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Note 10 - Rhode Island Acquisition
 6 Months Ended
Jun. 30, 2025
Notes to Financial Statements  
Business Combination [Text Block]

Note 10. Rhode Island Acquisition

 

On  November 10, 2023, the Company entered into the IPA with GenesisCare and GC Holdings, pursuant to which GenesisCare agreed to sell to the Company its entire equity interest in each of the RI Companies and to assign certain payor contacts to the Company for a cash purchase price of $2,850,000 (such transaction, the “RI Acquisition”).  The equity interests acquired by the Company under the IPA equate to a 60% interest in each RI Company. The RI Companies operate three functional radiation therapy cancer centers in Rhode Island. The Company acquired the RI Companies to expand its growing direct patient services business model in the United States and continue to diversify its cancer treatment product offerings.  

 

On  March 1, 2024, the Company, GenesisCare and GC Holdings entered into a First Amendment to the Investment Agreement pursuant to which the parties agreed to extend the date on which a party could terminate the IPA if the closing conditions had not been met (the “Permitted Termination Date”) from  March 10, 2024 to  April 30, 2024. On  April 18, 2024, the parties agreed to a Second Amendment to the Investment Agreement pursuant to which GenesisCare agreed to sell a GE Discovery RT CT Simulator (“CT Sim”) to the Company for $175,000, payment for which was required 5 days following the close of the acquisition. On   April 24 2024, the Company, GenesisCare and GC Holdings, entered into a Third Amendment to the Investment Agreement that further extended the Permitted Termination Date to  May 31, 2024. On  May 7, 2024, the parties entered into a Fourth Amendment to the Investment Purchase Agreement, pursuant to which GenesisCare agreed to transfer certain assets and payor contracts to the RI Companies, rather than transferring such assets and payor contracts to the Company. The parties completed the closing conditions pursuant to the IPA and closed the RI Acquisition on  May 7, 2024 (the “Closing Date”). 

 

The RI Acquisition has been accounted for as a business combination under ASC 805, which requires, among other things, that purchase consideration, assets acquired, liabilities assumed and non-controlling interest be measured at their fair values as of the acquisition date. The assets acquired were recorded based on valuations derived from estimated fair value assessments and assumptions used by the Company.  While the Company believes its estimates and assumptions underlying the valuations are reasonable, different estimates and assumptions could result in different valuations assigned to the individual assets acquired, and the resulting amount of the bargain purchase gain. During the three-month periods ended September 30, 2024 and December 31, 2024, the Company concluded some of the fair value estimates for accounts receivable, non-controlling interests, and unfavorable leasehold interests required adjustment.  The adjusted allocations provided below reflect these changes.   

 

The Company recorded medical equipment, facilities and non-controlling interest at fair value as of the Closing Date.  Sales comparison and cost approaches were used to value the medical equipment, including assumptions of estimated direct costs associated with acquiring the equipment.  Where appropriate, adjustments were made to the direct replacement cost to reflect depreciation and obsolescence. The sales comparison approach was also utilized to value certain assets, involving secondary market research.  The cost approach was also used to value the facilities acquired and the unfavorable leasehold interest.  The non-controlling interest was recorded at fair value based on the purchase price paid for the acquisition, after any premium or discount derived from the operating agreement with the minority owners. 

 

The Company recorded the preliminary allocation of the purchase price consideration as of the Closing Date, for the three-month period ended June 30, 2024. During each of the three-month periods ended September 30, 2024 and December 31, 2024, the Company concluded some of the fair value estimates for accounts receivable, non-controlling interests, and unfavorable leasehold interests required adjustment.  The net effect of these changes was an increase to the bargain purchase gain of $115,000, net of deferred taxes of $6,000. The net impact to the condensed consolidated statement of operations was not material for the year-ended December 31, 2024.

 

The major classes of assets and liabilities to which the Company allocated the fair value of the purchase price consideration as of the Closing Date and December 31, 2024 were as follows:

 

  

May 7, 2024

  

Remeasurement

  

December 31, 2024

 

Cash and cash equivalents

 $3,388,000  $-  $3,388,000 

Accounts receivable

  919,000   (542,000)  377,000 

Medical equipment

  2,403,000   -   2,403,000 

Facilities

  4,697,000   -   4,697,000 

ROU assets

  1,835,000   -   1,835,000 

Unfavorable leasehold interests

  (1,227,000)  451,000   (776,000)

Total assets acquired

  12,015,000   (91,000)  11,924,000 
             

Accounts payable

  (150,000)  -   (150,000)

Lease liabilities

  (1,835,000)  -   (1,835,000)

Deferred income taxes

  (1,226,000)  6,000   (1,220,000)

Gain on bargain purchase

  (3,679,000)  (115,000)  (3,794,000)

Base purchase consideration

  5,125,000   (200,000)  4,925,000 
             

Non-controlling interest

  (2,100,000)  200,000   (1,900,000)

CT Sim

  (175,000)  -   (175,000)

Cash paid by the Company

 $2,850,000  $-  $2,850,000 

 

The Company recognized a bargain purchase, as defined by ASC 805, in connection with the RI Acquisition.  The Company purchased the interest in the RI Companies as part of the sale of certain of GenesisCare’s assets in its bankruptcy proceedings, resulting in a bargain purchase. A bargain purchase gain of $3,794,000, net of deferred taxes of $1,220,000 was recorded for the year-ended December 31, 2024. None of the purchase price was allocated to intangible assets because none were acquired as part of the transaction. The Company recorded the unfavorable lease position received as part of the RI Acquisition as a reduction to ROU assets on the condensed consolidated balance sheet as of the Closing Date and December 31, 2024.

 

The value of the acquired tangible assets acquired were as follows:

 

  

Fair Value

  

Average Useful Life (in Years)

 
         

Facilities

 $4,697,000   15 

Medical equipment

  2,403,000   4 

Total medical equipment and facilities acquired

 $7,100,000