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EX-23.1 - EXHIBIT 23.1 - CLARIENT, INC | c95818exv23w1.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 21, 2009
Clarient, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 000-22677 | 75-2649072 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
31 Columbia, Aliso Viejo, CA |
92656 |
|
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code: (949) 425-5700
N/A
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Table of Contents
EXPLANATORY NOTE
This
Current Report on Form 8-K/A amends and supplements Item 9.01 of the Current Report on Form 8-K filed by Clarient, Inc.
(Clarient) on December 23, 2009 to include the
financial statements and pro forma financial information required by
parts (a) and (b) of Item 9.01 of Form 8-K that were not available at the
time of the filing of the initial report. Such financial statements
and pro forma financial information are required as a result of
Clarients December 21, 2009 acquisition of Applied
Genomics, Inc. (AGI) pursuant to a merger of Clarient
Acquisition Corporation, a wholly-owned subsidiary of Clarient, with
and into AGI.
ITEM 9.01. Financial Statements and Exhibits.
(a) | Financial Statements of Business Acquired. |
1. | Applied Genomics, Inc. |
||
Balance Sheet as of September 30, 2009 (unaudited). |
|||
Statements of Operations for the nine months ended September 30, 2009 (unaudited). |
|||
Statements of Cash Flows for the nine months ended September 30, 2009 (unaudited). |
|||
Statement of Changes in Stockholders Equity for the nine months ended September 30, 2009 (unaudited). |
|||
Notes to the Unaudited Financial Statements (unaudited). |
|||
2. | Applied Genomics, Inc. |
||
Report of Independent Registered Public Accounting Firm. |
|||
Balance Sheets as of December 31, 2008 and 2007. |
|||
Statements of Operations for the years ended December 31, 2008 and 2007. |
|||
Statements of Cash Flows for the years ended December 31, 2008 and 2007. |
|||
Statements of Changes in
Stockholders Equity (Deficit) for the years ended December 31, 2008 and 2007. |
|||
Notes to the Financial Statements. |
(b) | Unaudited Pro Forma Condensed Combined Financial Information. |
Introduction to Unaudited Pro Forma Condensed Combined Financial Statements. |
|||
Pro Forma Unaudited Condensed Combined Balance Sheet as of September 30, 2009. |
|||
Pro Forma Unaudited Condensed Combined Statement of Operations for the nine months ended September 30, 2009. |
|||
Pro Forma Unaudited Condensed Combined Statement of Operations for the year ended December 31, 2008. |
|||
Notes to Unaudited Pro Forma Condensed Combined Financial Statements. |
(d) | Exhibits. |
23.1 | Consent of Beason & Nalley, Inc. |
2
Table of Contents
Applied Genomics, Inc.
Financial Statements
Financial Statements
September 30, 2009
Table of Contents
Independent Accountants Report
To the Board of Directors
Applied Genomics, Inc.
Huntsville, Alabama
Applied Genomics, Inc.
Huntsville, Alabama
We have reviewed the accompanying balance sheet of Applied Genomics, Inc. as of September 30, 2009,
and the related statements of operations, changes in stockholders equity and cash flows for the
nine month period then ended, in accordance with standards established by the American Institute of
Certified Public Accountants. All of the information included in these statements is the
representation of the management of Applied Genomics, Inc.
A review of interim financial statements consists primarily of inquiries of Company personnel and
analytical procedures applied to financial data. It is substantially less in scope than an audit
in accordance with auditing standards generally accepted in the United States of America, the
objective of which is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the
accompanying interim financial statements in order for them to be in conformity with accounting
principles generally accepted in the United States of America.
Huntsville, Alabama
November 5, 2009
Beason & Nalley, Inc.
Huntsville, AL
101 Monroe Street
Huntsville, Alabama
35801-4829
T: 256.533.1720
800.416.1946
F: 256.534.8558
101 Monroe Street
Huntsville, Alabama
35801-4829
T: 256.533.1720
800.416.1946
F: 256.534.8558
Washington DC
11400 Commerce Park Dr.
Suite 220
Reston, Virginia
20191-1528
T: 703.860.8062
800.416.1946
F: 256.534.8558
11400 Commerce Park Dr.
Suite 220
Reston, Virginia
20191-1528
T: 703.860.8062
800.416.1946
F: 256.534.8558
www.beasonnalley.com
Table of Contents
Applied Genomics, Inc.
Balance Sheet
As of September 30, 2009
Current Assets: |
||||
Cash |
$ | 303,983 | ||
Prepaid expenses |
21,271 | |||
Total Current Assets |
325,254 | |||
Property and Equipment, net |
13,215 | |||
Patents, net |
149,267 | |||
Total Assets |
$ | 487,736 | ||
-2-
Table of Contents
Current Liabilities: |
||||
Accounts payable |
$ | 66,411 | ||
Accrued expenses |
62,195 | |||
Current portion of rent abatement |
8,454 | |||
Total Current Liabilities |
137,060 | |||
Long-Term Liabilities: |
||||
Rent abatement, net of current portion |
29,129 | |||
Total Long-Term Liabilities |
29,129 | |||
Total Liabilities |
166,189 | |||
Stockholders Equity: |
||||
Convertible Preferred stock, Series A: $0.01
par value; 5,777,800 shares authorized, issued
and outstanding |
57,778 | |||
Convertible Preferred stock, Series B: $0.01
par value; 2,976,500 shares authorized, issued
and outstanding |
29,765 | |||
Convertible Preferred stock, Series C: $0.01
par value; 2,500,000 shares authorized,
1,731,000 issued and outstanding |
17,310 | |||
Convertible Preferred stock, Series D: $0.01
par value; 7,000,000 shares authorized,
5,865,000 issued and outstanding |
58,650 | |||
Common stock, $0.01 par value; 30,000,000
shares authorized, 6,624,018 issued and
outstanding |
66,240 | |||
Paid-in capital |
14,359,588 | |||
Accumulated deficit |
(14,267,784 | ) | ||
Total Stockholders Equity |
321,547 | |||
Total Liabilities and Stockholders Equity |
$ | 487,736 | ||
See accompanying notes and independent accountants report.
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Applied Genomics, Inc.
Statement of Operations
For the nine month period ended September 30, 2009
Revenue |
$ | 475 | ||
Cost of Operations: |
||||
General and administrative costs |
706,589 | |||
Research and development costs |
507,269 | |||
Total Cost of Operations |
1,213,858 | |||
Loss From Operations |
(1,213,383 | ) | ||
Other Income and Expenses: |
||||
Interest income, net |
38 | |||
Compensation expense related to stock options granted |
(4,753 | ) | ||
Total Other Expense |
(4,715 | ) | ||
Loss Before Income Taxes |
(1,218,098 | ) | ||
Provision for Income Tax Benefit |
| |||
Net Loss |
$ | (1,218,098 | ) | |
See accompanying notes and independent accountants report.
-4-
Table of Contents
Applied Genomics, Inc.
Statement of Changes in Stockholders Equity
For the nine month period ended September 30, 2009
Series A | Series A | Series B | Series B | Series C | Series C | Series D | Series D | |||||||||||||||||||||||||||||||||||||||||||||
Preferred | Preferred | Preferred | Preferred | Preferred | Preferred | Preferred | Preferred | Common | Common | |||||||||||||||||||||||||||||||||||||||||||
Stock | Stock | Stock | Stock | Stock | Stock | Stock | Stock | Stock | Stock | Paid-in | Accumulated | |||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||||||||||||||
Balance, January 1,
2009 |
5,777,800 | $ | 57,778 | 2,976,500 | $ | 29,765 | 1,731,000 | $ | 17,310 | 3,745,700 | $ | 37,457 | 6,624,018 | $ | 66,240 | $ | 12,256,728 | $ | (13,049,686 | ) | $ | (584,408 | ) | |||||||||||||||||||||||||||||
Issuance of Series
D Preferred Stock |
| | | | | | 2,119,300 | 21,193 | | | 2,098,107 | | 2,119,300 | |||||||||||||||||||||||||||||||||||||||
Compensation
expense related to
stock options
granted |
| | | | | | | | | | 4,753 | | 4,753 | |||||||||||||||||||||||||||||||||||||||
Net loss |
| | | | | | | | | | | (1,218,098 | ) | (1,218,098 | ) | |||||||||||||||||||||||||||||||||||||
Balance, September
30, 2009 |
5,777,800 | $ | 57,778 | 2,976,500 | $ | 29,765 | 1,731,000 | $ | 17,310 | 5,865,000 | $ | 58,650 | 6,624,018 | $ | 66,240 | $ | 14,359,588 | $ | (14,267,784 | ) | $ | 321,547 | ||||||||||||||||||||||||||||||
See accompanying notes and independent accountants report.
-5-
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Applied Genomics, Inc.
