Note 3 - Discontinued Operations and Assets Held for Sale

9 Months Ended

Jun. 30, 2014

Discontinued Operations and Disposal Groups [Abstract]

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

Note 3 – Discontinued Operations and Assets Held for Sale

On January 31, 2014, the Company entered into an agreement to sell the majority of the net assets and operations of Adams Global Communications, LLC (“AGC”) to Adams Cable Equipment, a supplier of customer premise equipment (“CPE”) and other products for the cable television industry, for $2 million in cash, which yielded an after tax loss of $0.6 million. As part of the sales agreement, ADDvantage retained their existing relationship with ARRIS, as well as non-CPE inventory consisting primarily of headend and access and transport equipment. In addition, ADDvantage retained the AGC facility. As part of the agreement, the Company also agreed to not compete in the used CPE market for three years. The Company elected to pursue this opportunity to sell AGC as management determined that AGC did not fit within the Company’s primary cable television equipment distribution business of selling new and used headend and access and transport equipment, and AGC was not performing to the Company’s expectations.

The calculation of the pretax loss on sale of AGC is as follows:

Cash proceeds	$	2,000,000
Assets sold:
Accounts receivable		454,269
Inventories		2,044,135
Prepaid expenses		12,054
Property and equipment		60,586
Goodwill		410,123
Other		10,805
		2,991,972
Liabilities transferred:
Accounts payable		77,675
Accrued expenses		6,075
		83,750
Net assets sold		2,908,222
Pretax loss on sale of net assets of AGC	$	908,222

Assets and liabilities included within discontinued operations held for sale in the Company’s Consolidated Condensed Balance Sheets at June 30, 2014 and September 30, 2013, are as follows:

	June 30, 2014		September 30, 2013
Assets:
Cash and cash equivalents	$	−	$	(110,068	)
Accounts receivable, net		−		629,874
Income tax receivable		12,590		13,590
Inventories		−		2,718,747
Prepaid expenses		−		15,774
Current assets of discontinued operations held for sale	$	12,590	$	3,267,917
Property and equipment, at cost:
Land and building	$	−	$	1,585,594
Machinery and equipment		−		134,010
Less accumulated depreciation		−		(132,207	)
Net property and equipment		−		1,587,397
Goodwill		−		410,123
Non-current assets of discontinued operations held for sale	$	−	$	1,997,520
Liabilities:
Accounts payable	$	−	$	170,375
Accrued expenses		4,500		56,382
Current liabilities of discontinued operations held for sale	$	4,500	$	226,757

The Company retained the AGC facility following the disposition and actively marketed the facility with a real estate broker. Therefore, the Company had classified this facility as “Assets held for sale” on the Consolidated Condensed Balance Sheet, net of accumulated depreciation. On June 30, 2014, the Company sold the AGC facility for $1.5 million with net settlement proceeds of $1.4 million received on July 1, 2014. As of June 30, 2014, the Company has $1.4 million recorded in other receivable related to the sale. The sale resulted in a pretax loss of $0.1 million.

Income (loss) from discontinued operations, net of tax and the loss on sale of discontinued operations, net of tax, of AGC which are presented in total as discontinued operations, net of tax in the Company’s Consolidated Condensed Statements of Operations for the three months and nine months ended June 30, are as follows:

	Three Months Ended June 30,						Nine Months Ended June 30,
	2014			2013			2014			2013
Total net sales	$	−		$	1,103,873		$	1,408,462		$	5,020,780
Income (loss) before provision for income taxes		(1,135	)		(55,464	)		(57,211	)		171,977
Income tax provision (benefit)		1,000			(21,000	)		(21,000	)		66,000
Income (loss) from discontinued operations, net of tax		(2,135	)		(34,464	)		(36,211	)		105,977
Loss on sale of discontinued operations		(82,393	)		−			(993,835	)		−
Income tax benefit		(9,000	)		−			(364,000	)		−
Loss on sale of discontinued operations, net of tax		(73,393	)		−			(629,835	)		−
Discontinued operations, net of tax	$	(75,528	)	$	(34,464	)	$	(666,046	)	$	105,977