Note 15 – Discontinued Operations

As discussed in Notes 1 and 4, we committed to a strategic shift in our business strategy and a complete exit from the SaaS business serving the cannabis industry. In support of that effort, we disposed of the Disposal Group through a series of sale transactions during 2023. We also effectively abandoned the Trellis, Solo and Viridian business units during 2023. Finally, we committed to the sale of MJF which closed in February 2024 in connection with the Sale Transaction and the Merger.

We sold 365 Cannabis in January 2023 for cash proceeds of $0.5 million and the termination and release of the Earn-out Obligation. In accordance with the agreement to sell 365 Cannabis, which was entered into in 2022, we and the buyers agreed that the value of the Earn-out Obligation was $2.3 million, a reduction of $4.0 million from the original estimate. The gain associated with the reduction in estimate was recognized in the results of discontinued operations for the year ended December 31, 2022 in the table below. The Earn-out Obligation was reflected as Contingent consideration payable on our consolidated balance sheet as of December 31, 2022. We also sold LCA for cash proceeds of $0.1 million in January 2023. In connection with the sales of 365 Cannabis and LCA, we recognized a gain on the sale of discontinued operations of $0.2 million during the year ended December 31, 2023. The gain was primarily attributable to changes in the value of 365 Cannabis’ and LCA’s working capital from December 31, 2022 through the date that these transactions closed. As disclosed below, impairments of long-lived assets were recorded for 365 Cannabis and LCA during the year ended December 31, 2022 prior to the commitments to sell these business units.

In December 2023, we sold Ample for cash proceeds of $0.638 million. Prior to our commitment to the sale, we recorded an impairment of Ample’s goodwill during the third quarter of 2023 and, in connection with the sale in the fourth quarter of 2023, we recorded impairments as disclosed below, to Ample’s goodwill and intangible assets in order to adjust the value of the business unit to its fair value. In accordance with the agreement to sell Ample, the buyer is permitted to seek post-closing adjustments for certain working capital items. The Company has 30 days to dispute any adjustments sought by the buyer and, if necessary, an additional 30 days to resolve any disputes. The maximum exposure for such adjustments is approximately $0.1 million.

Subsequent to their sales, 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 Disposal Group have been classified as being attributable to discontinued operations, respectively, for all periods presented.

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

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

The $3.1 million charge for impairments of long-lived assets for the year ended December 31, 2023 are related to goodwill ($1.7 million) and intangible assets ($1.4 million), both of which were attributable to Ample. The $35.2 million charge for impairments of long-lived assets for the year ended December 31, 2022 are related to goodwill ($25.0 million), intangible assets ($9.9 million) and capitalized software ($0.3 million). Of this total, the amounts were attributed as follows: (i) $22.2 million to 365 Cannabis, (ii) $12.4 million to Ample, and (iii) $0.6 million to LCA. The Disposal Group incurred capital expenditures for capitalized software assets of $1.7 million for the year ended December 31, 2022 and no amounts were capitalized during the year ended December 31, 2023. There were no material non-cash investing and financing activities attributable to the Disposal Group for the year ended December 31, 2023. During the year ended December 31, 2022, there were two material non-cash investing and financing activities attributable to the original acquisition of 365 Cannabis. In connection with the finalization of the purchase accounting for 365 Cannabis in 2022, a total of 13,988 shares of Common Stock were returned to us for a value of $0.9 million and we recorded a non-cash reduction of $0.2 million in accrued expenses in connection with a working capital settlement.