3. Mergers and Acquisitions

Medistem Acquisition

On March 6, 2014, the Company acquired 100% of the outstanding common stock and securities convertible into common stock of California-based Medistem, Inc. (“Medistem”), a pioneer in the development of Endometrial Regenerative Cells (“ERCs”), for a combination of cash and Company common stock. The acquisition allows the Company to employ its synthetic biology platforms to engineer a diverse array of cell-based therapeutic candidates using Medistem’s multipotent ERCs. Pursuant to the terms of the merger agreement, Medistem equity holders were entitled to receive 714,144 shares of the Company’s common stock and $4,920 in cash in exchange for the outstanding Medistem common stock and securities convertible into common stock. Additionally, Medistem had issued the Company two promissory notes in the amount of $707, including accrued interest, which was settled with the closing of the merger. The results of Medistem’s operations subsequent to March 6, 2014 have been included in the consolidated financial statements.

The fair value of the total consideration transferred was $24,995. The acquisition date fair value of each class of consideration transferred was as follows:


Cash	$	4,920
Common shares		19,368
Settlement of promissory notes		707

	$	24,995

The fair value of the shares of the Company’s common stock issued was based on the quoted closing price of the Company’s common stock on March 6, 2014. The preliminary estimated fair value of assets acquired and liabilities assumed at the acquisition date is shown below:


Cash	$	8

Total assets acquired		8

Accounts payable		644
Accrued compensation and benefits		85
Other accrued expenses		150

Total liabilities assumed		879

Net liabilities assumed		(871	)
Goodwill		25,866

Total consideration	$	24,995

The fair value of assets acquired and liabilities assumed at the acquisition date are considered preliminary and is subject to revision when the identification and valuation of intangible assets is finalized upon receipt of the final valuation report from a third party valuation expert. The Company expects substantially all of the excess purchase price over net liabilities assumed to be allocated to goodwill due to buyer-specific synergies between the Company’s and Medistem’s technologies present and, as such, has initially included the excess as goodwill in the table above. The goodwill is not expected to be deductible for tax purposes.

As of March 31, 2014, the Company has incurred $661 of acquisition related costs, of which $291 is included in general and administrative expenses in the accompanying consolidated statement of operations for the three months ended March 31, 2014.

The results of operations of Medistem are included in the consolidated statement of operations beginning on the day after the acquisition date. The following unaudited condensed pro forma financial information for the three months ended March 31, 2014 and 2013 is presented as if the acquisition had been consummated on January 1, 2013:


	Three months ended March 31,
	2014		2013
	Pro forma
Revenues	$	7,837	$	3,976
Income (loss) before tax		2,973		(36,631	)
Net income (loss)		2,667		(36,631	)

Net loss attributable to the noncontrolling interests		866		51

Net income (loss) attributable to Intrexon		3,533		(36,580	)

Accretion of dividends on redeemable convertible preferred stock		—		(6,405	)

Net income (loss) attributable to common shareholders	$	3,533	$	(42,985	)