Business Combination

9 Months Ended

Sep. 30, 2015

Business Combinations [Abstract]

Business Combination

Note 4 – Business Combination

On July 14, 2015, the Company completed the Merger by acquiring 100% of the capital stock of AdvanDx in the Merger in a taxable transaction. AdvanDx researches, develops and markets advanced in vitro diagnostic kits for the diagnosis and prevention of infectious diseases, and sells its products principally to hospitals and clinical laboratories in the United States and Europe. The Company acquired AdvanDx principally to exploit AdvanDx’s diagnostic capabilities with respect to MDROs and leverage AdvanDx’s relationships with hospitals and clinical laboratories to accelerate the sales of OpGen’s products and services.

Pursuant to an Agreement and Plan of Merger (the “Merger Agreement”), Velox Acquisition Corp. merged with and into AdvanDx, Inc. with AdvanDx, Inc. surviving as a wholly owned subsidiary of the Company in accordance with the General Corporation Law of the State of Delaware. Under the terms of the Merger Agreement, the merger consideration consisted of an aggregate 681,818 shares of the Company's common stock with a value of $2.6 million (the “Merger Consideration”), which Merger Consideration was distributed in accordance with the liquidation preferences set forth in the AdvanDx, Inc. Restated Certificate of Incorporation, as amended.

The Company accounted for its acquisition of AdvanDx by recording all tangible and intangible assets acquired and liabilities assumed at their estimated fair values on the acquisition date, with the remaining unallocated purchase price recorded as goodwill. The fair value assigned to identifiable intangible assets acquired was determined using an income approach for trade names and customer relationships, and a cost approach for technology. The fair values are based on the Company’s estimates and may be adjusted from time to time, but no later than July 13, 2016, as better information becomes available. The Company received stepped-up bases in the acquired assets and liabilities and therefore did not recognize any deferred income tax assets and liabilities. The following represents the preliminary allocation of the purchase price:

Total purchase price - fair value of common stock issued	$	2,584,090
Fair value of tangible assets acquired:
Cash		1,367,211
Receivables		557,112
Inventory		1,073,855
Property and equipment		250,636
Other assets		359,587
Fair value of identifiable intangible assets acquired:
Customer relationships		1,094,000
Developed technology		458,000
Trademarks and tradenames		461,000
Fair value of goodwill		291,747
Fair value of liabilities assumed		3,329,058
	$	2,584,090

The total consideration paid in the acquisition exceeded the estimated fair value of the tangible and identifiable intangible assets acquired and liabilities assumed, resulting in approximately $0.3 million of goodwill. Goodwill, primarily related to expected synergies gained from combining operations, sales growth from future product offerings and customers, together with certain intangible assets that do not qualify for separate recognition, including assembled workforce, is tax deductible in all relevant taxing jurisdictions. The Company expensed acquisition-related costs of approximately $0.5 million related to the Merger in 2015. AdvanDx recognized approximately $0.8 million of revenue and $0.8 million of net losses from the acquisition date to September 30, 2015, which results are included in the Company’s 2015 interim condensed consolidated financial statements.

The following unaudited pro forma financial information summarizes the results of operations for the periods indicated as if the Merger had been completed as of January 1, 2014. Pro forma information primarily reflects adjustments relating to (i) elimination of the interest on AdvanDx’s outstanding debt, and (ii) the amortization of intangibles acquired. The pro forma amounts do not purport to be indicative of the results that would have actually been obtained if the acquisition occurred as of January 1, 2014 or that may be obtained in the future:

Unaudited pro forma results	Nine months ended				Three months ended
	September 30,		September 30,		September 30,		September 30,
	2015		2014		2015		2014
Revenues	$	3,902,337	$	6,631,510	$	1,126,530	$	1,955,894
Net loss	$	(15,623,109)	$	(11,784,997)	$	(4,650,817)	$	(4,517,541)
Net loss per share	$	(2.29)	$	(11.72)	$	(0.38)	$	(4.49)