Discontinued operations

12 Months Ended

Oct. 31, 2013

Discontinued Operations and Disposal Groups [Abstract]

Discontinued operations

Note 2 - Discontinued operations

During 2013, the Company sold its RF Neulink and RadioMobile divisions, which together use to comprise the Company’s RF Wireless segment, as discussed below. As part of the RF Wireless segment, RF Neulink was engaged in the sale of wireless data products, such as transmitter and receiver modules and standard or smart programmable modems, for use in certain high-speed wireless connection markets, and RadioMobile was engaged in the sale of complete hardware and software solutions for wireless mobile data management applications. Given the Company’s focus on the higher growth and higher margin components of its business, the Company decided to sell RF Neulink and RadioMobile in order to reduce operating costs and focus its resources on more profitable divisions. Accordingly, during 2013, the RF Neulink and RadioMobile divisions had met the criteria to be accounted for as discontinued operations. The operations of both RF Neulink and RadioMobile have been reclassified from the ongoing operations of the Company as a result of the sale of these businesses, and the Company will not have any continuing involvement in the operations of RF Neulink and RadioMobile after the disposal transactions, as detailed in the subsequent paragraphs.

Effective July 31, 2013, the Company closed an Asset Purchase Agreement (the “RF Neulink Agreement”) with Raveon Technologies Corporation (“Raveon”), whereby Raveon acquired the assets related to the RF Neulink business, primarily consisting of inventory, certain intellectual property and licenses, customer lists and trademarks. Pursuant to the RF Neulink Agreement, no purchase price was paid at the closing. Rather, the purchase price for the RF Neulink business will consist of cash payments made by Raveon to the Company under the following circumstances: (i) for each RF Neulink inventory item that Raveon sells, Raveon is required to pay the Company the assigned value of that inventory item. This arrangement continues until the earlier of three years from the closing date or the date all inventory items are sold; and (ii) Raveon is required to pay the Company a royalty based on Raveon’s use of RF Neulink’s tradename or trademark, its customer list or its intellectual property. The royalty, which ranges from 5% to 10% of Raveon’s sales of such RF Neulink-related products, may not exceed $450,000 in the aggregate, and will not be payable on sales of inventory items. For the year ended October 31, 2013, the Company recognized approximately $20,000 of royalty income, which amount has been included within discontinued operations.

Effective October 29, 2013, the Company closed an Asset Purchase Agreement (the “RadioMobile Agreement”) with RadioMobile, Inc. (“Purchaser”), a new company formed by the former manager of the Company’s RadioMobile division, whereby the Purchaser acquired the assets related to the RadioMobile business, primarily consisting of inventory, certain equipment, certain intellectual property and licenses, customer lists and trademarks, in return for the Purchaser’s three-year agreement to pay the Company 10.0% of all net revenues up to $2.0 million. Additionally, as part of the RadioMobile Agreement, all former RadioMobile employees were terminated by the Company and re-hired by the Purchaser, and the Company permitted Purchaser to continue to use its office space, rent-free, through the end of the lease, which expires on March 31, 2014. There is no obligation from Purchaser if inventory is never sold. Other closing costs amounted to approximately $0.2 million. For the year ended October 31, 2013, the Company has not recognized any royalty income in connection with the sale of the RadioMobile division.

The following summarized financial information related to the RF Neulink and RadioMobile divisions is segregated from continuing operations and reported as discontinued operations for the years ended October 31, 2013 and 2012 (in thousands):

	2013		2012
Net sales	$	1,230	$	2,545
Cost of sales		1,609		1,444
Gross profit (loss)		(379)		1,101
Operating expenses		1,400		1,095
Operating income (loss)		(1,779)		6
Provision (benefit) for income taxes		(639)		2
Income (loss) from discontinued operations, net of tax	$	(1,140)	$	4

Given the nature of the inventory at RF Neulink and RadioMobile, the Company assessed that the inventory had a fair value of zero, and recorded a charge of $768,000 in the aggregate during 2013, which has been classified within discontinued operations, in connection with the sales of these divisions. The inventory at both RF Neulink and RadioMobile is highly specialized and not easily transferrable to other products. Additionally, certain components require programming and engineering expertise, which is unique to these products, in order to become fully functional.