a combined, consolidated or unitary basis, as a result of any obligation under any agreement or arrangement (including any Tax Sharing Arrangement), as a result of being a transferee or successor, or otherwise.

(l)     “Tax Return” means any report, return, election, document, estimated tax filing, declaration or other filing provided to any taxing authority with respect to Taxes (including any attached schedules), including any information return, claim for refund, amended return or declaration of estimated Taxes, including any amendments thereto.

[remainder of page intentionally left blank; signature page follows]

IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written.

PURCHASER:                                 

WELLCANA PLUS, LLC
By: K2 Logic, LLC, its Manager

By: /s/ Charles Hohorst

Name: Charles F. Hohorst, III

Title: Manager

By: /s/ Charles Rush

Name: Charles M. Rush

Title: Manager

SELLER:

GB SCIENCES, INC.

By: /s/ John C. Poss
Name: John C. Poss
Title: CEO and Chairman

COMPANY:

GB SCIENCES LOUISIANA, LLC

By: /s/ John Davis
Name: John Davis
Title: President

WGC:

WELLCANA GROUP, LLC

By: K2 Logic, LLC, its Manager

By: /s/ Charles Hohorst

Name: Charles F. Hohorst, III

Title: Manager

By: /s/ Charles Rush

Name: Charles M. Rush

Title: Manager

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE AND FINANCIAL OFFICER 

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, John Poss, certify that:

1.I have reviewed this quarterly report on Form 10-Q of GB Sciences, Inc.; 

2.Based on my knowledge, the quarterly report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 

3.Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of and for the periods presented in this report; 

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: 

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; 

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; 

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures; and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and 

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function): 

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and 

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls. 

Date:  February 18, 2020	/s/ John Poss
	John Poss, Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL EXECUTIVE AND FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Zach Swarts, certify that:

1.I have reviewed this quarterly report on Form 10-Q of GB Sciences, Inc.; 

2.Based on my knowledge, the quarterly report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 

3.Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of and for the periods presented in this report; 

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: 

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; 

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; 

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures; and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and 

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function): 

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and 

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls. 

Date:  February 18, 2020	/s/ Zach Swarts
	Zach Swarts, Chief Financial Officer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of GB Sciences, Inc. (the “Company”) on Form 10-Q for the quarter ended December 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John Poss, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. 

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Date:  February 18, 2020	/s/ John Poss
	John Poss, Chief Executive Officer (Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of GB Sciences, Inc. (the “Company”) on Form 10-Q for the quarter ended December 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Zach Swarts, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. 

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Date:  February 18, 2020	/s/ Zach Swarts
	Zach Swarts, Chief Financial Officer (Principal Financial Officer)

XML

Note 11 - Sale of Membership Interests in Nevada Subsidiaries (Details Textual) - USD ($)	Dec. 06, 2019	Nov. 27, 2019
Line of Credit [Member]
Line of Credit Facility, Maximum Borrowing Capacity		$ 470,000
Teco Note [Member] | Line of Credit [Member]
Line of Credit Facility, Maximum Borrowing Capacity	$ 470,000
Debt Instrument, Interest Rate, Stated Percentage	8.00%
AJE Management, LLC [Member]
Management Fee	$ 75,000
Teco [Member]
Sale of Stock, Percentage of Ownership		75.00%
Sale of Stock, Consideration Received on Transaction		$ 3,000,000
Sale of Stock, Additional Earn-out Payments		$ 3,000,000
GB Sciences Nopah, LLC [Member]
Sale of Stock, Percentage of Ownership		100.00%
Sale of Stock, Consideration Received on Transaction		$ 300,000

XML

Note 4 - Leases (Tables)

9 Months Ended

Dec. 31, 2019

Notes Tables

Operating and Finance Lease Liabilities, Maturity [Table Text Block]

	Year Ending				Operating
	March 31,	Finance Leases			Leases
	2020 (3 months)	$	185,871		$	17,547
	2021		528,443			71,548
	2022		544,296			73,939
	2023		560,625			38,101
	2024		577,444			3,926
	Thereafter		4,375,869			-
Total undiscounted lease payments			6,772,548			205,061
Less: Amount representing interest			(3,072,687	)		(43,925	)
Present value of minimum lease payments			3,699,861			161,136
Less: Current maturities of lease obligations			(134,239	)		(47,084	)
Long-term lease obligations		$	3,565,622		$	114,052

XML

Note 1 - Background and Significant Accounting Policies - Discontinued Operations (Details) - USD ($)		3 Months Ended		9 Months Ended
	Nov. 15, 2019	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Mar. 31, 2019
CASH AND CASH EQUIVALENTS AT END OF PERIOD FROM CONTINUING OPERATIONS		$ 37,300	$ 87,772	$ 37,300	$ 87,772	$ 182,055
Accounts receivable, net of allowance for doubtful accounts of $91,536 and $66,748 at December 31, 2019 and March 31, 2019, respectively		80,436		80,436		488,329
Inventory, net		1,560,048		1,560,048		1,533,792
Prepaid expenses and other current assets		83,240		83,240		262,208
Note receivable		1,365,042		1,365,042
TOTAL CURRENT ASSETS		3,126,066		3,126,066		3,466,771
Property and equipment, net		10,097,430		10,097,430		10,481,706
Intangible assets, net of accumulated amortization of $3,745 at December 31, 2019 and March 31, 2019		2,073,839		2,073,839		1,818,802
Note receivable		5,366,133		5,366,133
Deposits and other noncurrent assets		95,504		95,504		230,651
Operating lease right-of-use assets, net		144,146		144,146
TOTAL ASSETS		20,903,118		20,903,118		30,023,302
Accounts payable		1,998,994		1,998,994		1,374,771
Accrued interest		429,064		429,064		142,112
Accrued liabilities		469,053		469,053		244,931
Notes and convertible notes payable, net of unamortized discount of $1,008,086 and $799,410 at December 31, 2019 and March 31, 2019, respectively		4,860,221		4,860,221		2,229,812
Indebtedness to related parties		324,738		324,738
Income tax payable		506,145		506,145		506,145
Operating lease obligations, current		47,084		47,084
Finance lease obligations, current		134,239		134,239		80,132
TOTAL CURRENT LIABILITIES		8,921,461		8,921,461		6,712,180
Note payable, net of unamortized discount of $0 and $13,929 at December 31, 2019 and March 31, 2019, respectively						161,072
Operating lease obligations, long term		114,052		114,052
Finance lease obligations, long term		3,565,622		3,565,622		3,646,540
TOTAL LIABILITIES		12,601,135		12,601,135		12,867,303
Sales revenue		254,131	695,764	2,336,505	2,728,277
Cost of goods sold		(675,933)	(302,569)	(3,157,452)	(1,185,878)
Gross profit (loss)		(421,802)	393,195	(820,947)	1,542,399
General and administrative expenses		1,744,699	2,456,411	5,213,561	10,079,767
LOSS FROM OPERATIONS		(2,166,501)	(2,063,216)	(6,034,508)	(8,537,368)
Interest expense, net		(419,264)	(258,522)	(1,332,637)	(4,681,235)
Loss on extinguishment		(92,795)		(216,954)
Gain on deconsolidation of subsidiary	$ 4,502,058	4,502,058		4,502,058
Total other expense		3,871,304	(661,026)	3,027,387	(8,033,546)
NET LOSS BEFORE INCOME TAXES		1,704,803	(2,724,242)	(3,007,121)	(16,570,914)
Income tax expense			(737,568)		(737,568)
Net loss		984,147	(4,050,647)	(4,483,341)	(19,433,195)
Continuing Operations [Member]
CASH AND CASH EQUIVALENTS AT END OF PERIOD FROM CONTINUING OPERATIONS		37,300		37,300		182,055
Accounts receivable, net of allowance for doubtful accounts of $91,536 and $66,748 at December 31, 2019 and March 31, 2019, respectively		80,436		80,436		488,329
Inventory, net		1,560,048		1,560,048		1,533,792
Prepaid expenses and other current assets		83,240		83,240		262,208
Note receivable		1,365,042		1,365,042
TOTAL CURRENT ASSETS		3,126,066		3,126,066		2,466,384
Property and equipment, net		10,097,430		10,097,430		10,481,706
Intangible assets, net of accumulated amortization of $3,745 at December 31, 2019 and March 31, 2019		2,073,839		2,073,839		1,818,802
Note receivable		5,366,133		5,366,133
Deposits and other noncurrent assets		95,504		95,504		230,651
Operating lease right-of-use assets, net		144,146		144,146
TOTAL ASSETS		20,903,118		20,903,118		14,997,543
Accounts payable		1,998,994		1,998,994		1,374,771
Accrued interest		429,064		429,064		142,112
Accrued liabilities		469,053		469,053		244,931
Notes and convertible notes payable, net of unamortized discount of $1,008,086 and $799,410 at December 31, 2019 and March 31, 2019, respectively		4,860,221		4,860,221		2,229,812
Indebtedness to related parties		476,661		476,661
Income tax payable		506,145		506,145		506,145
Operating lease obligations, current		47,084		47,084
Finance lease obligations, current		134,239		134,239		80,132
TOTAL CURRENT LIABILITIES		8,921,461		8,921,461		4,577,903
Note payable, net of unamortized discount of $0 and $13,929 at December 31, 2019 and March 31, 2019, respectively						161,072
Operating lease obligations, long term		114,052		114,052
Finance lease obligations, long term		3,565,622		3,565,622		3,646,540
TOTAL LIABILITIES		12,601,135		12,601,135		8,385,515
Sales revenue		254,131	695,764	2,336,505	2,728,277
Cost of goods sold		(675,933)	(302,569)	(3,157,452)	(1,185,878)
Gross profit (loss)		(421,802)	393,195	(820,947)	1,542,399
General and administrative expenses		1,744,699	2,456,411	5,213,561	10,079,767
LOSS FROM OPERATIONS		(2,166,501)	(2,063,216)	(6,034,508)	(8,537,368)
Interest expense, net		(419,264)	(258,522)	(1,332,637)	(4,681,235)
Other income/(expense)		(118,695)	(402,504)	74,920	(3,352,311)
Loss on extinguishment		(92,795)		(216,954)
Gain on deconsolidation of subsidiary		4,502,058		4,502,058
Total other expense		3,871,304	(661,026)	3,027,387	(8,033,546)
NET LOSS BEFORE INCOME TAXES		1,704,803	(2,724,242)	(3,007,121)	(16,570,914)
Income tax expense			(737,568)		(737,568)
Net loss		1,704,803	(3,461,810)	(3,007,121)	(17,308,482)
Discontinued Operations [Member]
CASH AND CASH EQUIVALENTS AT END OF PERIOD FROM CONTINUING OPERATIONS						45,703
Accounts receivable, net of allowance for doubtful accounts of $91,536 and $66,748 at December 31, 2019 and March 31, 2019, respectively
Inventory, net						602,714
Prepaid expenses and other current assets						351,970
Note receivable
TOTAL CURRENT ASSETS						1,000,387
Property and equipment, net						13,022,996
Intangible assets, net of accumulated amortization of $3,745 at December 31, 2019 and March 31, 2019
Note receivable
Deposits and other noncurrent assets						1,002,376
Operating lease right-of-use assets, net
TOTAL ASSETS						15,025,759
Accounts payable						1,695,985
Accrued interest
Accrued liabilities						76,415
Notes and convertible notes payable, net of unamortized discount of $1,008,086 and $799,410 at December 31, 2019 and March 31, 2019, respectively						300,000
Indebtedness to related parties
Income tax payable
Operating lease obligations, current
Finance lease obligations, current						61,877
TOTAL CURRENT LIABILITIES						2,134,277
Note payable, net of unamortized discount of $0 and $13,929 at December 31, 2019 and March 31, 2019, respectively
Operating lease obligations, long term
Finance lease obligations, long term						2,347,511
TOTAL LIABILITIES						4,481,788
Sales revenue		192,070		569,077
Cost of goods sold		(193,915)		(574,544)
Gross profit (loss)		(1,845)		(5,467)
General and administrative expenses		666,042	526,210	1,292,613	1,935,766
LOSS FROM OPERATIONS		(667,887)	(526,210)	(1,298,080)	(1,935,766)
Interest expense, net		(52,769)	(62,627)	(178,140)	(188,947)
Other income/(expense)
Loss on extinguishment
Gain on deconsolidation of subsidiary
Total other expense		(52,769)	(62,627)	(178,140)	(188,947)
NET LOSS BEFORE INCOME TAXES		(720,656)	(588,837)	(1,476,220)	(2,124,713)
Income tax expense
Net loss		(720,656)	(588,837)	(1,476,220)	(2,124,713)
Segment, Continuing and Discontinued Operations [Member]
CASH AND CASH EQUIVALENTS AT END OF PERIOD FROM CONTINUING OPERATIONS		37,300		37,300		227,758
Accounts receivable, net of allowance for doubtful accounts of $91,536 and $66,748 at December 31, 2019 and March 31, 2019, respectively		80,436		80,436		488,329
Inventory, net		1,560,048		1,560,048		2,136,506
Prepaid expenses and other current assets		83,240		83,240		614,178
Note receivable		1,365,042		1,365,042
TOTAL CURRENT ASSETS		3,126,066		3,126,066		3,466,771
Property and equipment, net		10,097,430		10,097,430		23,504,702
Intangible assets, net of accumulated amortization of $3,745 at December 31, 2019 and March 31, 2019		2,073,839		2,073,839		1,818,802
Note receivable		5,366,133		5,366,133
Deposits and other noncurrent assets		95,504		95,504		1,233,027
Operating lease right-of-use assets, net		144,146		144,146
TOTAL ASSETS		20,903,118		20,903,118		30,023,302
Accounts payable		1,998,994		1,998,994		3,070,756
Accrued interest		429,064		429,064		142,112
Accrued liabilities		469,053		469,053		321,346
Notes and convertible notes payable, net of unamortized discount of $1,008,086 and $799,410 at December 31, 2019 and March 31, 2019, respectively		4,860,221		4,860,221		2,529,812
Indebtedness to related parties		476,661		476,661
Income tax payable		506,145		506,145		506,145
Operating lease obligations, current		47,084		47,084
Finance lease obligations, current		134,239		134,239		142,009
TOTAL CURRENT LIABILITIES		8,921,461		8,921,461		6,712,180
Note payable, net of unamortized discount of $0 and $13,929 at December 31, 2019 and March 31, 2019, respectively						161,072
Operating lease obligations, long term		114,052		114,052
Finance lease obligations, long term		3,565,622		3,565,622		5,994,051
TOTAL LIABILITIES		12,601,135		12,601,135		$ 12,867,303
Sales revenue		446,201	695,764	2,905,582	2,728,277
Cost of goods sold		(869,848)	(302,569)	(3,731,996)	(1,185,878)
Gross profit (loss)		(423,647)	393,195	(826,414)	1,542,399
General and administrative expenses		2,410,741	2,982,621	6,506,174	12,015,533
LOSS FROM OPERATIONS		(2,834,388)	(2,589,426)	(7,332,588)	(10,473,134)
Interest expense, net		(472,033)	(321,149)	(1,510,777)	(4,870,182)
Other income/(expense)		(118,695)	(402,504)	74,920	(3,352,311)
Loss on extinguishment		(92,795)		(216,954)
Gain on deconsolidation of subsidiary		4,502,058		4,502,058
Total other expense		3,818,535	(723,653)	2,849,247	(8,222,493)
NET LOSS BEFORE INCOME TAXES		984,147	(3,313,079)	(4,483,341)	(18,695,627)
Income tax expense			(737,568)		(737,568)
Net loss		$ 984,147	$ (4,050,647)	$ (4,483,341)	$ (19,433,195)

XML

Note 4 - Leases

9 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Lessee, Operating and Finance Leases [Text Block]

Note

4

– 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

2021

to

2032.

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,

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.

During the

nine

months ended

December 31, 2019

, finance lease costs recorded in the consolidated financial statements were

$

790,666

, of which 

$

474,686

represents interest expense and 

$

315,980

represents amortization of the right-of-use assets. Operating lease costs were

$

61,144

, of which 

$

22,667

represents interest expense and 

$

38,477

represents amortization of the right-of-use assets.

