Document and Entity Information(USD $)
12 Months Ended
Dec. 31, 2011
Mar. 8, 2012
Jun. 30, 2011
Document and Entity Information [Abstract]
Entity Registrant Name
Opko Health, Inc.
Entity Central Index Key
0000944809
Document Type
10-K
Document Period End Date
Dec. 31, 2011
Amendment Flag
false
Document Fiscal Year Focus
2011
Document Fiscal Period Focus
FY
Current Fiscal Year End Date
--12-31
Entity Well-known Seasoned Issuer
No
Entity Voluntary Filers
No
Entity Current Reporting Status
Yes
Entity Filer Category
Accelerated Filer
Entity Public Float
$496,398,545
Entity Common Stock, Shares Outstanding
295,061,572
Consolidated Balance Sheets(USD $)
In Thousands, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Current assets
Cash and cash equivalents
$71,516
$18,016
Accounts receivable, net
12,544
11,856
Inventory, net
13,339
16,423
Prepaid expenses and other current assets
2,179
2,680
Current assets of discontinued operations
4
8,417
Total current assets
99,582
57,392
Property and equipment, net
5,358
2,589
Intangible assets, net
76,730
6,784
Goodwill
39,815
5,856
Investments, net
6,717
5,114
Other assets
1,287
111
Total assets
229,489
77,846
Current liabilities
Accounts payable
4,891
6,479
Accrued expenses
4,956
3,370
Current portion of lines of credit and notes payable
8,757
14,690
Current liabilities of discontinued operations
174
3,060
Total current liabilities
18,778
27,599
Other long-term liabilities, principally contingent consideration and deferred tax liabilities
25,443
1,067
Total liabilities
44,221
28,666
Commitments and contingencies
  
  
Series D Preferred Stock - $0.01 par value, 2,000,000 shares authorized; 1,129,032 and 1,209,677 shares issued and outstanding (liquidation value of $28,355 and $33,013) at December 31, 2011 and 2010, respectively
24,386
26,128
Shareholders' equity
Common Stock - $0.01 par value, 500,000,000 shares authorized; 297,503,033 and 255,412,706 shares issued and outstanding at December 31, 2011 and 2010, respectively
2,975
2,554
Treasury stock (2,488,477 and 45,154 shares at December 31, 2011 and 2010, respectively)
(8,092)
(61)
Additional paid-in capital
524,814
376,008
Accumulated other comprehensive income
907
2,921
Accumulated deficit
(359,722)
(358,379)
Total shareholders' equity
160,882
23,052
Total liabilities, Series D Preferred Stock, and shareholders' equity
229,489
77,846
Series A Preferred Stock
Shareholders' equity
Preferred Stock
0
9
Total shareholders' equity
0
9
Series C Preferred Stock
Shareholders' equity
Preferred Stock
  
  
Total shareholders' equity
$0
$0
Consolidated Balance Sheets (Parenthetical)(USD $)
In Thousands, except Share data, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Temporary equity, par value
$0.01
$0.01
Temporary equity, shares authorized
2,000,000
2,000,000
Temporary equity, shares issued
1,129,032
1,209,677
Temporary equity, shares outstanding
1,129,032
1,209,677
Liquidation preference, preferred stock value
$28,355
$33,013
Common stock, par value
$0.01
$0.01
Common stock, shares authorized
500,000,000
500,000,000
Common stock, shares issued
297,503,033
297,503,033
Common stock, shares outstanding
255,412,706
255,412,706
Treasury stock, shares
2,488,477
45,154
Series A Preferred Stock
Liquidation preference, preferred stock value
$0
$2,468
Preferred stock, par value
$0.01
$0.01
Preferred stock, shares authorized
4,000,000
4,000,000
Preferred stock, shares issued
0
897,439
Preferred stock, shares outstanding
0
897,439
Series C Preferred Stock
Preferred stock, par value
$0.01
$0.01
Preferred stock, shares authorized
500,000
500,000
Preferred stock, shares issued
  
