| Intangible Assets |
The Company’s intangible assets consist of the following:
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September 30,
2011 |
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December 31,
2010 |
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(unaudited) |
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License agreements
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$ |
875,830 |
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$ |
833,481 |
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Patents
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291,906 |
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28,801 |
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Less: accumulated amortization
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(260,776 |
) |
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(224,511 |
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Intangible assets, net
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$ |
906,960 |
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$ |
637,771 |
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License agreements are being amortized over periods ranging from 17-20 years. Patent costs are being amortized over the
estimated useful life, which is generally five years. Pending patent costs are not amortizable. Amortization expense for the nine months ended September 30, 2011 and 2010 was approximately $36,265 and $34,706, respectively. As of
September 30, 2011, future amortization of license agreements is expected to be approximately $29,400 for the remainder of fiscal 2011, $118,000 for 2012 and 2013, $95,000 for 2014 and $31,000 for 2015 and 2016..
License Agreements
The Company
has entered into multiple license agreements (the “License Agreements”) with the University of Florida Research Foundation (“UFRF”), University of Texas at Austin (“UTA”) and Emory University (“Emory”). Under
the terms of the License Agreements, the Company acquired exclusive worldwide licenses for underlying technology used in repairing and regenerating nerves. The licensed technologies include the rights to issued patents and patents pending in the
United States and international markets. The effective term of the License Agreements extends through the term of the related patents and the agreements may be terminated by the Company with 60 days prior written notice. Additionally, in the event
of default, licensors may terminate an agreement if the Company fails to cure a breach after written notice. The License Agreements contain the key terms listed below:
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AxoGen pays royalty fees ranging from 1% to 3% under the License Agreements based on net sales of licensed products. One of the agreements also
contains a minimum royalty of $12,500 per quarter, which may include a credit in future quarters in the same calendar year for the amount the minimum royalty exceeds the royalty fees. Also, when AxoGen pays royalties to more than one licensor
for sales of the same product, a royalty stack cap applies, capping total royalties at 3.75%;
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Under one of the agreements, if AxoGen does not achieve certain regulatory milestones, which AxoGen has not achieved, AxoGen would owe an annual
license maintenance fee starting on August 31, 2012 of $120,000, escalating to $240,000 on August 31, 2013 and August 31, 2014. In addition, if AxoGen does not either: (i) conduct discussions with at least three potential
sublicensees or corporate partners by November 30th, 2011 or (ii) submit a term sheet to a potential sublicensee or corporate partner by May 31st, 2012, it will owe a fee of $64,000;
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If AxoGen sublicenses technologies covered by the License Agreements to third parties, AxoGen would pay a percentage of sublicense fees received from
the third party to the licensor. Currently, AxoGen does not sublicense any technologies covered by License Agreements. The Company is not considered a sub-licensee under the License Agreements and does not owe any sublicensee fees for its own
use of the technologies;
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AxoGen reimburses the licensors for certain legal expenses incurred for patent prosecution and defense of the technologies covered by the License
Agreements; and
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Currently, under one of the License Agreements, AxoGen would owe a $15,000 milestone fee upon receiving a Phase II Small Business Innovation Research
or Phase II Small Business Technology Transfer grant involving the licensed technology. The Company has not received either grant and does not owe such a milestone fee. Other milestone fees are due if AxoGen develops certain pharmaceutical or
medical device products under the License Agreements. No such products are currently under development.
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Royalty fees were
approximately $30,116 and $20,125 during the three months ended September 30, 2011 and 2010, and $85,620 and $59,462 during the nine months ended September 30, 2011 and 2010 and are included in sales and marketing expense on the
accompanying statements of operations.
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