ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS

12 Months Ended

Dec. 31, 2023

Assets Held For Sale And Discontinued Operations

ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS

4. ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS

Presentation of AGREE Operations

In September 2023, the Company committed to a plan for its wholly owned subsidiary AGREE to list for sale its four recently renovated Midwest hotels, the Hilton Garden Inn in Madison West, the Residence Inn in Madison West, the Courtyard in Madison West, and the Hilton Garden Inn in Rockford. The decision to sell the hotels follows the decision to also list the multifamily development site in St. Petersburg, Florida and is driven by the Company’s desire to focus on its core businesses, Energy, Fintech and Sentinum. The Company’s real estate properties, which include both hotels and land, are currently listed for sale.

In connection with the planned sale of AGREE assets, the Company concluded that the net assets of AGREE met the criteria for classification as held for sale. In addition, the proposed sale represents a strategic shift that will have a significant effect on the Company’s operations and financial results. As a result, the Company has presented the results of operations, cash flows and financial position of AGREE as discontinued operations in the accompanying consolidated financial statements and notes for all periods presented. The assets held for sale were measured at the lower of their carrying amount or fair value less cost to sell. The Company performed a fair value analysis for the disposal group utilizing an income approach for the hotels and a market approach for the land, resulting in an $8.3 million impairment of property and equipment.

As of December 31, 2023, the Company expected the planned sale of AGREE assets to close within one year and, as a result, the Company has classified the total assets and total liabilities associated with AGREE as current in the consolidated balance sheets as of December 31, 2023.

The following table presents the assets and liabilities of AGREE operations:

	December 31,		December 31,
	2023		2022
Cash and cash equivalents	$	1,080,000	$	2,550,000
Restricted cash		697,000		2,831,000
Accounts receivable		247,000		264,000
Inventories		50,000		44,000
Property and equipment, net - current		88,525,000		-
Prepaid expenses and other current assets		392,000		270,000
Total current assets		90,991,000		5,959,000
Property and equipment, net		-		92,535,000
Total assets		90,991,000		98,494,000
Accounts payable and accrued expenses		3,099,000		2,631,000
Notes payable, current		67,262,000		-
Total current liabilities		70,361,000		2,631,000
Notes payable		-		61,633,000
Total liabilities		70,361,000		64,264,000
Net assets of discontinued operations	$	20,630,000	$	34,230,000

A disposal group classified as held for sale shall be measured at the lower of its carrying amount or fair value less costs to sell. No impairment was recognized upon reclassification of the disposal group as held for sale.

The following table presents the results of AGREE operations:

	For the Year Ended
	December 31,
	2023			2022
Revenue, hotel and real estate operations	$	16,161,000		$	16,697,000
Cost of revenue, hotel operations		12,300,000			11,406,000
Gross profit		3,861,000			5,291,000
General and administrative		3,383,000			5,982,000
Impairment of property and equipment		8,284,000			-
Total operating expenses		11,667,000			5,982,000
Loss from operations		(7,806,000	)		(691,000	)
Interest expense		(7,898,000	)		(5,204,000	)
Net loss from discontinued operations	$	(15,704,000	)	$	(5,895,000	)

The cash flow activity related to discontinued operations is presented separately on the statement of cash flows as summarized below:

	For the Year Ended December 31,
	2023			2022
Cash flows from operating activities:
Net loss	$	(15,704,000	)	$	(5,895,000	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		2,074,000			3,322,000
Amortization of debt discount		392,000			391,000
Impairment of property and equipment		8,284,000			-
Changes in operating assets and liabilities:
Accounts receivable		17,000			(213,000	)
Inventories		(6,000	)		(13,000	)
Prepaid expenses and other current assets		(122,000	)		349,000
Accounts payable and accrued expenses		467,000			2,026,000
Net cash used in operating activities		(4,598,000	)		(33,000	)
Cash flows from investing activities:
Purchase of property and equipment		(6,347,000	)		(9,111,000	)
Net cash used in investing activities		(6,347,000	)		(9,111,000	)
Cash flows from financing activities:
Proceeds from notes payable		5,237,000			7,340,000
Cash contributions from parent		2,104,000			794,000
Net cash provided by financing activities		7,341,000			8,134,000
Net decrease in cash and cash equivalents and restricted cash		(3,604,000	)		(1,010,000	)
Cash and cash equivalents and restricted cash at beginning of period		5,381,000			6,391,000
Cash and cash equivalents and restricted cash at end of period	$	1,777,000		$	5,381,000
Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	7,506,000		$	4,813,000