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8-K/A - FORM 8-K/AMENDMENT NO. 1 - Savara Inc | c18324e8vkza.htm |
EX-23.1 - EXHIBIT 23.1 - Savara Inc | c18324exv23w1.htm |
EX-99.2 - EXHIBIT 99.2 - Savara Inc | c18324exv99w2.htm |
Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The accompanying unaudited pro forma condensed combined financial statements present the pro
forma consolidated financial position and results of operations of the combined company based upon
the historical financial statements of ADVENTRX Pharmaceuticals, Inc. (ADVENTRX) and SynthRx,
Inc. (SynthRx), after giving effect to the acquisition of SynthRx and adjustments described in
the following footnotes, and are intended to reflect the impact of this acquisition on ADVENTRX on
a pro forma basis.
On April 8, 2011, SRX Acquisition Corporation, a Delaware corporation and wholly owned
subsidiary of ADVENTRX (Merger Sub), merged with and into SynthRx, Inc. pursuant to the terms of
the Agreement and Plan of Merger, dated February 12, 2011 (the Merger Agreement), by and among
ADVENTRX, Merger Sub, SynthRx and, solely with respect to Sections 2 and 8 of the Merger Agreement,
an individual who was a principal stockholder of SynthRx, the separate existence of Merger Sub
ceased and SynthRx continued as the surviving corporation and a wholly owned subsidiary of
ADVENTRX. As of the effective time of the merger, all issued and outstanding securities of SynthRx
were automatically converted and exchanged into the right to receive from ADVENTRX the
consideration set forth in the Merger Agreement.
The unaudited pro forma condensed combined balance sheet reflects the acquisition of SynthRx
as if it had been consummated on December 31, 2010 and includes pro forma adjustments for
preliminary valuations by ADVENTRX management of certain tangible and intangible assets as of the
acquisition date of April 8, 2011. These adjustments are subject to further revision upon
finalization of the transaction, the related intangible asset valuations and fair value
determinations.
The unaudited pro forma condensed combined statement of operations for the year ended December
31, 2010 combines ADVENTRXs historical results for the year ended December 31, 2010 with SynthRxs
historical results for the year ended December 31, 2010. The unaudited pro forma statement of
operations gives effect to the acquisition as if it had been consummated on January 1, 2010.
The accompanying unaudited pro forma condensed combined financial statements are presented for
illustrative purposes only. They do not purport to represent what ADVENTRXs consolidated results
of operations and financial position would have been had the transaction actually occurred as of
the dates indicated, and they do not purport to project ADVENTRXs future consolidated results of
operations or financial position.
Pro Forma Adjustments
Pro forma adjustments are necessary to reflect the estimated purchase price and to reflect the
amounts related to SynthRxs tangible and intangible assets and liabilities at an amount equal to
the preliminary estimate of their fair values. The historical consolidated financial information
has been adjusted to give effect to pro forma events that are (1) directly attributable to the
acquisition and (2) factually supportable and reasonable under the circumstances. There are no
events that are expected to have a continuing impact and therefore, no adjustments to the
pro forma condensed combined statement of operations were made in that regard.
The pro forma adjustments reflecting the completion of the acquisition are based upon the
acquisition method of accounting in accordance with Accounting Standards Codification, or ASC, 805
Business Combinations and the assumptions set forth in the notes to the unaudited pro forma
condensed combined financial statements. The unaudited pro forma condensed combined balance sheet
has been adjusted to reflect the preliminary allocation of the estimated purchase price to
identifiable assets and liabilities acquired, including an amount for goodwill representing the
difference between the purchase price and the fair value of the identifiable assets and
liabilities. The estimated purchase price was calculated based upon the number of shares to be
issued when a particular performance milestone is achieved, the probability that such milestone
will be achieved, the estimated date of achievement of such milestone and the estimated market
price of a share of common stock of ADVENTRX on the estimated date of achievement of such
milestone. This calculation is highly subjective and it is possible that other professionals,
applying reasonable judgment to the same facts and circumstances, could develop and support a range
of alternative estimated amounts.
The pro forma adjustments are based upon available information and certain assumptions that
ADVENTRX believes are reasonable under the circumstances. A final determination of the fair value
of the assets acquired and liabilities assumed may differ materially from the preliminary
estimates. This final valuation will be based on the actual fair values of tangible and intangible
assets and liabilities assumed of SynthRx that are acquired as of the date of completion of the
acquisition. The final valuation may change the purchase price allocation, which could affect the
fair value assigned to the assets acquired and liabilities assumed and could result in a change to
the unaudited pro forma condensed combined financial statements.
