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Note 3 - Discontinued Operations | 3 Months Ended
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Mar. 31, 2025
Notes to Financial Statements |
Disposal Groups, Including Discontinued Operations, Disclosure [Text Block] |
3. | Discontinued Operations
In October 2024, the Company announced a strategic shift to focus on its OA Pain Management and Regenerative Solutions businesses. This strategic decision resulted in the sale of Arthrosurface on October 31, 2024 and the sale of Parcus Medical on March 7, 2025. Arthrosurface On October 31, 2024 (the “Closing Date”), the Company completed the sale of all of the outstanding equity interests of Arthrosurface, a Delaware corporation and former wholly-owned subsidiary of the Company, which held the Company’s Arthrosurface business, to Phoenix Brio, Incorporated, a Delaware corporation (the “Buyer”), pursuant to the terms and conditions of a Share Purchase Agreement, dated as of the Closing Date (the “Purchase Agreement”), by and among the Company, Arthrosurface and Buyer (the “Arthrosurface Transaction”). As consideration for the Arthrosurface Transaction, at the closing, the Buyer delivered to the Company a ten-year non-interest-bearing promissory note in the principal amount of $7.0 million. Under the terms of the Purchase Agreement, the Company is also eligible to receive: (i) for each calendar quarter, an amount equal to a percentage of the net sales (the “Revenue Payments”) for the sale of certain commercial and pipeline products during the period commencing on the Closing Date and ending on the earlier of the fifth (5th) anniversary of the Closing Date or the date on which the Buy-Out Payment (as defined below) is paid to the Company; and (ii) a percentage of the gross proceeds with respect to the sale of certain commercial and pipeline products in a bona-fide arm’s length transaction with a third party that is not an affiliate of Buyer or the Company occurring within the first twenty four (24) months following the Closing Date. The Buyer can also elect to make a payment in an amount equal to the greater of (A) $14.0 million or (B) ten (10) times the Revenue Payments ((A) and (B) together, the “Buy-Out Payment”) paid to the Company during the last full calendar year prior to the consummation of a change of control transaction or Buyer’s written notice to the Company that it is electing to make the Buy-Out Payment. Pursuant to the Purchase Agreement, the aggregate consideration is subject to customary post-closing adjustments. The Company determined the fair value of the consideration with the sale of the Arthrosurface asset group to be $5.9 million and recorded as Notes Receivable on its balance sheet at the time of divestiture. The carrying value of the Notes Receivable was $5.8 and $5.9 million, as of March 31, 2025 and December 31, 2024, respectively. Parcus Medical On March 7, 2025, the Company completed the sale of all outstanding equity interests of Parcus Medical, to Medacta Americas Manufacturing, Inc. (“Medacta”), pursuant to the terms and conditions of a Membership Interest Purchase Agreement (the “Parcus Transaction”). As consideration for the Parcus Transaction, at closing, Medacta paid $4.5 million in cash. Pursuant to the terms of the agreement, the aggregate consideration is subject to customary post-closing adjustments. The components of loss from discontinued operations for the three months ended March 31, 2025 and 2024, consist of the following (in thousands):
|  | Three Months Ended March 31, |
|  | 2025 |  |  | 2024 |
Revenue |  | $ | 2,710 |  |  | $ | 11,501 |
Costs and expenses |  |  | 3,625 |  |  |  | 14,059 |
Loss from discontinued operations |  | $ | (915 | ) |  | $ | (2,558 | )
For the three months ended March 31, 2025 and 2024, there was no income tax expense associated with discontinued operations. The assets and liabilities reported as held-for-sale consist of the following (in thousands):
|  | As of December 31, |
|  | 2024 |
Assets |  |  |  |
Cash and cash equivalents |  | $ | 1,531 |
Accounts receivable, net |  |  | 3,285 |
Inventories |  |  | 221 |
Prepaid expenses and other current assets |  |  | 89 |
Property and equipment, net |  |  | 1,134 |
Right-of-use assets |  |  | 892 |
Total assets held-for-sale |  | $ | 7,152 |
Liabilities |  |  |  |
Accounts payable |  | $ | 797 |
Accrued expenses and other current liabilities |  |  | 3,324 |
Lease liabilities |  |  | 660 |
Total liabilities held-for-sale |  | $ | 4,781 |
There are no assets and liabilities reported as held-for-sale as of March 31, 2025, as the Company completed the divestitures of the Arthrosurface and Parcus Medical asset groups prior to March 31, 2025. Selected financial information related to significant operating and investing cash flow items from discontinued operations (excluding working capital impacts) are as follows (in thousands):
|  | Three Months Ended March 31, |
|  | 2025 |  |  | 2024 |
Depreciation |  | $ | 149 |  |  | $ | 492 |
Amortization of acquisition related intangible assets |  | $ | 55 |  |  | $ | 197 |
Non-cash operating lease cost |  | $ | 59 |  |  | $ | 102 |
Stock-based compensation expense |  | $ | 132 |  |  | $ | 336 |
Provision for inventory |  | $ | - |  |  | $ | 1,185 |
Purchases of property and equipment |  | $ | 19 |  |  | $ | 248 |

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