Note 7. Discontinued Operations

On September 16, 2011, the Company sold its entire interest in its AutoData Systems Division to Auto Data Inc. (ADI). The purchase price will be paid as an earn-out based on three percent of the software, hardware, and maintenance contracts that ADI sells over the next five years (four percent while ADI continues to occupy our building). As of June 30, 2012, ADI owed the Company approximately $10,000 under the earn-out. The amount is included in other current assets on the balance sheet.

 

The division, a separate operating segment as described in Note 8, designed and marketed desktop software based systems that read hand printed characters, checkmarks and bar code information from scanned or faxed forms, in addition to collecting and reporting data from web forms.

 

The financial results of the discontinued operation are as follows:

 

		For the three months ended June 30, 2011				For the six months ended June 30, 2011
Net sales		$	124,000			$	194,000
Expenses			(123,000	)			(234,000	)
Net income (loss) before income taxes			1,000				(40,000	)
Income tax benefit			0				7,000
Net income (loss) of discontinued operations		$	1,000			$	(33,000	)

 

 

The effect of the discontinued operation on the financial position of the Company, as of December 31, 2011, is as follows:

 

Property and equipment		$	2,000
Inventories			17,000
Accounts receivable			35,000
Net assets disposed		$	54,000
Accrued expenses		$	10,000
Deferred revenue			58,000
Net liabilities disposed		$	68,000
Net cash paid  to ADI		$	14,000