DECONSOLIDATION OF SUBSIDIARIES AND GIGA DISCONTINUED OPERATIONS

3 Months Ended

Mar. 31, 2025

Deconsolidation Of Subsidiaries And Giga Discontinued Operations

DECONSOLIDATION OF SUBSIDIARIES AND GIGA DISCONTINUED OPERATIONS

4. DECONSOLIDATION OF SUBSIDIARIES AND GIGA DISCONTINUED OPERATIONS

Deconsolidation of Avalanche International Corp. (“AVLP”)

On March 28, 2025, AVLP, a majority-owned subsidiary of the Company, filed a voluntary petition for liquidation under Chapter 7 of the U.S. Bankruptcy Code. As a result of the filing, AVLP became subject to the control of the bankruptcy court, and the Company no longer maintained a controlling financial interest. Accordingly, the Company deconsolidated AVLP effective as of the petition date. In connection with the deconsolidation, the Company recognized a gain of $10.0 million, which is included in the condensed consolidated statement of operations for the three months ended March 31, 2025. The Company evaluated the criteria for discontinued operations and determined that the operations of AVLP did not meet the requirements for such classification.

Presentation of GIGA as Discontinued Operations

On August 14, 2024, GIGA filed a petition for reorganization under Chapter 11 of the bankruptcy laws. The filing placed GIGA under the control of the bankruptcy court, which oversees its reorganization and restructuring process. The Company assessed the inherent uncertainties associated with the outcome of the Chapter 11 reorganization process and the anticipated duration thereof, and concluded that it was appropriate to deconsolidate GIGA and its subsidiaries effective on the petition date.

In connection with the Chapter 11 reorganization process, the Company concluded that the operations of GIGA met the criteria for discontinued operations as this strategic shift that will have a significant effect on the Company’s operations and financial results. As a result, the Company has presented the results of operations, cash flows and financial position of GIGA as discontinued operations in the accompanying consolidated financial statements and notes for all periods presented.

The following table presents the results of GIGA operations:

Schedule of operations
	For the Three Months Ended
	March 31,
	2025		2024
Revenue, products	$	-	$	9,573,000
Cost of revenue, products		-		8,063,000
Gross profit		-		1,510,000
Operating expenses
Research and development		-		961,000
Selling and marketing		-		612,000
General and administrative		-		3,415,000
Total operating expenses		-		4,988,000
Loss from operations		-		(3,478,000	)
Other income (expense):
Interest and other income		-		60,000
Interest expense		-		(852,000	)
Total other income (expense), net		-		(792,000	)
Loss before income taxes		-		(4,270,000	)
Income tax benefit		-		(43,000	)
Net loss		-		(4,227,000	)
Net loss attributable to non-controlling interest		-		891,000
Net loss available to common stockholders	$	-	$	(3,336,000	)

The cash flow activity related to discontinued operations is presented separately on the statement of cash flows as summarized below:

Schedule of statement of cash flows
	For the Three Months Ended March 31,
	2025		2024
Cash flows from operating activities:
Net loss	$	-	$	(4,227,000	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		-		194,000
Amortization of right-of-use assets		-		196,000
Amortization of intangibles		-		103,000
Stock-based compensation		-		(858,000	)
Changes in operating assets and liabilities:
Accounts receivable		-		38,000
Inventories		-		527,000
Prepaid expenses and other current assets		-		581,000
Lease liabilities		-		(219,000	)
Accounts payable and accrued expenses		-		3,079,000
Net cash used in operating activities		-		(586,000	)
Cash flows from investing activities:
Purchase of property and equipment		-		(51,000	)
Net cash used in investing activities		-		(51,000	)
Cash flows from financing activities:
Payments on notes payable		-		(517,000	)
Cash contributions from parent		-		1,472,000
Net cash provided by financing activities		-		955,000

Effect of exchange rate changes on cash and cash equivalents		-		45,000

Net increase in cash and cash equivalents and restricted cash		-		363,000

Cash and cash equivalents and restricted cash at beginning of period		-		4,301,000

Cash and cash equivalents and restricted cash at end of period	$	-	$	4,664,000

Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	-	$	507,000