1
You should read this information in conjunction with:
| the accompanying notes to the
unaudited pro forma condensed combined
financial statements included in this
Exhibit 99.3 to this Current Report on Form
8-K/A (Amendment No. 1); |
| the separate historical audited
financial statements of SynthRx as of
December 31, 2010 and 2009 and for the
years then ended and for the period from inception (January 12,
2004) through December 31, 2010 included as Exhibit 99.2
to this Current Report on Form 8-K/A
(Amendment No. 1); |
||
| the separate historical audited
consolidated financial statements of
ADVENTRX as of December 31, 2010 and 2009
and for the years then ended and for the period from inception (June 12,
1996) through December 31, 2010 included in
ADVENTRXs Annual Report on Form 10-K filed
with the Securities and Exchange Commission
on March 10, 2011; and |
||
| ADVENTRXs Current Report on Form 8-K
related to its acquisition of SynthRx filed
with the Securities and Exchange Commission
on April 11, 2011. |
2
ADVENTRX
PHARMACEUTICALS, INC.
(A Development Stage Enterprise)
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 2010
(A Development Stage Enterprise)
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 2010
Pro Forma | Pro Forma | |||||||||||||||
ADVENTRX | SynthRx | Adjustments | Combined | |||||||||||||
Assets |
||||||||||||||||
Current assets: |
||||||||||||||||
Cash |
$ | 27,978,823 | $ | 66,803 | $ | | $ | 28,045,626 | ||||||||
Interest and other receivables |
1,980 | | | 1,980 | ||||||||||||
Prepaid expenses |
428,276 | | | 428,276 | ||||||||||||
Total current assets |
28,409,079 | 66,803 | | 28,475,882 | ||||||||||||
Property and equipment, net |
44,254 | 19,257 | | 63,511 | ||||||||||||
Goodwill |
| | 545,247 | (a) | 545,247 | |||||||||||
Intangible assets, net |
| | 6,340,000 | (b) | 6,340,000 | |||||||||||
Other assets |
33,484 | | 300,481 | (c) | 333,965 | |||||||||||
Total assets |
$ | 28,486,817 | $ | 86,060 | $ | 7,185,728 | $ | 35,758,605 | ||||||||
Liabilities and Stockholders Equity |
||||||||||||||||
Current liabilities: |
||||||||||||||||
Accounts payable |
$ | 479,780 | $ | 24,587 | $ | 276,979 | (d,e) | $ | 781,346 | |||||||
Accrued liabilities |
864,857 | 7,050 | (7,050 | )(d) | 864,857 | |||||||||||
Accrued compensation and payroll taxes |
456,839 | | | 456,839 | ||||||||||||
Total current liabilities |
1,801,476 | 31,637 | 269,929 | 2,103,042 | ||||||||||||
Notes payable |
| 275,000 | (275,000 | )(d) | | |||||||||||
Contingent consideration |
| | 2,549,103 | (f)* | 2,549,103 | |||||||||||
Stockholders equity (deficit): |
||||||||||||||||
Common stock |
15,480 | 1 | 2,800 | (g) | 18,281 | |||||||||||
Additional paid-in capital |
182,798,982 | 1,045,268 | 3,373,050 | (g) | 187,217,300 | |||||||||||
Deficit accumulated during the development stage |
(156,129,121 | ) | (1,265,846 | ) | 1,265,846 | (h) | (156,129,121 | ) | ||||||||
Total
stockholders equity (deficit) |
26,685,341 | (220,577 | ) | 4,641,696 | 31,106,460 | |||||||||||
Total liabilities and stockholders equity |
$ | 28,486,817 | $ | 86,060 | $ | 7,185,728 | $ | 35,758,605 | ||||||||
See accompanying notes to unaudited pro forma condensed combined financial statements.
* | The fair value of the contingent consideration for the Second and Third Milestones
(collectively $1,464,204) will be reclassified to equity if stockholder approval for the issuance
of the Milestone Shares for the Milestone Payments is obtained on or prior to December 31, 2011. |
3
ADVENTRX
PHARMACEUTICALS, INC.
