| Intangible Assets |
4. Intangible
Assets
The Company’s
intangible assets consist of the following:
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March 31,
2013
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December 31,
2012
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| |
|
(unaudited) |
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|
|
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License
agreements
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|
$ |
802,994 |
|
|
$ |
772,230 |
|
|
Patents
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|
|
64,079 |
|
|
|
63,429 |
|
|
Less: accumulated
amortization
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|
|
(276,615 |
) |
|
|
(261,928 |
) |
|
|
|
|
|
|
|
|
|
|
Intangible assets,
net
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|
$ |
590,458 |
|
|
$ |
573,731 |
|
|
|
|
|
|
|
|
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License agreements are
being amortized over periods ranging from 17-20 years. Patent costs
are being amortized over three years. Pending patent costs are not
amortizable. Amortization expense for the three months ended
March 31, 2013 and 2012 was approximately $15,000 and $29,000,
respectively. As of March 31, 2013, future amortization of
license agreements is expected to be approximately $44,000 for the
remainder of fiscal 2013, $55,000 for 2014, $46,000 each year for
2015 through 2018.
License
Agreements
The Company has entered
into multiple license agreements (the “License
Agreements”) with the University of Florida Research
Foundation (“UFRF”) and University of Texas at Austin
(“UTA”). 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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• |
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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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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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| |
• |
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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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| |
• |
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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.
|
Royalty fees were $47,031
and $37,265 during the three months ended March 31, 2013 and
2012, respectively, and are included in sales and marketing expense
on the accompanying condensed consolidated statements of
operations.
|
The Company’s
intangible assets consist of the following:
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|
|
|
|
|
|
|
|
| |
|
December 31,
2012 |
|
|
December 31,
2011 |
|
|
License
agreements
|
|
$ |
772,230 |
|
|
$ |
899,231 |
|
|
Patents
|
|
|
63,429 |
|
|
|
291,907 |
|
|
Less: accumulated
amortization
|
|
|
(261,928 |
) |
|
|
(291,658 |
) |
|
|
|
|
|
|
|
|
|
|
Intangible assets,
net
|
|
$ |
573,731 |
|
|
$ |
899,480 |
|
|
|
|
|
|
|
|
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License agreements are
being amortized over periods ranging from 17-20 years. Patent costs
are being amortized over three years. Pending patent costs are not
amortizable. Amortization expense for 2012 and 2011 was
approximately $127,000 and $67,000, respectively. As of
December 31, 2012, future amortization of license and patent
agreements is expected to be $58,400 for 2013 $55,300 for 2014,
$46,000 for 2015, 2016 and 2017.
In 2012 the Company
determined that the carrying value of certain patents were not
recoverable and exceeded their estimated fair value. As a result,
the Company recorded an impairment loss of $129,667 to reduce these
patents to their estimated fair value.
License
Agreements
The Company has entered
into license agreements (the “License Agreements”) with
the University of Florida Research Foundation (“UFRF”)
and 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:
| |
• |
|
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%;
|
| |
• |
|
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 2012, AxoGen decided to abandon the
license and as a result recorded a $147,826 loss on abandonment of
license.
|
| |
• |
|
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;
|
| |
• |
|
AxoGen reimburses the licensors for certain legal expenses
incurred for patent prosecution and defense of the technologies
covered by the License Agreements; and
|
| |
• |
|
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.
|
Royalty fees were
approximately $167,000 and $115,000 during 2012 and 2011 and are
included in sales and marketing expense on the accompanying
consolidated statements of operations.
|