Intangible Assets - Intellectual Property

9 Months Ended

Sep. 30, 2013

Intangible Assets - Intellectual Property

Note 5. Intangible Assets - Intellectual Property

On July 12, 2013, the Company, together with its wholly owned subsidiary, JAC, entered into an asset purchase agreement with Dr. Jörg Gerlach, MD, PhD, pursuant to which JAC purchased all of Dr. Gerlach’s rights, title and interest in the Regeneration Technology. The Company plans to further the development of the Regeneration Technology and, if commercially viable, bring the product to market. Pursuant to the terms of the Asset Purchase Agreement, upon the closing of the transaction, the Company paid Dr. Gerlach $100,002 and issued to Dr. Gerlach a Series A Stock Purchase Warrant (the “Series A Warrant”) entitling him to purchase 1,200,000 shares (each a “Warrant Share”) of the Company’s common stock, subject to vesting milestones through July 11, 2019, at an exercise price of $0.35 per share.  Acquisition related costs amounted to $52,852 and were capitalized together with the cash payment.

The Series A Warrant was issued in exchange for services to be rendered in the future by Dr. Gerlach.  An additional agreed upon cash sum will be paid to Dr. Gerlach upon the Company attaining certain milestones related to the Regeneration Technology. The value of the Series A Warrant will be recognized as consulting expenses by the Company over the vesting term of the underlying warrant, subject to Dr. Gerlach providing ongoing consulting services to the Company with respect to the Regeneration Technology. As such, the measurement date for accounting purposes will be the date on which performance by Dr. Gerlach is completed.  The fair value of each Warrant Share is estimated at the end of each fiscal quarter during which Dr. Gerlach renders services using the Black-Scholes option pricing model.  The fair value of each Warrant Share was approximately $0.47 as of September 30, 2013.  Assumptions regarding volatility, expected term, dividend yield and risk-free interest rate are required for the Black-Scholes model and are as follows:

Weighted average risk-free interest rate	1.7	%
Expected life in years	6.0
Weighted average expected volatility	99.0	%
Expected dividend yield	0