Statement of Cash Flows
For the nine month period ended September 30, 2009
Cash Flows From Operating Activities: |
||||
Net Loss |
$ | (1,218,098 | ) | |
Adjustments to reconcile net loss to net cash used by operating activities: |
||||
Depreciation and amortization expense |
10,102 | |||
Compensation expense related to stock options granted |
4,753 | |||
Change in: |
||||
Accounts receivable |
25,250 | |||
Prepaid expenses |
(9,845 | ) | ||
Accounts payable |
43,943 | |||
Rent abatement |
(5,369 | ) | ||
Total adjustments |
68,834 | |||
Net Cash Used by Operating Activities |
(1,149,264 | ) | ||
Cash Flows From Investing Activities: |
||||
Purchase of property and equipment |
(4,912 | ) | ||
Investment in patents |
(49,240 | ) | ||
Net Cash Used by Investing Activities |
(54,152 | ) | ||
Cash Flows From Financing Activities: |
||||
Amount due to related party |
(769,300 | ) | ||
Issuance of preferred stock |
2,119,300 | |||
Net Cash Provided by Financing Activities |
1,350,000 | |||
Net Increase in Cash |
146,584 | |||
Cash, beginning of year |
157,399 | |||
Cash, end of year |
$ | 303,983 | ||
See accompanying notes and independent accountants report.
-6-
Table of Contents
Applied Genomics, Inc.
Notes to Financial Statements
September 30, 2009
1. | Summary of Significant Accounting Policies |
Nature of Business - Applied Genomics, Inc. (the Company) was incorporated in the State of
Delaware on May 9, 2000. The Company is a biotechnology company that develops targeted
diagnostics to improve treatment of cancer patients.
Property and Equipment - Property and Equipment are carried at cost less accumulated
depreciation. Depreciation is provided on a straight-line basis over the estimated useful
life of three to seven years.
Expenditures for maintenance and repairs are charged to operations as incurred.
Expenditures for renewals and betterments are capitalized and written off through
depreciation and amortization charges. Property retired or sold is removed from the asset
and related accumulated depreciation accounts, and any profit or loss resulting is reflected
in the statement of income.
Patents - Awarded patents are recorded at cost and are amortized using the straight-line
method over the estimated economic lives of the patents. Patents that have been applied
for, but not awarded, are carried at cost.
Revenue Recognition - Revenue is derived from sales of internally developed testing
supplies. Revenue is recognized when the supplies are accepted by the customer.
Research and Development - Research and development costs related to internal developments
of prospective products and processes are expensed as incurred.
Income Taxes - The Company accounts for income taxes in accordance with the Financial
Accounting Standards Boards (FASB) Accounting Standards Codification (ASC) 740, Income
Taxes. FASB ASC 740 prescribes the use of the liability method whereby deferred tax asset
and liability account balances are determined based on differences between the financial
reporting and tax bases of assets and liabilities and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected to reverse. The
Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their
estimated realizable value.
FASB ASC 740-10 clarifies the accounting for income taxes, by prescribing a minimum
recognition threshold a tax position is required to meet before being recognized in the
financial statements. It also provides guidance on derecognition, measurement and
classification of amounts relating to uncertain tax positions, accounting for and disclosure
of interest and penalties, accounting in interim periods, disclosures and transition
relating to the adoption of the new accounting standard. FASB ASC 740-10 is effective for
fiscal years beginning after December 15, 2008 for non-public entities. The Company adopted
FASB ASC 740-10 as of January 1, 2009, as required, and determined that the adoption of FASB
ASC 740-10 did not have a material impact on the Companys financial position and results of
operations.
-7-
Table of Contents
Notes to Financial Statements, Continued
Share-Based Compensation - In December 2004, the Company adopted ASC 718, Share Based
Payment. ASC 718 supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees,
and amends ASC 230, Statement of Cash Flows. share-based compensation cost is measured at
the grant date based on the estimated fair value of the award, and is recognized as expense
over the applicable service period. The Company adopted ASC 718 using the prospective
transition method, beginning January 1, 2006. As such, Statement ASC 718 is applied only to
awards granted, modified, repurchased, or cancelled after the adoption of ASC 718. The
prospective method of adoption does not permit Statement ASC 718 to be applied to the
nonvested portion of awards outstanding at the date of initial application.
Concentration of Credit Risk - Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash. The Company maintains cash in
accounts with high quality, federally insured financial institutions. At times, the
balances in these accounts may be in excess of federally insured limits.
Use of Estimates - Management uses estimates and assumptions in preparing financial
statements in accordance with accounting principles generally accepted in the United States
of America. Those estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and the reported revenues
and expenses. It is at least reasonably possible that the significant estimates used will
change within the next year.
Fair Value of Financial Instruments - The Company adopted the provisions of FASB ASC 820,
Fair Value Measurements and Disclosures, effective January 1, 2008. FASB ASC 820 defines
fair value, establishes a framework for measuring fair value under generally accepted
accounting principles and enhances disclosures about fair value measurements.
Fair value is defined as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the
measurement date. Valuation techniques used to measure fair value, as required by Topic 820
of the FASB ASC, must maximize the use of observable inputs and minimize the use of
unobservable inputs.
The standard describes a fair value hierarchy based on three levels of inputs, of which the
first two are considered observable and the last unobservable, that may be used to measure
fair value. The Companys assessment of the significance of a particular input to the fair
value measurements requires judgment, and may affect the valuation of the assets and
liabilities being measured and their placement within the fair value hierarchy.
New
Accounting Pronouncements - In June 2009, the FASB issued FASB ASC 105, Generally
Accepted Accounting Principles, which establishes the FASB Accounting Standards Codification
as the sole source of authoritative generally accepted accounting principles. Pursuant to
the provisions of FASB ASC 105, the Company has updated references to GAAP in its financial
statements issued for the interim period ended September 30, 2009. The adoption of FASB ASC
105 did not impact the Companys financial position or results of operations.
2. | Operations |
As shown in the accompanying financial statements, the Company has incurred a net loss of
$1,218,098 for the nine month period ended September 30, 2009. The Company also has
accumulated a deficit of $14,267,784 as of September 30, 2009. Management expects that
funds received from the issuance of Series D preferred stock in the future will allow the
Company to continue as a going concern through September 30, 2010.
-8-
Table of Contents
Notes to Financial Statements, Continued
3. | Property and Equipment |
A summary of property and equipment as of September 30, 2009, is as follows:
Lab equipment |
$ | 196,987 | ||
Computer equipment |
66,658 | |||
Office furniture and equipment |
1,763 | |||
265,408 | ||||
Less: accumulated depreciation |
252,193 | |||
Property and Equipment, net |
$ | 13,215 | ||
The Company recorded $6,647 of depreciation expense for the nine month period ended
September 30, 2009.
4. | Patents |
At September 30, 2009, patents consist of the following:
Awarded patents |
$ | 29,611 | ||
Patents in process |
123,111 | |||
152,722 | ||||
Less: accumulated amortization |
3,455 | |||
Patents, net |
$ | 149,267 | ||
Amortization expense for the nine month period ended September 30, 2009 was $3,455.
5. | Income Taxes |
The provision for income tax benefit consists of the following for the nine month period
ended September 30, 2009:
Deferred: |
||||
Federal |
$ | 535,000 | ||
State |
109,000 | |||
644,000 | ||||
Income tax benefit |
644,000 | |||
Valuation allowance |
(644,000 | ) | ||
Total provision for income taxes |
$ | | ||
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Table of Contents
Notes to Financial Statements, Continued
The Companys provision for income taxes differs from the amount of income tax determined by
applying the applicable federal and state statutory income tax rates to the loss before
income taxes due to the establishment of a valuation allowance for the full amount of net
operating loss carryforwards and deductible temporary differences.
The tax effect of temporary differences that give rise to significant portions of deferred
tax assets and liabilities consist of depreciation, impairment of patents, research and
development credit carryforward, net operating losses, accrued vacation, and rent abatement.
A summary of the composition of deferred income tax assets is as follows as of September
30, 2009:
Deferred tax assets (liability): |
||||
Net operating loss carryforwards |
$ | 5,859,000 | ||
Patent impairment |
| |||
Accrued liabilities |
2,000 | |||
Depreciation and amortization |
2,000 | |||
5,863,000 | ||||
Less: valuation allowance |
5,863,000 | |||
Net deferred tax assets |
$ | | ||
The valuation allowance for deferred income tax assets increased by 644,000 for the nine
month period ended September 30, 2009. The Company has provided a valuation allowance for
the full value of the deferred tax asset because of uncertainties regarding its realization.
The Companys federal net operating loss carryforward of $14,054,000 will expire, if not
utilized, in various years from 2020 through 2029. The Company paid no income taxes during
the nine month period ended September 30, 2009.
