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Note 4 - Acquisitions | 12 Months Ended
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Jun. 30, 2021
Notes to Financial Statements |
Business Combination Disclosure [Text Block] | Note 4. Acquisitions: We periodically complete business combinations that align with our business strategy. Acquisitions are accounted for using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized at fair value as of the acquisition date and that the results of operations of each acquired business be included in our consolidated statements of comprehensive income from their respective dates of acquisitions. Acquisition costs are recorded in selling, general and administrative expenses as incurred. 2021 Acquisitions Eminence Biotechnology On October 20, 2020, the Company acquired 47.6% of the outstanding equity shares of Changzhou Eminence Biotechnology Co., Ltd. (Eminence) for approximately $9.8 million, net of cash acquired. The fair value of the noncontrolling interest of $9.0 million included in the consolidated balance sheet was a non-cash activity within the statement of cash flows. Eminence is considered a variable interest entity as it is an early stage biotechnology company that required additional funding through a subsequent equity investment, which was used to fund Eminence’s expansion and GMP manufacturing capabilities within China. On April 2, 2021, the Company invested approximately $6 million of additional funding into Eminence, increasing our percentage of outstanding equity shares to 57.4%. The Company was considered the primary beneficiary at the time of initial acquisition given the Company was the largest shareholder coupled with its ability to exercise significant influence over the entity. As of June 30, 2021, the Company’s investment at risk is limited to its $15.8 million in investments. As Eminence met the criteria for consolidation, the transaction was accounted for in accordance with ASC 805, Business Combinations. In applying ASC 805 to the transaction, the Company has elected to include Eminence in our consolidated financial statements on a one month lag. The goodwill recorded as result of the acquisition represents the strategic benefits of growing the Company’s product portfolio and the expected revenue growth from increased market penetration. The fair value of the noncontrolling interest in Eminence was calculated utilizing cash flow projections discounted to the acquisition date and control premiums calculated using market data. Acquired goodwill is not deductible for income tax purposes. The business became part of the Protein Sciences reportable segment in the second quarter of fiscal year 2021. The allocation of purchase consideration related to Eminence was completed in the fourth quarter of fiscal year 2021. The fair values of the assets acquired and liabilities assumed at acquisition date and the updated final amounts as of June 30, 2021 are as follows (in thousands):
|  | Preliminary Allocation at Acquisition Date |  |  | Adjustments to Fair Value |  |  | Final Allocation at June 30, 2021
Current assets, net of cash |  | $ | 3,145 |  |  | $ | - |  |  | $ | 3,145
Equipment and other long-term assets |  |  | 1,639 |  |  |  | - |  |  |  | 1,639
Intangible assets: |  |  |  |  |  |  |  |  |  |  |
Developed technology |  |  | 6,778 |  |  |  | - |  |  |  | 6,778
Customer relationships |  |  | 2,133 |  |  |  | - |  |  |  | 2,133
Goodwill |  |  | 8,811 |  |  |  | (963 | ) |  |  | 7,848
Total assets acquired |  |  | 22,506 |  |  |  | (963 | ) |  |  | 21,543
Liabilities |  |  | 1,436 |  |  |  | - |  |  |  | 1,436
Deferred income taxes, net |  |  | 2,320 |  |  |  | (963 | ) |  |  | 1,357
Net assets acquired |  | $ | 18,750 |  |  | $ | - |  |  | $ | 18,750
Cash paid, net of cash acquired |  |  | 9,765 |  |  |  | - |  |  |  | 9,765
Fair value of noncontrolling interest in Eminence |  |  | 8,985 |  |  |  | - |  |  |  | 8,985
Net assets acquired |  | $ | 18,750 |  |  | $ | - |  |  | $ | 18,750
