Discontinued Operations

9 Months Ended

Sep. 30, 2020

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

10. Discontinued Operations

As a result of the insufficient cash flows from the operations of Plastic Printing Professionals, Inc. as well as the disruption of our business from the COVID-19 pandemic, on April 20, 2020, the Company executed a nonbinding letter of intent with a perspective buyer for substantially all the assets of this business line. As a result of insufficient cash flows, the disruption of our business from the Covid-19 pandemic, and with the intent to exit this business line, the Company terminated its production and office personnel and maintained only a few employees to assist in and facilitate the sale of its assets. The financial results for these subsidiaries have been presented as discontinued operations in the accompanying consolidated financial statements.

The consideration paid to the Company for the sale of the assets included a one-time cash payment of $683,000 and a potential additional earn-out payment of an aggregate amount of up to $517,000 based on future quarterly gross revenue of the business to be conducted by the buyer with the sold assets. Consistent with the Company’s policy for accounting for gain contingencies, the earn out will be recorded when determined realizable which did not occur during the nine months ended September 30, 2020. The net effect of all assets disposed of with this transaction is a net loss $111,000 and is included in Loss from Discontinued Operations.

The following tables show the major classes of assets and liabilities held for sale and results of operations of the discontinued operation.

DOCUMENT SECURITY SYSTEMS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets– Assets and Liabilities Held For Sale

	September 30,		December 31,
	2020		2019
	unaudited
ASSETS
Current assets:
Inventory	$	-	$	342,000
Total current assets		-		342,000
Property, plant and equipment, net		-		732,000
Right-of-use assets		886,000		1,081,000
LIABILITIES
Current liabilities:
Current portion of lease liability		274,000		274,000
Total current liabilities		274,000		274,000
Long term lease liability		612,000		807,000

DOCUMENT SECURITY SYSTEMS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations - Discontinued Operations

(unaudited)

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2020			2019			2020			2019
Revenue:
Printed products	$	243,000		$	916,000		$	1,626,000		$	2,591,000
Total revenue		243,000			916,000			1,626,000			2,591,000
Costs and expenses:
Cost of revenue, exclusive of depreciation and amortization		382,000			503,000			1,644,000			1,795,000
Selling, general and administrative (including stock based compensation)		130,000			310,000			715,000			910,000
Depreciation and amortization		37,000			122,000			152,000			207,000
Impairment of goodwill		-			-			685,000			-
Total costs and expenses		549,000			935,000			3,196,000			2,912,000
Operating loss		(306,000	)		(19,000	)		(1,570,000	)		(321,000	)
Other income (expense):
Interest expense		(7,000	)		(9,000	)		(21,000	)		(24,000	)
Loss on sale of assets held for sale		(111,000	)		-			(111,000	)		-
Income (loss) before income taxes		(424,000	)		(28,000	)		(1,702,000	)		(345,000	)
Income tax expense (benefit)		-			-			-			-
Income (loss) from discontinued operations		(424,000	)		(28,000	)		(1,702,000	)		(345,000	)