16. Discontinued operations - 1816191 Ontario Limited (1816191)

12 Months Ended

Dec. 31, 2014

Discontinued Operations and Disposal Groups [Abstract]

16. Discontinued operations - 1816191 Ontario Limited (1816191)

16. Discontinued operations - 1816191 Ontario Limited (“1816191”)

In September 2014, the Board approved a plan to sell the Endoscopy business and the Company entered into a definitive agreement to sell the business on October 6, 2014 to Jaintheelal, a Company owned by Dr. Jay Parekh, the Company’s Medical director in charge of Endoscopy for the sum of $CAN1,250,000. The sale price of $CAN1,250,000.00 includes the assumption by Jaintheelal of debt in the same amount as the sale price, which debt is owed by 1816191 to the Company. At closing, Jaintheelal will be permitted to offset the assumed debt by up to US$650,000 through the cancellation of three million shares of the Company’s common stock (valued at approximately $CAN250,000) and the cancellation of related party debt owed by 1816191 to Jaintheelal and/or Jay Parekh (valued at approximately $CAN400,000). The remainder of the assumed debt will be repaid by 1816191 to the Company pursuant to a six-month, interest-bearing note.

Prior to the sale, at September 30, 2014, the Company had determined that a sale of the Endoscopy business was more-likely-than-not to occur over the next twelve months. Accordingly, the Company initiated an interim goodwill impairment analysis of the Endoscopy reporting units' goodwill balances as of September 30, 2014. As a result of this analysis, the Company determined that the net book value of our Endoscopy reporting unit exceeded its estimated fair value. The Company prepared a preliminary analysis to estimate the amount of an impairment charge as of September 30, 2014, and determined that it was establishable that an impairment, if any was probable and reasonably estimable. The preliminary fair value assessments were performed by the Company taking into consideration a number of factors including the preliminary results of a hypothetical purchase price allocation. As a result of the preliminary analysis, the Company determined that no impairment charge was necessary.

Until it was sold, the assets of this business segment, previously known as the Endoscopy segment, and related liabilities were classified as held for sale in the Consolidated Balance Sheet. The operating results of this business segment are reported as Discontinued operations, net of tax in the Consolidated Statements of Operations for all periods presented. Financial results are only related to disposed of or to-be-disposed of businesses.

Jaintheelal is owned by Dr. Jay Parekh, the Company’s former Medical director in charge of Endoscopy. The sale price of C$1,282,001.87 included the assumption by Jaintheelal of debt in the same amount as the sale price, which debt is owed by 1816191 to the Company in the amount of C$895,495.60 and to Jaintheelal of C$386,542.27. At closing, Jaintheelal offset the assumed debt to the registrant of C$895,495.60 by US$277,500.00 through the cancellation of two million four hundred and eight thousand two hundred and sixty eight shares of the Company’s common stock, for a net amount due to the Company of US$493,807. The remainder of the assumed debt owed by 1816191 to the Company is due June 30, 2015 and is in the form of an interest-bearing note. After the sale of 1816191, the Company’s principal operations are in the addiction treatment business.

The sale, to a related party, was recorded as a $1,104,304 addition to APIC, and a reduction of $90,304 to Comprehensive (Loss) Income.