As summarized in the table, there were adjustments totaling $1.0 million to goodwill during the measurement period. These adjustments relate to refinements within our deferred tax amounts based on factors existing on the acquisition date. Tangible assets and liabilities acquired were recorded at fair value on the date of close based on management's preliminary assessment. The purchase price allocated to developed technology and customer relationships was based on management's preliminary forecasted cash inflows and outflows and using a multiperiod excess earnings method to calculate the fair value of assets purchased. The amount recorded for developed technology is being amortized with the expense reflected in cost of goods sold in the Condensed Consolidated Statement of Earnings and Comprehensive Income. The amortization period for developed technology is estimated to be 13 years. Amortization expense related to customer relationships is reflected in selling, general and administrative expenses in the Consolidated Statement of Earnings and Comprehensive Income. The amortization period for customer relationships is estimated to be 10 years. The net deferred income tax liability represents the net amount of the estimated future impact of adjustments for costs to be recognized as intangible asset amortization, which is not deductible for income tax purposes offset by the deferred tax asset for the calculation of acquired NOLs. Asuragen, Inc. On April 6, 2021, the Company acquired all of the ownership interests of Asuragen, Inc. for approximately $216 million, net of cash acquired, plus contingent consideration of up to $105.0 million, subject to certain revenue thresholds. The Asuragen acquisition adds a leading portfolio of best in-class molecular diagnostic and research products, including genetic screening, oncology testing kits, molecular controls, a GMP compliant manufacturing facility, and a CLIA-certified laboratory. The transaction was accounted for in accordance with ASC 805, Business Combinations. The goodwill recorded as a result of the acquisition represents the strategic benefits of growing the Company’ product portfolio and the expected revenue growth from increased market penetration. The goodwill is not deductible for income tax purposes. The business became part of the Diagnostics and Genomics operating segment in the fourth quarter of fiscal year 2021. The allocation of purchase consideration related to Asuragen Inc is considered preliminary with provisional amounts primarily rel ated to goodwill and income tax assessment of acquired net operating losses. The Company expects to finalize the allocation of purchase price within the one-year measurement-period following the acquisition. Net sales and operating loss of this business included in Bio-Techne's consolidated results of operations in fiscal year 2021 were approximately $7.1 million and $ 3.4 million, respectively. The preliminary estimated fair values of the assets acquired and liabilities assumed as of the acquisition date and at June 30, 2021 are as follows (in thousands):
|  |  |  | Preliminary allocation at acquisition date and at June 30, 2021
Current assets, net of cash |  |  |  | $ | 10,422
Equipment and other long-term assets |  |  |  |  | 3,762
Intangible assets: |  |  |  |  |
Developed technology |  |  |  |  | 107,000
In-process research and development |  |  |  |  | 22,700
Customer relationships |  |  |  |  | 11,700
Tradenames |  |  |  |  | 2,000
Non-competition agreement |  |  |  |  | 1,000
Goodwill |  |  |  |  | 94,970
Total assets acquired |  |  |  |  | 253,554
Liabilities |  |  |  |  | 4,003
Deferred income taxes, net |  |  |  |  | 15,664
Net assets acquired |  |  |  | $ | 233,887
Cash paid, net of cash acquired |  |  |  |  | 215,587
Contingent consideration payable |  |  |  |  | 18,300
Net assets acquired |  |  |  | $ | 233,887
Tangible assets and liabilities acquired were recorded at fair value on the date of close based on management's preliminary assessment. The purchase price allocated to developed technology, in-process research and development, and customer relationships was based on management's preliminary forecasted cash inflows and outflows and using a multiperiod excess earnings method to calculate the fair value of assets purchased. The amount recorded for developed technology is being amortized with the expense reflected in cost of goods sold in the Condensed Consolidated Statement of Earnings and Comprehensive Income. The amortization period for developed technology is estimated to be 14 years. Amortization expense related to customer relationships is reflected in selling, general and administrative expenses in the Consolidated Statement of Earnings and Comprehensive Income. The amortization period for customer relationships is estimated to be 16 years. The amount recorded for tradenames and the non-competition agreement is being amortized with the expense reflected in selling, general and administrative expenses in the Consolidated Statement of Earnings and Comprehensive Income. The amortization period for tradenames and the non-competition agreement is estimated to be 5 years and 3 years, respectively. The net deferred income