Discontinued operations includes 

$

280,227

in finance lease costs, of which 

$

153,977

represents interest expense and 

$

126,250

represents amortization of right-of-use assets.

Amortization of lease assets is included in general and administrative expenses. The future minimum lease payments of lease liabilities as of

December 31, 2019

, from continuing operations are as follows:

	Year Ending				Operating
	March 31,	Finance Leases			Leases
	2020 (3 months)	$	185,871		$	17,547
	2021		528,443			71,548
	2022		544,296			73,939
	2023		560,625			38,101
	2024		577,444			3,926
	Thereafter		4,375,869			-
Total undiscounted lease payments			6,772,548			205,061
Less: Amount representing interest			(3,072,687	)		(43,925	)
Present value of minimum lease payments			3,699,861			161,136
Less: Current maturities of lease obligations			(134,239	)		(47,084	)
Long-term lease obligations		$	3,565,622		$	114,052

XML

Note 8 - Commitments and Contingencies

9 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

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 the 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 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 remains obligated for

$250,000

of the

$500,000

annual research investment for

three

years, or a total commitment of

$750,000.

The research investment is paid annually in

September

and amortized over a

one

-year period.

The monetary contributions will be used to conduct research on plant varieties, compounds, extraction techniques and delivery methods that could generate additional revenue through discoveries that are subject to intellectual property rights, of which AgCenter would retain

50%

of those rights with the other

50%

retained

25%

each by the Company and by GB Sciences Louisiana, LLC.

On

December 6, 2018,

the Company entered into an agreement for business advisory and consulting services. In consideration for the services, the Company issued warrants to purchase

2

million shares of the Company’s common stock at

$0.1125

per share. The Company valued the warrants at

$244,000

using the Black-Scholes valuation model. The fair value of the warrants was recognized as consulting expense over the term of the agreement. The company recorded

$162,667

in expense related to the warrants for the

nine

months ended

December 31, 2019

. The Company also agreed to pay the consultant a

$10,000

monthly fee for

12

months and to issue

4

million restricted shares of the Company’s common stock. The Company issued

2

million shares on the date of the contract, with the remaining

2

million due

nine

months after the date of the agreement.

On

June 6, 2019,

the Company entered into a Cancellation and Settlement with the consultant and terminated the

December 6, 2018

agreement. In consideration for terminating the agreement, the Company will pay

$135,000

as a

one

-time cancellation fee and will

not

issue the remaining

two million

shares due under the agreement. This amount is accrued in accounts payable as of

December 31, 2019

.

On

October 1, 2019,

the Company entered into a new agreement for business advisory and consulting services. In connection with the agreement, the Company issued

2

million shares of its common stock and agreed to pay a monthly service fee of

$50,000

beginning

December 1, 2019,

plus a quarterly stock fee of

2

million shares

90,

180,

and

270

days after the agreement. The company recorded

$180,000

expense related to the common stock payments and

$50,000

expense related to the cash payments, which is accrued in accounts payable at

December 31, 2019

.

During the year ended

March 31, 2019

, the Company recorded a

$200,000

charge related to seizure of cash by local law enforcement during a routine traffic stop while transporting the cash to

one

of our subsidiaries. The charge was recorded in other expense as the Company believed it was more likely than

not

that the cash would

not

be returned. After appealing the seizure of the cash through appropriate channels, the cash was returned to the Company on

September 6, 2019,

and the Company recorded other income on that date.

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.

XML

Note 12 - Subsequent Events

9 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Subsequent Events [Text Block]

Note

12

– Subsequent Events

Capital Transactions

Subsequent to

December 31, 2019

, the Company received notices of the exercise of

2,214,000

warrants at the discounted exercise price of

$0.04

(Note

7

) and received proceeds of

$79,704,

net of brokerage fees of

$8,856.

XML

Note 7 - Capital Transactions (Details Textual) - USD ($)											1 Months Ended		3 Months Ended			9 Months Ended
	Dec. 31, 2019	Dec. 16, 2019	Nov. 27, 2019	Nov. 18, 2019	Oct. 30, 2019	Oct. 10, 2019	Oct. 01, 2019	Aug. 01, 2019	Jul. 12, 2019	May 28, 2019	Dec. 31, 2019	Nov. 18, 2019	Dec. 31, 2019	Jul. 11, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Oct. 23, 2019	Aug. 15, 2019	Jul. 10, 2019	Apr. 23, 2019	Mar. 31, 2019	Feb. 28, 2019	Jan. 15, 2019	Dec. 04, 2018	Apr. 08, 2018	Apr. 07, 2018
Common Stock, Shares Authorized	600,000,000										600,000,000		600,000,000			600,000,000			600,000,000			600,000,000				400,000,000	250,000,000
Debt Conversion, Converted Instrument, Shares Issued																7,583,333
Induced Conversion of Convertible Debt Expense													$ 127,059			$ 127,059
Exercise of Warrants for Stock, Shares																12,574,750
Stock Issued During Period, Shares, Issued for Services							2,000,000									2,500,000
Consulting Service Expense																$ 214,000
Stock Issued During Period, Shares, New Issues																7,668,167
Proceeds from Issuance of Common Stock and Warrants						$ 240,000
Share-based Payment Arrangement, Nonvested Award, Option, Cost Not yet Recognized, Amount	$ 15,131										$ 15,131		$ 15,131			$ 15,131
Employees and Consultants [Member] | Share-based Payment Arrangement, Option [Member]
Share-based Payment Arrangement, Expense																$ 241,242
Employees [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Ending Balance	10,383,334										10,383,334		10,383,334			10,383,334
Consultants [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Ending Balance	2,383,000										2,383,000		2,383,000			2,383,000
Private Placement [Member]
Brokerage Fees for Issuance of Common Stock and Warrants																$ 71,529
Units of Common Stock and Warrants, Authorized																								20,000,000	15,000,000
Units of Combined Common Stock and Warrants, Price Per Unit																								$ 0.15	$ 0.20
Units of Combined Common Stock and Warrants, Value																									$ 3,000,000
Proceeds from Issuance of Private Placement																$ 478,696
Warrants Issued to Investors in Private Placements [Member]
Class of Warrant or Right, Outstanding														70,500,000
Class of Warrant or Right, Exercise Price of Warrants or Rights	$ 0.04										$ 0.04		$ 0.04			$ 0.04
Class of Warrant or Right, Temporarily Reduced Exercise Price of Warrants or Rights														$ 0.10
Class of Warrant or Right, Exercises in Period									9,449,750		3,125,000
Proceeds from Warrant Exercises									$ 850,478		$ 112,500
Brokerage Fees for Issuance of Common Stock and Warrants									94,498		12,500
Inducement Dividend, Exercise of Warrants	$ 37,499								$ 230,025		$ 37,499		$ 37,499			$ 37,499
Warrants Issued to Investors in Private Placements [Member] | Maximum [Member]
Class of Warrant or Right, Exercise Price of Warrants or Rights																				$ 0.65
Warrants Issued to Investors in Private Placements [Member] | Minimum [Member]
Class of Warrant or Right, Exercise Price of Warrants or Rights																				$ 0.30
Warrants Issued In the Private Placement on December 4, 2018 [Member] | Private Placement [Member]
Class of Warrant or Right, Exercise Price of Warrants or Rights	$ 0.30										$ 0.30		$ 0.30			$ 0.30								$ 0.30	$ 0.60
Units of Combined Common Stock and Warrants, Warrants Per Unit																									1
Class of Warrant or Right, Number of Securities Called by Each Warrant or Right																									1
Warrants and Rights Outstanding, Term																									5 years
Class of Warrant or Right, Issued																3,668,167
Class of Warrant or Right, Number of Securities Called by Warrants or Rights	1										1		1			1
Warrants Issued to an Investor on October 10, 2019 [Member]
Class of Warrant or Right, Exercise Price of Warrants or Rights						$ 0.08
Class of Warrant or Right, Number of Securities Called by Each Warrant or Right						1
Warrants and Rights Outstanding, Term						3 years
Class of Warrant or Right, Issued						2,000,000
Warrants and Rights Outstanding						$ 110,000
Warrants Issued to Broker Participating in Private Placement on December 4, 2018 [Member]
Class of Warrant or Right, Outstanding	87,526,411										87,526,411		87,526,411			87,526,411
Warrants Issued to Broker Participating in Private Placement on December 4, 2018 [Member] | Private Placement [Member]
Class of Warrant or Right, Exercise Price of Warrants or Rights	$ 0.30										$ 0.30		$ 0.30			$ 0.30
Class of Warrant or Right, Issued	1,954,613
Class of Warrant or Right, Expense	$ 132,914
Warrants Issued to Broker Participating in Private Placement on December 4, 2018 [Member] | Maximum [Member]
Class of Warrant or Right, Exercise Price of Warrants or Rights	$ 1										1		1			1
Warrants Issued to Broker Participating in Private Placement on December 4, 2018 [Member] | Minimum [Member]
Class of Warrant or Right, Exercise Price of Warrants or Rights	$ 0.30										$ 0.30		$ 0.30			$ 0.30
Common Stock [Member]
Exercise of Warrants for Stock, Shares													3,125,000			12,574,750	12,657,875
Stock Issued During Period, Shares, Issued for Services													2,500,000		2,341,568	2,500,000	3,885,412
Stock Issued During Period, Shares, New Issues						4,000,000							4,000,000		3,470,000	7,668,167	23,747,778
Cancellation of Shares Issued for Services																400,000
Common Stock [Member] | Private Placement [Member]
Stock Issued During Period, Shares, New Issues																3,668,167
Units of Combined Common Stock and Warrants, Shares Per Unit																									1
Senior Secured Convertible Promissory Note [Member] | The 8% Senior Secured Convertible Promissory Note Dated February 28, 2019 [Member]
Debt Conversion, Original Debt, Amount		$ 120,000						$ 110,000		$ 170,000
Debt Instrument, Interest Rate, Stated Percentage									8.00%	8.00%													8.00%
Debt Instrument, Unamortized Discount, Total	$ 584,842	57,551						9,579		$ 17,225	$ 584,842		$ 584,842			$ 584,842
Debt Instrument, Increase (Decrease), Net, Total		(62,449)	$ 30,000					(100,421)	$ 100,000	(152,775)
Short-term Debt, Total	687,021	$ 1,271,863	$ 1,361,863					$ 1,361,863	$ 1,338,057	$ 1,330,000	687,021		687,021			687,021		$ 1,269,067
Senior Secured Convertible Promissory Note [Member] | The 8% Senior Secured Convertible Promissory Note Dated February 28, 2019 [Member] | Common Stock [Member]
Debt Conversion, Converted Instrument, Shares Issued		3,000,000						1,000,000		1,000,000
Debt Instrument, Convertible, Conversion Price		$ 0.04	$ 0.04					$ 0.11	$ 0.11	$ 0.17								$ 0.08					$ 0.17
Convertible Notes Payable [Member] | The 8% Convertible Promissory Note Dated April 23, 2019 [Member]
Debt Conversion, Converted Instrument, Shares Issued				1,333,333	1,250,000
Debt Conversion, Original Debt, Amount				$ 50,000	$ 75,000							$ 125,000
Debt Instrument, Interest Rate, Stated Percentage																					8.00%
Debt Instrument, Convertible, Conversion Price				$ 0.0375	$ 0.06							$ 0.0375									$ 0.17
Debt Instrument, Unamortized Discount, Total																					$ 265,000
Short-term Debt, Total	$ 2,497,686										$ 2,497,686		2,497,686			2,497,686
Induced Conversion of Convertible Debt Expense				$ 62,353	$ 64,706								$ 127,059			$ 127,059

XML

Note 5 - Notes Payable - Amounts Recorded in Other Expense (Details) - USD ($)	3 Months Ended	9 Months Ended
	Dec. 31, 2018	Dec. 31, 2018
Total		$ 3,140,925
Other Expense [Member]
Prepaid royalties expensed during the quarter	$ 1,530,000	1,530,000
Promissory note issued to Pacific Leaf, due on or before November 30, 2018		500,000
600,000 shares common stock issued to Pacific Leaf		131,000
Long-term note payable and accrued interest terminated		(20,075)
Total non-cash expense		2,140,925
Cash payments made in August 2018		$ 1,000,000

XML

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($)	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Noncontrolling Interest [Member]	Total
Balance (in shares) at Mar. 31, 2018	168,616,855
Balance at Mar. 31, 2018	$ 16,862	$ 70,961,104	$ (58,229,235)	$ 2,882,990	$ 15,631,721
Issuance of stock for services (in shares)	3,885,412
Issuance of stock for services	$ 388	1,231,207			1,231,595
Share based compensation expense (in shares)
Share based compensation expense		831,729			831,729
Issuance of stock for cash, net of issuance costs (in shares)	23,747,778
Issuance of stock for cash, net of issuance costs	$ 2,375	4,900,460			4,902,835
Contributions from non-controlling interest				6,920,856	6,920,856
Shares common stock issued to Pacific Leaf (in shares)	600,000
Stock issued to settle royalty agreement	$ 60	130,940			131,000
Net Income/(Loss)			(18,670,229)	(762,966)	(19,433,195)
Issuance of stock for debt conversion (in shares)	18,563,885
Issuance of stock for debt conversion	$ 1,856	4,639,115			4,640,971
Exercise of warrants for stock (in shares)	12,657,875
Exercise of warrants for stock	$ 1,266	3,919,454			3,920,720
Inducement dividend from warrant exercises		2,861,436	(2,861,436)
Compensation warrants		592,638			592,638
Balance (in shares) at Dec. 31, 2018	228,071,805
Balance at Dec. 31, 2018	$ 22,807	90,068,083	(79,760,900)	9,040,880	19,370,870
Balance (in shares) at Sep. 30, 2018	221,760,237
Balance at Sep. 30, 2018	$ 22,176	88,860,249	(75,997,660)	9,122,287	22,007,052
Issuance of stock for services (in shares)	2,341,568
Issuance of stock for services	$ 234	489,671			489,905
Share based compensation expense (in shares)
Share based compensation expense		170,725			170,725
Issuance of stock for cash, net of issuance costs (in shares)	3,470,000
Issuance of stock for cash, net of issuance costs	$ 347	452,488			452,835
Contributions from non-controlling interest				206,000	206,000
Shares common stock issued to Pacific Leaf (in shares)	500,000
Stock issued to settle royalty agreement	$ 50	94,950			95,000
Net Income/(Loss)			(3,763,240)	(287,407)	(4,050,647)
Balance (in shares) at Dec. 31, 2018	228,071,805
Balance at Dec. 31, 2018	$ 22,807	90,068,083	(79,760,900)	9,040,880	19,370,870
Balance (in shares) at Mar. 31, 2019	240,627,102
Balance at Mar. 31, 2019	$ 24,063	93,020,015	(84,743,836)	8,855,757	$ 17,155,999
Issuance of stock for services (in shares)	2,500,000				2,500,000
Issuance of stock for services	$ 250	213,750			$ 214,000
Share based compensation expense (in shares)
Share based compensation expense		241,242			$ 241,242
Issuance of stock for cash, net of issuance costs (in shares)	7,668,167				7,668,167
Issuance of stock for cash, net of issuance costs	$ 768	717,929			$ 718,697
Contributions from non-controlling interest				590,000	590,000
Stock issued to settle royalty agreement
Net Income/(Loss)			(3,745,234)	(738,107)	(4,483,341)
Issuance of stock for debt conversion (in shares)	7,583,333
Issuance of stock for debt conversion	$ 758	524,242			$ 525,000
Exercise of warrants for stock (in shares)	12,574,750				12,574,750
Exercise of warrants for stock	$ 1,257	964,620			$ 965,877
Beneficial conversion feature on notes payable		829,736			829,736
Inducement dividend from warrant exercises		267,525	(267,525)
Induced note conversions		127,059			127,059
Deconsolidation of subsidiary				(8,707,650)	(8,707,650)
Compensation warrants		132,914			132,914
Cancellation of shares issued to consultant (in shares)	(400,000)
Cancellation of shares issued to consultant	$ (40)	40
Cumulative effect of the new lease standard			(7,550)		(7,550)
Balance (in shares) at Dec. 31, 2019	270,553,352
Balance at Dec. 31, 2019	$ 27,056	97,039,072	(88,764,145)		8,301,983
Balance (in shares) at Sep. 30, 2019	255,345,019
Balance at Sep. 30, 2019	$ 25,535	95,333,271	(90,071,120)	9,027,977	14,315,663
Issuance of stock for services (in shares)	2,500,000
Issuance of stock for services	$ 250	213,750			214,000
Share based compensation expense (in shares)
Share based compensation expense		32,431			32,431
Issuance of stock for cash, net of issuance costs (in shares)	4,000,000
Issuance of stock for cash, net of issuance costs	$ 400	239,600			240,000
Contributions from non-controlling interest				40,000	40,000
Net Income/(Loss)			1,344,474	(360,327)	984,147
Issuance of stock for debt conversion (in shares)	5,583,333
Issuance of stock for debt conversion	$ 558	244,442			245,000
Exercise of warrants for stock (in shares)	3,125,000
Exercise of warrants for stock	$ 313	115,088			115,401
Beneficial conversion feature on notes payable		695,932			695,932
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)
Balance (in shares) at Dec. 31, 2019	270,553,352
Balance at Dec. 31, 2019	$ 27,056	$ 97,039,072	$ (88,764,145)		$ 8,301,983