  
Preferred stock, shares outstanding
  
  
Consolidated Statements of Operations(USD $)
In Thousands, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Revenue
Products
$27,844
$21,763
$4,418
Other
135
6,731
Total revenue
27,979
28,494
4,418
Cost of goods sold, excluding amortization of intangible assets
17,243
13,495
2,876
Gross margin, excluding amortization of intangible assets
10,736
14,999
1,542
Operating expenses
Selling, general and administrative
19,169
18,133
10,372
Research and development
11,352
5,949
10,836
Write-off of acquired in-process research and development
2,000
Other operating expenses, principally amortization of intangible assets
3,404
2,053
481
Total operating expenses
33,925
26,135
23,689
Operating loss from continuing operations
(23,189)
(11,136)
(22,147)
Other income and (expense)
Interest income
288
24
24
Interest expense
(1,005)
(1,215)
(1,760)
Other expense, net
(327)
347
(180)
Other expenses, net
(1,044)
(844)
(1,916)
Loss from continuing operations before income taxes and investment losses
(24,233)
(11,980)
(24,063)
Income tax benefit
19,358
18
25
Loss from continuing operations before investment losses
(4,875)
(11,962)
(24,038)
Loss from investments in investees
(1,589)
(714)
(353)
Loss from continuing operations
(6,464)
(12,676)
(24,391)
Income (loss) from discontinued operations, net of tax
5,181
(6,250)
(5,722)
Net loss
(1,283)
(18,926)
(30,113)
Preferred stock dividend
(2,379)
(2,624)
(4,718)
Net loss attributable to common shareholders
$(3,662)
$(21,550)
$(34,831)
(Loss) income per share, basic and diluted
Loss from continuing operations
$(0.03)
$(0.06)
$(0.12)
Income (loss) from discontinued operations
$0.02
$(0.02)
$(0.03)
Net loss per share
$(0.01)
$(0.08)
$(0.15)
Weighted average number of common shares outstanding, basic and diluted
280,673,122
255,095,586
233,191,617
Consolidated Statements of Shareholders' Equity(USD $)
In Thousands, except Share data
Total
Series A Preferred Stock
Series C Preferred Stock
Common Stock
Common Stock
Series A Preferred Stock
Common Stock
Series D Preferred Stock
Treasury Stock
Additional Paid-in Capital
Additional Paid-in Capital
Series A Preferred Stock
Additional Paid-in Capital
Series D Preferred Stock
Other Comprehensive Income (Loss)
Accumulated Deficit
Accumulated Deficit
Series A Preferred Stock
Pharmacos Exakta
Common Stock
Pharmacos Exakta
Additional Paid-in Capital
Claros
Claros
Common Stock
Claros
Treasury Stock
Claros
Additional Paid-in Capital
FineTech
FineTech
Common Stock
FineTech
Additional Paid-in Capital
Beginning balance at Dec. 31, 2008
$359
$10
$0
$1,991
$(24)
$307,498
$0
$(309,116)
Beginning balance, shares at Dec. 31, 2008
953,756
0
199,020,379
(18,000)
Equity-based compensation expense
4,498
4,498
Exercise of common stock options
694
30
664
Exercise of common stock options, shares
2,984,945
Exercise of common warrants
24
7
17
Exercise of common warrants, shares
706,164
Issuance of common stock in private placement to related party
20,000
200
19,800
Issuance of common stock in private placement to related party, shares
20,000,000
Issuance of common stock in private placement, including related parties
30,990
310
30,680
Issuance of common stock in private placement, including related parties, share
31,000,000
Relative fair value of warrants issued In connection with issuance of Series D preferred stock
3,872
3,872
Series A preferred stock dividend
1
(1)
Series A preferred stock dividend, shares
93,242
Conversion of Series A preferred stock
(1)
(1)
Conversion of Series A preferred stock, shares
(21,064)
21,064
Restricted stock grant
30,000
Purchase of shares
(37)
(37)
Purchase of shares, shares
(27,154)
Net loss
(30,113)
(30,113)
Cumulative translation adjustment net
1,313
1,313
Ending balance at Dec. 31, 2009
31,599
10
0
2,538
(61)
367,028
1,313
(339,229)
Ending balance, shares at Dec. 31, 2009
1,025,934
0
253,762,552
(45,154)
Equity-based compensation expense
6,922
6,922
Exercise of common stock options
74
2
72
Exercise of common stock options, shares
150,231
Series A preferred stock dividend
(224)
(224)
Conversion of Series A preferred stock
(1)
1
Conversion of Series A preferred stock, shares
(128,495)
128,495
Net loss
(18,926)
(18,926)
Cumulative translation adjustment net
1,608
1,608
Issuance of common stock in Connection with acquisition
1,999
13
1,986
Issuance of common stock in Connection with acquisition, shares
1,371,428
Ending balance at Dec. 31, 2010
23,052
9
0
2,554
(61)
376,008
2,921
(358,379)
Ending balance, shares at Dec. 31, 2010
897,439
0
255,412,706
(45,154)
Equity-based compensation expense
7,155
7,155
Exercise of common stock options
984
4
980
Exercise of common stock options, shares
422,500
Exercise of common warrants
260
29
231
Exercise of common warrants, shares
2,925,894
Series A preferred stock dividend
(4,704)
(60)
(4,704)
(60)
Conversion of Series A preferred stock
1,742
(3)
3
10
1,732
Conversion of Series A preferred stock, shares
(294,680)
294,680
940,141
Purchase of shares
(7,832)
(7,832)
Purchase of shares, shares
(2,398,740)
Net loss
(1,283)
(1,283)
Other comprehensive loss
(2,014)
(2,014)
Redemption of Series A preferred stock
(1,507)
(6)
(1,501)
Redemption of Series A preferred stock, shares
(602,759)
Issuance of common stock at $3.75 per share
104,828
294
104,534
Issuance of common stock at $3.75 per share, shares
29,397,029
Issuance of common stock in Connection with acquisition
22,452
45
(199)
22,606
17,717
36
17,681
Issuance of common stock in Connection with acquisition, shares
4,494,380
(44,583)
3,615,703
Exakta-OPKO purchase price adjustment
92
92
Ending balance at Dec. 31, 2011
$160,882
$0
$0
$2,975
$(8,092)
$524,814
$907
$(359,722)
Ending balance, shares at Dec. 31, 2011
0
0
297,503,033
(2,488,477)
Consolidated Statements of Stockholders' Equity (Parenthetical)
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Issuance of common stock in private placement to related party
$1.00
Issuance of common stock in private placement, including related parties
$1.00
Issuance of Series D preferred stock
8.00%
Purchase of shares
$3.27
$3.55
Issuance of common stock, per share
$3.75
Issuance of common stock for acquisition
$1.46
Common Stock
Issuance of common stock in private placement to related party
$1.00
Issuance of common stock in private placement, including related parties
$1.00
Issuance of common stock, per share
$3.75
Treasury Stock
Purchase of shares
$3.27
$3.55
Additional Paid-in Capital
Issuance of common stock in private placement to related party
$1.00
Issuance of common stock in private placement, including related parties
$1.00
Issuance of Series D preferred stock
8.00%
Issuance of common stock, per share
$3.75
Pharmacos Exakta |
Common Stock
Issuance of common stock for acquisition
$1.46
Pharmacos Exakta |
Additional Paid-in Capital
Issuance of common stock for acquisition
$1.46
Claros
Issuance of common stock for acquisition
$5.04
Claros |
Common Stock
Issuance of common stock for acquisition
$5.04
Claros |
Treasury Stock
Issuance of common stock for acquisition
$5.04
Claros |
Additional Paid-in Capital
Issuance of common stock for acquisition
$5.04
FineTech
Issuance of common stock for acquisition
$4.90
FineTech |
Common Stock
Issuance of common stock for acquisition
$4.90
FineTech |
Additional Paid-in Capital
Issuance of common stock for acquisition
$4.90
Consolidated Statements of Cash Flows(USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Cash flows from operating activities:
Net loss
$(1,283)
$(18,926)
$(30,113)
Income (loss) from discontinued operations, net of tax
(5,181)
6,250
5,722
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
3,830
2,207
564
Write-off of acquired in-process research and development
2,000
Accretion of debt discount related to notes payable
2
66
123
Losses from investments in investees
1,589
714
353
Equity based compensation - employees and non-employees
6,953
6,519
4,174
Provision for (recovery of) bad debts
257
(89)
25
Provision for (recovery of) inventory obsolescence
607
(48)
137
Unrealized gain from warrants
39
Deferred income tax benefit
(19,358)
Revenue from receipt of equity
(85)
(731)
Changes in assets and liabilities of continuing operations, net of the effects of acquisitions:
Accounts receivable
(1,719)
(2,888)
(740)
Inventory
2,170
(8,156)
(636)
Prepaid expenses and other current assets
57
270
432
Other assets
16
13
(58)
Accounts payable
(1,784)
1,498
(547)
Foreign Currency Remeasurement
363
Accrued expenses
(412)
(3,858)
(829)
Cash used in operating activities from continuing operations
(13,939)
(17,159)
(19,393)
Cash used in operating activities from discontinued operations
(4,561)
(1,553)
(4,065)
Net cash used in operating activities
(18,500)
(18,712)
(23,458)
Cash flows from investing activities:
Investments in investees
(2,013)
(650)
(4,800)
Acquisition of businesses, net of cash
(28,186)
(1,323)
(15,632)
Acquisition of rolapitant
(2,000)
Purchase of marketable securities
(100,161)
(14,997)
(9,997)
Maturities of marketable securities
100,161
14,997
9,997
Capital expenditures
(1,953)
(774)
(122)
Cash used in investing activities from continuing operations
(32,152)
(2,747)
(22,554)
Cash used in investing activities from discontinued operations
17,316
(33)
(50)
Net cash used in investing activities
(14,836)
(2,780)
(22,604)
Cash flows from financing activities:
Issuance of common stock, including related parties, net
104,828
50,990
Purchase of common stock held in treasury
(7,832)
Redemption of Series A preferred stock including related parties
(1,792)
Payment of Series D dividends, including to related parties
(4,704)
Issuance of Series D preferred stock and warrants, including related parties
30,000
Repayments of line of credit with related party
(12,000)
Proceeds from bridge loan with related party
3,000
Repayment of bridge loan with related party
(3,000)
Proceeds from the exercise of stock options and warrants
1,244
74
718
Borrowings on lines of credit
15,300
15,424
529
Repayments of lines of credit and capital lease obligations
(20,127)
(6,266)
(317)
Net cash provided by (used in) financing activities
86,917
(2,768)
81,920
Effect of exchange rate on cash and cash equivalents
(81)
(382)
122
Net change in cash and cash equivalents
53,500
(24,642)
35,980
Cash and cash equivalents at beginning of year
18,016
42,658
6,678
Cash and cash equivalents at end of year
$71,516
$18,016
$42,658
Business and Organization
Business and Organization

Note 1 Business and Organization

We are a multi-national pharmaceutical and diagnostics company that seeks to establish industry-leading positions in large and rapidly growing medical markets by leveraging our discovery, development and commercialization expertise and our novel and proprietary technologies. Our current focus is on conditions with major unmet medical needs. We are developing a range of solutions to diagnose, treat and prevent various conditions, including molecular diagnostics tests, point-of-care tests, and proprietary pharmaceuticals and vaccines. We plan to commercialize these solutions on a global basis in large and high growth markets, including emerging markets. We have already established emerging markets pharmaceutical platforms in Chile and Mexico, which are generating revenue and which we expect to generate positive cash flow and facilitate future market entry for our products currently in development. We also recently acquired a specialty active pharmaceutical ingredients (“APIs”) manufacturer in Israel, which is currently generating revenue and positive cash flow, and which we expect will play a valuable role in the development of our pipeline of peptoids and other molecules for our proprietary molecular diagnostic and therapeutic products. We continue to actively explore opportunities to acquire complementary pharmaceuticals, compounds, technologies, and businesses.

We are incorporated in Delaware and our principal executive offices are located in Miami, Florida. We lease office and lab space in Jupiter, Florida, and Miramar, Florida, which is where our molecular diagnostics research and development and oligonucleotide research and development operations are based, respectively. We have leased office, manufacturing, and warehouse space in Woburn, Massachusetts for our point-of-care diagnostics business, and in Nesher, Israel for our API business. Our Chilean operations are located in leased offices in Santiago, Chile, and we own an office and manufacturing facility, and lease a warehouse facility in Guadalajara, Mexico.

Summary of Significant Accounting Policies
Summary of Significant Accounting Policies

Note 2 Summary of Significant Accounting Policies

Basis of Presentation, Reclassifications and Correction of an Error. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and with the instructions to Form 10-K and of Regulation S-X. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. As further discussed in Note 4, the results of operations and the assets and the liabilities related to the Instrumentation Business have been accounted for as discontinued operations. Accordingly, the results of the operations related to the Instrumentation Business from prior periods have been reclassified to discontinued operations.

As of December 31, 2011, we corrected an immaterial error related to the classification of one of the intangible assets acquired as part of the CURNA, Inc. (“CURNA”) acquisition. Refer to Note 3. We reclassified million to in-process research and development from technology. Acquired in-process research and development is considered indefinite lived and does not amortize. Acquired in-process research and development is capitalized until it is completed and then amortized. If the acquired in-process research and development is abandoned, it is written off at the time of that determination. In addition, acquired in-process research and development assets are subject to impairment testing. As a result, during the three months ended December 31, 2011, we reversed $0.7 million of amortization expense previously recorded during the nine months ended September 30, 2011. In addition, we determined that we should have recorded a deferred tax liability of $4.0 million and $4.0 million of additional goodwill for the difference between the book and tax basis of the CURNA acquisition related intangible assets. As of December 31, 2011, we recorded the deferred tax liability and goodwill.

Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents. We consider all non-restrictive, highly liquid short-term investments purchased with a maturity of three months or less on the date of purchase to be cash equivalents.

 

Inventories. Inventories are valued at the lower of cost or market (net realizable value). Cost is determined by the first-in, first-out method.

Property and Equipment. Property and equipment are recorded at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the assets, generally five to ten years and includes amortization expense for assets capitalized under capital leases. The estimated useful lives by asset class are as follows: software – 3 years, machinery and equipment – 5-8 years, furniture and fixtures – 5-10 years and leasehold improvements – the lesser of their useful life or the lease term. Expenditures for repairs and maintenance are charged to expense as incurred, while betterments reduce accumulated depreciation. Depreciation expense from continuing operations was $0.4 million, $0.2 million, and $0.1 million for the years ended December 31, 2011, 2010, and 2009, respectively.

