Annual report pursuant to Section 13 and 15(d)

Discontinued Operations

Discontinued Operations
12 Months Ended
Dec. 31, 2023
Discontinued Operations [Abstract]  
Discontinued Operations

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: 


    As of December 31,  
    2023     2022  
Cash and restricted cash   $     $ 305,411  
Accounts receivable, net           357,121  
Prepaid expenses & other current assets           666,252  
Fixed assets           63,764  
Capitalized software, net           1,483,111  
Intangible assets, net           5,406,094  
Goodwill           1,708,303  
Total assets   $     $ 9,990,056  
Accounts payable, accrued expenses and other current liabilities   $     $ 1,437,661  
Deferred revenue           994,713  
Deferred revenue, noncurrent           217,083  
Total liabilities   $     $ 2,649,457  
Current assets of discontinued operations   $     $ 1,328,784  
Noncurrent assets of discontinued operations           8,661,272  
Total assets of discontinued operations   $     $ 9,990,056  
Current liabilities of discontinued operations   $     $ 2,432,374  
Noncurrent liabilities of discontinued operations           217,083  
Total liabilities of discontinued operations   $     $ 2,649,457  


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


    For the Years Ended
December 31,
    2023     2022  
Revenue   $ 2,412,534     $ 12,640,170  
Cost of revenue     575,246       2,919,208  
Gross profit     1,837,288       9,720,962  
Research and development     527,301       2,409,740  
Sales and marketing     421,049       4,646,997  
General and administrative     118,133       798,837  
Depreciation and amortization     891,708       3,412,717  
Impairment of long-lived assets     3,065,365       35,249,975  
Changes in fair value of contingent consideration           (4,016,194 )
Other expense, net     1,833        
Interest expense           746  
Loss from discontinued operations before income taxes     (3,188,101 )     (32,781,856 )
Income tax benefit           2,117  
Loss from discontinued operations, net of tax     (3,188,101 )     (32,779,739 )
Gain on sale of discontinued operations, net of tax     212,601        
Net loss from discontinued operations, net of tax   $ (2,975,500 )   $ (32,779,739 )


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.