Quarterly report pursuant to Section 13 or 15(d)

Discontinuing Operations

v3.22.1
Discontinuing Operations
3 Months Ended
Mar. 31, 2022
Discontinued Operations and Disposal Groups [Abstract]  
Discontinuing Operations

Note 3. Discontinuing Operations

 

In December 2021, the Company’s Board of Directors approved a plan to sell the vivoPharm Pty Ltd and related subsidiaries (“vivoPharm”) business to focus the Company on the development of neurological developmental and degenerative disease therapeutics. In December 2021, the Company engaged an investment bank to sell the vivoPharm business which is expected to be completed 2022.

 

The Company classified the vivoPharm business as held for sale as of December 31, 2021, and, given the significance of the change in the Company’s strategy, classified this business as discontinuing operations in these condensed consolidated financial statements. Therefore, the results for the three months ended March 31, 2021 have been retroactively restated to reflect the vivoPharm business as discontinuing operations. In connection with the reclassification of the vivoPharm business as held for sale in the fourth quarter of 2021, the Company completed a valuation of the net carrying value of this business and recorded a goodwill impairment charge of $20.2 million. The Company valued the vivoPharm business as of December 31, 2021 equally weighting public company revenue multiples as of December 31, 2021 and comparable transaction revenue multiples, which are classified as Level 3 measurements within the fair value hierarchy. The Company updated the valuation of the vivoPharm business as of March 31, 2022 based on equally weighting public company revenue multiples as of March 31, 2022 and comparable transaction revenue multiples. As a result of this analysis, the Company recorded an additional impairment charge of $4.3 million during the quarter ended March 31, 2022 consisting of the write-off of the remaining $2.2 million goodwill balance and reducing the cost basis of customer relationships and tradenames by $1.8 million and $0.3 million, respectively.

 

Also included in discontinuing operations are pre-Merger-related payables related to Cancer Genetic’s sale of its BioPharma and Clinical businesses (“Pre-Merger discontinuing operations”). As of March 31, 2022 and December 31, 2021, $409 thousand of liabilities relating to these businesses are classified as other current liabilities – discontinuing operations on the Company’s condensed consolidated balance sheets.

 

The following tables reflect the vivoPharm business operations for the three months ended March 31, 2022 and as of March 31, 2022 and December 31, 2021. As the vivoPharm business was acquired on March 30, 2021, the results of discontinuing operations for this business for the three-months ended March 31, 2021 were not significant.

 

Results of discontinuing operations were as follows for the three months ended March 31, 2022:

 

         
Revenue   $ 1,353  
Cost of goods sold     775  
General and administrative     1,045  
Impairment of goodwill and intangible assets     4,290  
Total operating costs and expenses     6,110  
Loss from discontinuing operations     (4,757 )
Total other income     -  
Loss from discontinuing operations before income taxes     (4,757 )
Income tax benefit     -  
Net loss from discontinuing operations   $ (4,757 )

 

 

Asset and liabilities of discontinuing operations were as follows as of March 31, 2022 and December 31, 2021:

 

    March 31,
2022
    December 31, 2021  
Accounts receivable   $ 542     $ 457  
Other current assets     459       345  
Assets of discontinuing operations - current     1,001       802  
                 
Fixed assets, net of accumulated depreciation     191       163  
Operating lease right-of-use assets     941       30  
Intangible assets, net     6,634       8,787  
Goodwill     -       2,164  
Other assets     362       364  
Assets of discontinuing operations - non-current     8,128       11,508  
                 
Accounts payable   $ 442     $ 358  
Accrued expense     417       418  
Obligation under operating lease, current     151       29  
Obligation under finance lease, current     34       32  
Deferred revenue     1,942       1,911  
Taxes payable     365       365  
Other current liabilities     409       409  
Liabilities of discontinued operations - current     3,760       3,522  
                 
Obligations under operating leases, less current     794       2  
Obligations under finance leases, less current     40       47  
Liabilities of discontinued operations - non-current     834       49  

 

During the three months ended March 31, 2022, the vivoPharm business signed an extension to its Hershey, Pennsylvania facility lease and a new lease in South Australia resulting in an increase of $1.0 million of right-of-use (“ROU”) assets and related liability within discontinuing operations.

 

Intangible assets consisted of the following as of March 31, 2022 and December 31, 2021:

 

   

March 31,

2022

    December 31, 2021  
Customer relationships   $ 6,187     $ 8,000  
Trade name     1,160       1,500  
Intangible assets, net     7,347       9,500  
Less accumulated amortization     (713 )     (713 )
Intangible assets, net   $ 6,634     $ 8,787  

 

Goodwill arising from the Merger was solely attributed to the vivoPharm business. The following is a roll forward of goodwill as of and for the three months ended March 31, 2022:

    2022  
       
Beginning balance, January 1   $ 2,164  
Purchase price adjustments     -  
Impairment charge     (2,164 )
Ending balance, March 31   $ -