4. Discontinued Operations

At the closing of the Globus Transaction, Globus paid the Company $80 million in cash. On September 1, 2016, the Company used approximately $66 million of the consideration received to (i) repay in full all amounts outstanding and due under the Company’s Deerfield Facility Agreement and (ii) repay certain of its outstanding indebtedness under the Company’s Amended Credit Facility with MidCap (described in Note 5 below), in each case, including debt-related costs. Also on September 1, 2016, the Company entered into a five-year term credit, security and guaranty agreement with Globus (the “Globus Facility Agreement”), as further described in Note 5, pursuant to which Globus agreed to loan the Company up to $30 million, subject to the terms and conditions set forth in the Globus Facility Agreement.

The following table summarizes the calculation of the gain on sale (in thousands). The Company recorded an adjustment of $104,000 to the purchase price accounting during November 2016.

Consideration received	$	80,000
Cash included in assets sold		(4,250	)
Transaction costs		(5,960	)
Net cash proceeds		69,790
Less:
Product supply obligation		(1,927	)
Working capital adjustment		(2,295	)
Carrying value of business and assets sold		(57,633	)
Net gain on sale of business	$	7,935

The results of operations from discontinued operations presented below include certain allocations that management believes fairly reflect the utilization of services provided to the International Business. The allocations do not include amounts related to general corporate administrative expenses. Therefore, the results of operations from the International Business do not necessarily reflect what the results of operations would have been had the International Business operated as a stand-alone entity.

In connection with the Globus Transaction, the Company entered into a product manufacture and supply agreement (the “Supply Agreement”) with Globus, pursuant to which the Company agreed to supply to Globus certain of its implants and instruments (the “Products”), previously offered for sale by the Company in international markets at agreed-upon prices for a minimum term of three years, with the option for Globus to extend the term for up to two additional twelve month periods subject to Globus meeting specified purchase requirements. In accordance with authoritative guidance, certain intercompany sales transactions have been reported under continuing operations as the Company will have continuing involvement due to future sales to Globus under the Supply Agreement. In connection with the Globus Transaction, Globus received, and fully utilized in 2017, a credit of up to a $2.2 million to be applied against product purchases pursuant to the Supply Agreement during a six-month period commencing one month after the closing of the Globus Transaction, which has been included as a reduction of the consideration received for the sale of the International Business and was recognized as revenue upon fulfilment by the Company of product purchases by Globus.

The agreements entered into concurrently with the sale of the International Business, including the Transition Services Agreement and the Supply Agreement, contain various elements and, as such, are deemed to be an arrangement with multiple deliverables as defined under authoritative accounting guidance (see Note 2). Several non-contingent deliverables were identified within the agreements. The Company identified the International Business, contract supply services, transition services and the Globus Facility as separate non-contingent deliverables within the arrangement. The Company determined the estimated selling price (fair value) for each of the non-contingent deliverables on a standalone basis by utilizing relevant market data and entity-specific factors. Based on the respective standalone fair values of the deliverables, there was no discount to allocate among the deliverables and the consideration received for each deliverable approximated standalone fair value. As such, none of the purchase consideration was allocated to these elements.

Included in the results of continuing operations for the years ended December 31, 2017 and 2016 are revenues of $0 and $10.3 million, respectively, and cost of revenue of $0 million, $8.9 million, respectively, that represent intercompany transactions that, prior to the Globus Transaction, were eliminated in the Company's consolidated financial statements.

During the year ended December 31, 2017, the Company recorded $14.4 million in revenue and $12.1 million in cost of sales from the Supply Agreement that are included in the continuing operations. During the year ended December 31, 2016, the Company recorded $2.6 million in revenue and $2.3 million in cost of sales from the Supply Agreement that are included in the continuing operations.

In connection with the Globus Transaction, the Company included interest expense of $7.0 million for the year ended December 31, 2016, under the Deerfield Facility Agreement and Amended Credit Facility (as further described in Note 5) in net loss from discontinued operations to the extent these debt facilities were repaid using the proceeds from the Globus Transaction.

The following table summarizes the results of discontinued operations for the periods presented in the consolidated statements of operations for the years ended December 31, 2017 and 2016 (in thousands):

	Years ended December 31,
Discontinued operations		2017		2016
Revenues	$	—		$	40,130
Cost of revenues		—			19,381
Amortization of acquired intangible assets		—			1,291
Gross profit		—			19,458
Operating (income) expenses:
Research and development		—			51
Sales and marketing		—			12,980
General and administrative		271			4,846
Amortization of intangible assets		—			622
Restructuring expenses		—			794
Net gain on sale of business		—			(7,935	)
Total operating expenses		271			11,358
Operating (loss) income		(271	)		8,100
Other income (expense):
Interest expense, net		—			(6,959	)
Other income, net		7			1,883
Total other income (expense)		7			(5,076	)
(Loss) income from discontinued operations before taxes		(264	)		3,024
Income tax (benefit) provision		(2,510	)		6,648
Income (loss) from discontinued operations, net of applicable taxes	$	2,246		$	(3,624	)

The following table summarizes the assets and liabilities of discontinued operations as of December 31, 2017 and 2016 related to the International Business (in thousands):

	December 31, 2017		December 31, 2016
Assets
Current assets:
Cash	$	127	$	159
Inventories, net		—		48
Prepaid expenses and other current assets		4		157
Total current assets of discontinued operations		131		364
Other assets		56		61
Total assets of discontinued operations	$	187	$	425
Liabilities
Current liabilities:
Accounts payable	$	0	$	43
Accrued expenses		312		689
Total current liabilities of discontinued operations		312		732
Total liabilities of discontinued operations	$	312	$	732

Included in the statements of cash flows for the year ended December 31, 2017 and 2016 are the following capital expenditures and non-cash adjustments related to the discontinued operations (in thousands):

	Year ended December 31,
	2017		2016
Depreciation and amortization	$	—	$	3,836
Provision for excess and obsolete inventory	$	—	$	151
Capital expenditures	$	—	$	1,319
Interest expense related to amortization of debt discount and debt issuance costs	$	—	$	2,052