3. Discontinued Operations

Content Delivery Business

On December 31, 2017, we completed the sale of the Content Delivery business and other related assets to Vecima pursuant to an Asset Purchase Agreement (the " CDN APA"), dated as of October 13, 2017, between the Company and Vecima for a purchase price of $29,000,000 (subject to an adjustment for net working capital). The sale included the Content Delivery business assets and related liabilities in the United States, United Kingdom, and Germany, as well as the sale of all equity in our Japanese subsidiary.

Gross proceeds of $29,812,000 from the sale were paid to us as follows: (i) a $28,362,000 cash payment during our fiscal year ended June 30, 2018 (including a $812,000 adjustment for surplus net working capital transferred to Vecima as defined in the CDN APA) and (ii) $1,450,000 placed in escrow as security for the Company’s indemnification obligations to Vecima under the CDN APA, which we received in full in January 2019.

Results associated with the Content Delivery business are classified within income from discontinued operations, net of income taxes, in the accompanying consolidated statements of operations. Operating expenses recorded in discontinued operations include costs incurred directly in support of the Content Delivery business.

For the fiscal year ended June 30, 2018, income from discontinued operations, net of income taxes, related to the Content Delivery business was comprised of the following (amounts in thousands):


	Fiscal Year Ended
	June 30, 2018

Revenue	$	16,018
Cost of sales		6,342
Gross margin		9,676

Operating expenses:
Sales and marketing		4,235
Research and development		3,290
General and administrative		951
Total operating expenses		8,476
Operating income		1,200

Gain on sale of Content Delivery business, net		22,568
Other expense, net		(143)
Income from discontinued operations before income taxes		23,625

Provision for income taxes		786

Income from discontinued operations	$	22,839

A reconciliation of the gain before income taxes recorded on the sale of the Content Delivery business is as follows (amounts in thousands):


	Fiscal Year Ended
	June 30, 2018
Closing consideration	$	29,000
Adjustment for working capital		812
Net book value of assets sold		(5,274)
Other adjustments		(170)
Transaction costs		(1,800)
Gain on sale of Content Delivery business	$	22,568

Transaction costs directly associated with the sale of the Content Delivery business include legal, accounting, investment banking, and other fees paid to external parties.

In connection with the sale of our Content Delivery business (i) we entered into a Separation and Consulting Agreement and General Release of Claims with Mr. Derek Elder, our former President and Chief Executive Officer, as a result of which (A) Mr. Elder’s role as president and chief executive officer was terminated, (B) Mr. Elder ceased to be a member of our Board of Directors and all committees thereof, and (C) we recorded severance related expenses of $544,000 pursuant to his Separation and Consulting Agreement, (ii) we terminated the employment of another executive of the Company and recorded severance expenses of $132,000, (iii) we paid transaction bonuses that had previously been approved by our compensation committee of $479,000 to internal executives and staff, and (iv) we accepted the resignation of an independent director of the Company. All of the above expenses were recorded as of December 31, 2017 and are included in general and administrative expenses of continuing operations in our consolidated statement of operations for the year ended June 30, 2018.

Cash flow information relating to the Content Delivery business for the fiscal year ended June 30, 2018 was as follows (amounts in thousands):


Operating cash flow data:
Depreciation and amortization	$	605
Share-based compensation		170
Recovery of provision for excess and obsolete inventories		(23)
Foreign currency exchange losses		144

Investing cash flow data:
Capital expenditures		(271)