Discontinued Operations and Divestitures

Discontinued Operations

Sale of Connected Care Business

On January 13, 2020, the Company entered into an asset purchase agreement (the “Purchase Agreement”) with Masimo Corporation (“Masimo”), VCCB Holdings, Inc., a wholly owned subsidiary of Masimo (collectively with Masimo, the “Purchaser”), and, solely with respect to certain provisions of the Purchase Agreement, NantWorks, LLC, an affiliate of the Company. Pursuant to the Purchase Agreement, the Company agreed to sell to the Purchaser certain of its assets related to its Connected Care business, including the products known as DCX (formerly DeviceConX), VCX (formerly VitalsConX), HBox and Shuttle Cable (collectively, the “Connected Care Business”).

On February 3, 2020, the Company completed the sale of the Connected Care Business for $47,250 of cash consideration in exchange for assets primarily related to the Connected Care Business (as defined under the terms of the Purchase Agreement). The cash consideration is subject to adjustment based upon the final amount of working capital as of the closing date.

The sale of the Connected Care Business qualified as a discontinued operation because it comprised operations and cash flows that could be distinguished, operationally and for financial reporting purposes, from the rest of the Company. The disposal of the Connected Care Business, which represented the Company's medical device interoperability solutions, represented a strategic shift in the Company’s operations as the sale enables the Company to focus on genomic sequencing, clinical decision support, and payer engagement.

The total gain on sale of the Connected Care Business consisted of the following:



Cash received as consideration	$	47,250
Less: Carrying value of net assets sold	(14,190		)
Less: Costs to sell	(849		)
Gain on sale of the Connected Care Business	$	32,211

The carrying amounts of the major classes of assets and liabilities of the Company's discontinued operation as of December 31, 2019 were as follows:



	December 31, 2019
Accounts receivable, net	$	4,739
Inventories	798
Prepaid expenses and other current assets	790
Current assets of discontinued operation	6,327
Property, plant, and equipment, net	1,110
Goodwill	18,623
Operating lease right-of-use assets	1,603
Total assets of discontinued operation	$	27,663

Accounts payable	$	574
Accrued and other current liabilities	456
Deferred revenue	9,650
Current liabilities of discontinued operation	10,680
Deferred revenue, net of current	157
Deferred income taxes, net	210
Operating lease liabilities	$	1,282
Total liabilities of discontinued operation	$	12,329

The operating results of the Company's discontinued operation are as follows:



	Three Months Ended March 31,
	2020			2019
Major classes of line items constituting pretax income (loss) of discontinued operations
Net revenue	$	1,165		$	3,520
Cost of revenue	(467		)	(1,029		)
Selling, general and administrative	(524		)	(1,465		)
Research and development	(592		)	(1,230		)
Other expense, net	(5		)	—
Pretax loss from discontinued operations related to major classes of pretax income (loss)	(423		)	(204		)
Pretax gain on sale of the Connected Care Business	32,211			—
Total pretax income (loss) from discontinued operations	31,788			(204		)
Benefit from income taxes	(223		)	—
Total income (loss) from discontinued operations, net of tax	$	32,011		$	(204	)

The significant operating and investing cash and noncash items of the discontinued operation included on the Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019 were as follows:



	Three Months Ended March 31,
	2020		2019
Cash flows from operating activities:
Depreciation and amortization	$	10	$	100
Gain on sale of the Connected Care Business	32,211		—
Cash flows from investing activities:
Net proceeds from sale of the Connected Care Business	46,401		—
Purchases of property and equipment, including internal-use software	76		—

Divestitures

Sale of Home Health Care Services Business

On June 7, 2019, the Company completed the divestiture of its home health care services business in exchange for cash proceeds of $300, which resulted in a loss on sale of business of $582. The home health care services business does not qualify as a discontinued operation as its divestiture does not represent a strategic shift that has had a major impact on the Company's operations or financial results.