Annual report pursuant to Section 13 and 15(d)

7. Note receivable - sale of discontinued operations

7. Note receivable - sale of discontinued operations
12 Months Ended
Dec. 29, 2018
Discontinued Operations and Disposal Groups [Abstract]  
Note receivable - sale of discontinued operations

Note 7:       Note receivable – sale of discontinued operations


On December 30, 2017, we signed an agreement to dispose of our retail appliance segment. ApplianceSmart Holdings LLC (the “Purchaser”), a wholly owned subsidiary of Live Ventures Incorporated, entered into a Stock Purchase Agreement (the “Agreement”) with the Company and ApplianceSmart, then a subsidiary of the Company. ApplianceSmart is a retail chain specializing in new and out-of-the-box appliances. Pursuant to the Agreement, the Purchaser purchased from the Company all the issued and outstanding shares of capital stock (the “Stock”) of ApplianceSmart in exchange for $6,500 (the “Purchase Price”). The Purchase Price per the Agreement was due and payable on or before March 31, 2018. As of December 30, 2017, the Company had an amount due from the Purchaser in the amount of $6,500 recorded as a current asset.


Between March 31, 2018 and April 24, 2018, the Purchaser and the Company negotiated in good faith the method of payment of the remaining outstanding balance of the Purchase Price. On April 25, 2018, the Purchaser delivered to the Company a promissory note (the “ApplianceSmart Note”) in the original principal amount of $3,919 (the “Original Principal Amount”), as such amount may be adjusted per the terms of the ApplianceSmart Note. The ApplianceSmart Note is effective as of April 1, 2018 and matures on April 1, 2021 (the “Maturity Date”). The ApplianceSmart Note bears interest at 5% per annum with interest and principal payable at the Maturity Date. ApplianceSmart provided the Company a guaranty of repayment of the ApplianceSmart Note. On December 26, 2018, the ApplianceSmart Note was amended and restated to grant ARCA a security interest in the assets of the Purchaser, ApplianceSmart, and ApplianceSmart Contracting Inc. in exchange for modifying the repayments terms to provide for the payment in full of all accrued interest and principal on April 1, 2021, the maturity date of the ApplianceSmart Note. On March 15, 2019, the Company entered into agreements with third parties pursuant to which it agreed to subordinate the payment of indebtedness under the ApplianceSmart Note and the Company’s security interest in the assets of ApplianceSmart and other related parties in exchange for up to $1,200. The remaining $2,581 of the Purchase Price was paid in cash by the Purchaser to the Company. The Purchaser may reborrow funds, and pay interest on such re-borrowings, from the Company up to the Original Principal Amount. Subsequent to December 30, 2017, ApplianceSmart assumed $1,901 in liabilities from the Company. For the 52 weeks ended December 29, 2018, the original balance owed to the Company of $6,500, increased with new borrowings of $1,819 and decreased with repayments of $2,581 and debt assumed of $1,901 represents a net amount due from the Purchaser, now in the form of a note receivable, in the sum of $3,837 as of December 29, 2018.


Discontinued operations include our retail appliance business ApplianceSmart. Results of operations, financial position and cash flows for this business are separately reported as discontinued operations for all periods presented. The Company made the decision to sell ApplianceSmart to eliminate losses and poor financial performance from our retail segment, decrease existing leverage, assign and eliminate long term lease liabilities for store leases, increase cash balances, enhance shareholder value and focus Company resources on its two remaining segments, Recycling and Technology.




    52 Weeks  
    December 30, 2017  
Revenue   $ 56,296  
Cost of revenue     42,252  
Gross profit     14,044  
Selling, general and administrative expense     15,911  
Operating loss - discontinued operations     (1,867 )
Other income     862  
Other expense     (5 )
Net loss - discontinued operations before income tax benefit     (1,010 )
Income tax benefit     270  
Net loss - discontinued operations, net of tax   $ (740 )



As of December 30, 2017 (date of sale)


    At December 30, 2017  
Accounts Receivable   $ 2,356  
Inventories     8,836  
Prepaid expenses     173  
Total current assets held for sale     11,365  
Buildings and improvements     2,073  
Equipment     1,756  
Accumulated depreciation     (3,319 )
Restricted cash     1,298  
Other assets     204  
Total non-current assets held for sale     2,012  
Total assets held for sale - discontinued operations   $ 13,377  
Purchase price     6,500  
Loss of sale of assets held for sale     (6,877 )
Income tax benefit     1,842  
Net loss on sale of assets held for sale and discontinued operations, net of tax   $ (5,035 )