Registration of securities issued in business combination transactions

Discontinued Operations

v3.23.3
Discontinued Operations
6 Months Ended 12 Months Ended
Jun. 30, 2023
Dec. 31, 2022
Discontinued Operations [Abstract]    
Discontinued Operations

Note 12 — Discontinued Operations

During the quarter ended December 31, 2022, we committed to a strategic shift in our business strategy for 2023 and beyond including the sale of 365 Cannabis and LCA, or the Discontinued Group. Subsequent to the sales of 365 Cannabis and LCA that were completed in January 2023, we have no future involvement or relationships with these businesses. As a result of these actions, the assets and liabilities and results of operations of the Discontinued Group have been classified as held for sale and discontinued operations, respectively, for all periods presented.

The following table presents the major classes of assets and liabilities of the Discontinued Group:

 

As of
June 30,
2023

 

As of
December 31,
2022

Cash and restricted cash

 

$

 

$

305,500

Accounts receivable, net

 

 

 

 

112,444

Prepaid expenses & other current assets

 

 

 

 

578,393

Fixed assets

 

 

 

 

63,764

Capitalized software, net

 

 

 

 

828,555

Intangible assets, net

 

 

 

 

3,241,372

Total assets held for sale

 

$

 

$

5,130,028

   

 

   

 

 

Accounts payable, accrued expenses and other current liabilities

 

$

 

$

1,034,426

Deferred revenue

 

 

 

 

994,713

Deferred revenue, noncurrent

 

 

 

 

217,083

Total liabilities held for sale

 

$

 

$

2,246,222

The following table summarizes the results of operations of the Discontinued Group:

 

Three Months Ended June 30,

 

Six Months Ended June 30,

   

2023

 

2022

 

2023

 

2022

Revenue

 

$

 

$

2,596,205

 

 

$

214,346

 

 

$

5,301,966

 

Cost of revenue

 

 

 

 

660,717

 

 

 

10,119

 

 

 

1,341,379

 

Gross profit

 

 

 

 

1,935,488

 

 

 

204,227

 

 

 

3,960,587

 

Product development

 

 

 

 

486,056

 

 

 

117,500

 

 

 

875,670

 

Sales and marketing

 

 

 

 

1,206,228

 

 

 

171,753

 

 

 

2,391,207

 

General and administrative

 

 

 

 

65,019

 

 

 

4,032

 

 

 

713,120

 

Depreciation and amortization

 

 

 

 

540,272

 

 

 

24,507

 

 

 

1,052,219

 

Impairment of long-lived assets

 

 

 

 

9,006,222

 

 

 

 

 

 

9,037,642

 

Other expense (income), net

 

 

 

 

(303,930

)

 

 

1,833

 

 

 

(303,930

)

Loss from discontinued operations before income taxes

 

 

 

 

(9,064,379

)

 

 

(115,398

)

 

 

(9,805,341

)

Income tax benefit

 

 

 

 

 

 

 

 

 

 

 

Loss from discontinued operations, net of tax

 

 

 

 

(9,064,379

)

 

 

(115,398

)

 

 

(9,805,341

)

Gain on sale of discontinued operations, net of tax

 

 

 

 

 

 

 

212,601

 

 

 

 

Net gain (loss) from discontinued operations, net of tax

 

$

 

$

(9,064,379

)

 

$

97,203

 

 

$

(9,805,341

)

The impairment of long-lived assets for the six months ended June 30, 2023 is attributable to goodwill associated with 365 Cannabis ($9.0 million) and LCA (less than $0.1 million). Other expense (income), net includes a reversal of bad debt expense of $0.3 million during the 2022 periods. We recognized a gain on the disposition of the Discontinued Group as the sum of the cash proceeds received, or $0.6 million, and the termination and release of the Earn-out Obligation, or $2.3 million, exceeded the carrying values of $2.7 million attributable to the net assets of the Discontinued Group upon their dispositions in January 2023. While there were none during the six months ended June 30, 2023, the Discontinued Group incurred capital expenditures for capitalized software assets of $0.6 million for the six months ended June 30, 2023. There were no material non-cash investing and financing activities attributable to the Discontinued Group for the six months ended June 30, 2023 and 2022, respectively.

