Quarterly report pursuant to Section 13 or 15(d)

Acquisition

v3.5.0.2
Acquisition
 9 Months Ended
Sep. 30, 2016
Business Combinations [Abstract]  
Acquisition
Note 2. Acquisition:

On September 12, 2016, the Company completed the strategic acquisition of BiOptix, a privately-held entity. Pursuant to the Purchase Agreement, through a wholly-owned subsidiary, the Company acquired all of the outstanding shares of Series 1 Preferred Stock of BiOptix from the selling stockholders. No BiOptix common shares were acquired in the transaction.  As a result, the Company now owns more than 98% of the outstanding voting stock of BiOptix, and BiOptix has become a majority owned subsidiary of the Company.

Under the terms of the Purchase Agreement, the consideration consisted of an aggregate of 627,010 shares of the Company's common stock (the "Shares") which Shares were distributed in accordance with the liquidation preferences set forth in the BiOptix Fifth Amended and Restated Certificate of Incorporation, as amended.  The Shares were valued at approximately $2,577,000 (based upon the closing value of our common stock on the acquisition date) and the issuance represented approximately 14% of the outstanding Venaxis common stock at the closing. The Purchase Agreement contains customary representations and warranties of the parties, including BiOptix, and the selling stockholders have customary indemnification obligations to the Company relating to BiOptix, which are subject to certain limitations described further in the Purchase Agreement. The issuance of the Shares was effected as a private placement of securities.  The Company also entered into a Registration Rights Agreement with the selling stockholders.

The purchase price allocation is preliminary and subject to change, as an analysis has not been completed as of the date of this report as Venaxis is still reviewing all of the underlying assumptions and calculations used in the allocation. However, the table below summarizes the provisional estimated fair values assigned to the assets and liabilities acquired:
 
Cash and cash equivalents
  
$
17,000
  
Accounts receivable
    
21,000
  
Inventory
    
413,000
  
Prepaid and other assets
    
52,000
  
Equipment
    
93,000
  
Intangible rights acquired
    
2,312,000
  
Accounts payable
    
(118,000
)
Accrued and other liabilities
    
(187,000
)
Non-controlling interest
    
(26,000
)
Purchase price
  
$
2,577,000
  

The purchase price allocation is preliminary and subject to change.  The intangible assets acquired are estimated to have an average life of 4-6 years, resulting in annual estimated future amortization of approximately $460,000 per year. On the acquisition date, the provisional fair value of the non-controlling interest was estimated to be approximately $26,000. This amount was based upon the gross consideration that would have been paid assuming 100% of the outstanding stock had been acquired.

From the September 12, 2016 acquisition date through September 30, 2016, BiOptix revenues and net loss were approximately $1,900 and $107,000, respectively. Amortization expense amounted to approximately $20,000 for each of the three and nine months ended September 30, 2016.
 
The following unaudited pro forma information presents the results of operations for the nine months ended September 30, 2016 and 2015, as if the acquisition of BiOptix had occurred on each of January 1, 2016 and 2015, respectively:
 
 
Year to Date period ended September 30,
  
 
2016
  
2015
  
Total revenues
  
$
191,577
      
639,944
  
Net (loss) attributable to Venaxis
  
$
(4,527,483
)
  
$
(8,380,348
)
Basic and diluted loss per share
  
$
(1.01
)
  
$
(1.86
)
  
As of September 30, 2016, Venaxis incurred a total of approximately $106,000 in advisory and legal fees related to the acquisition of BiOptix, which, are reported in selling, general and administrative expenses in the accompanying condensed consolidated statement of operations for the three and nine months ended September 30, 2016.

As of September 30, 2016 inventories acquired in connection with the BiOptix acquisition totaled $412,106, consisting of $118,734 in raw materials, $27,553 in work in process and $265,819 in finished goods.