Goodwill and Intangible Assets. Goodwill represents the difference between the purchase price and the estimated fair value of the net assets acquired when accounted for by the purchase method of accounting and arose from our acquisitions of OPKO Chile, Exakta-OPKO, CURNA, Claros and FineTech. We do not amortize goodwill, however, we perform an annual impairment test of goodwill during the fourth quarter. We did not record any impairment from continuing operations during the years ended December 31, 2011, 2010 or 2009. We evaluate our goodwill for impairment annually and whenever events and changes in circumstances suggest that the carrying amount may not be recoverable.

We amortize intangible assets with definite lives on a straight-line basis over their estimated useful lives, ranging from 3 to 10 years, and review for impairment at least annually, or sooner when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. We use the straight-line method of amortization as there is no reliably determinable pattern in which the economic benefits of our intangible assets are consumed or otherwise used up. Amortization expense from continuing operations was $3.4 million, $2.1 million, and $0.5 million for the years ended December 31, 2011, 2010, and 2009, respectively. Amortization expense from continuing operations for our intangible assets as of December 31, 2011 for the years ending December 31, 2012, 2013, 2014, 2015, and 2016 is expected to be $7.7 million, $6.2 million, $6.0 million, $5.8 million, and $5.3 million, respectively.

Impairment of Long-Lived Assets. Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, then an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value, or carrying amount for cost basis assets, of the asset.

Fair Value Measurements. The carrying amounts of our cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate their fair value due to the short-term maturities of these instruments. Investments that are accounted for under the equity method are considered available-for-sale as of December 31, 2011 and 2010, and are carried at fair value.

Short-term investments, which we invest in from time to time, include bank deposits, corporate notes, U.S. treasury securities and U.S. government agency securities with original maturities of greater than 90 days and remaining maturities of less than one year. Long-term investments include corporate notes, U.S. treasury securities and U.S. government agency securities with maturities greater than one year.

In evaluating the fair value information, considerable judgment is required to interpret the market data used to develop the estimates. The use of different market assumptions and/or different valuation techniques may have a material effect on the estimated fair value amounts. Accordingly, the estimates of fair value presented herein may not be indicative of the amounts that could be realized in a current market exchange. Refer to Note 18.

Derivative financial instruments. We record derivative financial instruments on our balance sheet at their fair value and the changes in the fair value are recognized in income when they occur, the only exception being derivatives that qualify as hedges. To qualify the derivative instrument as a hedge, we are required to meet strict hedge effectiveness and contemporaneous documentation requirements at the initiation of the hedge and assess the hedge effectiveness on an ongoing basis over the life of the hedge. At December 31, 2011, we had derivative financial instruments consisting of our Chilean forward purchase contracts (Refer to Note 19) and warrants to purchase Neovasc common stock (Refer to Note 3); neither meets the documentation requirements to be designated effective hedges. Accordingly, we recognize all changes in fair values of our forward contracts and Neovasc warrants in our results from operations.

 

Research and Development. Research and development costs are charged to expense as incurred. We record expense for in-process research and development projects acquired as asset acquisitions which have not reached technological feasibility and which have no alternative future use. For in-process research and development projects acquired in business combinations, the in-process research and development project is capitalized and evaluated for impairment until the development process has been completed. Once the development process has been completed the asset will be amortized over its remaining useful life.

Income Taxes. Income taxes are accounted for under the asset-and-liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and the respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. We periodically evaluate the realizability of our net deferred tax assets. Our tax accruals are analyzed periodically and adjustments are made as events occur to warrant such adjustment.

Loss Per Common Share. Basic and diluted earnings or loss per common share are based on the net loss increased by dividends on preferred stock divided by the weighted average number of common shares outstanding during the period. In the periods in which their effect would be anti-dilutive, no effect has been given to outstanding options, warrants or convertible preferred stock in the diluted computation. The diluted loss per share does not include the weighted average impact of the outstanding options, warrants, and other contingent consideration of 26,661,326, 20,310,765, and 16,840,762 shares for the years ended December 31, 2011, 2010, and 2009 respectively, because their inclusion would have been anti-dilutive. As of December 31, 2011, the holders of our Series D Preferred Stock could convert their shares into approximately 11,433,331 shares of our common stock, including accrued dividends. During the year ended December 31, 2011, approximately 3,702,497 common stock warrants and common stock options to purchase shares of our common stock were exercised, resulting in the issuance of 3,348,394 shares of our common stock. Of the 3,702,497 common stock warrants and common stock options exercised, 354,103 shares were surrendered in lieu of a cash payment via the net exercise feature of the warrant agreements.

Revenue Recognition. Generally, we recognize revenue from product sales when goods are shipped and title and risk of loss transfer to our customers.

Other revenues include revenue related to upfront license payments, license fees and milestone payments received through our license, collaboration and commercialization agreements. We analyze our multiple-element arrangements to determine whether the elements can be separated and accounted for individually as separate units of accounting. In addition, other revenue includes $0.1 million of revenue related to our consulting agreement we entered into with Neovasc. (Refer to Note 3). We recognize the revenue on a straight-line basis over the contractual term of the agreement.

Non-refundable license fees for the out-license of our technology are recognized depending on the provisions of each agreement. We recognize non-refundable upfront license payments as revenue upon receipt if the license has standalone value and the fair value of our undelivered obligations, if any, can be determined. If the license is considered to have standalone value but the fair value of any of the undelivered items cannot be determined, the license payments are recognized as revenue over the period of our performance for such undelivered items or services. License fees with ongoing involvement or performance obligations are recorded as deferred revenue once received and generally are recognized ratably over the period of such performance obligation only after both the license period has commenced and we have delivered the technology. Our assessment of our obligations and related performance periods requires significant management judgment. If an agreement contains research and development obligations, the relevant time period for the research and development phase is based on management estimates and could vary depending on the outcome of clinical trials and the regulatory approval process. Such changes could materially impact the revenue recognized, and as a result, management reviews the estimates related to the relevant time period of research and development on a quarterly basis.

Revenue from milestone payments related to arrangements under which we have continuing performance obligations are recognized as revenue upon achievement of the milestone only if all of the following conditions are met: the milestone payments are non-refundable; there was substantive uncertainty at the date of entering into the arrangement that the milestone would be achieved; the milestone is commensurate with either the vendor’s performance to achieve the milestone or the enhancement of the value of the delivered item by the vendor; the milestone relates solely to past performance; and the amount of the milestone is reasonable in relation to the effort expended or the risk associated with the achievement of the milestone. If any of these conditions are not met, the milestone payments are not considered to be substantive and are, therefore, deferred and recognized as revenue over the term of the arrangement as we complete our performance obligations.

Total deferred revenue related to other revenues was $0.9 million and $0.2 million at December 31, 2011 and December 31, 2010, respectively.

Allowance for Doubtful Accounts. We analyze accounts receivable and historical bad debt levels, customer credit worthiness and current economic trends when evaluating the adequacy of the allowance for doubtful accounts using the specific identification method. Our reported net loss is directly affected by management’s estimate of the collectability of accounts receivable. Estimated allowances for sales returns are based upon our history of product returns. The amount of allowance for doubtful accounts from continuing operations at December 31, 2011 and 2010 was $0.4 million and $0.3 million, respectively.

Product Warranties. Product warranties are accrued at the time we record revenue for a product. The costs of warranties are recorded as a component of cost of sales. We estimate warranty costs based on our estimated historical experience and adjust for any known product reliability issues.

Equity-Based Compensation. We measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized in the statement of operations over the period during which an employee is required to provide service in exchange for the award. We record excess tax benefits, realized from the exercise of stock options as a financing cash inflow rather than as a reduction of taxes paid in cash flow from operations. Refer to Note 9. Equity-based compensation arrangements to non-employees are recorded at their fair value on the measurement date. The measurement of equity-based compensation is subject to periodic adjustment as the underlying equity instruments vest.

Comprehensive income or loss. Our comprehensive loss for the year ended December 31, 2011 includes net loss for the year, the unrealized gain of $0.4 million, on our common stock options and common stock warrants of Neovasc, Inc. (Refer to Note 3) and the cumulative translation adjustment, net, of $2.4 million for the translation results of our subsidiaries in Chile and Mexico. Comprehensive loss for the year ended December 31, 2010 includes net loss for the year and the cumulative translation adjustment, net, $1.6 million for the translation results of our subsidiaries in Chile and Mexico.

Segment reporting. Our chief operating decision-maker (“CODM”) is comprised of our executive management with the oversight of our board of directors. Our CODM review our operating results and operating plans and make resource allocation decisions on a company-wide or aggregate basis. We currently manage our operations in one reportable segment, pharmaceutical. The pharmaceutical segment consists of two operating segments, our (i) pharmaceutical research and development segment which is focused on the research and development of pharmaceutical products, diagnostic tests and vaccines, and (ii) the pharmaceutical operations we acquired in Chile, Mexico and Israel through the acquisition of OPKO Chile, Exakta-OPKO and FineTech, respectively. There are no inter-segment sales. We evaluate the performance of each operating segment based on operating profit or loss. There is no inter-segment allocation of interest expense and income taxes.

