Assets and Liabilities Held for Sale and Discontinued Operations

9 Months Ended

Mar. 31, 2023

Discontinued Operations and Disposal Groups [Abstract]

Assets and Liabilities Held for Sale and Discontinued Operations

4. Assets and Liabilities Held for Sale and Discontinued Operations

On January 3, 2023, DME Holdings along with the minority owners of HC LLC, entered into a purchase agreement with QHM Holdings, Inc., a subsidiary of Quipt Home Medical Corp. (Quipt), to sell 100% of the outstanding membership interests in HC LLC to Quipt (Sale of HC LLC) for $80.0 million, consisting of approximately $72.8 million in cash, $5.2 million of indebtedness assumed by Quipt and $2.0 million in shares of Quipt common stock based on the 20-day volume-weighted average price of Quipt’s common stock for the period ending on and including the second business day prior to the closing of the transaction. After transaction costs of $2.5 million, distributions to non-controlling interests of $5.9 million, and indemnity escrow payment of $0.4 million, cash proceeds to GEG and subsidiaries were $64.1 million. The following table shows calculation of the recorded gain on Sale of HC LLC of $13.6 million:

(in thousands)	January 3, 2023
Net cash proceeds, after transaction costs and distributions to non-controlling interests	$	64,093
Fair value of shares of Quipt stock		2,000
Indemnity escrow receivable attributable to GEG and subsidiaries		320
Carrying value of non-controlling interest prior to sale (permanent equity)		2,977
Carrying value of non-controlling interest prior to sale (temporary equity)		2,977
Estimated future distributions of proceeds to non-controlling interests		(1,144	)
		71,223
Less: Carrying value of net assets disposed		57,671
Gain on Sale of HC LLC	$	13,552

The Company concluded that the disposal group satisfied the criteria for presentation as held for sale and discontinued operations as of December 31, 2022. The following table provides a reconciliation of the Company’s net income from discontinued operations presented in the condensed consolidated statements of operations:

	For the three months ended March 31,						For the nine months ended March 31,
(in thousands)	2023			2022			2023			2022
Discontinued operations:
Durable medical equipment sales and services revenue	$	-		$	10,359		$	21,574		$	30,712
Durable medical equipment rental income		-			5,275			11,874			16,205
Net revenue		-			15,634			33,448			46,917
Cost of durable medical equipment sold and services		-			(4,362	)		(8,654	)		(12,731	)
Cost of durable medical equipment rentals		-			(1,708	)		(4,263	)		(5,292	)
Durable medical equipment other operating expenses		-			(8,758	)		(17,519	)		(23,327	)
Depreciation and amortization		-			(428	)		(783	)		(1,324	)
Transaction costs		(1,023	)		-			(2,462	)		(224	)
Gain on sale of subsidiary		13,552			-			13,552			-
Interest expense		-			(68	)		(46	)		(206	)
Loss on distinguishment of debt		-			-			(23	)		-
Other income (expense), net		(202	)		-			(192	)		2
Income before income taxes from discontinued operations		12,327			310			13,058			3,815
Income tax (expense) benefit		(124	)		22			144			3
Net income from discontinued operations	$	12,203		$	332		$	13,202		$	3,818

The following table provides a reconciliation of the assets and liabilities held for sale presented in the condensed consolidated balance sheet as of June 30, 2022:

(in thousands)	June 30, 2022
Cash and cash equivalents	$	1,314
Accounts receivable		5,867
Inventories		898
Prepaid and other current assets		385
Current assets held for sale	$	8,464
Property and equipment, net	$	521
Equipment held for rental, net		7,504
Identifiable intangible assets, net		5,921
Goodwill		52,463
Right of use assets		2,989
Other assets		163
Non-current assets held for sale	$	69,561
Accounts payable	$	6,030
Accrued expenses and other liabilities		3,544
Deferred revenue		1,218
Current portion of lease liabilities		1,218
Current portion of equipment financing debt		2,993
Current liabilities held for sale	$	15,003
Lease liabilities, net of current portion	$	1,903
Redeemable preferred stock of subsidiaries		648
Non-current liabilities held for sale	$	2,551