Annual report pursuant to Section 13 and 15(d)

Discontinued Operations

v3.8.0.1
Discontinued Operations
12 Months Ended
Dec. 31, 2017
Discontinued Operations and Disposal Groups [Abstract]  
Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]
5.
Discontinued Operations
 
Asset Sales
 
In order to add capital and to focus on future investments on commercializing its own regenerative technologies on August 31, 2017, the Company entered into an Asset Purchase Agreement (“the Argentum Purchase Agreement”) with Argentum Medical, LLC. (“Argentum”) whereby the Company agreed to sell to Argentum all of the Company’s rights, including (i) all distribution rights, exclusivity rights, intellectual property rights and marketing rights to the TheraBond product line and (ii) the unsold inventory of TheraBond products and work in process previously purchased by the Company in existence as of the closing, which occurred upon execution and delivery of the Argentum Purchase Agreement. In consideration for the sale of the TheraBond product line and the unsold TheraBond inventory to Argentum by the Company, Argentum agreed to pay (i) $3.6 million for the TheraBond product line and certain other agreements between the parties and (ii) up to $112,000 for the unsold TheraBond inventory upon the Company’s completion of its obligations to deliver all remaining and qualifying unsold TheraBond inventory, as specified in the Argentum Purchase Agreement. Of the $3.6 million of consideration, $300,000 is deposited in an indemnity escrow account under standard terms and conditions. This amount is classified under current assets of discontinued operations on the Company’s balance sheet as of December 31, 2017.
 
Additionally, effective June 30, 2016, the Company entered into a purchase agreement with BSN medical, Inc. (“BSN”) whereby the Company agreed to sell to BSN all of the Company’s rights, including all distribution rights, exclusivity rights, intellectual property rights and marketing rights to the sorbion product line pursuant to its distribution agreement with Sorbion GmbH & Co KG. 
 
Summarized operating results of discontinued operations for the years ended December 31, 2017 and 2016 are presented in the following table (in thousands):
 
 
 
Years Ended December 31,
 
 
 
2017
 
2016
 
 
 
 
 
 
 
Revenue, net of returns, allowances and discounts
 
$
1,242
 
$
3,655
 
Cost of revenues
 
 
396
 
 
1,140
 
Gross profit
 
 
846
 
 
2,515
 
Selling, general and administrative
 
 
392
 
 
1,030
 
Income from discontinued operations, net of tax
 
$
454
 
$
1,485
 
 
Non-cash amortization expense of $185,000 and $334,000 is included in selling, general and administrative expense for the years ended December 31, 2017 and 2016, respectively.
 
During the year ended December 31, 2017, the Company recorded a gain of approximately $1.7 million (net of tax of $0) on the sale of the assets related to the Argentum Purchase Agreement, pursuant to the following (in thousands):
 
Proceeds from sale
 
 
 
 
 
 
 
Consideration for inventory
 
$
112
 
 
 
 
Consideration for intangible assets
 
 
3,600
 
 
 
 
Total Consideration
 
 
 
 
 
3,712
 
Less: Net book value of assets sold to Argentum
 
 
 
 
 
 
 
Inventory, net
 
 
(307)
 
 
 
 
Intangibles, net
 
 
(1,709)
 
 
 
 
Total net book value of assets
 
 
 
 
 
(2,016)
 
Gain on sale of assets
 
 
 
 
$
1,696
 
 
During the year ended December 31, 2016, the Company recorded a gain of approximately $3.3 million (net of tax of $0) on the sale of the assets related to the purchase agreement with BSN, pursuant to the following (in thousands):
 
Proceeds from sale
 
 
 
 
 
 
 
Consideration for inventory
 
$
603
 
 
 
 
Consideration for intangible assets
 
 
3,500
 
 
 
 
Total Consideration
 
 
 
 
 
4,103
 
Less: Net book value of assets sold BSN
 
 
 
 
 
 
 
Inventory, net
 
 
(603)
 
 
 
 
Intangibles, net
 
 
(189)
 
 
 
 
Total net book value of assets
 
 
 
 
 
(792)
 
Gain on sale of assets
 
 
 
 
$
3,311
 
 
Summarized assets and liabilities of discontinued operations are presented in the following table (in thousands):
 
 
 
December 31
 
December 31,
 
 
 
2017
 
2016
 
Accounts receivable, net
 
$
17
 
$
307
 
Escrow
 
 
300
 
 
-
 
Inventory, net
 
 
-
 
 
550
 
Total current assets
 
 
317
 
 
857
 
Intangible assets, net
 
 
-
 
 
1,893
 
Total assets
 
 
317
 
 
2,750
 
 
 
 
 
 
 
 
 
Accounts payable
 
 
-
 
 
19
 
Accrued expenses and other current liabilities
 
 
-
 
 
41
 
Total current liabilities
 
$
-
 
$
60
 
 
On June 30, 2016, the Company entered into a ninety-day transition services agreement with BSN (“Transition Agreement”). Under the Transition Agreement, the Company was required to perform certain services related to the communication with distributors, wholesalers and customers in respect of transition of the business to BSN, as specified in the Transition Agreement. As compensation, BSN paid the Company $100,000 for the services completed during the year ended December 31, 2016. This compensation was recognized over the service period and is included in other income for the year ended December 31, 2016.
 
On August 31, 2017, the Company entered into a ninety-day transition services agreement with Argentum (“Transition Agreement”). Under the Transition Agreement, the Company is required to perform certain services related to the communication with distributors, wholesalers and customers in respect of transition of the TheraBond product line to Argentum, as specified in the Transition Agreement. As compensation, Argentum paid the Company $200,000 for the services completed during the period from the closing of the purchase for three months ended November 30, 2017. This compensation was recognized over the service period and is included in other income for the year ended December 31, 2017.