In connection with the notice of termination from Philips Healthcare (“Philips”) described below in Item 8.01, the management of Digirad Corporation (“Digirad” or the “Company”) is conducting an impairment review under applicable accounting rules to determine whether, and to what extent, this change creates any impairment. We currently cannot make a reasonable estimate of any potential impairment under this event.
On September 28, 2017, DMS Health Technologies (“DMS”), a wholly-owned indirect subsidiary of the Company, received a notice of termination from Philips notifying DMS that the Consolidated Agreement, dated April 1, 2014, as amended on June 9, 2015, between Philips and DMS (as amended, the “Consolidated Agreement”) and the Remote Inside Sales Services Agreement dated March 23, 2016 (the “Remote Services Agreement”), will be terminated upon the normal close of business on December 31, 2017 ("Termination Date").
The Company’s relationship with Philips enabled it to provide contract sales services for larger imaging systems, patient monitoring systems, and other select Philips products, as well as installation and certain post warranty service contracts within a defined customer class and region in the upper Midwest region of the United States. Subsequent to the Termination Date, the Company will no longer provide contract sales services, or installation of imaging systems on behalf of Philips. Further, for any warranty active and outstanding prior to the Termination Date, the Company will continue to provide warranty services through the term of the warranty period but will not provide warranty services for any newly initiated warranty contracts subsequent to the Termination Date. This termination does not affect any post warranty service contracts currently serviced by the Company.
After the Termination Date, the Company will not be considered a Philips Original Equipment Manufacturer service provider pursuant to the Consolidated Agreement and Remote Services Agreement. As such, the Company will be free to sell and service contracts for any manufacturing entity, customer type, or geographical location, all of which were limited under the Consolidated Agreement and Remote Services Agreement.