Discontinued Operations

6 Months Ended

Jun. 30, 2018

Discontinued Operations and Disposal Groups [Abstract]

DISCONTINUED OPERATIONS

NOTE 10 – DISCONTINUED OPERATIONS

In order to increase access to cost-effective growth capital to help create shareholder value in our biomass innovation and healthcare businesses, in the fourth quarter of 2017, the Company committed to a plan to make available for immediate sale the waste management business. Management engaged in an active program to market the business which culminated with the reaching of a binding sales agreement in February 2018. Pursuant to the purchase Agreement, upon the closing of the Transaction, Buyer will pay Seller Parties $3.0 million in cash; satisfy $75.8 million of outstanding indebtedness under the Credit Agreement; and assume the Acquired Entities’ obligations under certain equipment leases and other operating indebtedness. At the Closing, Attis will issue to Buyer a warrant to purchase shares of common stock, par value $0.025, of Attis, equal to two percent of the issued and outstanding shares of capital stock of Attis on a fully-diluted basis as of Closing (subject to adjustment as set forth in the Purchase Agreement) on such terms to be determined by Attis and Buyer.

As all the required criteria for held for sale classification were met at December 31, 2017, the waste management business is classified as held for sale in the Consolidated Balance Sheets and reflected as discontinued operations in the Consolidated Statements of Operations for all periods presented. Included in these results are the operations of a consolidated variable interest entity (see Note 12, Variable Interest Entity).

The assets held for sale represent that entirety of the Mid-Atlantic and Midwest waste management segments historically disclosed by the Company. These assets included a 20% interest of the Tri-City Recycling Center (“TCR”), which had been treated as a variable interest entity. The Company will have no continuing involvement with the discontinued operations after the disposal date.

Upon the terms and subject to the conditions set forth in the Purchase Agreement, on April 20, 2018 Buyer purchased from Seller all of the membership interests in each of the direct wholly-owned subsidiaries of Seller (the “Acquired Parent Entities” and together with each direct and indirect subsidiary of the Acquired Parent Entities, the “Acquired Entities”), which constitute the Solid Waste Business (as defined below), and each such Acquired Parent Entity continues as a wholly-owned subsidiary of Buyer (the “Transaction”). Pursuant to the Purchase Agreement, upon the consummation of the Transaction (the “Closing”), Buyer paid Seller Parties $3.0 million in cash; satisfied $75.8 million of outstanding indebtedness under the Prior Credit Agreement (as defined below); and assumed the Acquired Entities’ obligations under certain equipment leases and other operating indebtedness and obligations. At the Closing, the Seller Parties retained approximately $8.7 million of outstanding indebtedness under the New Credit Agreement (as defined below), including accrued interest in an aggregate amount approximately equal to $1.6 million, and all other assets and obligations of Attis, the Technologies Business and the Innovations Business (each as defined below). Pursuant to the terms of the Purchase Agreement, at the Closing, Attis issued to Buyer a warrant (the “Company Warrant”) to purchase shares of Attis’ common stock, par value $0.025 equal to two percent of the issued and outstanding shares of capital stock of Attis on a fully-diluted basis as of Closing (subject to adjustment as set forth therein and as more fully described in the Purchase Agreement and the Company Warrant) at a per share purchase price equal to $1.00 (the “Company Warrant Exercise Price”). The Company Warrant Exercise Price is subject to adjustment as more fully set forth in the Company Warrant.

On March 30, 2018, Seller Parties and Buyer entered into Amendment #1 to the Purchase Agreement (“Amendment No. 1”) to (i) provide an exception to the indemnification obligations of Seller Parties with respect to Losses (as defined in the Purchase Agreement) arising out of or relating to an acquisition of certain solid waste assets by an Acquired Entity following the execution date of the Purchase Agreement and the assets and liabilities assumed by such Acquired Entity in connection with the acquisition and (ii) to amend the description of the Company Warrant to provide that the Company Warrant Exercise Price shall be equal to the lower of (a) $1.25 or (b) the average of the daily high and low sale prices per share over the 30 days ending one day prior to the Closing, provided that such price shall not be less than $1.00 per share of Common Stock.

In addition, on April 20, 2018, prior to the Closing, Parties and Buyer entered into Amendment #2 to the Purchase Agreement (“Amendment No. 2”) to, among other things, (i) require the Seller Parties to take certain actions related to the Company’s 401(k) plans and (ii) require the Company to maintain the employment agreement of a specific employee and indemnify Buyer for certain breaches of such employee’s employment agreement.

The following table contains select amounts reported in our Consolidated Statements of Operations as discontinued operations:

Major Class of line items constituting pretax (loss) of discontinued operations as of the three months ended June 30, 2017:

	Three months ended June 30,
	2018			2017
Total revenues	$	3,410,270		$	14,220,423
Total costs and expenses
Operating		2,019,919			11,370,739
Depreciation, depletion and amortization		-			4,320,920
Bad debt expense		-			158,886
Selling, general and administrative		(58,637	)		1,395,687
Interest Expense		1,021,375			2,042,030
Other		232,280			(20,301	)
Total costs and expenses		23,215,477			19,267,962
Pretax income (loss) from discontinued operations		194,793			(5,047,539	)
Gain on disposal of assets		21,778,559			(841	)
(Provision) benefit for income taxes		-			(122,905	)
Income (loss) from discontinued operations	$	21,973,353		$	(5,169,603	)

Major Class of line items constituting pretax (loss) of discontinued operations as of the six months ended June 30, 2017:

	Six months ended June 30,
	2018			2017
Total revenues	$	17,811,595		$	25,125,490
Total costs and expenses
Operating		12,393,313			18,358,125
Depreciation, depletion and amortization		-			7,356,344
Bad debt expense		40,089			337,374
Selling, general and administrative		2,100,643			3,521,530
Interest Expense		3,618,990			3,544,995
Other		(268	)		(76,459	)
Total costs and expenses		18,152,767			33,041,068
Pretax income (loss) from discontinued operations		(341,172	)		(7,916,420	)
Gain on disposal of assets		21,778,559			(841	)
(Provision) benefit for income taxes		-			(224,518	)
Income (loss) from discontinued operations	$	21,437,388		$	(8,140,097	)

The following table presents the depreciation, amortization, accretion, and capital expenditures for the discontinued operations for the six months ended June 30, 2018 and 2017, respectively and also any significant operating or investing non-cash items for the three and six months ended June 30, 2018 and 2017, respectively.

	Three Months Ended June 30,
	2018		2017
Depreciation and amortization	$	2,678,000	$	4,356,000
Accretion expense		117,000		113,000
Capital expenditures	$	-	$	5,131,000

	Six Months Ended June 30,
	2018		2017
Depreciation and amortization	$	2,678,000	$	7,356,000
Accretion expense		117,000		169,000
Capital expenditures	$	2,557,000	$	6,531,000

Significant Non-cash Operating and Investing Activities Related to Discontinued Operations

	Three Months Ended June 30,
	2018		2017
Note payable incurred for acquisition	$	-	$	4,400,000
Common stock issued for acquisition		-		12,500,000
Property, plant and equipment additions financed by notes payable and capital leases	$	-	$	32,000

	Six Months Ended June 30,
	2018		2017
Note payable incurred for acquisition	$	3,692,000	$	38,500,000
Common stock issued for acquisition		-		13,700,000
Property, plant and equipment additions financed by notes payable and capital leases	$	577,194	$	6,600,000