Annual report pursuant to Section 13 and 15(d) 12-31-2018

Discontinued Operations

v3.19.1
Discontinued Operations
12 Months Ended
Dec. 31, 2018
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued Operations

14. Discontinued Operations

 

As explained in Note 1, on October 1, 2018, the Company completed the sale of its retail spine business to CTL Medical The gain on the sale of the retail spine business is estimated to approximate $1.4 million, which was recognized during the quarter ended December 31, 2018.

 

The Company and CTL Medical entered in an asset purchase agreement whereby CTL Medical agreed to acquire all of the Company’s commercial spine business for total consideration of $8.5 million, which includes a $6.0 million (including interest) note receivable (See Note 13) and CTL Medical’s assumption of the Company’s $2.5 million related party note payable (see Note 8). As a result of the closing, CTL Medical is now the exclusive owner of Amedica’s portfolio of metal and silicon nitride spine products, which are presently sold under the brand names of Taurus, Preference, and Valeo, with access to future silicon nitride spine technologies. The Company has agreed to pay the cost, if any, to re-sterilize and re-package select silicon nitride spinal inventories sold to CTL Medical if the sterilization date expires prior to CTL Medical selling the inventories to a third-party customer. The Company estimates the sterilization and repackaging cost to approximate $0.5 million. Manufacturing, R&D, and all intellectual property related to the core, non-spine, biomaterial technology of silicon nitride remains with the Company in Salt Lake City. The Company will serve as CTL’s exclusive OEM provider of silicon nitride products.

 

Assets and liabilities held for sale consisted of the following:

 

    September 30, 2018     December 31, 2017  
             
Assets                
Current assets held for sale:                
Retail spine inventory, net   $ 1,708     $ 1,602  
Long-term assets held for sale:                
Property and equipment, net     959       1,162  
Intangible assets, net     2,249       2,651  
Total assets   $ 4,916     $ 5,415  
                 
Liabilities                
Current liabilities held for sale:                
Debt – related party   $ 2,500     $ 2,356  

 

Operating results related to discontinued operations consisted of the following:

 

    Year Ended December 31,  
    2018     2017  
Product revenue   $ 6,222     $ 11,227  
Costs of revenue     1,474       6,351  
Gross profit     4,748       4,876  
Operating expenses:                
Research and development     1,524       1,571  
General and administrative     190       726  
Sales and marketing     3,358       6,147  
Total operating expenses     5,072       8,444  
Loss from discontinued operations   $ (324 )   $ (3,568 )

 

During the nine-months ended September 30, 2018 and year ended December 31, 2017, the Company only recorded product revenues and cost of revenues related to the spine business. Because of the sale of the retail spine business to CTL Medical, all product revenues and costs of product revenues for these periods have been removed from the consolidated statements of operations. The only product revenues and cost of product revenues recorded in the statement of operations for the years ended December 31, 2018 and 2017, related to the three months ended December 31, 2018, which was subsequent to the sale of the spine business to CTL Medical.