Investment in Affiliated Company

9 Months Ended

Sep. 30, 2013

Investment in Affiliated Company

Investment in Affiliated Company

Note 8 — Investment in Affiliated Company

In January 2010, the Company acquired a minority equity ownership interest in Luxcel Biosciences Limited (Luxcel) based in Cork, Ireland.  The investment of €2.5 million (approximately $3.6 million) amounted to a 16.9% equity interest in Luxcel.  The Company has evaluated the cost versus equity method of accounting for its investment in Luxcel and determined that it does not have the ability to exercise significant influence over the operating and financial policies of Luxcel and, therefore, accounts for its investment on a cost basis.  The investment in Luxcel is carried on our Condensed Consolidated Balance Sheets at the original purchase price, adjusted for currency fluctuations.  The Company believes that it is not feasible to readily estimate the fair value of its investment in Luxcel.  Information related to future cash flows of Luxcel is not readily available as the entity is a start-up research and development company and future cash flows are highly dependent on their ability to obtain additional funding, gain acceptance of its products in the marketplace, and obtain regulatory approvals.

During the three months ended September 30, 2013, the Company paid $200,000 for two license and distribution agreements with Luxcel which grants the Company access to proprietary technology on an exclusive basis for a period of four years.  The agreements also provide for contracted research and development services to be performed by Luxcel.  The terms of the service agreement include upfront payments for each work order placed by the Company of which amounts paid are refundable if the work order is cancelled, excluding amounts incurred for work completed up to the cancellation date.  Total commitments for such work orders total $300,000 as of September 30, 2013, including $100,000 paid during the three months ended on that date.