10. DISCONTINUED OPERATIONS

6 Months Ended

Jun. 30, 2019

Notes

10. DISCONTINUED OPERATIONS

10.     DISCONTINUED OPERATIONS

In response to the changes in the telecommunications market and deterioration in the Company’s ability to effectively compete, the Company made the decision to exit the competitive local exchange carrier or CLEC business.  On October 27, 2017, the Company’s board of directors adopted a plan to exit the CLEC business as soon as possible through the sale of its wholly owned CLEC subsidiary and/or substantially all of its CLEC subsidiary’s operating assets.  The Company was in negotiations with a potential buyer at December 31, 2017, which buyer subsequently purchased substantially all of its CLEC subsidiary’s operating assets pursuant to an asset purchase agreement which was executed and closed on February 1, 2018 (the “Sale”).

The Company determined that the Sale represented a strategic shift that will have a major effect on the Company’s operations and financial results since it represented a complete exit from the CLEC business and, therefore, classified its CLEC subsidiary as held for sale at December 31, 2017.

During February, 2018, the Company recognized a gain of $233,277 on the Sale based on total consideration of $264,872 less total basis in the assets sold and transactions costs of $31,595.  The assets sold consisted primarily of customers and associated customer premise equipment.

Consideration:
Cash	$	246,500
Assumption of deferred revenue		8,366
Waived service obligation for February 2018		10,006
Total consideration	$	264,872
Total assets sold:
Customer contracts	$	-
Fiber innerduct		3,248
Fiber strands		-
Customer CPE		-
Total assets		3,248
Transactional costs		28,347
Total basis	$	31,595
Net gain	$	233,277

Assets and Liabilities of Discontinued Operations

	June 30, 2019	December 31, 2018
Carrying amounts of assets included in discontinued operations
Cash	$854	$775
Total Assets of Discontinued Operations	$854	$775
Carrying amounts of liabilities included in discontinued operations
Accounts payable	$43,270	$42,905
Accrued and other liabilities	8,209	9,458
Total Liabilities of Discontinued Operations	$51,479	$52,363

Operating Results of Discontinued Operations

	Three Months Ended		Six Months Ended
	June 30, 2019	June 30, 2018	June 30, 2019	June 30, 2018
Revenues included in discontinued operations
Total colocation and other revenues	$-	$-	$-	$28,091
Operating costs and expenses included in discontinued operations
Cost of services	$-	$18,660	$-	$72,546
Selling, general and administrative expenses	479	691	958	3,848
Depreciation and amortization	-	2,318	-	4,636
Interest expense	-	-	-	51
Total operating costs and expenses discontinued operations	$479	$21,669	$958	$81,081
Other Income included in discontinued operations
Gain on sale of assets	-	-	-	233,277
Other income from applied customer deposits	523	-	523	-
Net Income (Loss) from Discontinued Operations	$44	$(21,669)	$(435)	$180,287
Net Income (Loss) per share from discontinued operations basic and diluted	$0.00	$(0.00)	$(0.00)	$0.02

Cash Flows from Discontinued Operations

	June 30, 2019	June 30, 2018
Net cash used in operating activities	$ (1,398)	$(26,246)
Net cash provided by investing activities	-	218,153
Net cash used in financing activities	-	(116,592)
Net cash provided by (used in) discontinued operations	$ (1,398)	$75,315