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Dec. 31, 2019	Mar. 31, 2019
CURRENT ASSETS:
Cash and cash equivalents	$ 37,300	$ 182,055
Accounts receivable, net of allowance for doubtful accounts of $91,536 and $66,748 at December 31, 2019 and March 31, 2019, respectively	80,436	488,329
Inventory, net	1,560,048	1,533,792
Prepaid expenses and other current assets	83,240	262,208
Note receivable, net of unamortized discount of $884,958 and $0 at December 31, 2019 and March 31, 2019, respectively	1,365,042
Current assets from discontinued operations		1,000,387
TOTAL CURRENT ASSETS	3,126,066	3,466,771
Property and equipment, net	10,097,430	10,481,706
Intangible assets, net of accumulated amortization of $3,745 at December 31, 2019 and March 31, 2019	2,073,839	1,818,802
Note receivable, net of unamortized discount of $383,867 and $0 at December 31, 2019 and March 31, 2019, respectively	5,366,133
Deposits and other noncurrent assets	95,504	230,651
Operating lease right-of-use assets, net	144,146
Non-current assets from discontinued operations		14,025,372
TOTAL ASSETS	20,903,118	30,023,302
CURRENT LIABILITIES:
Accounts payable	1,998,994	1,374,771
Accrued interest	429,064	142,112
Accrued liabilities	469,053	244,931
Notes and convertible notes payable, net of unamortized discount of $1,008,086 and $799,410 at December 31, 2019 and March 31, 2019, respectively	4,860,221	2,229,812
Indebtedness to related parties	324,738
Note payable to related party	151,923
Income tax payable	506,145	506,145
Operating lease obligations, current	47,084
Finance lease obligations, current	134,239	80,132
Current liabilities from discontinued operations		2,134,277
TOTAL CURRENT LIABILITIES	8,921,461	6,712,180
Note payable, net of unamortized discount of $0 and $13,929 at December 31, 2019 and March 31, 2019, respectively		161,072
Operating lease obligations, long term	114,052
Finance lease obligations, long term	3,565,622	3,646,540
Long term liabilities from discontinued operations		2,347,511
TOTAL LIABILITIES	12,601,135	12,867,303
Commitments and contingencies (Note 8)
STOCKHOLDERS' EQUITY:
Common Stock, $0.0001 par value, 600,000,000 shares authorized, 270,553,352 and 240,627,102 shares issued and outstanding at December 31, 2019 and March 31, 2019, respectively	27,056	24,063
Additional paid-in capital	97,039,072	93,020,015
Accumulated deficit	(88,764,145)	(84,743,836)
TOTAL GB SCIENCES, INC. STOCKHOLDERS' EQUITY	8,301,983	8,300,242
Non-controlling interest in discontinued operations		8,855,757
TOTAL EQUITY	8,301,983	17,155,999
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 20,903,118	$ 30,023,302

XML

Significant Accounting Policies (Policies)

9 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

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, 2020.

The balance sheet at

March 31, 2019

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. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form

10

-K for the year ended

March 31, 2019

.

Consolidation, Policy [Policy Text Block]

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, Policy [Policy Text Block]

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, 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.

Reclassification, Policy [Policy Text Block]

Reclassifications

Certain reclassifications have been made to the comparative period amounts in order to conform to the current period presentation. The current and long-term capital lease obligations recorded in the consolidated balance sheet as of

March 31, 2019

have been reclassified to conform to the current period presentation as finance lease obligations, current, and finance lease obligations, long term. Certain items on the unaudited statements of cash flows have been reclassified to confirm with current period presentation. In addition, the assets, liabilities, income, and cash flows of GB Sciences Louisiana, LLC have been separated from the comparative period amounts to confirm to the current period presentation as discontinued operations as the result of the sale of the Company’s interest in GB Sciences Louisiana, LLC (Note

10

). The reclassifications had

no

effect on the reported financial position, results of operations or cash flows of the Company.

Discontinued Operations, Policy [Policy Text Block]

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 assets and liabilities associated with discontinued operations included in our condensed consolidated balance sheets are as follows:

	December 31, 2019						March 31, 2019
	Continuing		Discontinued		Total		Continuing		Discontinued		Total
ASSETS
CURRENT ASSETS
Cash	$	37,300	$	-	$	37,300	$	182,055	$	45,703	$	227,758
Accounts receivable, net		80,436		-		80,436		488,329		-		488,329
Inventory, net		1,560,048		-		1,560,048		1,533,792		602,714		2,136,506
Prepaid and other current assets		83,240		-		83,240		262,208		351,970		614,178
Note receivable		1,365,042		-		1,365,042		-		-		-
TOTAL CURRENT ASSETS		3,126,066		-		3,126,066		2,466,384		1,000,387		3,466,771
Property and equipment, net		10,097,430		-		10,097,430		10,481,706		13,022,996		23,504,702
Intangible assets, net		2,073,839		-		2,073,839		1,818,802		-		1,818,802
Note receivable		5,366,133		-		5,366,133		-		-		-
Deposits and other noncurrent assets		95,504		-		95,504		230,651		1,002,376		1,233,027
Operating lease right-of-use assets, net		144,146		-		144,146		-		-		-
TOTAL ASSETS	$	20,903,118	$	-	$	20,903,118	$	14,997,543	$	15,025,759	$	30,023,302
LIABILITIES
CURRENT LIABILITIES
Accounts payable	$	1,998,994	$	-	$	1,998,994	$	1,374,771	$	1,695,985	$	3,070,756
Accrued interest		429,064		-		429,064		142,112		-		142,112
Accrued expenses		469,053		-		469,053		244,931		76,415		321,346
Notes payable, net		4,860,221		-		4,860,221		2,229,812		300,000		2,529,812
Indebtedness to related parties		476,661		-		476,661		-		-		-
Income tax payable		506,145		-		506,145		506,145		-		506,145
Operating lease obligations, current		47,084		-		47,084		-		-		-
Finance lease obligations, current		134,239		-		134,239		80,132		61,877		142,009
TOTAL CURRENT LIABILITIES		8,921,461		-		8,921,461		4,577,903		2,134,277		6,712,180
Note payable, net		-		-		-		161,072				161,072
Operating lease obligations, long term		114,052		-		114,052		-				-
Finance lease obligations, long term		3,565,622		-		3,565,622		3,646,540		2,347,511		5,994,051
TOTAL LIABILITIES	$	12,601,135	$	-	$	12,601,135	$	8,385,515	$	4,481,788	$	12,867,303

The revenues and expenses associated with discontinued operations included in our condensed consolidated statements of operations were as follows:

	For the Three Months Ended December 31,
	2019									2018
	Continuing			Discontinued			Total			Continuing			Discontinued			Total
Sales revenue	$	254,131		$	192,070		$	446,201		$	695,764		$	-		$	695,764
Cost of goods sold		(675,933	)		(193,915	)		(869,848	)		(302,569	)		-			(302,569	)
Gross profit (loss)		(421,802	)		(1,845	)		(423,647	)		393,195			-			393,195
General and administrative expenses		1,744,699			666,042			2,410,741			2,456,411			526,210			2,982,621
LOSS FROM OPERATIONS		(2,166,501	)		(667,887	)		(2,834,388	)		(2,063,216	)		(526,210	)		(2,589,426	)
OTHER INCOME/(EXPENSE)
Interest expense		(419,264	)		(52,769	)		(472,033	)		(258,522	)		(62,627	)		(321,149	)
Other income/(expense)		(118,695	)		-			(118,695	)		(402,504	)					(402,504	)
Loss on extinguishment		(92,795	)		-			(92,795	)		-			-			-
Gain on deconsolidation of subsidiary		4,502,058			-			4,502,058			-			-			-
Total other expense		3,871,304			(52,769	)		3,818,535			(661,026	)		(62,627	)		(723,653	)
NET LOSS BEFORE INCOME TAXES		1,704,803			(720,656	)		984,147			(2,724,242	)		(588,837	)		(3,313,079	)
Income tax expense		-			-			-			(737,568	)		-			(737,568	)
NET LOSS	$	1,704,803		$	(720,656	)	$	984,147		$	(3,461,810	)	$	(588,837	)	$	(4,050,647	)

	For the Nine Months Ended December 31,
	2019									2018
	Continuing			Discontinued			Total			Continuing			Discontinued			Total
Sales revenue	$	2,336,505		$	569,077		$	2,905,582		$	2,728,277		$	-		$	2,728,277
Cost of goods sold		(3,157,452	)		(574,544	)		(3,731,996	)		(1,185,878	)		-			(1,185,878	)
Gross profit (loss)		(820,947	)		(5,467	)		(826,414	)		1,542,399			-			1,542,399
General and administrative expenses		5,213,561			1,292,613			6,506,174			10,079,767			1,935,766			12,015,533
LOSS FROM OPERATIONS		(6,034,508	)		(1,298,080	)		(7,332,588	)		(8,537,368	)		(1,935,766	)		(10,473,134	)
OTHER INCOME/(EXPENSE)
Interest expense		(1,332,637	)		(178,140	)		(1,510,777	)		(4,681,235	)		(188,947	)		(4,870,182	)
Other income/(expense)		74,920			-			74,920			(3,352,311	)		-			(3,352,311	)
Loss on extinguishment		(216,954	)		-			(216,954	)		-			-			-
Gain on deconsolidation of subsidiary		4,502,058			-			4,502,058			-			-			-
Total other expense		3,027,387			(178,140	)		2,849,247			(8,033,546	)		(188,947	)		(8,222,493	)
NET LOSS BEFORE INCOME TAXES		(3,007,121	)		(1,476,220	)		(4,483,341	)		(16,570,914	)		(2,124,713	)		(18,695,627	)
Income tax expense		-			-			-			(737,568	)		-			(737,568	)
NET LOSS	$	(3,007,121	)	$	(1,476,220	)	$	(4,483,341	)	$	(17,308,482	)	$	(2,124,713	)	$	(19,433,195	)

Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]

Long-Lived Assets

Property and equipment comprise a significant portion of our total 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

March 31, 2019

.

Inventory, Policy [Policy Text Block]

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.

Debt, Policy [Policy Text Block]

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 from Contract with Customer [Policy Text Block]

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 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.

Earnings Per Share, Policy [Policy Text Block]

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

158,728,095

and

108,999,521

potentially dilutive common shares at

December 31, 2019

and

2018

, respectively. However, for the

nine

months ended

December 31, 2019

and the

three

and

nine

months ended

December 31, 2018,

such common stock equivalents were

not

included in the computation of diluted net loss per share as their inclusion would have been anti-dilutive. The computation of diluted earnings per share for the

three

months ended

December 31, 2019,

is presented in the following table:

	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	$	1,704,803
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		1,756,411
Net loss from discontinued operations available to common stockholders		(360,329	)
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	$	1,756,411			325,790,554	$	0.01
Net loss from discontinued operations	$	(360,329	)		325,790,554	$	(0.00	)
Net loss	$	1,396,082			325,790,554	$	0.00

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

Recently Adopted Standards

In

February 2016,

the Financial Accounting Standards Board ("FASB") issued ASU

2016

-

02,

Leases (Topic

842

), (the "New Lease Standard"). This standard requires leases, other than short-term, to be recognized on the balance sheet as a lease liability and a corresponding right-of-use asset.

Lease payments include fixed payments, variable payments based on an index or rate, reasonably certain purchase options, termination penalties, and others as required by the standard. Lease payments do

not

include variable lease payments other than those that depend on an index or rate, any guarantee by the lessee of the lessor’s debt, or any amount allocated to non-lease components. This standard is effective for interim and annual reporting periods beginning after

December 15, 2018

and the Company adopted the standard as of

April 1, 2019.

The Company also elected the package of practical expedients, which among other things, does

not

require reassessment of lease classification.

The Company adopted the New Lease Standard using the modified retrospective transition approach as of the effective date as permitted by the amendments in ASU

2018

-

11,

"Targeted Improvements - Leases (Topic

842

)." Under this method, the cumulative effect adjustment to the opening balance of retained earnings is recognized at the adoption date. As a result, the Company was

not

required to adjust its comparative period financial information for effects of the standard or make the new required lease disclosures for periods before the date of adoption on

April 1, 2019.

The Company's consolidated balance sheet was affected by this standard, but the consolidated statement of operations and consolidated statement of cash flows were

not

significantly impacted. The most significant change to the consolidated balance sheet upon adoption on

April 1, 2019

relates to the recognition of new right-of-use (ROU) assets of

$182,624,

net of accumulated amortizations, and operating liabilities of

$190,173

at the date of adoption. The Company's accounting for finance leases remains substantially unchanged.

In

June 2018,

the FASB issued ASU

2018

-

07,

“Compensation - Stock Compensation (Topic

718

): Improvements to Nonemployee Share-Based Payment Accounting” (“ASU

2018

-

07”

). ASU

No

2018

-

07

expands the scope of Topic

718

to include share-based payment transactions for acquiring goods and services from nonemployees. The guidance also specifies that Topic

718

applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. This guidance is effective for fiscal years beginning after

December 15, 2018,

including interim periods within those fiscal years, and is effective for the Company as of

April 1, 2019.

The Company determined that all share-based payments were settled as of the date of the adoption, so there was

no

impact on the Company's consolidated financial statements.

All other newly issued accounting pronouncements but

not

yet effective have been deemed either immaterial or

not

applicable.

XML

Note 5 - Notes Payable

9 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Debt Disclosure [Text Block]

Note

5

– Notes Payable and Line of Credit

6%

Note Payable due

November 30, 2018

On

July 28, 2018,

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

$1

million of the

$1.5

million balance due to Pacific Leaf by

August 31, 2018.

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

$0.5

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

6%

per annum and matured on

November 30, 2018.

The Company recorded interest expense of

$5,425

related to the Promissory Note for the

three

months ended

December 31, 2018

.

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

100,000

shares of its common stock to Pacific Leaf on

July 31, 2018

having a fair market value of

$36,000.

The Company made cash payments totaling

$1.0

million to Pacific Leaf in

August 2018

related to the Amendment and Termination Agreement. Both the

$36,000

fair value of shares issued to Pacific Leaf and the

$

1,000,000

in cash payments made to Pacific Leaf in

August 2018

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

September

31,

2018,

under the other expense caption.

On

December 21, 2018,

the Company made a

$100,000

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

$12,164

and the remaining

$87,836

was applied to the principal balance of the Note.

On

December 21, 2018,

the Company also issued

500,000

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

95,000

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

March 31, 2019

, under the other expense caption.

The Company made additional payments on the promissory note of

$100,000

on

January 16, 2019,

$100,000

on

February 6, 2019,

and a final payment of

$210,000

on

March 4, 2019

which paid the note off in full.

