Note 4 - Discontinued Operations

12 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

Note 4 - Discontinued Operations

Discontinued Operations

Discontinued operations comprise those activities that were disposed of during the period, or which were classified as held for sale at the end of the period and represent a separate major line of business or geographical area that can be clearly distinguished for operational and financial reporting purposes. The Company has included its subsidiaries GB Sciences Nevada, LLC, GB Sciences Las Vegas, LLC, and GB Sciences Nopah, LLC in discontinued operations due to the sale of the Company's Nevada Subsidiaries (Note 13).

The assets and liabilities associated with discontinued operations included in our consolidated balance sheets as of  March 31, 2023 and 2022 were as follows:

	March 31, 2023						March 31, 2022
	Continuing		Discontinued Nevada Subsidiaries		Total		Continuing		Discontinued Nevada Subsidiaries		Total
ASSETS
CURRENT ASSETS
Cash	$	109,912	$	-	$	109,912	$	233,893	$	-	$	233,893
Prepaid and other current assets		199,592		-		199,592		93,933		-		93,933
TOTAL CURRENT ASSETS		309,504		-		309,504		327,826		-		327,826
Intangible assets, net		42,819		-		42,819		2,222,074		-		2,222,074
TOTAL ASSETS	$	352,323	$	-	$	352,323	$	2,549,900	$	-	$	2,549,900
LIABILITIES
CURRENT LIABILITIES
Accounts payable	$	1,982,740	$	-	$	1,982,740	$	1,657,008	$	-	$	1,657,008
Accrued interest		346,806		-		346,806		384,769		-		384,769
Accrued liabilities		75,628		-		75,628		9,627		-		9,627
Notes and convertible notes payable, net		935,000		-		935,000		987,565		-		987,565
Convertible notes payable, net		461,077		-		461,077		-		-		-
Income tax payable		958,455		-		958,455		896,495		-		896,495
TOTAL CURRENT LIABILITIES		4,759,706		-		4,759,706		3,935,464		-		3,935,464
Convertible notes payable, net		-		-		-		397,308		-		397,308
TOTAL LIABILITIES	$	4,759,706	$	-	$	4,759,706	$	4,332,772	$	-	$	4,332,772

The revenues and expenses associated with discontinued operations included in our consolidated statements of operations for the years ended  March 31, 2023 and 2022, were as follows:

	2023								2022
	Continuing			Discontinued - Nevada		Total			Continuing			Discontinued - Nevada			Total
Sales revenue	$	-		$	-	$	-		$	-		$	3,369,812		$	3,369,812
Cost of goods sold		-			-		-			-			(3,072,622	)		(3,072,622	)
Gross profit (loss)		-			-		-			-			297,190			297,190
General and administrative expenses		1,672,281			-		1,672,281			1,868,734			264,515			2,133,249
LOSS FROM OPERATIONS		(1,672,281	)		-		(1,672,281	)		(1,868,734	)		32,675			(1,836,059	)
OTHER INCOME/(EXPENSE)
Gain on extinguishment		-			-		-			22,405			-			22,405
Gain on deconsolidation		-			-		-			5,206,208			-			5,206,208
Interest expense		(178,652	)		-		(178,652	)		(474,768	)		(302,923	)		(777,691	)
Loss on impairment of note receivable		-			-		-			(3,025,000	)		-			(3,025,000	)
Loss on impairment of capitalized patent costs		(2,374,261	)		-		(2,374,261	)		-			-			-
Loss on disposal		-			-		-			(15,639	)		-			(15,639	)
Other income		100,000			-		100,000			9,000			20,889			29,889
TOTAL OTHER INCOME/(EXPENSE)		(2,452,913	)		-		(2,452,913	)		1,722,206			(282,034	)		1,440,172
NET LOSS BEFORE INCOME TAXES		(4,125,194	)		-		(4,125,194	)		(146,528	)		(249,359	)		(395,887	)
Income tax expense		-			-		-			-			(134,986	)		(134,986	)
NET LOSS	$	(4,125,194	)	$	-	$	(4,125,194	)	$	(146,528	)	$	(384,345	)	$	(530,873	)

Discontinued Operations - Accounts Receivable

Accounts receivable are carried at their estimated collectible amounts. Trade accounts receivable are periodically evaluated for collectability based on aging and subsequent collections. There were no accounts receivable at March 31, 2023 and March 31, 2022 due to the deconsolidation of the Nevada Subsidiaries (Note 13).

