Acquisitions

9 Months Ended

Sep. 30, 2024

Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]

Acquisitions

3. Acquisitions

Acquisition of Access Point Technologies EP, Inc. (“APT”)

On July 31, 2024, the Company acquired all the shares of capital stock of Access Point Technologies EP, Inc. (“APT”), a Minnesota corporation, from APT Holding Company, Inc., a Minnesota corporation. APT designs, manufactures, and commercializes a portfolio of differentiated high-quality diagnostic catheters used during cardiac ablation procedures that are commercially available across key global geographies.

The acquisition of APT was accounted for as a business combination using the acquisition method of accounting. The consideration included an upfront payment and additional contingent payments based upon the achievement of key regulatory and commercial milestones. At closing, the Company issued 1,486,620 shares of its common stock (the “Upfront Stock Consideration”) with a value of $3.0 million. The Share Purchase Agreement obligated us to file a resale registration statement relating to the Upfront Stock Consideration and additional Earnout Shares. The registration statement covered the 1,486,620 Closing Shares and an estimated 4,613,380 additional Earnout Shares. However, the exact number of shares that may be issued under the Share Purchase Agreement for such milestones will be calculated based on the average of the closing per share price of Stereotaxis common stock immediately prior to the dates such revenue performance and/or regulatory milestones are achieved, up to $24.0 million in total value through September 30, 2029, not to exceed 19.9% of the total number of shares of the Company’s common stock issued and outstanding immediately prior to July 31, 2024 (the “Share Cap Limitation”). In addition, the vesting of the right to receive the Earnout Shares would be accelerated in the event of a change of control of Stereotaxis, based on a probability-weighted average estimate of the potential to achieve any remaining milestones, discounted to its net present value taking into account expected time when earnouts related to the milestones would become payable through September 30, 2029. The preliminary estimated fair value of the contingent consideration related to the additional earnout shares at the acquisition date is $10,877. The total contingent consideration including the upfront payment is preliminarily estimated to be $13,877.

The following table summarizes the preliminary estimated fair value of the assets acquired and liabilities assumed for APT as of the acquisition date (in thousands):

(in thousands)	July 31, 2024
	(Unaudited)
Assets acquired:
Current assets
Cash	$	108
Accounts receivable, net of allowance of $19		698
Inventories, net		1,202
Prepaid expenses and other current assets		16
Total current assets		2,024
Property and equipment		825
Goodwill		4,494
Intangible assets		8,340
Total assets acquired	$	15,683
Liabilities assumed:
Current liabilities
Accounts payable	$	1,765
Accrued liabilities		41
Total liabilities assumed	$	1,806
Net assets acquired	$	13,877

The above purchase price allocation is preliminary and subject to revision as additional information about the fair value of individual assets and liabilities becomes available. The preliminary measurement of contingent consideration, accounts receivable, inventory, prepaid expenses and other current assets, property and equipment, intangible assets, goodwill, accounts payable, and accrued liabilities are subject to change. Furthermore, the Company is still evaluating the appropriate useful lives for the acquired property and equipment and intangible assets. A change in the estimated fair value of the net assets acquired will change the amount of the purchase price allocated to goodwill.

For purposes of the above allocation, we based our preliminary estimate of the fair values for contingent consideration, intangible assets, and property and equipment on valuation studies performed by third-party valuation firms. We used various valuation methods, including discounted cash flows, distributor method, excess earnings, and relief from royalty method to estimate the preliminary fair value of the identified intangible assets. The preliminary fair value of the contingent consideration was determined using a Monte Carlo simulation and probability based approaches. The Cost approach was utilized to determine the preliminary fair value of property and equipment. Goodwill and other intangible assets reflected above were determined to meet the criteria for recognition apart from tangible assets acquired and liabilities assumed. The goodwill is primarily attributable to APT’s in-house research and development team versus using third party developers and the expansion of manufacturing capacity. The tax basis in the acquired goodwill is zero.

The Company’s consolidated statement of earnings for the three and nine months ended September 30, 2024, includes APT post-acquisition revenue of $643 and net loss of $1,195. Net loss for the three and nine months ended September 30, 2024, includes $672 of expense due to the revaluation of the contingent consideration as of the reporting date. This expense is recognized within General and Administrative expenses for the three and nine months ended September 30, 2024.

(in thousands)	(Unaudited)
Revenue	$	643
Net income (loss)	$	(1,195	)

The following represents the pro forma consolidated revenue as if APT had been included in the consolidated results of the Company. Revenue was $9,686 and $23,519 for the three and nine months ended September 30, 2024, and $9,349 and $27,404 for the three and nine months for the period ended September 30, 2023.

The Company incurred acquisition costs of $235 and $368 that were recognized within General and Administrative expenses for the three and nine months ended September 30, 2024.

The intangible assets related to the acquisition consisted of the following:

Unaudited	Fair Value (in thousands)		Amortization Period (in years)
Intangible assets subject to amortization:
Developed Technology		7,610		8.0
Customer Relationships		310		10.0
Trademark		420		5.0
Total intangible assets subject to amortization		8,340
Intangible assets not subject to amortization
Goodwill		4,494		N/A
Total intangible assets not subject to amortization		4,494
Total intangible assets		12,834
Weighted average amortization period				7.9