Note 3 - Discontinued Operations

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

3. Discontinued Operations

On March 12, 2023, the Company entered into the Purchase Agreement with Alora for Alora’s acquisition of all assets related to DSUVIA, including inventories, equipment and intellectual property in exchange for consideration at closing of $1.1 million, a 15% royalty on commercial sales of DSUVIA, 75% royalty on sales of DSUVIA to the Department of Defense and up to $116.5 million in sales-based milestones.

The Company’s DSUVIA business met the definition of a discontinued operation as of March 31, 2023. Accordingly, the assets and liabilities associated with these operations have been classified as assets and liabilities of discontinued operations in the accompanying condensed consolidated balance sheets at March 31, 2023 and December 31, 2022. The carrying value of the disposal group was higher than its fair value, less costs to sell, and accordingly, an impairment loss was required at March 31, 2023. The operations and cash flows of the DSUVIA business are presented as discontinued for all periods presented. The transaction closed on April 3, 2023 (see Note 11, “Subsequent Events” below).

The following table presents the results of the discontinued operations for the three-month period ended March 31, 2023 and March 31, 2022 (in thousands):

		Three months ended
		March 31,
		2023				2022
Total revenues		$	501			$	442
Cost of goods sold			711				414
Selling, general and administrative expense			683				3,608
Impairment of net assets held for sale			7,007				—
Impairment of fixed assets			1,065				—
Gain on termination of lease liabilities			(1,098	)			—
Research and development expenses		349					479
Loss from operations			8,216				4,059
Loss from discontinued operations before loss on disposal		$	8,216			$	4,059

The following table summarizes the carrying amounts of major classes of assets and liabilities of discontinued operations for each of the periods presented (in thousands).

		March 31, 2023				December 31, 2022
Cash and cash equivalents		$	—			$	—
Accounts receivable, net			276				309
Inventories			1,117				1,178
Prepaid expenses and other current assets			231				444
Property, plant and equipment, net			8,509				—
Operating lease right-of-use assets			178				—
Other assets			172				—
Less: expected loss on sale of discontinued operations			(7,007	)			—
Total current assets of discontinued operations			3,476				1,931
Property, plant and equipment, net			—				10,261
Operating lease right-of-use assets			—				3,499
Other assets			—				176
Total non-current assets of discontinued operations			—				13,936
Total assets of discontinued operations		$	3,476			$	15,867

Accounts payable			618				784
Accrued liabilities			1,184				1,720
Operating lease liabilities, current portion			354				1,601
Note payable, current portion			—				400
Deferred revenue, current portion			1,122				115
Total current liabilities of discontinued operations			3,278				4,620
Operating lease liabilities, net of current portion			—				2,959
Deferred revenue, net of current portion			—				1,036
Total non-current liabilities of discontinued operations			—				3,995
Total liabilities of discontinued operations			3,278				8,615
Net assets of discontinued operations		$	198			$	7,252

The following table presents the significant non-cash items and purchases of property, plant and equipment for the discontinued operations that are included in the accompanying unaudited condensed consolidated statements of cash flows (in thousands):

		Three months ended
		March 31,
		2023				2022
Cash flows from operating activities:
Depreciation and amortization		$	215			$	379
Stock-based compensation			19				145
Impairment of net assets held for sale			7,007				—
Impairment of fixed assets			1,065				—
Gain on termination of lease liabilities			(1,098	)			—
Gain on extinguishment of debt			(400	)			—

The following table represents the expected loss on sale of discontinued operations for the three months ended March 31, 2023:

		March 31, 2023
Expected cash proceeds		$	2,723
Less: net assets transferred			(8,840	)
Less: expected disposal costs			(890	)
Expected loss on sale of discontinued operations, before income taxes			(7,007	)
Income tax expense			—
Expected loss on sale of discontinued operations		$	(7,007	)

Per ASC 450, we booked a contingent loss against the net assets held for sale in the three months ended March 31, 2023.