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BUSINESS COMBINATIONS | 9 Months Ended
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Jun. 30, 2021
BUSINESS COMBINATIONS |
BUSINESS COMBINATIONS | 11. BUSINESS COMBINATIONS (Restated) ​ The Company accounts for acquisitions in accordance with guidance found in ASC 805, Business Combinations. The guidance requires consideration given, including contingent consideration, assets acquired, and liabilities assumed to be valued at their fair market values at the acquisition date. The guidance further provides that: (1) in-process research and development will be recorded at fair value as an indefinite-lived intangible asset; (2) acquisition costs will generally be expensed as incurred, (3) restructuring costs associated with a business combination will generally be expensed subsequent to the acquisition date; and (4) changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will affect income tax expense. ASC 805 requires that any excess of purchase price over fair value of assets acquired, including identifiable intangibles and liabilities assumed, be recognized as goodwill. PCRS acquisition Overview On November 8, 2019, the Company and Bronco Research Services LLC, a wholly owned subsidiary of the Company (the “PCRS Purchaser”), entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Pre-Clinical Research Services, Inc., a Colorado corporation (the “PCRS Seller”), and its shareholder. Pursuant to the Purchase Agreement, on December 1, 2019, the Company indirectly acquired (the “PCRS Acquisition”) substantially all of the assets of PCRS Seller used or useful by PCRS Seller in connection with PCRS Seller's provision of GLP and non-GLP preclinical testing for the pharmaceutical and medical device industries. The total consideration for the PCRS Acquisition was $5,857, which consisted of $1,500 in cash, subject to certain adjustments, 240 of the Company’s common shares valued at $1,133 using the closing price of the Company’s common shares on November 29, 2019 and an unsecured promissory note in the initial principal amount of $800 made by PCRS Purchaser. The promissory note bears interest at 4.5%. The Company also purchased certain real property located in Fort Collins, Colorado, comprising the main facility for the PCRS Seller’s business and additional property located next to the facility available for future expansion, for $2,500. The Company funded the cash portion of the purchase price for the PCRS Acquisition with cash on hand and the net proceeds from its credit arrangements with FIB. As contemplated by the Purchase Agreement, the Company also entered into a lease arrangement for an ancillary property used by Seller’s business, located in Livermore, Colorado. ​ Accounting for the Transaction Results are included in the Company’s results from the acquisition date of December 1, 2019. The Company’s allocation of the $5,857 purchase price to PCRS Purchaser’s tangible and identifiable intangible assets acquired and liabilities assumed, based on their estimated fair values as of December 1, 2019, is included in the table below. Goodwill, which is derived from the enhanced scientific expertise, expanded client base and our ability to provide broader service solutions through a comprehensive portfolio, is recorded based on the amount by which the purchase price exceeds the fair value of the net assets acquired and is deductible for tax purposes. The purchase price allocation as of June 30, 2021 is as follows:
​ | ​ | ​ | ​
​ | ​ | Allocation as of
​ | ​ | June 30, 2021
Assets acquired and liabilities assumed: |  | ​ |
Receivables | ​ | $ | 578
Property and equipment | ​ |  | 2,836
Unbilled receivables | ​ | ​ | 162
Prepaid expenses | ​ |  | 27
Intangible assets | ​ | ​ | 2,081
Goodwill | ​ | ​ | 751
Accounts payable | ​ | ​ | (109)
Accrued expenses | ​ |  | (118)
Customer advances | ​ |  | (351)
​ | ​ | $ | 5,857
​ The allocation of the purchase price is based on valuations performed to determine the fair value of such assets and liabilities as of the acquisition date. Goodwill from this transaction is allocated to the Company’s Services segment. PCRS Purchaser recorded revenues of $5,191 and net income of $117 for the nine month period ending June 30, 2021. HistoTox Labs acquisition Overview On April 30, 2021, the Company completed the acquisition of HistoTox Labs, Inc. (“HistoTox Labs”) in a cash transaction. HistoTox Labs is a provider of services in connection with non-clinical consulting, laboratory and strategic support services and products related to routine and specialized histology, immunohistology, histopathology and image analysis/digital pathology. Consideration for the HistoTox Labs Acquisition consisted of $22,321 in cash. The purchase price is preliminary and subject to working capital and customary purchase price adjustments under the Purchase Agreement. We recognized transaction costs related to the acquisition of HistoTox Labs of $449 and $560 for the three and nine months ended June 30, 