Note 3 - Discontinued Operations

6 Months Ended

Jun. 30, 2025

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 focus on its OA Pain Management and Regenerative Solutions businesses. This strategic decision resulted in the sale of Arthrosurface on October 31, 2024 and the sale of Parcus Medical on March 7, 2025.

Arthrosurface

On October 31, 2024 (the “Closing Date”), the Company completed the sale of all of the outstanding equity interests of Arthrosurface, a Delaware corporation and former wholly-owned subsidiary of the Company, which held the Company’s Arthrosurface business, to Phoenix Brio, Incorporated, a Delaware corporation (the “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 determined the fair value of 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 the time of divestiture. The carrying value of the Notes Receivable was $6.0 million and $5.9 million, as of June 30, 2025 and December 31, 2024, respectively.

Parcus Medical

On March 7, 2025, the Company completed the sale of all outstanding equity interests of 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 paid $4.5 million in cash. Pursuant to the terms of the agreement, the aggregate consideration is subject to customary post-closing adjustments.

The components of loss from discontinued operations for the three and six months ended June 30, 2025 and 2024, consist of the following (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2025			2024			2025			2024
Revenue	$	-		$	11,197		$	2,710		$	22,699
Costs and expenses		(14	)		9,225			3,611			23,285
Income (loss) from discontinued operations before income taxes		14			1,972			(901	)		(586	)
Benefit from income taxes		(663	)		(481	)		(663	)		(481	)
Net income (loss) from discontinued operations	$	677		$	2,453		$	(238	)	$	(105	)

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

	As of December 31,
	2024
Assets
Cash and cash equivalents	$	1,531
Accounts receivable, net		3,285
Inventories		221
Prepaid expenses and other current assets		89
Property and equipment, net		1,134
Right-of-use assets		892
Total assets held-for-sale	$	7,152
Liabilities
Accounts payable	$	797
Accrued expenses and other current liabilities		3,324
Lease liabilities		660
Total liabilities held-for-sale	$	4,781

There are no assets and liabilities reported as held-for-sale as of June 30, 2025, as the Company completed the divestitures of the Arthrosurface and Parcus Medical asset groups prior to June 30, 2025.

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

	Six Months Ended June 30,
	2025		2024
Depreciation	$	149	$	1,006
Amortization of acquisition related intangible assets	$	-	$	339
Non-cash operating lease cost	$	55	$	45
Stock-based compensation expense	$	132	$	692
Provision for inventory	$	-	$	1,534
Purchases of property and equipment	$	19	$	466