14.

Discontinued operations

As previously disclosed, on

September 25, 2018,

the Company entered into a Limited Liability Company Interest Purchase Agreement, or the Purchase Agreement, with Quest, Oxford Immunotec Limited, a limited company incorporated in England and Wales and a wholly owned subsidiary of the Company, or Oxford Limited, and Oxford Immunotec, LLC, a Delaware limited liability company (formerly known as Oxford Immunotec, Inc., a Delaware corporation) and a wholly owned subsidiary of the Company, or Oxford LLC, pursuant to which Oxford Limited agreed to sell, and Quest agreed to acquire, the U.S. Laboratory Services Business, for gross proceeds of

$170

million in cash. This transaction is referred to herein as the Transaction. Of this amount, approximately

$32.3

million was paid directly to MidCap in settlement of all amounts due under a financing agreement, which included prepayment and exit fees of approximately

$2.3

million as described in Note

Loans payable

As contemplated in the Purchase Agreement, Oxford Immunotec USA, Inc., a Delaware corporation and a newly formed wholly owned subsidiary of Oxford Limited, or Oxford USA, joined the Purchase Agreement by way of a Joinder Agreement dated

October 1, 2018.

The Transaction was consummated in accordance with the terms and conditions of the Purchase Agreement on

November 6, 2018,

or the Closing Date. Prior to and in connection with consummation of the Transaction, Oxford USA and Oxford LLC (at the time, known as Oxford Immunotec, Inc.) carried out a corporate restructuring pursuant to which (i) the assets and businesses of Oxford LLC other than the U.S. Laboratory Services Business were transferred to Oxford USA and (ii) Oxford LLC was converted into a limited liability company.

At the time of sale, the U.S. Laboratory Services Business had a carrying value of

$27.9

million. The Company recorded a gain of

$146.0

million in connection with the Transaction, which amount was included in income from discontinued operations before income taxes in the Company’s consolidated statement of operations during the

three

months ended

December 31, 2018

Additionally, pursuant to the terms of the Purchase Agreement, the parties entered into certain ancillary agreements as of the Closing Date, including: (i) a transitional services agreement, or TSA, that will continue, unless otherwise terminated, until each service included in the TSA has been completed, (ii) a technology license agreement that will remain in effect until the date of expiration or lapse of the last “Blood Stability Patent” to expire or lapse, and (iii) a long-term supply agreement, or the Supply Agreement, pursuant to which Oxford USA agreed to sell, and Quest agreed to purchase, T-SPOT.

test kits and related accessories from Oxford USA. The Supply Agreement will last for a period of

seven

years after the effective date unless terminated earlier by a party to the Supply Agreement, as provided for in the Supply Agreement. In addition, the parties entered into a strategic collaboration agreement to drive continued growth of T-SPOT.

testing in the U.S. that will remain in effect until the expiration or termination of the Supply Agreement.

In conjunction with the Purchase Agreement, Quest agreed to purchase kits and accessories from the Company for an initial period of

seven

years after the effective date of the Purchase Agreement unless a party earlier terminates, as provided for in the Purchase Agreement. On

June 12, 2019,

the Company entered into an Amendment of Agreement between Quest and Oxford Immunotec, USA, Inc., or the Amendment. The Amendment revised growth targets, pricing and various other terms, which are confidential.

During the

three

and

nine

months ended

September 30, 2018

, Oxford Limited sold kits to its discontinued operations, Oxford LLC, for use in the lab services business of

$1.8

million and

$7.3

million, respectively, that were eliminated in the Company’s consolidated financial results.

The following table presents the results of discontinued operations, which solely relate to

2018

(in thousands)	Three months ended September 30, 2018		Nine months ended September 30, 2018
Major classes of line items constituting income (loss) from discontinued operations before income taxes:
Service revenue	$	18,446	$	46,265
Cost of service revenue		9,889		30,359
Gross profit		8,557		15,906
Research and development		2,077		4,989
Sales and marketing		2,093		6,582
General and administrative		1,613		4,439
Income (loss) from discontinued operations before income taxes		2,774		(104	)
Income tax expense		—		—
Income (loss) from discontinued operations	$	2,774	$	(104	)

During the

third

quarter of

2019,

the Company recorded a charge in discontinued operations of

$469,000

that resulted from adjustments on the remaining proceeds due from the Transaction.