SCWorx, Corp. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Discontinued Operations

Discontinued Operations

6 Months Ended

Jun. 30, 2018

Discontinued Operations and Disposal Groups [Abstract]

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

Note 3. Discontinued Operations

On May 25, 2018, the Company commenced cessation of all the professional MMA promotion operations and supporting functions including ASM and began a plan of disposition. This action included the termination of all promotion and support employees. As of June 30, 2018, all the MMA promotions were either disposed or ceased operations.

The Company has reported the results of operations and financial position of the discontinued professional MMA business in discontinued operations within the condensed consolidated statements of operations and condensed consolidated balance sheets for all periods presented.

The results from discontinued operations were as follows:

	Three Months Ended				Six Months Ended
	June 30,		June		June 30,		June 30,
	2018		2017		2018		2017
Revenue, net	$	517,106	$	755,782	$	1,291,290	$	1,247,572
Cost of revenue		356,229		446,370		962,995		793,461
Gross margin		160,877		309,412		328,295		454,111
Operating expenses:
General and administrative		729,124		1,265,836		1,600,322		2,652,764
Professional and consulting fees						925		471
Other expense				56				455
Total operating expenses		729,124		1,265,892		1,601,247		2,653,690
Loss from operations		(568,247)		(956,480)		(1,272,952)		(2,199,579)
Gain on disposal		515,546				515,546
Loss on disposal		(4,521,288)				(7,307,194)
Loss before income tax benefit		(4,573,989)		(956,480)		(8,064,600)		(2,199,579)
Income tax benefit						23,943
Loss from discontinued operations	$	(4,573,989)	$	(956,480)	$	(8,040,657)	$	(2,199,579)

In May 2018, the Company announced the cessation of the professional MMA promotion business. As part of these actions, the Company defaulted on the lease obligation for the Cherry Hill, New Jersey office, refer to “Note 7 Commitments and contingencies”.

As part of the cessation of its professional MMA promotion business, the Company disposed of all long-lived fixed assets and realized a loss on disposal of approximately $223,000.

The Company sold all the professional MMA promotion businesses, with the exception of Victory, to the former business owners and terminated/settled existing employment agreements with these former AMMA employees. In relation to the disposal of HFC, COGA, Shogun, V3, ITFS, and FCOC, the Company disposed of the MMA assets, recorded a $15,000 receivable related to the sale of a business, incurred approximately $246,000 of additional liabilities related to severance payments to former employees, settled the $310,000 earn-out liability related to the Shogun acquisition with the issuance of 366,072 common stock options with a Black-Scholes value of $94,000, issued 30,000 common stock options to a promoter as severance, and agreed to issue 75,000 common stock options to a former employee in connection with termination. The Company realized a gain of approximately $160,000 related to the settlement of outstanding accounts payable and $273,000 related to settlement with a promoter of customer payments. Additionally, the Company has abandoned the Cherry Hill, New Jersey promotion office and recorded a $167,500 charge for the remaining contractual lease payments.

The current assets, long-term assets, current liabilities and long-term liabilities of discontinued operations were as follows:

	June 30, 2018	December 31, 2017
Cash	$	$	90,772
Accounts receivable, net			101,195
Other receivables			7,254
Current assets - discontinued operations	$	$	199,221

	June 30, 2018	December 31, 2017

Property and equipment, net	$	$	259,463
Intangible assets, net			2,414,844
Goodwill			4,440,932
Long-term assets - discontinued operations	$	$	7,115,239

	June 30, 2018		December 31, 2017

Accounts payable	$		$	11,022
Accrued liabilities		413,766		371,680
Current liabilities - discontinued operations	$	413,766	$	382,702

	June 30, 2018	December 31, 2017

Long-term deferred tax liability	$	$	23,943
Long-term liabilities - discontinued operations	$	$	23,943