SUNation Energy, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Discontinued Operations

Discontinued Operations

9 Months Ended

Sep. 30, 2023

NOTE 7– DISCONTINUED OPERATIONS

On June 30, 2023, the Company sold substantially all of the assets of its legacy non-core subsidiaries, JDL and Ecessa, to TheIPGuys.net LLC doing business as OneNet Global for total net proceeds of $1,231,616. The Company received net initial proceeds of $1,106,616, consisting of $1,175,000 in initial consideration less $68,384 in adjustments. An additional $125,000 in consideration is being held in escrow until July 1, 2024 for potential indemnification claims that may arise under the asset purchase agreement. The amount in escrow represents a consideration receivable that is included in other current assets within the condensed consolidated balance sheet as it is currently considered to be probable that the amount will be received in full at the conclusion of the escrow period. The amount of escrow proceeds that will be received will depend on whether any indemnification obligations arise under the asset purchase agreement and the receivable will be monitored for potential impairment. The Company recorded a loss on sale of $1,190,002 during the second quarter of 2023. The presentation of discontinued operations with respect to this transaction has been retrospectively applied to all prior periods presented.

The assets and liabilities of the discontinued operations that are classified as held for sale are as follows:

		September 30, 2023		December 31, 2022
Trade accounts receivable	$	—	$	752,420
Inventories		—		145,808
Other current assets		—		255,871
Total current assets	$	—	$	1,154,099


Property, plant, and equipment	$	—	$	69,270
Right of use asset		—		46,025
Intangible assets		—		2,110,550
Goodwill		—		45,688
Total noncurrent assets	$	—	$	2,271,533

Total assets held for sale	$	—	$	3,425,632


Accounts payable	$	—	$	381,992
Accrued compensation and benefits		—		184,585
Operating lease liability		—		50,170
Other accrued liabilities		—		10,727
Deferred revenue		—		533,685
Total current liabilities	$	—	$	1,161,159

Deferred revenue	$	—	$	250,875
Total noncurrent liabilities	$	—	$	250,875

Total liabilities held for sale	$	—	$	1,412,034

The financial results of the discontinued operations are as follows:


	Three Months Ended September 30				Nine Months Ended September 30
	2023		2022		2023		2022
Sales	$	—	$	1,820,900	$	3,414,810	$	3,580,015
Cost of sales		—		1,211,331		2,444,014		2,567,203
Selling, general and administrative expenses		37,697		420,971		916,911		861,526
Amortization expense		—		162,788		—		325,575
Transaction costs		—		3,018		14,426		48,137
Restructuring expenses		—		—		56,717		—
Loss on sale of assets		—		—		1,190,002		—
Operating loss before income taxes		(37,697)		22,792		(1,207,260)		(222,426)
Income tax expense		(3,714)		—		(1,025)		—
Loss from discontinued operations	$	(33,983)	$	22,792	$	(1,206,235)	$	(222,426)

During the nine months ended September 30, 2023, the Company recorded $56,717 in expected restructuring expenses, which consisted of severance and related benefits costs. The Company made $36,213 in payments during the three months ended September 30, 2023 and had a restructuring accrual balance of $20,504 at September 30, 2023 recorded in accrued compensation and benefits, which is expected to be paid during the remainder of 2023.