Quarterly report pursuant to Section 13 or 15(d)

Discontinued Operations, Assets Held for Sale, Impairment Charges

v3.2.0.727
Discontinued Operations, Assets Held for Sale, Impairment Charges
 6 Months Ended
Jun. 30, 2015
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued Operations, Assets Held for Sale, Impairment Charges
Discontinued Operations, Assets Held for Sale, Impairment Charges
As part of the Company's strategic objective to focus its resources on the development of SCY-078, the Company's board of directors directed the Company's management to explore the divestiture of the Company's Services Business. The Company engaged a third-party firm to assist in the evaluation of several divestiture options (i.e., a third-party sale, spin-off, management buy-out or shut-down process). On May 4, 2015, the Company's board of directors completed its evaluation of the various divestiture options and directed management to pursue a plan to sell the Service Business to Accuratus, representing a strategic shift in the Company's operations. The Company met the relevant criteria for reporting the service business as held for sale and in discontinued operations in the accompanying unaudited interim financial statements as of and for the three and six month periods ended June 30, 2015, and 2014, pursuant to FASB Topic 205-20, Presentation of Financial Statements--Discontinued Operations, and FASB Topic 360, Property, Plant, and Equipment. The Company assessed the Services Business net asset group for impairment pursuant to FASB Topic 360 and recorded a $1,350 impairment charge on classification of property and equipment assets as held for sale in the quarterly period ended June 30, 2015. The fair value measurement used to determine the impairment charge has been described in Note 12.
On July 21, 2015, the Company completed the sale of the Services Business to Accuratus pursuant to the Agreement, with an effective date of July 17, 2015 (see Note 15).
As a condition to the execution of the Agreement, Accuratus assumed the Company’s post-closing obligation under its facility lease in Durham, North Carolina (see Note 5). The Company and its retained employees will continue to operate from the Durham facility immediately after the closing for a period of up to six months pursuant to a facility license agreement. In addition, under a Transition Services Agreement, Accuratus will provide accounting, IT, payroll, personnel and human resources support, and equity compensation plan administration support services to the Company at rates ranging from one hundred to two hundred dollars per hour for a period of time not to extend beyond December 31, 2015.
The Company and Accuratus also entered into a Commitment to Services Agreement (the "Services Agreement") pursuant to which Accuratus will provide the Company with certain contract research and development services for 18 months (the "Initial Term") following the closing of the sale of the Services Business for a minimum purchase obligation of at least $3,300 due from the Company over the Initial Term of the Services Agreement. The purpose of the Services Agreement is to replace services that were previously provided internally by employees of the Company prior to the sale of the Services Business. The employees performing these services became employees of Accuratus in connection with this sale transaction.
The following table presents a reconciliation of the carrying amounts of assets and liabilities of the Services Business to assets held for sale, net in the balance sheets:
 
 
June 30, 2015
 
December 31, 2014
Carrying amounts of assets included as part of discontinued operations:
 
 
 
 
Accounts and unbilled receivables, net
 
$
1,715

 
$
1,501

Prepaid expenses and other current assets
 
761

 
289

Property and equipment, net
 
4,901

 
4,835

Other assets
 
59

 
76

Disposal loss recognized on classification as held for sale
 
(1,350
)
 
—

Assets held for sale, net
 
$
6,086

 
$
6,701

 
 
 
 
 
Carrying amounts of liabilities included as part of discontinued operations:
 
 
 
 
Accounts payable and accrued expenses
 
$
546

 
$
681

Deferred revenue
 
381

 
445

Deferred rent
 
1,172

 
1,294

Liabilities related to assets held for sale
 
$
2,099

 
$
2,420


The following table presents revenue, (expenses), gains, and (losses) attributable to discontinued operations:
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2015
 
2014
 
2015
 
2014
Major line items constituting income (loss) of discontinued operations:
 
 
 
 
 
 
 
 
Total revenue
 
$
3,617

 
$
4,577

 
$
6,849

 
$
9,217

Cost of revenue
 
(3,599
)
 
(4,180
)
 
(6,830
)
 
(8,140
)
Research and development
 
(422
)
 
—

 
(853
)
 
—

Selling, general and administrative
 
(198
)
 
—

 
(221
)
 
—

Gain on insurance recovery
 
—

 
165

 
—

 
165

Severance and exit costs (Note 13)
 
(1,053
)
 
—

 
(1,053
)
 
—

Impairment charge from classification of assets as held for sale
 
(1,350
)
 
—

 
(1,350
)
 
—

Income (loss) from discontinued operations
 
$
(3,005
)
 
$
562

 
$
(3,458
)
 
$
1,242


The following table presents depreciation, capital expenditures, and significant operating and investing non-cash items related to the discontinued operations:
 
Six months ended June 30,
 
2015
 
2014
Depreciation expense
$
391

 
$
562

Purchases of property and equipment
(527
)
 
(323
)
Stock-based compensation
101

 
50

Changes in deferred rent
(122
)
 
(56
)
Equipment purchases in accounts payable and accrued expenses
20

 
6