NOTE 3 – Divestitures

General Flange & Forge LLC (“GF&F”)

On September 15, 2017, the Company sold substantially all of the assets of GF&F to GFFC Holdings, LLC (“GFFC”) for $3.0 million in cash. GFFC is owned, in part, by Quadrant Management Inc., which is an affiliate of the Company. The sale of GF&F is therefore a related party transaction. The GF&F sale was made pursuant to an industry-wide auction undertaken on behalf of the Company by a registered investment banking organization that managed the sale process with prospective bidders. GFFC entered into the bidding for the GF&F assets only after the first rounds of the auction indicated uncertainty both in respect to the timing for closing any prospective sale and achieving the Company’s valuation objectives. Mr. Alan Quasha, CEO of Quadrant Management Inc. and Chairman of the Company’s Board of Directors, recused himself from any deliberations or voting by the Board of Directors in respect of the sale of the GF&F assets to GFFC. The Board of Directors appointed a special committee consisting solely of independent directors to oversee and negotiate the sale process. The special committee engaged its own independent legal counsel to advise the special committee in respect of the drafting of the asset sale agreement and ancillary transaction documents in accordance with customary terms and conditions for transactions of this type. In this manner, the special committee was able to conclude that the sale price and the terms and conditions for the transaction were superior to any other offers, as well as fair and reasonable to the Company and its shareholders.

Below is a summary of the loss on sale of discontinued operations (in thousands):


Gross proceeds	$	3,000

Less:
Property and equipment, net		181
Accounts receivable		561
Inventory		882
Other current assets		42
Accounts payable and accrued expenses		(269)
Total net assets disposed		1,397

Goodwill		1,712
Transaction costs		373
Loss on sale of discontinued operations, before income taxes	$	(482)

The condensed consolidated statements of operations for the three months ended October 1, 2017, include the results of operations of GF&F through the sale date of September 15, 2017 and the loss on the sale of GF&F. Financial information for discontinued operations for the three months ended October 1, 2017 and October 2, 2016 is as follows (in thousands):


	For the three months ended
	October 1, 2017		October 2, 2016
Sales	$	726	$	1,113
Cost of sales		(615)		(791)
Gross profit		111		322
Selling, general and administrative		(108)		(191)
Income from discontinued operations, before income taxes		3		131
Loss on sale of discontinued operations		(482)		—
Total (loss) income from discontinued operations, before income taxes		(479)		131
Income tax benefit on discontinued operations		209		—
(Loss) income from discontinued operations, net of tax	$	(270)	$	131

The following table presents the carrying amount as of June 30, 2017, of the major classes of assets and liabilities held for sale in the condensed consolidated balance sheet (in thousands):


	June 30, 2017
Current assets:
Accounts receivable, net	$	687
Inventories, net		717
Prepaid expenses and other current assets		48
Total current assets		1,452
Property and equipment, net		181
Goodwill		1,712
Total assets of discontinued operations	$	3,345

Current liabilities:
Accounts payable and accrued expenses	$	283
Total current liabilities		283
Other long-term liabilities		260
Total liabilities of discontinued operations	$	543

Cash flows from GF&F for the three months ended October 1, 2017 and October 2, 2016 are combined with the cash flows from operations within each of the categories presented on the condensed consolidated statements of cash flows. There were no significant operating or investing activities from discontinued operations during the three months ended October 1, 2017 and October 2, 2016.