|9 Months Ended|
Sep. 30, 2023
|Business Combinations [Abstract]|
On July 10, 2023, the Company entered into a share purchase agreement to acquire Physio-Assist SAS (Physio-Assist), which is in the business of the design, production, and marketing of medical devices for bronchial decongestion (airway clearance technique) for patients suffering from obstructive respiratory diseases. On September 14, 2023, the Company completed the acquisition of all of the issued and outstanding capital stock of Physio-Assist and its wholly-owned subsidiary PhysioAssist GmbH for a purchase price consisting of $32,250 in cash consideration and the fair value of a potential earnout of $3,178 based on future regulatory clearances. The Company incurred acquisition-related expenses of approximately $1,427 in the nine months ended September 30, 2023, which were recorded within general and administrative expense.
A potential earnout payment of either $13,000 (without a clinical trial requirement) or $11,000 (with a required clinical trial and minus related development costs) is dependent upon the achievement of one of two milestones related to U.S. Food and Drug Administration (FDA) de novo authorization or 510(k) clearance for the Simeox Airway Clearance System within four years of the date of the closing of the transaction. The fair value of the earnout liability was measured using the probability weighted expected return methodology and was discounted using a rate and probability that appropriately captures the risk associated with the obligation.
The acquisition was treated as a business combination. Assets and liabilities of the acquired company were recorded at their estimated fair values at the date of acquisition. The excess purchase price over the fair value of net tangible assets and identifiable intangible assets acquired has been allocated to goodwill. Goodwill represents the expected synergies with the existing business, the acquired assembled workforce, and future cash flows after the acquisition. The fair value assigned to the identifiable intangible assets was determined primarily by using the excess earnings method. The key assumptions included in the excess earnings method included revenue recognized, cost of revenue, and the discount rate.
The following table summarizes the preliminary allocation of the purchase price over the estimated fair value of the assets acquired and liabilities assumed in the acquisition of Physio-Assist:
Included in the acquired intangible assets were $32,300 of developed technology, $1,600 of customer relationships, and $200 related to trade name. The fair value measurements of the intangibles were based primarily on Level 3 inputs. Certain working capital accounts such as accounts receivables, inventories, other current assets, accounts payable, accrued expenses, and other current liabilities, as well as intangibles and related income tax amounts may be adjusted subsequent to the acquisition as they are realized at different values. These changes would be reflected as measurement period adjustments. The majority of the bank loans were settled subsequent to the acquisition date and prior to September 30, 2023.
The consolidated financial and operating results reflect the Physio-Assist operations beginning September 14, 2023. The following unaudited pro forma information for the three and nine months ended September 30, 2023 and the three and nine months ended September 30, 2022 presents the revenues and operating income assuming the acquisition of Physio-Assist had occurred as of January 1, 2022. Revenue and earnings from the acquisition date to September 30, 2023 are immaterial.
The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable).
Reference 1: http://www.xbrl.org/2003/role/disclosureRef