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Sale of Recycling Subsidiaries
 12 Months Ended
Dec. 28, 2024
Discontinued Operations and Disposal Groups [Abstract]  
Sale of Recycling Subsidiaries Sale of Recycling Subsidiaries
On March 9, 2023, the Company entered into a Stock Purchase Agreement (the “Recycling Purchase Agreement”) with VM7 Corporation, a Delaware corporation (“VM7”), under which it agreed to acquire all of the outstanding equity interests of the Recycling Subsidiaries, consisting of: (a) ARCA Recycling, (b) ARCA Canada, and (c) Connexx. The principal of VM7 is Virland A. Johnson, our Chief Financial Officer. The sale of all of the outstanding equity interests of the Recycling Subsidiaries to VM7 under the Recycling Purchase Agreement was consummated simultaneously with the execution of the Recycling Purchase Agreement. The Recycling Purchase Agreement is retroactive to March 1, 2023 (see Note 4).
The valuation, factoring in the discount rate that the Company used, yielded a present value of approximately $6.0 million, which, in addition to the $3,000 paid at close, comprised the approximately 6.0 million of net consideration. The amount of the revised discount amount, or approximately $18.0 million, was recorded as an offset to the principal amount of the Note, and was to have been accreted ratably to interest income over the term of the Note. During the year ended December 30, 2023, approximately $720,000 of the discount was recorded as interest income.
During the fourth quarter of fiscal 2023, VM7 determined that, after expending significant amounts of time and resources, it was unable to obtain sufficient equity or debt financing to continue the operations of the Recycling Subsidiaries. Accordingly, the Company was advised that the operations of the Recycling Subsidiaries were wound down and, ultimately, ceased. For a variety of related reasons, the Company determined fully to impair the $5.3 million carrying value of the Disposition Transaction on its balance sheet and determined not to exercise any of its remedies under the Recycling Purchase Agreement so that it could maintain its focus on its clinical-stage biopharmaceutical activities.
The preliminary calculation of the gain on sale was approximately $15.8 million. The following table details the final calculation of the gain on sale of the Recycling Subsidiaries, as shown on the income statement (in $000’s):
Total minimum consideration$6,023 
Payment from buyer3 
Net consideration$6,026 
Accounts payable5,323 
Accrued liabilities1,857 
Accrued liabilities - California state sales tax6,320 
Lease liabilities5,285 
Debt2,139 
Accumulated other comprehensive loss(604)
Total disposal of liabilities20,320 
Total consideration26,346 
Cash145 
Accounts receivable4,884 
Inventory67 
Property, plant and equipment2,767 
Intangible assets732 
Right-of-use assets5,075 
Other assets574 
Total disposal of assets14,244 
Total gain on sale$12,102 
Discontinued Operations
As of December 30, 2023, the Company discontinued operations of its Recycling segment as follows:
On March 9, 2023, the Company executed a Recycling Purchase Agreement with VM7, under which, as of March 1, 2023, it agreed to acquire all of the outstanding equity interests of the Recycling Subsidiaries, consisting of (a) ARCA Recycling,
(b) ARCA Canada, and (c) Connexx. The principal of VM7 is Virland A. Johnson, our Chief Financial Officer. The sale of all of the outstanding equity interests of the Recycling Subsidiaries to VM7 under the Recycling Purchase Agreement was consummated simultaneously with the execution of the Recycling Purchase Agreement (See Note 4).
In accordance with the provisions of ASC 205-20, the Company has not included in the results of continuing operations the results of operations of the discontinued operations in the consolidated statements of operations and comprehensive income (loss). The results of operations for these entities for the year ended December 28, 2024 and December 30, 2023, respectively, have been reflected as discontinued operations in the consolidated statements of operations and comprehensive income (loss) and consist of the following (in $000’s):
December 28, 2024December 30, 2023
Revenues$— $3,795 
Cost of revenues— 3,992 
Gross profit— (197)
Operating expenses from discontinued operations:
Selling, general and administrative expenses— 1,467 
Gain on sale of ARCA— (12,102)
Total operating expenses from discontinued operations— (10,635)
Operating income from discontinued operations— 10,438 
Other expense from discontinued operations
Interest expense, net— (181)
Other expense, net— (3)
Total other expense, net— (184)
Income before provision for income taxes from discontinued operations— 10,254 
Income tax provision— 971 
Net income from discontinued operations$— $9,283 
In accordance with the provisions of ASC 205-20, the Company has separately reported the cash flow activity of the discontinued operations in the consolidated statements of cash flows. The cash flow activity from discontinued operations for the year ended December 28, 2024 and December 30, 2023 have been reflected as discontinued operations in the consolidated statements of cash flows and consist of the following (in $000’s):
December 28, 2024December 30, 2023
DISCONTINUED OPERATING ACTIVITIES:
Net income from discontinued operations— 9,283 
Depreciation and amortization— 96 
Amortization of debt issuance costs— 11 
Amortization of right-of-use assets— 52 
Gain on sale of ARCA, net of cash— (12,248)
Changes in assets and liabilities:
Accounts receivable— 2,932 
Inventories— 299 
Prepaid expenses and other current assets— 56 
Accounts payable and accrued expenses— 1,837 
Other assets— 1 
Net cash provided by operating activities from discontinued operations$— $2,319 
DISCONTINUED INVESTING ACTIVITIES:
Purchases of property and equipment— (123)
Purchase of intangible assets— (32)
Net cash used in investing activities from discontinued operations$— $(155)
DISCONTINUED FINANCING ACTIVITIES:
Proceeds from note payable— 5,162 
Payments on related party note— (38)
Payments on notes payable— (7,336)
Net cash used in financing activities from discontinued operations$— $(2,212)
Effect of changes in exchange rate on cash and cash equivalents— (5)
DECREASE IN CASH AND CASH EQUIVALENTS— (53)
CASH AND CASH EQUIVALENTS, beginning of period— 53 
CASH AND CASH EQUIVALENTS, end of period$— $—