v3.22.4
Acquisitions
 12 Months Ended
Dec. 31, 2022
Business Combination and Asset Acquisition [Abstract]  
Acquisitions Acquisitions
Purigen Acquisition
In November 2022, the Company, Mazdan Merger Sub, Inc., a wholly owned subsidiary of the Company (“Purigen Merger Sub”), Purigen and Shareholder Representative Services LLC, solely in its capacity as the securityholders’ representative,
entered into an Agreement and Plan of Merger (the “Purigen Merger Agreement”) pursuant to which the Company agreed to acquire Purigen. Pursuant to the terms and conditions of the Purigen Merger Agreement, Purigen Merger Sub merged with and into Purigen, whereupon the separate corporate existence of Purigen Merger Sub ceased, with Purigen continuing as the surviving corporation of such merger and a wholly owned subsidiary of the Company. Purigen’s isotachophoresis (ITP) technology is expected to expand and accelerate the adoption of OGM.
Pursuant to Purigen Merger Agreement, the Company paid upfront consideration consisting of a combination of approximately $32.0 million in cash. The upfront consideration is subject to adjustment for, among other things, cash, unpaid indebtedness, unpaid transaction expenses and working capital relative to a target. Under the Purigen Merger Agreement, the Company has also agreed to pay additional consideration, up to an aggregate of $32.0 million in cash based on the achievement of certain milestones. Cash of $1.2 million will be held in an escrow fund for purposes of satisfying any post-closing purchase price adjustments and indemnification claims under the Purigen Merger Agreement.
The Company accounted for its acquisition of Purigen using the acquisition method of accounting pursuant to ASC 805. The tangible and identifiable intangible assets acquired and liabilities assumed were recorded at their estimated fair values as of the acquisition date, and the excess of the purchase price over the estimated fair value assigned to the tangible and identifiable intangible assets acquired and liabilities assumed was recorded to goodwill. Goodwill relates to the expected synergies from combining the operations of the companies. The acquisition was structured as a stock sale and therefore goodwill is non-tax deductible.
The purchase price allocation for the acquisition of Purigen is preliminary and subject to revision as additional information about the fair value of assets and liabilities becomes available. As permitted under ASC 805, the Company is allowed a measurement period, which may not exceed one year, in which to complete its accounting for the acquisition. Per the terms of the Purigen Merger Agreement, the purchase price is still subject to adjustment for the final determination of cash, unpaid indebtedness, unpaid transaction expenses and working capital, as well for deferred and current tax assets and liabilities
The following is the estimated purchase price for the acquisition of Purigen:
Cash$32,034,000 
Estimated fair value of milestone consideration$12,970,000 
Estimated return of cash to buyer from escrow$(90,000)
Total estimated purchase price$44,914,000 
The total estimated purchase price was allocated to Purigen’s tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date, with the excess recorded as goodwill, as follows:
Cash & cash equivalents$290,000 
Accounts receivable259,000 
Inventory944,000 
Prepaid expenses and other current assets184,000 
Property and equipment, net805,000 
Restricted cash400,000 
Operating lease right-of-use assets1,636,000 
Other long-term assets533,000 
Intangible assets20,000,000 
Goodwill22,651,000 
Accounts payable and other accrued liabilities (1,152,000)
Operating lease liability (short-term and long-term)(1,636,000)
Net assets acquired$44,914,000 
The acquisition date fair values of identifiable intangible assets acquired are as following:
Developed technology$18,800,000 
Customer relationships200,000 
Tradename1,000,000 
Fair value of identifiable intangible assets$20,000,000 
The Company uses the income approach to derive the fair value of the identified intangible assets acquired. This approach calculates fair value by estimating future cash flows attributable to the assets and then discounting these cash flows to a present value using a risk-adjusted discount rate.
The customer relationships and trade name intangibles are being amortized on a straight-line basis over their estimated useful lives of 5 years. The developed technology intangible is being amortized on a straight-line basis over its estimated useful live of 15 years. Straight-line amortization was determined to be materially consistent with the pattern of expected use of the intangible assets.
As the Company began integrating Purigen’s operations with its existing operations during the fourth quarter of 2022, it is not practical or meaningful to distinguish Purigen’s expenses or net income or loss from that of the combined operations. Purigen revenues included in the Company’s consolidated statement of operations from the date of acquisition through December 31, 2022 were not significant.