6. | Operating Leases |
On September 30, 2009, the Company was obligated under certain operating leases for
facilities and equipment. Minimum future rental payments under non-cancelable operating
leases having initial terms in excess of one year as of September 30, 2009, for each of the
next five years and in the aggregate are, as follows:
2010 |
$ | 137,468 | ||
2011 |
137,388 | |||
2012 |
139,176 | |||
2013 |
74,724 | |||
2014 |
48,000 | |||
Total future minimum lease payments |
$ | 536,756 | ||
In accordance with generally accepted accounting principles, the Company is recognizing the
total cost of the office lease ratably over the lease term. The difference between rent
paid and expensed is recognized as rent abatement in the accompanying balance sheet.
Total rent expense under operating lease agreements, including lease agreements with
expiration dates of less than one year, for the nine month period ended September 30, 2009
totaled $96,696.
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Table of Contents
Notes to Financial Statements, Continued
7. | Profit Sharing Plan |
The Company has established a 401(k) profit sharing plan, for all eligible employees. The
plan provides for employee contributions up to 60% of their earnings, restricted to IRS
limitations. Employer contributions to the plan are made on a discretionary basis and become
fully vested ratably over 6 years of service. The Company expensed at total of $19,402 for
contributions to the plan for the nine month period ended September 30, 2009.
8. | Preferred Stock |
As of September 30, 2009, the Company had 50,000,000 shares of stock authorized. 30,000,000
shares of $.01 par value had been authorized as Common Stock. 5,777,800 shares of $.01 par
value had been authorized as Series A Preferred Stock (Series A Preferred Stock),
2,976,500 shares of $.01 par value had been authorized as Series B Preferred Stock (Series
B Preferred Stock), 2,500,000 shares of $.01 par value had been authorized as Series C
Convertible Preferred Stock (Series C Preferred Stock), and 7,000,000 shares of $.01 par
value had been authorized as Series D Convertible Preferred Stock (Series D Preferred
Stock). The 1,745,000 shares of authorized preferred stock remaining are available for
designation for future classes of stock.
The holders of preferred stock have various rights and preferences as follows:
Voting
Each share of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
and Series D Preferred Stock has voting rights equal to an equivalent number of shares in
common stock into which it is convertible and votes together as one class with the common
stock.
Dividends
Holders of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, and
Series D Preferred Stock are entitled to receive dividends when and if declared by the Board
of Directors. Dividends on Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, and Series D Preferred Stock are not mandatory or cumulative. The holders
of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, and Series
D Preferred Stock will also be entitled to participate in dividends on common stock, when
and if declared by the Board of Directors, based on the number of shares of common stock
held on an as-if converted basis.
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Table of Contents
Notes to Financial Statements, Continued
Liquidation Preference
In the event of any liquidation, dissolution, or winding up of the Company whether voluntary
or involuntary, the holders of Series A Preferred Stock shall be entitled to receive prior
and in preference to any distribution of any assets or surplus funds of the Company to the
holders of the Common Stock, the amount of $0.70 (the Series A Liquidation Preference) for
each share of Series A Preferred Stock then held by them. The holders of Series B Preferred
Stock shall be entitled to receive prior and in preference to any distribution of any assets
or surplus funds of the Company to the holders of the Common Stock, the amount of $1.00
(the Series B Liquidation Preference) for each share of Series B Preferred Stock then held
by them. The holders of Series C Preferred Stock shall be entitled to receive prior and in
preference to any distribution of any assets or surplus funds of the Company to the holders
of the Common Stock, the amount of $1.00 (the Series C Liquidation Preference) for each
share of Series C Preferred Stock then held by them. The holders of Series D Preferred
Stock shall be entitled to receive prior and in preference to any distribution of any assets
or surplus funds of the Company to the holders of the Common Stock, the amount of $1.00
(the Series D Liquidation Preference) for each share of Series D Preferred Stock then held
by them. The holders of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, and Series D Preferred Stock shall rank on a parity as to the receipt of
preferential amounts upon the occurrence of such event.
If upon the occurrence of such event, the assets and funds to be distributed among all
holders of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
and Series D Preferred Stock shall be insufficient to permit the payment to such holders of
the full preferential amount, then the entire assets and funds of the Company legally
available for distribution shall be distributed ratably to holders of the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock in
proportion to the preferential amount such holder is otherwise entitled to receive.
In lieu of the preference noted above, the holders of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall be entitled to
receive, on a pro rata basis with the holders of Common Stock as though the holders of the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock were the holders of the number of shares of Common Stock into which their
respective shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock and Series D Preferred Stock are then convertible, the entire remaining assets and
funds of the Company legally available for distribution.
Right to Convert
Each share of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock
and Series D Preferred Stock shall be convertible at any time and from time to time, at the
option of the holder thereof, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing the Series A Liquidation Preference, the Series B
Liquidation Preference, the Series C Liquidation Preference or the Series D Liquidation
Preference, respectively, by the conversion price applicable to such share, determined as
hereinafter provided, in effect on the date the certificate is surrendered for conversion.
The price at which shares of Common Stock shall be deliverable upon conversion of shares of
the Series A Preferred Stock (the Series A Conversion Price) shall initially be $0.70 per
share of Common Stock. The price at which shares of Common Stock shall be deliverable upon
conversion of shares of the Series B Preferred Stock (the Series B Conversion Price) shall
initially be $1.00 per share of Common Stock. The price at which shares of Common Stock
shall be deliverable upon conversion of shares of the Series C Preferred Stock (the Series
C Conversion Price) shall initially be $1.00 per share of Common Stock. The price at which
shares of Common Stock shall be deliverable upon conversion of shares of the Series D
Preferred Stock (the Series D Conversion Price) shall initially be $1.00 per share of
Common Stock.
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Table of Contents
Notes to Financial Statements, Continued
9. | Stock Options |
The Company established a stock option plan for all employees, directors, and consultants
under which options may be granted, not to exceed 4,077,780 shares. Stock options are
granted at the discretion of the Companys Board of Directors and are identified as
incentive stock options or non-qualified stock options. The plan provides that stock
options will be granted at the fair market value of the stock on the date of grant, with the
the exercise price equal to the fair market value of the stock on the date of grant.
Generally, incentive stock options vest 35% one year from date of grant, and 1/36th monthly
for the next three years. Generally, non-qualified stock options are 100% vested at grant
date. Stock options not exercised within one hundred twenty months from the date of grant
expire. No options may be granted under the Plan after August 1, 2010. More restrictive
features apply to any options granted to a ten percent stockholder.
The Company used the Black-Scholes Model to estimate the fair value of stock options
granted, which requires the use of highly subjective assumptions. The risk-free interest
rate used is based upon the U.S. Treasury yield curve in effect at the time of the grant for
instruments with a similar life. Expected volatility is established based on historical
volatility of the Companys own stock value, as determined by internal valuation. The
Black-Scholes Model is a trading price model that does not reflect either the non-traded
nature or the limited transferability of the options. The fair market value of the stock
options granted during 2009 was estimated using the following assumptions: dividend rate of
0%; average risk-free interest rate of 3.29%; forfeiture rate of 0%; expected life of 5 to 7
years; and price volatility of 45.00%.
The Company recognized $4,753 in compensation expense during the nine month period ended
September 30, 2009 for stock option awards. It is reflected in other expenses in the
accompanying statement of operations.
As of September 30, 2009, there was $25,347 of total measured but unrecognized compensation
expense related to non-vested share-based compensation arrangements. The cost is expected
to be recognized over a weighted average period of 6 years.
The Company generally issues authorized but unissued shares to satisfy stock option
exercises.
Details of the stock options outstanding as of September 30, 2009 are as follows:
Weighted-Average | ||||||||
Number of Options | Exercise Price | |||||||
Options outstanding at December 31, 2008 |
2,779,000 | $ | 0.106 | |||||
Granted |
201,000 | 0.100 | ||||||
Options outstanding at September 30, 2009 |
2,980,000 | $ | 0.105 | |||||
Options Outstanding | Options Exercisable | |||||||||||||||||||
Weighted-Average | ||||||||||||||||||||
Exercise | Number of | Remaining Contractual | Weighted-Average | Number of | Weighted-Average | |||||||||||||||
Price | Shares | Life | Exercise Price | Shares | Exercise Price | |||||||||||||||
.10 |
2,980,000 | 3.69 years | $ | 0.105 | 2,689,688 | $ | 0.136 |
-13-
Table of Contents
Applied Genomics, Inc.
Financial Statements
Financial Statements
December 31, 2008 and 2007
Table of Contents
Table of Contents
Page | ||||
1 | ||||
Financial Statements |
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2 | ||||
4 | ||||
5 | ||||
6 | ||||
7 | ||||
Table of Contents
Independent Auditors Report
To the Board of Directors
Applied Genomics, Inc.
Huntsville, Alabama
Applied Genomics, Inc.
