Note 3 - Discontinued Operations

12 Months Ended

Dec. 31, 2024

Notes to Financial Statements

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

3. Discontinued Operations

In October 2024, the Company announced a strategic shift to concentrate on OA pain management and regenerative solutions. This strategic decision involved the sale of Arthrosurface Incorporated and the planned divestiture of Parcus Medical, LLC, both of which were acquired in early 2020.

Arthrosurface

On October 31, 2024 (the “Closing Date”), the Company completed the sale of all of the outstanding equity interests of Arthrosurface Incorporated, a Delaware corporation and former wholly-owned subsidiary of the Company (“Arthrosurface”), which held the Company’s Arthrosurface business, to Phoenix Brio, Incorporated, a Delaware corporation (“Buyer”), pursuant to the terms and conditions of a Share Purchase Agreement, dated as of the Closing Date (the “Purchase Agreement”), by and among the Company, Arthrosurface and Buyer (the “Arthrosurface Transaction”).

As consideration for the Arthrosurface Transaction, at the closing, the Buyer delivered to the Company a ten-year non-interest-bearing promissory note in the principal amount of $7.0 million. Under the terms of the Purchase Agreement, the Company is also eligible to receive: (i) for each calendar quarter, an amount equal to a percentage of the net sales (the “Revenue Payments”) for the sale of certain commercial and pipeline products during the period commencing on the Closing Date and ending on the earlier of the fifth (5th) anniversary of the Closing Date or the date on which the Buy-Out Payment (as defined below) is paid to the Company; and (ii) a percentage of the gross proceeds with respect to the sale of certain commercial and pipeline products in a bona-fide arm’s length transaction with a third party that is not an affiliate of Buyer or the Company occurring within the first twenty four (24) months following the Closing Date. The Buyer can also elect to make a payment in an amount equal to the greater of (A) $14.0 million or (B) ten (10) times the Revenue Payments ((A) and (B) together, the “Buy-Out Payment”) paid to the Company during the last full calendar year prior to the consummation of a change of control transaction or Buyer’s written notice to the Company that it is electing to make the Buy-Out Payment. Pursuant to the Purchase Agreement, the aggregate consideration is subject to customary post-closing adjustments. The Company valued the consideration with the sale of the Arthrosurface asset group to be $5.9 million and recorded as Notes Receivable on its balance sheet at December 31, 2024.

As a result of the Arthrosurface Transaction, the Company tested the assets associated with the Arthrosurface asset group to determine if the carrying value of the assets at September 30, 2024 were fully recoverable. Given that the proceeds from the sale of the Arthrosurface assets group was less than the carrying value of its net assets, the Company recorded asset impairment charges totaling $27.4 million during the three-month period ended September 30, 2024 related to a write-down of its accounts receivable, inventories, property and equipment and intangible assets related to the Arthrosurface asset group.

Parcus Medical

On March 7, 2025, the Company completed the sale of all of the outstanding equity interests of Parcus Medical, LLC, (“Parcus Medical”) to Medacta Americas Manufacturing, Inc. (“Medacta”), pursuant to the terms and conditions of a Membership Interest Purchase Agreement (the “Parcus Transaction”). As consideration for the Parcus Transaction, at closing, Medacta delivered to the Company a payment of $4.5 million in cash. Pursuant to the terms of the agreement, the aggregate consideration is subject to customary post-closing adjustments.

As a result of the Parcus Transaction, the Company tested the assets associated with the Parcus Medical asset group to determine if the carrying value of the assets at December 31, 2024 were fully recoverable. Given that the proceeds from the sale of the Parcus Medical assets group was less than the carrying value of its net assets, the Company recorded asset impairment charges totaling $20.1 million during the three-month period ended December 31, 2024 related to a write-down of its inventories, property and equipment and intangible assets related to the Parcus Medical asset group.

The results of operations for Arthrosurface and Parcus are reported in income from discontinued operations within the consolidated statements of operations for the years ended December 31, 2024, 2023 and 2022, and the related assets and liabilities are presented within assets and liabilities held-for-sale on the consolidated balance sheets as of December 31, 2024 and 2023.

	Years Ended December 31,
	2024			2023			2022
Revenue	$	39,495		$	45,870		$	42,409
Costs and expenses		87,469			134,353			65,479
Loss from discontinued operations before income taxes		(47,974	)		(88,483	)		(23,070	)
Benefit from income taxes		(417	)		(9,255	)		(6,011	)
Net loss from discontinued operations	$	(47,557	)	$	(79,228	)	$	(17,059	)

The assets and liabilities reported as held-for-sale consist of the following (in thousands):

	As of December 31,
	2024		2023
Assets
Cash and cash equivalents	$	1,531	$	4,127
Accounts receivable, net		3,285		9,601
Inventories		221		21,958
Prepaid expenses and other current assets		89		619
Property and equipment, net		1,134		8,753
Right-of-use assets		892		1,213
Other long-term assets		-		12,947
Intangible assets, net		-		2,050
Total assets held-for-sale	$	7,152	$	61,268
Liabilities
Accounts payable	$	797	$	3,665
Accrued expenses and other current liabilities		3,324		7,134
Lease liabilities		660		989
Total liabilities held-for-sale	$	4,781	$	11,788

Selected financial information related to significant operating and investing cash flow items from discontinued operations are as follows (in thousands):

	Years Ended December 31,
	2024		2023		2022
Depreciation	$	1,874	$	1,563	$	1,853
Amortization of acquisition related intangible assets	$	559	$	7,148	$	7,147
Non-cash operating lease cost	$	322	$	398	$	375
Loss on impairment of long-lived assets	$	2,142	$	62,190	$	-
Stock-based compensation expense	$	972	$	1,706	$	704
Provision for inventory	$	42,013	$	1,262	$	435
Purchases of property and equipment	$	467	$	3,310	$	5,079