Discontinued Operations, Sale of the Cold-EEZE® Business

12 Months Ended

Dec. 31, 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 Fiscal 2017, we have 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 (see Note 9). 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 asset purchase agreement, we also agreed to a one-time sale to Mylan of certain non-lozenge-based Cold-EEZE^® inventory. At December 31, 2017, we have classified as assets held for sale approximately $22,000 of such inventory, which approximates our cost.

Pursuant to the asset purchase agreement, we entered into a transition service arrangement with Mylan, for which we earned $150,000 in transition service fees through December 31, 2017. Pursuant to this arrangement, we (i) received, processed, fulfilled, and shipped customer orders, and billed such customers for these shipments on behalf of Mylan from March 30, 2017 to June 30, 2017, (ii) processed certain sales allowances, returns and other customer promotional deductions, and (iii) paid certain Cold-EEZE^® Business expenses which are to be reimbursed by Mylan. For Fiscal 2017, the $150,000 transition service fees earned were recorded as a component of other income (expense).

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		(3,511	)
Gain on sale of the Cold-EEZE® Business after income taxes	$	42,301
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 Fiscal 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 operating results of our discontinued operations for Fiscal 2018 and 2017, respectively, (in thousands):

	For the Years ended
	December 31, 2018		December 31, 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

For Fiscal 2018, we incurred costs of $170,000 which was charged against the gain on sale of discontinued assets, net of taxes.