Disposal of Long-Lived Assets and Investment

12 Months Ended

Dec. 31, 2014

Discontinued Operations and Disposal Groups [Abstract]

Disposal of Long-Lived Assets and Investment

NOTE 3—Disposal of Long-Lived Assets and Investment

On November 15, 2013, the Company sold the business conducted by its To Go Brands, Inc. subsidiary to Healthy Brands Collective in exchange for 33,441 shares of preferred stock of Cell-nique Corporation (“Cell-nique”) (the parent company of Healthy Brands Collective) and the assumption of certain liabilities. Because Cell-nique was a private company at the time of the sale, the Company recorded the value of the shares of preferred stock in the Company’s consolidated balance sheet as an investment in Cell-nique at the net asset value of the assets transferred and liabilities assumed by Cell-nique Corporation. The Company elected to defer recognition of any gain on the sale of the To Go Brands business until such time that the realization of the gain was reasonably assured. Accordingly, the Company is accounting for its investment in Cell-nique using the cost method of accounting, in which the cost is equal to the carrying amount of the net assets sold to Cell-nique as of the date that the transaction closed.

The preferred shares are convertible into Cell-nique Corporation common stock at the option of the Company, and at the time of the sale would represent approximately 4% of the fully-diluted voting interests of Cell-nique Corporation. These preferred shares also accrue dividends at the rate of 8% per annum, are mandatorily convertible into common shares under certain circumstances, and feature customary rights of priority and a liquidation preference in the event of a dissolution or winding up Cell-nique Corporation’s affairs or upon the occurrence of other deemed liquidation events described in Cell-nique Corporation’s articles of incorporation.

On the date of sale, the Company calculated the net assets of To Go Brands, Inc. as follows:

Net assets sold:
Accounts receivable	$	106,843
Prepaid expenses and other current assets		8,059
Inventory, net		456,276
Property and equipment, net		18,082
Intangible assets, net		1,481,123
Other long term assets		0
Accounts payable		(305,072	)
Other liabilities		(65,639	)
Net Assets of To Go Brands, Inc. sold	$	1,699,672

For the year ended December 31, 2013, the following results of operations of To Go Brands, Inc. and the expense associated with the write-off of the remaining recorded value of the technology licenses associated with the Company’s discontinued nutraceutical business are presented as a loss from a discontinued operation in the accompanying consolidated statements of operations:

	Year ended December 31,2013
Revenues
Product sales	$	1,728,177
Cost of goods sold		1,002,064
Gross profit		726,113
Operating expenses
Research and development		128,215
Selling, general and administrative		1,507,210
Total operating expenses		1,635,425
Loss from operation		(909,312	)
Interest, net		(667	)
Net loss from discontinued operations of To Go Brands, Inc.		(909,979	)
Write-off of technology licenses associated with the nutraceutical product lines		(1,097,511	)
Net loss from discontinued operations	$	(2,007,490	)

During the year ended December 31, 2014, the Company believed there were certain impairment triggering events and circumstances which warranted an evaluation of its investment in the Cell-nique preferred shares and a non-cash impairment charge of $1,399,672 was recorded. As of December 31, 2014, the remaining fair value of preferred shares in Cell-nique was $300,000.