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

$1,530,000

in the quarter ended

December 31, 2018

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

February 2018

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

nine

months ended

December 31, 2018

. In total, the Company recorded

$3.1

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

nine

months ended

December 31, 2018

, as summarized in the table below:

Amounts Recorded in Other Expense Related to Royalty Settlement	For the Nine Months Ended December 31, 2018
Prepaid royalties expensed during the quarter	$	1,530,000
Promissory note issued to Pacific Leaf, due on or before November 30, 2018		500,000
600,000 shares common stock issued to Pacific Leaf		131,000
Long-term note payable and accrued interest terminated		(20,075	)
Total non-cash expense		2,140,925
Cash payments made in August 2018		1,000,000
Total	$	3,140,925

0%

Note Payable dated

October 23, 2017

On

October 23, 2017,

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

100%

ownership of the license. GB Sciences also received

100%

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

one

-time payment of

$500,000

and issued a

0%

Promissory Note in the amount of

$700,000

payable in equal monthly payments over a

three

-year period commencing on

January 1, 2018.

The present value of the note was

$521,067

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

20.3%

and the Company recorded a discount on notes payable of

$178,933.

During the

nine

months ended

December 31, 2019

, the Company recorded

$31,092

in interest expense related to amortization of the note discount.

The Company has been in default on this note since

June

of

2019,

and as of the date of this report,

eight

monthly payments on the note totaling

$155,555

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

ten

days of receiving a written notice,

483

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

$369,444

and impose a penalty interest rate of

10%,

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

Line of Credit dated

November 27, 2019

In connection with the Binding Letter of Intent dated

November 27, 2019,

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

$470,000

from the purchaser of

75%

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

nine

months ended

December 31, 2019

, the Company received

$330,000

in advances under the line of credit. Subsequent to

December 31, 2019

, the Company received an additional

$150,000

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

$480,000

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

$10,000.

The balance at

December 31, 2019

was

$330,000.

Note payable to BCM MED, LLC

On

December 20, 2018,

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

$300,000

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

Pursuant to the Loan Agreement, GBSLA began making

eight

(

8

) monthly installment payments in the amount of

$33,333

on or before the

10

th

business day of each month commencing in

April 2019.

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

November 15, 2019,

GBSLA made

$266,667

in payments towards the loan and reduced the loan balance to

$33,333.

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

10

).

Summary of Notes Payable and Convertible Notes

As of

December 31, 2019

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

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

XML

Note 9 - Related Party Transactions

9 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

Note

9

– Related Party Transactions

As of

December 31, 2019

, the Company is indebted to its officers for a total of

$324,738,

consisting of

$142,637

in unpaid wages,

$75,747

in unpaid bonuses, and

$106,354

of reimbursements for business expenses.

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 matures upon receipt of the

first

payment from the Wellcana Note Receivable (Note

10

).

During the fiscal year ended

March 31, 2017,

the Company entered into a consulting contract with Quantum Shop, a Company owned by a relative of

one

of the Company’s executives. Quantum Shop provided GB Sciences with research, design, development, fabrication, and production services. During the

nine

months ended

December 31, 2018,

the Company made payments totaling

$1.1

million to Quantum Shop primarily related to the build-out of the cultivation and production facility in Baton Rouge, Louisiana owned by GB Sciences Louisiana, LLC.

During the year ended

March 31, 2017,

the Company entered into an advisory agreement with Electrum Partners, LLC, a company whose President resides on GB Sciences’ Board of Directors and serves as a Chair of the Audit Committee. The agreement has a term of

one

year and was renewed for a successive

one

-year period on

March 31, 2018. 

During the

nine

months ended

December 31, 2018,

the Company made payments totaling

$73,904

to Electrum Partners, LLC and issued

285,412

shares of its restricted stock at an expense of

$99,596.

Subsequent to

December 31, 2018,

the Company terminated the advisory agreement.

On

November 1, 2017,

the Company entered into an Edibles Production Agreement (the “EPA”) with The Happy Confections, L.L.C. (“THCLLC”) through the Company’s wholly-owned subsidiary, GB Sciences Las Vegas, LLC (“GBLV”). A member of GB Science’s Board of Directors is a Co-Managing Member of THCLLC. Under the EPA, THCLLC was to produce cannabis-infused baked goods and other edibles in GBLV’s production facility. The Company will receive a royalty of between

20%

and

25%

on all sales of edibles produced by THCLLC.

Contemporaneously with the EPA, the Company entered into a Non-Revolving Credit Line Agreement and Non-Revolving Credit Line Promissory Note (together, the “THC Note” or “Note”) to advance up to

$300,000

to THCLLC for the purpose of expanding THCLLC’s operations. Beginning

90

days after the sale of its

first

product, THCLLC was to make repayment of its advances under the Note in an amount equal to

25%

of its gross sales revenue.

As of

December 31, 2018,

the Company had advanced

$253,034

under the THC Note. The Company terminated the Edibles Production Agreement and all other related agreements with THC LLC effective

October 19, 2018

and took possession of all tangible assets owned by THCLLC on

October 22, 2018,

as collateral for the balance owed under the Note. These assets included kitchen and production equipment, leasehold improvements, and inventory used in Company’s production operations at the Teco Facility.

The Company assessed the fair value of the machinery and equipment received at

$139,411

and capitalized that amount in fixed assets during the quarter ended

December 31, 2018.

All of the machinery and equipment received from THC LLC was placed in service for use in the Company’s production facility. The Company recorded

$

113,623

as other expense in its Condensed Consolidated Statement of Operations for the

three

and

nine

months ended

December 31, 2018,

which represents the remaining balance of the outstanding note receivable from THC LLC.

XML

Note 6 - Convertible Notes (Details Textual)											1 Months Ended			3 Months Ended					9 Months Ended
	Dec. 16, 2019 USD ($) $ / shares shares	Nov. 27, 2019 USD ($) $ / shares	Nov. 18, 2019 USD ($) $ / shares shares	Oct. 30, 2019 USD ($) $ / shares shares	Oct. 23, 2019 USD ($) $ / shares	Aug. 01, 2019 USD ($) $ / shares shares	Jul. 12, 2019 USD ($) $ / shares	May 28, 2019 USD ($) $ / shares shares	Apr. 23, 2019 USD ($) $ / shares	Feb. 28, 2019 USD ($) $ / shares	Nov. 18, 2019 USD ($) $ / shares	Jul. 31, 2017 USD ($) $ / shares	Mar. 31, 2017 USD ($) $ / shares shares	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($) $ / shares shares	Sep. 30, 2017 USD ($) $ / shares shares	Jun. 30, 2017 USD ($) $ / shares shares	Dec. 31, 2019 USD ($) shares	Dec. 31, 2018 USD ($)	Nov. 15, 2019	Mar. 31, 2019 USD ($)
Interest Payable, Current														$ 429,064					$ 429,064			$ 142,112
Amortization of Debt Discount (Premium)																			$ 741,912	$ 685,766
Debt Conversion, Converted Instrument, Shares Issued | shares																			7,583,333
Gain (Loss) on Extinguishment of Debt, Total														(92,795)					$ (216,954)
Interest Expense, Debt, Excluding Amortization																			93,931	3,464,187
Induced Conversion of Convertible Debt Expense														127,059					127,059
GB Sciences, Nevada, LLC and GB Sciences Las Vegas, LLC [Member]
Noncontrolling Interest, Ownership Percentage to be Sold by Parent		75.00%																			75.00%
Warrants Issued in March 2017 Convertible Note Offering [Member]
Class of Warrant or Right, Issued | shares													3,862,000					4,138,000
Class of Warrant or Right, Number of Securities Called by Each Warrant or Right | shares													1					1
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares													$ 0.60					$ 0.60
Warrants and Rights Outstanding, Term													3 years					3 years
Warrants Related to July 2017 Convertible Note Offering [Member]
Class of Warrant or Right, Issued | shares																16,464,000	12,340,000
Class of Warrant or Right, Number of Securities Called by Each Warrant or Right | shares																1	1
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares												$ 0.65				$ 0.65	$ 0.65
Warrants and Rights Outstanding, Term																3 years	3 years
Debt Instrument, Convertible, Number of Warrants												4,000
Convertible Notes Payable [Member]
Debt Instrument, Convertible, Beneficial Conversion Feature																			829,736
Convertible Notes Payable [Member] | March 2017 Convertible Note Offering [Member]
Debt Instrument, Face Amount													$ 965,500					$ 1,034,500
Debt Instrument, Term													3 years					3 years
Debt Instrument, Convertible, Beneficial Conversion Feature													$ 416,733					$ 487,957
Debt Instrument, Convertible, Discount, Fair Value of Warrants													$ 548,767					$ 480,236
Convertible Notes Payable [Member] | March 2017 Convertible Note Offering [Member] | Common Stock [Member]
Debt Instrument, Convertible, Number of Equity Instruments													3,862,000					4,138,000
Convertible Notes Payable [Member] | July 2017 Convertible Note Offering [Member]
Debt Instrument, Face Amount																$ 4,116,000	$ 3,085,000
Debt Instrument, Term												3 years				3 years	3 years
Debt Instrument, Convertible, Beneficial Conversion Feature																$ 1,600,808	$ 1,541,797
Debt Instrument, Convertible, Discount, Fair Value of Warrants																$ 2,417,856	$ 1,532,335
Debt Instrument, Face Amount Per Note												$ 1,000
Convertible Notes Payable [Member] | July 2017 Convertible Note Offering [Member] | Common Stock [Member]
Debt Instrument, Convertible, Number of Equity Instruments												4,000				16,464,000	12,340,000
Debt Instrument, Convertible, Conversion Price | $ / shares												$ 0.25
Convertible Notes Payable [Member] | March 2017 and July 2017 Note Offerings [Member]
Long-term Debt, Gross														999,823					999,823
Debt Instrument, Unamortized Discount, Total														257,177					257,177
Interest Payable, Current														178,381					178,381
Interest Expense, Debt, Total																			364,575
Amortization of Debt Discount (Premium)																			307,752
Convertible Notes Payable [Member] | The 8% Convertible Promissory Note Dated April 23, 2019 [Member]
Debt Instrument, Face Amount									$ 2,765,000					2,640,000					2,640,000
Debt Instrument, Interest Rate, Stated Percentage									8.00%
Debt Instrument, Convertible, Conversion Price | $ / shares			$ 0.0375	$ 0.06					$ 0.17		$ 0.0375
Debt Instrument, Unamortized Discount, Total									$ 265,000
Interest Expense, Debt, Total																			164,150
Amortization of Debt Discount (Premium)																			109,870
Debt Conversion, Original Debt, Amount			$ 50,000	$ 75,000							$ 125,000
Debt Conversion, Converted Instrument, Shares Issued | shares			1,333,333	1,250,000
Short-term Debt, Total														$ 2,497,686					$ 2,497,686
Debt Instrument, Debt Default, Interest Rate Penalty														15.00%					15.00%
Debt Instrument, Unamortized Discount (Premium) and Debt Issuance Costs, Net, Total									440,000
Payments for Brokerage Fees									$ 175,000
Debt Instrument, Debt Default, Increase in Balance Outstanding, Percentage														10.00%					10.00%
Induced Conversion of Convertible Debt Expense			$ 62,353	$ 64,706										$ 127,059					$ 127,059
Promissory Note [Member]
Debt Instrument, Face Amount														6,020,230					6,020,230
Short-term Debt, Total														5,012,144					5,012,144
Promissory Note [Member] | July 2017 Convertible Note Offering [Member]
Debt Instrument, Interest Rate, Stated Percentage												6.00%
Senior Secured Convertible Promissory Note [Member] | The 8% Senior Secured Convertible Promissory Note Dated February 28, 2019 [Member]
Debt Instrument, Face Amount										$ 1,500,000
Debt Instrument, Convertible, Beneficial Conversion Feature					$ 92,796		$ 133,806			$ 176,471
Debt Instrument, Interest Rate, Stated Percentage							8.00%	8.00%		8.00%
Debt Instrument, Unamortized Discount, Total	$ 57,551					$ 9,579		$ 17,225						584,842					584,842
Interest Payable, Current														32,186					32,186
Interest Expense, Debt, Total																			61,286
Debt Conversion, Original Debt, Amount	120,000					110,000		170,000
Debt Instrument, Increase (Decrease), Net, Total	(62,449)	$ 30,000				(100,421)	$ 100,000	(152,775)
Short-term Debt, Total	$ 1,271,863	1,361,863			1,269,067	$ 1,361,863	1,338,057	$ 1,330,000						$ 687,021					$ 687,021
Proceeds from Related Party Debt							100,000
Debt Instrument, Increase, Accrued Interest							41,863
Gain (Loss) on Extinguishment of Debt, Total		$ 0			$ (92,796)		$ (124,158)
Debt Instrument, Debt Default, Interest Rate Penalty														10.00%					10.00%
Senior Secured Convertible Promissory Note [Member] | The 8% Senior Secured Convertible Promissory Note Dated February 28, 2019 [Member] | Minimum [Member]
Days to Cure Breach of Default After Notification From Lender														5					5
Senior Secured Convertible Promissory Note [Member] | The 8% Senior Secured Convertible Promissory Note Dated February 28, 2019 [Member] | Maximum [Member]
Days to Cure Breach of Default After Notification From Lender														10					10
Senior Secured Convertible Promissory Note [Member] | The 8% Senior Secured Convertible Promissory Note Dated February 28, 2019 [Member] | GB Sciences, Nevada, LLC [Member] | Collateral Pledged [Member]
Noncontrolling Interest, Ownership Percentage by Parent										100.00%
Senior Secured Convertible Promissory Note [Member] | The 8% Senior Secured Convertible Promissory Note Dated February 28, 2019 [Member] | Common Stock [Member]
Debt Instrument, Convertible, Number of Equity Instruments										8,823,529
Debt Instrument, Convertible, Conversion Price | $ / shares	$ 0.04	$ 0.04			$ 0.08	$ 0.11	$ 0.11	$ 0.17		$ 0.17
Debt Conversion, Converted Instrument, Shares Issued | shares	3,000,000					1,000,000		1,000,000
Senior Secured Convertible Promissory Note [Member] | The Amended 8% Senior Secured Convertible Promissory Note Dated February 28, 2019 [Member]
Debt Instrument, Face Amount														$ 1,271,863					$ 1,271,863
Interest Expense, Debt, Total																			89,624
Amortization of Debt Discount (Premium)																			62,354
Short-term Debt, Total														$ 687,021					687,021
Interest Expense, Debt, Excluding Amortization																			$ 27,270

