Quarterly report pursuant to Section 13 or 15(d)

Investment in Tess

v3.19.2
Investment in Tess
6 Months Ended
Jun. 30, 2019
Investments, All Other Investments [Abstract]  
Investment in Tess

Note 7. Investment in Tess:

 

In October 2017, the Company acquired approximately 52.01% of Tess, which is developing blockchain solutions for telecommunications companies. During the year ended December 31, 2018, Tess issued approximately 189,000 of its common shares, reducing the investment percentage held by the Company from 52.01% to 50.2%. On April 10, 2019, Tess closed on a funding agreement under which approximately 23.8 million shares of Tess were issued for CAD $1.2 million. As a result of this funding, the Company’s ownership in Tess was reduced to approximately 9% and Tess will no longer be consolidated in the Company’s consolidated financial statements.

 

As of June 30, 2019, the Company evaluated its remaining interest in Tess under the guidance of ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, and determined it should remeasure its retained interest at fair value upon deconsolidation to establish a new cost basis. As of April 10, 2019, the fair value of the Tess shares owned by the Company is approximately $0.1 million, calculated based upon the April 10, 2019 funding price as follows:

 

    April 10, 2019
Tess shares held by Riot Blockchain, Inc.     2,708,333  
Per share fair value   $ 0.03  
Fair value of Tess shares held by Riot Blockchain, Inc.   $ 90,174  

 

The Company accounts for deconsolidation of subsidiaries in which it loses controlling interest in the financial interest of the subsidiary in accordance with Accounting Standards Codification (“ASC”) 810-10-40 – “Consolidation”.

 

The deconsolidation of Tess resulted in a gain of approximately $1.1 million calculated as follows:

 

Current assets   $ 130,432  
Less:        
Accounts payable     761,875  
Accrued expenses     273,935  
Convertible notes     1,696,083  
Net liabilities     (2,601,461 )
Non-controlling interest share     1,552,848  
Sub-total     (1,048,613 )
Less: fair value of shares owned by Riot Blockchain     90,174  
Gain on deconsolidation of Tess   $ (1,138,787 )