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

12 Months Ended

Dec. 31, 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” 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 Consolidated Balance Sheets as of  December 31, 2024, and 2023.  In addition, OKC’s operating loss, the loss on sale of assets, divestiture costs, and impairment charges on long-lived assets were reclassified to “Loss from Discontinued Operation, net of tax” in the Consolidated Statements of Operations for the years ended December 31, 2024, and 2023. 

The discontinued operation incurred an operating loss of approximately $111,000 for the year ended  December 31, 2024 resulting from taxes, insurance costs, and repairs and maintenance costs associated with the vacant portion of the building.  A commercial real estate broker ("broker") has been actively marketing the building for sale in March 2024 at an asking price above the current net book value of $1,428,000.  No third party offers, or other market indicators have occurred, that would indicate further impairment of the building as of December 31, 2024, and the timing for sale is within the expected window for closing.  Therefore, the Company believes the classification as an asset related to discontinued operation in current assets is appropriate as of December 31, 2024, and will continue to monitor the asking price relative to commercial real estate market conditions in 2025.

In August 2023, the Company sold inventory, machinery & equipment and intellectual property (patents & trademarks/tradenames) to a third-party buyer for approximately $2,158,000.  In accordance with the sale, the net carrying values of the assets sold exceeded its fair values, less estimated costs to sell, resulting in a loss on the sale of assets of approximately $3,162,000 for the twelve-month year ended December 31, 2023.  As a direct result of Management’s decision to sell OKC’s assets, divest the operations, and exit the CPG segment, the Company incurred an impairment charge on its long-lived asset (building) of approximately $1,219,000 and divestiture costs of approximately $807,000 related to key employee retention agreements, employee severance agreements, and supplier open purchase order obligations totaling $2,026,000 for the year ended  December 31, 2023.  In addition, OKC incurred an operating loss of approximately $2,052,000 for the year ended  December 31, 2023 that was also included in the Loss from Discontinued Operation.

In summary, the Discontinued Operation, net of tax, resulted in a loss of approximately $111,000 and $7,240,000 for the years ended December 31, 2024, and 2023, respectively, as follows:

Discontinued Operation Financial Information

Consolidated Statements of Operations are as follows:

	Years Ended December 31,
(in thousands)	2024			2023
Net Sales	$	—		$	3,410
Operating costs		(111	)		(5,462	)
Loss from discontinued operation		(111	)		(2,052	)
Loss from discontinued operation - impairment and divestiture costs		—			(2,026	)
Loss on sale of assets		—			(3,162	)
Loss from discontinued operation before income taxes		(111	)		(7,240	)
Income tax		—			—
Loss from discontinued operation, net of tax	$	(111	)	$	(7,240	)

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 Consolidated Balance Sheets, are as follows:

	Years Ended December 31,
(in thousands)	2024		2023
Accounts receivable, net	$	—	$	38
Prepaid and other assets		8		31
Inventories, net		—		55
Building and improvements, net		1,428		1,428
Assets related to discontinued operation	$	1,436	$	1,552
Accounts payable	$	24	$	197
Accrued employee compensation and other costs		—		16
Liabilities related to discontinued operation	$	24	$	213