(A Development Stage Enterprise)
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2010
(A Development Stage Enterprise)
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2010
Pro Forma | Pro Forma | |||||||||||||||
ADVENTRX | SynthRx | Adjustments | Combined | |||||||||||||
Grant revenue |
$ | 488,959 | $ | | $ | | $ | 488,959 | ||||||||
Cost of goods sold |
| | | | ||||||||||||
Gross margin |
488,959 | | | 488,959 | ||||||||||||
Operating expenses: |
||||||||||||||||
Research and development |
3,688,762 | 137,692 | | 3,826,454 | ||||||||||||
Selling, general and administrative |
5,320,073 | 40,890 | (275,130 | )(i) | 5,085,833 | |||||||||||
Depreciation and amortization |
19,821 | 1,878 | | 21,699 | ||||||||||||
Total operating expenses |
9,028,656 | 180,460 | (275,130 | ) | 8,933,986 | |||||||||||
Loss from operations |
(8,539,697 | ) | (180,460 | ) | 275,130 | (8,445,027 | ) | |||||||||
Interest income |
92,873 | 182 | | 93,055 | ||||||||||||
Interest expense |
(1,629 | ) | (4,473 | ) | 4,473 | (j) | (1,629 | ) | ||||||||
Other expense |
(2,469 | ) | | | (2,469 | ) | ||||||||||
Loss before income taxes |
(8,450,922 | ) | (184,751 | ) | 279,603 | (8,356,070 | ) | |||||||||
Provision for income taxes |
| | | | ||||||||||||
Net loss |
(8,450,922 | ) | (184,751 | ) | 279,603 | (8,356,070 | ) | |||||||||
Deemed dividends on preferred stock |
(5,639,796 | ) | | | (5,639,796 | ) | ||||||||||
Net loss applicable to common stock |
$ | (14,090,718 | ) | $ | (184,751 | ) | $ | 279,603 | $ | (13,995,866 | ) | |||||
Loss per common share basic and diluted |
$ | (1.07 | ) | $ | (0.88 | ) | ||||||||||
Weighted average shares outstanding basic and diluted |
13,180,583 | 15,981,434 | ||||||||||||||
See accompanying notes to unaudited pro forma condensed combined financial statements.
4
ADVENTRX
PHARMACEUTICALS, INC.
(A Development Stage Enterprise)
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(A Development Stage Enterprise)
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
1. Basis of Presentation
The unaudited pro forma condensed combined financial statements included herein have been
prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain
information and certain footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles in the United States (U.S. GAAP) have
been condensed or omitted pursuant to such rules and regulations; however, management believes that
the disclosures are adequate to make the information presented not misleading.
The acquisition method of accounting under U.S. GAAP requires, among other things, that most
assets acquired and liabilities assumed be recognized at their fair values at the acquisition date. Fair value is defined under
U.S. GAAP 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 (or most advantageous)
market for the asset or liability. Fair
value measurements for an asset assume the highest and best use by these market participants. Fair
value measurements can be highly
subjective and it is possible that other professionals, applying reasonable judgment to the same
facts and circumstances, could develop
and support a range of alternative estimated amounts. Accordingly, the assets acquired and
liabilities assumed were recorded at their respective fair values and added to those of ADVENTRX.
2. Acquisition of SynthRx
On April 8, 2011, SynthRx, a private biotechnology company developing a novel, purified,
rheologic and antithrombotic compound, poloxamer 188, now referred to as ANX-188, became a wholly
owned subsidiary of ADVENTRX pursuant to the terms of the Agreement and Plan of Merger, dated
February 12, 2011 (the Merger Agreement), by and among ADVENTRX, SRX Acquisition Corporation, a
wholly owned subsidiary of ADVENTRX, SynthRx and, solely with respect to Sections 2 and 8 of the
Merger Agreement, an individual who was a principal stockholder of SynthRx. The merger is accounted
for under the acquisition method of accounting.