tax liability represents the net amount of the estimated future impact of adjustments for costs to be recognized as intangible asset amortization, which is not deductible for income tax purposes offset by the deferred tax asset for the preliminary calculation of acquired NOLs. 2019 Acquisitions Quad Technologies On July 2, 2018, the Company acquired QT Holdings Corporation (Quad) for approximately $20.5 million, net of cash acquired, plus contingent consideration of up to $51.0 million, subject to certain product development milestones and revenue thresholds. The goodwill recorded as a result of the acquisition represents the strategic benefits of growing the Company’s product portfolio and the expected revenue growth from increased market penetration. The goodwill is not deductible for income tax purposes. The business became part of the Protein Sciences operating segment in the first quarter of fiscal year 2019. Purchase accounting was finalized during fiscal 2019. Tangible assets and liabilities acquired were recorded at fair value on the date of close based on management's assessment. The purchase price allocated to developed technology was estimated based on management's forecasted cash inflows and outflows using a multi-period excess earnings method to calculate the fair value of assets purchased. The developed technology asset is being amortized with the expense reflected in cost of goods sold in the Consolidated Statement of Earnings and Comprehensive Income. The amortization period for the developed technology intangible assets acquired in fiscal 2019 is 14 years. The net deferred income tax liability represents the net amount of the estimated future impact of adjustments for costs to be recognized as intangible asset amortization, which is not deductible for income tax purposes offset by the deferred tax asset for our calculation of acquired net operating losses (NOLs). Exosome Diagnostics On August 1, 2018, the Company acquired Exosome Diagnostics, Inc. (ExosomeDx) for approximately $251.6 million, net of cash acquired, plus contingent consideration of up to $325.0 million, subject to certain EBITA thresholds. The goodwill recorded as a result of the acquisition represents the strategic benefits of growing the Company’s product portfolio and the expected revenue growth from increased market penetration. The goodwill is not deductible for income tax purposes. The business became part of the Diagnostics and Genomics operating segment in the first quarter of fiscal year 2019. Purchase accounting was finalized during fiscal 2019. Tangible assets and liabilities acquired were recorded at fair value on the date of close based on management's assessment. The purchase price allocated to developed technology, trade names, and customer relationships was based on management's forecasted cash inflows and outflows and using either a relief-from-royalty or a multiperiod excess earnings method to calculate the fair value of assets purchased. The developed technology asset is being amortized with the expense reflected in cost of goods sold in the Condensed Consolidated Statement of Earnings and Comprehensive Income. Amortization expense related to trade names, and customer relationships is reflected in selling, general and administrative expenses in the Consolidated Statement of Earnings and Comprehensive Income. The amortization periods for intangible assets acquired in fiscal 2019 are 15 years for developed technology and trade names, and 14 years for customer relationships. The net deferred income tax liability represents the net amount of the estimated future impact of adjustments for costs to be recognized as intangible asset amortization, which is not deductible for income tax purposes offset by the deferred tax asset for the calculation of acquired NOLs. Note: As part of the ExosomeDx acquisition, a certain amount of the cash payment was held in escrow. As part of the finalization of the outstanding amounts held in escrow, the Company recognized a gain of $7.2 million during fiscal year 2020 related to returned proceeds and a relief of any future contingent payments as described in Note 5. The gain was recorded within selling, general, and administrative costs in the Consolidated Statement of Comprehensive Income. B-MoGen Biotechnologies On June 4, 2019, the Company acquired the remaining interest in B-MoGen Biotechnologies Inc. (B-MoGen) for approximately $17.5 million, net of cash acquired, plus contingent consideration of up to $38.0 million, subject to certain product development milestones and revenue thresholds. The Company previously