Note 2 - Discontinued Operation and Assets and Liabilities Related to Discontinued Operation

9 Months Ended

Sep. 30, 2024

Notes to Financial Statements

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

2. Discontinued Operation and Assets and Liabilities Related to Discontinued Operation

The Company’s decision to sell certain assets and wind down the operations of OKC met the “held for sale” definition under ASC 205-20-45-9 Discontinued Operations and represented a strategic shift that had a significant impact on the Company’s overall operations and financial results. Accordingly, the assets and liabilities of OKC are reflected as “Assets and Liabilities related to Discontinued Operation” in the Condensed Consolidated Balance Sheets as of  September 30, 2024 and December 31, 2023. In addition, OKC’s operating loss, divestiture costs, and impairment charges on long-lived assets were reclassified to “Loss from Discontinued Operation, net of tax” in the Condensed Consolidated Statements of Operations for the three- and nine-month periods ended September 30, 2024 and 2023 (as reclassified).

Under the terms of the Asset Purchase Agreement, the Company sold inventory, machinery & equipment and intellectual property (patents & trademarks/tradenames) to a third party on August 1, 2023. As a direct result of Management’s decision to sell OKC’s assets, divest the operations, and exit the CPG business segment, the Company incurred impairment charges on its long-lived asset (building) in 2023 based on independent, third-party appraisals (less estimated costs to sell).  No impairment charges were incurred for the three- and nine-month periods ended September 30, 2024.

Operating loss from discontinued operation was approximately $33,000 and $90,000 for the three- and nine-month periods ended September 30, 2024, respectively (compared to $403,000 and $1,893,000 for the three- and nine-month periods ended September 30, 2023, respectively, as reclassified).  Divestiture and impairment cost changes were approximately $(10,000) and $18,000 for the three- and nine-month periods ended September 30, 2024(compared to divestiture and impairment cost estimates of $79,000 and $2,306,000 for the three- and nine-month periods ended September 30, 2023, respectively, as reclassified).  The loss on the sale of assets was $0 for the three- and nine-month periods ended September 30, 2024, respectively (compared to a change in purchase price of $96,000 and a loss of $(3,127,000) for the three- and nine-month periods ended September 30, 2023, respectively, as reclassified).  Therefore, the total Loss from Discontinued Operation, net of tax, is approximately $(43,000) and $(72,000) for the three- and nine-month periods ended September 30, 2024, respectively (compared to a Loss of $(386,000) and $(7,326,000) for the three- and nine-month periods ended September 30, 2023, respectively, as reclassified).

Discontinued Operation Financial Information

Consolidated Statements of Operations are as follows:

	Three Months Ended
(in thousands)	September 30, 2024			September 30, 2023
Net Sales	$	-		$	336
Operating costs		(33	)		(739	)
Loss from discontinued operation		(33	)		(403	)
Loss from discontinued operation - impairment and divestiture costs		(10	)		(79	)
Change in purchase price		-			96
Loss from discontinued operation before income taxes		(43	)		(386	)
Income tax benefit		-			-
Loss from discontinued operation, net of tax	$	(43	)	$	(386	)

	Nine Months Ended
(in thousands)	September 30, 2024			September 30, 2023
Net Sales	$	-		$	3,423
Operating costs		(90	)		(5,316	)
Loss from discontinued operation		(90	)		(1,893	)
Loss from discontinued operation - divestiture and impairment costs		18			(2,306	)
Loss on sale of assets		-			(3,127	)
Loss from discontinued operation before income taxes		(72	)		(7,326	)
Income tax benefit		-			-
Loss from discontinued operation, net of tax	$	(72	)	$	(7,326	)

Assets & Liabilities Related to Discontinued Operation Financial Information

A summary of the carrying amounts of major classes of assets and liabilities, which are included in assets and liabilities related to discontinued operation in the Condensed Consolidated Balance Sheets, are as follows:

	September 30,		December 31,
(in thousands)	2024		2023
Accounts receivable	$	-	$	38
Prepaid and other assets		38		31
Inventories		-		55
Building, net of estimated costs to sell		1,428		1,428
Assets related to discontinued operation	$	1,466	$	1,552
Accounts payable	$	24	$	197
Accrued employee compensation and other costs		3		16
Liabilities related to discontinued operation	$	27	$	213

The Company is actively marketing the building for sale using a commercial real estate broker with a selling price above its appraised value.  To date, no events have occurred that would trigger further impairment, and Management expects to sell the real property within the next twelve months. Most of the remaining assets and liabilities are expected to be expensed or settled in 2024, as divestiture and wind-down activities are substantially complete.