Annual report pursuant to Section 13 and 15(d)

Acquisitions

v3.6.0.2
Acquisitions
 12 Months Ended
Dec. 31, 2016
Business Combinations [Abstract]  
Business Combination Disclosure [Text Block]

13. Acquisitions

Jade Therapeutics, Inc. Acquisition

Effective March 7, 2016, the Company acquired all of the capital stock of Jade, a privately-held company developing locally-administered, polymer-based products designed to treat ophthalmic indications. With the Jade Acquisition, Jade became a wholly-owned subsidiary of EyeGate. Under the terms of the Jade Acquisition agreement, in consideration for 100% of the outstanding equity interests in Jade, the Company repaid Jade liabilities of up to $300,000 and agreed to issue 765,728 shares of our Common Stock, 90% of which were issued at the closing, and 10% of which will be held back for 18 months (the “Holdback Shares”) in order to satisfy post-closing adjustments or indemnification obligations. Subsequent to the Jade Acquisition, the Company satisfied an additional $232,457 of Jade obligations that arose prior to the acquisition. This amount exceeded the value of the Holdback Shares, and as a result the obligation to release the Holdback Shares was extinguished and the Holdback Shares were retired. The Jade Acquisition also includes a cash earn-out provision calling for an additional cash payment of $2,164,451, contingent upon a Jade product receiving FDA marketing approval. The cash earn-out was recorded as contingent consideration and fair valued at $1,210,000 at the acquisition date based on the probability of FDA approval of the three products in development. The fair value of the shares the Company agreed to issue in the Jade Acquisition was approximately $2.910 million, based on the closing price per share of our Common Stock as reported by NASDAQ Capital Market on the closing date of the acquisition, $3.80 per share. The adjusted value of the Holdback Shares was $205,207.  
The following table summarizes the final purchase price allocation and the fair value of the net assets acquired and liabilities assumed in the Jade Acquisition at the date of acquisition:
 
 
 
Jade
Current Assets(1)
 
$
600,604
 
Intangible Asset (In-Process R&D)
 
 
3,912,314
 
Property, Plant and Equipment, Net
 
 
649
 
Goodwill
 
 
1,525,896
 
Accounts Payable and Other Liabilities
 
 
(393,801
) 
Deferred Tax Liability
 
 
(1,525,896
) 
Contingent Consideration (face value $2,164,451)
 
 
(1,210,000
) 
Total Purchase Price
 
$
2,909,766
 
  
 
(1)
Current Assets include cash, grants receivable and prepaid expenses of $0.186 million, $0.046 million and $0.369 million, respectively, related to the Jade Acquisition.
During the fourth quarter of 2016, the Company determined that $0.300 million in acquired liabilities had previously been paid, and thus adjusted in-process R&D and liabilities accordingly.
In connection with the Jade Acquisition, the Company recorded $1,525,896 as a deferred tax liability representing the income tax effect of the difference between the book and tax basis of the tangible and intangible assets acquired. The Company recorded a deferred tax liability on the ascribed value of the acquired intangible assets of $1,525,896, increasing the value of the asset reported as goodwill.
Net Loss in the Consolidated Statement of Operations for the year ended December 31, 2016 includes net losses of Jade from the date of acquisition to December 31, 2016 of $0.509 million. The Company’s intangible asset, which consists solely of in-process R&D, will not be amortized until the underlying development program for the EyeGate OBG program is completed. Completion is generally considered to have occurred once regulatory approval is granted, and related intangible assets generally are accounted for as finite-lived intangible assets and amortized on a straight-line basis over their estimated useful life. The Company expects to amortize the in-process R&D over 3 years once it receives FDA approval to commercialize the EyeGate OBG.
Pro Forma Disclosure for Jade Acquisition
The following table includes the unaudited pro forma results for the year ended December 31, 2016 and 2015 of the combined companies as though the Jade Acquisition had been completed as of the beginning of the period presented.
 
 
 
For the Year Ended December 31,
  
 
   2016  
   
    2015   
Revenues
 
$
952,184
 
 
$
477,956
 
Net Loss
 
 
(13,275,986
) 
 
 
(9,075,459
) 
Net Loss Attributable to Common Stockholders
 
 
(13,275,986
) 
 
 
(17,302,644
) 
The pro forma financial information is presented for information purposes only. The unaudited pro forma financial information may not necessarily reflect our future results of operations or what the results of operations would have been had we owned and operated Jade  as of the beginning of the period presented.