Acquisitions

9 Months Ended

Mar. 31, 2020

Business Combinations [Abstract]

Acquisitions

16. Acquisitions

Solsys Medical, LLC

On September 27, 2019, the Company completed the Solsys Acquisition. The purchase price was approximately $108.6 million, based on the Company's issuance of 5,703,082 shares of Misonix common stock as acquisition consideration, valued at $19.05 per share. In addition, business transaction costs incurred in connection with the acquisition were $4.5 million, of which $1.8 million and were incurred in the nine months ended March 31, 2020. These fees were charged to general and administrative expenses on the Statement of Operations. In addition, approximately $1.4 million of the transaction costs were capitalized to additional paid in capital, in connection with the registration of the underlying stock issued in the transaction.

The transaction was accounted for using the acquisition method of accounting in accordance with FASB ASC Topic 805. U.S. GAAP requires that one of the companies in the transactions be designated as the acquirer for accounting purposes based on the evidence available. Misonix was treated as the acquiring entity for accounting purposes.

The preliminary Solsys purchase price allocation as of March 31, 2020, is shown in the following table:

Cash	$	5,525,601
Accounts receivable		5,797,020
Inventory		98,911
Prepaid expenses		88,863
Indemnified asset - sales tax		250,000
Property and equipment		673,353
Lease assets		946,617
Customer relationships		9,500,000
Trade names		12,800,000
Non-competition agreements		200,000
Accounts payable and other current liabilities		(4,794,878	)
Lease liabilities		(855,732	)
Deferred tax liability		(4,540,000	)
Notes payable		(23,915,701	)
Total identifiable net assets		1,774,054
Goodwill		106,869,656
Total consideration	$	108,643,710

The fair values of the Solsys assets and liabilities are provisional and were determined based on preliminary estimates and assumptions that management believes are reasonable. Goodwill decreased by $1,963,509 and $2,217,026 during the three and nine months ended March 31, 2020, respectively, as a result of refinements relating to the purchase price valuation of Solsys. The preliminary purchase price allocation is subject to further refinement and may require significant adjustments to arrive at the final purchase price allocation. These adjustments will primarily relate to certain short-term assets, intangible assets, and certain liabilities. The final determination of the fair value of certain assets and liabilities will be completed as soon as the necessary information is available, including the completion of a valuation of the tangible and intangible assets, but no later than one year from the acquisition date.

The goodwill from the acquisition of Solsys, which is fully deductible for tax purposes, consists largely of synergies and economies of scale expected from combining the operations of Solsys and the Company's existing business.

The estimate of fair value of the Solsys identifiable intangible assets was determined primarily using the "income approach," which requires a forecast of all of the expected future cash flows either through the use of the multi-period excess earnings method or the relief-from-royalty method. Some of the more significant assumptions inherent in the development of intangible asset values include: the amount and timing of projected future cash flows, the discount rate selected to measure the risks inherent in the future cash flows, the assessment of the intangible asset's life cycle, as well as other factors. The following table summarizes key information underlying intangible assets related to the Solsys Acquisition:

	March 31,			June 30,		Amortization
	2020			2019		Period
Customer relationships	$	9,500,000		$	-	15 years
Trade names		12,800,000			-	15 years
Non-competition agreements		200,000			-	1 year
Total		22,500,000			-
Less accumulated amortization		(797,197	)		-
					-
Net intangible assets	$	21,702,803		$	-

Solsys' operations were consolidated with those of the Company for the period September 27, 2019 through March 31, 2020. Had the acquisition occurred as of the beginning of fiscal 2018, revenue and net loss, on a pro forma basis excluding transaction fees and the one-time tax benefit, for the combined company would have been as follows:

	For the nine months ended
	March 31,
	2020			2019
Revenue	$	57,151,615		$	47,736,646
Net loss	$	(11,542,176	)	$	(13,433,741	)

Pro forma net loss for the nine months ended March 31, 2020 was adjusted to exclude $4.3 million of acquisition-related costs, exclude $4.5 million of acquisition-related income tax benefit, include $0.2 million of additional interest expense related to new and refinanced borrowings that occurred as a result of the acquisition, and to include $0.4 million of amortization expense related to the intangible assets acquired.

Pro forma net loss for the nine months ended March 31, 2019 was adjusted to include $4.3 million of acquisition-related costs, include $4.5 million of acquisition-related income tax benefit, include $0.5 million of additional interest expense related to new and refinanced borrowings that occurred as a result of the acquisition, and include $1.3 million of amortization expense related to the intangible assets acquired.