18.

Acquisition activity

Imugen, Inc.

July 1, 2016,

the Company acquired substantially all of the assets of Imugen, a privately owned Massachusetts corporation focused on the development and performance of testing for tick-borne diseases. The assets acquired primarily related to Imugen’s proprietary testing technology and its Clinical Laboratory Improvements Amendment, or CLIA, approved and College of American Pathologists, or CAP, approved laboratory in Norwood, Massachusetts.

The consideration for the acquisition of Imugen consisted of

$22.2

million in cash. The Company filed the required financial statements (including pro forma financial statements) relating to the acquisition on a Form

-K/A on

September 9, 2016.

The acquisition of Imugen was accounted for under the acquisition method of accounting and the purchase price allocation was provisionally prepared during the

third

quarter of

2016.

These provisional amounts were finalized during the

fourth

quarter of

2016.

The table below summarizes the purchase price of the Imugen acquisition and the fair value of identified assets acquired at the acquisition date (in thousands):

Assets acquired:
Property and equipment	$	655
In-process research and development		9,200
Technology - clinical		5,100
Customer relationships		2,700
Trademarks / trade names		1,900
Total assets acquired		19,555
Add: Goodwill		2,645
Total consideration transferred	$	22,200

On the date of the acquisition, the fair value of acquired intangible assets was determined to be

$18.9

million using primarily the excess earnings method with significant inputs that are

not

observable, including estimates of the timing and cost required for product approval, revenue growth, gross margin, operating expenses and a discount rate of approximately

22%.

These intangible assets were considered to be Level

fair value assets due to the significant estimates and assumptions used by management in establishing the estimated fair value.

Goodwill of approximately

$2.6

million represented the excess of the purchase price of the acquired business over the fair value of the underlying net tangible and identifiable intangible assets and represented the expected synergistic benefits of the transaction, which related to an increase in future revenues for the Company as a result of leveraging Imugen’s systems and expertise of its employees. The goodwill also related to the knowledge and experience of the workforce in place. Goodwill and IPR&D are indefinite-lived intangible assets and are

not

amortized. Rather, they are reviewed for impairment at least annually. Goodwill related to the Imugen acquisition is deductible for tax purposes over a period of

years.

During the year ended

December 31, 2016,

the Company incurred transaction costs of

$475,000

associated with the acquisition of Imugen that were recorded within general and administrative expense in the statement of operations.

Actual results of operations for the year ended

December 31, 2016

acquired from Imugen are included in the consolidated financial statements from the date of the acquisition, including revenues in the amount of

$7.0

million and income from operations of

$730,000,

not

including transaction costs.

See Note

Goodwill and intangible assets

for information regarding impairment charges recorded on the intangible assets recorded in the acquisition of Imugen.

With the exception of the blood donor screening business, the bulk of the remaining assets acquired from Imugen were sold to Quest in the Transaction.

Immunetics, Inc.

October 12, 2016,

the Company, through its indirect subsidiary, Oxford Immunotec, Inc., acquired Immunetics, a Massachusetts based diagnostics company focused on developing specialized tests for infectious diseases, including tick-borne diseases, such as Lyme disease. The assets acquired primarily related to IPR&D for a test for Babesia, fixed assets, customer relationships, the “Immunetics” trade name, Immunetics’ proprietary testing technology for Lyme disease, and various government grants in progress at the time.

Total consideration consisted of

$6.0

million in cash and up to an additional

$6.0

million in cash payable on the achievement of certain revenue thresholds and pipeline related milestones over the following

three

years.

The acquisition of Immunetics was accounted for under the acquisition method of accounting and the purchase price allocation was provisionally prepared during the

fourth

quarter of

2016.

In the

second

quarter of

2017,

the Company finalized the accounting for the acquisition and recorded the following measurement period adjustments:

	●	the fair value of the acquired inventory decreased by $45,000 with corresponding increases to the clinical technology asset of $22,500 and to goodwill of $22,500
	●	the fair value of the acquired customer relationships decreased by $50,000 with a corresponding increase to goodwill
	●	the fair value of the Immunetics trade name decreased by $130,000 with a corresponding increase to goodwill
	●	goodwill decreased by $58,000 due to changes in deferred taxes

The impact on the consolidated statement of operations for the year ended

December 31, 2016

was a

$44,000

reduction in cost of product revenue, a

$26,000

reduction in sales and marketing expense and a

$58,000

increase in income tax expense.

The Company paid approximately

$655,000

in transaction costs associated with this transaction, which was included in general and administrative expense in the statement of operations for the year ended

December 31, 2016.

Total consideration was (in thousands):

Cash consideration	$	6,000
Estimated fair value of contingent consideration		3,444
Total consideration transferred	$	9,444

The table below summarizes the final purchase price allocation for the Immunetics acquisition (in thousands):

Assets acquired:
Cash	$	285
Accounts receivable, net		347
Inventory, net		375
Prepaid expenses and other assets		199
Property and equipment		787
In-process research and development		6,970
Customer relationships		350
Trade name		160
Technology – clinical		883
Grants		50
Total assets acquired		10,406
Liabilities assumed:
Accounts payable		(319	)
Accrued liabilities		(739	)
Other liabilities		(1,226	)
Total liabilities assumed		(2,284	)
Net assets acquired		8,122
Add: Goodwill		1,322
Total consideration transferred	$	9,444

On the date of the acquisition, the fair value of acquired intangible assets was determined to be

$8.4

million using primarily the excess earnings method with significant inputs that are

not

observable, including estimates of the timing and cost required for product approval, revenue growth, gross margin, operating expenses and discount rate rates ranging between

21.6%

and

60.2%,

depending on the levels of risk inherent in the various intangible assets. We considered these intangible assets to be Level

fair value assets due to the significant estimates and assumptions used by management in establishing the estimated fair value.

Actual results of operations for the year ended

December 31, 2016

acquired from Immunetics were included in the consolidated financial statements from the date of the acquisition, including revenues in the amount of

$392,000

and loss from operations of

$813,000,

not

including transaction costs.

Goodwill of approximately

$1.3

million represented the excess of the purchase price of the acquired business over the fair value of the underlying net tangible and identifiable intangible assets and represented the expected benefits of the transaction, which related to an increase in future revenues for the Company as a result of leveraging Immunetics’ systems and expertise of its employees. The goodwill was also related to the knowledge and experience of the workforce in place. Goodwill is an indefinite-lived intangible asset and is

not

amortized. Rather, it is reviewed for impairment at least annually. There was

evidence of any goodwill impairment at

December 31, 2018

and there were

goodwill impairment charges during the year ended

December 31, 2018.

The goodwill recognized was

not

deductible for tax purposes.

See Note

Goodwill and intangible assets

for information regarding impairment charges recorded on the intangible assets recorded in the acquisition of Immunetics.

The remaining definite-lived intangible assets recorded in the acquisition of Immunetics were written-off in the

fourth

quarter of

2018,

as a result of the Company’s change in strategic focus following the Transaction with Quest.