Recent accounting pronouncements. In May 2011, the Financial Accounting Standards Board (“FASB”) issued a new standard on fair value measurement and disclosure requirements. The new standard changes fair value measurement principles and disclosure requirements including measuring the fair value of financial instruments that are managed within a portfolio, the application of applying premiums and discounts in a fair value measurement, and additional disclosure about fair value measurements. The new standard is effective for interim and annual periods beginning after December 15, 2011. We do not expect a material impact with the adoption of this new standard.

In June 2011, the FASB issued a new standard on the presentation of comprehensive income. The new standard eliminated the current option to report other comprehensive income and its components in the statement of changes in equity. Under the new standard, companies can elect to present items of net income and other comprehensive income in one continuous statement or in two separate, but consecutive statements. The new standard is effective at the beginning of fiscal years beginning after December 15, 2011 and we will comply with this requirement in the first quarter 2012. We do not expect a material impact with the adoption of this new standard.

 

In September 2011, the FASB issued a new standard to simplify how an entity tests goodwill for impairment. The new standard allows companies an option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining if it is necessary to perform the two-step quantitative goodwill impairment test. Under the new standard, a company is no longer required to calculate the fair value of a reporting unit unless the company determines, based on the qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The new standard is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. We do not expect a material impact with the adoption of this new standard.

Acquisitions, Investments, and Licenses
Acquisitions, Investments, and Licenses

Note 3 Acquisitions, Investments, and Licenses

FineTech acquisition

On December 29, 2011, we purchased all of the issued and outstanding shares of FineTech Pharmaceuticals, Ltd., a privately held Israeli company focused on the development and production of specialty Active Pharmaceutical Ingredients (“APIs”). At closing, we delivered to the seller $27.7 million, of which $10.0 million was paid in cash and $17.7 million was paid in shares of our common stock. The shares delivered at closing were valued at $17.7 million based on the closing sales price per share of our common stock as reported by the New York Stock Exchange (“NYSE”) on the actual closing date of the acquisition, or $4.90 per share. The number of shares issued was based on the average closing sales price per share of our common stock as reported on the NYSE for the ten trading days immediately preceding the execution of the purchase agreement, or $4.84 per share. Upon finalization of the closing financial statements of FineTech, we accrued an additional $0.5 million for a working capital surplus, as defined in the purchase agreement, which was paid to the seller in February 2012. In addition, the purchase agreement provides for the payment of additional cash consideration subject to the achievement of certain sales milestones.

The following table summarizes the estimated fair value of the net assets acquired and liabilities assumed in the acquisition of FineTech at the date of acquisition which are subject to change while contingencies that existed on the acquisition date are resolved:

 

         

(in thousands)

      

Current assets (including cash of $2,000)

   $ 3,358  

Intangible assets:

        

Customer relationships

     14,200  

Technology

     2,700  

Non-compete

     1,500  

Tradename

     400  
   

 

 

  

Total intangible assets

     18,800  

Goodwill

     11,623  

Plant and equipment

     1,358  

Other assets

     1,154  

Accounts payable and accrued expenses

     (910 ) 

Deferred tax liability

     (2,457 ) 

Contingent consideration

     (4,747 ) 
   

 

 

  

Total purchase price

   $ 28,179  
   

 

 

  

Claros Diagnostics acquisition

On October 13, 2011, we acquired Claros Diagnostics, Inc. (“Claros”) pursuant to an agreement and plan of merger. We paid $10.0 million in cash, subject to certain set-offs and deductions, and $22.5 million in shares of our common stock, based on the closing sales price per share of our common stock as reported by the NYSE on the closing date of the Merger, or $5.04 per share. The number of shares issued was based on the average closing sales price per share of our common stock as reported by the NYSE for the ten trading days immediately preceding the date of the merger, or $4.45 per share. Pursuant to the merger agreement, $5.0 million of the stock consideration is held in a separate escrow account to secure the indemnification obligations of Claros under the Claros merger agreement. In December 2011, we made a $0.2 million claim against the escrow for certain undisclosed liabilities. In addition, the merger agreement provides for the payment of up to an additional $19.125 million in shares of our common stock upon and subject to the achievement of certain milestones.

 

The following table summarizes the estimated fair value of the net assets acquired and liabilities assumed in the acquisition of Claros at the date of acquisition which are subject to change while contingencies that existed on the acquisition date are resolved:

 

         

(in thousands)

      

Current assets (including cash of $351)

   $ 378  

Technology

     44,400  

Goodwill

     17,977  

Equipment

     333  

Other assets

     18  

Accounts payable and accrued expenses

     (655 ) 

Deferred tax liability

     (17,254 ) 

Contingent consideration

     (12,745 ) 
   

 

 

  

Total purchase price

   $ 32,452  
   

 

 

  

CURNA acquisition

In January 2011, we acquired all of the outstanding stock of CURNA, Inc. (“CURNA”) in exchange for $10.0 million in cash, plus $0.6 million in liabilities, of which, $0.5 million was paid at closing. In addition to the cash consideration, we have agreed to pay to the CURNA sellers a portion of any consideration we receive in connection with certain license, partnership or collaboration agreements we may enter into with third parties in the future relating to the CURNA technology, including, license fees, upfront payments, royalties and milestone payments. As a result, we recorded $0.6 million, as contingent consideration for the future consideration. We will evaluate the contingent consideration on an ongoing basis and the changes in fair value will be recognized in earnings until the contingencies are resolved. Refer to Note 18. CURNA was a privately held company based in Jupiter, Florida, engaged in the discovery of new drugs for the treatment of a wide variety of illnesses, including cancer, heart disease, metabolic disorders and a range of genetic anomalies.

The following table reflects the estimated fair value of the net assets acquired at the date of acquisition which are subject to change while contingencies that existed on the acquisition date are resolved:

 

         

(in thousands)

      

Current assets (including cash of $5)

   $ 38  

Fixed assets

     21  

Intangible assets

        

In-process research and development

     10,000  

Patents

     290  
   

 

 

  

Total intangible assets

     10,290  

Goodwill

     4,827  

Accounts payable and accrued expenses

     (54 ) 

Deferred tax liability

     (3,999 ) 

Contingent consideration

     (580 ) 
   

 

 

  

Total purchase price

   $ 10,543  
   

 

 

  

Rolapitant license

In December 2010, we entered into a license agreement (the “TESARO License”) with TESARO, Inc. (“TESARO”) granting TESARO exclusive rights to the development, manufacture, commercialization and distribution of rolapitant and a related compound. Under the terms of the TESARO License, we are eligible for payments of up to $121.0 million, including an up-front payment of $6.0 million, which has been received, and additional payments based upon achievement of specified regulatory and commercialization milestones. In addition, TESARO will pay us double digit tiered royalties on sales of licensed product. We will share future profits from the commercialization of licensed products in Japan with TESARO and we will have an option to market the products in Latin America. In connection with the TESARO License, we also acquired an equity position in TESARO. We recorded the equity position at $0.7 million, the estimated fair value based on a discounted cash flow model.

In accounting for the license of rolapitant to TESARO, we determined that we did not have any continuing involvement in the development of rolapitant or any other future performance obligations and, as a result, recognized the $6.0 million up-front payment and the $0.7 million equity position as license revenue during the year ended December 31, 2010.

 

We acquired rolapitant on October 12, 2009 from Schering-Plough Corporation (“Schering”). We entered into an asset purchase agreement (the “Schering Agreement”) with Schering to acquire rolapitant and other assets relating to Schering’s neurokinin-1 (“NK-1”) receptor antagonist program. Under the terms of the Schering Agreement, we paid Schering $2.0 million in cash upon closing and agreed to pay up to an additional $27.0 million upon certain development milestones. Rolapitant, the lead product in the NK-1 program, successfully completed Phase II clinical testing for prevention of nausea and vomiting related to cancer chemotherapy and surgery, and other indications. Development of rolapitant and the other assets had been stopped at the time of our acquisition and there were no ongoing clinical trials. None of the assets acquired have alternative future uses, nor have they reached a stage of technological feasibility, as such, we recorded $2.0 million as in-process research and development expense during the year ended December 31, 2009.

Latin America acquisitions

In February 2010, we acquired Exakta-OPKO (previously known as Pharmacos Exakta S.A. de C.V.), a privately-owned Mexican company, engaged in the manufacture, marketing and distribution of ophthalmic and other pharmaceutical products for government and private markets since 1957. Pursuant to a purchase agreement we acquired all of the outstanding stock of Exakta-OPKO and real property owned by an affiliate of Exakta-OPKO for a total aggregate purchase price of $3.5 million, of which an aggregate of $1.5 million was paid in cash and $2.0 million was paid in shares of our common stock, par value $.01. In September 2010, we reduced the consideration paid by $0.1 million in working capital adjustments per the purchase agreement. The number of shares to be issued was determined by the average closing price of our common stock as reported on the NYSE Amex for the ten trading days ending on February 12, 2010. A total of 1,371,428 shares of our common stock were issued in the transaction which were valued at $2.0 million due to trading restrictions. A portion of the proceeds will remain in escrow for a period of time to satisfy indemnification claims.

In October 2009, we entered into a definitive agreement to acquire OPKO Chile (previously known as Pharma Genexx, S.A.), a privately-owned Chilean company engaged in the representation, importation, commercialization and distribution of pharmaceutical products, over-the-counter products and medical devices for government, private and institutional markets in Chile. Pursuant to a stock purchase agreement with OPKO Chile and its shareholders, Farmacias Ahumada S.A., FASA Chile S.A., and Laboratorios Volta S.A., we acquired all of the outstanding stock of OPKO Chile in exchange for $16.0 million in cash. The transaction closed on October 7, 2009.

