Business Combination |
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| Business Combination | Note 15. Business Combination On February 17, 2026, we acquired all outstanding equity interests of LymphaTech pursuant to the Stock Purchase Agreement, dated as of February 17, 2026. LymphaTech is a medical technology company pioneering a digital, three-dimensional (the “3D”) full body measurement and monitoring platform designed specifically for lymphedema. We acquired LymphaTech to further expand our position as a leader in treating lymphedema by extending our solutions across the care continuum, including earlier identification, assessment, and long‑term monitoring. The total purchase consideration for LymphaTech payable at closing, on a cash-free, debt-free basis, was approximately $7.2 million. Each holder of issued and outstanding shares of LymphaTech capital stock received their pro rata portion (based on their relative ownership percentage) of the consideration paid at closing, less $0.2 million, which was utilized to pay the sellers’ transaction expenses. The other component of purchase consideration is contingent consideration based on the achievement of non-financial milestones after closing, which contingent consideration had an estimated fair value of approximately $4.9 million as of the acquisition date. The acquisition date fair value of contingent consideration was measured using the income approach, specifically the probability weighted expected return method for the milestone payments. We will remeasure the fair value of the contingent liability on a quarterly basis. Estimates and assumptions used in the valuation include the probability of achieving these non-financial milestones, the expected timing of achieving these milestones, and a discount rate. These unobservable inputs represent a Level 3 measurement because they are supported by little or no market activity and reflect our own assumptions in measuring fair value. Any changes in the fair value subsequent to the acquisition date will be recognized in our consolidated statements of operations. There was no change in fair value for contingent consideration as of June 30, 2026. The acquisition of LymphaTech was funded by cash on hand. We recognized transaction costs of $0.8 million in the six months ended June 30, 2026. These costs are reported in Reimbursement, general and administrative expenses in our Condensed Consolidated Statements of Operations. Transaction costs include, but are not limited to, investment banker, advisory, legal, and other professional fees. The following table reflects the allocation of the purchase consideration between the amount paid at closing and the contingent consideration:
Fair Value of Assets Acquired and Liabilities Assumed The acquisition of LymphaTech has been accounted for using the acquisition method of accounting in accordance with ASC 805, Business Combinations, with the Company treated as the accounting acquirer, which requires, among other things, that the assets acquired and liabilities assumed be recognized at their fair value on the acquisition date. Acquisition accounting is dependent upon certain valuations and other studies that have yet to commence or progress to a stage where there is sufficient information for a definitive measurement. The process for estimating the fair values of identifiable intangible assets and certain tangible assets and assumed liabilities requires the use of judgment in determining the appropriate assumptions and estimates. The purchase price allocation for the LymphaTech acquisition is considered final as of June 30, 2026. The table below presents the estimated fair values of assets acquired and liabilities assumed on the acquisition date based on valuations and management estimates. Fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. The judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact our results of operations.
Identifiable Intangible Assets The identifiable intangible assets acquired consist of a developed technology asset, customer relationship assets and a tradename asset. The estimated fair value of the developed technology asset was prepared using the relief from royalty method which calculates the value of the developed technology based on royalties that would be paid if licensed by a third party. The estimated fair value of customer relationship assets was prepared using the multi-period excess earnings method which calculates the present value of the incremental after-tax cash flows attributable solely to each customer relationship. The estimated fair value of the tradename asset was prepared using the relief from royalty method which calculates the value of the tradename based on royalties that would be paid if licensed by a third party. The estimated useful lives are based on forecasted periods of benefit for each intangible asset. Estimated useful lives and estimated preliminary fair values are presented in the table below.
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