Note 4 - Held for Sale and Discontinued Operation

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

NOTE 4: HELD FOR SALE AND DISCONTINUED OPERATION

Under ASC 205-20, "Discontinued Operations" when a component of an entity, as defined in ASC 205-20, has been disposed of or is classified as held for sale, the results of its operations, including the gain or loss on its component are classified as discontinued operations and the assets and liabilities of such component are classified as assets and liabilities attributed to discontinued operations; that is, provided that the operations, assets and liabilities and cash flows of the component have been eliminated from the Company’s consolidated operations and the Company will have no significant continuing involvement in the operations of the component.

As a result of the Transaction, for the three-month period ended September 30, 2023, Intrinsix's results of operations and balances are disclosed as discontinued operation, with the resulting gain or loss from the sale to be accounted during which the reporting period in which the Transaction closed, at which time the Transaction will be finalized as discontinued operation as well. All prior periods comparable results of operation have been retroactively included in discontinued operation, and all prior period comparable assets and liabilities have been retroactively classified as assets and liabilities of a discontinued operation. The Company concluded that the held for sale criteria are met from July 15, 2023.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED (UNAUDITED)

The following assets and liabilities allocated to the discontinued operation are reflected as discontinued operation assets and liabilities in the Company’s Condensed Consolidated Balance Sheet for the periods presented. Since the Company operates as one reporting unit, the Company allocated goodwill to the discontinued operation using relative fair value. The major classes of assets and liabilities included as part of the discontinued operation as of September 30, 2023 and December 31, 2022, are presented in the following table (unaudited):

	September 30, 2023		December 31, 2022
	Unaudited		Unaudited
Assets of discontinued operation
Current assets of discontinued operation:
Cash and cash equivalents	$	608	$	1,169
Trade receivables		894		1,420
Prepaid expenses and other current assets		157		107
Total current assets of discontinued operation		1,659		2,696
Long-term assets of discontinued operation:
Deferred tax assets		—		115
Property and equipment, net		365		475
Operating lease right-of-use assets		1,590		1,798
Goodwill		18,463		17,983
Intangible assets, net		3,323		4,288
Total long-term assets of discontinued operation		23,741		24,659
Total assets of discontinued operation	$	25,400	$	27,355
Liabilities of discontinued operation
Current liabilities of discontinued operation:
Trade payables	$	21	$	136
Deferred revenues		124		70
Accrued expenses and other payables		8		115
Accrued payroll and related benefits		217		969
Operating lease liabilities		285		302
Total current liabilities of discontinued operation		655		1,592
Long-term liabilities of discontinued operation:
Operating lease liabilities		1,305		1,496
Total long-term liabilities of discontinued operation		1,305		1,496
Total liabilities of discontinued operation	$	1,960	$	3,088

The following table shows the Company's results of discontinued operation for the below presented periods:

	Nine months ended September 30,						Three months ended September 30,
	2023 (unaudited)			2022 (unaudited)			2023 (unaudited)			2022 (unaudited)
Revenues	$	7,868		$	11,013		$	2,145		$	3,610
Cost of revenue		5,091			9,340			1,236			2,287
Gross profit		2,777			1,673			909			1,323
Operating expenses:
Research and development, net		5,464			5,947			1,809			1,981
Sales and marketing		679			1,042			190			534
General and administrative		1,472			886			993			305
Amortization of intangible assets		373			524			24			175
Total operating expenses		7,988			8,399			3,016			2,995
Operating loss		(5,211	)		(6,726	)		(2,107	)		(1,672	)
Financial income, net		3			—			—			—
Loss from discontinued operations before taxes on income		(5,208	)		(6,726	)		(2,107	)		(1,672	)
Income tax expense		100			—			100			—
Net loss from discontinued operation	$	(5,308	)	$	(6,726	)	$	(2,207	)	$	(1,672	)

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED (UNAUDITED)

The following table presents cash flows from discontinued operations:

	Nine months ended September 30,
	2023 (unaudited)			2022 (unaudited)
Net cash flows (used in) provided by operating activities (*)	$	(556	)	$	360
Net cash flows used in investing activities		(5	)		(433	)

(*) Amortization and depreciation allocated to discontinued operation for the nine-month periods ended September 30, 2023 and 2022 amounted to $1,081 and $1,666, respectively.

In addition, on November 7, 2023, the Compensation Committee of the Company’s Board of Directors revised financial targets associated with executive bonus and short-term equity awards to exclude results from Intrinsix.