The following table summarizes the estimated fair value of the net assets acquired and liabilities assumed in the acquisition of OPKO Chile at the date of acquisition:

 

         

(in thousands)

      

Current assets (including cash of $368)

   $ 12,208  

Intangible assets

     7,826  

Goodwill

     4,983  

Other assets

     20  

Accounts payable and accrued expenses

     (9,037 ) 
   

 

 

  

Total purchase price

   $ 16,000  
   

 

 

  

Investments

In August 2011, we made an investment in Neovasc Inc. (“Neovasc”), a medical technology company based in Vancouver, Canada, a Canadian publicly traded company. Neovasc is developing devices to treat cardiovascular diseases and is also a leading supplier of tissue components for the manufacturers of replacement heart valves. We invested $2.0 million and received two million Neovasc common shares, and two-year warrants to purchase an additional one million shares for $1.25 a share. We recorded the warrants at their estimated fair value using the Black-Scholes-Merton Model at $0.7 million. We recorded an unrealized gain of $0.2 million at December 31, 2011 related to these warrants to reflect the closing price increase of Neovasc common stock. We also entered into an agreement with Neovasc to provide strategic advisory services to Neovasc as it continues to develop and commercialize its novel cardiac devices. In connection with the consulting agreement, Neovasc granted us 913,750 common stock options. The options were granted at (Canadian) $1.00 per share and vest annually over three years. We valued the options using the Black-Scholes-Merton Model at $0.8 million on the date of grant and will recognize the revenue over four years as other revenue. In addition, we recorded an unrecognized gain of $0.2 million at December 31, 2011 related to these options to reflect the (Canadian) $1.29 closing share price of Neovasc. Refer to Note 18.

 

In November 2010, we made an investment in Fabrus, Inc., a privately held early stage biotechnology company with next generation therapeutic antibody drug discovery and development capabilities. Fabrus is using its proprietary antibody screening and engineering approach to discover promising lead compounds against several important oncology targets. Our investment was part of a $2.1 million financing for Fabrus and included other related parties. Refer to Note 12.

In September 2009, we entered into an agreement pursuant to which we invested $2.5 million in cash in Cocrystal Discovery, Inc., a privately held biopharmaceutical company (“Cocrystal”) in exchange for 1,701,723 shares of Cocrystal’s Convertible Series A Preferred Stock. Cocrystal is focused on the discovery and development of novel antiviral drugs using a combination of protein structure-based approaches. Refer to Note 12.

In June 2009, we entered into a stock purchase agreement with Sorrento Therapeutics, Inc. (“Sorrento”), a publicly held company with a technology for generating fully human monoclonal antibodies, pursuant to which we invested $2.3 million in Sorrento. The closing stock price for Sorrento’s common stock, a thinly traded stock, as quoted on the over-the-counter markets was $0.20 per share on December 31, 2011. Refer to Note 12.

The total assets, liabilities, and net losses of our equity method investees as of and for the year ended December 31, 2011 were $22.9 million, $1.9 million, and $9.1 million, respectively. The following table reflects our maximum exposure, accounting method, ownership interest and underlying equity in net assets of each of our investments:

 

                                     

Investee name

   Year
invested		     Accounting method   Ownership at
December 31,
2011		     (in thousands)     Underlying
equity in net
assets		  

Cocrystal

     2009     Equity method     16 %    $ 2,500     $ 1,595  

Sorrento

     2009     Equity method     23 %      2,300       947  

Neovasc

     2011     Equity method, cost (warrants)     4 %      2,013       233  

Fabrus

     2010     VIE, equity method     13 %      650       184  

TESARO

     2010     Cost method     2 %      731       817  

Less accumulated losses in investees

                         (2,656 )         
                       

 

 

          

Total

                       $ 5,538          

Neovasc options

                         813          

Plus unrealized gain on Neovasc options and warrants

                         366          
                       

 

 

          

TOTAL

                       $ 6,717          
                       

 

 

          

Variable interest entities

We have determined that we hold a variable interest in one entity (“VIE”), Fabrus. We made this determination as a result of our assessment that they do not have sufficient resources to carry out their principal activities without additional subordinated financial support.

In order to determine the primary beneficiary of Fabrus, we evaluated our investment and our related parties investment, as well as our investment combined with the related party group’s investment to identify if we had the power to control Fabrus and who received the largest benefits (absorbed the most losses) from Fabrus. The related party group when considering our investment in Fabrus includes OPKO, the Gamma Trust, Hsu Gamma Investment, L.P., of which Jane Hsiao is the general partner, and the Richard Lerner Family Trust. Dr.’s Frost, Hsiao and Lerner are all members of our Board of Directors. As of December 31, 2011 we own approximately 13% of Fabrus and Dr.’s Frost, Hsiao and Lerner own 24% of Fabrus’ voting stock on an as converted basis, including 16% held by the Gamma Trust. Drs. Frost and Hsiao currently serve on the board of directors of Fabrus and represent 40% of its board. Based on this analysis, we determined that neither OPKO nor its related parties have the power to direct the activities of Fabrus. However, we did determine OPKO and its related parties can significantly influence the success of Fabrus through its board representation and voting power. As OPKO and its related parties have the ability to exercise significant influence over Fabrus’ operations, we account for our investments in Fabrus, under the equity method.

 

In October 2011, Cocrystal received an investment of $7.5 million from Teva Pharmaceutical Industries Ltd. In connection with that investment, we determined Cocrystal no longer meets the definition of a variable interest entity as it has sufficient capital to carry out its principal activities without additional financial support and as such had a reconsideration event occur. As a result of OPKO and its related parties’ ownership interest, OPKO and its related parties have the ability to significantly influence Cocrystal, we account for our investment under the equity method.

In June 2011, TESARO announced a $101 million financing. In connection with that financing, we determined TESARO no longer meets the definition of a variable interest entity as it has sufficient capital to carry out its principal activities without additional financial support. Neither OPKO nor its related parties have the ability to significantly influence TESARO and as such, OPKO accounts for its investment in TESARO under the cost method.

Pro forma disclosures for acquisitions

The following table includes the pro forma results for the years ended December 31, 2011 and 2010 of the combined companies as though the acquisitions of FineTech and Claros had been completed as of the beginning of each period, respectively.

 

                 
    For the years ended December 31,  

(in thousands, except per share amounts)

   2011     2010  

Revenue

   $ 36,238     $ 34,102  

Loss from continuing operations

   $ (20,879 )    $ (12,606 ) 

Net loss attributable to common shareholders

   $ (1,368 )    $ (23,295 ) 

Basic and diluted loss from continuing operations per share

   $ (0.00 )    $ (0.08 ) 

Basic and diluted loss from discontinued operations per share

   $ (0.00 )    $ (0.04 ) 

Basic and diluted loss per share

   $ (0.00 )    $ (0.12 ) 

This unaudited pro forma financial information is presented for informational purposes only. The unaudited pro forma financial information may not necessarily reflect our future results of operations or what the results of operations would have been had we owned and operated each company as of the beginning of the periods presented.

We incurred a pre-tax loss related to the activities of Claros of $1.7 million from the date of our acquisition through December 31, 2011.

Discontinued Operations
Discontinued Operations

Note 4 Discontinued Operations

In September 2011, we announced that we entered into an agreement with OPTOS, Inc., a subsidiary of Optos plc (collectively “Optos”) to sell our ophthalmic instrumentation business. Upon closing in October 2011, we received $17.5 million of cash and we are eligible to receive royalties up to $22.5 million on future sales.

The assets and liabilities related to our instrumentation business have identifiable cash flows that are independent of the cash flows of other groups of assets and liabilities and we will not have a significant continuing involvement with the related products beyond one year after the closing of the transactions. Therefore, the accompanying Consolidated Balance Sheets report the assets and liabilities related to our instrumentation business as discontinued operations in all periods presented, and the results of operations related to our instrumentation business have been classified as discontinued operations in the accompanying Consolidated Statements of Operations for all periods presented.

