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Note 3 - Business Combination | 12 Months Ended
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Dec. 31, 2021
Notes to Financial Statements |
Business Combination Disclosure [Text Block] | NOTE 3. BUSINESS COMBINATION On November 5, 2021, the Company completed the DERMAdoctor Acquisition. Pursuant to the Acquisition Purchase Agreement, NovaBay acquired 100% of the membership units of DERMAdoctor from the Sellers for a closing purchase price of $12.0 million and potential future earn out payments of up to an aggregate of $3.0 million over a period of two calendar years post-closing. The following pro forma financial information is based on the historical financial statements of the Company and presents the Company’s results as if the business combination had occurred as of January 1, 2020 (in thousands):
|  | Unaudited Pro Forma |
|  | Year Ended December 31, |
|  | 2021 |  |  | 2020 |
Revenue |  | $ | 12,767 |  |  | $ | 18,170 |
Net Profit (Loss) |  | $ | (4,918 | ) |  | $ | (11,647 | )
The pro forma financial information is not indicative of the results of operations that the Company would have attained had the business combination occurred as of January 1, 2020, nor is the pro forma financial information indicative of the results of operations that may occur in the future. The unaudited pro forma information includes adjustments to reflect the $1.2 million of transaction costs as if they were incurred in the year ended December 31, 2020. The Company funded the closing purchase price in part through the 2021 Private Placement (See Note 14, “Stockholders’ Equity”). The Acquisition is accounted for as a business combination in accordance to ASC 805, Business Combinations, which requires that the assets acquired and liabilities assumed be recognized at their estimated fair values as of the Acquisition Closing. Goodwill represents the excess of the consideration transferred over the estimated fair value of assets acquired and liabilities assumed in a business combination. The following table sets forth the final allocation of the purchase price for the DERMAdoctor Acquisition to the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed from DERMAdoctor (in thousands):
|  | Fair Value |
Tangible net assets and liabilities: |  |  |  |
Cash and cash equivalents |  | $ | 12 |
Accounts receivable, net of allowance for doubtful accounts |  |  | 1,015 |
Inventory, net of allowance |  |  | 2,369 |
Prepaid expenses and other current assets |  |  | 150 |
Property and equipment, net |  |  | 62 |
Other intangible assets |  |  | 54 |
Accounts payable |  |  | (200 | )
Accrued liabilities |  |  | (683 | )
Total net assets |  |  | 2,779 |
Intangible Assets: |  |  |  |
Customer relationships |  |  | 290 |
Trade secrets / product formulations |  |  | 2,890 |
Trade names |  |  | 2,080 |
Total intangible assets |  |  | 5,260 |
Net assets acquired |  |  | 8,039 |
Purchased consideration |  |  | 12,561 |
Goodwill |  | $ | 4,528 |
Goodwill is primarily attributable to assembled workforce, expected synergies and other factors. The fair values of the identifiable intangible assets acquired at the date of the DERMAdoctor Acquisition are as follows (in thousands):
Intangible Asset |  | Fair Value |  |  | Useful Life (in years) |  |  | Amortization Method |
Customer relationships |  | $ | 290 |  |  |  | 7 |  |  | Straight line |
Trade secrets / product formulations |  |  | 2,890 |  |  |  | 9 |  |  | Straight line |
Trade names |  |  | 2,080 |  |  | Indefinite |  |  |  | N/A |
Goodwill |  |  | 4,528 |  |  | Indefinite |  |  |  | N/A |
|  | $ | 9,788 |  |  |  |  |  |  |  |  |
The valuations of intangible assets incorporate significant unobservable inputs and require significant judgment and estimates, including the amount and timing of future cash flows. The Company recognized approximately $1.2 million of transaction costs in the year ended December 31, 2021. These costs are recorded in “General and administrative expense” in the consolidated statements of operations and comprehensive loss. The Company’s management reviews financial results and manages the business on an aggregate basis in accordance with ASC 280. Therefore, financial results are reported in two operating segments: (1) Optical & Wound Care and (2) Skincare (See Note 21, “Segment Reporting” below).

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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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