WODI Assets and Liabilities Held-for-Sale, Discontinuing Operations

9 Months Ended

Sep. 30, 2024

WODI Assets and Liabilities Held-for-Sale, Discontinuing Operations [Abstract]

WODI Assets and Liabilities Held-for-Sale, Discontinuing Operations

2. WODI Assets and Liabilities Held-for-Sale, Discontinuing Operations

On September 21, 2023, WODI entered into a merger agreement with PWT, to enhance enterprise value in anticipation of a potential merger with FRLA. As part of the merger, PWT rebranded to Water on Demand and entered discussions with FRLA to acquire all outstanding securities of the combined WODI/PWT entity, subject to certain financial and business conditions. The preliminary LOI is non-binding and provides a framework for good faith negotiations.

On October 24, 2023, WODI and FRLA executed a definitive Business Combination Agreement (the “BCA”), estimated a proforma equity valuation of approximately $72 million for the merged entity, assuming no additional redemptions of FRLA public shares. Subsequently, on October 25, 2023, at a Special Meeting, FRLA shareholders approved a twelve-month extension option, extending the deadline to consummate its initial business combination to November 5, 2024, subject to certain conditions.  

On February 14, 2024, the Company and FRLA filed a registration statement on Form S-4 with the SEC, which includes a preliminary proxy statement and prospectus for the proposed business combination with WODI.

Classification ad Held-For-Sale and Discontinued Operations

In accordance with ASC 205-20, the assets, liabilities, and operating results of WODI, including those associated with the lease of Sherman, Texas facility (See Footnote 3 – Leases for lease specifics) are classified as held-for-sale and discontinued operations as of September 30, 2024. This classification reflects a strategic shift expected to significantly impact the Company’s financial results The classification meets all held-for-sale criteria under ASC 205-20, as follows:

● Management has committed to a plan to sell the entity.

● The entity is available for immediate sale in its current condition

● An active program to locate a buyer and finalize the sale is underway.

● The sale is probable, withing one year.

● The entity is marked for sale at a reasonable price relative to fair value.

Financial Statement Impact and Comparability Adjustments

As a result of the held-for-sale classification, WODI’s assets, liabilities, and operating results have been reclassified as held-for-sale and discontinued operations on the balance sheet and income statement as of September 30, 2024. The prior period condensed consolidated financial statements as of December 31, 2023, have been restated for comparability. Net losses for held-for-sale operations are presented as a sperate line item in both the current and prior periods to facilitate comparability.

As the proposed business combination meets all these criteria, WODI’s assets, liabilities, and operating results have been reclassified as held-for-sale as of September 30, 2024. The prior period condensed consolidated financial statements, ending December 31, 2023, have been adjusted for comparability.

Assets and Liabilities Held-for-Sale

Major categories of assets and liabilities included in the held-for-sale classification are separately presented on the balance sheet. These include, but are not limited to, assets related to contract receivables and right of use assets and corresponding liabilities as of September 30, 2024.

	September 30,		December  31,
	2024		2023
CURRENT ASSETS
Cash	$	200,347	$	374,192
Contracts receivable, net allowance of $355,453 and $379,335, respectively (Note 2)		1,011,709		1,509,504
Contract assets (Note 7)		830,194		455,102
Right-of-use asset, net		596,235		-
Prepaid expenses		72,088		-
Other receivable		-		-
Total Current Assets Held-For-Sale		2,710,573		2,338,798
NET PROPERTY AND EQUIPMENT HELD-FOR-SALE		1,324		3,370
NON-CURRENT ASSETS HELD-FOR SALE
SPAC Class B common shares purchase cost (Note 10)		400,000		400,000
Security deposit		19,051		-
Total Non-Current Liabilities Held-For-Sale		419,051		400,000
CURRENT LIABILITIES HELD-FOR-SALE
Accounts payable and other payable	$	1,948,771	$	1,335,211
Accrued expenses		2,826,113		1,103,159
Customer deposit		143,503		143,503
Secured loans payable		-		110,695
Lease liabilities, current		146,315		-
Contract liabilities (Note 7)		2,348,458		1,346,366
Warranty reserve		20,000		20,000
Tax Liability				13,600
Line of credit (Note 11)		27,292		178,808
Convertible secured promissory notes (Note 6)		21,051,139		16,729,089
Total Current Liabilities Held-For-Sale	$	28,511,591	$	20,980,431
NONCURRENT LIABILITIES HELD-FOR-SALE
Lease liabilities, non current		480,038		-
Total Non-Current Liabilities Held-For-Sale	$	480,038	$	-

Net loss from Assets Held-for-Sale

The operating results and net loss from assets held-for-sale are reported in a separate line on the income statement. The presentation isolates the impact of the discontinued operations on overall financial performance for both the current and prior period comparatives.

	Three Months Ended September 30						Nine Months Ended September 30
	2024			2023			2024			2023
Revenue	$	868,123		$	1,357,267		$	3,472,319		$	5,181,199
Cost of goods sold		909,504			1,136,539			3,241,850			4,649,625
Gross Profit		(41,381	)		220,728			230,469			531,574
Operating Expenses
Selling and marketing expenses		173,068			335			267,739			43,322
General and administrative expenses		987,002			306,064			1,565,786			866,314
Total Operating Expenses		1,160,070			306,399			1,833,525			909,636
Loss from Operations		(1,201,451	)		(85,671	)		(1,603,056	)		(378,062	)
OTHER INCOME (EXPENSE)
Other income		40,828			569			41,974			127,448
Impairment of receivable from SPAC		(452,508	)		(610,000	)		(1,580,508	)		(3,210,985	)
Conversion and settlement value added to note purchase agreements (see Note 6)		(382,349	)		(420,765	)		(1,679,349	)		(7,728,089	)
Preferred stock compensation expense		-			(1,690,500	)		-			(576,618	)
Interest expense		(602,486	)		(369,868	)		(1,642,713	)		(681,477	)
TOTAL OTHER (EXPENSE) INCOME		(1,396,515	)		(3,090,564	)		(4,860,596	)		(12,069,721	)
NET LOSS FROM ASSETS-HELD-FOR-SALE	$	(2,597,966	)	$	(3,176,235	)	$	(6,463,652	)	$	(12,447,783	)