IMPERIAL INDUSTRIES INC

CIK:0000049930|SEC Filings

5. Discontinued Operations

6 Months Ended

Jun. 30, 2012

(5)

Discontinued Operations

Effective with the Assignment (Note 4), we discontinued all of Just-Rite’s operations, and Just-Rite became a non-operating subsidiary. The Assignee is winding down, selling and liquidating the assets for the benefit of creditors in accordance with the laws of the State of Florida. As a result, all of Just-Rite’s results of operations are presented as discontinued operations for the six and three months ended June 30, 2012 and 2011.

Just-Rite did not have any sales during the six and three months ended June 30, 2012 or 2011. Pretax income (losses), amounting to $0 and $2,000 during the six and three months ended June 30, 2012, and ($177,000) and ($66,000) during the six and three months ended June 30, 2011, were reported as discontinued operations. The operating results incurred during the respective periods were from the Assignee’s efforts to liquidate assets. No income taxes were allocated to the operating results for any of the respective periods.

The carrying amount of the remaining major classes of “Assets held for sale by assignee” and “Liabilities related to assets held for sale by assignee” of Just-Rite that was transferred to the Assignee are as follows:

	June 30, 2012		December 31, 2011


Deferred rental income	$	4,000	$	—
Total current assets held for sale by assignee		4,000		—
Property, plant and equipment, at cost, net of accumulated depreciation of $48,000 at June 30, 2012 and December 31, 2011, respectively	$	546,000	$	546,000
Other assets		33,000		36,000
Total non-current assets held for sale by assignee		579,000		582,000
Total assets held for sale by assignee	$	583,000	$	582,000

Accounts payable and accrued expenses		189,000		188,000
Current portion of long term debt		247,000		247,000
Total current liabilities related to assets held for sale by assignee	$	436,000	$	435,000

The above liabilities exclude $147,000 pertaining to charges incurred by Imperial after the Assignment date on behalf of the Assignee. The amounts payable by Just-Rite to Imperial are eliminated in consolidation.

See Note 16(b) for discussion of a loss contingency recorded by Imperial as result of being a guarantor of certain Just-Rite obligations.

Assets held for sale by assignee are recorded at their estimated realizable value, and the liabilities related to assets held for sale are recorded at their estimated amounts payable, upon conclusion of the Assignment process. Just-Rite has not obtained either (a) a final court order for the conveyance of assets, (b) a settlement with creditors or (c) a court action granting Just-Rite relief from the creditor’s claims. It cannot be determined when the Assignment will be completed. Also, since the Assignment process has not been completed, it is possible, although not likely, that the ultimate proceeds from the disposition of the assets held for sale by assignee, and the settlement of liabilities related to sale by assignee could be at amounts materially different than the carrying amounts reflected in the consolidated financial statements.

Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Cash flows from operating activities:
Net loss	$ (732,000)	$ (589,000)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation	128,000	108,000
Amortization	1,000	1,000
Recovery of doubtful accounts	(3,000)	(15,000)
Share-based compensation		25,000
Changes in operating assets and liabilities:
Trade accounts receivable	(115,000)	(283,000)
Inventories	(166,000)	13,000
Other current assets	(31,000)	494,000
Accounts payable	339,000	224,000
Accrued expenses and other liabilities	(9,000)	(154,000)
Assets held for sale by assignee	(1,000)	87,000
Liabilities related to assets held for sale by assignee	1,000	97,000
Net cash (used in) provided by operating activities	(588,000)	8,000
Cash flows from investing activities:
Purchases of property and equipment	(2,000)	(51,000)
Net cash used in investing activities	(2,000)	(51,000)
Cash flows from financing activities:
Proceeds from line of credit	100,000
Repayment of long-term debt	(20,000)	(10,000)
Net cash provided by (used in) financing activities	80,000	(10,000)
Net decrease in cash and cash equivalents	(510,000)	(53,000)
Cash and cash equivalents, beginning of period	636,000	1,379,000
Cash and cash equivalents, end of period	126,000	1,326,000
Non-cash investing and financing activities:
Capital lease obligations and equipment notes for new equipment		$ 127,000

Condensed Consolidated Balance Sheets (Unaudited) (USD $)	Jun. 30, 2012	Dec. 31, 2011
ASSETS
Cash and cash equivalents	$ 126,000	$ 636,000
Trade accounts receivable, net	655,000	537,000
Inventories	854,000	688,000
Other current assets	100,000	69,000
Current assets held for sale by assignee	4,000
Total current assets	1,739,000	1,930,000
Property, plant and equipment, net	1,437,000	1,563,000
Assets held for sale by assignee	579,000	582,000
Other assets	154,000	155,000
Total assets	3,909,000	4,230,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	772,000	433,000
Payable to former preferred stockholders	48,000	48,000
Accrued expenses and other liabilities	283,000	292,000
Current liabilities related to assets held for sale by assignee	436,000	435,000
Line of Credit	100,000
Current portion of long-term debt	43,000	41,000
Total current liabilities	1,682,000	1,249,000
Long-term debt, less current maturities	65,000	87,000
Secured financing	1,146,000	1,146,000
Total liabilities	2,893,000	2,482,000
Commitments and contingencies (Note 16)
Stockholders' equity:
Common stock, at par value	26,000	26,000
Additional paid-in capital	14,975,000	14,975,000
Accumulated deficit	(13,985,000)	(13,253,000)
Total stockholders' equity	1,016,000	1,748,000
Total liabilities and stockholders' equity	$ 3,909,000	$ 4,230,000