Note 9 - GKCE Acquisition

9 Months Ended

Sep. 30, 2021

Notes to Financial Statements

Business Combination Disclosure [Text Block]

Note 9.    GKCE Acquisition

On June 18, 2019, the Company entered into a Stock Purchase Agreement (the “Agreement”) to acquire Gamma Knife Center Ecuador S.A. (“GKCE”) from GKCE’s selling majority shareholders. GKCE is a well-established Gamma Knife operation founded in 2009 as a private clinic to introduce advanced stereotactic radiosurgery into Ecuador and continues to operate the only Gamma Knife unit in the country. The Company acquired GKCE for the continued expansion of its business internationally.

The Acquisition has been accounted for according to ASC 805 Business Combinations (“ASC 805”) using the acquisition method of accounting. Under the acquisition method of accounting, all assets acquired, including goodwill and other intangible assets, should be stated at fair value at the time of acquisition. The measurement period for the acquisition of GKCE ended June 12, 2021.  As of June 30, 2021, the allocation of purchase price consideration and the Company's analysis of fair value of certain tangible, intangible assets, and residual goodwill was complete. As of June 30, 2021, accounting for the Closing Date accounts receivable balances, allowance on the uncollected accounts receivable balances, and related liabilities, was complete.  

The following table summarizes the fair value of assets acquired and liabilities assumed at the date of acquisition:

	June 12, 2020
Cash and cash equivalents	$	432,000
Accounts receivable		854,000
Prepaid expense and other		22,000
Building		385,000
Land		19,000
Medical equipment		319,000
Purchased intangible assets		78,000
Goodwill		1,265,000
Total assets acquired	$	3,374,000
Accounts payable	$	(193,000	)
Income taxes payable		(141,000	)
Deferred income taxes		(66,000	)
Employee compensation and benefits		(91,000	)
Total liabilities assumed		(491,000	)
Consideration allocated to assets acquired and liabilities assumed	$	2,883,000
First working capital payment	$	(515,000	)
Estimated subsequent working capital payment		(368,000	)
Base purchase consideration	$	2,000,000

The Company has allocated the purchase price of GKCE to the tangible assets, liabilities, and intangible asset acquired, based on their estimated fair values. Goodwill represents the excess of the purchase price consideration over the fair value of the identifiable tangible and intangible assets assumed. The Company believes the amount of goodwill resulting from the acquisition is primarily attributable to expected synergies from an assembled and trained workforce and enhanced opportunities for growth and innovation. The goodwill resulting from the acquisition is not tax deductible.

The following table summarizes the fair value of the tangible assets acquired at the date of acquisition:

	Fair Value		Useful Life (in Years)
Building	$	385,000	20
Land		19,000
Medical equipment		302,000	2
Other fixed assets		17,000	2
Total tangible assets	$	723,000

The Company also acquired intangible assets with a fair value of $78,000. The intangible asset identified was GKCE's trade name and the Company assigned an indefinite useful life