Huntsville, Alabama
We have audited the accompanying balance sheets of Applied Genomics, Inc. as of December 31, 2008
and 2007, and the related statements of operations, changes in stockholders equity (deficit) and
cash flows for the years then ended. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the financial position of Applied Genomics, Inc. as of December 31, 2008 and 2007, and
the results of its operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.
November 3, 2009
(January 29, 2010 as to Note 10)
(January 29, 2010 as to Note 10)
Table of Contents
Applied Genomics, Inc.
Balance Sheets
As of December 31, 2008 and 2007
2008 | 2007 | |||||||
Current Assets: |
||||||||
Cash |
$ | 157,399 | $ | 66,801 | ||||
Accounts receivable, net of allowance for doubtful accounts of $0 |
25,250 | | ||||||
Prepaid expenses |
11,426 | 11,026 | ||||||
Total Current Assets |
194,075 | 77,827 | ||||||
Property and Equipment, net |
14,950 | 28,203 | ||||||
Patents, net |
103,482 | 60,696 | ||||||
Total Assets |
$ | 312,507 | $ | 166,726 | ||||
-2-
Table of Contents
2008 | 2007 | |||||||
Current Liabilities: |
||||||||
Accounts payable |
$ | 22,468 | $ | 62,521 | ||||
Due to related party |
769,300 | | ||||||
Accrued expenses |
62,195 | 63,434 | ||||||
Current portion of rent abatement |
7,159 | | ||||||
Total Current Liabilities |
861,122 | 125,955 | ||||||
Long-Term Liabilities: |
||||||||
Rent abatement, net of current portion |
35,793 | | ||||||
Total Long-Term Liabilities |
35,793 | | ||||||
Total Liabilities |
896,915 | 125,955 | ||||||
Stockholders Equity (Deficit): |
||||||||
Convertible preferred stock, Series A: $0.01
par value; 5,777,800 shares authorized, issued
and outstanding |
57,778 | 57,778 | ||||||
Convertible preferred stock, Series B: $0.01
par value; 2,976,500 shares authorized, issued
and outstanding |
29,765 | 29,765 | ||||||
Convertible preferred stock, Series C: $0.01
par value; 2,500,000 shares authorized,
1,731,000 issued and outstanding |
17,310 | 17,310 | ||||||
Convertible preferred stock, Series D: $0.01
par value; 3,745,700 shares authorized,
3,745,000 and 2,690,000 shares issued and
outstanding as of December 31, 2008 and 2007,
respectively |
37,457 | 26,900 | ||||||
Common stock, $0.01 par value; 30,000,000 shares
authorized, 6,624,018 issued and outstanding |
66,240 | 66,240 | ||||||
Paid-in capital |
12,256,728 | 11,205,843 | ||||||
Accumulated deficit |
(13,049,686 | ) | (11,363,065 | ) | ||||
Total Stockholders Equity (Deficit) |
(584,408 | ) | 40,771 | |||||
Total Liabilities and Stockholders Equity (Deficit) |
$ | 312,507 | $ | 166,726 | ||||
The accompanying notes are an integral part of the financial statements.
-3-
Table of Contents
Applied Genomics, Inc.
Statements of Operations
For the years ended December 31, 2008 and 2007
2008 | 2007 | |||||||
Revenue |
$ | 29,734 | $ | 250,112 | ||||
Cost of Operations: |
||||||||
Cost of goods sold |
117 | | ||||||
General and administrative costs |
966,083 | 798,790 | ||||||
Research and development costs |
744,513 | 908,158 | ||||||
Total Cost of Operations |
1,710,713 | 1,706,948 | ||||||
Loss From Operations |
(1,680,979 | ) | (1,456,836 | ) | ||||
Other Income and Expenses: |
||||||||
Interest income, net |
100 | 795 | ||||||
Compensation expense related to stock options granted |
(5,742 | ) | (5,686 | ) | ||||
Total Other Expense |
(5,642 | ) | (4,891 | ) | ||||
Loss Before Income Taxes |
(1,686,621 | ) | (1,461,727 | ) | ||||
Provision for Income Tax Benefit |
| | ||||||
Net Loss |
$ | (1,686,621 | ) | $ | (1,461,727 | ) | ||
The accompanying notes are an integral part of the financial statements.
-4-
Table of Contents
Applied Genomics, Inc.
Statements of Changes in Stockholders Equity (Deficit)
For the years ended December 31, 2008 and 2007
Series A | Series A | Series B | Series B | Series C | Series C | Series D | Series D | |||||||||||||||||||||||||||||||||||||||||||||
Preferred | Preferred | Preferred | Preferred | Preferred | Preferred | Preferred | Preferred | Common | Common | |||||||||||||||||||||||||||||||||||||||||||
Stock | Stock | Stock | Stock | Stock | Stock | Stock | Stock | Stock | Stock | Paid-in | Accumulated | |||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||||||||||||||
January 1, 2007 |
5,777,800 | $ | 57,778 | 2,976,500 | $ | 29,765 | 1,731,000 | $ | 17,310 | 1,355,000 | $ | 13,550 | 6,624,018 | $ | 66,240 | $ | 9,878,507 | $ | (9,901,338 | ) | $ | 161,812 | ||||||||||||||||||||||||||||||
Issuance of Series
D Preferred Stock |
| | | | | | 1,335,000 | 13,350 | | | 1,321,650 | | 1,335,000 | |||||||||||||||||||||||||||||||||||||||
Compensation
expense related to
stock options
granted |
| | | | | | | | | | 5,686 | | 5,686 | |||||||||||||||||||||||||||||||||||||||
Net loss |
| | | | | | | | | | | (1,461,727 | ) | (1,461,727 | ) | |||||||||||||||||||||||||||||||||||||
December 31, 2007 |
5,777,800 | $ | 57,778 | 2,976,500 | $ | 29,765 | 1,731,000 | $ | 17,310 | 2,690,000 | $ | 26,900 | 6,624,018 | $ | 66,240 | $ | 11,205,843 | $ | (11,363,065 | ) | $ | 40,771 | ||||||||||||||||||||||||||||||
Issuance of Series
D Preferred Stock |
| | | | | | 1,055,700 | 10,557 | | | 1,045,143 | | 1,055,700 | |||||||||||||||||||||||||||||||||||||||
Compensation
expense related to
stock options
granted |
| | | | | | | | | | 5,742 | | 5,742 | |||||||||||||||||||||||||||||||||||||||
Net loss |
| | | | | | | | | | | (1,686,621 | ) | (1,686,621 | ) | |||||||||||||||||||||||||||||||||||||
December 31, 2008 |
5,777,800 | $ | 57,778 | 2,976,500 | $ | 29,765 | 1,731,000 | $ | 17,310 | 3,745,700 | $ | 37,457 | 6,624,018 | $ | 66,240 | $ | 12,256,728 | $ | (13,049,686 | ) | $ | (584,408 | ) | |||||||||||||||||||||||||||||
The accompanying notes are an integral part of the financial statements.
-5-
Table of Contents
Applied Genomics, Inc.
Statements of Cash Flows
For the years ended December 31, 2008 and 2007
2008 | 2007 | |||||||
Cash Flows From Operating Activities: |
||||||||
Net Loss |
$ | (1,686,621 | ) | $ | (1,461,727 | ) | ||
Adjustments to reconcile net loss to net cash used by operating activities: |
||||||||
Depreciation expense |
24,130 | 30,001 | ||||||
Impairment of patents |
13,338 | 46,395 | ||||||
Compensation expense related to stock options granted |
5,742 | 5,686 | ||||||
Change in: |
||||||||
Accounts receivable |
(25,250 | ) | | |||||
Inventory |
| 23,296 | ||||||
Prepaid expenses |
(400 | ) | (8,075 | ) | ||||
Accounts payable |
(40,053 | ) | 43,068 | |||||
Rent abatement |
42,952 | | ||||||
Accrued expenses |
(1,239 | ) | (2,078 | ) | ||||
Total adjustments |
19,220 | 138,293 | ||||||
Net Cash Used by Operating Activities |
(1,667,401 | ) | (1,323,434 | ) | ||||
Cash Flows From Investing Activities: |
||||||||
Purchase of property and equipment |
(10,877 | ) | | |||||
Investment in patents |
(56,124 | ) | (49,728 | ) | ||||
Net Cash Used by Investing Activities |
(67,001 | ) | (49,728 | ) | ||||
Cash Flows From Financing Activities: |
||||||||
Proceeds from due to related party |
769,300 | | ||||||
Issuance of preferred stock |
1,055,700 | 1,335,000 | ||||||
Net Cash Provided by Financing Activities |
1,825,000 | 1,335,000 | ||||||
Net Increase (Decrease) in Cash |
90,598 | (38,162 | ) | |||||
Cash, beginning of year |
66,801 | 104,963 | ||||||
Cash, end of year |
$ | 157,399 | $ | 66,801 | ||||
The accompanying notes are an integral part of the financial statements.
