Quarterly report pursuant to Section 13 or 15(d)

Discontinued Operations, Sale of the Cold-EEZE?? Business

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Discontinued Operations, Sale of the Cold-EEZE® Business
 9 Months Ended
Sep. 30, 2018
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued Operations, Sale of Cold-EEZE® Business

Note 3 – Discontinued Operations, Sale of the Cold-EEZE® Business

 

Effective March 29, 2017, we completed the sale of the Cold-EEZE® Business to Mylan.

 

As a consequence of the sale of the Cold-EEZE® Business, for the three months ended June 30, 2017, we classified as discontinued operations (i) the gain from the sale of the Cold-EEZE® Business, (ii) all gains and losses attributable to the Cold-EEZE® Business operations and (iii) the income tax expense attributed to the sale of the Cold-EEZE® Business. Excluded from the sale of the Cold-EEZE® Business were our accounts receivable and inventory, and we also retained all liabilities associated with our Cold-EEZE® Business operations arising prior to March 29, 2017.

 

Pursuant to the terms of the asset purchase agreement entered into with Mylan on January 6, 2017 (the “Asset Purchase Agreement”), we also agreed to a one-time sale to Mylan of certain non-lozenge-based Cold-EEZE® inventory. At September 30, 2017, we have classified as assets held for sale approximately $22,000 of such inventory, which approximates our cost.

 

The net proceeds received from the sale of the Cold-EEZE® Business were as follows (in thousands):

 

    Amount  
Gross consideration from the sale of the Cold-EEZE® Business   $ 50,000  
Closing and transaction costs     (4,175 )
Net proceeds from sale of the Cold-EEZE® Business     45,825  
Book value of assets sold     (13 )
Gain on sale of the Cold-EEZE® Business before income taxes     45,812  
Income tax expense     (3,423 )
Gain on sale of the Cold-EEZE® Business after income taxes   $ 42,389  
         
Net proceeds:        
Cash paid at closing, net of closing and transaction costs   $ 43,145  
Proceeds due on sale of assets, cash held in escrow     5,000  
    $ 48,145  

 

For the nine months ended September 30, 2017, we incurred $4.2 million in closing and transaction costs associated with the sale of the Cold-EEZE® Business which were comprised of (i) transaction fees and related closing costs of $1.9 million and (ii) performance bonuses, contract termination compensation and severance payments to certain employees associated with the sale of the Cold-EEZE® Business of $2.3 million. The compensation committee of our board of directors approved these compensation arrangements. These compensation and termination payments were paid by us in April 2017.

 

The following table sets forth the condensed operating results of our discontinued operations for the nine months ended September 30, 2018 and 2017, respectively, (in thousands):

 

    For the Nine Months ended  
    September 30, 2018     September 30, 2017  
Net sales   $ -     $ 4,687  
Cost of sales     -       2,037  
Sales and marketing     -       1,720  
Administration     -       348  
Research and development     -       52  
Income from discontinued operations   $ -     $ 530  

 

There was no activity related to discontinued operations for the three months ended September 30, 2018 and 2017, and nine months ended September 30, 2018. For the three months and nine months ended September 30, 2018, we incurred costs of $160,000 which was charged against the gain on sale of the Cold-EEZE® Business (See Note 5).