Quarterly report pursuant to Section 13 or 15(d)

Discontinued Operations

v3.19.1
Discontinued Operations
 3 Months Ended
Mar. 31, 2019
Discontinued Operations and Disposal Groups [Abstract]  
Disposal Groups, Including Discontinued Operations, Disclosure
Note 3 – Discontinued Operations
 
On January 2, 2019, the Board approved a strategic shift to focus on the commercialization of its B-TRAN™ technology and a plan to suspend further power converter system development and sales while the Company located a buyer for its power conversion systems division. On January 4, 2019, the Company implemented a reduction-in-force in connection with this exit activity and recognized an expense of $92,600 in involuntary termination benefits. The Company did not recognize other associated costs related to exiting production of its power converters products as the sale of the power conversion systems division was deemed probable.
 
The Company’s power conversion system division, a component supplier to energy storage system integrators, had not achieved the necessary scale to generate positive cash flows. As the division was dependent on the ability of its customers to scale in the small commercial and industrial segment of the storage market and based on the sales forecasts and commitments provided by these customers, the Company did not expect its power conversion systems division to scale sufficiently in the short term, requiring an inflow of additional capital for the business. As such, the decision was made to exit the power conversion systems business and sell the division and the Company’s PPSA™ technology and focus on the Company’s B-TRAN™ technology.
 
As a result, the assets held for sale and discontinued operations criteria have been met and the Company’s financial statements are presented in accordance with ASC 205. Under ASC 205-20-45-10, during the period in which a component meets the assets held for sale and discontinued operations criteria, an entity must present the assets and liabilities of the discontinued operation separately in the asset and liability sections of the balance sheet for the comparative reporting periods. The prior period balance sheet should be reclassified for the held for sale items. For income statements, the current and prior periods should report the results of operations of the component in discontinued operations when comparative income statements are presented.
 
The following is a reconciliation of the carrying amounts of major classes of assets and liabilities of the discontinued operations to assets and liabilities held for sale:
 
 
 
March 31,
 
 
December 31,
 
 
 
2019
 
 
2018
 
Accounts receivable, net
 
$
47,250
 
 
$
270,768
 
Inventories, net
 
 
134,082
 
 
 
131,342
 
Prepayments and other current assets
 
 
17,336
 
 
 
22,322
 
Property and equipment, net
 
 
327,122
 
 
 
329,738
 
Intangible assets, net (1)
 
 
202,153
 
 
 
342,153
 
Current assets held for sale (2)
 
$
727,943
 
 
$
1,096,323
 
 
 
 
 
 
 
 
 
 
Accounts payable
 
$
41,773
 
 
$
356,113
 
Accrued expenses
 
 
459,663
 
 
 
521,642
 
Current liabilities held for sale
 
$
501,436
 
 
$
877,755
 
 
 
(1)
Includes an impairment charge of $500,000 of which $140,000 was recognized in the three months ended March 31, 2019, calculated as the net book value of assets held for sale prior to the impairment less the expected proceeds from the planned sale. The expected proceeds are based on the estimated fair value of the net assets held for sale less the estimated cost to sell the net assets held for sale.
 
(2)
The assets of the discontinued operations classified as held for sale are classified as current on the March 31, 2019 and December 31, 2018 balance sheets because it is probable that the sale will occur and proceeds will be collected within one year.
 
The following is a reconciliation of the major classes of line items constituting loss on discontinued operations to loss on discontinued operations shown in the Statement of Operations:
 
 
 
March 31,
 
 
 
2019
 
 
2018
 
Product revenue
 
$
113,500
 
 
$
181,500
 
Cost of product revenue
 
 
98,768
 
 
 
334,963
 
Research and development
 
 
160,284
 
 
 
663,239
 
General and administrative
 
 
25,506
 
 
 
9,889
 
Sales and marketing
 
 
36,117
 
 
 
254,243
 
Impairment (1)
 
 
140,000
 
 
 
—
 
Loss on discontinued operations
 
$
(347,175
)
 
$
(1,080,834
)
 
 
(1)
For the three months ended March 31, 2019, includes an impairment charge of $140,000, calculated as the net book value of assets held for sale prior to the impairment less the expected proceeds from the planned sale. The expected proceeds are based on the estimated fair value of the net assets held for sale less the estimated cost to sell the net assets held for sale.