-6-
Table of Contents
Applied Genomics, Inc.
Notes to Financial Statements
December 31, 2008 and 2007
1. | Summary of Significant Accounting Policies |
Nature of Business - Applied Genomics, Inc. (the Company) was incorporated in the State of
Delaware on May 9, 2000. The Company is a biotechnology company that develops targeted
diagnostics to improve treatment of cancer patients.
Property and Equipment - Property and Equipment are carried at cost less accumulated
depreciation. Depreciation is provided on a straight-line basis over the estimated useful
life of three to seven years.
Expenditures for maintenance and repairs are charged to operations as incurred.
Expenditures for renewals and betterments are capitalized and written off through
depreciation and amortization charges. Property retired or sold is removed from the asset
and related accumulated depreciation accounts, and any profit or loss resulting is reflected
in the statement of income.
Patents - Awarded patents are recorded at cost and are amortized using the straight-line
method over the estimated economic lives of the patents. Patents that have been applied
for, but not awarded, are carried at cost.
Revenue Recognition - Revenue is derived from sales of internally developed testing
supplies. Revenue is recognized when the supplies are accepted by the customer. Revenue
from licensing agreements is recognized per the terms of the licensing agreement.
Research and Development - Research and development costs related to internal developments
of prospective products and processes are expensed as incurred.
Income Taxes - Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due and deferred taxes. Deferred taxes
represent income taxes on income and expenses included in the financial statements, which
will not be reported as taxable income or expenses until future periods. Deferred tax asset
and liability amounts are recognized for the future tax benefits and liabilities
attributable to differences between the financial statement carrying amount and the carrying
amount for tax purposes. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which the differences are expected
to be recovered or settled.
Share-Based Compensation - In December 2004, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standard No. 123 (SFAS 123R), Share Based Payment.
SFAS 123R supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and
amends SFAS No. 95, Statement of Cash Flows. SFAS 123R is effective for private companies
in fiscal years beginning after December 15, 2005. The company has elected to use the fair
value method for measurement of share-based payments granted and the recognition of the
related compensation costs over the vesting period. The Company adopted SFAS 123R, using
the prospective transition method, beginning January 1, 2006.
Concentration of Credit Risk - Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash and accounts receivable. The
Company maintains cash in accounts with high quality, federally insured financial
institutions. At times, the balances in these accounts may be in excess of federally
insured limits. The Company also extends credit to its customers, which primarily include
other research companies.
-7-
Table of Contents
Notes to Financial Statements, Continued
Use of Estimates - Management uses estimates and assumptions in preparing financial
statements in accordance with accounting principles generally accepted in the United States
of America. Those estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and the reported revenues
and expenses. It is at least reasonably possible that the significant estimates used will
change within the next year.
Fair Value of Financial Instruments - The carrying amounts of financial instruments,
including cash, accounts receivable, accounts payable, accrued liabilities, and short-term
borrowings approximates fair value due to the short maturity of these instruments.
New Accounting Pronouncements In June 2006, the FASB issued FASB Interpretation No. 48
(FIN 48), Accounting for Uncertainty in Income Taxes an Interpretation of FASB Statement
No. 109. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in a
companys financial statements in accordance with FASB Statement No. 109, Accounting for
Income Taxes. FIN 48 prescribes a comprehensive model for recognizing, measuring, presenting
and disclosing in the financial statements tax positions taken or expected to be taken on a
tax return. If there are changes in net assets as a result of application of FIN 48 these
will be accounted for as an adjustment to the opening balance of retained deficit.
Additional disclosures about the amounts of such liabilities will also be required. In
December 2008, the FASB delayed the effective date of FIN 48 for certain nonpublic companies
to annual financial statements for fiscal years beginning after December 15, 2008. The
Company will be required to adopt FIN 48 in its 2009 annual financial statements. Management
is currently assessing the impact of FIN 48 on its financial position and results of
operations and has not determined if the adoption of FIN 48 will have a material effect on
its financial statements.
2. | Operations |
As shown in the accompanying financial statements, the Company has incurred a net loss of
$1,686,621 for the year ended December 31, 2008. The Company also has accumulated a deficit
of $13,049,686 as of December 31, 2008. Management expects that funds received from the
issuance of Series D preferred stock in 2009 will allow the Company to continue as a going
concern through December 31, 2009. See Note 10.
3. | Property and Equipment |
A summary of property and equipment as of December 31, 2008 and 2007, is as follows:
2008 | 2007 | |||||||
Lab equipment |
$ | 193,260 | $ | 182,384 | ||||
Computer equipment |
65,472 | 65,472 | ||||||
Office furniture and equipment |
1,763 | 6,318 | ||||||
260,495 | 254,174 | |||||||
Less: accumulated depreciation |
245,545 | 225,971 | ||||||
Property and Equipment, net |
$ | 14,950 | $ | 28,203 | ||||
-8-
Table of Contents
Notes to Financial Statements, Continued
4. | Patents |
Patents consist of the following as of December 31, 2008 and 2007:
2008 | 2007 | |||||||
Awarded patents |
$ | | $ | | ||||
Patents in process |
103,482 | 60,696 | ||||||
103,482 | 60,696 | |||||||
Less: accumulated amortization |
| | ||||||
Patents, net |
$ | 103,482 | $ | 60,696 | ||||
There was no amortization expense for the years ended December 31, 2008 and 2007,
respectively.
Impairment of patents in the amount of $13,338 and $46,395 were recognized during the years
ended December 31, 2008 and 2007, respectively due to technical abandonment. It is reflected
in general and administrative costs in the accompanying statement of operations.
5. | Income Taxes |
The provision for income tax benefit consists of the following for the years ended December
31, 2008 and 2007:
2008 | 2007 | |||||||
Current: |
||||||||
Federal |
$ | | $ | | ||||
State |
| | ||||||
| | |||||||
Deferred: |
||||||||
Federal |
533,000 | $ | 516,000 | |||||
State |
109,000 | 88,000 | ||||||
642,000 | 604,000 | |||||||
Income tax benefit |
642,000 | 604,000 | ||||||
Valuation allowance |
(642,000 | ) | (604,000 | ) | ||||
Provision for income tax |
$ | | $ | | ||||
-9-
Table of Contents
Notes to Financial Statements, Continued
The Companys provision for income taxes differs from the amount of income tax determined by
applying the applicable federal and state statutory income tax rates to the loss before
income taxes due to the establishment of a valuation allowance for the full amount of net
operating loss carryforwards and deductible temporary differences.
The tax effect of temporary differences that give rise to significant portions of deferred
tax assets and liabilities consist of depreciation, impairment of patents, research and
development credit carryforward, and net operating losses. A summary of the composition of
deferred income tax assets is as follows as of December 31, 2008 and 2007:
2008 | 2007 | |||||||
Deferred tax assets: |
||||||||
Net operating loss carryforwards |
$ | 5,209,000 | $ | 4,600,000 | ||||
Patent impairment |
6,000 | 20,000 | ||||||
Rent abatement |
18,000 | | ||||||
Depreciation and amortization |
(7,000 | ) | 4,000 | |||||
Research and development tax credits |
480,000 | 480,000 | ||||||
5,706,000 | 5,104,000 | |||||||
Less: valuation allowance |
5,706,000 | 5,104,000 | ||||||
Net deferred tax assets |
$ | | $ | | ||||
The valuation allowance for deferred income tax assets increased by $642,000 and $604,000
for the years ended December 31, 2008 and 2007, respectively. The Company has provided a
valuation allowance for the full value of the deferred tax asset because of uncertainties
regarding its realization.
The Companys federal net operating loss carryforward as of December 31, 2008 of $12,361,000
will expire, if not utilized, in various years through 2028. The Company paid no income
taxes during the years ended December 31, 2008 and 2007, respectively.
6. | Operating Leases |
On December 31, 2008, the Company was obligated under certain operating leases for
facilities. Minimum future rental payments under non-cancelable operating leases having
initial terms in excess of one year as of December 31, 2008, for each of the next five years
and in the aggregate are, as follows:
2009 |
$ | 120,840 | ||
2010 |
88,067 | |||
2011 |
89,828 | |||
2012 |
91,625 | |||
2013 |
3,818 | |||
Total future minimum lease payments |
$ | 394,178 | ||
In accordance with accounting principles generally accepted in the United States, the
Company is recognizing the total cost of the office lease ratably over the lease term. The
difference between rent paid and expensed is recognized as rent abatement in the
accompanying balance sheets.
Total rent expense under operating lease agreements, including lease agreements with
expiration dates of less than one year, aggregated $165,330 and $130,029, for the years
ended December 31, 2008 and 2007, respectively.