As consideration for the merger, all shares of SynthRx common stock outstanding immediately
prior to the effective time of the merger were cancelled and automatically converted into the right
to receive shares of ADVENTRXs common stock, in the aggregate, as follows:
(i) 1,000,000 shares (the Fully Vested Shares) of ADVENTRXs common stock at the effective
time of the merger; provided, however that, pursuant to the Merger Agreement, 137,922 shares were
deducted from the number of Fully Vested Shares issued as a result of certain transaction expenses
of SynthRx and 200,000 of the Fully Vested Shares were deposited into escrow (the Closing Escrow
Amount) to indemnify ADVENTRX against breaches of representations and warranties;
(ii) up to 1,938,773 shares of ADVENTRXs common stock at the at the effective time of the
merger (the Subject to Vesting Shares, and together with the 862,078 Fully Vested Shares issued
to the former stockholders of SynthRx and the escrow agent, the Closing Shares), which Subject to
Vesting Shares are subject to various repurchase rights by ADVENTRX and fully vest, subject to
reduction upon certain events, upon achievement of the First Milestone (defined below);
(iii) up to 1,000,000 shares of ADVENTRXs common stock (the First Milestone Shares), issued
upon achievement of the First Milestone (the First Milestone Payment); provided, however, that in
the event the First Milestone is achieved prior to the first anniversary of the closing of the
merger, 20% of the First Milestone Payment shall be deposited into escrow (the First Milestone
Escrow Amount, and together with the Closing Escrow Amount, the Escrow Amount). The First
Milestone means the dosing of the first patient in a phase 3 clinical study carried out pursuant
to a protocol that is mutually agreed to by SynthRx and ADVENTRX; provided, however, that the
number of evaluable patients planned to target statistical significance with a p value of 0.01 in
the primary endpoint shall not exceed 250 (unless otherwise mutually agreed) (the First
Protocol). In the event that the FDA indicates that a single phase 3 clinical study will not be
adequate to support approval of a new drug application covering the use of ANX-188 for the
treatment of sickle cell crisis in children (the ANX-188 NDA), First Milestone shall mean the
dosing of the first patient in a phase 3 clinical study carried out pursuant to a protocol that (a)
is mutually agreed to by SynthRx and ADVENTRX as such and (b) describes a phase 3 clinical study
that the FDA has indicated may be sufficient, with the phase 3 clinical study described in the
First Protocol, to support approval of the ANX-188 NDA.
(iv) 3,839,400 shares of ADVENTRXs common stock (the Second Milestone Shares), issued upon
achievement of the Second Milestone (the Second Milestone Payment). The Second Milestone shall
mean the acceptance for review of the ANX-188 NDA by the FDA; and
(v) 8,638,650 shares of ADVENTRXs common stock (the Third Milestone Shares, and together
with the First Milestone Shares and the Second Milestone Shares, the Milestone Shares), issued
upon achievement of the Third Milestone (the Third Milestone Payment, and together with the First
Milestone Payment and the Second Milestone Payment, the Milestone Payments). The Third
Milestone shall mean the approval by the FDA of the ANX-188 NDA.
5
Notwithstanding the foregoing, in the event that the issuance of the Milestone Shares (x)
violates federal or state securities laws or the listing standards of any national securities
exchange to which ADVENTRX is subject at the time of such issuance, or (y) ADVENTRX is unable to
obtain the affirmative vote of the holders of a majority of its common stock approving the issuance
of the Milestone Shares on or before December 31, 2011, ADVENTRX is required to make the applicable
Milestone Payments, or portion thereof, in cash based on the product of (x) the number of shares of
ADVENTRXs common stock issuable upon achievement of an applicable milestone and (y) the daily
volume weighted average of actual closing prices measured in hundredths of cents of ADVENTRXs
common stock on the NYSE Amex, or such other national securities exchange on which its common stock
is then listed, for the ten consecutive trading days immediately prior to the applicable Milestone
Payment. Any Milestone Payment made in cash will be payable in quarterly installments. If the First
Milestone Payment must be made in cash, such amount will be payable at a rate of $1,000,000 per
calendar quarter and, if the Second Milestone Payment or the Third Milestone Payment must be made
in cash, such amounts will be payable at a rate of 35% of net sales for the applicable calendar
quarter of intravenous injection products in which a purified form of poloxamer 188 is an active
ingredient. In connection with its 2011 Annual Meeting of Stockholders, which is scheduled for
June 15, 2011 (the 2011 Annual Meeting), ADVENTRX filed a definitive proxy statement that
includes a proposal requesting that stockholders approve the issuance of the Milestone Shares in
satisfaction of the Milestone Payments.
The Subject to Vesting Shares and Milestone Payments constitute contingent consideration. In
order to determine the appropriate classification of the contingent consideration as a liability or
equity, ADVENTRX reviewed ASC 480 Distinguishing Liabilities from Equity and ASC 815-40
Derivatives and Hedging Contracts in Entitys Own Equity. ASC 480 requires that contingent
consideration that is required to be settled in cash be classified as a liability.
Contingent consideration that can be settled in shares may be classified as a liability or equity.
