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DISCONTINUED OPERATIONS
 12 Months Ended
Dec. 31, 2021
DISCONTINUED OPERATIONS

 

21. DISCONTINUED OPERATIONS

 

On November 8, 2019, the Company sold 100% of the issued and outstanding shares of DenseLight for $26,000,000. The Buyer assumed control of DenseLight on November 8, 2019 and is responsible for all operations of DenseLight. Upon closing, the Company recognized a gain on the sale of $8,707,280. The sale proceeds were to be paid over multiple tranches. The first tranche payment was recived on November 8, 2019 in the amount of $8,000,000. The second tranche payment was payment was made in two installments, with first paid on February 14, 2020 in the amount of $4,750,000 and the second on March 30, 2020 in the amount of $8,250,000.

 

 

POET TECHNOLOGIES INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in US Dollars)

 

 

21. DISCONTINUED OPERATION (Continued)

 

The Company received payments of $1,500,000 and $1,000,000 on June 29, 2020 and July 3, 2020 respectively. After taking into consideration the length of time it had taken the Buyer to make the foregoing payments and the Company’s expectations regarding the likelihood of receiving an additional payment, the Company determined that it was in its best interest to accept partial payments as final payment on the Company’s receivable. As a result, the Company recognized a credit loss of $2,500,000 during the year ended December 31, 2020 (nil - 2021 and 2019).

 

The Company received an additional $2,000,000, in excess of the sale proceeds which was immediately paid to Oak Capital on behalf of the Buyer for due diligence, legal and other expenses.

 

Revenue and expenses, and gains and losses relating to the discontinued operations were removed from the results of continuing operations and are shown as a single line item on the face of the consolidated statements of operations and deficit. The operating results of the discontinued operations can be analysed as follows:

 

Results of discontinued operations

 

   2021   2020   2019 
  

For the Year Ended

December 31,

   For the Period From January 1, 2019 to November 8, 
   2021   2020   2019 
Revenue  $-   $-   $4,426,355 
Cost of revenue   -    -    1,201,373 
Gross margin   -    -    3,224,982 
                
Operating expenses               
Research and development   -    -    5,677,222 
Selling, marketing and administration   -    -    1,950,526 
Interest expense   -    -    74,494 
Impairment loss   -    -    - 
Other income   -    -    (1,251,737)
Operating expenses   -    -    6,450,505 
Loss from discontinued operations   -    -    (3,225,523)
Gain on sale of discontinued operations, net of taxes   -    -    8,707,280 
Income tax recovery   -    -    - 
Net income, net of taxes  $-   $-   $5,481,757 

 

Disaggregated Revenues

 

The Company disaggregates revenue by timing of revenue recognition, that is, at a point in time and revenue over time. Disaggregated revenue is as follows:

 

  

For the Year Ended

December 31,

   For the Period From January 1, 2019 to November 8, 
   2021   2020   2019 
Non-contract revenue (at a point in time)(1)  $-   $-   $2,092,426 
Contract revenue (revenue over time)(2)   -    -    2,221,429 
Contract revenue (at a point in time)(2)   -    -    112,500 
  $-   $-   $4,426,355 

 

  (1) Revenue from the sale of products.
  (2) Revenue from long-term projects or non-recurring engineering (NRE).

 

 

POET TECHNOLOGIES INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in US Dollars)

 

 

21. DISCONTINUED OPERATION (Continued)

 

   Contract 
   Receivables   Liabilities 
Balance, January 1, 2019   60,000    - 
Revenues recognized   2,333,929    (2,333,929)
Changes due to payment, fulfillment of performance obligations or other   (1,293,929)   2,333,929 
Balance, November 8, 2019  $1,100,000   $- 

 

Research and development costs included in discontinued operations can be analysed as follows:

 

   2021   2020   2019 
   For the Year Ended
December 31,		   For the Period From
January 1, 2019 to
November 8,		 
   2021   2020   2019 
Wages and benefits  $-   $-   $3,565,076 
Supplies   -    -    1,412,572 
Subcontract fees   -    -    728,457 
Stock-based compensation   -    -    (28,883)
Research and development  $-   $-   $5,677,222 

 

Selling, marketing and administration costs included in discontinued operations can be analysed as follows:

 

                
Wages and benefits  $-   $-   $887,860 
Rent and facility costs   -    -    604,442 
General expenses   -    -    458,465 
Stock-based compensation   -    -    (46,725)
Professional fees   -    -    46,484 
Selling, marketing and administration  $-   $-   $1,950,526 

 

Cash flows from (used in) discontinued operations

 

   2021   2020   2019 
CASH (USED IN) PROVIDED BY:               
OPERATING ACTIVITIES               
Net income (loss)  $-   $-   $5,481,757 
Adjustments for:               
Depreciation of property and equipment   -    -    - 
Gain on sale of discontinued operations   -    -    (8,707,280)
Amortization of intangibles   -    -    - 
Interest expense   -    -    74,494 
Impairment loss   -    -    - 
Stock-based compensation   -    -    (75,608)
Income tax recovery   -    -    - 
Deferred rent   -    -    (1,825)
Expected credit loss   -    -    - 
Total adjustments   -    -    (3,228,462)

 

 

POET TECHNOLOGIES INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in US Dollars)

 

 

21. DISCONTINUED OPERATION (Continued)

 

Net change in non-cash working capital accounts:
Accounts receivable		   -    -    584,902 
Prepaid and other current assets   -    -    497,259 
Inventory   -    -    (334,425)
Accounts payable and accrued liabilities   -    -    (470,378)
Cash flows provided by (used in) operating activities   -    -    (2,951,104)
                
INVESTING ACTIVITIES               
Proceeds from the sale of discontinued operations, net of cash given up (1)   -    -    7,519,126 
Purchase of property and equipment (Note 6)   -    -    (1,599,272)
Purchase of patents and licenses (Note 7)   -    -    (11,231)
Cash flows from investing activities   -    -    5,908,623 
FINANCING ACTIVITIES               
Payment of lease liability (Note 8)   -    -    (258,460)
Cash flows from financing activities   -    -    (258,460)
                
EFFECT OF EXCHANGE RATE CHANGES ON CASH   -    -    (14,010)
                
NET CHANGE IN CASH  $-   $-   $2,685,049 

 

Effect of Disposal on the Financial Position of the Group on November 8, 2019

 

      
Accounts receivable  $396,037 
Prepaid and other current assets   2,303,014 
Inventory   774,404 
Property and equipment   8,424,638 
Right of use asset   880,577 
Patents   29,696 
Goodwill and customer list   6,718,953 
Trade payables   (1,312,053)
Lease Liability   (695,733)
Deferred tax liability   (707,687)
Net assets disposed  $16,811,846 
      

(1) Consideration received in cash

  $8,000,000 
(1) Cash given up   (480,874)
Consideration receivable   18,000,000 
Net inflows  $25,519,126 

 

 

POET TECHNOLOGIES INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in US Dollars)