Discontinued Operations - Sale of Infusionz to Bloomios

3 Months Ended

Sep. 30, 2023

Discontinued Operations - Sale of Infusionz to Bloomios

Discontinued Operations - Sale of Infusionz to Bloomios

Note 16.  Discontinued Operations – Sale of Infusionz to Bloomios

On October 28, 2022, the Company determined that the best course of action related to Infusionz, LLC and certain manufacturing business was to accept an offer to sell those operations.  

The Company received from Bloomios, Inc.(OTCQB:BLMS), the purchaser (i) $5,500,000 paid at closing; (ii) a convertible secured subordinated promissory note in the original principal amount of $5,000,000; (iii) 85,000 shares of Series D convertible preferred stock, with a total stated value of $8,500,000; (iv) a senior secured convertible debenture with a subscription amount of $4,500,000, after original issue discount of $779,117; and (v) a common stock purchase warrant to purchase up to 2,853,910 shares of Bloomios’s common stock.  The Company recorded the consideration received at the estimated value at the time of the transaction and as part of that estimate valued the additional warrants to purchase Bloomios shares of common stock at $8,500,000 and a valuation allowance of $8,500,000.

The assets transferred were recorded at their respective book values, the accrued and incurred expenses estimated by management were recorded and the consideration received was recorded at managements estimated fair value based on the balance sheet on October 26, 2022, the effective closing date.

Tangible assets, inventory / working capital*	$	(1,344,000	)
Tangible assets, warehouse and manufacturing equipment, net of accumulated depreciation*		(679,327	)
Goodwill		(2,413,814	)
Intangible assets, net of accumulated amortization		(946,996	)
Accrued and incurred expenses related to the transaction and additional working capital*		(2,051,500	)
Consideration received, including cash, debt and equity, net		15,000,000
Total gain recognized	$	7,564,363

*During the continuing transition period, all of the inventory or working capital has not been transferred to the buyer.

At closing, the Company provided working capital, in the form of inventory, in excess of the working capital agreement and during the transition period, there are certain expenses and purchases incurred that are to be netted against funds collected on behalf of the buyer.  June 30, 2023, there was a receivable balance from the buyer of 845,443, net of a reserve of $931,613.    

Advance for payroll	$	50,000
Operating expense		652,891
Management fees		685,600
Excess working capital		388,565
Accrued Interest		247,885
Subtotal due from Bloomios	$	2,024,941
Reserve		1,179,498
Total due from Bloomios	$	845,443

For several reasons, including but not limited to the non-payment per the terms of several agreements and the continuous delay in getting the business transitioned, the Company notified Bloomios of its termination of the transition agreement.  Management accrued a reserve on the receivable balance of $1,179,498 leaving a receivable balance of $845,443 on June 30, 2023.  Accrued interest and the gain from the original issue discount were reversed and the remaining balance was expensed to loss from discontinued operations. 

During the three months ended, September 30, 2023 the Company recorded the following non-cash amounts against the receivable balance.

Inventory	$	1,090,828
Accounts receivable		157,200
Accounts payable and accrued liabilities		(475,817	)
Customer deposits		(133,950	)
Fixed assets		208,182
Net assets	$	845,443
Due from Bloomios	$	-

Note 16. Discontinued Operations – Sale of Interactive Offers

On August 31, 2023, the Company sold Interactive offers to Amplifyir Inc. The purchase price is $1,250,000 with a provision to adjust the final purchase price based on the business being transferred to Amplifyer Inc. with a net zero working capital. In addition, the Buyer is obligated to pay the Company two-and one-half percent (2.5%) of certain advertising revenues of Interactive for a two-year period post-closing. Accordingly, the results of the business were classified as discontinued operations in our statements of operations and excluded from both continuing operations and segment results for all periods presented.

Summary of discontinued operations:

	Three months ended September 30,
	2023			2022
Discontinued Operations
Revenue	$	158,147		$	955,762
Cost of sales	$	11,982		$	730,306
Sales, general and administrative expenses	$	339,205		$	663,778
Depreciation and amortization	$	-		$	9,795
Income (loss) from discontinued operations	$	(193,040	)	$	(448,117	)
Accounts receivable net of allowance for doubtful accounts	$	-		$	35,482
Fixed assets, net of accumulated depreciation	$	-		$	5,195
Total assets	$	-		$	321,425
Total liabilities	$	-		$	652,911