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ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS | 12 Months Ended
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Dec. 31, 2023
Assets Held For Sale And Discontinued Operations |
ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS | 4. ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS Presentation of AGREE Operations In September 2023, the Company committed to a plan for its wholly owned subsidiary AGREE to list for sale its four recently renovated Midwest hotels, the Hilton Garden Inn in Madison West, the Residence Inn in Madison West, the Courtyard in Madison West, and the Hilton Garden Inn in Rockford. The decision to sell the hotels follows the decision to also list the multifamily development site in St. Petersburg, Florida and is driven by the Company’s desire to focus on its core businesses, Energy, Fintech and Sentinum. The Company’s real estate properties, which include both hotels and land, are currently listed for sale. In connection with the planned sale of AGREE assets, the Company concluded that the net assets of AGREE met the criteria for classification as held for sale. In addition, the proposed sale represents a strategic shift that will have a significant effect on the Company’s operations and financial results. As a result, the Company has presented the results of operations, cash flows and financial position of AGREE as discontinued operations in the accompanying consolidated financial statements and notes for all periods presented. The assets held for sale were measured at the lower of their carrying amount or fair value less cost to sell. The Company performed a fair value analysis for the disposal group utilizing an income approach for the hotels and a market approach for the land, resulting in an $8.3 million impairment of property and equipment. As of December 31, 2023, the Company expected the planned sale of AGREE assets to close within one year and, as a result, the Company has classified the total assets and total liabilities associated with AGREE as current in the consolidated balance sheets as of December 31, 2023. The following table presents the assets and liabilities of AGREE operations:
Schedule of assets and liabilities of agree operations |  |  |  |  |  |  |  |
|  | December 31, |  |  | December 31, |
|  | 2023 |  |  | 2022 |
Cash and cash equivalents |  | $ | 1,080,000 |  |  | $ | 2,550,000 |
Restricted cash |  |  | 697,000 |  |  |  | 2,831,000 |
Accounts receivable |  |  | 247,000 |  |  |  | 264,000 |
Inventories |  |  | 50,000 |  |  |  | 44,000 |
Property and equipment, net - current |  |  | 88,525,000 |  |  |  | - |
Prepaid expenses and other current assets |  |  | 392,000 |  |  |  | 270,000 |
Total current assets |  |  | 90,991,000 |  |  |  | 5,959,000 |
Property and equipment, net |  |  | - |  |  |  | 92,535,000 |
Total assets |  |  | 90,991,000 |  |  |  | 98,494,000 |
Accounts payable and accrued expenses |  |  | 3,099,000 |  |  |  | 2,631,000 |
Notes payable, current |  |  | 67,262,000 |  |  |  | - |
Total current liabilities |  |  | 70,361,000 |  |  |  | 2,631,000 |
Notes payable |  |  | - |  |  |  | 61,633,000 |
Total liabilities |  |  | 70,361,000 |  |  |  | 64,264,000 |
Net assets of discontinued operations |  | $ | 20,630,000 |  |  | $ | 34,230,000 |
A disposal group classified as held for sale shall be measured at the lower of its carrying amount or fair value less costs to sell. No impairment was recognized upon reclassification of the disposal group as held for sale. The following table presents the results of AGREE operations:
Schedule of estimated costs to sell and expected |  |  |  |  |  |  |  |
|  | For the Year Ended |
|  | December 31, |
|  | 2023 |  |  | 2022 |
Revenue, hotel and real estate operations |  | $ | 16,161,000 |  |  | $ | 16,697,000 |
Cost of revenue, hotel operations |  |  | 12,300,000 |  |  |  | 11,406,000 |
Gross profit |  |  | 3,861,000 |  |  |  | 5,291,000 |
General and administrative |  |  | 3,383,000 |  |  |  | 5,982,000 |
Impairment of property and equipment |  |  | 8,284,000 |  |  |  | - |
Total operating expenses |  |  | 11,667,000 |  |  |  | 5,982,000 |
Loss from operations |  |  | (7,806,000 | ) |  |  | (691,000 | )
Interest expense |  |  | (7,898,000 | ) |  |  | (5,204,000 | )
Net loss from discontinued operations |  | $ | (15,704,000 | ) |  | $ | (5,895,000 | )
The cash flow activity related to discontinued operations is presented separately on the statement of cash flows as summarized below:
Schedule of cash flow activity related to discontinued operations |  |  |  |  |  |  |  |
|  | For the Year Ended December 31, |
|  | 2023 |  |  | 2022 |
Cash flows from operating activities: |  |  |  |  |  |
Net loss |  | $ | (15,704,000 | ) |  | $ | (5,895,000 | )
Adjustments to reconcile net loss to net cash provided by operating activities: |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | 2,074,000 |  |  |  | 3,322,000 |
Amortization of debt discount |  |  | 392,000 |  |  |  | 391,000 |
Impairment of property and equipment |  |  | 8,284,000 |  |  |  | - |
Changes in operating assets and liabilities: |  |  |  |  |  |  |  |
Accounts receivable |  |  | 17,000 |  |  |  | (213,000 | )
Inventories |  |  | (6,000 | ) |  |  | (13,000 | )
Prepaid expenses and other current assets |  |  | (122,000 | ) |  |  | 349,000 |
Accounts payable and accrued expenses |  |  | 467,000 |  |  |  | 2,026,000 |
Net cash used in operating activities |  |  | (4,598,000 | ) |  |  | (33,000 | )
Cash flows from investing activities: |  |  |  |  |  |  |  |
Purchase of property and equipment |  |  | (6,347,000 | ) |  |  | (9,111,000 | )
Net cash used in investing activities |  |  | (6,347,000 | ) |  |  | (9,111,000 | )
Cash flows from financing activities: |  |  |  |  |  |  |  |
Proceeds from notes payable |  |  | 5,237,000 |  |  |  | 7,340,000 |
Cash contributions from parent |  |  | 2,104,000 |  |  |  | 794,000 |
Net cash provided by financing activities |  |  | 7,341,000 |  |  |  | 8,134,000 |
Net decrease in cash and cash equivalents and restricted cash |  |  | (3,604,000 | ) |  |  | (1,010,000 | )
Cash and cash equivalents and restricted cash at beginning of period |  |  | 5,381,000 |  |  |  | 6,391,000 |
Cash and cash equivalents and restricted cash at end of period |  | $ | 1,777,000 |  |  | $ | 5,381,000 |
Supplemental disclosures of cash flow information: |  |  |  |  |  |  |  |
Cash paid during the period for interest |  | $ | 7,506,000 |  |  | $ | 4,813,000 |

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