-10-
Table of Contents
Notes to Financial Statements, Continued
7. | Profit Sharing Plan |
The Company has established a 401(k) profit sharing plan, for all eligible employees. The
plan provides for employee contributions up to 60% of their earnings, restricted to IRS
limitations. Employer contributions to the plan are made on a discretionary basis and become
fully vested ratably over 6 years of service. The Company expensed at total of $26,456 and
$25,777 for contributions to the plan for the years ended December 31, 2008 and 2007,
respectively.
8. | Preferred Stock |
As of December 31, 2008, the Company had 45,000,000 shares of stock authorized. 30,000,000
shares of $.01 par value had been authorized as Common Stock. 5,777,800 shares of $.01 par
value had been authorized as Series A Preferred Stock (Series A Preferred Stock),
2,976,500 shares of $.01 par value had been authorized as Series B Preferred Stock (Series
B Preferred Stock), 2,500,000 shares of $.01 par value had been authorized as Series C
Convertible Preferred Stock (Series C Preferred Stock), and 3,745,700 shares of $.01 par
value had been authorized as Series D Convertible Preferred Stock (Series D Preferred
Stock).
As of December 31, 2008, the Company had entered into an agreement to sell 769,300 more
shares of Series D Preferred Stock than had been authorized. This resulted in a balance due
to a related party of $769,300. Additional shares were authorized by the Company in 2009
and the agreed upon shares were subsequently issued.
The holders of preferred stock have various rights and preferences as follows:
Voting
Each share of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
and Series D Preferred Stock has voting rights equal to an equivalent number of shares in
common stock into which it is convertible and votes together as one class with the common
stock.
Dividends
Holders of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, and
Series D Preferred Stock are entitled to receive dividends when and if declared by the Board
of Directors. Dividends on Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, and Series D Preferred Stock are not mandatory or cumulative. The holders
of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, and Series
D Preferred Stock will also be entitled to participate in dividends on common stock, when
and if declared by the Board of Directors, based on the number of shares of common stock
held on an as-if converted basis.
-11-
Table of Contents
Notes to Financial Statements, Continued
Liquidation Preference
In the event of any liquidation, dissolution, or winding up of the Company whether voluntary
or involuntary, the holders of Series A Preferred Stock shall be entitled to receive prior
and in preference to any distribution of any assets or surplus funds of the Company to the
holders of the Common Stock, the amount of $0.70 (the Series A Liquidation Preference) for
each share of Series A Preferred Stock then held by them. The holders of Series B Preferred
Stock shall be entitled to receive prior and in preference to any distribution of any assets
or surplus funds of the Company to the holders of the Common Stock, the amount of $1.00
(the Series B Liquidation Preference) for each share of Series B Preferred Stock then held
by them. The holders of Series C Preferred Stock shall be entitled to receive prior and in
preference to any distribution of any assets or surplus funds of the Company to the holders
of the Common Stock, the amount of $1.00 (the Series C Liquidation Preference) for each
share of Series C Preferred Stock then held by them. The holders of Series D Preferred
Stock shall be entitled to receive prior and in preference to any distribution of any assets
or surplus funds of the Company to the holders of the Common Stock, the amount of $1.00
(the Series D Liquidation Preference) for each share of Series D Preferred Stock then held
by them. The holders of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, and Series D Preferred Stock shall rank on a parity as to the receipt of
preferential amounts upon the occurrence of such event.
If upon the occurrence of such event, the assets and funds to be distributed among all
holders of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
and Series D Preferred Stock shall be insufficient to permit the payment to such holders of
the full preferential amount, then the entire assets and funds of the Company legally
available for distribution shall be distributed ratably to holders of the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock in
proportion to the preferential amount such holder is otherwise entitled to receive.
In lieu of the preference noted above, the holders of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall be entitled to
receive, on a pro rata basis with the holders of Common Stock as though the holders of the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock were the holders of the number of shares of Common Stock into which their
respective shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock and Series D Preferred Stock are then convertible, the entire remaining assets and
funds of the Company legally available for distribution.
Right to Convert
Each share of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock
and Series D Preferred Stock shall be convertible at any time and from time to time, at the
option of the holder thereof, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing the Series A Liquidation Preference, the Series B
Liquidation Preference, the Series C Liquidation Preference or the Series D Liquidation
Preference, respectively, by the conversion price applicable to such share, determined as
hereinafter provided, in effect on the date the certificate is surrendered for conversion.
The price at which shares of Common Stock shall be deliverable upon conversion of shares of
the Series A Preferred Stock (the Series A Conversion Price) shall initially be $0.70 per
share of Common Stock. The price at which shares of Common Stock shall be deliverable upon
conversion of shares of the Series B Preferred Stock (the Series B Conversion Price) shall
initially be $1.00 per share of Common Stock. The price at which shares of Common Stock
shall be deliverable upon conversion of shares of the Series C Preferred Stock (the Series
C Conversion Price) shall initially be $1.00 per share of Common Stock. The price at which
shares of Common Stock shall be deliverable upon conversion of shares of the Series D
Preferred Stock (the Series D Conversion Price) shall initially be $1.00 per share of
Common Stock.
-12-
Table of Contents
Notes to Financial Statements, Continued
9. | Stock Options |
The Company established a stock option plan for all employees, directors, and consultants
under which options may be granted, not to exceed 4,077,780 shares. Stock options are
granted at the discretion of the Companys Board of Directors and are identified as
incentive stock options or non-qualified stock options. The plan provides that stock
options will be granted at the fair market value of the stock on the date of grant, with the
the exercise price equal to the fair market value of the stock on the date of grant.
Generally, incentive stock options vest 35% one year from date of grant, and 1/36th monthly
for the next three years. Stock options not exercised within one hundred twenty months from
the date of grant expire. No options may be granted under the Plan after August 1, 2010.
More restrictive features apply to any options granted to a ten percent stockholder.
The Company used the Black-Scholes Model to estimate the fair value of stock options
granted, which requires the use of highly subjective assumptions. The risk-free interest
rate used is based upon the U.S. Treasury yield curve in effect at the time of the grant for
instruments with a similar life. Expected volatility is established based on historical
volatility of the Companys own stock value, as determined by internal valuation. The
Black-Scholes Model is a trading price model that does not reflect either the non-traded
nature or the limited transferability of the options. The fair market value of the stock
options granted during 2008 was estimated using the following assumptions: dividend rate of
0%; average risk-free interest rate of 3.04% to 3.70%; forfeiture rate of 0%; expected life
of 5 to 7 years; and price volatility of 45.00%. The fair market value of the stock options
granted during 2007 was estimated using the following assumptions: dividend rate of 0%;
average risk-free interest rate of 4.31% to 4.92%; forfeiture rate of 0%; expected life of 5
to 7 years; and price volatility of 45.00%.
As a result of the adoption of SFAS 123R, $5,742 and $5,686 in compensation expense has been
recognized for the years ending December 31, 2008 and 2007, respectively, for stock option
awards. respectively. It is reflected in other expenses in the accompanying statements of
operations.
As of December 31, 2008 and 2007, there was $30,100 and $35,842, respectively of total
measured but unrecognized compensation expense related to non-vested share-based
compensation arrangements. The cost is expected to be recognized over a weighted average
period of 6 years.
The Company generally issues authorized but unissued shares to satisfy stock option
exercises.
-13-
Table of Contents
Notes to Financial Statements, Continued
Details of the stock options outstanding as of December 31, 2008 and 2007 are as follows:
Weighted-Average | ||||||||
Number of Options | Exercise Price | |||||||
Options outstanding at December 31, 2006 |
2,873,000 | $ | 0.107 | |||||
Granted |
58,000 | 0.100 | ||||||
Forfeited |
(200,000 | ) | 0.100 | |||||
Options outstanding at December 31, 2007 |
2,731,000 | $ | 0.106 | |||||
Granted |
48,000 | 0.100 | ||||||
Options outstanding at December 31, 2008 |
2,779,000 | $ | 0.106 | |||||
As of December 31, 2008:
Options Outstanding | Options Exercisable | |||||||||||||||||||
Weighted-Average | ||||||||||||||||||||
Exercise | Number | Remaining Contractual | Weighted-Average | Number of | Weighted-Average | |||||||||||||||
Price | of Shares | Life | Exercise Price | Shares | Exercise Price | |||||||||||||||
.10 |
2,779,000 | 3.80 years | $ | 0.106 | 2,441,271 | $ | 0.136 |
As of December 31, 2007:
Options Outstanding | Options Exercisable | |||||||||||||||||||
Weighted-Average | ||||||||||||||||||||
Exercise | Number | Remaining Contractual | Weighted-Average | Number of | Weighted-Average | |||||||||||||||
Price | of Shares | Life | Exercise Price | Shares | Exercise Price | |||||||||||||||
0.10 |
2,731,000 | 3.53 years | $ | 0.108 | 2,192,854 | $ | 0.136 |
10. | Event (Unaudited) Subsequent to the Date of the Independent Auditors Report |
On December 21, 2009, the Company was acquired by Clarient, Inc.
