Note 3  Biocon Acquisition On December 31, 2018, the Company completed the Biocon Acquisition, which included the acquisition of 100% of the outstanding membership interests of each of Aether and Biocon. The purpose of the Biocon Acquisition was to accelerate growth and to expedite entry into additional markets. For the year ended December 31, 2018, transaction costs associated with the Biocon Acquisition of approximately $33,000 were recorded in selling, general and administrative costs. The Company has accounted for the Biocon Acquisition as a business combination under the acquisition method of accounting. The following is a summary of total consideration for the Biocon Acquisition: Total Consideration Fixed purchase price $ 1,059,000 Acquisition date fair value of contingent consideration 562,000 Total consideration 1 $ 1,621,000 1 Total consideration consists of an upfront payment of $991,000 which includes $250,000 held in escrow, $131,000 in accrued expenses and $499,000 of contingent consideration liabilities. The Company has allocated the total consideration for the transaction based upon the fair value of net assets acquired and liabilities assumed at the date of acquisition. The following is a summary of the preliminary purchase price allocation for the Biocon Acquisition: Fair Values as of December 31, 2018 Trade accounts receivable $ 164,000 Inventories 179,000 Equipment 39,000 Security deposit 7,000 Goodwill 748,000 Intangible assets 590,000 Total assets acquired, net of cash acquired 1,727,000 Accounts payable 91,000 Accrued expenses 15,000 Total liabilities assumed 106,000 Net assets acquired, net of cash acquired $ 1,621,000 Intangible Assets The acquired intangible assets are being amortized over their estimated useful lives as follows: Preliminary Fair Values Weighted Average Useful Life (Years) Tradenames, service marks and domain names 50,000 5 Customer relationships 540,000 17 Total intangible assets $ 590,000 Estimated aggregate amortization expense for each of the next five years is estimated to be approximately $42,000. The estimated fair value of the identifiable intangible assets was determined using the income approach, which is a valuation technique that provides an estimate of the fair value of an asset based on market participant expectations of the cash flows an asset would generate over its remaining useful life. The assumptions, including the expected projected cash flows, utilized in the preliminary purchase price allocation and in determining the purchase price were based on the Companys best estimates as of December 31, 2018, the closing date of the Biocon Acquisition. Some of the more significant assumptions inherent in the development of those asset valuations include the estimated net cash flows for each year for each asset or product (including net revenues, cost of sales, research and development costs, selling and marketing costs and working capital / contributory asset charges), the appropriate discount rate to select in order to measure the risk inherent in each future cash flow stream, the assessment of each assets life cycle, the potential regulatory and commercial success risks, competitive trends impacting the asset and each cash flow stream, as well as other factors. No assurances can be given that the underlying assumptions used to prepare the discounted cash flow analysis will not change. For these and other reasons, actual results may vary significantly from estimated results. Goodwill Goodwill is calculated as the excess of the consideration transferred over the net assets recognized. Factors that contributed to the Companys recognition of goodwill include the Companys intent to expand its product portfolio. Goodwill has been allocated to the Water Filtration segment. Unaudited Pro Forma Results of Operations The following table reflects the unaudited pro forma combined results of operations for the years ended December 31, 2018 and 2017 (assuming the closing of the Biocon Acquisition occurred on January 1, 2017): Year Ended December 31, 2018 December 31, 2017 Total revenues $ 6,412,000 $ 4,236,000 Net loss attributable to Nephros, Inc $ (3,158,000 ) $ (855,000 ) The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the actual results of operations had the closing of the Biocon Acquisition taken place on January 1, 2017. Furthermore, the pro forma results do not purport to project the future results of operations of the Company. The unaudited pro forma information reflects the following adjustments: ? Adjustments to amortization expense for each of the years ended December 31, 2018 and 2017 of approximately $21,000 related to identifiable intangible assets acquired; ? Adjustments, net of a reduction, to depreciation expense for each of the years ended December 31, 2018 and 2017 of approximately $10,000 related to equipment acquired and for which the capitalization policy and useful lives were adjusted based on the Companys policy; ? Adjustments to selling, general and administrative expense related to transaction costs directly attributable to the Biocon Acquisition, including the elimination of $33,000 of expenses incurred in the year ended December 31, 2018 which have been included in the year ended December 31, 2017; ? Eliminate interest expense in the historical Biocon results of operations and eliminate interest income in the Companys historical results of operations, each of which was approximately $4,000 for each of the years ended December 31, 2018 and 2017, which interest was related to a lease that was terminated as of the acquisition; and ? Eliminate sales, and related cost of goods, for products sold by Biocon to the Company, with a gross margin impact of approximately $5,000 and $10,000 for the years ended December 31, 2018 and 2017, respectively.