Quarterly report pursuant to Section 13 or 15(d)


3 Months Ended
Mar. 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 three months ended March 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. Another $93,000 is classified in other current assets as a net working capital receivable. 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.  


    March 31,     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 of discontinued operations           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 of discontinued operations           869,604  
Net assets of discontinued operations   $     $ 6,280,367  


The following table summarizes the statements of operations information for discontinued operations.



For the Three Months Ended

March 31,

    2017     2016  
Revenues, net:                
Product   $ 653,839     $ 716,643  
Recurring     925,837       967,403  
Total Net Revenues     1,579,676       1,684,046  
Cost of Sales:                
Product     424,829       481,207  
Recurring     209,179       247,003  
Total Cost of Sales     634,008       728,210  
Gross Profit     945,668       955,836  
Operating Expenses:                
Selling, general and administrative     262,034       232,895  
Depreciation and amortization     60,420       60,857  
Total Operating Expenses     322,454       293,752  
Income from Discontinued Operations before Provision for Income Taxes     623,214       662,084  
Provision for Income Taxes     51,412       51,312  
Income from Discontinued Operations (net of tax)   $ 571,802     $ 610,772  


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 periods ended March 31, 2017 and 2016.