DISCONTINUED OPERATIONS

12 Months Ended

Jun. 30, 2022

Discontinued Operations and Disposal Groups [Abstract]

Opensalon Pro (OSP):

On June 30, 2022, the Company sold its OSP software-as-a-service solution to Soham Inc. for a purchase price of $20.0 million in cash plus up to an additional $19.0 million in cash contingent upon the number of salons that migrate to Soham's Zenoti product as their salon technology platform. The Company received $13.0 million in proceeds in June 2022. The remaining $7.0 million of the purchase price is subject to holdbacks including $4.0 million of the proceeds retained in escrow to be paid upon completion of the Company's refinancing, $1.0 million once the Company ends its arrangement with ProPoint in December 2022 and $2.0 million of proceeds held back until general indemnity provisions are satisfied within 18 months from closing. As a result of the sale, the Company classified the OSP business as discontinued operations in the financial statements for all years presented. Discontinued operations is included in the Franchise segment in the Consolidated Statement of Operations for all periods presented.

The following summarizes the components of the loss from sale of OSP for fiscal year 2022 included in discontinued operations (in thousands):


Cash proceeds	$	13,000
Goodwill derecognition	(38,358)
Software write-off (1)	(8,408)
Hardware write-down (2)	(1,825)
Other, net, including professional fees	(552)
Loss from sale of OSP	$	(36,143)

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(1)Internally developed capitalized software is included in non-current assets related to discontinued operations as of June 30, 2021 and written off in June 2022 upon completion of the sale.

(2)Prior to the sale, hardware used to run OSP was sold to franchisees. As a result of the sale, the Company wrote-down the value of the hardware to its net realizable value and the charge is included in the loss on the sale of OSP. The hardware is included in inventory as of June 30, 2022 and current assets related to discontinued operations as of June 30, 2021 in the Consolidated Balance Sheet.

The following summarizes the results of discontinued operations for the periods presented:


	Fiscal Years
	2022		2021

	(Dollars in thousands)
Discontinued operations:
Fees	$	3,811	$	3,461
Cost of product sales to franchisees	(1,037)		(2,790)
General and administrative	(3,517)		(9,006)
Rent	(194)		(176)
Depreciation and amortization	(1,322)		(964)
Goodwill impairment (1)	(2,880)		—
Interest expense	(715)		(650)
Loss from sale of OSP	(36,143)		—
Loss from discontinued operations, before taxes	(41,997)		(10,125)
Income tax benefit from discontinued operations (2)	2,599		—
Loss from discontinued operations, net of tax	$	(39,398)	$	(10,125)

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(1)Goodwill impairment included in discontinued operations represents the portion of impairment allocated to the OSP business based on relative fair value.

(2)Income taxes have been allocated to continuing and discontinued operations based on the methodology required by accounting for income taxes guidance.

The Company leases office space in Fremont, California. The lease related liabilities are included in long-term lease liability as of June 30, 2022, and the lease related assets and liabilities are included in non-current assets, current liabilities and non-current liabilities related to discontinued operations as of June 30, 2021 in the Consolidated Balance Sheet.