XML

Note 5 - Notes Payable (Details Textual)										2 Months Ended		3 Months Ended		6 Months Ended	9 Months Ended		11 Months Ended		12 Months Ended
	Nov. 15, 2019 USD ($)	Mar. 04, 2019 USD ($)	Feb. 06, 2019 USD ($)	Jan. 16, 2019 USD ($)	Dec. 21, 2018 USD ($) shares	Dec. 20, 2018 USD ($)	Jul. 31, 2018 USD ($) shares	Jul. 28, 2018 USD ($)	Oct. 23, 2017 USD ($)	Feb. 18, 2020 USD ($)	Feb. 14, 2020 USD ($)	Dec. 31, 2018 USD ($)	Sep. 30, 2018 USD ($)	Sep. 30, 2018 USD ($)	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($) shares	Feb. 18, 2020 USD ($)	Nov. 15, 2019 USD ($)	Mar. 31, 2019 USD ($)	Nov. 27, 2019 USD ($)	Nov. 30, 2018
Stock Issued to Settle Royalty Agreement, Value												$ 95,000				$ 131,000
Interest Paid, Excluding Capitalized Interest, Operating Activities															451,040	539,242
Other Expenses, Total																3,140,925
Proceeds from Lines of Credit, Total															330,000
Long-term Line of Credit, Total															330,000
Subsequent Event [Member]
Proceeds from Lines of Credit, Total											$ 150,000						$ 480,000
Line of Credit Facility, Maximum Borrowing Capacity, Increased										$ 10,000
GB Sciences, Nevada, LLC and GB Sciences Las Vegas, LLC [Member]
Noncontrolling Interest, Ownership Percentage to be Sold by Parent	75.00%																	75.00%		75.00%
Line of Credit [Member]
Line of Credit Facility, Maximum Borrowing Capacity																				$ 470,000
Promissory Note [Member]
Debt Instrument, Face Amount															6,020,230
Other Expense [Member]
Repayments of Debt																$ 1,000,000
Stock Issued to Settle Royalty Agreement, Shares | shares																600,000
Stock Issued During Period, Expense, New Issues																$ 131,000
Royalty Expense												1,530,000				$ 1,530,000
The 0% Note Payable Dated October 23, 2017 [Member] | Promissory Note [Member]
Debt Instrument, Face Amount															369,444
Debt Instrument, Debt Default, Remaining Balance															369,444
The 0% Note Payable Dated October 23, 2017 [Member] | Promissory Note [Member]
Debt Instrument, Face Amount									$ 700,000
Debt Instrument, Interest Rate, Stated Percentage									0.00%
Interest Expense, Debt, Total															31,092
Debt Instrument, Term									3 years
Debt Instrument, Present Value															$ 521,067
Receivable with Imputed Interest, Effective Yield (Interest Rate)															20.30%
Debt Instrument, Unamortized Discount, Total															$ 178,933
Debt Instrument, Accrued Monthly Payments, Amount															$ 155,555
Days to Cure Breach of Default After Notification From Lender															10
Debt Instrument, Debt Default, Interest Rate Penalty															10.00%
Amendment and Termination Agreement [Member] | Pacific Leaf [Member]
Stock Issued to Settle Royalty Agreement, Shares | shares							100,000
Stock Issued to Settle Royalty Agreement, Value							$ 36,000
Amendment and Termination Agreement [Member] | Pacific Leaf [Member] | Other Expense [Member]
Stock Issued to Settle Royalty Agreement, Value													$ 36,000
Nevada Medical Marijuana Production License Agreement [Member]
Payments to Acquire License									$ 500,000
Nevada Medical Marijuana Production License Agreement [Member] | Production License [Member]
Ownership of Licence									100.00%
Nevada Medical Marijuana Production License Agreement [Member] | Cultivation License [Member]
Ownership of Licence									100.00%
Pacific Leaf [Member] | The 6% Note Payable Due November 30, 2018 [Member]
Debt Conversion, Original Debt, Amount								$ 500,000
Debt Instrument, Interest Rate, Stated Percentage																					6.00%
Interest Expense, Debt, Total												$ 5,425
Stock Issued to Settle Royalty Agreement, Shares | shares					500,000
Repayments of Notes Payable		$ 210,000	$ 100,000	$ 100,000	$ 100,000
Interest Paid, Excluding Capitalized Interest, Operating Activities					12,164
Repayments of Notes Payable, Principal					$ 87,836
Stock Issued During Period, Expense, New Issues																			$ 95,000
Pacific Leaf [Member] | Amendment and Termination Agreement [Member]
Repayments of Debt								1,000,000
Debt Instrument, Face Amount								$ 1,500,000
Pacific Leaf [Member] | Amendment and Termination Agreement [Member] | Other Expense [Member]
Repayments of Debt													$ 1,000,000	$ 1,000,000
BCM MED [Member] | The 0% Note Payable Dated December 20, 2018 [Member] | Notes Payable, Other Payables [Member]
Repayments of Debt																		$ 266,667
Debt Instrument, Face Amount						$ 300,000
Debt Instrument, Periodic Payments, Number of Monthly Payments						8
Debt Instrument, Periodic Payment, Total						$ 33,333
Debt Instrument, Increase (Decrease), Net, Total	$ 33,333

XML

Note 1 - Background and Significant Accounting Policies

9 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Significant Accounting Policies [Text Block]

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 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 cannabinoid medicines with virtual operations in North America and Europe. GBSGB assets include cannabinoid medicine intellectual property, research contracts and key supplier arrangements. GBSGB’s intellectual property covers a range of conditions and several programs are in 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

four

USPTO & WIPO patent applications,

four

provisional USPTO patent applications, and

three

patent applications that we anticipate filing during the fiscal year ended

March 31, 2020,

as well as licenses for

three

additional patents covering novel cannabinoid delivery systems.

We currently hold

100%

membership interests in cultivation and extraction facilities in Nevada under our subsidiaries GB Sciences Nevada, LLC ("GBSN") and GB Sciences Las Vegas, LLC ("GBLV"). On

November 15, 2019,

we entered into a Binding Letter of Intent (the "LOI") to sell

75%

of the Company's membership interest interests in GBSN and GBLV for

$3

million cash upon close and up to an additional

$3

million in earn-out payments after close. In connection with the 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. 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 is presently subject to an indefinite moratorium, and while the moratorium is expected to be lifted shortly, we cannot provide any assurances as to the timing of the close of the sale.

We recently completed the sale of the Company's controlling interest in GB Sciences Louisiana, LLC, which has partnered with Louisiana State University to operate a cultivation and extraction facility to produce products for the medical cannabis market. As consideration for the sale of our controlling membership interest in GB Sciences Louisiana, LLC, we received an

$8

million promissory note and

may

receive up to an additional

$8

million in earn out payments. The Company retained its

50%

interest in the research relationship with Louisiana State University ("LSU") and will retain an interest in rights to the intellectual property developed through the relationship with LSU.

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, 2020.

The balance sheet at

March 31, 2019

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. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form

10

-K for the year ended

March 31, 2019

.

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, 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 in order to conform to the current period presentation. The current and long-term capital lease obligations recorded in the consolidated balance sheet as of

March 31, 2019

have been reclassified to conform to the current period presentation as finance lease obligations, current, and finance lease obligations, long term. Certain items on the unaudited statements of cash flows have been reclassified to confirm with current period presentation. In addition, the assets, liabilities, income, and cash flows of GB Sciences Louisiana, LLC have been separated from the comparative period amounts to confirm to the current period presentation as discontinued operations as the result of the sale of the Company’s interest in GB Sciences Louisiana, LLC (Note

10

). The reclassifications had

no

effect on the reported financial position, results of operations or cash flows of the Company.

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 assets and liabilities associated with discontinued operations included in our condensed consolidated balance sheets are as follows:

Discontinued Operations – (continued)	December 31, 2019						March 31, 2019
	Continuing		Discontinued		Total		Continuing		Discontinued		Total
ASSETS
CURRENT ASSETS
Cash	$	37,300	$	-	$	37,300	$	182,055	$	45,703	$	227,758
Accounts receivable, net		80,436		-		80,436		488,329		-		488,329
Inventory, net		1,560,048		-		1,560,048		1,533,792		602,714		2,136,506
Prepaid and other current assets		83,240		-		83,240		262,208		351,970		614,178
Note receivable		1,365,042		-		1,365,042		-		-		-
TOTAL CURRENT ASSETS		3,126,066		-		3,126,066		2,466,384		1,000,387		3,466,771
Property and equipment, net		10,097,430		-		10,097,430		10,481,706		13,022,996		23,504,702
Intangible assets, net		2,073,839		-		2,073,839		1,818,802		-		1,818,802
Note receivable		5,366,133		-		5,366,133		-		-		-
Deposits and other noncurrent assets		95,504		-		95,504		230,651		1,002,376		1,233,027
Operating lease right-of-use assets, net		144,146		-		144,146		-		-		-
TOTAL ASSETS	$	20,903,118	$	-	$	20,903,118	$	14,997,543	$	15,025,759	$	30,023,302
LIABILITIES
CURRENT LIABILITIES
Accounts payable	$	1,998,994	$	-	$	1,998,994	$	1,374,771	$	1,695,985	$	3,070,756
Accrued interest		429,064		-		429,064		142,112		-		142,112
Accrued expenses		469,053		-		469,053		244,931		76,415		321,346
Notes payable, net		4,860,221		-		4,860,221		2,229,812		300,000		2,529,812
Indebtedness to related parties		476,661		-		476,661		-		-		-
Income tax payable		506,145		-		506,145		506,145		-		506,145
Operating lease obligations, current		47,084		-		47,084		-		-		-
Finance lease obligations, current		134,239		-		134,239		80,132		61,877		142,009
TOTAL CURRENT LIABILITIES		8,921,461		-		8,921,461		4,577,903		2,134,277		6,712,180
Note payable, net		-		-		-		161,072				161,072
Operating lease obligations, long term		114,052		-		114,052		-				-
Finance lease obligations, long term		3,565,622		-		3,565,622		3,646,540		2,347,511		5,994,051
TOTAL LIABILITIES	$	12,601,135	$	-	$	12,601,135	$	8,385,515	$	4,481,788	$	12,867,303

The revenues and expenses associated with discontinued operations included in our condensed consolidated statements of operations were as follows:

	For the Three Months Ended December 31,
	2019									2018
	Continuing			Discontinued			Total			Continuing			Discontinued			Total
Sales revenue	$	254,131		$	192,070		$	446,201		$	695,764		$	-		$	695,764
Cost of goods sold		(675,933	)		(193,915	)		(869,848	)		(302,569	)		-			(302,569	)
Gross profit (loss)		(421,802	)		(1,845	)		(423,647	)		393,195			-			393,195
General and administrative expenses		1,744,699			666,042			2,410,741			2,456,411			526,210			2,982,621
LOSS FROM OPERATIONS		(2,166,501	)		(667,887	)		(2,834,388	)		(2,063,216	)		(526,210	)		(2,589,426	)
OTHER INCOME/(EXPENSE)
Interest expense		(419,264	)		(52,769	)		(472,033	)		(258,522	)		(62,627	)		(321,149	)
Other income/(expense)		(118,695	)		-			(118,695	)		(402,504	)					(402,504	)
Loss on extinguishment		(92,795	)		-			(92,795	)		-			-			-
Gain on deconsolidation of subsidiary		4,502,058			-			4,502,058			-			-			-
Total other expense		3,871,304			(52,769	)		3,818,535			(661,026	)		(62,627	)		(723,653	)
NET LOSS BEFORE INCOME TAXES		1,704,803			(720,656	)		984,147			(2,724,242	)		(588,837	)		(3,313,079	)
Income tax expense		-			-			-			(737,568	)		-			(737,568	)
NET INCOME/(LOSS)	$	1,704,803		$	(720,656	)	$	984,147		$	(3,461,810	)	$	(588,837	)	$	(4,050,647	)

	For the Nine Months Ended December 31,
	2019									2018
	Continuing			Discontinued			Total			Continuing			Discontinued			Total
Sales revenue	$	2,336,505		$	569,077		$	2,905,582		$	2,728,277		$	-		$	2,728,277
Cost of goods sold		(3,157,452	)		(574,544	)		(3,731,996	)		(1,185,878	)		-			(1,185,878	)
Gross profit (loss)		(820,947	)		(5,467	)		(826,414	)		1,542,399			-			1,542,399
General and administrative expenses		5,213,561			1,292,613			6,506,174			10,079,767			1,935,766			12,015,533
LOSS FROM OPERATIONS		(6,034,508	)		(1,298,080	)		(7,332,588	)		(8,537,368	)		(1,935,766	)		(10,473,134	)
OTHER INCOME/(EXPENSE)
Interest expense		(1,332,637	)		(178,140	)		(1,510,777	)		(4,681,235	)		(188,947	)		(4,870,182	)
Other income/(expense)		74,920			-			74,920			(3,352,311	)		-			(3,352,311	)
Loss on extinguishment		(216,954	)		-			(216,954	)		-			-			-
Gain on deconsolidation of subsidiary		4,502,058			-			4,502,058			-			-			-
Total other expense		3,027,387			(178,140	)		2,849,247			(8,033,546	)		(188,947	)		(8,222,493	)
NET LOSS BEFORE INCOME TAXES		(3,007,121	)		(1,476,220	)		(4,483,341	)		(16,570,914	)		(2,124,713	)		(18,695,627	)
Income tax expense		-			-			-			(737,568	)		-			(737,568	)
NET LOSS	$	(3,007,121	)	$	(1,476,220	)	$	(4,483,341	)	$	(17,308,482	)	$	(2,124,713	)	$	(19,433,195	)

Long-Lived Assets

Property and equipment comprise a significant portion of our total 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

March 31, 2019

.

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 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.

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

158,728,095

and

108,999,521

potentially dilutive common shares at

December 31, 2019

and

2018

, respectively. However, for the

nine

months ended

December 31, 2019

and the

three

and

nine

months ended

December 31, 2018,

such common stock equivalents were

not

included in the computation of diluted net loss per share as their inclusion would have been anti-dilutive. The computation of diluted earnings per share for the

three

months ended

December 31, 2019,

is presented in the following table:

	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	$	1,704,803
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		1,756,411
Net loss from discontinued operations available to common stockholders		(360,329	)
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	$	1,756,411			325,790,554	$	0.01
Net loss from discontinued operations	$	(360,329	)		325,790,554	$	(0.00	)
Net loss	$	1,396,082			325,790,554	$	0.00

Recent Accounting Pronouncements

Recently Adopted Standards

In

February 2016,

the Financial Accounting Standards Board ("FASB") issued ASU

2016

-

02,

Leases (Topic

842

), (the "New Lease Standard"). This standard requires leases, other than short-term, to be recognized on the balance sheet as a lease liability and a corresponding right-of-use asset.

Lease payments include fixed payments, variable payments based on an index or rate, reasonably certain purchase options, termination penalties, and others as required by the standard. Lease payments do

not

include variable lease payments other than those that depend on an index or rate, any guarantee by the lessee of the lessor’s debt, or any amount allocated to non-lease components. This standard is effective for interim and annual reporting periods beginning after

December 15, 2018

and the Company adopted the standard as of

April 1, 2019.

The Company also elected the package of practical expedients, which among other things, does

not

require reassessment of lease classification.

The Company adopted the New Lease Standard using the modified retrospective transition approach as of the effective date as permitted by the amendments in ASU

2018

-

11,

"Targeted Improvements - Leases (Topic

842

)." Under this method, the cumulative effect adjustment to the opening balance of retained earnings is recognized at the adoption date. As a result, the Company was

not

required to adjust its comparative period financial information for effects of the standard or make the new required lease disclosures for periods before the date of adoption on

April 1, 2019.

The Company's consolidated balance sheet was affected by this standard, but the consolidated statement of operations and consolidated statement of cash flows were

not

significantly impacted. The most significant change to the consolidated balance sheet upon adoption on

April 1, 2019

relates to the recognition of new right-of-use (ROU) assets of

$182,624,

net of accumulated amortizations, and operating liabilities of

$190,173

at the date of adoption. The Company's accounting for finance leases remains substantially unchanged.

In

June 2018,

the FASB issued ASU

2018

-

07,

“Compensation - Stock Compensation (Topic

718

): Improvements to Nonemployee Share-Based Payment Accounting” (“ASU

2018

-

07”

). ASU

No

2018

-

07

expands the scope of Topic

718

to include share-based payment transactions for acquiring goods and services from nonemployees. The guidance also specifies that Topic

718

applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. This guidance is effective for fiscal years beginning after

December 15, 2018,

including interim periods within those fiscal years, and is effective for the Company as of

April 1, 2019.

The Company determined that all share-based payments were settled as of the date of the adoption, so there was

no

impact on the Company's consolidated financial statements.

All other newly issued accounting pronouncements but

not

yet effective have been deemed either immaterial or

not

applicable.