ASC 815-40 requires that any contingent consideration arrangements including potential net cash
settlements or variable provisions be classified as a liability. Classification as a liability
requires fair value measurement initially and subsequently at each reporting date. Changes in the
fair value of contingent consideration are recognized in earnings until the contingent
consideration arrangement is settled. Classification as equity requires fair value measurement
initially and there are no subsequent re-measurements. Settlement of the equity-classified
contingent consideration is accounted for within equity.
The Subject to Vesting Shares were issued on April 8, 2011. Accordingly, the fair value of
the contingent consideration related to the Subject to Vesting shares has been classified as
equity. However, the Subject to Vesting shares are subject to various repurchase rights by
ADVENTRX. The fair value related to the number of such shares that may be repurchased has been
accounted for as a contingent asset. The fair value of the contingent asset will be remeasured at
each reporting date until the arrangement is settled.
ADVENTRX is requesting stockholder approval for the issuance of the Milestone Shares for the
Milestone Payments at the 2011 Annual Meeting. Until stockholder approval is obtained, ADVENTRX
has classified the contingent consideration for the Milestone Payments as a liability. If
stockholder approval is obtained, the fair values of the contingent consideration on the Second and
Third Milestone will be reclassified to equity as there will no longer be any net cash settlement
or variable provisions. The amount of the contingent consideration for the First Milestone will
remain classified as a liability as there is a variable component related to the timing of and the
number of patients enrolled in the phase 3 clinical study of ANX-188 and the number of shares
ultimately to be issued. The fair value of the contingent consideration for the First Milestone
will be remeasured at each reporting date until the arrangement is settled.
Based on the fair value of the shares issued to the former stockholders of SynthRx upon
consummation of the merger and issuable to them in the future as the Milestone Payments (which is
based upon the number of shares to be issued at the time of achievement of each milestone, the
probability that such milestone will be achieved, the estimated date of achievement for each
milestone and the estimated market price of a share of common stock of ADVENTRX on the estimated
date of achievement of such milestone), the preliminary aggregate purchase price was approximately
$6.7 million.
The pro forma condensed combined balance sheet has been adjusted to reflect the preliminary
allocation by ADVENTRX management of the SynthRx purchase price to identifiable tangible and
intangible assets and liabilities acquired and the excess purchase price to goodwill. The
preliminary purchase price allocation is based upon an estimated total purchase price of
approximately $6.7 million.
The preliminary estimated total purchase price of the acquisition is as follows:
Probability | ||||||||
Shares Issued / | Weighted | |||||||
Milestone | To Be Issued | Fair Value | ||||||
Initial consideration (fully vested) |
862,078 | $ | 2,017,263 | |||||
Initial consideration that vests upon achievement of First Milestone |
1,938,773 | 2,103,375 | ||||||
First Milestone phase 3 clinical study first dosing |
1,000,000 | 1,084,900 | ||||||
Second Milestone NDA acceptance |
3,839,400 | 733,403 | ||||||
Third Milestone FDA approval |
8,638,650 | 730,801 | ||||||
Total |
16,278,901 | $ | 6,669,742 | |||||
6
Under the acquisition method of accounting, the total estimated purchase price is allocated to
SynthRxs tangible and intangible assets and liabilities based on their estimated fair values
at the date of the completion of the acquisition (April 8, 2011). The following table summarizes the preliminary
allocation of the purchase price for SynthRx:
Assets acquired |
$ | 18,513 | ||
Liabilities assumed |
(301,566 | ) | ||
Acquired intangibles: |
||||
In-process research and development |
6,340,000 | |||
Goodwill |
612,795 | |||
Total preliminary estimated purchase price |
$ | 6,669,742 | ||
3. Pro Forma Condensed Financial Statements
The accompanying unaudited pro forma condensed combined financial statements present the pro
forma consolidated financial position and results of operations of the combined company based upon
the historical financial statements of ADVENTRX and SynthRx, after giving effect to the SynthRx
acquisition and adjustments described in the following footnotes, and are intended to reflect the
impact of this acquisition on ADVENTRX on a pro forma basis.
The unaudited pro forma condensed combined balance sheet reflects the acquisition of SynthRx
as if it has been consummated on December 31, 2010 and includes pro forma adjustments for
preliminary valuations by ADVENTRX management of certain tangible and intangible assets as of the
acquisition date of April 8, 2011. These adjustments are subject to further revision upon
finalization of the fair value determinations.
