|9 Months Ended|
Sep. 30, 2020
9. Intangibles, net
On July 29, 2020 Journey entered into a license and supply agreement with a third party for an oral acne treatment. Pursuant to the terms and conditions of the License and Supply Agreement (“LSA”), Journey agreed to pay $5.0 million, comprised of an upfront payment of $1.0 million paid upon execution with remaining payments due as follows: $1.0 million upon achievement of two marketing milestones and $3.0 million due$1.0 installments, commencing on the 18-month anniversary, the 24-month anniversary and the 36-month anniversary of execution of the LSA. Three additional milestone payments totaling $17.0 million are due upon the achievement of certain net sales milestones. Royalties in the mid, single digits based on net sales, subject to specified reductions are also due.
In accordance with ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, Journey determined the conditions of the LSA did not constitute the purchase of a business, and therefore recorded the consideration as an asset, to be amortized over the expected life of the product, which is deemed to be five years. In addition, Journey determined pursuant to ASC 450, Contingencies, that royalty payments in connection with the LSA will be recorded when they become payable with a corresponding charge to cost of goods sold.
In accordance with the installment payment terms of the LSA, Journey recorded a discount for imputed interest per ASC 835-30 Interest-Imputed Interest of $0.3 million. As of September 30, 2020, Journey recorded a net intangible asset related to this transaction of $4.7 million which was recorded on the Company’s condensed consolidated balance sheet.
The table below provides a summary of the Journey intangible assets as of September 30, 2020 and December 31, 2019, respectively:
The table below provides a summary for the nine months ended September 30, 2020, of Journey’s recognized expense related to its product licenses, which was recorded in costs of goods sold on the condensed consolidated statement of operations:
Note 1: As of September 30, 2020, this asset has not yet been placed in service, therefore no amortization expense was recognized on this asset for the quarter ended September 30, 2020. The Company expects the asset to be placed in service in the first half of 2021. Once the asset is placed in service the Company will amortize the asset over five years, which represents its expected useful life.
The future amortization of these intangible assets is as follows:
The entire disclosure for all or part of the information related to intangible assets.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef