Note 10 - Discontinued Operations

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

Note 10 - Discontinued Operations

In connection with the Dubin acquisition, certain assets acquired are still owned by us and classified as held-for-sale. When we acquired Dubin, there were two business lines.  Dubin Workforce Solutions specialized in temporary labor assignments.  The Dubin Group focused on permanent recruiting.  We immediately sold the assets of Dubin Workforce Solutions to a new franchisee.  There was not a franchisee identified for the Dubin Group portion of the business, however, we began marketing the franchise and classified it as held-for-sale immediately upon acquisition.  We entered into an employment agreement with the seller to continue managing the business as a Company-owned location while it was held-for-sale. During 2022, we actively solicited but did not receive any reasonable offers to purchase the assets and, in response, have adjusted the price. The franchise continues to be actively marketed at a price that is reasonable given its results of operation. We expect to complete a sale of these assets within the next 12 months.

When we acquired Dental Power in 2021, we used the platform to build a customer base in the dental-oriented sector of the staffing industry to increase revenue opportunities under the HireQuest Health brand. Once we acquired MRI in  December 2022, there were a number of natural buyers within the MRI Network.  At that time we reclassified Dental Power to held-for-sale.  On  March 1, 2023, we agreed to sell the Dental Power assets to an MRI franchisee, who will continue to operate the business as part of their franchise. The sale agreement calls for proceeds of $2 million payable over 5 years with a market rate of interest. We recognized a gain of approximately $340 thousand in the first quarter of 2023 upon completion of the transaction.

Intangible assets associated with discontinued operations consist of customer lists with a net carrying value of approximately $1.4 million and $3.1 million on  September 30, 2023 and December 31, 2022, respectively. 

The income from discontinued operations amounts as reported on our consolidated statements of operations was comprised of the following amounts (in thousands):

	Three months ended						Nine months ended
	September 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022
Revenue	$	209		$	1,815		$	1,688		$	4,786
Cost of staffing services		102			1,296			1,106			3,336
Gross profit		107			519			582			1,450
Selling, general and administrative expenses		(116	)		(286	)		(579	)		(789	)
Depreciation & amortization		-			(104	)		-			(259	)
(Loss) gain on sale of intangible assets		(143	)		-			196			-
Net (loss) income before tax		(152	)		129			199			402
(Benefit) provision for income taxes		(37	)		31			48			98
Net (loss) income	$	(115	)	$	98		$	151		$	304