 

The following table presents the major classes of assets and liabilities that have been presented as assets of discontinued operations and liabilities of discontinued operations in the accompanying Consolidated Balance Sheets:

 

                 

(in thousands)

   December 31,
2011		     December 31,
2010		  

Trade accounts receivable, net

   $ —       $ 1,461  

Inventories, net

     —         3,534  

Other current assets

     4       103  

Property, plant and equipment, net

     —         140  

Intangible assets, net

     —         3,179  
   

 

 

    

 

 

  

Total assets of discontinued operations

   $ 4     $ 8,417  
   

 

 

    

 

 

  

Trade accounts payable

   $ 1     $ 690  

Accrued expenses and other liabilities

     173       2,370  
   

 

 

    

 

 

  

Total liabilities of discontinued operations

   $ 174     $ 3,060  
   

 

 

    

 

 

  

The following table presents summarized financial information for the discontinued operations presented in the Consolidated Statements of Operations:

 

                         
    For the years ended December 31  
(in thousands)   2011     2010     2009  

Total revenue

   $ 4,254     $ 8,386     $ 8,729  

Operating loss

     (3,434 )      (6,095 )      (5,873 ) 

Gain on sale to Optos

     10,597       —         —    

Income (loss) before provision for income taxes

     7,142       (6,092 )      (5,991 ) 

Net income (loss)

     5,181       (6,250 )      (5,722 ) 

 

Composition of Certain Financial Statement Captions
Composition of Certain Financial Statement Captions

Note 5 Composition of Certain Financial Statement Captions

 

                 
    December 31,  

(in thousands)

   2011     2010  

Accounts receivable, net

                

Accounts receivable

   $ 12,984     $ 12,135  

Less allowance for doubtful accounts

     (440 )      (279 ) 
   

 

 

    

 

 

  
    $ 12,544     $ 11,856  
   

 

 

    

 

 

  

Inventories, net

                

Finished products

   $ 11,100     $ 13,643  

Work in-process

     277       406  

Raw materials (components)

     2,287       2,638  

Less inventory reserve

     (325 )      (264 ) 
   

 

 

    

 

 

  
    $ 13,339     $ 16,423  
   

 

 

    

 

 

  

Prepaid expenses and other current assets

                

Prepaid supplies

   $ 256     $ 37  

Other receivables

     288       666  

Prepaid insurance

     176       116  

Taxes recoverable

     542       1,441  

Other

     917       420  
   

 

 

    

 

 

  
    $ 2,179     $ 2,680  
   

 

 

    

 

 

  

Property and equipment, net

                

Machinery and equipment

   $ 4,850     $ 2,460  

Building

     656       288  

Land

     437       495  

Furniture and fixtures

     313       203  

Software

     630       573  

Leasehold improvements

     309       21  

Less accumulated depreciation

     (1,837 )      (1,451 ) 
   

 

 

    

 

 

  
    $ 5,358     $ 2,589  
   

 

 

    

 

 

  

Intangible assets, net

                

Technology

   $ 47,100     $ —    

Customer relationships

     18,386       4,741  

In-process research and development

     10,000       —    

Product registrations

     3,895       4,227  

Tradename

     827       471  

Covenants not to compete

     1,560       32  

Other

     297       7  

Less accumulated amortization

     (5,335 )      (2,694 ) 
   

 

 

    

 

 

  
    $ 76,730     $ 6,784  
   

 

 

    

 

 

  

Accrued expenses

                

Income taxes payable

   $ 484     $ 422  

Deferred revenue

     530       50  

Clinical trials

     7       801  

Customer deposits

     255       79  

Professional fees

     632       232  

Employee benefits

     907       225  

Other

     2,141       1,561  
   

 

 

    

 

 

  
    $ 4,956     $ 3,370  
   

 

 

    

 

 

  

Other long-term liabilities

                

Contingent consideration – Claros

   $ 12,745     $ —    

Contingent consideration – FineTech

     4,747       —    

Contingent consideration – CURNA

     510       —    

Deferred tax liabilities

     6,863       940  

Other, including deferred revenue

     578       127  
   

 

 

    

 

 

  
    $ 25,443     $ 1,067  
   

 

 

    

 

 

  

 

The following table summarizes the fair values assigned to our major intangible asset classes upon each acquisition:

 

                                                 

(in thousands)

   OPKO
Chile		     Exakta
OPKO		     CURNA     Claros     FineTech     Weighted
average
amortization
period		  

Technology

   $ —       $ —       $ —       $ 44,400     $ 2,700       15 years  

In-process research and development

     —         —         10,000       —         —         Indefinite  

Customer relationships

     3,945       121       —         —         14,200       6 years  

Product registrations

     3,529       77       —         —         —         10 years  

Covenants not to compete

     —         70       —         —         1,500       5 years  

Tradename

     352       77       —         —         400       3 years  

Other

     —         —         290       —         —         5 years  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

          

Total identified intangible assets

     7,826       345       10,290       44,400       18,800          

Goodwill

     4,983       21       4,827       17,977       11,623       Indefinite  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

          

Total intangible assets acquired

   $ 12,809     $ 366     $ 15,117     $ 62,377     $ 30,423          
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

          

All of the intangible assets and goodwill acquired relate to our acquisitions of OPKO Chile, Exakta-OPKO, CURNA, Claros, and FineTech. The weighted average period prior to the next renewal or extension for our acquired product registrations is 1.7 years. We do not anticipate capitalizing the cost of product registration renewals, rather we expect to expense these costs, as incurred. Our goodwill is not tax deductible for income tax purposes in Chile, the U.S. or Israel.

The changes to goodwill for the year ended December 31, 2011 are primarily due to the acquisitions of CURNA, Claros, and FineTech, as well as a $0.3 million increase resulting from foreign exchange translation of the assets and liabilities of OPKO Chile. The purchase price allocation of the assets acquired in the CURNA, Claros, and FineTech acquisitions are subject to change while contingencies that existed on the acquisition dates are resolved.

The following table reflects the changes in the allowance for doubtful accounts, provision for inventory reserve and tax valuation allowance accounts for continuing operations:

 

                                         

(in thousands)

   Beginning
balance		     Charged to
expense		     Written-off     Charged to
other		     Ending
balance		  

2011

                                        

Allowance for doubtful accounts

   $ (279 )      (257 )      96       —       $ (440 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Inventory reserve

   $ (264 )      (607 )      546       —       $ (325 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Tax valuation allowance

   $ (47,341 )      19,358       —         (25,272 )    $ (53,255 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

2010

                                        

Allowance for doubtful accounts

   $ —         (279 )      —         —       $ (279 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Inventory reserve

   $ (140 )      (274 )      150       —       $ (264 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Tax valuation allowance

   $ (46,836 )      (505 )      —         —       $ (47,341 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Debt
Debt

Note 6 Debt

We have an unutilized $12.0 million line of credit with the Frost Group, a related party. In June 2010 we repaid all amounts outstanding on the line of credit including $12.0 million in principal and $4.1 million in interest. The line of credit was renewed in February 2011 with a new maturity date of March 31, 2012. We have the ability to draw funds under the line of credit until its expiration in March 2012. We are obligated to pay interest upon maturity, capitalized quarterly, on any outstanding borrowings under the line of credit at an 11% annual rate. The line of credit is collateralized by all of our U.S. personal property except our intellectual property.

 

We have entered into lines of credit agreements with nine financial institutions in Chile in addition to our line of credit with the Frost Group. The Chilean lines of credit are used primarily as a source of working capital for inventory purchases. The following table summarizes the lines of credit:

 

                             
(in thousands)   Interest rate on
borrowings		   Maximum
borrowings		     Amount outstanding at December 31,  

Lender

       2011     2010  

The Frost Group LLC

   11%   $ 12,000     $ —       $ —    

Itau Bank

   Libor +3.2%     2,351       1,091       1,849  

Bank of Chile

   Libor +3.2%     3,096       1,749       3,100  

BICE Bank

   Libor +3.2%     2,893       952       2,813  

Santander Bank

   Libor +3.2%     1,796       236       1,826  

Corp Banca

   Libor +3.2%     435       420       426  

BBVA Bank

   Libor +3.2%     3,214       2,348       3,123  

BCI

   Libor +3.2%     964       945       —    

Security

   Libor +3.2%     1,010       1,016       —    

Scotiabank

   Libor +3.2%     1,401       —         1,553  
       

 

 

    

 

 

    

 

 

  

Total

       $ 29,160     $ 8,757     $ 14,690  
       

 

 

    

 

 

    

 

 

  

In March 2009, the Gamma Trust, a related party, advanced $3.0 million to us pursuant to a Promissory Note we issued to the Gamma Trust (the “Note”). The entire amount of this advance and all accrued interest thereon was due and payable on the earlier of May 4, 2009, or such earlier date following the closing of the stock purchase transaction with the Gamma Trust. Refer to Note 7. The Note bore interest at a rate equal to 11% per annum and could be prepaid in whole or in part without penalty or premium. We repaid the Note and $48 thousand of interest on April 27, 2009.

Equity Offerings
Equity Offerings

Note 7 Equity Offerings

On March 14, 2011, we issued 27,000,000 shares of our common stock in a public offering at a price of $3.75 per share. We also granted the underwriters a 30-day option to purchase up to an additional 4,050,000 shares of our common stock to cover over-allotments, if any. On March 15, 2011, representatives for the underwriters provided us notice that the underwriters exercised a portion of their 4,050,000 share over-allotment option for 2,397,029 additional shares of our common stock.

The following table reflects the proceeds received from the issuance of shares:

 

                 
(in thousands, except share amounts)   Shares     Dollars  

Original issuance

     27,000,000     $ 101,250  

Over-allotment

     2,397,029       8,989  
   

 

 

    

 

 

  

Total

     29,397,029       110,239  
   

 

 

          

Underwriters discount and commissions (1)

     5.5% on 24,064,029 shares       (4,963 ) 

Offering expenses

             (448 ) 
           

 

 

  

Net proceeds

           $ 104,828  
           

 

 

  

 

(1) 

The underwriters did not receive any underwriting discount or commissions on the sale of 5,333,000 shares of common stock to entities associated with certain stockholders, including two of our directors and executive officers. Refer to Note 12.

