GB Sciences Inc (GBLX)

[big_haze]

Company is The Happy Confections LLC (THC, a clever pun indeed), per the last 10-Q

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 (“GBSLV”). Dr. Andrea Small-Howard, a member of GB Science’s Board of Directors, is a Co-Managing Member of THCLLC. Under the EPA, THCLLC is to produce cannabis-infused baked goods and other edibles in GBSLV’s production facility upon approval of GBSLV’s Nevada Medical Marijuana Production License. The Company will receive a royalty of between 20% and 25% on all sales of edibles produced by THCLLC.

In 2017, GB lent them $300K on the basis they GB would earn a royalty on sales. In 2018 the agreement was terminated because THC was unable to find additional funding. It appears THC was an unsuccessful business - this is a poor reflection on Dr Small-Howard and I'm curious as to why they were unsuccessful.

As of September 30, 2018, the Company has advanced $253,034 under the THC Note. This amount, including accrued interest, is reported under the other assets caption on the Company’s September 30, 2018 balance sheet. Subsequent to September 30, 2018, the Company terminated its agreements with THC LLC, as further described below in Note 10.

Note 10

Termination of Agreements with THC LLC

On October 15, 2018, the Company gave notice to The Happy Confections, LLC (“THC LLC”) that Company would not provide any additional financing beyond the $300,000 Credit Line granted under the Non-Revolving Credit Line Agreement dated November 1, 2017. In this notice, the Company requested that THC LLC seek to find additional sources of financing to be able to fund the manufacture of edibles. The Company further notified THC LLC that the Company would terminate the Edibles Production Agreement and all other related agreements with THC LLC if it was unable to acquire additional funding by October 22, 2018. On October 19, 2018, the Company received a response from THC LLC that it was unable to acquire additional funding. Accordingly, the Company has terminated all of its agreements with THCLLC 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 include kitchen machinery and equipment, leasehold improvements, and inventory that will be used in the Company’s production operations at the Teco Facility. The Company is in the process of assessing the fair value of the collateral and anticipates recording a loss in October 2018 equal to the balance of the Non-Revolving Credit Line and Promissory Note in excess of the fair value of the collateral received.

Someone shout if I've got this wrong.