Sale Of Discontinued Operations

12 Months Ended

Oct. 31, 2012

Sale Of Discontinued Operations [Abstract]

Sale Of Discontinued Operations

(3)Sale of Discontinued Operations

On August 28, 2012, the Company entered into several agreements with Life Time Fitness, Inc. and affiliated companies (“Life Time Fitness”) under which the Company sold and licensed to Life Time Fitness, the assets of the Company’s New Leaf business, excluding contracts and other assets related to the Company’s non-Life Time customers as part of the Company’s renewed focus on its core business and its strategy of bringing innovative cardiorespiratory technology solutions to the market and continuing its best-in-class customer support and service.

Specifically, the Company sold to Life Time Fitness New Leaf-related software and support materials, New Leaf product inventory, and New Leaf trademarks, service marks, and websites.  The Company also licensed to Life Time Fitness patents and other intellectual property for use in the general wellness and health and fitness field.  The Company retained all rights to this intellectual property in the medical field.  Finally, the Company and Life Time Fitness entered into a Transition Services and Supply Agreement that runs through June 30, 2014 under which the parties will provide services to transition the New Leaf business to Life Time Fitness.

Under the transaction, Life Time Fitness paid the Company $1.0 million at closing, and agreed to pay the Company an additional $235,000 over the next 18 months.  In connection with its sale of the New Leaf business, the Company recognized a gain of $816,000, net of transaction costs, in the year ended October 31, 2012, calculated as follows:

(In thousands)	Amount
Sale proceeds	$	1,235
Less:
Inventories		52
Other non-current assets		32
Transaction costs		335
		419
Gain on sale	$	816

Life Time Fitness has been the largest New Leaf customer over the past five years, but total Company sales to Life Time Fitness never exceeded five percent of total Company revenues in any fiscal year.  The Company continues to provide its existing New Leaf customers other than Life Time Fitness with products and services under ongoing contractual obligations through June 30, 2014.

The Company expects to recognize revenue and expense associated with its on-going obligations to Life Time Fitness under the Transition Services and Supply Agreement, and expects to incur revenue and expenses from the products and services sold to non-Life Time Fitness customers through June 30, 2014.  The Company believes the expected cash flows from these activities are not sufficient to preclude the Company from using discontinued operations treatment for the event.

As  a result of its August 28, 2012 sale of the New Leaf assets, the Company has reclassified its New Leaf assets as “assets of discontinued operations” as of October 31, 2011, has eliminated all revenues and expenses associated with its New Leaf business from its statements of comprehensive loss, and has reported the net income (loss) from its New Leaf activities as “discontinued operations.”  Revenues included in discontinued operations totaled