Discontinued Operations

12 Months Ended

Dec. 31, 2013

Discontinued Operations [Abstract]

Discontinued Operations [Text Block]

Discontinued Operations

Regenerative Medicine - China segment

In 2009, the Company operated its Regenerative Medicine-China business in the People’s Republic of China (“China” or “PRC”) through its subsidiary, a wholly foreign owned entity (“WFOE”) and entered into contractual arrangements with certain variable interest entities (“VIEs”). Foreign companies have commonly used VIE structures to operate in the PRC, and while such structures are not uncommon, recently they have drawn greater scrutiny from the local Chinese business community in the PRC who have urged the PRC State Council to clamp down on these structures. In addition, in December 2011, China’s Ministry of Health announced its intention to more tightly regulate stem cell clinical trials and stem cell therapeutic treatments in the PRC, which has created uncertainty regarding the ultimate regulatory environment in the PRC. Accordingly, the Company took steps to restrict, and ultimately eliminate, its regenerative medicine business in the PRC. As a result of these steps, the Company has discontinued its operations in its Regenerative Medicine-China business. The Company has determined that any liability arising from the activities of the WFOE and the VIEs will likely be limited to the net assets currently held by each entity. As of March 31, 2012, the Company recognized the following loss on exit of the Regenerative Medicine-China business (in thousands):

Cash	$	195.1
Prepaid expenses and other current assets	14.9
Property, plant and equipment, net	1,023.7
Other Assets	330.5
Accounts payable	(177.1		)
Accrued liabilities	(79.2		)
Accumulated comprehensive income	(169.9		)
Loss on exit of segment	$	1,138.0

The operations and cash flows of the Regenerative Medicine - China business were eliminated from ongoing operations as a result of our exit decision, and the Company will not have continuing involvement in this business going forward. The operating results of the Regenerative Medicine – China business for the year ended December 31, 2012, which are included in discontinued operations, were as follows (in thousands):

	Year Ended December 31,
	2012
Revenue	$	52.3
Cost of revenues	(30.6		)
Research and development	(103.3		)
Selling, general, and administrative	(497.3		)
Other income (expense)	(6.8		)
Loss on exit of segment	(1,138.0		)
Loss from discontinued operations	$	(1,723.7	)

Pharmaceutical Manufacturing - China segment

On November 13, 2012, the Company completed the divestiture (the “Erye Sale”) of our 51% interest (the “Erye Interest”) in Suzhou Erye Pharmaceuticals Company Ltd., a Sino-foreign equity joint venture with limited liability organized under the laws of the PRC primarily engaged in the manufacture of generic antibiotics (“Erye”), to Suzhou Erye Economy & Trading Co., Ltd., a limited liability company organized under the laws of the PRC (“EET”), and Highacheive Holdings Limited, a limited liability company organized under the laws of the British Virgin Islands (“Highacheive” and together with EET, each a “Purchaser” and collectively the “Purchasers”). The Erye Sale was consummated pursuant to the terms and conditions of the Equity Purchase Agreement, dated as of June 18, 2012 (as amended, the “Equity Purchase Agreement”), by and among our Company, China Biopharmaceuticals Holdings, Inc., a Delaware corporation and a wholly-owned subsidiary of NeoStem (“CBH”), EET, Highacheive, Fullbright Finance Limited, a limited liability company organized under the laws of the British Virgin Islands (“Fullbright”), and Erye. Pursuant to the Equity Purchase Agreement, the aggregate purchase price paid to the Company by the Purchasers for the Erye Interest consisted of (i) approximately $12.3 million in cash, (ii) the return to the Company of 104,000 shares of NeoStem common stock and (iii) the cancellation of 117,000 options and 64,000 warrants to purchase our common stock. The fair value of the shares was based on the Company's closing price on the date of sale, and was recorded as Treasury Stock in our balance sheet. The fair values of the canceled options and warrants were based on the Black-Scholes values on the date of sale, and were recorded against Additional Paid in Capital in the accompanying balance sheet.  The Company recognized the following loss on the date of sale of its 51% interest in Erye (in thousands):

Fair value of consideration received	$	13,397.9
Carrying value of segment non-controlling interest	6,015.0
Carrying value of segment accumulated comprehensive income	4,387.4
	$	23,800.3
Less carrying amount of assets and liabilities sold:
Cash	$	8,457.5
Restricted Cash	2,918.1
Accounts Receivable	6,130.2
Inventories	15,077.7
Prepaid expenses and other current assets	957.8
Property, plant and equipment, net	38,102.0
Other assets	5,946.3
Accounts payable	(9,604.8		)
Accrued liabilities	(2,008.8		)
Bank loans	(15,133.5		)
Notes payable	(6,599.3		)
Other liabilities	(9,166.8		)
Amount due related party	(7,859.7		)
	$	27,216.7
Loss on exit of segment	$	(3,416.4	)

The operations and cash flows of the Pharmaceutical Manufacturing - China business were eliminated from ongoing operations with the sale of the Company's Erye Interest. The operating results of the Pharmaceutical Manufacturing - China business for the year ended December 31, 2012, which are included in discontinued operations, were as follows (in thousands):

	Year Ended December 31,
	2012
Revenue	$	61,703.1
Cost of revenues	(40,245.2		)
Research and development	(1,836.4		)
Selling, general, and administrative	(10,740.0		)
Other expense	(1,045.2		)
Provision for income taxes	(1,794.1		)
Asset impairments	(31,170.1		)
Loss on sale of segment	(3,416.4		)
Loss from discontinued operations	$	(28,544.3	)