v3.26.1
Discontinued Operations
 12 Months Ended
Dec. 31, 2025
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued Operations

Note 3 – Discontinued Operations

 

On September 11, 2025, the Company completed the sale of its Cloud Solutions Business, which consisted of the operations of the Company’s subsidiaries, CloudFirst Technologies Corporation and CloudFirst Europe Ltd., 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, resulting 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 businesses have been reclassified and presented as “(Loss) income from discontinued operations, net of tax” on the Consolidated Statements of Operations for all periods presented as the sale represented a strategic shift that had a major effect on the Company’s operations and financial results. The sale resulted in the removal of the CloudFirst Technologies Corporation and CloudFirst Europe Ltd. reportable segments.

 

The gain on the sale is presented separately in the Consolidated Statements of Operations, as follows:

 

     
   Amount
Gross cash proceeds received after working capital adjustment  $38,068,463 
Add: Amount placed in Escrow   1,500,000 
Less:     
Carrying value of net assets disposed (1)   (9,869,738)
Cash transaction and selling costs (2)   (2,502,020)
Warrant liability reclassification (3)   215,981
Total pre-tax gain on sale  $27,412,686 
Income tax expense (4)   (7,294,005)
Gain on sale of discontinued operation, net of tax  $20,118,681 

 

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

 

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

 

(3) Represents the changes in fair value of the warrant liability as a cost of the transaction (see Note 5).

 

(4) Represents the provision for federal and state income taxes on the gain from the sale.

 

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

 

     
   December 31, 2024
ASSETS:     
Accounts receivable  $2,166,440 
Prepaid and other assets   740,964 
Current assets of discontinued operations   2,907,404 
      
Property and equipment, net   3,433,579 
Goodwill and intangible assets, net   5,665,677 
Right-of-use and other assets   621,742 
Total assets of discontinued operations  $12,628,402 
      
LIABILITIES:     
Accounts payable and accrued expenses  $2,594,789 
Deferred revenue   212,390 
Finance and operating lease liabilities - current   150,380 
Current liabilities of discontinued operations   2,957,559 
Finance and operating lease liabilities - non-current   523,070 
Total liabilities of discontinued operations  $3,480,629 

 

Operating results for the discontinued operations were as follows:

 

          
   January 1, 2025 to  Twelve Months Ended
   September 11, 2025  December 31, 2024
       
Sales  $16,039,680   $24,152,056 
Cost of sales   9,388,216    13,575,938 
Gross profit   6,651,464    10,576,118 
           
Selling, general and administrative   6,678,953    7,183,108 
(Loss) income from discontinued operations   (27,489)   3,393,010 
           
Interest and other expense   (41,653)   (120,607)
Benefit from income taxes   31,624    — 
           
(Loss) income from discontinued operations, net of tax  $(37,518)  $3,272,403 

 

Summary of Significant Accounting Policies of Discontinued Operations 

 

Revenue Recognition

 

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.