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

9 Months Ended

Jun. 30, 2012

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

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

Note B — 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 had 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 has applied 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 is approximately $5,602,000 of goodwill and $5,612,000 of finite —lived intangibles.  The intangible assets and long-term liabilities have been adjusted by $669,000 as disclosed in Note H.

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 three and nine months ended June 30, 2011, assuming consummation of the purchase of Laprolan B.V. as of October 1, 2010, are as follow (in thousands):

	Three Months Ended		Nine Months Ended
	June 30, 2011		June 30, 2011
	(pro forma)		(pro forma)
Net sales	$	14,281	$	40,794
Net income (loss)	29		(596		)
Per share data:
Net loss per share - basic	$	0.00	$	(0.05	)
Net loss per share - diluted	$	0.00	$	(0.05	)

In the table above, $304,000 and $695,000 have been added back to net income (loss) for the three and nine months ended June 30, 2011, respectively, for one-time merger and acquisition costs and $19,000 and $45,000 have been added back to net income (loss) for the three and nine months ended June 30, 2011, respectively, 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.