NOTE 5 : Acquisitions

On February 5, 2016, the Company completed its acquisition of FSC Holdings, LLC (“FSC”), a Charlotte, NC-based specialty pharmaceutical company dedicated to providing innovative solutions to unmet medical needs for pediatric patients, from Deerfield CSF, LLC, a Deerfield Management company (“Deerfield”), a related party.

This acquisition has been accounted for using the acquisition method of accounting and, accordingly, its results are included in the Company's consolidated financial statements from the date of acquisition. Total consideration to acquire FSC was $22,695 and was funded with a combination of the following:

$15,000 long-term liability to Deerfield. Under the terms of the acquisition agreement, the Company will pay $1,050 annually for five years with a final payment in January 2021 of $15,000. The present value of these discounted future cash flows is reported in Long-term related party payable within the Company’s Consolidated Balance Sheets.

$7,695 contingent consideration to Deerfield. Under the terms of the acquisition agreement, the Company shall pay quarterly a 15% royalty on the net sales of certain FSC products, up to $12,500 for a period not exceeding ten years. The present value of these estimated discounted future cash flows is reported in Long-term contingent consideration payable within the Company’s Consolidated Balance Sheets, and is further disclosed at Note 7 – Long-term Contingent Consideration Payable.

During the first quarter of 2016, the Company determined its preliminary accounting for the FSC acquisition. As the Company completes its final accounting for the acquisition, future adjustments related to working capital, amortizable intangible assets, goodwill and deferred taxes could occur. The preliminary fair values assigned to the acquired assets and liabilities have been recognized as follows:

Assigned Fair Value:
Inventories	$	2,360
Prepaid expenses and other current assets		1,711
Goodwill		5,564
Intangible assets:
Acquired product marketing rights		16,200
Acquired developed technology		4,400
Other assets		278
Accounts payable and other current liabilities		(3,868)
Deferred tax liabilities		(3,950)
Total	$	22,695

Goodwill resulting from the acquisition is largely attributable to the existing workforce of FSC, and is not expected to be deductible for tax purposes. Transaction expenses for legal and professional fees associated with the acquisition of FSC amounted to $76 during the first quarter of 2016 and are reported within the Selling, general and administrative expenses line in the consolidated statements of income.

FSC contributed $876 and ($1,393) to the Company's first quarter 2016 net revenues and net loss, respectively, after its acquisition on February 5, 2016. Had the FSC acquisition been completed as of the beginning of 2015, the Company's unaudited pro forma net sales for the three months ended March 31, 2016 and 2015 would have been $36,694 and $33,226, respectively, and the Company's unaudited pro forma net income (loss) for the same periods would have been ($7,390) and $8,480, respectively.