Asset Acquisition

9 Months Ended

Sep. 30, 2023

Business Combination and Asset Acquisition [Abstract]

On July 10, 2023, the Company completed the Evoqua Acquisition. At the Closing, the Company purchased customer relationships, equipment and inventory from Evoqua, which were related to manufacturing and selling of hemodialysis concentrates products, all of which are manufactured under a contract manufacturing agreement with a third-party organization.

Pursuant to the Purchase Agreement, total consideration was $17.4 million, comprising a cash payment at Closing of $12.2 million (inclusive of transaction costs) and two $2.5 million deferred payments, the first to be paid on the one-year anniversary of the Closing, which is included as a current liability on the Company's condensed consolidated balance sheet, and the second to be paid on the second anniversary of the Closing (collectively, the “deferred consideration”).

The transaction was accounted for as an asset acquisition, as the acquired assets did not meet the definition of a business as defined by ASC 805, Business Combinations.

The purchase price was allocated, on a relative fair value basis, to the assets acquired at the July 10, 2023 acquisition date as follows (table in thousands):



Consideration
Cash Payment	$	12,233
Deferred Consideration	5,000
Transaction Costs	128
Total Consideration	$	17,361

Assets Acquired
Customer Relationships Intangible Asset	$	11,035
Equipment	5,093
Inventory	1,233
Total Assets Acquired	$	17,361

The fair value of the customer relationships intangible asset was determined using a multi-period excess earnings method, a form of the income approach, which incorporates the estimated future cash flows to be generated from the customer base. Key assumptions included discounted cash flow, estimated life cycle and customer attrition rates. Customer relationships are being amortized over a period of 20 years. Given the recency of the purchase of the equipment in which the assets were recorded at fair value, the Company determined the fair value of the equipment using a cost approach, which considered

assumptions over the equipment's current replacement cost and useful life. Inventory was purchased directly from the contract manufacturer holding the inventory, which approximated fair value.

During the three and nine months ended September 30, 2023, the Company recorded amortization of its customer relationship intangible asset of $0.1 million, resulting in a net intangible asset of $10.9 million as of September 30, 2023.

Estimated future amortization expense on the Company's customer relationships intangible asset as of September 30, 2023 is as follows (table in thousands):


Year ended December 31:
2023 (remainder of year)	$	138
2024	552
2025	552
2026	552
2027	552
Thereafter	8,551
Total	$	10,897