On December 7, 2020, the Company acquired QrumPharma, Inc., a privately held pharmaceutical company developing inhalation treatments for severe chronic and recurrent pulmonary infections, including Nontuberculous Mycobacterial (NTM) lung disease. The Company purchased all of the outstanding capital stock of QrumPharma for consideration consisting of cash and shares of the Company’s common stock, subject to adjustment for cash on hand, unpaid indebtedness, unpaid transaction expenses, and net working capital as follows (in thousands):

Consideration
Cash consideration	$	3,574
Stock consideration (3,067,179 shares at $3.01 per share)		9,250
Transaction costs		531
Repayment of debt		11
Liabilities assumed		22
Cash acquired		(155	)
Total consideration paid for IPR&D	$	13,233

The stock purchase of QrumPharma was accounted for under ASC 805, Business Combinations, as an asset acquisition since the transaction did not include the acquisition of inputs or processes and the fair value of the assets acquired were concentrated in a single identifiable asset, QRM-003 (a nebulized version of clofazimine), which consisted of an in-process research and development asset (“IPR&D”). Under ASC 805, an entity that acquires IPR&D in an asset acquisition should follow the guidance in ASC 730, Research and Development, which requires that both tangible and intangible identifiable research and development assets with no alternative future use be allocated a portion of the consideration transferred and charged to expense at the acquisition date. Due to the stage of development of QRM-003 at the date of acquisition, significant risk remained that the product would not obtain regulatory approval and it was not yet probable that there would be future economic benefit for the Company. Absent successful clinical results and regulatory approval, it was determined that there was no alternative future use associated with QRM-003. Accordingly, the value of this asset was expensed at the time of acquisition and the total accumulated cost of $13.2 million, was allocated to the IPR&D asset using a relative fair value basis and the total consideration was recognized as in-process research and development expense in the consolidated statement of operations.

The acquisition of QrumPharma also included a potential future royalty payment of 1.5% of net sales in each of the calendar years in which the total annual and global adjusted net sales of specified products exceeds $50 million and a royalty payment of 1.0% of net sales in each of the calendar years in which the total annual and global adjusted net sales of nebulized clofazimine are greater than or equal to $200 million. The contingent consideration in the form of royalty payments will be expensed as incurred since the probability of QRM-003 obtaining FDA approval and generating net sales that exceed the specified thresholds could not be reasonably estimated on the date of acquisition.