The unaudited pro forma condensed combined statement of operations for the year ended December
31, 2010 combines ADVENTRXs historical results for the year ended December 31, 2010 with SynthRx
historical results for the year ended December 31, 2010. The unaudited pro forma statement of
operations gives effect to the acquisition as if it had taken place on January 1, 2010.
The accompanying unaudited pro forma condensed combined financial statements are presented for
illustrative purposes only.
4. Pro Forma Adjustments
Pro forma adjustments are necessary to reflect the estimated purchase price and to reflect
amounts related to SynthRxs net tangible and intangible assets and liabilities at an amount equal
to the preliminary estimate of their fair values. The only intangible asset identified was
in-process research and development valued at $6.3 million. Under the guidance of ASC 805, the
fair value of in-process research and development is capitalized on the balance sheet until the
project is either abandoned and written off or successfully commercialized, at which time the
Company begins amortizing the fair value over the estimated useful life.
There were no significant intercompany balances and transactions between ADVENTRX and SynthRx
at the dates and for the period of these pro forma condensed combined financial statements.
The unaudited pro forma condensed combined financial statements do not include any adjustments
for liabilities that will result from integration activities related to the SynthRx acquisition.
Additional assets or liabilities may be recorded that could affect amounts in the unaudited pro
forma condensed combined financial statements. During the measurement period, any such adjustments
to provisional amounts would increase or decrease goodwill. Adjustments that occur after the end of
the measurement period will be recognized in the post-combination current period operations.
The pro forma adjustments included in the unaudited pro forma condensed combined financial
statements are as follows:
a. To record goodwill related to the SynthRx acquisition. A value of $0.6 million,
representing the difference between the total purchase price and the aggregate fair
values assigned to the tangible and intangible assets acquired, less liabilities
assumed, was assigned to goodwill. ADVENTRX acquired SynthRx to expand its product
pipeline, enter into new therapeutic areas and address unmet market needs. These are
among the factors that contributed to a purchase price for the SynthRx acquisition that
resulted in the recognition of goodwill.
b. To record the preliminary fair value of SynthRxs in-process research and development
for the novel, rheologic and antithrombotic compound that ADVENTRX is developing as
ANX-188.
c.
To record the fair value of a contingent asset for the number of
shares that may be repurchased pursuant to ADVENTRXs repurchase rights
related to the Subject to Vesting Shares.
d. To eliminate SynthRxs recorded liabilities as of December 31, 2010 because ADVENTRX did not
assume those liabilities.
e.
To record liabilities for acquisition-related legal and accounting
fees incurred by SynthRx which ADVENTRX is obligated to pay.
7
f. To record the fair value of contingent consideration for the First, Second and Third
Milestone in the SynthRx acquisition. The fair value for the Second Milestone and Third
Milestone will be reclassified to equity if stockholder approval for the issuance of the
Milestone Shares for the Milestone Payments is obtained on or prior to December 31, 2011.
g. To eliminate SynthRxs historical stockholders equity accounts and to record the
fair value of ADVENTRX common stock and related contingent consideration exchanged as
initial consideration in the SynthRx acquisition.
h. To eliminate SynthRxs historical accumulated deficit.
i. To reduce general and administrative expenses for transaction costs incurred in
connection with the SynthRx acquisition.
j. To eliminate interest expense related to liabilities that ADVENTRX did not assume.
5. Pro Forma Net Loss per Share
Shares used to calculate unaudited pro forma combined basic and diluted net loss per share are
based on the sum of the following:
a. The number of ADVENTRX weighted-average shares used in computing historical net
loss per share, basic and diluted; and
b. The number of ADVENTRX common shares issued to the former stockholders of SynthRx on
April 8, 2011, as initial consideration for the acquisition.
6. Transaction Costs
For the year ended December 31, 2010, transaction costs incurred related to the acquisition of
SynthRx totaled $275,130, all of which was incurred by ADVENTRX. These costs have been recorded as
a pro forma adjustment to reduce general and administrative expenses in the statement of operations
for the year ended December 31, 2010. The combined company expects to incur approximately $1.6
million in direct transaction costs in connection with the acquisition. The $1.3 million remaining
will be incurred and expensed in the first and second quarters of 2011.
The combined company may incur charges to operations that ADVENTRX cannot reasonably estimate,
in the quarter in which the acquisition is completed or the following quarters, to reflect costs
associated with integrating the two businesses. In addition, the combined company may incur
additional charges relating to the transaction in subsequent periods, which could have a material
impact on the combined companys financial position or results of operations.
8