-14-
Table of Contents
CLARIENT, INC.
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
On December 21, 2009 (the Closing Date), Clarient, Inc. (Clarient ) completed the
acquisition (the Acquisition) of all the issued and outstanding stock of Applied Genomics, Inc.
(AGI) in accordance with the terms and conditions of the Agreement and Plan of Merger and
Reorganization, dated as of December 21, 2009, by and between Clarient and AGI (the Agreement).
As of the Closing Date, AGI held 10 prognostic and predictive
multivariate immunohistochemistry-based
(IHC) markers that it developed for use in assessing recurrence rates of various cancers, and the
likelihood of favorable response to various treatment options.
The AGI purchase
price consisted of 4.4 million shares of Clarient common stock (the Upfront
Shares) and a maximum of an additional 3.2 million shares of Clarient common stock,
upon the achievement of certain revenue and scientific publication milestones by
December 31, 2012 (the Contingent Shares). Management of Clarient and AGI believe that the
revenue and scientific milestones have a high probability of being
met, which would result in the former AGI Stockholders also
receiving the 3.2 million shares of contingent common stock in
due course, for a total of 7.6 million shares of Clarient
common stock.
The unaudited pro forma Condensed Combined Statement of Operations for the nine months ended
September 30, 2009 and twelve months ended December 31, 2008, assume the Acquisition took place at
the beginning each of the respective periods. The unaudited pro forma Condensed Combined Statement
of Operations for the nine months ended September 30, 2009 combines Clarients and AGIs unaudited
Consolidated Statement of Operations for the nine months ended September 30, 2009. The unaudited
pro forma Condensed Combined Statement of Operations for the year ended December 31, 2008, combines
Clarients and AGIs audited Consolidated Statement of Operations for the year ended December 31,
2008. An unaudited pro forma Condensed Combined Balance Sheet, combining the accounts of Clarient
and AGI, is also provided as of September 30, 2009, assuming the Acquisition took place at such
date.
The unaudited pro forma Condensed Combined Financial Statements included in this Current
Report on Form 8-K is presented for illustrative purposes only, and was prepared in accordance with
the regulations of the Securities and Exchange Commission (SEC) and should not be considered
indicative of the financial position or results of operations that would have occurred if the
Acquisition had been consummated on the dates indicated, nor are they indicative of the future
financial position or results of operations of Clarient and AGI as a combined company.
The unaudited pro forma Condensed Combined Financial Statements is based upon the operating
results of AGI during the period when the acquired business was not under the control, influence,
or management of Clarient. The unaudited pro forma Condensed Combined Financial Statements is
subject to the assumptions and adjustments described below and in the accompanying notes. In
accordance with SEC regulations, the pro forma Condensed Combined Statement of Operations does not
reflect the potential realization of cost savings or other costs relating to the integration of
Clarient and AGI. The unaudited pro forma Condensed Combined Financial Statements included in this
Current Report on Form 8-K should be read in conjunction with the:
| separate Financial Statements and Notes thereto of AGI for the years ended
December 31, 2008 and 2007, and for the nine months ended September 30, 2009,
included in this Current Report on Form 8-K; |
| separate Consolidated Financial Statements and Notes thereto of Clarient for the
years ended December 31, 2008 and 2007 included in Clarients Annual Reports on Forms
10-K for the years ended December 31, 2008 and 2007; and |
| separate and the Consolidated Financial Statements and Notes thereto of Clarient
for the nine months ended September 30, 2009, which are included in Clarients
Quarterly Report on Form 10-Q for the quarter ended September 30, 2009. |
The Acquisition will be accounted for under the acquisition method of accounting in accordance
with U.S. Generally Accepted Accounting Principles (U.S. GAAP). Under the acquisition method,
the total estimated purchase price (consideration transferred) as described in Note (1) to the
unaudited pro forma Condensed Combined Financial Statements, was measured on the Closing Date of
the Acquisition. The assets and liabilities of AGI have been measured based on various fair value estimates,
using assumptions that Clarient management believes are reasonable, based upon information
currently available. Use of different estimates and judgments could yield materially different
results.
The process for estimating the fair values of in-process research and development,
identifiable intangible assets, and certain tangible assets requires the use of significant
estimates and assumptions, including estimating future cash flows, developing appropriate discount
rates, estimating the costs, timing, and probability of success to complete in-process projects,
and projecting the effects of potential regulatory requirements. Transaction costs are not included
as a component of consideration transferred, but are expensed as incurred. The excess of the
purchase price (consideration transferred), equaling the fair value of the Upfront Shares and
Contingent Shares on the Closing Date, over the estimated
fair values of identifiable assets and
liabilities of AGI on the Closing Date, was allocated to goodwill.
For purposes of measuring the estimated fair values of the assets acquired and liabilities
assumed as reflected in the unaudited pro forma condensed combined financial statements, Clarient
used the fair value guidance under U.S. GAAP. Fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. Market participants are assumed to be buyers and sellers in
the principal market for the asset or liability. Additionally, fair value measurements for an asset
assume the highest and best use of that asset by market participants. Use of different estimates
and judgments could yield materially different results.
Table of Contents
Pro Forma Condensed Combined Balance Sheet
September 30, 2009
(in thousands, except par values)
(unaudited)
September 30, 2009
(in thousands, except par values)
(unaudited)
Historical | Pro Forma | Pro Forma | ||||||||||||||
Clarient | AGI | Adjustment | Combined | |||||||||||||
ASSETS |
||||||||||||||||
Current Assets: |
||||||||||||||||
Cash and cash equivalents |
$ | 8,149 | $ | 304 | $ | | $ | 8,453 | ||||||||
Restricted cash |
761 | | | 761 | ||||||||||||
Accounts receivable, net of allowance for
doubtful accounts of $7,861 at September 30,
2009 |
24,605 | | | 24,605 | ||||||||||||
Supplies inventory |
919 | | | 919 | ||||||||||||
Prepaid expenses and other current assets |
890 | 21 | | 911 | ||||||||||||
Total current assets |
35,324 | 325 | | 35,649 | ||||||||||||
Restricted cash |
2,064 | | | 2,064 | ||||||||||||
Property and equipment, net |
13,686 | 13 | (13 | )(d) | 13,686 | |||||||||||
Intangible assets, net |
| 150 | 11,534 | (a) | 11,684 | |||||||||||
Goodwill |
| | 3,959 | (b) | 3,959 | |||||||||||
Other assets |
242 | | | 242 | ||||||||||||
Total assets |
51,316 | 488 | 15,480 | 67,284 | ||||||||||||
LIABILITIES AND STOCKHOLDERS DEFICIT |
||||||||||||||||
Current liabilities: |
||||||||||||||||
Revolving lines of credit |
5,052 | | | 5,052 | ||||||||||||
Related party line of credit, net of discount |
| | | | ||||||||||||
Accounts payable |
2,284 | 66 | | 2,350 | ||||||||||||
Accrued payroll |
2,914 | | | 2,914 | ||||||||||||
Accrued expenses and other current liabilities |
3,227 | 71 | | 3,298 | ||||||||||||
Current maturities of capital lease obligations |
676 | | | 676 | ||||||||||||
Total current liabilities |
14,153 | 137 | | 14,290 | ||||||||||||
Long-term capital lease obligations |
806 | | | 806 | ||||||||||||
Deferred rent and other non-current liabilities |
3,177 | 29 | | 3,206 | ||||||||||||
Commitments and contingencies |
||||||||||||||||
Preferred stock subject to redemption requirements
outside the control of the issuer: |
||||||||||||||||
Series A convertible preferred stock $0.01 par
value, authorized 8,000 shares, issued and
outstanding 5,263 shares at September 30, 2009.
Aggregate liquidation preference and redemption
value: September 30, 2009 $88.6 million |
38,586 | | | 38,586 | ||||||||||||
Stockholders deficit: |
||||||||||||||||
Series A through D convertible preferred stock
$0.01 par value, authorized 48,254 shares, issued
and outstanding 22,974 shares at September 30, 2009 |
| 164 | (164) | (c) | | |||||||||||
Common stock $0.01 par value, authorized 150,000
shares, issued and outstanding 78,234 at September
30, 2009 |
782 | 66 | (25) | (c) | 823 | |||||||||||
Additional paid-in capital |
156,385 | 14,360 | 1,401 | (c) | 172,146 | |||||||||||
Accumulated deficit |
(162,474 | ) | (14,268 | ) | 14,268 | (c) | (162,474 | ) | ||||||||
Accumulated other comprehensive loss |
(99 | ) | | | (99 | ) | ||||||||||
Total stockholders equity (deficit) |
(5,406 | ) | 322 | 15,480 | 10,395 | |||||||||||
Total liabilities and stockholders equity (deficit) |
$ | 51,316 | $ | 488 | $ | 15,480 | $ | 67,284 | ||||||||
See Notes to unaudited pro forma Condensed Combined Financial Statements.
