Merger Accounting (Tables)

9 Months Ended

Sep. 30, 2021

Business Combinations [Abstract]

Summary of Total Consideration for Merger

The total consideration for the Merger is as follows (in thousands, except per share data):

Number of shares of Eloxx common stock issued to Zikani stockholders (1)					7,597
Actual closing price per share of Company common stock as reported on the Nasdaq Capital Market on April 1, 2021	$	3.36
Adjusted for a discount for lack of marketability (“DLOM”) (1)		87.5	%	$	2.94
Estimated fair value of common stock consideration					22,335
Estimated transaction costs					1,003
Total preliminary estimated purchase price				$	23,338

(1) The shares of common stock issued as merger consideration are unregistered and subject to trading restriction under Rule 144. The Company estimated the DLOM based on consideration of multiple valuation methods. A DLOM is applied to the Company’s quoted common stock price to estimate the value of Eloxx common stock issued on a minority, non-marketable basis. The Eloxx Common Stock issued was offered and sold in transactions exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on Section 4(a)(2) thereof and Regulation D thereunder.

Summary of Purchase Price Allocation

The following table summarizes the preliminary allocation of the cost of the acquisition to the respective assets acquired and liabilities assumed, based on their relative fair values. The purchase price allocations were prepared on a preliminary basis and are subject to change as additional information becomes available concerning the fair value of the assets acquired and liabilities assumed. Any measurement period adjustments to the purchase price allocation will be made as soon as practicable but no later than one year from the date of acquisition.

Cash and cash equivalents	$	1,954
Restricted cash		191
Prepaid expenses and other current assets		296
Operating lease right-of-use asset		1,810
Property and equipment, net (2)		192
Intangible assets (3)		467
Total Assets		4,910
Accounts payable		1,219
Accrued expenses		748
Current portion of operating lease liability		588
Operating lease liability		1,222
Total liabilities		3,777
Net assets acquired		1,133
In process research and development acquired (4)		22,205
Purchase price		23,338

(2) Zikani’s property and equipment consists principally of laboratory and computer equipment, furniture and fixtures and leasehold improvements.

(3) Employee-related intangible assets relate to Zikani’s assembled workforce acquired in the Merger.

(4) IPR&D represents the allocated consideration based on the estimated fair value of Zikani’s IPR&D. In accordance with ASC 730, Research and Development, the fair value of IPR&D acquired in an asset acquisition with no alternative future use be allocated a portion of the consideration transferred and charged to expense at the acquisition date.  The actual purchase price allocated to IPR&D may change, subject to finalization of the fair value estimates and the determination of final transaction costs. The final valuation of the IPR&D consideration could differ significantly from the current estimate.