5.	Omnifrio Acquisition and Discontinued Operations

Omnifrio Single-Serve Beverage Business

On April 11, 2011, we completed the acquisition of certain intellectual property and other assets (the "Omnifrio Single-Serve Beverage Business") from Omnifrio Beverage Company, LLC ("Omnifrio") for total consideration of up to $14,060, consisting of: (i) a cash payment at closing of $2,000; (ii) the issuance at closing of 501 shares of our common stock; (iii) a cash payment of $2,000 on the 15-month anniversary of the closing date (subject to our setoff rights in the asset purchase agreement); (iv) up to $3,000 in cash milestone payments; and (v) the assumption of certain specified liabilities relating to the Omnifrio Single-Serve Beverage Business.

The Omnifrio Single-Serve Beverage Business was accounted for as a business combination in accordance with the acquisition method. Assets acquired and liabilities assumed in the business combination were recorded at fair value in accordance with U.S. GAAP based upon appraisals obtained from an unrelated third party valuation specialist. The purchase price was originally allocated to identifiable intangible assets of $7,627, resulting in goodwill of $6,433, which was amortizable for tax purposes. The identifiable intangible assets consisted of developed technology patents with originally estimated lives of 15 years. The goodwill and developed technology were both fully impaired effective June 30, 2012.

On March 15, 2012, we entered into the Second Amendment to Asset Purchase Agreement (the "Second Amendment") with Omnifrio and the other parties thereto. The Second Amendment amends the Asset Purchase Agreement dated March 8, 2011, as amended on May 11, 2011, by and among the Primo, Omnifrio and the other parties thereto (the "Purchase Agreement") to revise the cash milestone payments and deferred purchase price payments payable under the Purchase Agreement.

Under the Second Amendment, we agreed to make milestone payments consisting of (i) a cash payment of $1,000, subject to certain offset amounts, upon our shipment of 5 single-serve beverage dispensing appliances to a retail customer, (ii) a second cash payment of $1,000, subject to certain offset amounts, upon our shipment of the next 10 single-serve beverage dispensing appliances to a retail customer, and (iii) a final cash payment of $1,000, subject to certain offset amounts, upon our shipment of the next 10 single-serve beverage dispensing appliances to a retail customer. Additionally, under the Second Amendment, our deferred purchase price payments were revised as follows: (i) $1,000 on June 11, 2012 and (ii) $1,000 on January 4, 2013.

At December 31, 2011, the estimated value of the cash milestone payments was $2,559, of which $559 was reported in current liabilities of the Disposal Group held for sale and $2,000 was reported in liabilities of the Disposal group held for sale, net of current portion. Delays in the development and manufacturing of the Omnifrio appliance caused us to significantly decrease our future sales projections, which caused the reduction in the estimated fair value of the milestone payments. We currently do not expect to make any cash milestone payments. The decrease in estimated fair value of the milestone payments resulted in other operating income of $2,457 for the year ended December 31, 2012, which is shown as a component of the loss from discontinued operations (see "Discontinued Operations" below for details for the loss from discontinued operations; see Note 14 for full fair value information). The deferred purchase price payments totaled $2,000 at December 31, 2012 and were included within current liabilities of Disposal Group held for sale on the consolidated balance sheets. The deferred purchase price payments totaled $2,000 on December 31, 2011 and were included within liabilities of Disposal Group held for sale, net of current portion on the consolidated balance sheets. We continue to negotiate with the seller for revised terms for the deferred purchase price payments.

Discontinued Operations

During 2012, we committed to a plan to sell the assets of the Disposal Group, which includes sparkling beverage appliances, flavorings, CO2 cylinders and accessories sold under the Flavorstation brand as well as the Omnifrio Single-Serve Business and initiated an active program to execute this plan. In addition, we determined that the Disposal Group met all of the criteria for classification as discontinued operations. As a result, current and prior year amounts and disclosures reflect these operations as discontinued operations.

The assets and liabilities of the Disposal Group classified as held for sale are summarized as follows:

	December 31, 2012			December 31, 2011
Accounts receivable, net	$	(32	)	$	857
Inventories		2,794			2,495
Prepaid expenses and other current assets		247			390
Property and equipment, net		–			–
Current assets of disposal group held for sale	$	3,009		$	3,742

Property and equipment, net		–			1,263
Intangible assets, net		–			7,267
Goodwill		–			6,433
Assets of disposal group held for sale, net of current portion	$	–		$	14,963

Accounts payable		146			1,646
Accrued expenses and other current liabilities		2,606			1,559
Current liabilities of disposal group held for sale	$	2,752		$	3,205

Other long-term liabilities		–			3,000
Liabilities of disposal group held for sale, net of current portion	$	–		$	3,000

The net sales and operating results classified as discontinued operations were as follows:

	Year ended December 31,
	2012			2011

Net sales	$	363		$	893
Operating costs and expenses:
Cost of sales		3,493			1,165
Selling, general and administrative		1,597			1,798
Other operating expense (income)		(2,457	)		–
Non-recurring and acquisition-related costs		1			–
Depreciation and amortization		650			359
Goodwill and developed technology impairment		13,446			–
Other impairment		1,296			–
Loss on disposal of fixed assets		116			–
Total operating costs and expenses		18,142			3,322
Loss from discontinued operations	$	(17,779	)	$	(2,429	)

SDS Agreements

We entered into cross licensing and distribution agreements (collectively "SDS Agreements") with Sparkling Drink System Innovation Center S.r.l, its owner and RBAS Ltd Israel (collectively "SDS") in November 2011 that were amended in January 2012. The SDS Agreements provided for the cross licensing and distribution of carbonated beverage products in certain territories. With the plan to exit the operations of the Disposal Group, we terminated the agreements with SDS.

Goodwill and Developed Technology Impairment

As described in Note 2, effective June 30, 2012, we performed goodwill and other intangible asset impairment tests. In addition to the sustained decrease in our stock price relative to our book value, we noted that delays in product development and manufacturing of the Omnifrio Single-Serve Business appliance created an indication of impairment in the related goodwill and developed technology definite-lived intangible asset. As a result of the delays, we determined that the appliance would not be available for the 2012 holiday season. We recorded a non-cash goodwill impairment of $6,433. The developed technology intangible asset was also considered impaired as its carrying value exceeded its undiscounted cash flows. We recorded a non-cash impairment charge of $7,013 for the developed technology intangible asset. These impairment charges are included in the results of discontinued operations for the year ended December 31, 2012.