Effective September 18, 2009, we entered into a securities purchase agreement (the “Preferred Purchase Agreement”) with the private investors (the “Preferred Investors”), pursuant to which the Preferred Investors agreed to purchase an aggregate of 1,209,677 shares (the “Preferred Shares”) of our 8.0% Series D Cumulative Convertible Preferred Stock, par value $0.01 per share (“Series D Preferred Stock”) (Refer to Note 8) at a purchase price of $24.80 per share, together with warrants (the “Warrants”) to purchase up to an aggregate of 3,024,196 shares of our common stock, par value $.01 at an exercise price of $2.48 per share (the “Preferred Investment”). The Series D Preferred Stock is convertible into approximately ten shares of our common stock, and the Preferred Shares purchase price was based on the average closing price of our common stock as reported on the NYSE Amex for the five days preceding the execution of the Preferred Purchase Agreement. In connection with the Preferred Investment, we issued the Preferred Shares and Warrants and received an aggregate of $30.0 million in cash on September 28, 2009.

 

We allocated the $30.0 million of proceeds from the Preferred Investment between the Series D Preferred Stock and the Warrants based on their relative fair values as follows:

 

         

(in thousands)

      

Series D Preferred Stock

   $ 26,128  

Warrants Settlements in kind or expired

     3,872  
   

 

 

  

Total

   $ 30,000  
   

 

 

  

We allocated the $30.0 million in proceeds received from the issuance of the Preferred Stock and warrants to those instruments based on their relative fair values, which resulted in a $3.9 million beneficial conversion feature. We recorded the $3.9 million beneficial conversion feature as a further discount to the Series D Preferred Stock and an increase to additional paid-in capital.

The Series D Preferred Stock was immediately convertible into shares of our common stock. As a result, the discount was immediately recognized as a deemed dividend and included in preferred stock dividends in the accompanying consolidated statement of operations. The Series D Preferred Stock contains redemption features that are not solely within our control. As a result, the Series D Preferred Stock is classified outside of permanent equity. The Series D Preferred Stock is recorded at this time at initial fair value and not at its Liquidation Amount as it is not probable that it will be redeemed.

We agreed to issue the Preferred Shares and the Warrants in reliance upon the exemption from registration under Section 4(2) of the Securities Act of 1933, as amended (the “Act”). The Preferred Shares issued in the Preferred Investment, including the shares of our common stock into which the Preferred Shares and Warrants may be converted, are “restricted securities” as that term is defined by Rule 144 under the Act, subject to a three year contractual lockup, and no registration rights have been granted.

On May 26, 2009, May 29, 2009, and June 1, 2009, we entered into stock purchase agreements with a total of seven accredited investors (“Investors”) pursuant to which the Investors agreed to make a $31.0 million investment in the Company in exchange for 31,000,000 shares of our common stock at $1.00 per share, representing a range of discounts of approximately 16-21% to the average closing price of our common stock on the NYSE Amex for the five trading days immediately preceding the closing date of the agreements. The shares issued were restricted securities and were exempt from registration requirements under Section 4(2) of the Act because the transaction did not involve a public offering.

On February 23, 2009, we entered into a Stock Purchase Agreement with the Gamma Trust, pursuant to which the Gamma Trust agreed to make a $20.0 million cash investment in the Company in exchange for 20,000,000 shares (the “Shares”) of our common stock, at $1.00 per share, representing an approximately 20% discount to the average closing price of our common stock on the NYSE Amex for the five trading days immediately preceding the effective date of Audit Committee and stockholder approval of the transaction. We issued the Shares and received the proceeds on April 27, 2009. The Shares issued were restricted securities, subject to a two-year lockup and no registration rights were granted.

Shareholders' Equity
Shareholders' Equity

Note 8 Shareholders’ Equity

Our authorized capital stock consists of 500,000,000 shares of common stock, par value $.01 per share, and 10,000,000 shares of preferred stock, par value $.01 per share.

 

Common Stock

Subject to the rights of the holders of any shares of preferred stock currently outstanding or which may be issued in the future, the holders of the common stock are entitled to receive dividends from our funds legally available when, as and if declared by our board of directors, and are entitled to share ratably in all of our assets available for distribution to holders of common stock upon the liquidation, dissolution or winding-up of our affairs subject to the liquidation preference, if any, of any then outstanding shares of preferred stock. Holders of our common stock do not have any preemptive, subscription, redemption or conversion rights. Holders of our common stock are entitled to one vote per share on all matters which they are entitled to vote upon at meetings of stockholders or upon actions taken by written consent pursuant to Delaware corporate law. The holders of our common stock do not have cumulative voting rights, which means that the holders of a plurality of the outstanding shares can elect all of our directors. All of the shares of our common stock currently issued and outstanding are fully-paid and nonassessable. No dividends have been paid to holders of our common stock since our incorporation, and no cash dividends are anticipated to be declared or paid on our common stock in the reasonably foreseeable future.

In addition to our equity-based compensation plans, we have issued warrants to purchase our common stock. Refer to Note 9 for additional information on our share-based compensation plans. The table below provides additional information for warrants outstanding as of December 31, 2011.

 

                     

Warrants

   Number of
warrants		     Weighted
average
exercise price		    

Expiration date

Outstanding at December 31, 2010

     29,194,162              

Issued

     —                

Exercised

     (3,279,997 )             

Expired

     —                
   

 

 

              

Outstanding and Exercisable at December 31, 2011

     25,914,165     $ 0.95     Various from September 2014 through March 2017
   

 

 

              

Of the 3,279,997 common stock warrants exercised, 354,103 shares were surrendered in lieu of a cash payment via the net exercise feature of the warrant agreements.

Preferred Stock

Under our certificate of incorporation, our board of directors has the authority, without further action by stockholders, to designate up to 10 million shares of preferred stock in one or more series and to fix or alter, from time to time, the designations, powers and rights of each series of preferred stock and the qualifications, limitations or restrictions of any series of preferred stock, including dividend rights, dividend rate, conversion rights, voting rights, rights and terms of redemption (including sinking fund provisions), redemption price or prices, and the liquidation preference of any wholly issued series of preferred stock, any or all of which may be greater than the rights of the common stock, and to establish the number of shares constituting any such series.

Series A Preferred Stock

Of the authorized preferred stock, 4,000,000 shares were designated Series A preferred stock. Dividends were payable on the Series A preferred stock in the amount of $0.25 per share, payable annually in arrears. At the option of our board of directors, dividends were paid either (i) wholly or partially in cash or (ii) in newly issued shares of Series A preferred stock valued at $2.50 per share to the extent a cash dividend was not paid. On June 3, 2011, we redeemed all 602,759 shares outstanding of our Series A Preferred Stock for an aggregate redemption price of $1.8 million, including accrued dividends.

Series C Preferred Stock

Of the authorized preferred stock, 500,000 shares were designated Series C preferred stock. On June 22, 2007, 457,603 shares of Series C preferred stock were issued and outstanding and held by 30 stockholders. Cumulative dividends were payable on the Series C preferred stock in the amount of $1.54 per share when declared by the board of directors. On June 22, 2007, all outstanding shares (457,603 shares) of Series C preferred stock automatically converted into shares of common stock, on a one-hundred-for-one basis.

 

8% Series D Cumulative Convertible Preferred Stock

Of the authorized preferred stock, 2,000,000 shares were designated 8% Series D Cumulative Convertible Preferred Stock (“Series D Preferred Stock”). Holders of the Series D Preferred Stock are entitled to receive, when, as and if declared by our Board of Directors, dividends on each share of Series D Preferred Stock at a rate per annum equal to 8.0% of the sum of (a) $24.80, plus (b) any and all declared and unpaid and accrued dividends thereon, subject to adjustment for any stock split, combination, recapitalization or other similar corporate action (the “Liquidation Amount”). All dividends shall be cumulative, whether or not earned or declared, accruing on an annual basis from the issue date of the Series D Preferred Stock. In October 2011, 80,654 shares of our Series D Preferred Stock were converted into 940,141 shares of our common stock, reflecting the liquidation value on the date of conversion. On November 3, 2011, our Board of Directors declared a cash dividend to all Series D Preferred Stockholders as of November 3, 2011. The total cash dividend was approximately $4.7 million. As of December 31, 2011 we had approximately $0.31 per Series D Preferred Share, or $0.4 million of Series D Preferred Stock dividends in arrears.

The Holders of Series D Preferred Stock have the right to receive notice of any meeting of holders of our common stock or Series D Preferred Stock and to vote (on an as-converted into common stock basis) upon any matter submitted to a vote of the holders of common stock or Series D Preferred Stock. Except as otherwise expressly set forth in the Company’s Amended and Restated Certificate of Incorporation, as amended from time to time, the holders of Series D Preferred Stock will vote on each matter submitted to them with the holders of common stock and all other classes and series of our capital stock entitled to vote on such matter, taken together as a single class.

With respect to dividend distributions (other than required dividends to the holders of our Series A Preferred Stock) and distributions upon liquidation, winding up or dissolution of the Company, the Series D Preferred Stock ranks senior to all classes of common stock, our Series A Preferred Stock, our Series C Preferred Stock, and to each other class of our capital stock existing now or hereafter created that are not specifically designated as ranking senior to or pari passu with the Series D Preferred Stock.

