|6 Months Ended|
Jun. 30, 2021
|Equity Method Investments and Joint Ventures [Abstract]|
NOTE J – INVESTMENT
During the period December 2018 through March 2021, the Company made an aggregate investment of $6,000,000 in ILiAD Biotechnologies, LLC (“ILiAD), a privately held clinical stage biotechnology company dedicated to the prevention of human disease caused by Bordetella pertussis with a current focus on its proprietary intranasal vaccine BPZE1, for the prevention of pertussis (whooping cough). The aggregate investment of $6,000,000 by the Company includes a $5,000,000 equity investment and a $1,000,000 investment in a convertible note (see below). At June 30, 2021, the Company owned approximately 9.5% of the outstanding units of ILiAD on a non-fully diluted basis and 7.4% of the outstanding units on a fully diluted basis (after giving effect to the exercise of all outstanding options and warrants). In connection with its investment, the Company’s Chairman and Chief Executive Officer obtained a seat on ILiAD’s Board of Managers and receives the same compensation for service on the Board of Managers as other non-management Board members.
March 12, 2021, the Company invested an additional $1,000,000 in ILiAD as part of a private offering of up to $23,500,000 of convertible
notes (the “Notes”). The Notes have a maturity of three years with interest accruing at 6% per annum. The Notes
are required to be converted into a Qualified Financing (minimum financing of $15 million) at the lesser of (i) 80% of the price paid
per unit in such offering or (ii) a price based on an enterprise value of $176,000,000. In addition, the Notes shall convert in the event
of a merger at the lower of an enterprise value of $176,000,000 or the stated valuation of ILiAD in the merger transaction. In the event
of a change-in-control,
noteholders will also have the option to have the Notes repaid except in a Qualified Offering or a stock-for-stock merger.
For the three months ended June 30, 2021, the Company recorded a net loss from its equity investment in ILiAD totaling $231,000. For the six months ended June 30, 2020, the Company recorded a net loss from its equity investment in ILiAD totaling $446,000.
The difference between the Company’s share of equity in ILiAD’s net assets and the equity investment carrying value reported on the Company’s unaudited condensed consolidated balance sheet at June 30, 2021 is due to an excess amount paid over the book value of the equity investment totaling approximately $5,000,000 which is accounted for as equity method goodwill.
The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef