Note 2 - Acquisition of Totipotent RX

12 Months Ended

Jun. 30, 2015

Notes to Financial Statements

Business Combination Disclosure [Text Block]

2.     

Acquisition

of Totipotent

RX

On February 18, 2014, the Company consummated the acquisition of TotipotentRX by merger pursuant to the Agreement and Plan of Merger and Reorganization (Merger Agreement). TotipotentRX was a privately held biomedical technology company specializing in human clinical trials in the field of regenerative medicine and a provider of cell-based therapies to the Fortis Healthcare System. TotipotentRX had two wholly-owned subsidiaries, TotipotentRX Cell Therapy Pvt. Ltd. (TotiRX India) and TotipotentSC Product Pvt. Ltd. (TotiSC India). The two subsidiaries are located in Gurgaon, a suburb of New Delhi, India. The Company believes that TotipotentRX has the depth of clinical, scientific and biological experience necessary to fully develop and effectively navigate the evolving regulatory pathways necessary to commercialize approved blockbuster cell therapies.

The acquisition was accounted for under the acquisition method of accounting for business combinations in accordance with FASB ASC 805,

Business Combinations

, which requires, among other things, that the assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. Acquisition-related costs are not included as a component of the acquisition accounting, but are recognized as expenses in the periods in which the costs are incurred. Acquisition related costs of $1,715 for the year ended June 30, 2014 were included in general and administrative expenses.

Pursuant to the Merger Agreement, TotipotentRX shareholders were issued in the aggregate 12,490,841 shares of the Company’s common stock, or 38% of the then outstanding common stock of the combined company, in exchange for all the TotipotentRX common stock outstanding and the Company assumed warrants of TotipotentRX representing the right to purchase approximately 61,020 shares of the Company’s common stock. All outstanding stock options to purchase shares of the TotipotentRX common stock were exercised or cancelled.

Allocation of Consideration Transferred to Net Assets Acquired

The following represents the consideration transferred to acquire TotipotentRX and its determination of the fair value of identifiable assets acquired and liabilities assumed at the acquisition date. The Company issued 12,490,841 shares of its common stock that had a total fair value of $27,105 based on the closing market price on February 18, 2014, the acquisition date. The Company also assumed 2,004 TotipotentRX warrants, issuing 61,020 warrants to replace them. The warrants, which are convertible into 61,020 shares of common stock, had a total fair value of $52. We also assumed $130 for the settlement of existing receivables and payables between the parties pre-merger. Property and equipment was stated at its historical cost basis, less accumulated depreciation, until its appropriate fair value was determined in the second quarter of fiscal 2015. The Company acquired $232 gross contractual amounts receivable. The difference between the gross contractual amount and the fair value of receivables is the best estimate of the contractual cash flows not expected to be collected. Certain adjustments related to TotipotentRX’s opening balance sheet were finalized during the second quarter of fiscal 2015. As a result, the carrying amount of equipment acquired in the acquisition was increased by $59, with a corresponding decrease to goodwill.

Purchase Price:
ThermoGenesis common shares and warrants			$	27,287
Fair value of assets acquired:
Cash	$	351
Receivables		171
Inventories		191
Clinical protocols		19,870
Other intangible assets		2,187
Property and equipment		384
Other assets		132
Total assets		23,286
Fair value of liabilities assumed:
Accounts payable		514
Related party notes payable		337
Deferred tax liability		8,048
Other liabilities		295
Total liabilities		9,194
Net assets acquired				14,092
Goodwill			$	13,195

Supplemental Pro Forma Data

The Company used the acquisition method of accounting to account for the Totipotent RX acquisition and, accordingly, the results of TotipotentRX are included in the Company’s consolidated financial statements for the period subsequent to the date of acquisition. The following unaudited supplemental pro forma data for the year ended June 30, 2014 present consolidated information as if the acquisition had been completed on July 1, 2013. The pro forma results were calculated by combining the results of ThermoGenesis Corp with the stand-alone results of Totipotent RX for the pre-acquisition periods:

	Year Ended
	June 30, 2014
Net revenues	$	16,619
Net loss	$	(7,922	)

The unaudited pro forma financial information is based on the allocation of consideration transferred to net assets acquired and reflects certain adjustments related to the acquisition. Such adjustments include the incremental amortization expense in connection with recording acquired identifiable intangible assets at fair value, the incremental payroll expense associated with the new executive salaries resulting from the merger, and the elimination of the impact of historical transactions between ThermoGenesis and TotipotentRX that would have been treated as intercompany transactions had the companies been consolidated.  The unaudited pro forma financial information also excludes certain non-recurring expenses directly attributable to the merger in the amount of $1,958 for the year ended June 30, 2014.

Repayment of Related Party Notes Payable

As of February 18, 2014, TotipotentRX owed $337 to two of its officers who have since joined the Company. In the Merger Agreement, Cesca agreed to pay off the notes payable at closing as follows: $75 cash to each officer for a total of $150 and the remainder in shares of common stock. Approximately 82,000 shares of common stock were issued to satisfy the remainder of the debt.