Note 13. Discontinued Operations:

 

During the quarter ended March 31, 2017, the Company made the decision to discontinue the operations of its wholly-owned subsidiary BDI. BDI had developed a proprietary Enhanced Surface Plasmon Resonance technology platform for the detection of molecular interactions. The decision to adopt this plan was made following an evaluation by the Company's Board of Directors in January 2017 of the estimated results of operations projected during the near to mid-term period for BDI, including consideration of product development required and updated sales forecasts, and estimated additional cash resources required. The Company substantially disposed of the assets and operations during 2017 by selling the assets and licensing the intellectual property rights.  The Company has recognized the exit of BDI in accordance with ASC 205-20, Discontinued Operations. As such, the historical results of BDI, following its 2016 acquisition, have been classified as discontinued operations.

 

The Company's historical financial statements have been revised to present the operating results of the BDI business as a discontinued operation. Assets and liabilities related to the discontinued operations of BDI are approximately as follows as of December 31, 2018 and 2017:

Current Liabilities		December 31, 2018				December 31, 2017
Accounts payable		$	16,000			$	16,000
Accrued expenses			-				28,000
Deferred revenue			-				137,000
Total current liabilities		$	16,000			$	181,000

 

Summarized results of the discontinued operation are as follows for the years ended December 31, 2018 and 2017:

		Years Ended December 31,
		2018				2017
Revenue		$	137,000			$	37,000
Cost of revenue			41,000				6,000
Gross margin			96,000				31,000
Operating expenses			-				955,000
Operating income (loss)			96,000				(924,000	)
Escrow forfeiture gain			-				135,000
Impairment loss			-				(2,754,000	)
Income (loss) from discontinued operations, net of tax		$	96,000			$	(3,543,000	)

 

Included in the impairment loss recognized for the year ended December 31, 2017 on the discontinuance of BDI are impairment losses recognized on inventories of $453,000, equipment and furnishings of $29,000, identifiable intangible assets of $1,833,000, goodwill of $430,000, and a $9,000, net expense from all other items, all associated with the assets and operations of BDI. Additional costs associated with the exit of operations of the Company's subsidiary BDI may be incurred as final wrap-up of BDI's operations are completed.

In December 2017, BDI entered an asset purchase agreement with a privately held third party (the "Buyer"), pursuant to which BDI sold its rights to its intellectual property, technology rights and know-how associated with the business to the Buyer in exchange for future payments when and if the technology generates cash flow. Should the Buyer decide to pursue development of the acquired rights and if they successfully commercialize a product using the acquired rights, BDI would be entitled to receive future earn-out payments based upon a low single digit percentage of such defined sales. Such earn-out payments are subject to certain per product sale limitations and a cumulative payment ceiling (not to exceed total payments of low single-digit millions of dollars). Based upon the Company's assessment of the current low likelihood receiving future payments under this agreement, no revenue has been recognized.