Discontinued Operations and Assets and Liabilities Held for Sale

12 Months Ended

Dec. 31, 2022

Discontinued Operations and Assets and Liabilities Held for Sale [Abstract]

DISCONTINUED OPERATIONS AND ASSETS AND LIABILITIES HELD FOR SALE

NOTE 3 DISCONTINUED OPERATIONS AND ASSETS AND LIABILITIES HELD FOR SALE

Sovereign Plastics LLC

Sovereign Plastics is a manufacturer of plastic and metal components to third-party manufacturers based out of Colorado Springs, Colorado. The Company’s Board of Directors, in consultation with management as well as its financial and legal advisors, considered a number of factors, including the risks and challenges facing Sovereign Plastics in the future as compared to the opportunities available to Sovereign Plastics in the future, and the availability of strategic alternatives. On June 13, 2022, after careful consideration, the Board of Directors unanimously approved the sale of Sovereign Plastics.

On June 21, 2022, the Company completed the sale of its Sovereign Plastics business unit to TheLandersCompanies LLC for total consideration of $2.0 million in a secured note with interest of 5% and a maturity date of May 31, 2025. As a result of the sale, the Company recognized a $1.1 million gain on the sale of Sovereign Plastics included in the income (loss) from discontinued operations, net of tax on the consolidated statements of operations.

Results of Discontinued Operations

The results and net income (loss) of Sovereign Plastics’ discontinued operations were as follows:

	For the Years Ended
	December 31,
(Amounts in thousands, except share and per share data)	2022			2021
Revenue	$	1,718		$	3,576
Cost of goods sold		1,065			1,915
Gross profit		653			1,661
Operating expenses
General and administrative		691			1,394
Depreciation and amortization		283			633
Gain on sale of Sovereign Plastics		(1,074	)		-
Total operating income (expenses), net		(100	)		2,027
Income (loss) from operations		753			(366	)
Other expense
Interest expense		(6	)		(51	)
Loss on extinguishment of debt		-			(246	)
Total other expense		(6	)		(297	)
Income (loss) from discontinued operations, net of tax	$	747		$	(663	)

Assets and liabilities of discontinued operations as of December 31, 2021 were classified as current and non-current because the sale transaction did not qualify as discontinued operations as of December 31, 2021, and because the consideration of $2.0 million for the sale is due on May 31, 2023 and is recorded as a note receivable on the Consolidated Balance Sheet. The details are as follows:

	Sovereign Plastics
	December 31,
(Amounts in thousands, except share and per share data)	2021
Assets
Cash	$	26
Accounts receivable, net		222
Inventory, net		295
Prepaid and deferred expenses		266
Assets of discontinued operations – current		809
Property and equipment, net		736
Operating lease right-of-use assets		717
Goodwill		48
Other assets – long term		73
Assets of discontinued operations – long-term		1,574
Total assets of discontinued operations	$	2,383
Liabilities
Accounts payable	$	129
Accrued liabilities		50
Accrued payroll		52
Contract liabilities, current		475
Operating lease liabilities, current		194
Current portion of long-term debt, net of unamortized discounts and debt issuance costs		11
Liabilities of discontinued operations - current		911
Contract liabilities – long term		34
Operating lease liabilities – long term		553
Liabilities of discontinued operations – long-term		587
Total liabilities of discontinued operations	$	1,498

Sky Sapience Ltd.

Sky Sapience was acquired on February 25, 2021 (see Note 20 – Business Acquisitions – Sky Sapience Ltd.) and is a manufacturer of drones with a patented tethered hovering technology that provides long-duration, mobile and all-weather Intelligence, Surveillance and Reconnaissance (ISR) capabilities to customers worldwide for both land and marine-based applications based out of Israel. The Company’s Board of Directors, in consultation with management as well as its financial and legal advisors, considered a number of factors, including the risks and challenges facing Sky Sapience in the future as compared to the opportunities available to Sky Sapience in the future, and the availability of strategic alternatives. On December 21, 2022, after careful consideration, the Board of Directors unanimously approved the sale of Sky Sapience. On March 20, 2023, the Company completed the sale of its Sky Sapience business unit to Titan Innovations Ltd. for total consideration of $1.8 million (see Note 22 – Subsequent Events – Business Developments for additional information). The sale of Sky Sapience didn’t qualify for discontinued operations presentation because the sale didn’t represent a strategic shift that will have a major effect on the Company’s operations (the Company will continue to be in the drone business). Sky Sapience’s assets and liabilities met the criteria to be classified as held for sale as of December 31, 2022 as follows:

	Sky Sapience
	December 31,
(Amounts in thousands, except share and per share data)	2022
Assets
Cash	$	35
Inventory, net		535
Prepaid and deferred expenses		56
Other current assets		25
Assets held for sale - current		651
Property and equipment, net		640
Operating lease right-of-use assets		269
Intangible assets, net		246
Goodwill		1,219
Assets held for sale - long-term		2,374
Total assets held for sale	$	3,025
Liabilities
Accounts payable	$	233
Accrued liabilities		321
Accrued payroll		321
Contract liabilities, current		1,347
Operating lease liabilities, current		120
Liabilities of assets held for sale - current		2,342
Operating lease liabilities - long term		140
Liabilities held for sale - long-term		140
Total liabilities held for sale	$	2,482