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Note 12. Sale of development project
3 Months Ended
May 04, 2013
Mergers, Acquisitions and Dispositions Disclosures [Text Block]

12.          Sale of development project


On March 8, 2013, we entered into an Asset Purchase Agreement with a third party (the “Buyer”) to sell certain development projects (intellectual property) and long-lived assets (the “Connectivity Assets”) related to the connectivity technology over coaxial cable market, including the transfer of 21 employees (the “Connectivity Employees”) to the Buyer. The aggregate carrying amount of the Connectivity Assets ultimately transferred was approximately $0.6 million and were classified as assets held for sale in prepaid expenses and other current assets in the accompanying condensed consolidated balance sheet at February 2, 2013. We received an initial payment of $2.0 million in cash at the closing of the transaction and a payroll expense reimbursement payment of $0.6 million (as described more fully below). Under the terms of the Asset Purchase Agreement, if certain technical milestones are met by September 30, 2013 as a result of further development of the transferred technology by the Buyer, we will be paid an additional $5.0 million in cash. There can be no assurance that this technical milestone will be met.


In April 2013, upon receiving the closing consideration of $2.0 million, we recorded a gain of $1.1 million, net of the carrying value of the Connectivity Assets and fees for legal and bank services of approximately $0.4 million. The gain is included in “Gain on sale of development project” in the accompanying condensed consolidated statements of operations for the three months ended May 4, 2013. The gain was recorded in the current fiscal quarter on the basis that we obtained a signed agreement, the closing consideration of $2.0 million was received (non-refundable), delivery of the underlying assets and intellectual property and transfer of employees occurred during our quarter ended May 4, 2013, and we do not have further obligations or deliverables under the Asset Purchase Agreement beyond May 4, 2013. 


We have elected to account for the contingent payment under the milestone under the milestone method described by FASB ASC Topic 605-28, under which consideration contingent on the achievement of a substantive milestone is recognized in its entirety in the period when the milestone is achieved. Milestones are considered substantive based on the potential enhancement of value to the Buyer and the fact that consideration earned from the achievement of a milestone relates solely to past performance. Accordingly, payment consideration if and when the milestone is met associated with the technical milestone will be recorded as other income in our consolidated statements of operations in its entirety, which is due by September 30, 2013, in accordance with the Asset Purchase Agreement.


Additionally, in April 2013, in connection with the Asset Purchase Agreement, the Buyer reimbursed us for payroll expenses related to the employees transferred to the Buyer for the period from February 1, 2013 through the actual payroll transfer, totaling $0.6 million.