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.