Discontinued Operations and Disposition of Operating Segment

9 Months Ended

12 Months Ended

Sep. 30, 2019

Dec. 31, 2018

DISCONTINUED OPERATIONS

Discontinued Operations and Disposition of Operating Segment

5. Discontinued Operations and Disposition of Operating Segment

On December 24, 2018, the Company completed the sale of WPCS International – Suisun City, Inc., a California corporation, its wholly-owned subsidiary, pursuant to the terms of a stock purchase agreement, dated December 10, 2018 by and between the Company and World Professional Cabling Systems, LLC, a California limited liability company. Upon the closing of the sale, the Purchaser acquired all of the issued and outstanding shares of common stock, no par value per share, of Suisun City Operations, for an aggregate purchase price of $3,500,000.

The operations and cash flows of the Suisun City Operations are presented as discontinued operations. The operating results of the Suisun City Operations for the three and nine months ended September 30, 2018 were as follows:

	For the Three Months Ended September 30, 2018			For the Nine Months Ended September 30, 2018
Revenues	$	3,222,928		$	10,871,777
Cost of revenues		2,649,168			8,576,847
Gross profit		573,760			2,294,930
Selling, general and administrative expenses		575,248			1,691,934
Depreciation and amortization		78,954			221,897
Total Operating Expenses		654,202			1,913,831
Operating income (loss)		(80,442	)		381,099
Interest expense, net		(3,294	)		(3,892	)
Net income (loss) from discontinued operations	$	(83,736	)	$	377,207

4. Discontinued Operations and Disposition of Operating Segment

On December 10, 2018, the Company signed a definitive agreement with a private corporation and completed the sale on December 24, 2018, of 100% of the corporate capital of Suisun City Operations, a wholly owned subsidiary of DropCar, Inc, for a total cash consideration of $3.5 million. The Company recognized the following loss on sale of component on the date of sale:

Sales price	$	3,500,000
Commissions and various transaction costs		(332,220	)
Net sales proceeds		3,167,780
Carrying amounts of assets, net of liabilities		7,337,498	*
Loss on sale of Suisun City Operations	$	(4,169,718	)

* The carrying amounts of assets included cash of $1,504,366; accounts receivable and contract asset of $4,177,568; prepaid expenses and other current assets of $57,486; property and equipment of $295,206; intangibles and goodwill of $5,048,247; carrying amounts of liabilities included accounts payable and accrued liabilities of $3,688,831 and loans of $56,544.

The operations and cash flows of the Suisun City Operations were eliminated from ongoing operations following its sale. The operating results of the Suisun City Operations for the year ended December 31, 2018 were as follows:

Revenues	$	13,730,252
Cost of revenues		10,836,754
Gross profit		2,893,498
Selling, general and administrative expenses		2,285,661
Depreciation and amortization		287,830
Total Operating Expenses		2,573,491
Interest expense, net		4,888
Net income from discontinued operations	$	315,119