DISCONTINUED OPERATIONS

Overview

On March 1, 2019, we completed the Commercial Product Portfolio Transaction -- see Note 1(b) (as we first announced on January 17, 2019 on Form 8-K, upon the signing of a definitive asset purchase agreement).

In accordance with applicable GAAP (ASC 205-20, Presentation of Financial Statements), the revenue-deriving activities and allocable expenses of our sold commercial operation, as well as the assets and liabilities connected to the Commercial Product Portfolio, are separately classified as “discontinued” for all periods presented within the accompanying Condensed Consolidated Statement of Operations and Condensed Consolidated Balance Sheet.

Condensed Consolidated Statement of Operations

The following table presents the various elements of “income from discontinued operations, net of income taxes” as reported in the accompanying Condensed Consolidated Statement of Operations for the three months ended March 31, 2019 and 2018:



	Three Months Ended March 31,
	2019			2018
Product sales, net	$	14,183		$	28,111
License fees and service revenue	290			2,384
Total revenues	$	14,473		$	30,495
Operating costs and expenses:
Cost of sales (excluding amortization of intangible assets)	3,168			6,813
Selling, general and administrative	5,951			7,488
Research and development	2,536			4,530
Amortization of intangible assets	1,248			6,947
Restructuring - employee severance (Note 12)	6,297			—
Total operating costs and expenses	$	19,200		$	25,778
Loss from discontinued operations	$	(4,727	)	$	4,717
Other income (expense):
Change in fair value of contingent consideration	(1,478		)	(291		)
Gain on sale of Commercial Product Portfolio*	33,644			—
Total other income (expense)	$	32,166		$	(291	)
Income from discontinued operations before income taxes	27,439			4,426
Provision for income taxes from discontinued operations**	(6,774		)	(1,070		)
Income from discontinued operations, net of income taxes	$	20,665		$	3,356

*This pre-tax gain on sale represents the $158.8 million proceeds from the Commercial Product Portfolio Transaction less our $121.2 book value of transferred net assets (inclusive of assumed liabilities) to Acrotech on the March 1, 2019 closing date, less legal and banker fees for the three months ended March 31, 2019 aggregating $3.9 million.

**This income tax provision represents an allocation of taxes as required under intraperiod allocation guidance (see Note 10). Due to our aggregate net operating loss-carryforwards, no federal or state income tax payments are expected to be made relating to our current year activity, inclusive of our gain on sale of the Commercial Product Portfolio.

Condensed Consolidated Balance Sheets

Accounts receivable derived from our product sales on and prior to February 28, 2019 was not transferred to Acrotech as part of Commercial Product Portfolio Transaction, nor were our GTN liabilities and trade accounts payable assumed by Acrotech that were associated with our commercial activities on and prior to February 28, 2019 (see Note 3(g)). Accordingly, these specific assets and liabilities remain presented within “accounts receivable, net of allowance for doubtful accounts” and “accounts payable and other accrued liabilities” on the accompanying Condensed Consolidated Balance Sheets.

The following table presents a summary of our “discontinued operations, assets” and “discontinued operations, liabilities” as of December 31, 2018 within the accompanying Condensed Consolidated Balance Sheets (representing those assets and liabilities transferred to Acrotech as part of the Commercial Product Portfolio Transaction):



	December 31, 2018
Inventories	$	3,550
Prepaid expenses and other assets	2,005
Discontinued operations, current assets	$	5,555

Intangible assets, net of accumulated amortization	111,594
Goodwill	18,061
Other assets	2,970
Discontinued operations, non-current assets	$	132,625

FOLOTYN development liability	2,311
Discontinued operations, current liabilities	$	2,311

FOLOTYN development liability, less current portion	9,686
Acquisition-related contingent obligations	4,345
Discontinued operations, non-current liabilities	$	14,031

Condensed Consolidated Statement of Cash Flows

The following table presents significant non-cash items for our discontinued operations that are included as adjustments in the accompanying Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and 2018:



	Three Months Ended March 31,
	2019		2018
Depreciation and amortization	$	1,263	$	6,969
Stock-based compensation	$	3,405	$	1,593
Change in fair value of contingent consideration	$	1,478	$	291