Upon the occurrence of a Liquidation Event (as defined in the Certificate of Designation), holders of Series D Preferred Stock are entitled to be paid, subject to applicable law, out of the assets of the Company available for distribution to its stockholders, an amount in cash (the “Liquidation Payment”) for each share of Series D Preferred Stock equal to the greater of (x) the Liquidation Amount for each such share of Series D Preferred Stock outstanding plus (i) any declared and unpaid dividends and (ii) accrued dividends or (y) the amount for each share of Series D Preferred Stock the holders would be entitled to receive pursuant to the Liquidation Event if all of the shares of Series D Preferred Stock had been converted into common stock as of the date immediately prior to the date fixed for determination of stockholders entitled to receive a distribution in such Liquidation Event. Such Liquidation Payment will be paid before any cash distribution will be made or any other assets distributed in respect of any class of securities junior to the Series D Preferred Stock, including, without limitation, common stock and the Company’s Series A Preferred Stock.

The holder of any share of Series D Preferred Stock may at any time and from time to time convert such share into such number of fully paid and nonassessable shares of common stock as is determined by dividing (A) the Liquidation Amount of the share by (B) the Conversion Price, which is initially $2.48, subject to adjustment as provided in the Certificate of Designation. Initially, the Series D Preferred Stock was convertible into 10 shares of the Company’s common stock.

We may, at any time, convert the outstanding Series D Preferred Stock into such number of fully paid and non-assessable shares of common stock as is determined by dividing (A) the Liquidation Amount of the shares by (B) the Conversion Price, but only if the closing bid price of the common stock exceeds $5.00 per share during any thirty (30) consecutive trading days prior to each conversion. Initially, the Series D Preferred Stock was convertible into 10 shares of our common stock.

To the extent it is lawfully able to do so, we may redeem all of the then outstanding shares of Series D Preferred Stock by paying in cash an amount per share equal to $24.80 plus all declared or accrued unpaid dividends on such shares, subject to adjustment for any stock dividends or distributions, splits, subdivisions, combinations, reclassifications, stock issuances or similar events with respect to the common stock.

 

Equity-Based Compensation
Equity-Based Compensation

Note 9 Equity-Based Compensation

We maintain three equity-based incentive compensation plans, the 2007 Equity Incentive Plan, the 2000 Stock Option Plan, and the 1996 Stock Option Plan that provide for grants of stock options and restricted stock to our directors, officers, key employees and certain outside consultants. Equity awards granted under our 2007 Equity Incentive Plan are exercisable for a period up to seven years from the date of grant. Equity awards granted under our 2000 Stock Option Plan and the 1996 Stock Option Plan are exercisable for a period of up to 10 years from date of grant. Vesting periods range from immediate to 5 years.

We classify the cash flows resulting from the tax benefit that arises when the tax deductions exceed the compensation cost recognized for those equity awards (excess tax benefits) as financing cash flows. There were no excess tax benefits for the years ended December 31, 2011, 2010, and 2009.

Equity-based compensation arrangements to non-employees are accounted for at their fair value on the measurement date. The measurement of equity-based compensation is subject to periodic adjustment over the vesting period of the equity instruments.

Valuation and Expense Information

We recorded equity based compensation expense from continuing operations of $7.0 million, $6.5 million, and $4.2 million for the years ended December 31, 2011, 2010 and 2009, respectively, all of which were reflected as operating expenses. Of the $7.0 million of equity based compensation expense recorded in the year ended December 31, 2011, $3.0 million was recorded as selling, general and administrative expense and $4.0 million was recorded as research and development expenses. Of the $6.5 million of equity based compensation expense recorded in the year ended December 31, 2010, $4.8 million was recorded as selling, general and administrative expense and $1.7 million was recorded as research and development expenses. Of the $4.2 million of equity based compensation expense recorded in the year ended December 31, 2009, $2.9 million was recorded as selling, general and administrative expense and $1.3 million was recorded as research and development expenses. In addition, during the years ended December 31, 2011, 2010 and 2009, we recorded equity based compensation expense from discontinued operations of $0.2 million, $0.4 million and $0.3 million, respectively. Refer to Note 4.

We estimate forfeitures of stock options and recognize compensation cost only for those awards expected to vest. Forfeiture rates are determined for all employees and non-employee directors based on historical experience and our estimate of future vesting. Estimated forfeiture rates are adjusted from time to time based on actual forfeiture experience.

As of December 31, 2011, there was $10.4 million of unrecognized compensation cost related to the stock options granted under our stock plans. That cost is expected to be recognized over a weighted-average period of approximately 2.7 years.

Stock Options

We estimate the fair value of each stock option on the date of grant using a Black-Scholes option-pricing formula, applying the following assumptions, and amortize the fair value to expense over the option’s vesting period using the straight-line attribution approach for employees and non-employee directors, and for awards issued to non-employees we recognize compensation expense on a graded basis, with most of the compensation expense being recorded during the initial periods of vesting:

 

             
    Year Ended
December 31, 2011		   Year Ended
December 31, 2010		   Year Ended
December 31, 2009

Expected term (in years)

   1.0 - 7.0   0.6 - 7.0   0.6 - 7.9

Risk-free interest rate

   0.09% - 2.61%   1.3% - 2.7%   1.4% - 3.0%

Expected volatility

   69%   69% - 74%   70% - 77%

Expected dividend yield

   0%   0%   0%

Expected Term: The expected term of the stock options granted to employees and non-employee directors was calculated using the shortcut method. We believe this method is appropriate as our equity shares have been publicly traded for a limited period of time and as such we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. The expected term of stock options issued to non-employee consultants is the remaining contractual life of the options issued.

 

Risk-Free Interest Rate: The risk-free interest rate is based on the rates paid on securities issued by the U.S. Treasury with a term approximating the expected life of the option.

Expected Volatility: The expected volatility was based on a peer group of publicly-traded stocks’ historical trading which we believe will be representative of the volatility over the expected term of the options. We believe the peer group’s historical volatility is appropriate as our equity shares have been publicly traded for a limited period of time.

Expected Dividend Yield: We do not intend to pay dividends on common stock for the foreseeable future. Accordingly, we used a dividend yield of zero in the assumptions.

We maintain incentive stock plans that provide for the grants of stock options to our directors, officers, employees and non-employee consultants. As of December 31, 2011, there were 8,577,850 shares of common stock reserved for issuance under our 2007 Incentive Plan. We intend to issue new shares upon the exercise of options. Stock options granted under these plans have been granted at an option price equal to the closing market value of the stock on the date of the grant. Options granted under these plans to employees typically become exercisable over four years in equal annual installments after the date of grant, and options granted to non-employee directors become exercisable in full one-year after the grant date, subject to, in each case, continuous service with the Company during the applicable vesting period. The Company assumed options to grant common stock as part of the mergers with Acuity Pharmaceuticals, Inc. and Froptix, Inc., which reflected various vesting schedules, including monthly vesting to employees and non-employee consultants.

A summary of option activity under our stock plans as of December 31, 2011, and the changes during the year is presented below:

 

                                 

Options

   Number of
options		     Weighted
average
exercise
price		     Weighted
average
remaining
contractual
term (years)		     Aggregate
intrinsic value
(in thousands)		  

Outstanding at December 31, 2010

     14,708,146     $ 2.31       4.8     $ 23,464  

Granted

     3,376,500     $ 4.12                  

Exercised

     (422,500 )    $ 2.33                  

Forfeited

     (595,125 )    $ 2.24                  

Expired

     (252,500 )    $ 4.85                  
   

 

 

                          

Outstanding at December 31, 2011

     16,814,521     $ 2.64       4.3     $ 38,092  
   

 

 

    

 

 

    

 

 

    

 

 

  

Vested and expected to vest at December 31, 2011

     16,114,665     $ 2.63       4.3     $ 36,731  
   

 

 

    

 

 

    

 

 

    

 

 

  

Exercisable at December 31, 2011

     10,329,646     $ 2.39       3.0     $ 25,905  
   

 

 

    

 

 

    

 

 

    

 

 

  

The total intrinsic value of stock options exercised for the years ended December 31, 2011, 2010, and 2009 was $0.8 million, $0.3 million, and $3.8 million, respectively.

 

The weighted average grant date fair value of stock options granted for the years ended December 31, 2011, 2010 and 2009 was $2.49, $1.39, and $0.99, respectively. The total fair value of stock options vested during the years ended December 31, 2011, 2010 and 2009 was $6.4 million, $3.4 million, and $5.1 million, respectively. The following table provides the grant date fair value for each of the following groups of stock option activity during 2011:

 

                 

Options

   Number of
options		     Weighted
average grant
date fair value		  

Nonvested at December 31, 2010

     7,933,082     $ 1.32  

Granted

     3,376,500     $ 2.49  

Forfeited

     595,125     $ 1.33  

Nonvested at December 31, 2011

     6,484,875     $ 1.84  

Restricted Stock

In 2009, we issued 30,000 shares of restricted common stock to one of our independent board members. The restricted stock was granted under our 2007 Equity Incentive Plan with a term of seven years and vesting occurring five years after the grant date with certain events which would accelerate the vesting of the award. The restricted stock was valued using the grant date fair value which was equivalent to the closing price of our common stock on the grant date. We record the cost of restricted stock over the vesting period.

Income Taxes
Income Taxes

Note 10 Income Taxes

We operate in the following countries in which we are required to file tax returns: U.S., Canada, Israel, Mexico, Taiwan, and Chile.

The (expense) benefit from continuing operations for incomes taxes consists of the following:

 

                         
    For the years ended December 31,  

(in thousands)

   2011     2010     2009  

Current

                        

Federal

   $ —       $ —       $ —    

State

     —         —         —    

Foreign

     (391 )