DISCONTINUED OPERATIONS

12 Months Ended

Dec. 31, 2024

Discontinued Operations and Disposal Groups [Abstract]

DISCONTINUED OPERATIONS

NOTE 4 – DISCONTINUED OPERATIONS

On October 31, 2024 the Company completed the sale of its subsidiary Recoup (the “Recoup Sale) in exchange for consideration of $1,000,000 to Recoup Partners, LLC, a related party through a direct family relationship to our former COO Jeff Rizzo. The consideration was composed of the forgiveness of $750,000 of accounts payables and the receipt of a $250,000 note receivable. The Recoup Sale qualified for held-for-sale classification on October 31, 2024 and represented a strategic shift with a major effect on the Company’s operations and financial results. Following the Recoup Sale the Company will not have any significant continuing involvement in the operations of Recoup. As a result, Recoup met the criteria for reporting as discontinued operations on October 31, 2024.

The note receivable has a principal amount of $250,000 and accrues interest at a 7.5% annual rate. It has a maturity date of December 31, 2024. As of the issuance date of these financial statements the Company has not received the funds owed from the note receivable. As part of the agreed upon terms of the Recoup Sale, the Company agreed to indemnify $593,674 of accounts payable held by Recoup. The indemnified accounts payable are included within accounts payable from continuing operations on the consolidated balance sheet.

Recoup’s financial results are presented within loss from discontinued operations, after tax in the consolidated statement of operations. For the year ended December 31, 2024, these results include the period from the beginning of the year through the date of the Recoup Sale. The following table presents the amounts that have been reclassified from continuing operations and included in loss from discontinued operations within the Company’s consolidated statement of operations for the years ended December 31, 2024 and 2023:

	For the year ended December 31,
	2024			2023
REVENUE	$	1,428,815		$	1,395,992
COST OF REVENUES		410,706			597,243
GROSS PROFIT		1,018,109			798,749
OPERATING EXPENSES
Salaries and salary related costs		265,050			189,808
Professional fees		85,775			23,042
Depreciation and amortization expense		529,225			436,684
General and administrative expenses		158,224			88,949
Intangible asset Impairment		5,508,595			-
Goodwill Impairment		4,853,142			20,364,001
Total operating expenses		11,400,011			21,102,484
OPERATING LOSS		(10,381,902	)		(20,303,735	)
OTHER INCOME (EXPENSE)
Other income		28,864			23,556
Loss on disposal of Recoup		(785,871	)		-
Net loss from discontinued operations before income taxes		(11,138,909	)		(20,280,179	)
Provision for income taxes		-			-
Net loss from discontinued operations after income taxes	$	(11,138,909	)	$	(20,280,179	)

The following table presents the assets and liabilities of Recoup that were reclassified as discontinued operations within the Company’s consolidated balance sheet as of December 31, 2023.

	December 31,
	2023
Assets:
Cash	$	69,738
Accounts receivable, net		311,637
Prepaid expenses and other assets		5,632
Inventory		145,000
Property and equipment, net		15,156
Intangible assets, net		6,035,280
Goodwill		6,516,915
Total assets - discontinued operations	$	13,099,358
Liabilities:
Accounts payable	$	621,090
Accrued expenses		44,190
Customer deposits		212,071
Total liabilities - discontinued operations	$	877,351

Impairments

During the year ended December 31, 2023, and as a result of the financial performance of the former Digester Segment, the Company concluded it was more likely than not that the fair value of the reporting unit was less than it’s carrying amount. Therefore, the Company performed an impairment assessment of the goodwill. The fair value of the Digester reporting unit was estimated using an income approach and included assumptions related to estimates of future revenue and operating expenses, long-term growth rates, a technology obsolescence rate, and a discount rate. As a result of the quantitative impairment test, the goodwill was impaired with an impairment expense of $20,364,001 within loss from discontinued operations, after tax for the year ended December 31, 2023.

During the third quarter of 2024, and as a result of the financial performance of the former Digester Segment, the Company concluded it was more likely than not that the fair value of the reporting unit was less than it’s carrying amount. Therefore, the Company performed an impairment assessment of the goodwill. At this time the Company did not reclassify Recoup as held for sale, as the necessary criteria were not met. As a result of the quantitative impairment test the goodwill was impaired with an impairment expense of $4,853,142, recorded within loss from discontinued operations, after tax for the year ended December 31, 2024.

During the third quarter of 2024, and as a result of the financial performance of the former Digester Segment, the Company concluded it was more likely than not that the fair value of the intangible assets held by Recoup were less than their carrying amount. Therefore, the Company performed an impairment assessment of the intangible assets. At this time the Company did not reclassify Recoup as held for sale, as the necessary criteria were not met. As a result of the quantitative impairment test, the intangible assets were impaired with an impairment expense of $ 5,508,595, recorded within loss from discontinued operations, after tax for the year ended December 31, 2024.