NOTE 3 - DISCONTINUED OPERATIONS

During the fourth quarter of fiscal year 2018, we determined to discontinue operations of the Wholesale Business. The Company decided to sell all assets and liabilities directly related to those assets associated with the Wholesale Business due to the sustained losses incurred. Further, the Company determined that the discontinued operations represented a strategic shift that will have a major effect on the Company’s operations and financial results since it represented a complete exit from the wholesale business and, therefore, classified the disposal group as held for sale as of June 30, 2018.

In accordance with ASC 205-20-45-1E, the results of discontinued operations are aggregated and separately presented in our consolidated statements of operations, net of income taxes. The assets and liabilities of the discontinued operations are presented separately under the captions “Assets of discontinued operations” and “Liabilities of discontinued operations,” respectively, within the accompanying Consolidated Balance Sheets at June 30, 2018 and 2017, and consist of the following:

Assets and Liabilities of Discontinued Operations

	June 30, 2018		June 30, 2017
Carrying amounts of assets included in discontinued operations
Accounts receivable	$	3,031	$	1,932
Inventories		14,151		14,332
Bulk wine deposits		629		—
Property, plant and equipment, net		26		—
Intangible assets, net		219		—
Other current assets, net		340		210
Total current assets	$	18,396	$	16,474
Property, plant and equipment, net		—		73
Intangible assets, net		—		468
Other assets, net		—		135
Total noncurrent assets	$	—	$	676
Total assets	$	18,396	$	17,150
Carrying amounts of liabilities included in discontinued operations
Accounts payable	$	936	$	1,388
Accrued expenses		2,164		421
Depletion allowance and accrual for sales returns		640		495
Total current liabilities	$	3,740	$	2,304

Operating Results of Discontinued Operations

	June 30, 2018			June 30, 2017
Revenues
Total revenues less excise tax	$	17,282		$	15,576
Cost of sales		13,468			12,161

Operating costs and expenses
Selling, general and administrative expenses		6,377			4,473
Depreciation and amortization		85			81
Interest expense		373			250
Other expense		28			28
Net loss attributable to Truett-Hurst, Inc. and H.D.D. LLC from Discontinued Operations		3,049			1,417
Net loss attributable to noncontrolling interest: H.D.D. LLC		1,221			1,063
Net loss attributable to Truett Hurst, Inc.		1,828			354
Net loss per share from discontinued operations basic and diluted		(0.68	)		(0.32	)

Cash Flow from Discontinued Operations

	Fiscal Year Ended
	June 30,		June 30,
	2018		2017
Net cash provided by (used in) operating activities	$	69	$	(48	)
Net cash provided by (used in) investing activities		100		(10	)
Net cash provided by (used in) discontinued operations	$	169	$	(58	)

On August 13, 2018, pursuant to the terms of the Purchase Agreement of the same date, the LLC sold the Wholesale Business. As a part of this agreement the Company will maintain a continuing relationship with the purchaser as noted in the Royalty Payment Agreement (the “Royalty Payment Agreement”) and the Transition Services Agreement (the “Transition Services Agreement”).

The Company received proceeds of $18 million. After the estimated transaction-related costs and expenses of approximately $0.9 million, the Company used the remaining proceeds to pay off secured debt first with any residual proceeds used to pay unsecured debt.