Annual report pursuant to Section 13 and 15(d)

Discontinued Operations

Discontinued Operations
12 Months Ended
Dec. 31, 2020
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued Operations



On November 6, 2020, the Company executed a Separation Agreement (see Note 4 – Separation Agreement), whereby the Company transferred its Legacy Business and the related assets and liabilities to EPH, a related party and equity method investee.


ASC 205-20 “Discontinued Operations” establishes that the disposal or abandonment of a component of an entity or a group of components of an entity should be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. As a result, the component’s results of operations have been reclassified as discontinued operations on a retrospective basis for all periods presented. Accordingly, the liabilities forgiven or assumed by EPH in connection with the Separation Agreement separately reported as “liabilities held for disposal” as of December 31, 2019. As of December 31, 2020, there were no assets held associated with this business. The results of operations of this component, for all periods, are separately reported as “discontinued operations” on the consolidated statements of operations.


As disclosed in Note 5, the Company retained its equity interest in EPH as of December 31, 2020. This equity interest has been accounted for as an equity method investment for all periods. There have been no transactions between the Company and EPH since the Separation Agreement.


A reconciliation of the major classes of line items constituting the income (loss) from discontinued operations, net of income taxes as is presented in the consolidated statements of operations for the years ended December 31, 2020, and 2019 are summarized below:


Reconciliation of liabilities included in current liabilities held for disposal on the consolidated balance sheet:


    Year ended December 31,  
    2020     2019  
Carrying amounts of major classes of liabilities included as part of liabilities held for disposal                
Accounts payable and accrued expenses   $ -     $ 15,000  
Accrued interest - related parties     -       15,426  
Notes payable - related parties     -       788,500  
Total liabilities included in the liabilities held for disposal   $ -     $ 818,926  


Reconciliation of revenue and expense items in discontinued operations on the consolidated statement of operations:


    Year ended December 31,  
    2020     2019  
REVENUES   $ 541,200     $ 916,667  
OPERATING EXPENSES                
Payroll and related expenses     515,741       835,183  
Professional fees     -       7,500  
General and administrative     53,398       106,256  
Total Operating Expenses     569,139       948,939  
Financing costs including interest     46,967       15,426  
Gain on debt extinguishment     (1,032,160 )     -  


Reconciliation of cash flows from operating activities and financing activities on the consolidated statement of cash flow:


    Year ended December 31,  
    2020     2019  
Net Income (Loss) from Discontinued Operations   $ 957,254     $ (47,698
Adjustments to reconcile net loss to net cash provided by discontinued operations:                
Gain on forgiveness or assumption of promissory notes and accrued expenses     (1,032,160 )     -  
Changes in operating assets and liabilities                
Increase in accounts payable and accrued expenses     22,500       15,000  
Increase in contract liabilities - related party     -       (117,667 )
Increase in accrued interest - related party     46,967       15,426  
Net cash used in operating activities     (5,439 )     (134,939 )
Proceeds from promissory notes - related parties     338,373       788,500  
Repayments on promissory notes - related parties     (1,590 )     -  
Net cash provided by financing activities     336,783       788,500  
Net cash provided by discontinued operations   $ 331,344     $ 653,561