Acquisition of Laprolan B.V. from Fornix BioSciences N.V.

12 Months Ended

Sep. 30, 2012

Acquisition of Laprolan B.V. from Fornix BioSciences N.V.

Acquisition of Laprolan B.V. from Fornix BioSciences N.V.

3. Acquisition of Laprolan B.V. from Fornix BioSciences N.V.

        On April 7, 2011, the Company completed the acquisition of the outstanding capital stock of Laprolan B.V., a corporation organized under the laws of the Netherlands and a wholly owned subsidiary of Fornix BioSciences N.V., pursuant to a Share Purchase Agreement dated as of January 12, 2011 (the "Purchase Agreement"). As provided in the Purchase Agreement, the transaction has a retroactive effective date of January 1, 2011, and the operating results of Laprolan are for the account of the Company from and after January 1, 2011. The Company is applying purchase accounting as of that date and has included the results of Laprolan in its financial statements beginning with its second quarter of fiscal 2011. At closing, the Company paid to Fornix €10,474,974 (US$15,057,775, of which $60,217 was paid for the cash balance of Laprolan on January 1, 2011 and $119,433 was interest from January 1, 2011 until closing).

        The following table summarizes the fair values of the assets and liabilities acquired at the date of acquisition. Included in the intangible assets acquired was approximately $5,602,000 of goodwill and $5,612,000 of finite-lived intangibles. In the third quarter of fiscal 2012, the intangible assets and long-term liabilities were adjusted by $669,000 to record a deferred tax asset related to Laprolan that existed as of the acquisition date and which impacted purchase accounting and was treated as a correction of an immaterial error.

Current assets	$	3,212,000
Property and equipment		1,831,000
Intangible assets		10,545,000
Total assets acquired	$	15,588,000
Current liabilities	$	824,000
Long term liabilities		877,000
Total liabilities assumed	$	1,701,000

        The pro forma unaudited results of operations for the years ended September 30, 2011 and 2010, assuming consummation of the purchase of Laprolan B.V. as of October 1, 2009, are as follow (in thousands):

	Year Ended
	2011			2010
Net sales	$	55,633			52,767
Net income (loss)		(159	)		2,356
Per share data:
Basic income (loss)	$	(.01	)	$	0.19
Diluted income (loss)	$	(.01	)	$	0.18

        In the table above for the year ended September 30, 2011, $725,000 has been added back to net loss for one-time merger and acquisition costs and $45,000 has been added back to net loss related to a short term accounting and IT support contract.

        The pro forma unaudited results do not purport to be indicative of the results which would actually have been obtained had the acquisition of Laprolan B.V. been completed as of the beginning of the earliest period presented.