Discontinued Operations and Disposal Groups

3 Months Ended

Mar. 31, 2012

Discontinued Operations and Disposal Groups

Schedule of Disposal Groups, Including Discontinued Operations, Income Statement, Balance Sheet and Additional Disclosures [Table Text Block]

NOTE 10 – 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 April, 2012, 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 March 31, 2012, 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. See Note 11.

As a result of the decision to sell the QuickVerse^® product line, we have classified this asset as discontinued operations for the three months ended March 31, 2012 and 2011. We have recorded the remaining class of liabilities for the QuickVerse^® product line as presented below:

Other current liabilities from discontinued operations:			March 31, 2012	December 31, 2011
	Accrued royalties		$148,573	$153,383
		Other current liabilities from discontinued operations	$148,573	$153,383

The following table presents the results of operations of our discontinued operations for the three months ended March 31, 2012 and 2011:

Three Months Ended March 31,		2012	2011
Gross revenues		$---	$417,844
	Less estimated sales returns and allowances	---	(29,380)
Net revenues		---	388,464
Cost of sales		---	114,630
	Gross profit	---	273,834
Operating expenses:
	Advertising and direct marketing	---	30,683
	Sales and marketing wages	---	42,077
Total sales and marketing		---	72,760
	Research and development	---	61,217
	Rent	---	8,491
	Other general and administrative costs	---	27,888
Total general and administrative		---	97,596
Income from operations of discontinued component		---	103,478
	Impairment expense	---	(62,135)
	Gain on debt settlement	3,853	---
	Income tax (provision)	---	---
Income from discontinued operations, net of taxes		$3,853	$41,343

For the three months ended March 31, 2012, the gain on debt settlement within our discontinued operations results from settlement agreements reached with certain of our royalty content providers pursuant to which reductions in the total accrued royalty balance owed by us to them were finalized, which agreements were part of a broad initiative on our part arising in connection with our sale to WORDsearch of our QuickVerse^® product line.

- Definition

Tabular disclosure of disposal groups, which may include the gain (loss) recognized in the income statement and the income statement caption that includes that gain (loss), amounts of revenues and pretax profit or loss reported in discontinued operations, the classification and carrying value of the assets and liabilities comprising the disposal group, and the segment in which the disposal group was reported. Also may include the amount of adjustments to amounts previously reported in discontinued operations such as resolution of contingencies arising from the disposal transaction or the operations of the component prior to disposal.

+ References+ Details