Discontinued Operations - Inventory

We value inventory at the lower of the actual cost of our inventory, as determined using the first-in, first-out method, or its current estimated market 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. Indirect costs, which primarily related to the lease and operation costs of the Teco Facility, are allocated based on square footage of the facility used in the production of inventory.

Raw materials consist of supplies, materials, and consumables used in the cultivation and extraction processes. Work-in-progress consisted of live plants and cannabis in the drying, curing, and trimming processes. Finished goods includes completed cannabis flower, trim, and extracts in bulk and packaged forms. There is no remaining inventory on the Company's consolidated balance sheet as of March 31, 2023 and March 31, 2022, due to the sale and deconsolidation of the Nevada Subsidiairies (Note 13).

Discontinued Operations - Deposits and Noncurrent Assets

There were no deposits and noncurrent assets from discontinued operations at March 31, 2023 and 2022, due to the deconsolidation of the Nevada Subsidiaries. 

Discontinued Operations - Leases

The Company evaluates all finance and operating leases, and they are measured on the balance sheet with a lease liability and right-of-use asset (“ROU”) at inception. 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. 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. 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 Company's only remaining lease commitment was a finance lease for the Nevada Subsidiaries, which is classified as discontinued operations in the Company's consolidated balance sheet at March 31, 2021. This lease had a remaining non-cancelable term ending December 31, 2025 with an option to extend through December 31, 2030. The rate used to discount this lease was 11.5%.

Finance leases are included in property and equipment (long term assets from discontinued operations), finance lease obligations, short term (current liabilities from discontinued operations), and finance lease obligations, long term (long term liabilities from discontinued operations), on the balance sheet as of March 31, 2021.

The right-of-use asset and lease liability were deconsolidated at December 31, 2021 due to the close of the sale of the Nevada Subsidiaries. The lease costs included in discontinued operations for the years ended  March 31, 2023 and 2022 are set forth in the table below:

		March 31,
Lease costs (discontinued operations)	Classification on the Statements of Operations	2023		2022
Discontinued operations:
Finance leases - amortization of ROU assets	Loss from discontinued operations	$	-	$	116,024
Finance leases - interest on lease liabilities	Loss from discontinued operations		-		301,796
Operating leases	Loss from discontinued operations		-		-
Total lease cost, discontinued operations		$	-	$	417,820

Discontinued Operations - 8% Line of Credit dated November 27, 2019

In connection with the Binding Letter of Intent dated November 27, 2019 (Note 13), the Teco Subsidiaries entered into a promissory note and line of credit for up to $470,000 from the purchaser of the membership interests in the Teco Subsidiaries. The purpose of the line of credit was to supply working capital for the Teco Subsidiaries, and the note matures upon the close of the sale of the Teco Subsidiaries. The principal and accrued interest balances outstanding at the time of closing will be considered paid in full upon closing and will not reduce the purchase price received by GB Sciences. In total, the Teco Subsidiaries received $485,000 in advances under the line of credit, reflecting an informal agreement with the lender to increase the line of credit by $15,000. On December 29, 2020, the Company entered into the Omnibus Amendment with the purchaser of the Teco Facility, which provided that no further interest would accrue on the line of credit after November 30, 2020. The balance of the line of credit was $485,000 at  December 31, 2021 and accrued interest was $49,211, prior to deconsolidation. The note and related interest expense are included in current liabilities from discontinued operations and loss from discontinued operations on the Company's March 31, 2021 balance sheet.