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Assets Held for Sale and Discontinued Operations
9 Months Ended
Sep. 30, 2021
Discontinued Operations and Disposal Groups [Abstract]  
Assets Held for Sale and Discontinued Operations

4. Assets Held for Sale and Discontinued Operations

In June 2021, the Company announced its plan to reallocate resources to research and development to better position the business for future growth. The plan includes the closure of the Progenity genetics laboratory in Ann Arbor, Michigan and the potential divestiture of Avero. The Company will continue testing out of the Avero laboratory while it continues to explore ways of monetizing this asset. This plan represents a strategic business shift having a major effect on the Company's operations and financial results. The Company has stopped providing genetic laboratory-developed test services in its Ann Arbor, Michigan laboratory and determined that the Laboratory Operations, including Avero, met the requirements of discontinued operations. The Company has classified the results of its Laboratory Operations as discontinued operations in its condensed consolidated statements of operations

and condensed consolidated statements of cash flows for all periods presented. The Company recognized a loss of $0.6 million and $19.9 million for the three and nine months ended September 30, 2021, respectively, for contract terminations, severance, inventory and fixed asset write-downs in discontinued operations related to the Progenity genetics laboratory shutdown. Additionally, the related assets and liabilities have been reported as assets and liabilities held for sale in the Company’s condensed consolidated balance sheet as of September 30, 2021 and December 31, 2020.

The following table presents the combined results of discontinued operations of the Laboratory Operations (in thousands):

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenues

 

$

9,536

 

 

$

25,887

 

 

$

52,137

 

 

$

59,981

 

Cost of sales

 

 

10,221

 

 

 

23,601

 

 

 

58,687

 

 

 

72,005

 

Gross (loss) profit

 

 

(685

)

 

 

2,286

 

 

 

(6,550

)

 

 

(12,024

)

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

 

 

 

 

 

 

1,590

 

 

 

 

Selling and marketing

 

 

2,744

 

 

 

11,681

 

 

 

35,661

 

 

 

35,618

 

General and administrative

 

 

3,531

 

 

 

4,510

 

 

 

15,064

 

 

 

14,378

 

Total operating expenses

 

 

6,275

 

 

 

16,191

 

 

 

52,315

 

 

 

49,996

 

Interest and other income (expense), net

 

 

90

 

 

 

(18

)

 

 

61

 

 

 

139

 

Net loss from discontinued operations

 

$

(6,870

)

 

$

(13,923

)

 

$

(58,804

)

 

$

(61,881

)

The following table presents the carrying amounts of the classes of assets and liabilities held for sale related to the Laboratory Operations as of September 30, 2021 and December 31, 2020 (in thousands):

 

 

September 30,
2021

 

 

December 31,
2020

 

 

 

 

 

 

 

 

Carrying amounts of assets of disposal group held for sale

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

425

 

 

$

556

 

Accounts receivable, net

 

 

3,626

 

 

 

6,047

 

Inventory

 

 

2,609

 

 

 

12,220

 

Prepaid expenses and other current assets

 

 

1,811

 

 

 

1,254

 

Total current assets of disposal group held for sale (1)

 

 

 

 

 

20,077

 

Property and equipment, net

 

 

8,441

 

 

 

9,735

 

Other assets

 

 

30

 

 

 

30

 

Goodwill

 

 

6,219

 

 

 

6,219

 

Other intangible assets, net

 

 

3,384

 

 

 

3,843

 

Total assets of disposal group held for sale (1)

 

$

26,545

 

 

$

39,904

 

Carrying amounts of liabilities of disposal group held for sale

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

 

5,044

 

 

 

4,722

 

Accrued expenses and other current liabilities

 

 

5,246

 

 

 

3,503

 

Current portion of mortgages payable

 

 

1,570

 

 

 

198

 

Current portion of capital lease obligations

 

 

62

 

 

 

46

 

Total current liabilities of disposal group held for sale (1)

 

 

11,922

 

 

 

8,469

 

Capital lease obligations, net of current portion

 

 

 

 

 

4

 

Mortgages payable, net of current portion

 

 

 

 

 

1,520

 

Other long-term liabilities

 

 

 

 

 

428

 

Total liabilities of disposal group held for sale (1)

 

$

11,922

 

 

$

10,421

 

 

(1) The assets and liabilities of the Laboratory Operations are classified as held for sale and are classified as current in the unaudited condensed consolidated balance sheet at September 30, 2021, because they are expected to be sold within one year.