Annual report pursuant to Section 13 and 15(d)

ABEONA THERAPEUTICS LLC ACQUISITION

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ABEONA THERAPEUTICS LLC ACQUISITION
 12 Months Ended
Dec. 31, 2016
ABEONA THERAPEUTICS LLC ACQUISITION [Abstract]  
ABEONA THERAPEUTICS LLC ACQUISITION
NOTE 9 - ABEONA THERAPEUTICS LLC ACQUISITION

On May 15, 2015, we agreed to issue an aggregate of 3,979,761 unregistered shares of our common stock to the members of Abeona Therapeutics LLC (Abeona Ohio). Abeona Ohio’s principal activities were focused on developing and delivering gene therapy products for severe and life-threatening rare diseases. Abeona Ohio's lead program is ABO-101 (AA NAGLU) and ABO-102 (AAV SGSH), adeno-associated virus (AAV)-based gene therapies for Sanfilippo syndrome (MPS IIIA and IIIB, respectively) in collaboration with patient advocate groups, researchers and clinicians.

The initial consideration of $31,758,000 was calculated using the Company’s stock price on date of the closing, May 15, 2015 of $7.98 times the number of the Company shares (3,979,761) issued to Abeona Ohio members.

There was a contingent valuation on three milestones. Per the merger agreement with Abeona Ohio each milestone would consist of either cash, our stock or a combination of both, at the Company’s election, equivalent to a stated dollar amount. The fair value of the probability of achieving all three milestones was estimated at $6,489,000.
 
The following purchase price allocation is as follows:

Total purchase price
      
Initial consideration
  
$
31,758,000
  
Contingent consideration
    
6,489,000
  
Total purchase price
  
$
38,247,000
  
         
Allocation of the purchase price
        
Cash
  
$
3,697,000
  
Accounts receivable
    
1,000
  
Prepaid expenses
    
28,000
  
Property and equipment
    
51,000
  
Other assets
    
1,000
  
Accounts payable
    
(153,000
)
Total tangible assets
    
3,625,000
  
         
Licensing agreement
    
2,156,000
  
Goodwill
    
32,466,000
  
         
Total net asset value
  
$
38,247, 000
  

In connection with the acquisition $375,000 in merger costs were expensed.

The first milestone of receiving IND allowance from the FDA to initiate a Phase 1 clinical study from MPS IIIA or MPS IIIB by November 15, 2015 was not met after the measurement period ended. The Company recognized $3,898,000 in Miscellaneous Income for change in fair value of our contingent consideration liability in 2015.

The second milestone upon dosing of First-Patient-In second Phase I clinical study for MPS IIIA or MPS IIIB was not met after the measurement period ended. The third milestone upon earliest of (i) dosing of First-Patient-In Phase II clinical study for MPS IIIA or MPS IIIB or (ii) receipt of international regulatory approval was not met after the measurement period ended. After negotiations with Abeona Ohio’s member’s representative we agreed to pay $1,200,000 for partial achievement of the third milestone, which is accrued in accounts payable. The Company recognized $1,391,000 in Miscellaneous Income for change in fair value of our contingent consideration liability in 2016.

Goodwill is not expected to be deductible for tax purposes.