DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

12 Months Ended

Sep. 30, 2023

Discontinued Operations and Disposal Groups [Abstract]

DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

NOTE 3         DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

Considering the recurring losses incurred by the retail segment, in July 2023, the Company decided to cease operations of its retail distribution segment (“Retail Exit”). The primary assets of the retail segment are inventory and accounts receivable. The Company expects to sell, liquidate, or otherwise dispose of remaining retail inventory by June 30, 2024, and to collect remaining retail accounts receivable by the end of Fiscal 2024. After this time, we expect to have no further significant continuing involvement with the retail distribution segment. The Retail Exit is considered a strategic shift that will have a significant impact on the Company’s operations and financial results. The inventory of the retail segment meets the criteria to be considered “held-for-sale” in accordance with ASC 205-20, “Discontinued Operations.” Accordingly, the retail inventory is classified on our consolidated balance sheet as “discontinued assets held for sale” at September 30, 2023 and 2022, and the results of operations for the retail segment have been classified as “Discontinued Operations” on the consolidated statements of operations for the years ended September 30, 2023 and 2022. The consolidated balance sheets and results of operations for comparable prior periods have been reclassified to conform to this presentation in accordance with the accounting guidance.

Consistent with the Company's plan for the Retail Exit, the Company re-evaluated its retail inventory and recorded an increase in the reserve of approximately $685,000 relating to discounts deemed necessary to sell the remaining retail inventory. Additionally, on September 30, 2023, the Company had unfulfilled purchase orders for retail products totaling approximately $1,021,000. As of September 30, 2023, the Company made prepayments on these orders of approximately $298,000. Due to the Retail Exit, the Company and Forward China agreed to cancel the full amount of these orders. The unpaid balance on the purchase orders of approximately $723,000, is accrued for as of September 30, 2023 and included in Due to Forward China on the consolidated balance sheets. Collectively, the additional inventory reserve, write off of the prepayments and accrual on the unfulfilled purchase orders represent the loss on classification of discontinued assets held for sale shown in the table below. The total amount related to the retail segment included in Due to Forward China on the consolidated balance sheets was approximately $1,002,000 (which includes the $723,000 due on canceled purchase orders) at September 30, 2023 and $238,000 at September 30, 2022.

The following table presents the major classes of the “Net loss from discontinued operations, net of tax” in our consolidated statements of operations.

	For the Fiscal Years Ended September 30,
	2023			2022
Revenues, net	$	4,332,890		$	4,130,427
Cost of sales		5,285,495			4,562,106
Gross profit		(952,605	)		(431,679	)
Sales and marketing expenses		1,210,563			1,376,729
General and administrative expenses		26,762			19,736
Loss from operations		(2,189,930	)		(1,828,144	)
Loss on classification as held for sale		1,705,385			–
Net loss from discontinued operations before income taxes		(3,895,315	)		(1,828,144	)
Provision for income taxes		–			–
Loss from discontinued operations	$	(3,895,315	)	$	(1,828,144	)

At September 30, 2023 and 2022, discontinued assets held for sale of $508,000 and $3,150,000, respectively, consist of the net inventory of the retail segment. These numbers include an allowance of $1,464,000 and $535,000, respectively to reduce excess or otherwise unsellable inventory to its estimated net realizable value.

There was no depreciation, amortization, investing or financing cash flow activities, or other significant noncash operating cash flow activities for the retail segment in Fiscal 2023 or 2022.