Acquisitions

On November 13, 2015, the Company completed its acquisition of all of the rights, title and interest in the development, production, marketing, import and distribution of all pharmaceutical products of Alveda.

In connection with the closing of the Acquisition, the Company formed three subsidiaries: Teligent Luxembourg S.à.r.l., a private limited company incorporated under the laws of the Grand Duchy of Luxembourg and wholly-owned by the Company ("LuxCo"); Teligent OÜ, a private limited company incorporated under the laws of the Republic of Estonia that is wholly-owned by LuxCo ("EstoniaCo"); and Teligent Canada Inc., a company incorporated under the laws of the Province of British Columbia that is wholly-owned by LuxCo ("CanadaCo"). Effective immediately prior to the closing, the Company assigned its rights and obligations under the IP-Related APA to EstoniaCo and assigned its rights and obligations under the Non-IP Related APA to CanadaCo, The Company capitalized these subsidiaries and funded the Acquisition as follows: the Company funded LuxCo by way of an equity contribution in the amount of $3,374,549 in accordance with the terms and conditions of the Contribution Agreement, by and between the Company and LuxCo, dated as of November 13, 2015 (the "Contribution Agreement"), and extended a loan in a principal amount of $28,185,847 in accordance with the terms and provisions of a loan agreement, by and between the Company and LuxCo dated as of November 13, 2015 (the "LuxCo Loan Agreement"). The LuxCo Loan Agreement has a maturity date of November 4, 2022. The initial interest rate under the LuxCo Loan Agreement is 0.49% per annum, which shall reset annually to be equal to the short-term Applicable Federal Rate published by the Internal Revenue Service (the "AFR"). LuxCo, in turn, extended a loan to EstoniaCo in the same principal amount on the same terms (except that the interest rate is increased by 25 basis points). In addition, the Company funded CanadaCo by extending a loan in a principal amount of $3,746,094 in accordance with the terms and provisions of a loan agreement, by and between the Company and CanadaCo dated as of November 13, 2015 (the "CanadaCo Loan Agreement"). The initial interest rate under the CanadaCo Loan Agreement is 0.49% per annum, which shall reset annually to be equal to the short-term AFR.

Also in connection with the closing of the Acquisition, CanadaCo and EstoniaCo entered into a distribution agreement pursuant to which CanadaCo has agreed to purchase from EstoniaCo certain products and act as the exclusive distributor of such products in Canada (the "Distribution Agreement"). In consideration for the supply of the products, CanadaCo agrees to pay an established per-unit amount for each packaging configuration unit of the product, with such price to be negotiated by the parties from time to time throughout the effective period. As a result, EstoniaCo shall manage all contract manufacturing arrangements with third parties and the sale of all such manufactured products to CanadaCo, which, in turn, shall manage the sale to third parties of all such finished products in Canada. The Distribution Agreement shall have an initial term of two years from the effective date, with automatic one-year renewals, unless terminated earlier by either party.

The Company has the right to use licenses and product registrations, access to intellectual property rights (“IPR”) (including know-how, and patents) to use, import, have imported, offer for sale, sell, manufacture and commercialize the devices in Canada.

The Alveda Acquisition has been accounted for using the acquisition method of accounting. This method requires that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date. Acquisition related costs were expensed as incurred.

The Company utilized the Multi-Period Excess Earnings Method (MPEEM) income approach to value intangible assets. Key assumptions utilized in the analysis of the intangibles were the revenue base, cost of goods sold, operating expenses, income tax rate and discount rate.

The following table summarizes the consideration paid for Alveda, the total acquisition related costs incurred by the Company during 2015 in connection with the acquisition, and the fair values of the assets acquired and liabilities assumed (amounts in thousands):



Consideration:
Fair value of total consideration transferred	$	35,418

Acquisition-related costs* :	$	2,256

Estimated fair value of identifiable assets acquired and liabilities assumed:
Accounts receivable	$	911
Inventories	2,673
Prepaid expenses and other current assets	4
Property and equipment	6
Goodwill, deductible	440
Developed Technology	24,858
In-process research and development	3,816
Customer relationships	3,615
Accounts payable and other assumed liabilities	(661		)
Deferred tax liability	(244		)

*At closing, the Company also paid $5.2 million related to Canadian goods and services tax (GST) and the harmonized sales tax (HST), which is not included in the above table as consideration or acquisition related costs, and all amounts have been refunded in 2016.

The following sets forth the major categories of the Company’s intangible assets acquired from Alveda and the weighted-average remaining amortization period as of December 31, 2015 for those assets that are not already fully amortized (dollar amounts in thousands):



	Gross Carrying Amount at 12/31/15	Accumulated Amortization at 12/31/15		Net Carrying Amount at 12/31/15	Weighted Average Remaining Amortization Period
Technology	25,243	(210	)	25,033	14.9 years
In-process research and development ("IPR&D")	3,875	—		3,875	N/A - Indefinite lived
Customer relationships	3,460	(43	)	3,417	9.9 years
Total	32,578	(253	)	32,325

As of December 31, 2016, $10.8 million of revenues and $1.6 million net income from CanadaCo are included in the Company’s earnings.

Pro Forma Information (unaudited): The following pro forma information presents the results of operations for the years ended December 31, 2015, and December 31, 2014, as if the Alveda acquisition occurred on January 1, 2014:



	(amounts in thousands, except for per share amounts)
	For the Years Ended
	December 31, 2015			December 31, 2014
Total Revenue	$	55,767		$	47,284
Net income	$	8,443		$	6,525
Basic earnings per share	$	0.16		$	0.13
Diluted earnings (loss) per share	$	(0.04	)	$	0.11

The above pro forma results are presented for illustrative purposes and are not intended to represent or be indicative of the actual results of operations of the merged companies that would have been achieved had the acquisition occurred at January 1, 2014, nor are they intended to represent or be indicative of future results of operations. These pro forma results require significant estimates and judgments.