Note 3 –Discontinued Operations

On September 11, 2025, the Company completed the sale of its Cloud Solutions Business for a base purchase price of $40,000,000. At closing, the proceeds were contractually adjusted for a $1,500,000 escrow deposit and $431,537 in net adjustments for estimated closing date debt and working capital.

This resulted in total cash received at closing of $38,068,463. The transaction remains subject to final post-closing adjustments, which may be settled from the escrowed funds. 

The operating results of these divested subsidiaries have been reclassified and are presented as “Income (loss) from discontinued operations, net of tax” on the Condensed Consolidated Statements of Operations for all periods presented. The gain on the sale is presented separately in the Condensed Consolidated Statements of Operations, as follows:

(1) Represents the carrying value (book value) of the assets and liabilities of the Business on the date of sale.

(2) Represents cash selling expenses, including legal and advisory fees, as shown on the Condensed Consolidated Statement of Cash Flows.

(3) Represents the fair value of the warrant liability reclassified from equity as cost of the transaction (see Note 5).  

(4) Represents the estimated provision for federal and state income taxes on the gain from the sale. This tax expense was determined based on management's preliminary analysis, which included estimates for the taxable gain on the sale, the utilization of the Company's net operating loss carryforwards based on a preliminary analysis and an estimate for state income taxes. The final tax expense is subject to change pending the completion of formal tax studies and final calculations and may be adjusted.

Summary of Significant Accounting Policies of Discontinued Operations

The Cloud Solutions Business derived revenue from subscription services for cloud infrastructure and disaster recovery, managed services, and the sale of equipment and software. Subscription revenue was recognized ratably over the contract term. Revenue from equipment and software sales was recognized at a point in time when control transferred to the customer. Goodwill and other intangible assets of the Cloud Solutions Business were tested for impairment annually. Property and equipment, primarily data center assets, were depreciated on a straight-line basis over their estimated useful lives.

The major classes of assets and liabilities of the Cloud Solutions Business classified as discontinued operations   were as follows:

Operating results for the discontinued operations were as follows: