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ANP Restructuring | 9 Months Ended
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Sep. 30, 2021
ANP Restructuring |
ANP Restructuring | Note 3. ANP Restructuring ​ In July 2018, the Company’s Chinese subsidiary, ANP, completed a private placement of its common equity interest to accredited investors and received approximately $56.3 million of cash proceeds. The Company retained approximately 58% of the equity interest in ANP following the private placement and continues to consolidate the financial results of ANP with the Company’s results of operations. ​ In May 2021, the Company’s Board of Directors approved a plan for the restructuring of the equity ownership of ANP, whereby the Company purchased an additional ownership interest in ANP from certain equity holders of ANP, or the Sellers, and split-off certain subsidiaries of ANP. Under the terms of the restructuring plan, the Company entered into a Share Purchase Agreement, or SPA, with certain of the Sellers to acquire an approximately 18% additional ownership interest in ANP for approximately $29.4 million in cash. The Company also entered into a Share Repurchase Agreement, or SRA, with certain of the Sellers, whereby the Company contributed 80% of its ownership interest in Hanxin and Hanxin’s existing subsidiaries, Baixin and Letop, to the Sellers in exchange for an approximately 10% additional ownership interest in ANP. Following completion of these transactions, the Company ownership increased to approximately 85% of the equity interest in ANP. ​ In August 2021, the Company entered into a second Share Purchase Agreement, or Second SPA, with the sole remaining equity holder of ANP to acquire the remaining approximately 15% of ownership interest in ANP. The total cash payment by the Company for this transaction was approximately $22.5 million. Following completion of the transaction, the Company’s ownership of ANP increased to 100%. ​ Certain of the Sellers are the Company’s executive officers, directors and other related parties. The Sellers who participated in the SPA included executives of the Company William J. Peters, Rong Zhou, and Jacob Liawatidewi; directors of the Company Howard Lee and Richard Koo; relatives of Dr. Jack Zhang and Dr. Mary Luo, Henry Zhang, Qingqing Chen, Chongqing Zhang, Lu Zhang, and James Luo, or entities related to such persons. ​ The Sellers who participated in the SRA included Dr. Mary Luo and Dr. Jack Zhang through an affiliated party, and their family members Henry Zhang, Qingqing Chen, Chongqing Zhang, Bill Zhang, and Lu Zhang. Sellers who participated in the Second SPA include Dr. Mary Luo, Dr. Jack Zhang, through an affiliated party, and their family members Chongqing Zhang and Bill Zhang. ​ The restructuring of ANP was completed in the third quarter of 2021. As a result of the restructuring activities, the Company’s ownership interest in ANP was increased to 100%, and ANP’s ownership interest in Hanxin and its subsidiaries was reduced to approximately 20%. ​ The reduction of the Company’s ownership in Hanxin to 20%, resulted in ANP experiencing a “loss of control” of a subsidiary as defined by GAAP. Loss of control is deemed to have occurred when, among other things, a parent company owns less than a majority of the outstanding common stock in the subsidiary, lacks a controlling financial interest in the subsidiary and, is unable to unilaterally control the subsidiary through other means such as having, or being able to obtain, the power to elect a majority of the subsidiary's board of directors based solely on contractual rights or ownership of shares holding a majority of the voting power of the subsidiary's voting securities. These loss-of-control factors were met with respect to ANP’s ownership interest in Hanxin after the restructuring. ​ Accordingly, on completion of the SRA in the third quarter, the Company deconsolidated Hanxin and recorded a $13.6 million gain on deconsolidation, which is recognized in other income (expenses), net, in the consolidated statement of operations for the three and nine months ended September 30, 2021. Of the $13.6 million gain recorded, approximately $2.7 million related to the remeasurement of the retained noncontrolling investment in Hanxin. The remainder of the gain relates to the excess of the fair value the consideration received, over the book value of Hanxin’s net assets. ​ Hanxin continues to be a related party after the deconsolidation. ​ In addition to the retained noncontrolling investment in Hanxin, the Company maintains a seat on Hanxin’s board of directors, and Henry Zhang, a relative of Dr. Jack Zhang and Dr. Mary Luo, is an equity holder, general manager, and chairman of the board of directors of Hanxin. As a result, it was determined that the Company has significant influence over Hanxin and as such the retained noncontrolling investment in Hanxin is accounted for as an equity method investment. ​ As an equity method investment, the retained noncontrolling 20% investment in Hanxin was recorded at fair value in the amount of $4.2 million, which exceeds the amount of underlying equity in Hanxin’s net assets by $2.7 million. This basis difference was deemed to be a premium in excess of fair value, which is referred to as equity method goodwill, and is recorded within the “Equity Method Investment” line on the Company’s consolidated balance sheets. The fair value of the noncontrolling investment in Hanxin was determined using a discounted cash flow model using Level 3 inputs. ​ Subsequent to the restructuring, during the third quarter of 2021, Hanxin received additional capital contributions resulting in further reduction of ANP’s ownership to approximately 14%. ​ During the second quarter of 2021, in connection with the restructuring, the Company terminated the 2018 ANP Equity Incentive Plan. (See note 16)

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- Definition The entire disclosure for restructuring and related activities. Description of restructuring activities such as exit and disposal activities, include facts and circumstances leading to the plan, the expected plan completion date, the major types of costs associated with the plan activities, total expected costs, the accrual balance at the end of the period, and the periods over which the remaining accrual will be settled. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 420 -URI http://asc.fasb.org/topic&trid=2175745 + Details
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