Table of Contents
Pro Forma Condensed Combined Statement of Operations
For the nine months ended September 30, 2009
(in thousands, except per share amounts)
(unaudited)
For the nine months ended September 30, 2009
(in thousands, except per share amounts)
(unaudited)
Historical | Pro Forma | Pro Forma | ||||||||||||||
Clarient | AGI | Adjustment | Combined | |||||||||||||
Net revenue: |
$ | 68,347 | $ | | $ | | $ | 68,347 | ||||||||
Cost of services |
28,675 | | 1,203 | (e) | 29,878 | |||||||||||
Gross profit |
39,672 | | 1,203 | 38,469 | ||||||||||||
Operating expenses: |
||||||||||||||||
Sales and marketing |
13,116 | | | 13,116 | ||||||||||||
General and administrative |
17,074 | 712 | | 17,786 | ||||||||||||
Bad Debt |
9,483 | | | 9,483 | ||||||||||||
Research and development |
805 | 506 | 65 | (e) | 1,376 | |||||||||||
Total operating expenses |
40,478 | 1,218 | 65 | 41,761 | ||||||||||||
Loss from operations |
(806 | ) | (1,218 | ) | (1,268 | ) | (3,292 | ) | ||||||||
Interest expense, net |
499 | | | 499 | ||||||||||||
Interest expense to related parties |
3,557 | | | 3,557 | ||||||||||||
Loss from continuing operations before income taxes |
(4,862 | ) | (1,218 | ) | (1,268 | ) | (7,348 | ) | ||||||||
Income tax benefit (expense) |
599 | | | 599 | ||||||||||||
Loss from continuing operations |
(4,263 | ) | (1,218 | ) | (1,268 | ) | (6,749 | ) | ||||||||
Income from discontinued operations, net of income taxes |
901 | | | 901 | ||||||||||||
Net Loss |
$ | (3,362 | ) | $ | (1,218 | ) | $ | (1,268 | ) | $ | (5,848) | |||||
Series A preferred stock beneficial conversion feature |
(4,290 | ) | | | (4,290 | ) | ||||||||||
Net loss applicable to common stockholders |
(7,652 | ) | (1,218 | ) | (1,268 | ) | (10,138 | ) | ||||||||
Net income (loss) per share applicable to common stockholders
basic and diluted: |
||||||||||||||||
Loss from continuing operations |
$ | (0.11 | ) | $ | (0.12 | ) | ||||||||||
Income from discontinued operations |
0.01 | 0.01 | ||||||||||||||
Net loss applicable to common stockholders |
$ | (0.10 | ) | $ | (0.11 | ) | ||||||||||
Weighted-average shares used to compute net loss per common share: |
||||||||||||||||
Basic and diluted |
77,257 | 4,090 | (f) | 81,347 | ||||||||||||
See Notes to unaudited pro forma Condensed Combined Financial Statements.
Table of Contents
Pro Forma Condensed Combined Statement of Operations
For the year ended December 31, 2008
(in thousands, except per share amounts)
(unaudited)
For the year ended December 31, 2008
(in thousands, except per share amounts)
(unaudited)
Historical | Pro Forma | Pro Forma | ||||||||||||||
Clarient | AGI | Adjustment | Combined | |||||||||||||
Net revenue: |
$ | 73,736 | $ | 30 | $ | | $ | 73,766 | ||||||||
Cost of services |
32,936 | | 1,643 | (e) | 34,579 | |||||||||||
Gross profit |
40,800 | 30 | (1,643 | ) | 39,187 | |||||||||||
Operating expenses: |
||||||||||||||||
Sales and marketing |
10,941 | | | 10,941 | ||||||||||||
General and administrative |
18,729 | 972 | | 19,701 | ||||||||||||
Bad Debt |
12,199 | | | 12,199 | ||||||||||||
Research and development |
421 | 745 | 48 | (e) | 1,214 | |||||||||||
Total operating expenses |
42,290 | 1,717 | 48 | 44,055 | ||||||||||||
Loss from operations |
(1,490 | ) | (1,687 | ) | (1,691 | ) | (4,868 | ) | ||||||||
Interest expense, net |
859 | | | 859 | ||||||||||||
Interest expense to related parties |
7,290 | | | 7,290 | ||||||||||||
Loss from continuing operations before income taxes |
(9,639 | ) | (1,687 | ) | (1,691 | ) | (13,017 | ) | ||||||||
Income tax benefit (expense) |
(6 | ) | | | (6 | ) | ||||||||||
Loss from continuing operations |
(9,645 | ) | (1,687 | ) | (1,691 | ) | (13,023 | ) | ||||||||
Income from discontinued operations, net of income taxes |
| | | | ||||||||||||
Net Loss |
$ | (9,645 | ) | $ | (1,687 | ) | $ | (1,691 | ) | $ | (13,023 | ) | ||||
Net income (loss) per share basic and diluted: |
||||||||||||||||
Loss from continuing operations |
$ | (0.13 | ) | $ | (0.17 | ) | ||||||||||
Income from discontinued operations |
| | ||||||||||||||
Net loss |
$ | (0.13 | ) | $ | ( 0.17 | ) | ||||||||||
Weighted-average shares used to compute net loss per common share: |
||||||||||||||||
Basic and diluted |
72,918 | 4,090 | (f) | 77,008 | ||||||||||||
See Notes to unaudited pro forma Condensed Combined Financial Statements.
Table of Contents
CLARIENT, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(1) Calculation of Consideration Transferred and Preliminary Allocation of Consideration
to Net Assets Acquired
AGI purchase price |
$ | 15,601 | ||
Transaction costs |
320 | |||
Total |
$ | 15,921 | ||
Clarients
closing stock price on the Closing Date was $2.48 per common share. The AGI
purchase price was $15.6 million, as $0.3 million of transaction costs were expensed under applicable U.S. GAAP.
The AGI purchase was calculated as follows:
7.6 million shares multiplied by $2.48, less $3.2 million, which represents managements
estimate of an appropriate discount for (i) certain liquidity
restrictions on the Upfront and Contingent Shares,
(ii) the contingency associated with the Contingent Shares, and the (iii) volatility associated
with Clarients stock through the estimated period of achieving the milestones required for the
issuance the Contingent Shares.
The
following table summarizes, as of the Closing Date, the preliminary estimated fair values
of the assets acquired and liabilities assumed from AGI (in thousands):
Purchase price paid as: |
||||
Common stock |
$ | 15,601 | ||
Allocated to: |
||||
Cash and prepaid expenses |
26 | |||
Identifiable intangible assets |
11,684 | * | ||
Accounts payable and other current liabilities |
(68 | ) | ||
Total identifiable net assets |
11,642 | |||
Excess purchase price over allocation to identifiable
assets and liabilities (goodwill) |
$ | 3,959 | ||
* | Intangible assets primarily
consist of: i) biomarkers with an approximate value of $11.3
million, ii) in-process research and development with an approximate value of $0.1 million,
iii) issued patents and patents applications with an approximate value of $0.1 million, and
iv) a non-competition agreements with an approximate value of $0.1 million. |
(2) Pro Forma Adjustments
Pro Forma Condensed Combined Balance Sheet
(a) | To reflect the step-up of intangible asset values to fair value
based on independent appraisals, to be amortized on a straight-line basis over periods of
three to seven years. |
(b) | To reflect the excess of acquisition cost over the estimated fair value of tangible and
intangible net assets acquired. The purchase price, purchase-price allocation, and
financing of the Acquisition are summarized in Note (1). |
(c) | To reflect the elimination of the shareholders equity accounts of AGI and to reflect
the issuance of Clarient common stock as consideration for the Acquisition. |
(d) | To reflect the adjustment
of property and
equipment, net, based on managements estimate of related fair
values. |
Pro Forma Condensed Combined Statement of Operations
(e) | To reflect the increase in amortization expense due to the
amortization of identifiable intangible assets using the straight-line method over a period
of three to seven years. |
(f) | To reflect the increase in
weighted average share outstanding for the issuance of the
Upfront Shares as partial consideration for the Acquisition. The weighted average share
outstanding calculation assumes the Upfront Shares were issued on the first day of the
reported fiscal year. The purchase price also consists of Contingent Shares that
Clarient believes has a high probability of being issued,
nonetheless, under applicable U.S. GAAP, the Contingent Shares will not be included in the
weighted average shares outstanding calculation until milestones are
achieved and the shares are issuable. |
Table of Contents
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the
Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly
authorized.
Date: March 5, 2010 | By: | /s/ MICHAEL R. RODRIGUEZ | ||
Michael R. Rodriguez | ||||
Senior Vice President and Chief Financial Officer |
Table of Contents