Note 3 – Discontinued Operations 

On December 30, 2024, the Company and The Female Health Company Limited entered into a Stock and Asset Purchase Agreement (the “Purchase Agreement”) with Clear Future, Inc. (the “Purchaser”). Pursuant to, and subject to the terms and conditions of, the Purchase Agreement, the Purchaser purchased substantially all of the assets (the “FC2 Business Sale”) related to the Company's FC2 female condom business ® (internal condom), including the stock of The Female Health Company (UK) plc and the Malaysia subsidiary. The Purchaser assumed certain liabilities relating to the FC2 business that are specified in the Purchase Agreement. The transaction closed on December 30, 2024. 

The purchase price for the FC2 Business Sale was $18.0 million in cash, subject to adjustment as set forth in the Purchase Agreement. The adjustments to the purchase price in the Purchase Agreement include a customary working capital adjustment in 90 days from closing based on the amount by which certain working capital items at closing are greater or less than a target set forth in the Purchase Agreement. Net proceeds from the FC2 Business Sale are expected to be $16.4 million, which is the $18.0 million purchase price per the Purchase Agreement, net of costs incurred of $1.4 million, estimated purchase price adjustments of $0.1 million, and amounts allocated to the related transition services agreement of $0.2 million but excluding the change of control payment pursuant to the Residual Royalty Agreement of $4.2 million (see Note 8 for additional information). These net proceeds are subject to adjustment as set forth in the Purchase Agreement. The loss on sale of the FC2 business is $4.2 million, which is the difference between estimated net proceeds of $16.4 million and the total carrying value of the FC2 business of $20.6 million. The carrying value of the FC2 business at December 30, 2024 primarily included deferred income tax assets of $12.3 million, accounts receivable of $4.6 million, and inventory of $3.4 million, partially offset by accrued expenses and other current liabilities of $1.5 million.

In connection with the FC2 Business Sale, the Company and the Purchaser entered into a transition services agreement (the “TSA”). Under the terms of the TSA, the Company will provide to the Purchaser, on a transitional basis, certain services or functions, including information technology services, facilitating the transition of assignable and non-assignable contracts, and other corporate and administrative matters. Generally, these services will be provided within six months, with certain services related to the transition of IT and technology systems extending up to 12 months and certain services related to the transition of contracts extending up to 32 months. The transition services will be provided at no fees but the TSA provides for the reimbursement of certain out-of-pocket costs. The Company allocated $0.2 million of the purchase price per the Purchase Agreement to the transition services per the TSA, based on an estimate of the fair value of the services to be provided, to be recognized by the Company over a six month period. The Company estimates that any transition services extending beyond six months have a de minimis value. 

Pursuant to the terms of the Purchase Agreement, the Company, the Purchaser, and an escrow agent entered into an Escrow Agreement at closing, pursuant to which the Purchaser deposited $0.4 million of the aggregate purchase price of the FC2 Business Sale into an escrow account established with the escrow agent for the following purposes: (1) $0.3 million, from which any adjustment amount requiring payment from the Company to the Purchaser may be recovered upon final determination of such adjustments pursuant to the Purchase Agreement and (2) $0.1 million for certain indemnity obligations, if any, that arise under the Purchase Agreement, to be held for 18 months from the closing date to the extent not subject to a pending indemnity claim. The amounts held in escrow of $0.4 million as of December 31, 2024 are classified as restricted cash and included within cash, cash equivalents, and restricted cash on the accompanying condensed consolidated balance sheet.

The FC2 Business Sale represented a strategic shift, which had a major effect on our operations and financial results. We have classified all direct revenues, costs and expenses related to the FC2 business within loss from discontinued operations, net of tax, in the condensed consolidated statements of operations for all periods presented. We have not allocated any amounts for shared general and administrative operating support expense to discontinued operations. Additionally, the related assets and liabilities have been reported as assets and liabilities of discontinued operations in our condensed consolidated balance sheet as of September 30, 2024. The assets and liabilities sold as part of the FC2 Business Sale were written off upon the closing of the FC2 Business Sale, and therefore there are no assets and liabilities of discontinued operations in our condensed consolidated balance sheet as of December 31, 2024. 

The following table presents results of discontinued operations for the three months ended December 31, 2024 and 2023:

The following table presents the carrying amounts of assets and liabilities of discontinued operations as of September 30, 2024:

The cash flows related to discontinued operations have not been segregated and are included in the consolidated statements of cash flows. Total operating and investing cash flows, which includes net proceeds from the sale of FC2, from discontinued operations for the three months ended December 31, 2024 and 2023 are comprised of the following: