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Asset Sale

6 Months Ended

Jun. 30, 2023

2. Asset Sale.

On August 3, 2023, the Company completed the sale of certain assets and certain liabilities relating to the Company’s Legacy Business for a price of $3.5 million to TIMIBO LLC, an affiliate of Park Printing, Inc. (the “Buyer”), under an Asset Purchase Agreement (the “Purchase Agreement”). The Company retained accounts receivable, as well as cash, cash equivalents and marketable securities. The purchase price is subject to a post-closing adjustment depending on the net balance of (i) cash received by the Company for programs that remained unexecuted as of August 3, 2023, minus (ii) the payments made by the Company to vendors for unexecuted programs. The Company received significant cash payments between July 1 and August 3, 2023 for unexecuted programs, which the Company will retain, but which will reduce the purchase price. Under the Purchase Agreement, $200,000 was escrowed for a twelve-month period for any future claims, as defined in the Purchase Agreement, by the Buyer against the Company.

The Company incurred approximately $350,000 of transaction-related costs that had not previously been expensed. The Company also incurred transaction-related severance and other separation benefits in connection with the termination of certain officers and employees of the Company of approximately $1,537,000, as well as retention award payouts totaling $143,000 and employee bonuses totaling $164,000, each of which will be recorded as expense in the three months ended September 30, 2023.

The operations of the Legacy Business will be presented as discontinued operations beginning with the Quarterly Report on Form 10-Q for the three months ended September 30, 2023. The Company is presenting unaudited pro forma condensed consolidated information on a discontinued operations basis to illustrate the significant impact of the sale of the Legacy Business on the Company’s balance sheet and statement of operations. The Company is presenting the pro forma information for the three months ended June 30, 2023, as that is the period in which the non-bank lending business began. No impact from the sale proceeds and related costs are included in the pro forma information.

The unaudited pro forma condensed consolidated balance sheet illustrates the impact at June 30, 2023 had discontinued operations presentation been used (unaudited). The amounts held for sale represent the assets that will be purchased by the Buyer and liabilities which will be assumed by the Buyer:

	Historical		Discontinued Operations Adjustments			Pro Forma Continued Operations
ASSETS
Current Assets:
Cash and cash equivalents	$	11,419,000	$	-		$	11,419,000
Restricted cash		85,000		-			85,000
Accounts receivable, net		7,583,000		-			7,583,000
Inventories		28,000		(28,000	)		-
Income tax receivable		90,000		-			90,000
Prepaid production costs		143,000		(143,000	)		-
Other prepaid expense		208,000		(19,000	)		189,000
Current assets held for sale		-		190,000			190,000
Total Current Assets		19,556,000		-			19,556,000

Other Assets:
Property and equipment, net		71,000		(71,000	)		-
Operating lease right-of-use assets		123,000		(123,000	)		-
Other, net		10,000		-			10,000
Non-current assets held for sale		-		194,000			194,000

Total Assets	$	19,760,000	$	-		$	19,760,000

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable		1,324,000		(72,000	)		1,252,000
Accrued liabilities		2,031,000		-			2,031,000
Current portion of operating lease liabilities		16,000		(16,000	)		-
Deferred revenue		1,154,000		(1,154,000	)		-
Current liabilities held for sale		-		1,242,000			1,242,000
Total Current Liabilities		4,525,000		-			4,525,000

Long-Term Liabilities:
Accrued income taxes		55,000		-			55,000
Operating lease liabilities		123,000		(123,000	)		-
Non-current liabilities held for sale		-		123,000			123,000
Total Long-Term Liabilities		178,000		-			178,000

Commitments and Contingencies		-		-			-

Shareholders' Equity:
Total Shareholders' Equity		15,057,000		-			15,057,000

Total Liabilities and Shareholders' Equity	$	19,760,000	$	-		$	19,760,000

The unaudited pro forma condensed consolidated statement of operations for the three months ended June 30, 2023 illustrates the impact for that period had discontinued operations presentation been used (unaudited). The discontinued operations adjustments represent amounts that relate to the Legacy Business, with no allocation of general overhead to the Legacy Business:

	Historical			Discontinued Operations Adjustments			Pro Forma Continuing Operations
Net services revenues	$	6,211,000		$	(6,211,000	)	$	-

Cost of services		4,588,000			(4,588,000	)		-
Gross Profit		1,623,000			(1,623,000	)		-

Operating Expenses:
Selling		361,000			(361,000	)		-
Marketing		300,000			(300,000	)		-
General and administrative		1,129,000			(572,000	)		557,000
Total Operating Expenses		1,790,000			(1,233,000	)		557,000
Operating Income (Loss)		(167,000	)		(390,000	)		(557,000	)

Interest income		135,000			-			135,000
Income (Loss) from Operations Before Taxes		(32,000	)		(390,000	)		(422,000	)

Income tax expense		4,000			-			4,000

Net Income (Loss) from Continuing Operations							$	(426,000	)

Net (Income) Loss from Discontinued Operations				$	(390,000	)

Net Income (Loss)	$	(36,000	)

Net income (loss) per share, basic and diluted:
Continuing operations							$	(0.24	)
Discontinued operations				$	0.22
Total	$	(0.02	)

Weighted average shares outstanding:
Basic and diluted		1,798,000			1,798,000			1,798,000