Asset Acquisition

9 Months Ended

Sep. 30, 2024

Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]

On July 10, 2023, the Company executed and consummated the transactions contemplated by an Asset Purchase Agreement (the “Purchase Agreement”) with Evoqua (the "Evoqua Acquisition"). Subject to the terms and conditions of the Purchase Agreement, at the closing of the transaction (the “Closing”), the Company purchased customer relationships, equipment and inventory from Evoqua, which were related to its manufacturing and selling of hemodialysis concentrates products, all of which are manufactured under a contract manufacturing agreement with a third-party organization.

Pursuant to the Purchase Agreement, total consideration was $17.4 million, comprising a cash payment at Closing of $12.4 million (inclusive of transaction costs) and two $2.5 million deferred payments. On July 12, 2024, the Company and Evoqua executed an amendment to the Purchase Agreement (the "First Amendment"), which stipulated that the first deferred payment would be partially offset by $0.3 million to reimburse the Company for certain expenses incurred following the close of the Evoqua Acquisition and split the first deferred payment into four quarterly installments to be paid through April 2025. The First Amendment also split the second deferred payment into four quarterly installments to be paid from July 2025 through April 2026. During the three and nine months ended September 30, 2024, the Company paid the first installment of the first deferred payment of $0.6 million. The remaining installments due within the next twelve months are included as Deferred Consideration - Current on the Company's condensed consolidated balance sheets.

The transaction was accounted for as an asset acquisition, as the acquired assets did not meet the definition of a business as defined by Accounting Standards Codification ("ASC") 805, Business Combinations.

The purchase price was allocated, on a relative fair value basis, to the assets acquired at the July 10, 2023 acquisition date as follows (table in thousands):



Consideration
Cash Payment	$	12,233
Deferred Consideration	5,000
Transaction Costs	128
Total Consideration	$	17,361

Assets Acquired
Customer Relationships Intangible Asset	$	11,035
Equipment	5,093
Inventory	1,233
Total Assets Acquired	$	17,361

The fair value of the customer relationships intangible asset was determined using a multi-period excess earnings method, a form of the income approach, which incorporates the estimated future cash flows to be generated from the customer base. Key assumptions included discounted cash flow, estimated life cycle and customer attrition rates. Customer relationships are being amortized over a period of 20 years. Given that the acquired equipment had been recently purchased and recorded at fair value, the Company determined the fair value of the equipment using a cost approach, which considered assumptions over the equipment's current replacement cost and useful life. Inventory was purchased directly from the contract manufacturer holding the inventory, which approximated fair value.

During the three and nine months ended September 30, 2024, the Company recorded amortization of its customer relationship intangible asset of $0.1 million and $0.4 million, respectively, resulting in a net intangible asset of $10.3 million as of September 30, 2024. During the three and nine months ended September 30, 2023, the Company recorded amortization of its customer relationship intangible asset of $0.1 million.

Estimated future amortization expense on the Company's customer relationships intangible asset as of September 30, 2024 is as follows (table in thousands):


Year ending December 31:
2024 (remainder of year)	$	138
2025	552
2026	552
2027	552
2028	552
Thereafter	7,999
Total	$	10,345