Investment in a Joint Venture
|12 Months Ended|
Dec. 31, 2015
|Investments, Debt and Equity Securities [Abstract]|
|Investment in a Joint Venture||
NOTE 10 INVESTMENT IN A JOINT VENTURE
On March 22, 2010, we, Phosphagenics Limited (PSI Parent), an Australian corporation, Phosphagenics Inc. (PSI), a Delaware corporation and subsidiary of PSI Parent, and Phusion, a Delaware limited liability company, entered into a Limited Liability Company Agreement (the LLC Agreement) of the Phusion joint venture and additional related agreements for the purpose of developing and commercializing, for worldwide distribution and sale, a wide range of non-prescription remedies using PSI Parents proprietary patented TPM technology (TPM). TPM facilitates the delivery and depth of penetration of active molecules in pharmaceutical, nutraceutical, and other products. Pursuant to the LLC Agreement, we and PSI each own a 50% membership interest in the Phusion joint venture.
In connection with the LLC Agreement, PSI Parent granted to us, pursuant to the terms of a License Agreement, dated March 22, 2010 (the Original License Agreement), (i) an exclusive, royalty-free, world-wide (subject to certain limitations), paid-up license to exploit OTC drugs and certain other products that embody certain of PSI Parents TPM-related patents and related know-how (collectively, the PSI Technology) and (ii) a non-exclusive, royalty-free, world-wide (subject to certain limitations), paid-up license to exploit certain compounds that embody the PSI Technology for use in a product combining one or more of such compounds with an OTC drug or in a product that is part of a regimen that includes the application of an OTC drug.
Pursuant to the Original License Agreement, we issued 1,440,000 shares of our Common Stock having an aggregate value of approximately $2.6 million to PSI Parent (such shares, the PSI Shares, which PSI no longer owns), and made a one-time payment to PSI Parent of $1.0 million. We recorded an intangible asset valued at $3.6 million in March 2010 for the acquisition of the PSI Technology license.
In September 2014, we began implementing a series of new product development and pre-commercialization initiatives principally in the dietary supplement category. While several of our product development initiatives have advanced, including those specific to the dietary supplement category, our Phusion product development initiatives had not progressed to managements satisfaction. At that time, management believed that any products embodying the licensed technology to be developed by Phusion would not be available until Fiscal 2016 or 2017 at the earliest, and may be more limited than previously forecasted and may encompass fewer products or have limited retail distribution.
During the third quarter of Fiscal 2014, our evaluation of the Companys progress in its new product development pipeline and delays in Phusion product development caused management to reassess projections (including income projections) relied upon in December 2013. Accordingly, management performed an impairment analysis for the period ended September 30, 2014 for the licensed technology. As a consequence of our impairment assessment, we determined that a full impairment occurred of the intangible asset, licensed technology. As a consequence, we charged to operations a $3.6 million impairment charge during the third quarter of Fiscal 2014.
On October 17, 2014, we initiated a demand for arbitration with the American Arbitration Association, case number 01-14-0001-7373. The Phosphagenics Entities have made counter claims of breaches against the Company and Phusion (see Note 9). At December 31, 2015, cash and cash equivalents includes $366,000 which is available to be used by Phusion to fund future product development initiatives currently under consideration by PSI Parent, PSI and us.
Tabular disclosure of investment income, including, but not limited to, interest and dividend income and amortization of discount (premium) derived from debt and equity securities. Excludes realized and unrealized gain (loss) on investments.
Reference 1: http://www.xbrl.org/2003/role/presentationRef