Discontinued Operations

6 Months Ended

Jun. 30, 2014

Discontinued Operations

2. Discontinued Operations

During the fourth quarter of 2013, the Company’s Board of Directors (the “Board”), after reviewing strategic options, committed to a plan designed to simplify the Company’s business structure and to focus on high-growth technology trends within the security market including cloud-based services and mobility. In December 2013, the Company completed the sale of its Swiss Multicard AG subsidiary, its German payment solution AG subsidiary and its Dutch Multicard Nederland BV subsidiary to Sandpiper Assets SA, an international holding company (“Sandpiper”), pursuant to a share purchase agreement whereby the Company agreed to sell its holdings in these subsidiaries to Sandpiper for total negative cash consideration of $0.5 million, which was paid to Sandpiper in February 2014 subsequent to the close of the transaction. The sale of Multicard AG and payment solution AG closed on December 19, 2013 and sale of Multicard Nederland BV closed on December 31, 2013. In addition, the Company completed the sale of its German Multicard GmbH subsidiary to an employee for the sum of one euro on December 30, 2013. Based on the carrying value of the assets and the liabilities attributed to these businesses on the date of sale, and the estimated costs and expenses incurred in connection with the sale, the Company recorded a gain of $4.8 million, net of tax of nil, during the fourth quarter of fiscal 2013 in the consolidated statements of operations for the year ended December 31, 2013, which is included in the loss from discontinued operations, net of income taxes line.

In addition, during the fourth quarter of 2013, the Company committed to sell its Rockwest Technology Group, Inc. d/b/a/ Multicard US (“Multicard US”) subsidiary to George Levy, Matt McDaniel and Hugo Garcia (the “Buyers”), the founders and former owners of the Multicard US business. The sale of the Multicard US subsidiary was completed on February 4, 2014 and was made pursuant to a Share Purchase Agreement dated January 21, 2014 between the Company and the Buyers whereby the Company agreed to sell 80.1% of the shares of its holdings in Multicard US, to the Buyers for cash consideration of $1.2 million. Based on the carrying value of the assets and the liabilities attributed to Multicard US on the date of sale, and the estimated costs and expenses incurred in connection with the sale, the Company recorded a gain of $0.5 million, net of income taxes of nil, in the condensed consolidated statement of operations for the six months ended June 30, 2014, which is included in income (loss) from discontinued operations, net of income taxes.

On June 30, 2014, the Company entered into an Asset Purchase agreement with a former employee to sell certain non-core assets consisting of inventory, some prepaid items, certain fully depreciated office equipment and certain intellectual property (“Non-Core Assets”) relating to one of its subsidiaries for cash consideration of $0.1 million. The Company measured these Non-Core Assets at the lower of their carrying amount or fair value less cost to sell as stated in the table below. The sale of these Non-Core Assets was completed on July 7, 2014.

In accordance with ASC Topic 205-20, Discontinued Operations (“ASC 205”), for the three and six months ended June 30, 2014 and 2013, the results of these businesses have been presented as discontinued operations in the condensed consolidated statements of operations and all prior periods have been reclassified to conform to this presentation. The assets and liabilities of discontinued operations have been reclassified and are segregated as assets and liabilities of discontinued operations in the condensed consolidated balance sheets as of June 30, 2014 and December 31, 2013.

The key components of income (loss) from discontinued operations consist of the following (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Net revenues	$	441		$	5,413		$	1,276		$	10,823
Discontinued operations:
Income (loss) from discontinued operations, net of income taxes of nil	$	60		$	(963	)	$	95		$	(1,727	)
Adjustments to amounts reported previously for gain on sale of discontinued operations, net of income taxes of nil		(3	)		—			(54	)		—
Gain on sale of discontinued operations, net of income taxes of nil		—			—			503			—
Income (loss) from discontinued operations, net of income taxes	$	57		$	(963	)	$	544		$	(1,727	)

The following table summarizes the assets and liabilities of discontinued operations (in thousands):

		June 30, 2014	December 31, 2013
Assets:
Cash and cash equivalents	$	—	$	16
Accounts receivable, net		—		787
Inventories		94		574
Other current assets		2		27
Property and equipment		—		13
Goodwill		—		1,310
Total assets of discontinued operations	$	96	$	2,727
Liabilities:
Accounts payable		—		418
Deferred revenue		—		966
Accrued expenses and other liabilities		—		246
Total liabilities of discontinued operations	$	—	$	1,630