2021. These costs were associated with legal and professional services related to the acquisition and are reflected within general and administrative expenses in our condensed consolidated statement of operations. HistoTox Labs and Bolder BioPATH (discussed below) were combined into one business unit and recorded combined revenues of $4,251 and combined net income of $585 for the three and nine month periods ending June 30, 2021. The valuation of assets acquired and liabilities assumed has not yet been finalized as of June 30, 2021. The purchase price allocation is preliminary and subject to change, including the valuation of property and equipment, intangible assets, income taxes and goodwill, among other items. The amounts recognized will be finalized as the information necessary to complete the analysis is obtained, but no later than one year after the acquisition date. Finalization of the valuation during the measurement period could result in a change in the amounts recorded for the acquisition date fair value. The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the acquisition date: ​
​ | ​ | ​ | ​
​ | ​ | Preliminary
​ | ​ | Allocation as of
​ | ​ | June 30, 2021
Assets acquired and liabilities assumed: |  | ​
Receivables | ​ | ​ | 1,020
Prepaid expenses | ​ | ​ | 40
Operating lease ROU | ​ | ​ | 2,239
Property and equipment | ​ |  | 4,021
Intangible assets | ​ | ​ | 8,500
Other Assets | ​ | ​ | 35
Goodwill | ​ | ​ | 9,386
Accounts payable | ​ | ​ | (128)
Customer advances | ​ | ​ | (553)
Operating lease liability | ​ |  | (2,239)
​ | ​ | $ | 22,321
​ Property and equipment is mostly composed of equipment (including lab equipment, furniture and fixtures, and computer equipment). The fair value of property and equipment was determined using a combination of cost and market-based methodologies. The fair value of intangible assets as of June 30, 2021 is based on preliminary assumptions which are subject to change as we complete our valuation procedures. Intangible assets primarily relate to customer relationships and a non-compete agreement. The acquired definite-lived intangible assets are being amortized over a weighted-average estimated useful life of approximately 8 years for customer relationships and 5 years for the non-compete agreement on a straight-line basis. The estimated fair values of identifiable intangible assets were determined using the "income approach," which is a valuation technique that provides an estimate of the fair value of an asset based on market participant expectations of the cash flows an asset would generate over its remaining useful life. Some of the significant assumptions inherent in the development of these asset valuations include the estimated net cash flows for each year for each asset or product (including revenues, cost of services, marketing, selling and administrative expenses, and contributory asset charges), the appropriate discount rate necessary to measure the risk inherent in each future cash flow stream, the life cycle of each asset, the potential regulatory and commercial success risk, and competitive trends impacting the asset and each cash flow stream, as well as other factors. The fair value of intangible assets as of June 30, 2021 is based on preliminary assumptions which are subject to change as we complete our valuation procedures. Goodwill, which is derived from the enhanced scientific expertise, expanded client base and our ability to provide broader service solutions through a comprehensive portfolio, is recorded based on the amount by which the purchase price exceeds the fair value of the net assets acquired and $10,804 is deductible for tax purposes. Goodwill from this transaction is allocated to the Company’s Services segment. Goodwill is reviewed for impairment at least annually and when certain impairment indicators are present. As of June 30, 2021, there were no goodwill impairment losses. Bolder BioPATH acquisition Overview On May 3, 2021, the Company completed the acquisition of Bolder BioPATH in a merger of Bolder BioPATH with a wholly owned subsidiary of the Company. Bolder BioPATH is a provider of services specializing in in vivo models of rheumatoid arthritis, osteoarthritis, and inflammatory bowel disease as well as other autoimmune and inflammation models. Consideration for the Bolder BioPATH acquisition consisted of (i) $18,500 in cash, subject to customary purchase price adjustments and inclusive of $1,250 being held in escrow for purposes of securing any amounts payable by the selling parties on account of indemnification obligations, purchase price adjustments, and other amounts payable under the merger agreement, (ii) 1,588 of the Company’s common shares valued at $34,452 using the closing price of the Company’s common shares on May 3, 2021 and (iii) seller notes in an aggregate principal amount of $1,500. We recognized transaction costs related to the acquisition of Bolder BioPATH of $450 and $568 for the three and nine months ended June 30, 2021. These costs were associated with