Quarterly report pursuant to Section 13 or 15(d)

Discontinued Operations

v2.3.0.15
Discontinued Operations
 9 Months Ended
Sep. 30, 2011
Discontinued Operations
2.
Discontinued Operations

In August 2011, we completed the sale of the GDS Business to Devicor under the terms of the APA that was signed in May 2011.  On August 17, 2011, Devicor made a cash payment to us of $30,000,000, assumed certain liabilities of the Company associated with the GDS Business as specified in the APA, and agreed to make royalty payments to us of up to an aggregate maximum amount of $20,000,000 based on the net revenue attributable to the GDS Business over the course of the next six fiscal years.  We recorded a net gain on the sale of the GDS business of $19.5 million for the nine months ended September 30, 2011.  The sales price of $30.3 million includes a cash payment of $30.0 million and an accrued net working capital adjustment of an additional $254,000.  The proceeds were offset by $2.8 million in legal and other fees related to the sale, $2.3 million in net balance sheet dispositions and write-offs, and $5.7 million in estimated taxes.

As a result of the sale of the GDS Business, we reclassified certain assets and liabilities as assets and liabilities associated with discontinued operations.  We also reclassified all assets and liabilities related to discontinued operations of our Cardiosonix subsidiary for all periods presented, the amounts of which are not significant.  The following assets and liabilities have been segregated and included in assets associated with discontinued operations or liabilities associated with discontinued operations, as appropriate, in the consolidated balance sheets:

   
September 30,
2011
    
December 31,
2010
  
             
Accounts receivable, net
   $ 235     $ 1,917,213  
Inventory, net
     —       826,588  
Property and equipment, net of accumulated depreciation
     —       114,248  
Patents and trademarks, net of accumulated amortization
     —       60,215  
Other assets
     4,980       40,839  
Assets associated with discontinued operations
   $ 5,215     $ 2,959,103  
                 
Accounts payable
   $ 6,200     $ 170,981  
Accrued liabilities
     2,665       279,167  
Deferred revenue
     1,253,087       1,327,354  
Liabilities associated with discontinued operations
   $ 1,261,952     $ 1,777,502  
 
In addition, we reclassified certain revenues and expenses related to the GDS Business and our Cardiosonix subsidiary to discontinued operations for all periods presented.  The following amounts have been segregated from continuing operations and included in discontinued operations in the consolidated statements of operations:

   
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
   
2011
    
2010
    
2011
    
2010
  
                         
Net sales
   $ 1,785,540     $ 2,159,254     $ 7,522,474     $ 7,417,237  
Cost of goods sold
    560,909       629,810       2,323,858       2,342,047  
Gross profit
     1,224,631       1,529,444       5,198,616       5,075,190  
                                 
Operating expenses:
                                
Research and development
     293,990       136,967       572,209       267,178  
Selling, general and administrative
     149,799       68,996       296,652       187,912  
Total operating expenses
     443,789       205,963       868,861       455,090  
                                 
Other expense, net
     (363 )     (290 )     (585 )     (473 )
Income taxes
     (1,001,161 )     —       (1,001,161 )     —  
                                 
(Loss) income from discontinued operations
   $ (220,682 )   $ 1,323,191     $ 3,328,009     $ 4,619,627