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 was 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.

The condensed consolidated statement of operations for the three months ended October 1, 2017, includes 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 is as follows (in thousands):


	October 1, 2017
Sales	$	726
Cost of sales		(615)
Gross profit		111
Selling, general and administrative		(108)
Income from discontinued operations, before income taxes		3
Loss on sale of discontinued operations		(482)
Total (loss) income from discontinued operations, before income taxes		(479)
Income tax benefit on discontinued operations		209
Income (loss) from discontinued operations, net of tax	$	(270)

Cash flows from GF&F for the three months ended October 1, 2017 are combined with the cash flows from operations within each of the categories presented on the condensed consolidated statements of cash flows.

3D Material Technologies (“3DMT”)

On July 25, 2018, the Board of Directors voted to sell its 3DMT division. The Company is currently actively seeking a buyer for 3DMT while still operating until the sale.

The condensed consolidated statements of operations for the three months ended September 30, 2018 and October 1, 2017, respectively, include the results of operations of 3DMT. Financial information for discontinued operations for the three months ended September 30, 2018 and October 1, 2017 are as follows (in thousands):


	September 30, 2018		October 1, 2017
Sales	$	336	$	865
Cost of sales		(898)		(634)
Gross profit		(562)		231
Selling, general and administrative		(158)		(172)
Loss from discontinued operations, before income taxes		(720)		59
Interest expense		(13)		(36)
Total income (loss) from discontinued operations, before income taxes		(733)		23
Income tax benefit on discontinued operations		1		—
Income (loss) from discontinued operations, net of tax	$	(732)	$	23

The condensed consolidated balance sheets for September 30, 2018 and June 30, 2018 include assets related to discontinued operations as follows (in thousands):


	September 30, 2018		June 30, 2018
Current assets:
Accounts receivable, net	$	173	$	148
Inventories, net		209		225
Prepaid expenses and other current assets		193		174
Total current assets		575		547
Property and equipment, net		2,928		3,101
Other Assets		26		26
Total assets of discontinued operations	$	3,529	$	3,674

Current liabilities:
Accounts payable and accrued expenses	$	535	$	449
Capital lease obligations, current portion		762		973
Total current liabilities		1,297		1,422
Capital lease obligations, net of current portion		342		462
Total liabilities of discontinued operations	$	1,639	$	1,884

The Company did not reclassify its Statements of Cash Flows to reflect the various discontinued operations. Cash flows from 3DMT for the three months ended September 30, 2018 and October 1, 2017 are combined within each of the categories presented.


	September 30, 2018		October 1, 2017
Net Cash Used in Operating Activities	$	502	$	6
Net Cash Used in Investing Activities		—		4
Net Cash Used in Financing Activities		331		229