From last 10-Q
Note 11 – Deconsolidation of GB Sciences Puerto Rico, LLC
During the quarter, the Company agreed to transfer approximately 17% of its membership interest in GB Sciences Puerto Rico, LLC (GBSPR) to Cesar Cordero- Kruger, who at the time of the agreement owned approximately 34% of GBSPR. The Company did not receive any consideration in the transaction but was relieved of any obligation to fund the losses of GBSPR going forward.
As the result of the transaction, the Company deconsolidated the assets, liabilities and noncontrolling interests of GBSPR since its ownership interest was reduced to a non- controlling level.
Total net liabilities deconsolidated were $228,572, which consisted of the following:
October 1, 2017
Cash and cash equivalents 19,417
Long term deposits 112,134
Property and equipment 45,752
Less:
Accrued liabilities 405,000
Other liabilities 875
Net liabilities reconsolidated $ (228,572)
GBSPR has a history of recorded losses and no revenue or sales contracts to date. Its liabilities exceed its assets and management does not have any reason to believe that GBSPR will ever generate positive cash flows to the Company. The Company is not
obligated to fund GBSPR’s future losses. Based on these facts, the Company determined that the fair value of its remaining interest in GBSPR is zero and recorded a gain on the deconsolidation of GBSPR, calculated as follows:
October 1, 2017
Consideration received (Part missing. See 10-Q)
The gain on deconsolidation of GBSPRLLC is classified under the other income/ (expense) caption in the Company’s Condensed Consolidated Statement of Operations for the three and nine months ended December 31, 2017.
The investment in GBSPR will be accounted for under the equity method as the Company maintains significant influence but lacks control over GBSPR. Because the Company is not obligated to and does not intend to fund future losses, the Company’s share of GBSPR’s net losses will be suspended until GBSPR achieves cumulative net profitability.
