Note 3 - Discontinued Operations

9 Months Ended

Sep. 30, 2013

Discontinued Operations and Disposal Groups [Abstract]

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

3. Discontinued Operations

Pharmalicensing, Global Licensing, Pharma Transfer and Knowledge Express operating divisions

Pursuant to an asset purchase agreement dated September 12, 2012, the Company sold the Pharmalicensing, Global Licensing, Pharma Transfer and Knowledge Express operating divisions to IP Technology Exchange, Inc. (“IP Tech Ex”) effective as of August 31, 2012. These divisions operated out of the United States and the United Kingdom as part of the Company’s intelligence and insights services segment. Under the terms of the original agreement, the Company was receive $2,000,000, consisting of (i) a lump-sum payment of $600,000 upon closing, (ii) the assumption of approximately $70,000 of debt relating to the divisions, (iii) quarterly payments of $100,000 through August 2014, and (iv) payment of the remaining balance on September 1, 2014. In addition, IP Tech Ex was entitled to a $125,000 reduction in the purchase price if all amounts were paid to the Company by May 1, 2013.The outstanding balance accrued interest at 5% per annum.

The Company’s Board of Directors approved a reduction to the balance of the note receivable from IP Tech Ex in return for the acceleration of the payments on the note. IP Tech Ex agreed to make a $400,000 payment in May 2013 and a $300,000 in December 2014 in full satisfaction of the note. Accordingly, the Company recorded a loss of approximately $489,000 during the first quarter of 2013 related to the write-down of this note to its net realizable value of approximately $700,000. The outstanding balance will accrue interest at 5% per annum.

Strategic Services operating division

On October 2, 2012, the Company entered into an asset purchase agreement to sell certain assets, primarily intellectual property rights and equipment, relating to our strategic services division, known as Strategos, to one of its officers and employees for $100,000. In connection with the asset purchase agreement, the Company entered into separation and release agreements with all of the officers and employees of our Strategos division pursuant to which they agreed to forgo approximately $1,489,000 in accrued bonuses owed them in exchange for $150,000. Finally, as part of the transaction, the Company also entered into a technology license agreement with Strategos, Inc., a newly formed company that will carry on the business formerly conducted by our Strategos division, pursuant to which we agreed to license Strategos, Inc. certain technology and intellectual property rights relating to our Strategos division, including the use of the name “Strategos,” for royalty payments equal to 12.5% of the professional fee revenue earned by Strategos, Inc. in excess of $10,000,000 during the period from October 2, 2012 to December 31, 2015.

The Company has reflected the operations of these divisions as discontinued operations in the consolidated statements of comprehensive loss for the three and nine months ended September 30, 2012. Substantially all the cash flows from discontinued operations for all periods presented relate to operating activities, and accordingly, the Company has presented cash flows from discontinued operations as a single line item in the consolidated statements of cash flows.

The summary financial results of discontinued operations are as follows:

	Three Months Ended September 30, 2012						Nine Months Ended September 30, 2012
	Strategic Services			Intelligence & Insights			Strategic Services			Intelligence & Insights
Revenue	$	22,004		$	247,866		$	2,500,534		$	1,199,098
Long-lived asset impairment charge		-			-			(4,756,898	)		(255,126	)
Operating expense		(405,953	)		(271,469	)		(2,711,484	)		(963,610	)
Other income (loss)		(102,163	)		10			(169,170	)		144
Loss on disposal of business		-			(87,539	)		-			(87,539	)
Loss before income taxes		(486,112	)		(111,132	)		(5,137,018	)		(107,033	)
Provision (benefit) for income tax expense		-			(4,390	)		515,531			(8,266	)
Loss from discontinued operations, net of tax	$	(486,112	)	$	(115,522	)	$	(4,621,487	)	$	(115,299	)