Discontinued Operations

12 Months Ended

Dec. 31, 2022

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

4. Discontinued Operations

On August 31, 2022, the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Flagship Biosciences, Inc. (the “Purchaser”) pursuant to which the Purchaser agreed to (i) acquire substantially all of the assets of Interpace Pharma Solutions, Inc. used in its business of complex molecular analysis for the early diagnosis and treatment of cancer and supporting the development of targeted therapeutics (the “Business”) and (ii) assume and pay certain liabilities related to the purchased assets (collectively, the “Transaction”). The Transaction closed on August 31, 2022.

As consideration for the Transaction, Interpace received a total sale price of approximately $6.2 million after working capital and other adjustments ($0.5 million of which has been deposited into escrow). In addition, the Purchaser paid the Company an earnout of approximately $1.0 million based on revenue for the period beginning September 1, 2021 and ending August 31, 2022.

The Purchase Agreement includes a one-year commitment of Interpace not to compete with the Business, recruit or hire any former employees of the Subsidiary who accept employment with the Purchaser in connection with the Transaction, or divert or attempt to divert from Purchaser any business to be performed from any of the contracts or agreements with customers as set forth in the Purchase Agreement. The Purchase Agreement also contains customary representations and warranties, post-closing covenants and mutual indemnification obligations for, among other things, any inaccuracy or breach of any representation or warranty and any breach or non-fulfillment of any covenant.

In connection with the Transaction, on August 31, 2022, Interpace and Purchaser entered into a Shared Services Agreement (the “Shared Services Agreement”) pursuant to which Interpace agreed to provide, or cause its affiliates to provide, to the Purchaser certain services set forth in the Shared Services Agreement on a transitional basis and subject to the terms and conditions set forth in the Shared Services Agreement (the “Services”). As consideration for the Services provided by Interpace, Purchaser will pay Interpace the amounts specified for each Service as set forth in the Shared Services Agreement. The Company’s obligations to provide the Services will terminate with respect to each Service as set forth in the Shared Services Agreement.

The Purchaser is identified as a related party as an affiliate of Ampersand and an affiliate of BroadOak and have each provided equity financing to the Purchaser. Collectively, they own a majority of the Purchaser’s outstanding equity securities and are represented on its Board of Directors.

The Company intends to use the remaining net proceeds to fund its future business activities and for general working capital purposes. As a result of the sale, the gain on sale and all operations from Interpace Pharma Solutions have been classified as discontinued operations for all periods presented.

A reconciliation of the accounting for the Company’s Pharma Solutions business is as follows:

	Gain on Sale
Purchase price	$	7,000
Earnout received		1,043
Working capital adjustment, net		(766	)
Less: transaction costs		(307	)
Total net consideration	$	6,970
Assets and liabilities disposed of, net (1)		(6,970	)
Gain on sale	$	-

(1) includes goodwill and intangible assets written down prior to the Transaction. The goodwill write-down was approximately $8.4 million and the write-down of intangible assets was approximately $3.8 million.

The components of assets and liabilities classified as discontinued operations consist of the following as of December 31, 2022 and December 31, 2021:

	December 31, 2022		December 31, 2021
Accounts receivable, net	$	-	$	1,486
Other		-		1,607
Current assets of discontinued operations		-		3,093
Property and equipment, net		-		6,032
Other intangible assets, net		-		5,155
Goodwill		-		8,433
Other		-		2,767
Long-term assets of discontinued operations		-		22,387
Total assets	$	-	$	25,480
Accounts payable		-		1,320
Accrued salary and bonus		92		335
Other (1)		766		1,502
Current liabilities of discontinued operations		858		3,157
Operating lease liabilities, net of current portion		-		2,634
Other		-		71
Long-term liabilities of discontinued operations		-		2,705
Total liabilities	$	858	$	5,862

(1) Includes $766 of liabilities related to the former Commercial Services business unit.

The table below presents the significant components of its former Pharma Solutions business unit’s results included within loss from discontinued operations, net of tax in the consolidated statements of operations for the years ended December 31, 2022 and 2021.

	For The Years Ended
	December 31,
	2022			2021
Revenue, net	$	5,678		$	8,197
Loss from discontinued operations		(15,968	)		(7,671	)
Gain (loss) on sale of Pharma Solutions		-			-
Income tax expense		125			235
Loss from discontinued operations, net of tax	$	(16,093	)	$	(7,906	)

The income tax expense for the years ended December 31, 2022 and December 31, 2021 primarily pertained to the interest accrued on uncertain tax position liabilities.

Cash used from discontinued operations, operating activities, for the year ended December 31, 2022 was approximately $2.8 million. There was cash provided by discontinued operations, investing activities, for the year ended December 31, 2022 of $6.5 million which pertained to the net proceeds received from the Pharma Solutions sale. Cash used from discontinued operations, operating activities, for the year ended December 31, 2021 was approximately $4.9 million. There was cash used from discontinued operations, investing activities, for the year ended December 31, 2021 of $0.1 million. Depreciation and amortization expense within discontinued operations for the years ended December 31, 2022 and December 31, 2021 was $1.1 million and $1.8 million, respectively.