Note 17 — Discontinued Operations

During the quarter ended December 31, 2022, we committed to a strategic shift in our business strategy for 2023 and beyond including the sale of 365 Cannabis and LCA, or the Discontinued Group. Subsequent to the sales of 365 Cannabis and LCA that were completed in January 2023, we will have no future involvement or relationships with these businesses. As a result of these actions, the assets and liabilities and results of operations of the Discontinued Group have been classified as held for sale and discontinued operations, respectively, for all periods presented.

The following table presents the major classes of assets and liabilities of the Discontinued Group:

 

As of December 31,

   

2022

 

2021

Cash and restricted cash

 

$

305,500

 

$

1,354,899

Accounts receivable, net

 

 

112,444

 

 

530,086

Prepaid expenses & other current assets

 

 

578,393

 

 

258,042

Fixed assets

 

 

63,764

 

 

87,123

Capitalized software, net

 

 

828,555

 

 

371,023

Intangible assets, net

 

 

3,241,372

 

 

15,056,111

Goodwill

 

 

 

 

14,098,384

Other noncurrent assets

 

 

 

 

9,700

Total assets

 

$

5,130,028

 

$

31,765,368

   

 

   

 

 

Accounts payable, accrued expenses and other current liabilities

 

$

1,034,426

 

$

677,747

Deferred revenue

 

 

994,713

 

 

2,672,019

Deferred revenue, noncurrent

 

 

217,083

 

 

336,773

Total liabilities

 

$

2,246,222

 

$

3,686,539

   

 

   

 

 

Current assets held for sale

 

$

5,130,028

 

$

2,143,027

Noncurrent assets held for sale

 

 

 

 

29,622,341

Total assets held for sale

 

$

5,130,028

 

$

31,765,368

   

 

   

 

 

Current liabilities held for sale

 

$

2,246,222

 

$

3,349,766

Noncurrent liabilities held for sale

 

 

 

 

336,773

Total liabilities held for sale

 

$

2,246,222

 

$

3,686,539

The following table summarizes the results of operations of the Discontinued Group:

 

Year Ended December 31,

   

2022

 

2021

Revenue

 

$

9,453,309

 

 

$

3,057,877

 

Cost of revenue

 

 

2,418,322

 

 

 

685,603

 

Gross profit

 

 

7,034,987

 

 

 

2,372,274

 

Research and development

 

 

1,807,068

 

 

 

379,943

 

Sales and marketing

 

 

4,166,545

 

 

 

1,399,908

 

General and administrative

 

 

472,479

 

 

 

248,578

 

Depreciation and amortization

 

 

2,212,438

 

 

 

560,599

 

Impairment of long-lived assets

 

 

22,811,310

 

 

 

29,196

 

Changes in fair value of contingent consideration

 

 

(4,016,194

)

 

 

 

Interest expense

 

 

596

 

 

 

794

 

Loss from discontinued operations before income taxes

 

 

(20,419,255

)

 

 

(246,744

)

Income tax benefit

 

 

(12,919

)

 

 

(1,500

)

Net loss from discontinued operations, net of tax

 

$

(20,432,174

)

 

$

(248,244

)

The $22.8 million impairments of long-lived assets for the year ended December 31, 2022 are attributable to goodwill ($12.5 million), intangible assets ($10.0 million) and capitalized software ($0.3 million). Of this total, $22.2 million was attributable to 365 Cannabis and $0.6 million to LCA. The impairments of long-lived assets for the year ended December 31, 2021 are fully attributable to goodwill of LCA. The Discontinued Group incurred capital expenditures for capitalized software assets of $1.1 million and $0.4 million for the years ended December 31, 2022 and 2021, respectively. Other than those attributable to the acquisition of 365 Cannabis in 2021 which are disclosed in Note 4, there were no material non-cash investing and financing activities attributable to the Discontinued Group for the years ended December 31, 2022 and 2021, respectively.