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($)	Dec. 31, 2019	Mar. 31, 2019
Accounts receivable, allowance for doubtful accounts	$ 91,536	$ 66,748
Note receivable, unamortized discount, current	884,958	0
Intangible assets, accumulated amortization	3,745	3,745
Note receivable, unamortized discount, noncurrent	383,867	0
Notes and convertible notes payable, unamortized discount, current	1,008,086	799,410
Note payable, unamortized discount, noncurrent	$ 0	$ 13,929
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized (in shares)	600,000,000	600,000,000
Common stock, shares issued (in shares)	270,553,352	240,627,102
Common stock, shares outstanding (in shares)	270,553,352	240,627,102

XML

Note 10 - Sale of 50% Membership Interest in GB Sciences Louisiana, LLC - Deconsolidation (Details) - USD ($)		3 Months Ended		9 Months Ended
	Nov. 15, 2019	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
GAIN ON DECONSOLIDATION	$ 4,502,058	$ 4,502,058		$ 4,502,058
GB Sciences Louisiana, LLC [Member]
Present value of promissory note	6,610,592
Carrying amount of non-controlling interest	8,707,651
TOTAL	15,318,243
Carrying amount of assets	14,715,798
Carrying amount of liabilities	(3,899,613)
Net assets deconsolidated	10,816,185
GAIN ON DECONSOLIDATION	$ 4,502,058

XML

Note 5 - Notes Payable (Tables)

9 Months Ended

Dec. 31, 2019

Notes Tables

Schedule of Amounts Recorded in Other Expense [Table Text Block]

Amounts Recorded in Other Expense Related to Royalty Settlement	For the Nine Months Ended December 31, 2018
Prepaid royalties expensed during the quarter	$	1,530,000
Promissory note issued to Pacific Leaf, due on or before November 30, 2018		500,000
600,000 shares common stock issued to Pacific Leaf		131,000
Long-term note payable and accrued interest terminated		(20,075	)
Total non-cash expense		2,140,925
Cash payments made in August 2018		1,000,000
Total	$	3,140,925

Schedule of Debt [Table Text Block]

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

XML

Note 1 - Background and Significant Accounting Policies - Earnings (Loss) Per Share (Details) - USD ($)	3 Months Ended		9 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Net income from continuing operations available to common stockholders	$ 1,704,803	$ (3,461,810)	$ (3,007,121)	$ (17,308,482)
Interest expense on convertible notes payable	51,608
Effect of assumed conversions	51,608
Income from continuing operations plus assumed conversions	1,756,411	(3,461,810)	(3,007,121)	(17,308,482)
Net loss from discontinued operations available to common stockholders	(360,329)	(301,431)	(738,113)	(1,361,747)
Net income available to common stockholders	$ 1,396,082	$ (3,763,241)	$ (3,745,234)	$ (18,670,229)
Weighted-average common shares outstanding (in shares)	263,055,254	222,856,453	253,297,660	200,971,724
Warrants (in shares)	26,648,530
Convertible notes payable (in shares)	36,086,770
Dilutive potential common shares (in shares)	62,735,300
Adjusted weighted-average shares (in shares)	325,790,554	222,856,453	253,297,660	200,971,724
Net income from continuing operations per common share diluted (in dollars per share)	$ 0.01	$ (0.02)	$ (0.01)	$ (0.08)
Net loss from discontinued operations per common share diluted (in dollars per share)				(0.01)
Net loss per common share diluted (in dollars per share)		$ (0.02)	$ (0.01)	$ (0.09)

XML

Note 8 - Commitments and Contingencies (Details Textual)					3 Months Ended	6 Months Ended	9 Months Ended	12 Months Ended	27 Months Ended
	Oct. 01, 2019 USD ($) shares	Jun. 06, 2019 USD ($) shares	Dec. 06, 2018 USD ($) $ / shares shares	Sep. 18, 2017 USD ($)	Dec. 31, 2019 USD ($)	Jun. 06, 2019 shares	Dec. 31, 2019 USD ($) shares	Mar. 31, 2019 USD ($)	Dec. 31, 2019 USD ($)
Monthly Consulting Fee	$ 50,000
Stock Issued During Period, Shares, Issued for Services | shares	2,000,000						2,500,000
Quarterly Stock Fee, Shares | shares	2,000,000
Consulting Expense Related to Common Stock Payments					$ 180,000
Consulting Expense Related to Cash Payments					$ 50,000
Asset Forfeiture, Charge								$ 200,000
SylvaCap Media [Member]
Monthly Consulting Fee			$ 10,000
Monthly Consulting Fee, Number of Months			12
SylvaCap Media [Member] | Restricted Stock [Member]
Stock Issued During Period, Shares, Issued for Services | shares		2,000,000	2,000,000			4,000,000
Loss on Contract Termination		$ 135,000
Shares Unissued for Services, Contract Termination | shares		2,000,000
Warrants Issued to SylvaCap Media for Business Advisory and Consulting Services [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | shares			2,000,000
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares			$ 0.1125
Warrants and Rights Outstanding			$ 244,000
Class of Warrant or Right, Expense							$ 162,667
Agreement With Louisiana State Unversity AgCenter [Member]
Term of Agreement				5 years			3 years
Option to Renew Agreement, Amount				2
Term of Agreement, Renewal				5 years
Research and Development Expense, Total				$ 500,000			$ 250,000		$ 750,000

XML

Note 5 - Notes Payable - Amounts Recorded in Other Expense (Details) (Parentheticals)	9 Months Ended
	Dec. 31, 2018 shares
Other Expense [Member]
Shares common stock issued to Pacific Leaf (in shares)	600,000

XML

Note 4 - Leases (Details Textual) - USD ($)	9 Months Ended
	Dec. 31, 2019	Apr. 01, 2019	Mar. 31, 2019
Operating Lease, Right-of-Use Asset	$ 144,146
Operating Lease, Liability, Total	$ 161,136
Lessee, Operating Lease, Discount Rate	17.00%
Finance Lease Costs	$ 790,666
Finance Lease, Interest Expense	474,686
Finance Lease, Right-of-Use Asset, Amortization	315,980
Operating Lease, Cost	61,144
Operating Lease, Interest Expense	22,667
Operating Lease, Right-of-Use Asset Amortization	38,477
Discontinued Operations [Member]
Operating Lease, Right-of-Use Asset
Finance Lease Costs	280,227
Finance Lease, Interest Expense	153,977
Finance Lease, Right-of-Use Asset, Amortization	$ 126,250
Minimum [Member]
Lessee, Finance Lease, Discount Rate	10.20%
Maximum [Member]
Lessee, Finance Lease, Discount Rate	11.50%
Accounting Standards Update 2016-02 [Member]
Operating Lease, Right-of-Use Asset		$ 182,624
Operating Lease, Liability, Total		$ 190,173

XML

Note 7 - Capital Transactions

9 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

Note

7

– Capital Transactions

Increase in Authorized Capital

Effective

April 8, 2018,

Shareholders of the Company approved the change in corporate domicile from the State of Delaware to the State of Nevada and an increase in the number of authorized capital shares from

250,000,000

to

400,000,000.

On

August 15, 2019,

Shareholders of the Company approved an increase in authorized capital shares from

400,000,000

to

600,000,000.

Sale of Common Stock and Exercise of Warrants

Stock Issued for Debt Conversions

During the

nine

months ended

December 31, 2019

,the Company issued a total of 

7,583,333

shares of common stock for the conversion of notes payable:

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 (

See Note

6

). 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 has reduced the carrying amount of convertible notes payable by

$152,775.

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

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 carrrying amount of the note was

$687,021,

net of

$584,842

in unamortized discount from the beneficial conversion feature.

As inducement for the temporary forbearance of formal default proceedings, the Company has honored the conversion of a total of a total of

$125,000

of debt owed under 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 expense in that amount. 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. The fair value of the shares issued exceeded the fair value of the shares issuable under the original terms of the Note by

$62,353,

and the Company recorded an expense in that amount. In total, the Company recorded

$

127,059

in noncash expense for the

two

conversions of the Iliad note at below contractual conversion rates for the

three

and

nine

months ended

December 31, 2019

.

Exercise of Warrants for Stock

During the

nine

months ended

December 31, 2019

, the Company issued 

12,574,750

shares of common stock for exercises of warrants:

In order to encourage the exercise of approximately

70.5

million warrants issued to investors in private placements of convertible notes and common stock having exercise prices ranging between

$0.65

and

$0.30,

the Company effected a temporary decrease in the exercise price of the warrants to

$0.10

per share until

July 11, 2019.

On

July 12, 2019,

the Company extended the repricing of the warrants through

August 30, 2019,

and on

July 31, 2019,

the Company extended the repricing of the warrants to

December 31, 2019

. As a result of the price reduction, the Company received notice of the exercise of

9,449,750

warrants and received proceeds of

$850,478,

net of brokerage fees of

$94,498.

In connection with the induced exercise of the warrants, the Company recorded an inducement dividend of

$230,025.

In order to encourage the further exercise of the same warrants, the Company effected a temporary decrease in the exercise price of the warrants to

$0.04

per share beginning in

December 2019.

As a result of the price reduction, the Company received notice of the exercise of an additional

3,125,000

warrants and received proceeds of

$112,500,

net of brokerage fees of

$12,500.

In connection with the induced exercise of the warrants, the Company recorded an inducement dividend of $

37,499

.

Issuance of Stock for Services

During the

nine

months ended

December 31, 2019

, the Company issued 

2,500,000

shares of common stock for consulting services and recorded related expense of

$214,000

based on the fair value of the stock on the date of the related consulting agreements.

Issuance of Stock for Cash

During the

nine

months ended

December 31, 2019

, the company issued 

7,668,167

shares of common stock for cash as follows:

On

December 4, 2018,

the Company entered into a Placement Agent’s Agreement to offer a total of

15,000,000

units at the price of

$0.20

per unit up to a total of

$3

million. Each unit consisted of

one

share of the Company’s common stock and

one

warrant to purchase

one

share of the Company’s common stock at the price of

$0.60

for a period of

five

years. On

January 15, 2019,

the Placement Agent’s Agreement was amended to decrease the unit price from

$0.20

per unit to

$0.15

per unit for a total of

20,000,000

units and decrease the exercise price of the warrants included in each unit from

$0.60

to

$0.30,

applied retroactively to funds raised prior to the date of the amendment, with

no

other changes to the agreement. During the

nine

months ended

December 31, 2019

, the Company received a total of

$478,696

in proceeds from the private placement, net of

$71,529

in brokerage fees and issued

3,668,167

shares of its common stock and

3,668,167

warrants to purchase

one

share of its common stock at

$0.30

per share.

On

October 10, 2019,

the Company issued

4,000,000

shares of common stock and

2,000,000

warrants to purchase

one

share of common stock at

$0.08

per share for a period of

three

years to an investor for

$240,000

cash. The warrants were valued at

$110,000

on the date of issuance using the Black-Scholes model.

Cancellation of Shares Issued to Consultant

During the

nine

months ended

December 31, 2019

, the Company cancelled

400,000

shares of common stock issued to a consultant as compensation for services rendered during the year ended

March 31, 2019

, that were initially issued as part of the consulting agreement. During the quarter ended

June 30, 2019,

the Company agreed to amend the consulting agreement to issue options instead of shares of common stock. The amendment has

not

yet been executed nor has the option agreement as of

December 31, 2019

.

Options and Warrants

At the conclusion of the

December 2018

private placement on

December 31, 2019

, the Company issued

1,954,613

compensation warrants to the broker participating in the private placement. The warrants are exercisable at

$0.30

per share until expiration on

June 15, 2024

and are eligible for cashless exercise. The Company recorded a $

132,914

expense related to the issuance of the warrants.

As of

December 31, 2019,

there were

87,526,411

warrants outstanding at exercise prices ranging from

$0.30

to

$1.00

per share.

For the

nine

months ended

December 31, 2019

, the Company recorded $

241,242

in share-based compensation expense relating to options granted to employees and consultants in prior periods. As of

December 31, 2019,

the Company had

$15,131

of remaining unrecognized option expense related to options vesting at a future date. As of

December 31, 2019,

there were

10,383,334

options outstanding from grants to employees and

2,383,000

options outstanding from grants to consultants.

XML

Note 11 - Sale of Membership Interests in Nevada Subsidiaries

9 Months Ended

Dec. 31, 2019

Nevada Subsidiaries [Member]

Notes to Financial Statements

Noncontrolling Interest Disclosure [Text Block]

Note

11

– Sale of Membership Interests in Nevada Subsidiaries

The Company operates cannabis cultivation and extraction facilities located at

3550

W. Teco Ave., Las Vegas, NV

89118.

The facilities operate under

two

wholly-owned subsidiaries, GB Sciences, Nevada, LLC and GB Sciences Las Vegas, LLC (together, "Teco"), which hold the Company’s Nevada Licenses for the State-regulated cultivation and production of cannabis and cannabis products, respectively (the "Teco Licenses").

On

November 27, 2019,

the Company entered into a Binding Letter of Intent (the “Teco LOI”) to sell

75%

of its interests in Teco to AJE Management, LLC, with the transaction closing upon transfer of the Licenses. As consideration for the transfer of membership interests, the Company will receive

$3,000,000

upon closing and up to an additional

$3,000,000

in earn-out payments. The transaction closes upon the approval of the transfer of the Teco Licenses by Nevada regulatory authorities. As of the date of this report, the State of Nevada has imposed a temporary moratorium on cannabis license transfers. The Company anticipates that the moratorium will be lifted in the near future but we are unable to say when the timing of the close

may

be.

In connection with the Teco LOI, on

December 6, 2019,

the Company entered into a Management Agreement with AJE Management whereby AJE Management will manage the operations of Teco until the closing of the sale of membership interests. Under the management agreement, AJE Management is entitled to receive a

$75,000

monthly management fee for the duration of the management contract, to be paid out of available cash flow from Teco or

no

later than the close of the sale of membership interests. The management fee is accrued in the unaudited consolidated balance sheets under accrued liabilities.

In connection with the Teco LOI, the Company also entered into a Line of Credit of up to

$470,000

with AJE Management (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 facilites as collateral for the note, subject to the preexisting lien for collateralization of the CSW Ventures Note (Note

6

). 

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 to The Moore Group, Inc. (the “Nopah LOI”), with the transaction closing upon transfer of the Nopah License. As consideration for the transfer of the license, the Company will receive

$300,000.

The transfer of the Nopah License is subject to the same restrictions on license transfers currently in effect in the State of Nevada.

XML

Note 3 - Inventory

9 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Inventory Disclosure [Text Block]

Note

3

– 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, extracts, and vapes in bulk and packaged forms.

	December 31, 2019			March 31, 2019
Raw materials	$	299,740		$	440,414
Work in progress		1,495,301			676,341
Finished goods		257,995			579,604
Allowance to reduce inventory to NRV		(492,988	)		(162,567	)
Total inventory	$	1,560,048		$	1,533,792

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
OPERATING ACTIVITIES:
Net loss	$ (4,483,341)	$ (19,433,195)
Loss from discontinued operations	(1,476,220)	(2,124,713)
Net loss from continuing operations	(3,007,121)	(17,308,482)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	223,249	389,813
Stock-based compensation	588,156	2,322,629
Bad debt expense/(recoveries)	64,522	(18,175)
Amortization of debt discount and beneficial conversion feature	741,912	685,766
Interest expense on conversion of notes payable	93,931	3,464,187
Noncash expense recorded for settlement of royalty agreement (Note 5)		2,140,925
Loss on extinguishment of debt and disposal of assets	224,089	113,623
Loss on induced conversion of note payable	127,059
Gain on deconsolidation of subsidiary	(4,502,058)
Interest income receivable and amortization of discount on note receivable	(170,994)
Changes in operating assets and liabilities:
Accounts receivable	520,565	255,442
Prepaid expenses and other current assets	178,968	1,074,985
Decrease in deposits and other noncurrent assets		131,026
Inventory	343,911	(1,401,906)
Accounts payable	477,913	(155,164)
Accrued expenses	615,667	905,432
Indebtedness to related parties	476,661
Net cash used in operating activities of continuing operations	(3,003,570)	(7,399,899)
Net cash used in operating activities of discontinued operations	(1,244,721)	(447,852)
Net cash used in operating activities	(4,248,291)	(7,847,751)
INVESTING ACTIVITIES:
Purchase of property and equipment	(186,297)	(897,087)
Acquisition of intangible assets	(91,862)	(248,116)
Net cash used in investing activities of continuing operations	(278,159)	(1,145,203)
Net cash used in investing activities of discontinued operations	(260,625)	(8,946,434)
Net cash used in investing activities	(538,784)	(10,091,637)
FINANCING ACTIVITIES:
Proceeds from issuance of common stock and warrant exercises	1,860,200	8,823,555
Proceeds from notes payable and line of credit	2,960,000
Brokerage fees for issuance of common stock and warrants	(175,628)
Fees for issuance of convertible note	(175,000)
Principal payments on debt and finance lease obligations	(110,087)	(318,968)
Cash paid to settle royalty agreement		(1,000,000)
Net cash provided by financing activities of continuing operations	4,359,485	7,504,587
Net cash provided by financing activities of discontinued operations	282,835	7,179,156
Net cash provided by financing activities	4,642,320	14,683,743
Net change in cash and cash equivalents	(144,755)	(3,255,645)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	182,055	3,579,700
CASH AND CASH EQUIVALENTS AT END OF PERIOD	37,300	324,055
Less: cash and cash equivalents classified as discontinued operations		(236,283)
CASH AND CASH EQUIVALENTS AT END OF PERIOD FROM CONTINUING OPERATIONS	37,300	87,772
Cash paid for interest	451,040	539,242
Cash paid for income tax
Non-cash transactions:
Stock issued upon conversion of long-term note payable	525,000	4,640,971
Stock issued to settle royalty agreement		131,000
Depreciation capitalized in inventory	370,167	104,481
Induced dividend from warrant exercises	267,525	2,861,436
Property capitalized under operating leases	182,624
Cumulative effect of the new lease standard	7,550
Convertible Notes Payable [Member]
Non-cash transactions:
Beneficial conversion feature on notes payable	$ 829,736

