| Business divestitures |
TransPacific Energy, Inc.
In February 2015, the Company’s Board of
Directors authorized the sale of its waste heat recovery (“Organic Rankine Cycle” or “ORC”) business due
to its lack of operating performance and as part of a settlement of certain lawsuits filed by and against both TPE and the Company.
On March 5, 2015, the Company completed such sale of its 50.3% equity interest in TPE back to certain current and former TPE shareholders.
In exchange for its equity interest, ForceField received $50,000 in cash proceeds and the return of 255,351 shares of the Company’s
common stock originally issued in May 2012 when it acquired the equity interest in TPE.
The Company analyzed the divestment of its ORC
business for discontinued operations reporting consideration. As the divestment did not represent a strategic shift expected to
have a major effect on the Company’s operations and financial results, the Company determined that discontinued operations
reporting was not applicable.
Additionally, the Company analyzed the results
of its ORC business for segment reporting consideration. ASC 280 “Segment Reporting” establishes that an operating
segment is considered a reportable segment if: (i) it engages in business activities from which it may recognize revenues and generate
expenses, its operating results are regularly reviewed by the Company’s chief operating decision maker, and discrete financial
information is available; and (ii) it exceeds certain quantitative thresholds. At the time of the divestment, the Company’s
ORC business did not exceed any of the prescribed quantitative thresholds. As such, the Company determined that segment reporting
was not applicable. As a result of the transaction, the Company’s operations are now comprised of only one reportable segment
for financial reporting purposes. The operating results of the Company’s ORC business for the six-month periods ended June
30, 2015 and 2014 are summarized below:
| |
|
Successor |
|
| |
|
Six Months Ended
June 30, |
|
|
Period from April 26 through
June 30, |
|
| |
|
2015 |
|
|
2014 |
|
| Sales |
|
$ |
- |
|
|
$ |
- |
|
| Cost of goods sold |
|
|
- |
|
|
|
- |
|
| Gross margin |
|
|
- |
|
|
|
- |
|
| Operating expenses: |
|
|
|
|
|
|
|
|
| Depreciation and amortization |
|
|
17,589 |
|
|
|
17,589 |
|
| Selling and marketing |
|
|
752 |
|
|
|
- |
|
| General and administrative |
|
|
(2,816 |
) |
|
|
11,885 |
|
| Professional fees |
|
|
4,340 |
|
|
|
3,998 |
|
| Total operating expenses |
|
|
19,865 |
|
|
|
33,472 |
|
| Loss from continuing operations before other income (expense) and income taxes |
|
|
(19,865 |
) |
|
|
(33,472 |
) |
| Other income (expense) |
|
|
|
|
|
|
|
|
| Interest income (expense), net |
|
|
8 |
|
|
|
31 |
|
| Total other income (expense) |
|
|
8 |
|
|
|
31 |
|
| Loss from continuing operations before income taxes |
|
|
(19,857 |
) |
|
|
(33,441 |
) |
| Provision for income taxes (benefit) |
|
|
(7,006 |
) |
|
|
- |
|
| Net loss from continuing operations |
|
|
(12,851 |
) |
|
|
(33,441 |
) |
| Discontinued operations, net of income taxes |
|
|
- |
|
|
|
- |
|
| Net loss from continuing operations |
|
|
(12,851 |
) |
|
|
(33,441 |
) |
| Less: Accretion of preferred stock |
|
|
- |
|
|
|
- |
|
| Less: Net loss attributable to noncontrolling interests |
|
|
- |
|
|
|
(16,619 |
) |
| Net loss attributable to ForceField Energy Inc. stockholders |
|
$ |
(12,851 |
) |
|
$ |
(16,822 |
) |
No results of operations for the Company’s
ORC segment were reported in the period January 1 through April 25, 2014 as those results pertain solely to ALD as the predecessor
entity.
ESCO Energy Services Company
Pursuant to a stock purchase agreement dated
as of June 30, 2015 (the “Agreement”) by and among the Company, ESCO Energy Services, LLC (the “Buyer”),
Mitchell Barack and ESCO Energy Services Company (“ESCO”), the Company’s wholly owned subsidiary, the Buyer purchased
from the Company all of the issued and outstanding capital stock of ESCO. Mr. Barack is sole owner of all of the issued and
outstanding member interests of the Buyer. Prior to the Agreement, Mr. Barack served as a director and the chief executive officer
of ESCO.
In connection with the Buyer’s acquisition
of ESCO from the Company, the following occurred:
| ● |
Mr. Barack paid $900,000 in cash to the Company, which was received on July 2, 2015 (this amount was recorded to “Other Receivables” on the Company’s Consolidated Balance Sheets as of June 30, 2015); |
| ● |
Mr. Barack and certain employees of ESCO returned to the Company 366,845 and 87,700 shares of restricted common stock of the Company, respectively, which shares were issued to such persons by the Registrant pursuant to the October 17, 2014 stock purchase agreement (these shares valued at their fair market value $31,818, or $0.07 per share, and recorded to “Common Stock Held in Treasury, at Cost” on the Company’s Consolidated Balance Sheets as of June 30, 2015); |
| ● |
Mr. Barack cancelled two promissory notes in the aggregate principal amount of $2,230,355 issued to him by the Company in connection with the October 17, 2014 stock purchase agreement. Additionally, Mr. Barack and certain employees of ESCO returned 8,216 and 9,200 shares, respectively, that had been issued to them by the Company post-acquisition, in return for extending the post-closing due dates on the two promissory notes; |
| ● |
Mr. Barack returned to the Company 687,500 shares of restricted common stock of the Company, which secured the Company’s obligations under one of the two notes; |
| ● |
Certain ESCO employees cancelled $750,000 in unpaid purchase consideration obligations due from the Company relating to October 17, 2014 stock purchase agreement; and |
| ● |
The Company cancelled a $1,250,000 intercompany loan due from ESCO. |
As a result of the divestment, the Company
realized a net gain of $1,060,430. ESCO’s results of operations have been reclassified as discontinued operations on
a retrospective basis for all periods presented (see “Note 6 – Discontinued Operations” for
additional information).
|