BioDiscovery Acquisition
In October 2021, the Company, Starship Merger Sub I, Inc., a wholly owned subsidiary of the Company (“BioDiscovery Merger Sub I”), Starship Merger Sub II, LLC, a California limited liability company (“BioDiscovery Merger Sub II”), BioDiscovery, Inc., a California corporation (“Former BioDiscovery”), and Soheil Shams, solely in his capacity as the securityholders’ representative, entered into an Agreement and Plan of Merger (the “BioDiscovery Merger Agreement”), pursuant to which the Company agreed to acquire Former BioDiscovery. Pursuant to the terms and conditions of the BioDiscovery Merger Agreement, BioDiscovery Merger Sub I merged with and into Former BioDiscovery (“BioDiscovery Merger I”), whereupon the separate corporate existence of BioDiscovery Merger Sub I ceased, with Former BioDiscovery continuing as the surviving corporation of BioDiscovery Merger I and a wholly owned subsidiary of the Company. Immediately after BioDiscovery Merger I, pursuant to the terms and conditions of the BioDiscovery Merger Agreement, Former BioDiscovery merged with and into BioDiscovery Merger Sub II (“BioDiscovery Merger II”), whereupon the separate corporate existence of Former BioDiscovery ceased, with BioDiscovery Merger Sub II continuing as the surviving company of BioDiscovery Merger II and a wholly owned subsidiary of the Company. Concurrent with BioDiscovery Merger II, BioDiscovery Merger Sub II changed its name to that of our current subsidiary, BioDiscovery, LLC.
Pursuant to the BioDiscovery Merger Agreement, the Company completed the acquisition of BioDiscovery, LLC for a combination of approximately $52.3 million in cash and $40.0 million in shares of Company common stock. Of the $40.0 million in shares of Company common stock, approximately $26.0 million was subject to vesting based on continuous service. These shares vested in full in October 2022. See Note 9 to our consolidated financial statements for a discussion of the restricted stock vesting terms and accounting treatment.
As permitted under ASC 805, the Company is allowed a measurement period, which may not exceed one year, in which to complete its accounting for the acquisition. During the year ended December 31, 2022, the Company recorded an increase to the value of acquired contract liabilities in the amount of $0.3 million, a decrease to acquired deferred tax liabilities in the amount of $1.8 million, and an increase to acquired other assets in the amount of $0.1 million, with the offset recorded to goodwill. There were no additional purchase price adjustments made during 2022. The purchase price for BioDiscovery was finalized during the year ended December 31, 2022.
The following is the purchase price for the acquisition of BioDiscovery:
Cash$52,291,000 
Fair value of milestone consideration$9,000,000 
Return of cash to buyer from escrow$(694,000)
Shares common stock issued as consideration2,723,000 
Stock price per share on closing date$5.20 
Value of common stock consideration$14,159,000 
Total purchase price$74,756,000 
The total purchase price was allocated to BioDiscovery’s tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date, with the excess recorded as goodwill, as follows:
Cash and cash equivalents$3,205,000 
Accounts receivable1,782,000 
Right-of-use assets3,987,000 
Other assets280,000 
Intangible assets26,800,000 
Goodwill47,466,000 
Accounts payable and other accrued liabilities(193,000)
Right-of-use liabilities (short-term and long-term)(3,987,000)
Deferred tax liability(4,016,000)
Contract liabilities(568,000)
Net assets acquired$74,756,000 
The acquisition date fair values of identifiable intangible assets acquired are as following:
Customer relationships$3,000,000 
Developed technology22,800,000 
Tradename1,000,000 
Fair value of identifiable intangible assets$26,800,000 
The Company uses the income approach to derive the fair value of the identified intangible assets acquired. This approach calculates fair value by estimating future cash flows attributable to the assets and then discounting these cash flows to a present value using a risk-adjusted discount rate.
The developed technology, customer relationships and trade name intangibles are both being amortized on a straight-line basis over their estimated useful lives of five years. Straight-line amortization was determined to be materially consistent with the pattern of expected use of the intangible assets.
As the Company began integrating BioDiscovery’s operations with its existing operations during the fourth quarter of 2021, it was not practical or meaningful to distinguish BioDiscovery’s expenses or net income or loss from that of the combined operations.
The Company recognized approximately $1.8 million and $1.5 million of acquisition-related transaction costs for the acquisitions of Purigen and BioDiscovery, including financial advisor fees, legal expenses and accounting fees for the years ended December 31, 2022 and 2021, respectively. These costs are included in the consolidated statement of operations in selling, general and administrative expense.
Pro forma Financial Information
The unaudited pro forma financial information in the table below summarizes the combined results of operations for the Company, BioDiscovery and Purigen as if the companies had been combined as of the beginning of the year prior to the acquisition. These amounts have been calculated after applying the Company’s accounting policies and adjusting the results of BioDiscovery and Purigen to reflect the additional amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied at the beginning of the year prior to the acquisition. The following unaudited pro forma financial information is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved as if the acquisitions had taken place as of January 1, 2020 and January 1, 2021, respectively.
 Years Ended December 31,
(Unaudited)
20222021
Revenue$29,893,000 $24,086,000 
Net loss(143,309,000)(91,505,000)
Basic and diluted net loss per share
$(0.50)$(0.32)