held an investment of $1.4 million in B-MoGen and recognized a gain of approximately $3.7 million on the transaction within other non-operating income fiscal year 2019 in the consolidated statements of earnings and comprehensive income, which represented the adjustment of our historical investment to its fair value. The goodwill recorded as result of the acquisition represents the strategic benefits of growing the Company’s product portfolio and the expected revenue growth from increased market penetration. The goodwill is not deductible for income tax purposes. The business became part of the Protein Sciences segment in the fourth quarter of fiscal year 2019. Purchase accounting remained opened as disclosed in our prior year 10-K/A for working capital adjustments and our income tax assessment of acquired net operating losses (NOLs) with the completion of the stub period tax returns. Our purchase accounting was finalized in fiscal 2020 with an immaterial adjustment of $0.3 million to deferred tax amounts and goodwill. Tangible assets and liabilities acquired were recorded at fair value on the date of close based on management's assessment. The purchase price allocated to developed technology was estimated based on management's forecasted cash inflows and outflows and using a multi-period excess earnings method to calculate the fair value of assets purchased. The developed technology asset is being amortized with the expense reflected in cost of goods sold in the Consolidated Statement of Earnings and Comprehensive Income. The amortization period for the developed technology intangible asset acquired in fiscal 2019 is 14 years. The net deferred income tax liability represents the net amount of the estimated future impact of adjustments for costs to be recognized as intangible asset amortization, which is not deductible for income tax purposes offset by the deferred tax asset for the calculation of acquired NOLs.
|  | B-MoGen Biotechnologies |  |  | Exosome Diagnostics |  |  | Quad Technologies
Current assets, net of cash |  | $ | 504 |  |  | $ | 2,611 |  |  | $ | 36
Equipment and other long-term assets |  |  | 269 |  |  |  | 2,212 |  |  |  | 228
Intangible assets: |  |  |  |  |  |  |  |  |  |  |
Developed technology |  |  | 14,000 |  |  |  | 105,000 |  |  |  | 12,256
Trade name |  |  | - |  |  |  | 58,000 |  |  |  | -
Customer relationships |  |  | 400 |  |  |  | 2,300 |  |  |  | -
Goodwill |  |  | 16,131 |  |  |  | 105,362 |  |  |  | 14,481
Total assets acquired |  |  | 31,304 |  |  |  | 275,485 |  |  |  | 27,001
Liabilities |  |  | 211 |  |  |  | 3,716 |  |  |  | 296
Deferred income taxes, net |  |  | 3,051 |  |  |  | 16,346 |  |  |  | 943
Net assets acquired |  | $ | 28,042 |  |  | $ | 255,423 |  |  | $ | 25,762
Cash paid, net of cash acquired |  |  | 17,448 |  |  |  | 251,623 |  |  |  | 20,462
Additional consideration(1) |  |  | 10,594 |  |  |  | 3,800 |  |  |  | 5,300
Net assets acquired |  | $ | 28,042 |  |  | $ | 255,423 |  |  | $ | 25,762
(1)Additional consideration for the B-MoGen acquisition includes a previously held investment of $1.4 million and a gain of approximately $3.7 million recorded on the transaction. The remaining additional consideration for B-MoGen, ExosomeDx, and Quad relate to the opening balance sheet value of contingent consideration. Tangible assets acquired, net of liabilities assumed, were stated at fair value at the date of acquisition based on management's assessment. The purchase price allocated to developed technology, trade names, non-compete agreements and customer relationships was based on management's forecasted cash inflows and outflows and using a relief-from-royalty and multi-period excess earnings method to calculate the fair value of assets purchased. The developed technology is being amortized with the expense reflected in cost of good sold in the Consolidated Statements of Earnings and Comprehensive Income. Amortization expense related to trade names, the non-compete agreement and customer relationships is reflected in selling, general and administrative expenses in the Consolidated Statements of Earnings and Comprehensive Income. The deferred income tax liability represents the estimated future impact of adjustments for the cost to be recognized upon the sale of acquired inventory that was written up to fair value and intangible asset amortization, both of which are not deductible for income tax purposes, and the future tax benefit of net operating loss and tax credit carryforwards which will be deductible by the Company in future periods.

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