4. Discontinued Operations

On August 31, 2022, the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Flagship Biosciences, Inc. (the “Purchaser”) pursuant to which the Purchaser agreed to (i) acquire substantially all of the assets of Interpace Pharma Solutions, Inc. used in its business of complex molecular analysis for the early diagnosis and treatment of cancer and supporting the development of targeted therapeutics (the “Business”) and (ii) assume and pay certain liabilities related to the purchased assets (collectively, the “Transaction”). The Transaction closed on August 31, 2022.

As consideration for the Transaction, Interpace received a total sale price of approximately $6.2 million after working capital and other adjustments ($0.5 million of which has been deposited into escrow). In addition, the Purchaser paid the Company an earnout of approximately $1.0 million based on revenue for the period beginning September 1, 2021 and ending August 31, 2022. In the third quarter of 2023, the $0.5 million funds in escrow were released to the Company.

The Purchase Agreement includes a one-year commitment of Interpace not to compete with the Business, recruit or hire any former employees of the Subsidiary who accept employment with the Purchaser in connection with the Transaction, or divert or attempt to divert from Purchaser any business to be performed from any of the contracts or agreements with customers as set forth in the Purchase Agreement. The Purchase Agreement also contains customary representations and warranties, post-closing covenants and mutual indemnification obligations for, among other things, any inaccuracy or breach of any representation or warranty and any breach or non-fulfillment of any covenant.

In connection with the Transaction, on August 31, 2022, Interpace and Purchaser entered into a Shared Services Agreement (the “Shared Services Agreement”) pursuant to which Interpace agreed to provide, or cause its affiliates to provide, to the Purchaser certain services set forth in the Shared Services Agreement on a transitional basis and subject to the terms and conditions set forth in the Shared Services Agreement (the “Services”). As consideration for the Services provided by Interpace, Purchaser will pay Interpace the amounts specified for each Service as set forth in the Shared Services Agreement. The Company’s obligations to provide the Services will terminate with respect to each Service as set forth in the Shared Services Agreement.

The Purchaser is identified as a related party as an affiliate of Ampersand and an affiliate of BroadOak and have each provided equity financing to the Purchaser. Collectively, they own a majority of the Purchaser’s outstanding equity securities and are represented on its Board of Directors.

The Company intends to use the remaining net proceeds to fund its future business activities and for general working capital purposes. As a result of the sale, the gain on sale and all operations from Interpace Pharma Solutions have been classified as discontinued operations for all periods presented.

A reconciliation of the accounting for the Company’s Pharma Solutions business in 2023 and 2022 is as follows:

Schedule of Sale of Business

The components of assets and liabilities classified as discontinued operations consist of the following as of December 31, 2023 and December 31, 2022:

 Schedule of Components of Assets and Liabilities and Revenue Classified as Discontinued Operations

The table below presents the significant components of its former Pharma Solutions and Commercial Services business units’ results included within loss from discontinued operations, net of tax in the consolidated statements of operations for the years ended December 31, 2023 and 2022.

The income tax expense for the years ended December 31, 2023 and December 31, 2022 primarily pertained to the interest accrued on uncertain tax position liabilities.

Cash used from discontinued operations, operating activities, for the year ended December 31, 2023 was approximately $0.1 million. There was cash provided by discontinued operations, investing activities, for the year ended December 31, 2023 of $0.4 million which pertained to the net proceeds released from escrow for the Pharma Solutions sale net of final working capital adjustments. Cash used from discontinued operations, operating activities, for the year ended December 31, 2022 was approximately $2.8 million. There was cash provided by discontinued operations, investing activities, for the year ended December 31, 2022 of $6.5 million which pertained to the net proceeds received from the Pharma Solutions sale. Depreciation and amortization expense within discontinued operations for the year ended December 31, 2022 was $1.1 million. There was no depreciation and amortization expense within discontinued operations for the year ended December 31, 2023.