v2.3.0.15
Discontinued Operations and Disposal Groups
3 Months Ended
Sep. 30, 2011
Discontinued Operations and Disposal Groups 
Schedule of Disposal Groups, Including Discontinued Operations, Income Statement, Balance Sheet and Additional Disclosures [Table Text Block]

NOTE 11 – DISCONTINUED OPERATIONS

 

On May 5, 2011, we entered into a Software Product Line Purchase Agreement to sell our QuickVerse product line to WORDsearch Corp., L.L.C. In accordance with the Software Product Line Purchase Agreement, WORDsearch agreed to acquire from us all of the assets associated with our QuickVerse® product line for $975,000 in cash at closing and the assumption of up to $140,000 of our then-existing liabilities at closing.  

 

On June 30, 2011, closing of the asset sale transaction governed by the Software Product Line Purchase Agreement, which is transitional in nature and expected to be ongoing through approximately the end of November, 2011, commenced.  As one of the initial parts of the closing, on July 1, 2011 WORDsearch assumed possession of the physical assets conveyed in the transaction as well as control and responsibility of the business operations related to the QuickVerse® product line, including, among many other things, the receipt of revenues for sales in exchange for partial payment of the cash portion of the purchase price being paid to us. At September 30, 2011, certain closing matters remain open and subject to completion and, as a consequence, in accordance with the terms of the Software Product Line Purchase Agreement, the transaction remains uncompleted. 

 

As a result of the decision to sell the QuickVerse product line, we have classified this asset as discontinued operations for the nine months ended September 30, 2011. We have recorded the remaining class of liabilities for the QuickVerse product line as presented below:

 

Liabilities:

 

September 30, 2011

Accrued royalties

 

$271,816

 

Total liabilities

 

$271,816

 

The following table presents the results of operations of our continuing operations and discontinued operations for the nine months ended September 30, 2011:

 

 

 

 

 

 

 

 

Continuing Operations

Discontinued Operations

Total

Gross revenues

 

 

 

$64,721

$658,634

$723,355

 

Less estimated sales returns and allowances

(20,702)

40,727

20,025

Net revenues

 

 

 

44,019

699,361

743,380

Cost of sales

 

 

 

30,915

212,677

243,592

 

Gross profit

 

 

 

13,104

486,684

499,788

Operating expenses:

 

 

 

 

 

 

 

Advertising and direct marketing

 

12,749

52,582

65,331

 

Sales and marketing wages

 

 

42,077

59,700

101,777

 

Bad debt provision

 

 

(17,491)

---

(17,491)

Total sales and marketing

 

 

37,335

112,282

149,617

 

Personnel costs

 

 

 

195,551

---

195,551

 

Amortization and depreciation

 

 

39,410

4,847

44,257

 

Research and development

 

 

---

142,411

142,411

 

Rent

 

 

 

 

20,636

---

20,636

 

Other general and administrative costs

 

 

 

 

 

269,725

10,076

279,801

Total general and administrative

 

 

525,322

157,334

682,656

Impairment expense

 

 

 

 

 

217,972

---

217,972

 

Total operating expenses

 

 

780,629

269,616

1,050,245

Income (loss) from operations

 

 

(767,525)

217,068

(550,457)

 

Other income (expenses), net

 

 

(10,038)

---

(10,038)

 

Gain on debt settlement

 

 

558,409

---

558,409

 

Gain on sale of software product line

 

---

972,082

972,082

Income (loss) before income taxes

 

 

(219,154)

1,189,150

969,996

 

Income tax benefit (provision)

 

 

405,619

(405,619)

---

Net income (loss)

 

 

$186,465

$783,531

$969,996

 

For comparative purposes, the following table presents the results of operations of our continuing operations and discontinued operations for the nine months ended September 30, 2010:

 

 

 

 

 

 

 

 

Continuing Operations

Discontinued Operations

Total

Gross revenues

 

 

 

$137,239

$1,214,590

$1,351,829

 

Less estimated sales returns and allowances

(11,332)

(83,206)

(94,538)

Net revenues

 

 

 

125,907

1,131,384

1,257,291

Cost of sales

 

 

 

51,520

448,262

499,782

 

Gross profit

 

 

 

74,387

683,122

757,509

Operating expenses:

 

 

 

 

 

 

 

Advertising and direct marketing

 

23,184

86,680

109,864

 

Sales and marketing wages

 

 

58,267

99,420

157,687

Total sales and marketing

 

 

81,451

186,100

267,551

 

Personnel costs

 

 

 

316,663

---

316,663

 

Amortization and depreciation

 

 

52,761

13,082

65,843

 

Research and development

 

 

---

126,468

126,468

 

Rent

 

 

 

 

69,696

---

69,696

 

Other general and administrative costs

 

 

 

 

 

330,481

23,163

353,644

Total general and administrative

 

 

769,601

162,713

932,314

 

Total operating expenses

 

 

851,052

348,813

1,199,865

Income (loss) from operations

 

 

(776,665)

334,309

(442,356)

 

Other income (expenses), net

 

 

(12,421)

---

(12,421)

Income (loss) before income taxes

 

 

(789,086)

334,309

(454,777)

 

Income taxes

 

 

 

---

---

---

Net income (loss)

 

 

 

$(789,086)

$334,309

$(454,777)

 

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

NOTE 12 – GAIN ON SALE OF SOFTWARE PRODUCT LINE

 

Due to the transfer of control and responsibility of the business operations related to the QuickVerse product line to WORDsearch on July 1, 2011, we recognized a disposal gain of $972,082 at September 30, 2011 in accordance with ASC 360-10-35, Property, Plant, and Equipment, Overall, Subsequent Measurement.  The disposal gain has been treated as a gain on long-lived assets classified as held for sale and included in Discontinued operations as a Gain on sale of software product line on our Condensed Consolidated Statement of Operations.

 

At September 30, 2011, the Gain on sale of software product line consisted of the following:

 

Purchase price for the sale of the QuickVerse product line

 

$975,000

Assumed liabilities by WORDsearch

 

93,673

Inventory transferred to WORDsearch, at cost

 

(42,868)

Unamortized basis of QuickVerse software license

 

(9,083)

Legal and broker fees associated with the Software Product Line Purchase Agreement

 

(44,640)

 

Balance September 30, 2011

 

$972,082