legal and professional services related to the acquisition and are reflected within general and administrative expenses in our condensed consolidated statement of operations. The valuation of assets acquired and liabilities assumed has not yet been finalized as of June 30, 2021. The purchase price allocation is preliminary and subject to change, including the valuation of property and equipment, intangible assets, income taxes and goodwill, among other items. The amounts recognized will be finalized as the information necessary to complete the analysis is obtained, but no later than one year after the acquisition date. Finalization of the valuation during the measurement period could result in a change in the amounts recorded for the acquisition date fair value. The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the acquisition date: ​
​ | ​ | ​ | ​
​ | ​ | Preliminary
​ | ​ | Allocation as of
​ | ​ | June 30, 2021
Assets acquired and liabilities assumed: |  | ​ |
Cash and cash equivalents | ​ | $ | 124
Receivables | ​ | ​ | 2,278
Unbilled receivables | ​ | ​ | 1,867
Prepaid expenses | ​ |  | 103
Operating lease ROU | ​ | ​ | 2,750
Property and equipment | ​ |  | 6,609
Intangible assets | ​ | ​ | 12,500
Other assets | ​ | ​ | 70
Goodwill | ​ | ​ | 36,863
Accounts payable | ​ | ​ | (93)
Accrued expenses | ​ |  | (279)
Deferred revenue | ​ | ​ | (723)
Deferred tax liability | ​ | ​ | (4,867)
Operating lease liability | ​ |  | (2,750)
​ | ​ | $ | 54,452
​ Property and equipment is mostly composed of equipment (including lab equipment, furniture and fixtures, and computer equipment). The fair value of property and equipment was determined using a combination of cost and market-based methodologies. The fair value of intangible assets as of June 30, 2021 is based on preliminary assumptions which are subject to change as we complete our valuation procedures. Intangible assets primarily relate to customer relationships. The acquired definite-lived intangible assets are being amortized over a weighted-average estimated useful life of approximately 8 years on a straight-line basis. The estimated fair values of identifiable intangible assets were determined using the "income approach," which is a valuation technique that provides an estimate of the fair value of an asset based on market participant expectations of the cash flows an asset would generate over its remaining useful life. Some of the significant assumptions inherent in the development of these asset valuations include the estimated net cash flows for each year for each asset or product (including revenues, cost of services, marketing, selling and administrative expenses, and contributory asset charges), the appropriate discount rate necessary to measure the risk inherent in each future cash flow stream, the life cycle of each asset, the potential regulatory and commercial success risk, and competitive trends impacting the asset and each cash flow stream, as well as other factors. The fair value of intangible assets as of June 30, 2021 is based on preliminary assumptions which are subject to change as we complete our valuation procedures. Goodwill, which is derived from the enhanced scientific expertise, expanded client base and our ability to provide broader service solutions through a comprehensive portfolio, is recorded based on the amount by which the purchase price exceeds the fair value of the net assets acquired and none is deductible for tax purposes. Goodwill from this transaction is allocated to the Company’s Services segment. Goodwill is reviewed for impairment at least annually and when certain impairment indicators are present. As of June 30, 2021, there were no goodwill impairment losses. Pro Forma Results The Company’s unaudited pro forma results of operations for the three and nine months ended June 30, 2021 and June 30, 2020, assuming the PCRS and HistoTox Labs acquisitions and the merger of Bolder BioPATH had occurred as of October 1, 2019 are presented for comparative purposes below. These amounts are based on available information of the results of operations of the PCRS, HistoTox Labs, and Bolder BioPATH operations prior to the acquisition date and are not necessarily indicative of what the results of operations would have been had the acquisitions and the merger been completed on October 1, 2019. The unaudited pro forma information is as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | Three Months Ended | ​ | Three Months Ended | ​ | Nine Months Ended | ​ | Nine Months Ended | ​
​ | June 30, 2021 | ​ | June 30, 2020 | ​ | June 30, 2021 | ​ | June 30, 2020 |
Total revenues | $ | 24,786 | ​ | $ | 21,448 | ​ | $ | 72,789 | ​ | $ | 62,661 | ​
​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​
Net income (loss) |  | (1,847) | ​ |  | 5,242 | ​ |  | (428) | ​ |  | 5,863 | ​
​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​
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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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