Annual report pursuant to Section 13 and 15(d)


12 Months Ended
Dec. 31, 2017
Discontinued Operations and Disposal Groups [Abstract]  



In October of 2016, the Company, under the direction and authority of the Board of Directors, committed to a plan to offer for sale EthoStream, the Company’s wholly–owned High-Speed Internet Access (“HSIA”) subsidiary. As a result of this decision to sell EthoStream, the operating results of EthoStream as of and for the year ended December 31, 2016 were reclassified as discontinued operations and as assets and liabilities held for sale in the consolidated financial statements as detailed in the table below. During the year ended December 31, 2017, the Company, and EthoStream, entered into an Asset Purchase Agreement (the “Purchase Agreement”) with DCI-Design Communications LLC (“DCI”), a Delaware limited liability company, whereby DCI acquired all of the assets and certain liabilities of EthoStream for a base purchase price of $12,750,000. The Purchase Agreement includes that proceeds of $900,000 are to be withheld from the $12,750,000 base purchase price and placed into an escrow account to support potential indemnification obligations of up to $800,000 and net working capital adjustments of up to $100,000. The escrow amount, net of potential claims, would be fully released after an escrow period not to exceed 12 months after closing. The assets included, among other items, certain inventory, contracts and intellectual property. DCI acquired only the liabilities provided for in the Purchase Agreement. 


On March 29, 2017, pursuant to the terms and the conditions of the Purchase Agreement, the Company closed on the sale.


On September 27, 2017, the Company reached a final settlement with DCI on net working capital as set forth in the Purchase Agreement and subsequently received $100,000 from the escrow account for the portion of the escrow account set aside for net working capital adjustments and cash proceeds of $311,000 from DCI in the settlement of net working capital adjustments. During the year ended December 31, 2017, the Company recorded a gain from the sale of EthoStream (net of tax) of $6,630,244.


The following table summarizes the balance sheet information from discontinued operations:


    December 31,  
    2017     2016  
Accounts receivable, net   $     $ 456,478  
Inventories           350,506  
Other current assets           12,980  
Other asset - goodwill           5,796,430  
Other  asset – intangible asset, net           533,577  
Current assets held for sale           7,149,971  
Accounts payable           465,346  
Accrued liabilities and expenses           90,187  
Deferred revenues           37,509  
Customer deposits           200,466  
Deferred lease liability           76,096  
Current liabilities held for sale           869,604  
Net assets of discontinued operations   $     $ 6,280,367  


The following table summarizes the statements of operations information for discontinued operations for the years ended December 31, 2017 and 2016.


    2017     2016  
Revenues, net:                
Product   $ 653,839     $ 3,529,012  
Recurring     925,837       3,894,998  
Total Net Revenues     1,579,676       7,424,010  
Cost of Sales:                
Product     393,804       2,235,641  
Recurring     209,868       925,212  
Total Cost of Sales     603,672       3,160,853  
Gross Profit     976,004       4,263,157  
Operating Expenses:                
Research and development           2,511  
Selling, general and administrative     252,378       1,191,385  
Depreciation and amortization     60,420       242,117  
Total Operating Expenses     312,798       1,436,013  
Income from Discontinued Operations before Provision for Income Taxes     663,206       2,827,144  
Provision  for Income Taxes     50,331       199,386  
Income from Discontinued Operations (net of tax)   $ 612,875     $ 2,627,758  


The consolidated statements of cash flows do not present the cash flows from discontinued operations for investing activities or financing activities because there were no investing or financing activities associated with the discontinued operations in the years ended December 31, 2017 and 2016.