Correction of Errors

3 Months Ended

Mar. 31, 2014

Accounting Changes and Error Corrections [Abstract]

Accounting Changes and Error Corrections [Text Block]

5. Correction of Errors

The Company’s previously issued March 31, 2014 financial statements were restated to remove deemed dividends which were accrued on its preferred shares and to recognize an increase in derivative expense due to adding several features to the valuation model used to measure the compound derivatives and changing from a Black-Scholes valuation model to a Monte Carlo valuation model. Additional paid in capital and accumulated deficit were reduced by $8,464,000 to reflect the elimination of deemed dividends. Loss on derivative liabilities increased by $1,870,000 to $9,428,000 due to the change in the valuation model.

The Company also contracted a valuation team to review the purchase price allocation of Biocontrol. As a result, in process research and development (IPR&D) was restated and a new intangible asset, patents, was recognized. For the Biocontrol acquisition, $493,000 of IPR&D was reclassified to patents. In addition, amortization expense for patents was recognized in the three month period ending March 31, 2014 and the three month period ending March 31, 2013.

As a result of these corrections, the Company’s net loss for the period ending March 31, 2014 increased by $1,885,000 to $12,029,000. The net loss per share decreased by $0.03 per share to $(0.07) per share which reflected both the increased net loss and the removal of the deemed dividends. The Company’s net loss for the period ending March 31, 2013 increased $7,000 to $1,619,000. The net loss per share remained the same.

Amended Financial Statements

The Company’s financial statements for the quarter ended March 31, 2014 have been further amended to:

⋅ reclassify its Series B Redeemable Convertible Preferred Stock from Stockholders’ Equity (Deficit) to temporary equity due to the stock’s redemption features. This adjustment resulted in a reclassification at March 31, 2014 of $1,021,000 of Stockholders’ Equity (Deficit) to Series B Redeemable Convertible Preferred Stock, including the par value of these shares of $89,000 and the accretion of the stock’s redemption value of $932,000.

⋅ recognize deferred revenue and deferred costs related to certain sub-licensing agreements. This change resulted in an increase in revenue of $104,000 and an increase in G&A expense of $33,000 in the first quarter of 2014.

⋅ reclassify certain warrants issued in 2011 as liability instruments. These warrants were previously recorded in error as equity instruments. This adjustment resulted in the in the recording of a liability of $646,000 as of March 31, 2014.

⋅ adjust goodwill for the acquisitions of Biocontrol and SPH for acquired deferred tax liabilities and errors in previous reporting. This change resulted in an increase of $1,685,000 in goodwill related to the Biocontrol acquisition and $1,548,000 in goodwill related to the acquisition of SPH.

⋅ modify the key assumptions employed to value the compound derivative associated with the Series B Redeemable Convertible Preferred Stock and the Company’s 2013 warrants, under a Monte Carlo valuation model. The change in assumptions resulted in a $4,969,000 increase in the compound derivative liability and a $285,000 reduction in the warrant liability related to 2013 warrants. Loss on derivative liabilities declined by $655,000 in the first quarter of 2014.

As a result of these corrections, the Company’s net loss attributable to common stockholders in the first quarter of 2014, as amended, was reduced by $408,000 to $11,621,000. The net loss per share attributable to common stockholders increased by $(0.01) per share to $(0.06) per share. The Company’s net loss attributable to common stockholders in the first quarter of 2013, as amended, was reduced by $26,000 to $1,645,000. The net loss per share in the attributable to common stockholders increased by $(0.01) to $(0.03) per share.