DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

3 Months Ended

Dec. 31, 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 condensed consolidated balance sheets as “discontinued assets held for sale” at December 31, 2023 and September 30, 2023, and the results of operations for the retail segment have been classified as “Discontinued Operations” on the condensed consolidated statements of operations for the three months ended December 31, 2023 and 2022. The condensed 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.

The total amount related to the discontinued retail segment included in Due to Forward China on the condensed consolidated balance sheets was approximately $905,000 and $1,002,000 (which includes the $723,000 due on canceled purchase orders) at December 31, 2023 and September 30, 2023, respectively.

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

	For the Three Months Ended December 31,
	2023		2022
Revenues, net	$	665,000	$	1,057,000
Cost of sales		470,000		1,104,000
Gross profit		195,000		(47,000	)
Sales and marketing expenses		145,000		279,000
General and administrative expenses		23,000		13,000
Income / (loss) from discontinued operations before income taxes		27,000		(339,000	)
Provision for income taxes		–		–
Income / (loss) from discontinued operations	$	27,000	$	(339,000	)

At December 31, 2023 and September 30, 2023, discontinued assets held for sale of $136,000 and $508,000, respectively, consist of the net inventory of the retail segment. These numbers include an allowance of $834,000 and $1,464,000, 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 the three months ended December 31, 2023 and 2022.