Discontinued Operation and Assets and Liabilities Related to Discontinued Operation

3 Months Ended

Mar. 31, 2024

Discontinued Operation and Assets and Liabilities Related to Discontinued Operation

Discontinued Operation and Assets and Liabilities Related to Discontinued Operation

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 March 31, 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-month periods ended March 31, 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-month periods ended March 31, 2024 and 2023 (as reclassified).

Changes in divestiture cost estimates resulted in income from discontinued operation of approximately $8,000 for the three-month period ended March 31, 2024. OKC’s operating losses of approximately $25,000 resulted primarily from employee compensation and severance costs incurred for the three-month period ended March 31, 2024 (loss of approximately $720,000 for the three-month period ended March 31, 2023, as reclassified). Therefore, the total Loss from Discontinued Operation, net of tax, is approximately $17,000 for the three-month period ended March 31, 2024 (Loss of $567,000 for the three-month period ended March 31, 2023, as reclassified).

Discontinued Operation Financial Information

Consolidated Statements of Operations are as follows:

	Three Months Ended
(in thousands)	Mar 31, 2024		Mar 31, 2023
Net Sales	$	—	$	1,742
Operating costs		(25)		(2,462)
Loss from discontinued operation		(25)		(720)
Change in divestiture and impairment cost estimates		8		—
Loss from discontinued operation before income taxes		(17)		(720)
Income tax benefit		—		153
Loss from discontinued operation, net of tax	$	(17)	$	(567)

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:

(in thousands)	March 31, 2024		December 31, 2023
Accounts receivable, net	$	—	$	38
Prepaid and other assets		52		31
Inventories, net		—		55
Building and improvements, net		1,428		1,428
Assets related to discontinued operation	$	1,480	$	1,552
Accounts payable	$	26	$	197
Accrued employee compensation and other costs		6		16
Liabilities related to discontinued operation	$	32	$	213

The Company has actively marketed the building for sale with a commercial real estate broker during the first quarter and expects to sell the real property in 2024. The majority of the remaining assets and liabilities are expected to be settled during the second quarter.