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Acquisition of SCS Operations
 12 Months Ended
Dec. 31, 2011
Acquisition of SCS Operations [Abstract]  
Acquisition of SCS Operations

Note 5. Acquisition of SCS Operations

On April 1, 2009, we acquired the operations of SCS for an aggregate purchase price of approximately $5,135,000. The acquired operations includes proprietary cell technologies relating to embryonic stem cells, induced pluripotent stem (iPS) cells, and tissue-derived (adult) stem cells; expertise and infrastructure for providing cell-based assays for drug discovery; a media formulation and reagent business; and an intellectual property portfolio with claims relevant to cell processing, reprogramming and manipulation, as well as to gene targeting and insertion. These acquired operations will help us pursue applications of our cell technologies to develop cell-based research tools, which we believe represent nearer-term commercial opportunities.

As consideration for the acquired operations, we issued to SCS 265,000 shares of common stock and waived certain commitments of SCS to repay approximately $709,000 in principal and accrued interest owed to us. The closing price of our common stock on April 1, 2009 was $16.70 per share.

This transaction has been accounted for as a business purchase. We have evaluated the acquired assets and liabilities and believe that the book value of the net tangible assets acquired approximated fair market value. The primary method used to calculate the fair value of the intangible assets was the “Excess Earnings Method”. These intangible assets will be amortized over their estimated lives. Goodwill and acquired technology recorded as part of the acquisition will be tested periodically for impairment.

None of the goodwill is deductible for tax purposes.

At April 1, 2009, the purchase price has been allocated as follows:

 

                 
    Allocated
Purchase
Price		     Estimated Life  of
Intangible Assets
in Years		  

Net tangible assets

   $ 36,000          

Intangible assets:

                

Customer relationships and developed technology

     1,310,000       6 to 9  

In process research and development

     1,340,000       N/A  

Trade name

     310,000       15  

Goodwill

     2,139,000       N/A  
   

 

 

          

Total

   $ 5,135,000          
   

 

 

          

In-process research and development assets relate to: 1) the acquisition of certain intellectual property rights not expected to expire until 2027 related to our program focused on developing genetically engineered rat models of human disease (our “Transgenic Rat Program”), and 2) the acquisition of certain technology related to the commercialization of our SC Proven cell culture products and the development and commercialization of cell-based assay platforms for use in drug discovery and development (our “Assay Development Program”).

 

At the time of valuation (April 2009), the technology related to our Transgenic Rat Program was in its nascent stage and as for our Assay Development Program, we expected to achieve proof of concept by 2012. These technologies were not expected to begin generating revenue until 2011-2012. In December 2011, in part because of management’s decision to focus on our therapeutic product development programs and not to allocate time and resources to the assays technology, we determined that we could not predict the future cash flows from the intangible IPR&D asset related to the assays technology. Therefore, we determined that the intangible asset was impaired and wrote off the approximately $655,000 carrying value of the asset.

Trade name relates to the “SC Proven” trademark of our cell culture products which we expect to market for 15 years from the date of acquisition, based on which, we estimated a remaining useful life of 15 years from the valuation date.

In connection with our acquisition of the operations of SCS, acquisition costs of approximately $693,000, which primarily consists of legal and other professional fees, were expensed in 2009. These costs are reported in our accompanying Consolidated Statements of Operations as part of our selling, general & administrative expense.