clarification about NantPro For those like me who have read the MD&A, I think some clarifications are needed for the NantPro JV.
The good news is PLI own 66.67% of the JV for the moment. The fact that PLI have an asset with an accounting value of $ 67K make me believe that PLI end up with 4% in the JV!!!
The deal is much better than it look.
NantPharma put $ 2.5M, and PLI transfered licence for a value of $ 5M.
Why $ 5M?
Because PLI declared declared on that transfer $ 1 666 777 in licence revenues, ( 1/3 X $ 5 000 000) as it's considered as an equity investment, you don't declared as an income, the percentage attributed to your ownership.
From the MD&A
At the inception, the Company granted NantPro a license to certain of its intellectual property. In exchange, the Company received units in NantPro. The Company measured its initial cost of the investment based on the value of the intellectual property contributed by the Company attributable to the other investor in NantPro. That other investor, NantPharma, LLC (“NantPharma”), contributed US$2,500,000 in cash in exchange for its units. Therefore in recognising only that value of the intellectual property license attributable to the other investor in NantPro, the initial cost of this investment was measured net at US$1,667,000 resulting in the recognition of licensing revenue in the amount of US$1,667,000.
That’s also explain why on the $ 2.5M payment by NantPro, PLI declared only $ 800 000.
( $ 2 500 000 - $ 100 000 in differed revenues = $ 2 400 000 X 1/3 = $ 800 000.
From the MD&A
During the quarter ended June 30, 2012 the Company also granted access to a specific protein to NantPro for a nonrefundable amount of US$2,500,000. Of this sum, US$100,000 was deferred to future accounting periods, and as a result, licensing revenue in the amount of US$800,160 was recognized.
This also Explains why the book value for NantPro is only 67K, even if the FMV should be much higher.
Value of the licence: $ 5 000 000, part of the other partner $ 166 667.
For PLI books:
investment in NantPro $ 1 666 667
Revenues $ 1 666 667
Then PLI received $ 2.5M from NantPro, and $ 100 000 is differed revenues. So PLI have to declare 1/3 of $ 2.4M.
Cash $2 500 000
differed revenues $ 100 000
revenues $ 800 000
Investment in NantPro $ 1 600 000
At the end, the book value is only $67K, but the assets of NantPro are at $ 7.5M, $ 5M for the licence of PLI technology, and $ 2.5M for the rights on one protein.