If I'm not mistaken the business was iPhone apps. Honestly it sounds to me like sales dropping below B/E was just a good excuse to break up the startup, clearly the breakdown of the founders' relationship would have forced a change sooner or later. It seems both founders wanted out and if that's the case then why waste time when you're cash flow negative, better to cut your losses early so you still get something of value out of the startup.
Of course I could be completely mistaken and I think we'd all appreciate a comment by Max to clarify, if he's up for it.