6. EXTAB ACQUISITION

On May 14, 2015, we entered into a Share Purchase Agreement with Sopharma, AD, or Sopharma, a public pharmaceutical company located in Bulgaria, to acquire 75% of the outstanding shares of Extab.

Pursuant to the Share Purchase Agreement, we acquired a 75% controlling interest in Extab from Sopharma for $2.0 million in cash and $2.0 million in a deferred payment, contingent on regulatory approval of cytisine by the Food and Drug Administration, or FDA, or the European Medicines Agency, or EMA. In addition, as part of and in conjunction with the Share Purchase Agreement, we amended our existing license and supply agreements with Sopharma, extending their terms by five years and reducing the royalty rate payable by us. (Note 7—License Agreements) Subsequent to the acquisition, we paid to Sopharma $0.3 million to retire the balance of Extab’s outstanding loans with Sopharma.

The acquisition was accounted for using the acquisition method under ASC 805 business combinations. Results of operations have been included in the financial statements from the date of acquisition May 18, 2015, the date we assumed control of Extab. The fair value of the business combination was determined using level 3 inputs.

The purchase price of our 75% controlling interest in Extab was as follows:

As of the date of acquisition we assessed the likelihood of meeting the contingent event as unlikely and as a result have estimated its fair value at zero. We consider the best indicator of the fair value of net assets acquired to be the $2.0 million cash consideration paid to acquire our 75% controlling interest plus the $0.7 million fair value attributable to the non-controlling interest, or NCI, calculated on a proportionate basis.

Under the acquisition method of accounting, the total purchase price is allocated to the acquired tangible and intangible assets and assumed liabilities of Extab based on their estimated fair values as of the transaction closing date. The allocation of the purchase price based on the estimated fair values is as follows:

The license agreement expires May 26, 2029. As of the acquisition date, we estimated its useful life to be the same as the remaining 14 year contractual life. We also elected to amortize intangible assets on a straight line basis over its useful life, since there is no pattern of successful economic benefits available at the time to reliably determine a different amortization.

Subsequent to acquiring control of Extab, we entered into an agreement with the NCI stockholder of Extab to convert their shares in Extab into shares of our common stock. As of September 30, 2015, all of the NCI had converted their shares in Extab into shares of our common stock resulting in elimination of the Extab non-controlling interest and Extab becoming a wholly-owned subsidiary of us.