XML 21 R10.htm IDEA: XBRL DOCUMENT
v3.21.2

Business Acquisitions | 9 Months Ended
--- | ---
Sep. 30, 2021
Business Combination and Asset Acquisition [Abstract] |
Business Acquisitions | Note 3 - Business Acquisitions Nebula Acquisition On August 10, 2021 (the “Effective Date”), the Company and its wholly-owned subsidiary, ProPhase Precision Medicine, Inc. (“ProPhase Precision”), entered into and closed a Stock Purchase Agreement (the “Nebula Stock Purchase Agreement”) with Nebula Genomics, Inc., a privately owned personal genomics company (“Nebula”), each of the stockholders of Nebula (the “Seller Parties”), and Kamal Obbad, as Seller Party Representative. Pursuant to the terms of the Nebula Stock Purchase Agreement, ProPhase Precision acquired all of the issued and outstanding shares of common stock of Nebula from the Seller Parties, for an aggregate purchase price of approximately $14.6 million, subject to post-closing adjustments (the “Nebula Acquisition”). A portion of the purchase price equal to $3.6 million was paid in shares of the Company to certain Seller Parties and noteholders of Nebula, based on their election to receive shares of Company common stock in lieu of cash, which shares were valued at a price per share of $7.46, which is equal to the average closing price of the Company’s common stock on Nasdaq for the five trading days preceding the signing of the Nebula Stock Purchase Agreement. A portion of the purchase price equal to $1,080,000 (the “Escrow Amount”) will be held in escrow by Citibank, N.A. (the “Escrow Agent”) until February 23, 2023 (“Escrow Termination Date”), pursuant to the terms and conditions of an escrow agreement entered into with the Escrow Agent, as security for the indemnification obligations of the Seller Parties. At the Escrow Termination Date, the remaining amount, if any, of the Escrow Amount, less any amount reasonably necessary to pay any claim with respect to which a notice of claim has been timely and properly given, will be delivered to the Seller Parties, as applicable. In connection with the Nebula Acquisition, ProPhase Precision entered into an employment agreement with Kamal Obbad, the Chief Executive Officer of Nebula, on the Effective Date, pursuant to which Mr. Obbad will serve as Senior Vice President, Director of Sales and Marketing of ProPhase Precision. As a condition to the employment agreement, Mr. Obbad was awarded a stock option to purchase 250,000 shares of Company common stock at an exercise price equal to $7.67 per share, the closing price of the Company common stock on the Effective Date. The award was issued as a material inducement to Mr. Obbad’s acceptance of employment with ProPhase Precision in accordance with Nasdaq Listing Rule 5635(c)(4) and was approved by the Company’s Compensation Committee (see Note 7, Stockholders’ Equity). ProPhase Labs, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (unaudited) Based on the preliminary valuation, the total consideration of $12.7 million, which is net of $1.6 million in cash acquired and $0.3 million anticipated to be paid back to the Company from the Escrow Amount, has been allocated to assets acquired and liabilities assumed based on their respective fair values as follows (amounts in thousands): Schedule of Assets Acquired and Liabilities Assumed
Short term investments |  | $ | 1,800 |
Accounts receivable |  |  | 222 |
Clinical lab material |  | $ |  |
Lab equipment |  |  |  |
Inventory |  |  | 435 |
Prepaid and other current assets |  |  | 379 |
Definite-lived intangible assets |  |  | 10,990 |
Total assets acquired |  |  | 13,826 |
Accounts payable |  |  | (372 | )
Accrued expenses and other current liabilities |  |  | (43 | )
Deferred revenue |  |  | (1,140 | )
Note payable |  |  | (81 | )
Total liabilities assumed |  |  | (1,636 | )
Net identifiable assets acquired |  |  | 12,190 |
Goodwill |  |  | 484 |
Total consideration, net of cash acquired (1) |  | $ | 12,674 |
(1) | Net of $1,639 cash acquired and $257 anticipated amounts due back to the Company from the escrow account.
