Business combinations

6 Months Ended

Jun. 30, 2020

Business combinations

Business combinations

15. Business combinations

UmanDiagnostics AB

On August 1, 2019, the Company completed its acquisition of Uman for an aggregate purchase price of $21.2 million, comprised of (i) $15.7 million in cash plus (ii) 191,152 shares of common stock (representing $5.5 million based on the closing prices of the Company’s common stock on the Nasdaq Global Market on July 1, 2019 and August 1, 2019, the dates of issuance). The acquisition closed with respect to 95% of the outstanding shares of capital stock of Uman on July 1, 2019 and with respect to the remaining 5% of the outstanding shares of capital stock of Uman on August 1, 2019.

Uman supplies Nf-L antibodies and ELISA kits, which are widely recognized by researchers and biopharmaceutical and diagnostics companies world-wide as the premier solution for the detection of Nf-L to advance the development of therapeutics and diagnostics for neurodegenerative conditions. With the acquisition of Uman, the Company has secured a long-term source of supply for a critical technology. This acquisition was considered a business acquisition for accounting purposes.

The Company has accounted for the acquisition of Uman as a purchase of a business under U.S. GAAP. Under the acquisition method of accounting, the assets and liabilities of Uman are recorded as of the acquisition date of July 1, 2019, generally at their respective fair values, and consolidated with those of the Company. Purchase consideration in excess of the amounts recognized for the net assets acquired was recognized as goodwill and is not expected to be tax deductible in any taxing jurisdiction.

The following table summarizes the amounts recognized for the acquisition, net of $1.2 million in cash and cash equivalents acquired (in thousands):

Purchase price:
Cash and stock paid	$	21,217
Cash and cash equivalents acquired		1,221
Purchase price, net		19,996
Assets (liabilities) acquired:
Accounts receivable	$	638
Inventory		1,680
Prepaids and other current assets		114
Property and equipment		33
Intangibles		13,450
Goodwill		8,111
Accounts payable		(20)
Accrued expense and other current liabilities		(871)
Deferred tax liabilities		(3,139)
Total	$	19,996

Revenue and net income related to Uman’s operations was $0.4 million and $0.1 million, respectively, for the three months ended June 30, 2020, and $1.2 million and $0.6 million, respectively, for the six months ended June 30, 2020, and is included in the Company’s consolidated statements of operations.

The following unaudited pro forma information presents the condensed consolidated results of operations of the Company and Uman for the three and six months ended June 30, 2019 as if the acquisition of Uman had been completed on January 1, 2018. These pro forma condensed consolidated financial results have been prepared for comparative purposes only and include certain adjustments that reflect pro forma results of operations, such as increased amortization for the fair value of acquired intangible assets, increased cost of sales related to the inventory valuation adjustment, and adjustments relating to the tax effect of combining the Company and Uman businesses.

The unaudited pro forma results do not reflect any operating efficiencies or potential cost savings which may result from the consolidation of the operations of the Company and Uman. Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of the results of operations that actually would have been achieved had the acquisition occurred as of January 1, 2018, nor are they intended to represent or be indicative of future results of operations (in thousands):

	Three Months Ended			Six Months Ended
	June 30, 2019			June 30, 2019
Revenue (unaudited)	$	13,775	$	26,735
Pre-tax loss (unaudited)	$	(9,830)	$	(18,856)

The Company recorded no costs associated with the acquisition of Uman for each of the three and six months ended June 30, 2020. For each of the three and six months ended June 30, 2019, the Company incurred $0.9 million in costs associated with the acquisition of Uman. Costs associated with the acquisition of Uman are recorded as selling, general, and administrative expenses within the consolidated statements of operations.