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Business Acquisition | 9 Months Ended
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Sep. 30, 2022
Business Combination and Asset Acquisition [Abstract] |
Business Acquisition | Note 3 - Business Acquisition Nebula Acquisition On August 10, 2021 (the “Nebula Effective Date”), the Company and its wholly owned subsidiary, ProPhase Precision, entered into and closed a Stock Purchase Agreement (the “Nebula Stock Purchase Agreement”) with 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 $14.3 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’s common stock to certain Seller Parties and noteholders of Nebula, based on their election to receive shares of the Company’s 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”) is being 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 Nebula Effective Date, pursuant to which Mr. Obbad serves 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 Nebula Effective Date (see Note 7, Stockholders’ Equity). Based on the valuation, the total consideration of $12.7 million, which is net of $1.6 million in cash acquired, has been allocated to assets acquired and liabilities assumed based on their respective fair values as follows (in thousands): Schedule of Assets Acquired and Liabilities Assumed
Account |  | Amount |
Short term investments |  | $ | 1,800 |
Accounts receivable |  |  | 171 |
Inventory |  |  | 133 |
Prepaid expenses and other current assets |  |  | 379 |
Definite-lived intangible assets |  |  | 10,990 |
Total assets acquired |  |  | 13,473 |
Accounts payable |  |  | (805 | )
Accrued expenses and other current liabilities |  |  | (43 | )
Deferred revenue |  |  | (2,391 | )
Note payable |  |  | (81 | )
Deferred tax liability |  |  | (1,925 | )
Total liabilities assumed |  |  | (5,245 | )
Net identifiable assets acquired |  |  | 8,228 |
Goodwill |  |  | 4,446 |
Total consideration, net of cash acquired (1) |  | $ | 12,674 |
(1) | Net of $1.6 million cash acquired.
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 identified in conjunction with the Nebula Acquisition are as follows (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 |  |  |  |  |
ProPhase Labs, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (unaudited)

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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 https://asc.fasb.org/topic&trid=2303972 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 5 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=128092470&loc=d3e4946-128472 + Details
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