XML

Document And Entity Information - shares	9 Months Ended
	Dec. 31, 2019	Feb. 14, 2020
Document Information [Line Items]
Entity Registrant Name	GB SCIENCES INC
Entity Central Index Key	0001165320
Current Fiscal Year End Date	--03-31
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Interactive Data Current	Yes
Entity Common Stock, Shares Outstanding (in shares)		272,767,352
Entity Shell Company	false
Document Type	10-Q
Document Period End Date	Dec. 31, 2019
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Amendment Flag	false

XML

Note 12 - Subsequent Events (Details Textual) - Subsequent Event [Member]	2 Months Ended
	Feb. 18, 2020 USD ($) $ / shares shares
Class of Warrant or Right, Exercises in Period | shares	2,214,000
Class of Warrant or Right, Exercises in Period, Exercise Price | $ / shares	$ 0.04
Proceeds from Warrant Exercises	$ 79,704
Brokerage Fees	$ 8,856

XML

Note 10 - Sale of 50% Membership Interest in GB Sciences Louisiana, LLC (Details Textual) - USD ($)			3 Months Ended		9 Months Ended		23 Months Ended
	Nov. 15, 2019	Feb. 12, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Nov. 30, 2019
Deconsolidation, Gain (Loss), Amount	$ 4,502,058		$ 4,502,058		$ 4,502,058
Wellcana Note [Member]
Note Receivable, Interest Rate	5.00%
Receivable with Imputed Interest, Discount	$ 1,389,408
Receivable with Imputed Interest, Effective Yield (Interest Rate)	17.00%
Receivable with Imputed Interest, Net Amount, Total	$ 6,610,592
GB Sciences Louisiana, LLC [Member]
Proceeds from Divestiture of Businesses	8,000,000
Earnout Payments	$ 8,000,000							$ 8,000,000
Wellcana Group, LLC [Member]
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners		49.99%
Wellcana Group, LLC [Member] | GB Sciences Louisiana, LLC, Sale of Equity [Member]
Sale of Stock, Percentage of Ownership	50.01%	15.00%
Sale of Stock, Consideration Received on Transaction		$ 3,000,000					$ 7,000,000
Sale of Stock, Percentage of Ownership Available For Sale		35.00%
Sale of Stock, Percentage of Available Stock For Sale, Percent to be Sold Per Transaction		5.00%
Sale of Stock, Consideration Received Per Transaction		$ 1,000,000

XML

Note 3 - Inventory (Tables)

9 Months Ended

Dec. 31, 2019

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	December 31, 2019			March 31, 2019
Raw materials	$	299,740		$	440,414
Work in progress		1,495,301			676,341
Finished goods		257,995			579,604
Allowance to reduce inventory to NRV		(492,988	)		(162,567	)
Total inventory	$	1,560,048		$	1,533,792

XML

Note 1 - Background and Significant Accounting Policies (Details Textual) - USD ($)		9 Months Ended		12 Months Ended
	Nov. 15, 2019	Dec. 31, 2019	Dec. 31, 2018	Mar. 31, 2019	Nov. 30, 2019	Apr. 01, 2019
Impairment of Long-Lived Assets Held-for-use				$ 0
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount		158,728,095	108,999,521
Operating Lease, Right-of-Use Asset		$ 144,146
Operating Lease, Liability, Total		$ 161,136
Accounting Standards Update 2016-02 [Member]
Operating Lease, Right-of-Use Asset						$ 182,624
Operating Lease, Liability, Total						$ 190,173
GB Sciences Louisiana, LLC [Member]
Disposal Group, Including Discontinued Operation, Consideration					$ 8,000,000
Earnout Payments	$ 8,000,000				$ 8,000,000
GB Sciences, Nevada, LLC and GB Sciences Las Vegas, LLC [Member]
Sale of Stock, Percentage of Ownership	75.00%
Sale of Stock, Consideration Received on Transaction	$ 3,000,000
Sale of Stock, Additional Earn-out Payments	$ 3,000,000
GB Sciences, Nevada, LLC and GB Sciences Las Vegas, LLC [Member]
Controlling Interest, Ownership Percentage by Parent		100.00%

XML

Note 3 - Inventory - Schedule of Inventory (Details) - USD ($)	Dec. 31, 2019	Mar. 31, 2019
Raw materials	$ 299,740	$ 440,414
Work in progress	1,495,301	676,341
Finished goods	257,995	579,604
Allowance to reduce inventory to NRV	(492,988)	(162,567)
Total inventory	$ 1,560,048	$ 1,533,792

XML

Note 10 - Sale of 50% Membership Interest in GB Sciences Louisiana, LLC - Note Receivable (Details) - Wellcana Note [Member]	Nov. 15, 2019 USD ($)
June 1, 2020	$ 500,000
September 1, 2020	750,000
December 1, 2020	1,000,000
March 1, 2020	1,250,000
June 1, 2021	1,500,000
September 1, 2021	1,500,000
December 1, 2021	1,500,000
TOTAL PAYMENTS	8,000,000
DISCOUNT ON NOTE RECEIVABLE	(1,389,408)
NET PRESENT VALUE	$ 6,610,592

XML

Note 2 - Going Concern (Details Textual) - USD ($)	9 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Mar. 31, 2019
Retained Earnings (Accumulated Deficit), Ending Balance	$ (88,764,145)		$ (84,743,836)
Working Capital Deficit	5,795,395		3,245,409
Net Cash Provided by (Used in) Operating Activities, Total	(4,248,291)	$ (7,847,751)
Cash Provided by (Used in) Operating Activities, Discontinued Operations	$ (1,244,721)	$ (447,852)
Discontinued Operations [Member]
Working Capital Deficit			$ 1,133,890

XML

Note 1 - Background and Significant Accounting Policies (Tables)

9 Months Ended

Dec. 31, 2019

Notes Tables

Disposal Groups, Including Discontinued Operations [Table Text Block]

Discontinued Operations – (continued)	December 31, 2019						March 31, 2019
	Continuing		Discontinued		Total		Continuing		Discontinued		Total
ASSETS
CURRENT ASSETS
Cash	$	37,300	$	-	$	37,300	$	182,055	$	45,703	$	227,758
Accounts receivable, net		80,436		-		80,436		488,329		-		488,329
Inventory, net		1,560,048		-		1,560,048		1,533,792		602,714		2,136,506
Prepaid and other current assets		83,240		-		83,240		262,208		351,970		614,178
Note receivable		1,365,042		-		1,365,042		-		-		-
TOTAL CURRENT ASSETS		3,126,066		-		3,126,066		2,466,384		1,000,387		3,466,771
Property and equipment, net		10,097,430		-		10,097,430		10,481,706		13,022,996		23,504,702
Intangible assets, net		2,073,839		-		2,073,839		1,818,802		-		1,818,802
Note receivable		5,366,133		-		5,366,133		-		-		-
Deposits and other noncurrent assets		95,504		-		95,504		230,651		1,002,376		1,233,027
Operating lease right-of-use assets, net		144,146		-		144,146		-		-		-
TOTAL ASSETS	$	20,903,118	$	-	$	20,903,118	$	14,997,543	$	15,025,759	$	30,023,302
LIABILITIES
CURRENT LIABILITIES
Accounts payable	$	1,998,994	$	-	$	1,998,994	$	1,374,771	$	1,695,985	$	3,070,756
Accrued interest		429,064		-		429,064		142,112		-		142,112
Accrued expenses		469,053		-		469,053		244,931		76,415		321,346
Notes payable, net		4,860,221		-		4,860,221		2,229,812		300,000		2,529,812
Indebtedness to related parties		476,661		-		476,661		-		-		-
Income tax payable		506,145		-		506,145		506,145		-		506,145
Operating lease obligations, current		47,084		-		47,084		-		-		-
Finance lease obligations, current		134,239		-		134,239		80,132		61,877		142,009
TOTAL CURRENT LIABILITIES		8,921,461		-		8,921,461		4,577,903		2,134,277		6,712,180
Note payable, net		-		-		-		161,072				161,072
Operating lease obligations, long term		114,052		-		114,052		-				-
Finance lease obligations, long term		3,565,622		-		3,565,622		3,646,540		2,347,511		5,994,051
TOTAL LIABILITIES	$	12,601,135	$	-	$	12,601,135	$	8,385,515	$	4,481,788	$	12,867,303

	For the Three Months Ended December 31,
	2019									2018
	Continuing			Discontinued			Total			Continuing			Discontinued			Total
Sales revenue	$	254,131		$	192,070		$	446,201		$	695,764		$	-		$	695,764
Cost of goods sold		(675,933	)		(193,915	)		(869,848	)		(302,569	)		-			(302,569	)
Gross profit (loss)		(421,802	)		(1,845	)		(423,647	)		393,195			-			393,195
General and administrative expenses		1,744,699			666,042			2,410,741			2,456,411			526,210			2,982,621
LOSS FROM OPERATIONS		(2,166,501	)		(667,887	)		(2,834,388	)		(2,063,216	)		(526,210	)		(2,589,426	)
OTHER INCOME/(EXPENSE)
Interest expense		(419,264	)		(52,769	)		(472,033	)		(258,522	)		(62,627	)		(321,149	)
Other income/(expense)		(118,695	)		-			(118,695	)		(402,504	)					(402,504	)
Loss on extinguishment		(92,795	)		-			(92,795	)		-			-			-
Gain on deconsolidation of subsidiary		4,502,058			-			4,502,058			-			-			-
Total other expense		3,871,304			(52,769	)		3,818,535			(661,026	)		(62,627	)		(723,653	)
NET LOSS BEFORE INCOME TAXES		1,704,803			(720,656	)		984,147			(2,724,242	)		(588,837	)		(3,313,079	)
Income tax expense		-			-			-			(737,568	)		-			(737,568	)
NET INCOME/(LOSS)	$	1,704,803		$	(720,656	)	$	984,147		$	(3,461,810	)	$	(588,837	)	$	(4,050,647	)

	For the Nine Months Ended December 31,
	2019									2018
	Continuing			Discontinued			Total			Continuing			Discontinued			Total
Sales revenue	$	2,336,505		$	569,077		$	2,905,582		$	2,728,277		$	-		$	2,728,277
Cost of goods sold		(3,157,452	)		(574,544	)		(3,731,996	)		(1,185,878	)		-			(1,185,878	)
Gross profit (loss)		(820,947	)		(5,467	)		(826,414	)		1,542,399			-			1,542,399
General and administrative expenses		5,213,561			1,292,613			6,506,174			10,079,767			1,935,766			12,015,533
LOSS FROM OPERATIONS		(6,034,508	)		(1,298,080	)		(7,332,588	)		(8,537,368	)		(1,935,766	)		(10,473,134	)
OTHER INCOME/(EXPENSE)
Interest expense		(1,332,637	)		(178,140	)		(1,510,777	)		(4,681,235	)		(188,947	)		(4,870,182	)
Other income/(expense)		74,920			-			74,920			(3,352,311	)		-			(3,352,311	)
Loss on extinguishment		(216,954	)		-			(216,954	)		-			-			-
Gain on deconsolidation of subsidiary		4,502,058			-			4,502,058			-			-			-
Total other expense		3,027,387			(178,140	)		2,849,247			(8,033,546	)		(188,947	)		(8,222,493	)
NET LOSS BEFORE INCOME TAXES		(3,007,121	)		(1,476,220	)		(4,483,341	)		(16,570,914	)		(2,124,713	)		(18,695,627	)
Income tax expense		-			-			-			(737,568	)		-			(737,568	)
NET LOSS	$	(3,007,121	)	$	(1,476,220	)	$	(4,483,341	)	$	(17,308,482	)	$	(2,124,713	)	$	(19,433,195	)

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	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	$	1,704,803
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		1,756,411
Net loss from discontinued operations available to common stockholders		(360,329	)
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	$	1,756,411			325,790,554	$	0.01
Net loss from discontinued operations	$	(360,329	)		325,790,554	$	(0.00	)
Net loss	$	1,396,082			325,790,554	$	0.00

XML

Note 10 - Sale of 50% Membership Interest in GB Sciences Louisiana, LLC (Tables)

9 Months Ended

Dec. 31, 2019

Notes Tables

Schedule of Note Receivable with Imputed Interest [Table Text Block]

Wellcana Note Receivable	Note Payments
June 1, 2020	$	500,000
September 1, 2020		750,000
December 1, 2020		1,000,000
March 1, 2020		1,250,000
June 1, 2021		1,500,000
September 1, 2021		1,500,000
December 1, 2021		1,500,000
TOTAL PAYMENTS		8,000,000
DISCOUNT ON NOTE RECEIVABLE		(1,389,408	)
NET PRESENT VALUE	$	6,610,592

Schedule of Deconsolidation [Table Text Block]

	As of
	November 15, 2019
Present value of promissory note	$	6,610,592
Carrying amount of non-controlling interest		8,707,651
TOTAL		15,318,243
Carrying amount of assets		14,715,798
Carrying amount of liabilities		(3,899,613	)
Net assets deconsolidated		10,816,185
GAIN ON DECONSOLIDATION	$	4,502,058

XML

Note 5 - Notes Payable - Schedule of Debt Payable (Details) - USD ($)	Dec. 31, 2019	Apr. 23, 2019	Mar. 31, 2019
Discount, short-term notes payable	$ (1,008,086)		$ (799,410)
Note Payable to John Davis [Member]
Face Value, short-term notes payable	151,923
Discount, short-term notes payable
Carrying Value, short-term notes payable	151,923
Convertible Notes Payable [Member] | The 6% Note Payable Due November 30, 2018 [Member]
Face Value, short-term notes payable	1,257,000
Discount, short-term notes payable	(257,177)
Carrying Value, short-term notes payable	999,823
Convertible Notes Payable [Member] | The 8% Convertible Promissory Note Dated April 23, 2019 [Member]
Face Value, short-term notes payable	2,640,000	$ 2,765,000
Discount, short-term notes payable	(142,314)
Carrying Value, short-term notes payable	2,497,686
Senior Secured Convertible Promissory Note [Member] | The Amended 8% Senior Secured Convertible Promissory Note Dated February 28, 2019 [Member]
Face Value, short-term notes payable	1,271,863
Discount, short-term notes payable	(584,842)
Carrying Value, short-term notes payable	687,021
Promissory Note [Member]
Face Value, short-term notes payable	6,020,230
Discount, short-term notes payable	(1,008,086)
Carrying Value, short-term notes payable	5,012,144
Promissory Note [Member] | The 0% Note Payable Dated October 23, 2017 [Member]
Face Value, short-term notes payable	369,444
Discount, short-term notes payable	(23,753)
Carrying Value, short-term notes payable	345,691
Line of Credit [Member]
Face Value, short-term notes payable	330,000
Discount, short-term notes payable
Carrying Value, short-term notes payable	$ 330,000

