Annual report pursuant to Section 13 and 15(d)

Intangible Asset Acquisition and Cross License Agreement

v3.3.0.814
Intangible Asset Acquisition and Cross License Agreement
12 Months Ended
Jul. 31, 2015
Intangible Asset Acquisition and Cross License Agreement  
Intangible Asset Acquisition and Cross License Agreement

Note 6—Intangible Asset Acquisition and Cross License Agreement

 

On March 14, 2011, the Company entered into the Asset Purchase Agreement with Inovio , whereby the Company acquired technology and related assets related to the use of drug-medical device combination products for the treatment of various cancers. In return, the Company agreed to pay Inovio $3,000,000 in scheduled payments and a royalty on commercial product sales related to the acquired technology.  The transaction closed on March 24, 2011. The Asset Purchase Agreement has been amended by the parties to modify the schedule of payments to Inovio (see Note 7).

 

In connection with the closing of the Asset Purchase Agreement, the Company entered into a cross-license agreement with Inovio.  Under the terms of the agreement, the Company granted Inovio a fully paid-up, exclusive, worldwide license to limited uses of certain of the acquired technology patents in the field of use of electroporation. No consideration was received by the Company, nor will Inovio be liable for future royalty fees related to this arrangement.  Inovio also granted the Company a non-exclusive, worldwide license to certain other technology patents held by it in consideration for the following: (a) a fee for any sublicense of the Inovio technology, not to exceed 10%; (b) a royalty on net sales of business the Company develops, with certain limitations, with the Inovio technology, not to exceed 1.5%; and (c) payment to Inovio of any amount owed by Inovio to one licensor of the Inovio technology that is a direct result of the license.  In addition, the Company agreed not to transfer this non-exclusive license apart from the assigned intellectual property.

 

ASC 805, Business Combinations, provides guidance on determining whether an acquired set of assets meets the definition of a business for accounting purposes.  Under the framework, the acquired set of activities and assets have to be capable of being operated as a business, from the viewpoint of a market participant as defined in ASC 820, Fair Value Measurements.  Two essential elements required for an integrated set of activities are inputs and outputs.  The Company evaluated the Asset Purchase Agreement and in accordance with the guidance, determined it did not meet the definition of a business acquisition as the acquisition consisted solely of the acquired technology and certain other tangible assets.  The Company did not acquire the right to any employees previously involved with the technology, or research processes previously in place at Inovio.  The Company therefore accounted for the transaction as an asset acquisition and allocated the purchase price to the identified tangible and intangible assets (patents) acquired based on their relative fair values, $38,000 and $2,962,000, respectively. The relative fair value of the intangible assets (patents) of $2,962,000 was reduced by a discount of approximately $174,000 recorded for the acquisition obligation (see Note 6).  The relative fair value of the tangible assets of $38,000 was expensed to research and development as of the acquisition date.

 

As of July 31, 2015, the intangible assets (patents) are fully amortized. As of July 31, 2014, the intangible assets (patents) are stated net of accumulated amortization of approximately $2,788,000. The intangible assets (patents) were amortized on a straight-line basis over the estimated remaining useful lives of the assets, determined as four years from the date of acquisition.  Amortization expense for the years ended July 31, 2015, 2014 and 2013 was approximately $465,000, $697,000 and $697,000, respectively

 

In accordance with the provisions of the applicable authoritative guidance, the Company’s long-lived assets and amortizable intangible assets are tested for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable.  The Company assesses the recoverability of such assets by determining whether their carrying value can be recovered through undiscounted future operating cash flows, including its estimates of revenue driven by assumed market segment share and estimated costs.  If impairment is indicated, the Company measures the amount of such impairment by comparing the fair value to the carrying value.  During the years ended July 31, 2015 and 2014, no impairment was recorded.