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Disposition of the Hospital Products | 9 Months Ended
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Sep. 30, 2021
Discontinued Operations and Disposal Groups [Abstract] |
Disposition of the Hospital Products | Disposition of the Hospital Products On June 30, 2020 (the “Closing Date”), we announced the sale of our portfolio of sterile injectable drugs used in the hospital setting (“Hospital Products”), which included our three commercial products, Akovaz, Bloxiverz and Vazculep, as well as Nouress, to Exela Sterile Medicines LLC (“Exela Buyer”) pursuant to an Asset Purchase Agreement (the “Transaction”). Pursuant to the Asset Purchase Agreement, the Exela Buyer agreed to pay a total aggregate consideration amount of $42,000, of which $14,500 was paid on the Closing Date and an additional $27,500 was paid in ten equal monthly installments following the Closing Date. During the year ended December 31, 2020, we collected four installment payments, totaling $11,000. We collected the remaining six installment payments, totaling $16,500, during 2021. In connection with the sale of the Hospital Products, the parties also agreed to cause the dismissal of the pending civil litigation related to Nouress in the District Court for the District of Delaware. We were party to a Membership Interest Purchase Agreement, dated March 13, 2012, by and among us, Avadel Legacy, Breaking Stick Holdings, LLC, Deerfield Private Design International II, L.P. (“Deerfield International”), Deerfield Private Design Fund II, L.P. (“Deerfield Fund”) and Horizon Santé FLML, Sarl (“Horizon”) (the “Deerfield MIPA”) and a Royalty Agreement, dated February 4, 2013, by and among us, Avadel Legacy, the Deerfield Fund and Horizon (the “Deerfield Royalty Agreement”). In connection with the closing of the sale of the Hospital Products, the Deerfield MIPA (with respect to certain sections thereof) and the Royalty Agreement were assigned to the Exela Buyer. Pursuant to the Purchase Agreement, the Exela Buyer assumed and will pay, perform, satisfy and discharge the liabilities and obligations of Avadel Legacy under the Deerfield Royalty Agreement for obligations that arise after the Closing Date. We were also party to a Royalty Agreement, dated December 3, 2013, by and between us, Avadel Legacy and Broadfin Healthcare Master Fund, Ltd. (the “Broadfin Royalty Agreement”). In connection with the closing of the sale of the Hospital Products, the Broadfin Royalty Agreement was assigned to the Exela Buyer and the Exela Buyer assumed and shall pay, perform, satisfy and discharge the liabilities and obligations of Avadel Legacy under the Broadfin Royalty Agreement for obligations that arise after the Closing Date. The following table represents the major classes of assets and liabilities either transferred to the Exela Buyer or eliminated by us due to the sale of the Hospital Products in exchange for aggregate consideration of $42,000, less transaction fees of $2,928.
|  | June 30, 2020 |  |
Prepaid expenses and other current assets |  | $ | (134) |  |  |
Inventories |  | (4,922) |  |  |
Goodwill |  | (1,654) |  |  |
Intangible assets, net |  | (407) |  |  |
Other non-current assets |  | (1,095) |  |  |
Total long-term contingent consideration payable |  | 14,900 |  |  |
Net liabilities disposed of |  | 6,688 |  |  |
Aggregate consideration |  | 42,000 |  |  |
Less transaction fees |  | (2,928) |  |  |
Net gain on the sale of the Hospital Products |  | $ | 45,760 |  |  |
We evaluated various qualitative and quantitative factors related to the disposition of the Hospital Products and determined that it did not meet the criteria for presentation as a discontinued operation. The unaudited pro forma condensed combined statement of income (loss) for the nine months ended September 30, 2020 included below is being provided for information purposes only and are not necessarily indicative of the results of operations that would have resulted if the Transaction had actually occurred on the date indicated. The pro forma adjustments are based on available information and assumptions that the Company believes are attributable to the sale.
|  | Unaudited Pro Forma Condensed Combined Statement of Income (Loss)
|  | Nine Months Ended September 30, 2020
|  | As Reported |  | Pro Forma Adjustments |  | Notes |  | Pro Forma
Product sales |  | $ | 22,334 |  |  | $ | (22,175) |  |  | (a) |  | $ | 159 |
Total operating expense |  | 2,259 |  |  | (8,489) |  |  | (b) |  | (6,230) |
Operating income (loss) |  | 20,075 |  |  | (13,686) |  |  |  |  | 6,389 |
Income (loss) before income taxes |  | $ | 9,048 |  |  | $ | (13,251) |  |  | (c) |  | $ | (4,203) |
Adjustments to the pro forma unaudited condensed combined statements of income (loss) (a) This adjustment reflects product sales attributable to the Hospital Products. (b) This adjustment reflects the following estimated expenses attributable to the Hospital Products: •Cost of products of $3,540. •Research and development expenses of $407. •Selling, general and administrative expenses of $809. •Intangible asset amortization on acquired development technology for Vazculep of $406. •Changes in fair value of related party contingent consideration of $3,327. The Company will no longer be responsible for these payments. (c) This amount reflects the adjustments noted in (a) and (b) above, as well as estimated Changes in fair value of related party payable of $435 attributable to the Hospital Products. The Company will no longer be responsible for these payments.

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -URI http://asc.fasb.org/topic&trid=2155823 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 + Details
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