XML

Note 4 - Leases - Future Minimum Lease Payments (Details) - USD ($)	Dec. 31, 2019	Mar. 31, 2019
2020 (6 Months), finance leases	$ 185,871
2020 (6 Months), operating leases	17,547
2021, finance leases	528,443
2021, operating leases	71,548
2022, finance leases	544,296
2022, operating leases	73,939
2023, finance leases	560,625
2023, operating leases	38,101
2024, finance lease	577,444
2024, operating leases	3,926
Thereafter, finance leases	4,375,869
Thereafter, operating leases
Total undiscounted lease payments, finance leases	6,772,548
Total undiscounted lease payments, operating leases	205,061
Less: Amount representing interest, finance leases	(3,072,687)
Less: Amount representing interest, operating leases	(43,925)
Present value of minimum lease payments, finance leases	3,699,861
Present value of minimum lease payments, operating leases	161,136
Less: Current maturities of lease obligations, finance leases	(134,239)	$ (80,132)
Less: Current maturities of lease obligations, operating leases	(47,084)
Finance lease obligations, long term	3,565,622	3,646,540
Operating lease obligations, long term	$ 114,052

XML

Note 9 - Related Party Transactions (Details Textual) - USD ($)			3 Months Ended	9 Months Ended
	Oct. 01, 2019	Nov. 01, 2017	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Mar. 31, 2019
Due to Officers or Stockholders, Current				$ 324,738
Notes Payable, Related Parties, Current				$ 151,923
Stock Issued During Period, Shares, Issued for Services	2,000,000			2,500,000
Other Expenses, Total					$ 3,140,925
THC Note [Member] | Line of Credit [Member]
Line of Credit Facility, Current Borrowing Capacity		$ 300,000
Repayment as Percent of Gross Revenue		25.00%
Proceeds from Related Party Debt					253,034
Officer [Member]
Due to Officers or Stockholders, Current				$ 324,738
Unpaid Wages, Related Parties				142,637
Unpaid Bonuses, Related Parties				75,747
Reimbursement for Business Expense, Related Parties				106,354
John Davis [Member]
Notes Payable, Related Parties, Current				$ 151,923
Quantum Shop [Member]
Related Party Transaction, Amounts of Transaction					1,100,000
Electrum Partners, LLC [Member]
Related Party Transaction, Amounts of Transaction					$ 73,904
Stock Issued During Period, Shares, Issued for Services					285,412
Restricted Stock or Unit Expense					$ 99,596
THCLLC [Member]
Capitalization of Fair Value of Machinery and Equipment			$ 139,411
Other Expenses, Total			$ 113,623		$ 113,623
THCLLC [Member] | Minimum [Member]
Royalty Rates		20.00%
THCLLC [Member] | Maximum [Member]
Royalty Rates		25.00%

XML

Note 6 - Convertible Notes

9 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Convertible Debt [Text Block]

Note

6

– Convertible Notes

March 2017

Convertible Note Offering

In

March 2017,

the Company issued short-term Promissory Notes (“Notes”) to various holders with combined face value of

$965,500.

The Notes are payable within

three

years of issuance and are convertible into

3,862,000

shares of the Company’s common stock. The Company also issued

3,862,000

common stock warrants to the Note holders. 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 beneficial conversion feature resulting from the discounted conversion price compared to the market price was calculated based on the date of issuance to be

$416,733

after adjusting the effective conversion price for the relative fair value of the note proceeds compared to the fair value of the attached warrants and note. In addition to this discount related to the beneficial conversion feature, an additional discount of

$548,767

was recorded based on the fair value of the warrants attached to the note. This value was derived using the Black-Scholes valuation model.

During the

three

months ended

June 30, 2017,

the Company issued short-term Promissory Notes (“Notes”) to various holders with combined face value of

$1,034,500.

The Notes are payable within

three

years of issuance and are convertible into

4,138,000

shares of the Company’s common stock. The Company also issued

4,138,000

common stock warrants to the Note holders. 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 beneficial conversion feature resulting from the discounted conversion price compared to the market price was calculated based on the date of issuance to be

$487,957

after adjusting the effective conversion price for the relative fair value of the note proceeds compared to the fair value of the attached warrants and note. In addition to this discount related to the beneficial conversion feature, an additional discount of

$480,236

was recorded based on the fair value of the warrants attached to the note. This value was derived using the Black-Scholes valuation model.

July 2017

Convertible Note Offering

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.

During the

three

months ended

September 30, 2017,

the Company issued short-term Promissory Notes (“Notes”) to various holders with combined face value of

$3,085,000.

The Notes are payable within

three

years of issuance and are convertible into

12,340,000

shares of the Company’s common stock. The Company also issued

12,340,000

common stock warrants to the Note holders. 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

$0.65

per share for a period of

three

years.  The beneficial conversion feature resulting from the discounted conversion price compared to the market price was calculated based on the date of issuance to be

$1,541,797

after adjusting the effective conversion price for the relative fair value of the note proceeds compared to the fair value of the attached warrants and note. In addition to this discount related to the beneficial conversion feature, an additional discount of

$1,532,335

recorded based on the fair value of the warrants attached to the note. This value was derived using the Black-Scholes valuation model.

During the

three

months ended

December 31, 2017,

the Company issued short-term Promissory Notes (“Notes”) to various holders with combined face value of

$4,116,000.

The Notes are payable within

three

years of issuance and are convertible into

16,464,000

shares of the Company’s common stock. The Company also issued

16,464,000

common stock warrants to the Note holders. 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

$0.65

per share for a period of

three

years.  The beneficial conversion feature resulting from the discounted conversion price compared to the market price was calculated based on the date of issuance to be

$1,600,808

after adjusting the effective conversion price for the relative fair value of the note proceeds compared to the fair value of the attached warrants and note. In addition to this discount related to the beneficial conversion feature, an additional discount of

$2,417,856

was recorded based on the fair value of the warrants attached to the note. This value was derived using the Black-Scholes valuation model.

As of

December 31, 2019

, convertible notes having a carrying value of

$

999,823

, net of unamortized discount of 

$ (

257,177

)

remained outstanding from the

March 2017

and

July 2017

note offerings, and accrued interest on the notes was

$

178,381

. Interest expense for the

nine

months ended

December 31, 2019

, was

$

364,575

, of which 

$

307,752

was amortization of the note discount.

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, LP (together, “CSW Note”). The note matures on

August 28, 2020

and is 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 its 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. During the

nine

months ended

December 31, 2019

, the Company recorded accrued interest on the CSW Note of

$32,186

and recorded an additional

$61,286

in interest expense as the result of amortization of the note discount.

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,

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.

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 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.

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.

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 carrrying amount of the note was

$687,021,

net of

$584,842

in unamortized discount from the beneficial conversion feature.

During the

nine

months ended

December 31, 2019

, we recorded interest expense of 

$

89,624

related to the CSW Note and its amendments consisting of 

$

27,270

in accrued interest and 

$

62,354

related to amortization of the note discount.

The Company is in default on the amended CSW Note due to non-payment of the quarterly interest payments due on

October 1, 2019,

and

January 1, 2020,

and nonpayment of an income tax liability related to the

March 31, 2018

tax year. The terms of the note provide that the Company has

5

days to cure a default caused by nonpayment of interest and

ten

days to cure a default caused by noncompliance with affirmative or negative debt covenants. As of the date of this report, the lender has

not

provided formal notice of the default and the Company anticipates that the CSW Note will be settled in full upon close of the sale of

75%

of the Company's interests in its Nevada operations to an entity affiliated with CSW Ventures, LP (Note

10

). Upon written notice of default to the Company, the lender

may

accelerate the payment of principal and interest, impose a penalty interest rate of

10%,

and enforce its remedies under the Security Agreement.

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. 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 matures 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

nine

months ended

December 31, 2019

, interest expense related to the note was

$

164,150

, of which 

$

109,870

was amortization of the note discount.

The Company

may

be in default on the Iliad Note due to nonpayment of an income tax liability related to the

March 31, 2018

tax year. In addition, the note includes cross-default and cross-acceleration clauses that

may

be triggered by the defaults on the Company’s other debts described above in Note

5

and Note

6.

The Company has

not

received formal notice of default from the lender and intends to work with the lender to negotiate terms of a forbearance arrangement. In the event of default, the lender's rights under the promissory note include enforcing a penalty interest rate of

15%

and increasing the balance outstanding under the note by

10%.

As inducement for the temporary forbearance of formal default proceedings, the Company has honored the conversion of a total of a total of

$125,000

of debt owed under 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 expense in that amount. 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. The fair value of the shares issued exceeded the fair value of the shares issuable under the original terms of the Note by

$62,353,

and the Company recorded an expense in that amount. In total, the Company recorded

$

127,059

in noncash expense for the

two

conversions of the Iliad note at below contractual conversion rates for the

three

and

nine

months ended

December 31, 2019

.

XML

Note 10 - Sale of 50% Membership Interest in GB Sciences Louisiana, LLC

9 Months Ended

Dec. 31, 2019

GB Sciences Louisiana, LLC, Sale of Equity [Member]

Notes to Financial Statements

Noncontrolling Interest Disclosure [Text Block]

Note

10

– Sale of

50%

Membership Interest in GB Sciences Louisiana, LLC

On

February 12, 2018,

the Company’s wholly-owned subsidiary, GB Sciences Louisiana, LLC (“GBSLA"), issued members’ equity interests equal to

15%

in GBSLA to Wellcana Group, LLC (“Wellcana”) for

$3

million. Under the GBSLA operating agreement, Wellcana had an option to make additional capital contributions for the purchase of up to an additional

35%

membership interest in GBSLA, at the rate of

5%

membership interest per

$1

million contributed. To date, Wellcana has made additional cash contributions of

$7.0

million and its non-controlling interest in GBSLA increased to

49.99%.

The capital contributions have been used to fund the buildout of the Petroleum Drive facility and to pay for the operating costs of GBSLA.

On

November 15, 2019,

the Company entered into the Membership Interest Purchase Agreement ("MIPA") with Wellcana Plus, LLC ("Purchaser"), an affiliate of Wellcana Group, LLC. In consideration for the sale of its

50.01%

membership interest in GBSLA, the Company received the

$8,000,000

Promissory Note  ("Wellcana Note") and

may

receive up to an additional

$8,000,000

in earn-out payments.

The Wellcana note bears interest at a rate of

5%

per annum and payments are due beginning

June 1, 2020,

and ending

December 1, 2021.

The Company recorded a

$1,389,408

discount on the note receivable based on an imputed interest rate of

17.0%,

and the carrying amount of the note was

$6,610,592

as of

November 15, 2019:

Wellcana Note Receivable	Note Payments
June 1, 2020	$	500,000
September 1, 2020		750,000
December 1, 2020		1,000,000
March 1, 2020		1,250,000
June 1, 2021		1,500,000
September 1, 2021		1,500,000
December 1, 2021		1,500,000
TOTAL PAYMENTS		8,000,000
DISCOUNT ON NOTE RECEIVABLE		(1,389,408	)
NET PRESENT VALUE	$	6,610,592

The Company

may

also receive up to

$8,000,000

in earn-out payments under the MIPA. Earn-out payments are calculated as

25%

of the distributions made by GBSLA to Purchaser through

September 30, 2022,

and

10%

of distributions made thereafter under any extension or renewal of the relationship with LSU. The Company accounts for contingent consideration under a loss recovery approach. Under a loss recovery approach, the Company records a contingent consideration asset only to the extent of the lesser of,

1

) the amount that the non-contingent consideration received is exceeded by the net assets deconsolidated, or

2

) the amount of contingent consideration that it is probable will be received. As of the transaction date, the Company was unable to determine that it was probable that any of the contingent consideration would be received, and accordingly

no

asset was recorded for contingent consideration. Subsequent measurement of contingent consideration will be based on the guidance for gain contingencies, and any gain from contingent consideration will be recorded at the time the consideration is received.

Based on the foregoing assessment of the consideration received, the Company recorded a gain on deconsolidation of

$4,502,058

related to the sale of its membership interest in GBSLA, calculated as follows:

	As of
	November 15, 2019
Present value of promissory note	$	6,610,592
Carrying amount of non-controlling interest		8,707,651
TOTAL		15,318,243
Carrying amount of assets		14,715,798
Carrying amount of liabilities		(3,899,613	)
Net assets deconsolidated		10,816,185
GAIN ON DECONSOLIDATION	$	4,502,058

For all periods presented in the unaudited financial statements, the assets, liabilities, income, and cash flows of GBSLA have been reclassified to discontinued operations. The losses and cash flows from discontinued operations for the

three

and 

nine

months ended

December 31, 2019

represent activity through the close of the sale on

November 15, 2019.

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Sales revenue	$ 254,131	$ 695,764	$ 2,336,505	$ 2,728,277
Cost of goods sold	(675,933)	(302,569)	(3,157,452)	(1,185,878)
Gross profit (loss)	(421,802)	393,195	(820,947)	1,542,399
General and administrative expenses	1,744,699	2,456,411	5,213,561	10,079,767
LOSS FROM OPERATIONS	(2,166,501)	(2,063,216)	(6,034,508)	(8,537,368)
OTHER INCOME (EXPENSE)
Interest expense, net	(419,264)	(258,522)	(1,332,637)	(4,681,235)
Other expense	(118,695)	(402,504)	74,920	(3,352,311)
Loss on extinguishment	(92,795)		(216,954)
Gain on deconsolidation of subsidiary	4,502,058		4,502,058
Total other income/(expense)	3,871,304	(661,026)	3,027,387	(8,033,546)
NET INCOME/(LOSS) BEFORE INCOME TAXES	1,704,803	(2,724,242)	(3,007,121)	(16,570,914)
Income tax expense		(737,568)		(737,568)
INCOME/(LOSS) FROM CONTINUING OPERATIONS	1,704,803	(3,461,810)	(3,007,121)	(17,308,482)
Loss from discontinued operations	(720,656)	(588,837)	(1,476,220)	(2,124,713)
NET INCOME/(LOSS)	984,147	(4,050,647)	(4,483,341)	(19,433,195)
Net loss attributable to non-controlling interest	(360,327)	(287,406)	(738,107)	(762,966)
NET INCOME/(LOSS) ATTRIBUTABLE TO GB SCIENCES, INC.	1,344,474	(3,763,241)	(3,745,234)	(18,670,229)
Continuing operations	1,704,803	(3,461,810)	(3,007,121)	(17,308,482)
Discontinued operations	(360,329)	(301,431)	(738,113)	(1,361,747)
Net income/(loss)	1,344,474	(3,763,241)	(3,745,234)	(18,670,229)
Continuing operations	1,756,411	(3,461,810)	(3,007,121)	(17,308,482)
Discontinued operations	(360,329)	(301,431)	(738,113)	(1,361,747)
Net income/(loss)	$ 1,396,082	$ (3,763,241)	$ (3,745,234)	$ (18,670,229)
Continuing operations, basic (in dollars per share)	$ 0.01	$ (0.02)	$ (0.01)	$ (0.08)
Discontinued operations, basic (in dollars per share)				(0.01)
Net income/(loss), basic (in dollars per share)	0.01	(0.02)	(0.01)	(0.09)
Continuing operations, diluted (in dollars per share)	0.01	(0.02)	(0.01)	(0.08)
Discontinued operations, diluted (in dollars per share)				(0.01)
Net income/(loss), diluted (in dollars per share)		$ (0.02)	$ (0.01)	$ (0.09)
Weighted average common shares outstanding - basic (in shares)	263,055,254	222,856,453	253,297,660	200,971,724
Weighted average common shares outstanding - diluted (in shares)	325,790,554	222,856,453	253,297,660	200,971,724

XML

Note 2 - Going Concern

9 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Substantial Doubt about Going Concern [Text Block]

Note

2

– Going Concern

The Company’s condensed consolidated 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 $

(

88,764,145

)

at

December 31, 2019

. The Company had a working capital deficit of  

$ (

5,795,395

)

at

December 31, 2019

, compared to

$ (

3,245,409

)

including a deficit of 

$ (

1,133,890

)

from discontinued operations at

March 31, 2019

. In addition, the Company has consumed cash in its operating activities of $

(

4,248,291

)

including $

(

1,244,721

)

from discontinued operations for the

nine

months ended

December 31, 2019

, compared to $

(

7,847,751

)

including $

(

447,852

)

from discontinued operations for the same period last year. 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 securing capital necessary to achieve its goals.

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 consolidated 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.