NOTE 4. DISCONTINUED OPERATIONS

In the second quarter of 2017, we determined that our plans to dispose of our wholly owned subsidiary Healthy Natural (HN) and to divest of our investment in Nutra SA, LLC (Nutra SA) met the criteria for presentation as discontinued operations. Accordingly, the HN and Nutra SA operating results are presented as discontinued operations and are excluded from continuing operations for all periods presented.

The following table summarizes the major line items included in the income from discontinued operations, cash flows from discontinued operations, and other data related to the discontinued operations (in thousands).

	Three Months Ended March 31, 2017
	HN			Nutra SA			Total
Revenues	$	4,417		$	3,403		$	7,820
Cost of goods sold		(3,022	)		(3,475	)		(6,497	)
Selling, general and administrative expenses		(226	)		(534	)		(760	)
Other expenses		(2	)		(352	)		(354	)
Income (loss) from operations, before income taxes		1,167			(958	)		209
Income tax expense		(397	)		-			(397	)
Income (loss) from operations, net of tax		770			(958	)		(188	)

Net cash provided by (used in) operating activities	$	938		$	(961	)	$	(23	)
Net cash used in investing activities		(9	)		(79	)		(88	)
Net cash provided by (used in) financing activities		(4	)		899			895
Effect of exchange rate changes on cash and cash equivalents		-			141			141
Net cash provided to continuing operations	$	925		$	-		$	925

Depreciation included in cost of goods sold	$	44		$	264		$	308
Depreciation included in selling, general and administrative expenses		25			16			41
Capital expenditures		9			79			88

Healthy Natural (HN) Discontinued Operations

In July 2017, we completed the sale of the assets of HN for $18.3 million in cash. The selling price is subject to adjustment if the estimated closing working capital with respect to the assets sold and the liabilities assumed is different than the actual closing working capital for those assets and liabilities. The sale agreement contains customary indemnification provisions and provisions that restrict us from engaging in a business conducted by HN for five years from the date of closing. A $0.2 million working capital adjustment escrow and a $0.6 million indemnity claim escrow were funded from the proceeds and are classified as restricted cash.

On a preliminary basis, we estimated a working capital adjustment of $0.3 million as of December 31, 2017 and March 31, 2018. The working capital adjustment will result in an adjustment to the initial net proceeds of $16.7 million and the gain on the sale of $8.2 million, net of a $4.7 million income tax provision which we recognized in 2017. The definition of working capital under the agreement is subject to interpretation and we have not yet finalized the adjustment with the purchaser of HN. The final adjustment may differ from the estimate.

Nutra SA Discontinued Operations

On November 28, 2017, Nutra SA redeemed our entire membership interest in Nutra SA. We no longer hold any interest in Nutra SA. We held a variable interest in our equity interest in Nutra SA. We were the primary beneficiary of Nutra SA, and as such, Nutra SA’s assets, liabilities and results of operations were included in the consolidated financial statements through November 28, 2017, the date of disposal of Nutra SA. The minority investors in Nutra SA held an average interest in Nutra SA was 36% in 2017, through the date of disposal.

Cash provided by Nutra SA operations was generally unavailable for distribution to our continuing operations under to the terms of the LLC Agreement. Nutra SA’s only operating subsidiary is Industria Riograndens De Oleos Vegetais Ltda. (Irgovel), located in Pelotas, Brazil. Nutra SA’s debt was secured by Irgovel’s accounts receivable and property. The non-Brazilian entities within the consolidated ownership group did not guarantee any of Nutra SA’s debt. No interest related to debt held by non-Brazilian entities was allocated to Nutra SA in any period presented.