Goodwill represents the excess of the purchase price over the net identifiable tangible and intangible assets acquired. The Company believes the goodwill related to the acquisition was a result of the expected synergies to be realized from combining operations and is not deductible for income tax purposes. The preliminary purchase price allocation is adjusted, as necessary, up to one year after the acquisition closing date if management obtains more information regarding asset valuations and liabilities assumed. The intangible assets preliminarily identified in conjunction with the Nebula Acquisition are as follows (amount in thousands): Schedule of Intangible Assets Acquisition
|  | Gross Carrying Value |  |  | Estimated Useful Life (in years) |
Trade names |  | $ | 5,550 |  |  |  | 15 |
Proprietary intellectual property |  |  | 4,260 |  |  |  | 5 |
Customer relationships |  |  | 1,180 |  |  |  | 1 |
Total |  | $ | 10,990 |  |  |  |  |
The Company recognized $336,000 amortization expense on the above identified intangible assets during the three and nine months September 30, 2021. ProPhase Labs, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (unaudited) Pro Forma Results The following table summarizes, on a pro forma basis, the combined results of the Company as though the Nebula Acquisition had occurred as of January 1, 2020. These pro forma results are not necessarily indicative of the actual consolidated results had the acquisition occurred as of that date or of the future consolidated operating results for any period. Pro forma results are (in thousands): Schedule of Pro-forma Results
|  | September 30, 2021 |  |  | September 30, 2020 |  |  | September 30, 2021 |  |  | September 30, 2020 |
|  | For the three months ended |  |  | For the nine months ended |
|  | September 30, 2021 |  |  | September 30, 2020 |  |  | September 30, 2021 |  |  | September 30, 2020 |
Revenue, net |  | $ | 9,843 |  |  | $ | 4,131 |  |  | $ | 36,007 |  |  | $ | 9,890 |
Net loss |  | $ | (4,020 | ) |  | $ | (764 | ) |  | $ | (4,454 | ) |  | $ | (2,425 | )
CPM Acquisition On October 23, 2020, the Company acquired all of the issued and outstanding shares of capital stock of CPM for approximately $2.5 million in cash, subject to certain adjustments, pursuant to the terms of a Stock Purchase Agreement, by and among the Company, CPM, Pride Diagnostics LLC (“Pride Diagnostics”) and the members of Pride Diagnostics (together with Pride Diagnostics, the “Seller Parties”), and Arvind Gurnani, as representative of the Seller Parties. As part of the acquisition, we acquired a 4,000 square foot (CLIA) accredited laboratory located in Old Bridge, New Jersey owned by CPM (now known as ProPhase Diagnostics NJ, Inc.). Based on valuation, the total consideration of $2.5 million has been allocated to assets acquired and liabilities assumed based on their respective fair values as follows (amount in thousands): Schedule of Assets Acquired and Liabilities Assumed
Clinical lab material |  | $ | 180 |
Lab equipment |  |  | 112 |
Definite-lived intangible asset |  |  | 1,307 |
Total assets acquired |  |  | 1,599 |
Liabilities assumed |  |  | - |
Net identifiable assets acquired |  |  | 1,599 |
Goodwill |  |  | 901 |
Total consideration |  | $ | 2,500 |
Goodwill has been measured as the excess of the total consideration over the amounts assigned to the identifiable assets acquired and liabilities assumed in the amount of $901,000, which was primarily related to the acquisition of the assembled workforce. Other definite-lived intangible asset of approximate $1.3 million were related to the CLIA license, which was determined to have an estimated useful life of three years. The Company recognized $924,000 and $1,131,000 aggregate amortization expense during the three and nine months September 30, 2021, respectively.

X
- References No definition available. + Details
Name: | us-gaap_BusinessCombinationAndAssetAcquisitionAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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
Name: | us-gaap_BusinessCombinationDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration