Attached files
file | filename |
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8-K - FORM 8-K - Axogen, Inc. | d239706d8k.htm |
EX-10.6 - EXHIBIT 10.6 - Axogen, Inc. | d239706dex106.htm |
EX-10.3 - EXHIBIT 10.3 - Axogen, Inc. | d239706dex103.htm |
EX-99.1 - EXHIBIT 99.1 - Axogen, Inc. | d239706dex991.htm |
EX-10.2 - EXHIBIT 10.2 - Axogen, Inc. | d239706dex102.htm |
EX-10.1 - EXHIBIT 10.1 - Axogen, Inc. | d239706dex101.htm |
EX-10.5 - EXHIBIT 10.5 - Axogen, Inc. | d239706dex105.htm |
EX-10.4.1 - EXHIBIT 10.4.1 - Axogen, Inc. | d239706dex1041.htm |
EX-10.8.1 - EXHIBIT 10.8.1 - Axogen, Inc. | d239706dex1081.htm |
EX-10.9.2 - EXHIBIT 10.9.2 - Axogen, Inc. | d239706dex1092.htm |
EX-10.4.2 - EXHIBIT 10.4.2 - Axogen, Inc. | d239706dex1042.htm |
EX-10.9.1 - EXHIBIT 10.9.1 - Axogen, Inc. | d239706dex1091.htm |
EX-10.8.2 - EXHIBIT 10.8.2 - Axogen, Inc. | d239706dex1082.htm |
Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS OF
LECTEC CORPORATION AND AXOGEN CORPORATION
The following presents unaudited pro forma condensed combined financial statements of LecTec Corporation (LecTec) and AxoGen Corporation (AxoGen) as if the Merger had been completed at the beginning of each of the periods presented for statement of operations purposes and as of June 30, 2011 for balance sheet purposes. The following unaudited pro forma condensed combined financial statements are based on an assumption that all of AxoGens convertible debt, preferred stock and common stock were exchanged for LecTecs common stock in the Merger, all of AxoGens stock options were exchanged for LecTecs stock options and all of AxoGens outstanding warrants were forfeited. The Merger was accounted for as a purchase, with AxoGen as the acquiring entity for accounting purposes.
The historical data of LecTec and AxoGen for the year ended December 31, 2010 has been derived from their audited financial statements. The historical data of LecTec and AxoGen for the six months ended June 30, 2011 has been derived from their unaudited financial statements. The unaudited pro forma condensed combined balance sheet and statements of operations are based on assumptions and include adjustments as explained in the notes thereto.
The unaudited pro forma condensed combined financial statements include adjustments, which are based upon preliminary estimates, to reflect the allocation of the purchase price to the acquired assets and assumed liabilities of LecTec. The final allocation of the purchase price will be determined after the completion of the acquisition and will be based upon actual net tangible and intangible assets acquired as well as liabilities assumed. The preliminary purchase price allocation for LecTec is subject to revision as more detailed analysis is completed and additional information on the fair values of LecTecs assets and liabilities becomes available. Any change in the fair value of the net assets of LecTec will change the amount of the purchase price allocation. Additionally, changes in LecTecs working capital, including the results of operations from June 30, 2011 through the date the transaction is completed, will change the amount of the purchase price allocation. Furthermore, the final purchase price is dependent on the actual amount of LecTec common stock and vested employee equity awards outstanding as well as the LecTec share price on the date of closing. Final purchase accounting adjustments may differ materially from the pro forma adjustments presented here.
The summary unaudited pro forma condensed combined financial statements do not necessarily reflect the results of operations of LecTec and AxoGen that actually would have resulted had the Merger been consummated as of the dates referred to above. Accordingly, such data should not be viewed as fully representative of the past performance of LecTec or AxoGen or indicative of future results.
These unaudited pro forma condensed combined financial statements are based upon the respective historical financial statements of LecTec and AxoGen and should be read in conjunction with the historical financial statements of LecTec and AxoGen and the related notes.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
June 30, 2011
ASSETS | LecTec Corporation |
AxoGen Corporation |
Pro Forma Adjustments |
Pro Forma Combined |
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CURRENT ASSETS |
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Cash and cash equivalents |
$ | 7,840,329 | $ | 2,229,765 | $ | 1,000,000 | (5) | $ | 11,070,094 | |||||||
Certificates of deposit |
1,714,848 | | | 1,714,848 | ||||||||||||
Accounts receivable |
19,111 | 615,828 | | 634,939 | ||||||||||||
Inventory |
| 1,957,300 | | 1,957,300 | ||||||||||||
Prepaid expenses |
650 | 162,673 | | 163,323 | ||||||||||||
Deferred financing costs, current |
| 134,570 | (134,570 | )(6) | | |||||||||||
Deferred tax asset |
18,000 | | (18,000 | )(12) | | |||||||||||
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TOTAL CURRENT ASSETS |
9,592,938 | 5,100,136 | 847,430 | 15,540,504 | ||||||||||||
NOTES AND ACCRUED INTEREST RECEIVABLE |
2,520,712 | | (2,520,712 | )(14) | | |||||||||||
PROPERTY AND EQUIPMENT, net |
2,358 | 353,580 | | 355,938 | ||||||||||||
GOODWILL |
| | 1,248,563 | (3) | 1,248,563 | |||||||||||
INTANGIBLE ASSETS |
44,559 | 640,614 | 255,441 | (3) | 940,614 | |||||||||||
OTHER ASSETS |
| 8,000 | | 8,000 | ||||||||||||
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TOTAL ASSETS |
$ | 12,160,567 | $ | 6,102,330 | $ | (169,278 | ) | $ | 18,093,619 | |||||||
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LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) |
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CURRENT LIABILITIES |
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Accounts payable and accrued expenses |
$ | 611,571 | $ | 1,623,244 | $ | 1,400,000 | (10) | $ | 3,400,979 | |||||||
(213,124 | )(4) | |||||||||||||||
(20,712 | )(14) | |||||||||||||||
Current portion of long-term debt |
| 4,732,857 | | 4,732,857 | ||||||||||||
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TOTAL CURRENT LIABILITIES |
611,571 | 6,356,101 | 1,166,164 | 8,133,836 | ||||||||||||
LONG TERM DEBT, related party |
| 1,338,455 | (1,338,455 | )(4) | | |||||||||||
LONG TERM DEBT |
| 5,359,090 | (2,359,090 | )(4) | | |||||||||||
(500,000 | )(4) | |||||||||||||||
(2,500,000 | )(14) | |||||||||||||||
PREFERRED STOCK DIVIDENDS PAYABLE |
| 6,746,896 | (6,746,896 | )(7) | | |||||||||||
WARRANT LIABILITY |
| 2,607,510 | (2,607,510 | )(6) | | |||||||||||
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TOTAL LIABILITIES |
611,571 | 22,408,052 | (14,885,787 | ) | 8,133,836 | |||||||||||
COMMITMENTS AND CONTINGENCIES |
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TEMPORARY EQUITY |
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Series B convertible preferred stock, $.00001 par value; 17,065,217 shares authorized; 9,782,609 shares issued and outstanding |
| 4,243,948 | (4,243,948 | )(4) | | |||||||||||
Series C convertible preferred stock, $.00001 par value; 16,798,924 shares authorized; 11,072,239 shares issued and outstanding |
| 8,092,568 | (8,092,568 | )(4) | | |||||||||||
Series D convertible preferred stock, $.00001 par value; 67,000,000 shares authorized; 30,156,259 shares issued and outstanding |
| 3,075,523 | (3,075,523 | )(4) | | |||||||||||
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TOTAL TEMPORARY EQUITY |
| 15,412,039 | (15,412,039 | ) | |
See notes to pro forma condensed combined financial statements.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET (CONTINUED)
June 30, 2011
LecTec Corporation |
AxoGen Corporation |
Pro Forma Adjustments |
Pro Forma Combined |
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STOCKHOLDERS EQUITY (DEFICIT) |
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Common stock, $.01 par value; 15,000,000 shares authorized; 4,305,026 historical shares issued and outstanding, |
$ | 62,118 | (4 | ) | ||||||||||||||||
10,940,494 pro forma shares issued and outstanding |
$ | 43,050 | $ | | 4,237 | (5 | ) | $ | 109,405 | |||||||||||
Series A convertible preferred stock, $.00001 par value; 2,544,750 shares authorized, issued and outstanding |
| 1,125,000 | (1,125,000 | ) | (4 | ) | | |||||||||||||
Common stock, $.00001 par value; 133,000,000 shares authorized; 32,459,676 shares issued and outstanding |
| 325 | (325 | ) | (4 | ) | | |||||||||||||
Additional paid-in capital |
13,300,545 | 10,007,860 | 1,504,004 | (3 | ) | 45,519,941 | ||||||||||||||
19,091,316 | (4 | ) | ||||||||||||||||||
995,763 | (5 | ) | ||||||||||||||||||
620,453 | (6 | ) | ||||||||||||||||||
Accumulated deficit |
(1,794,599 | ) | (42,850,946 | ) | 1,794,599 | (4 | ) | (35,669,563 | ) | |||||||||||
1,987,057 | (6 | ) | ||||||||||||||||||
(134,570 | ) | (6 | ) | |||||||||||||||||
6,746,896 | (7 | ) | ||||||||||||||||||
(1,400,000 | ) | (10 | ) | |||||||||||||||||
(18,000 | ) | (12 | ) | |||||||||||||||||
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TOTAL STOCKHOLDERS EQUITY (DEFICIT) |
11,548,996 | (31,717,761 | ) | 30,128,548 | 9,959,783 | |||||||||||||||
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TOTAL LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) |
$ | 12,160,567 | $ | 6,102,330 | $ | (169,278 | ) | $ | 18,093,619 | |||||||||||
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See notes to pro forma condensed combined financial statements.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 2011
LecTec Corporation |
AxoGen Corporation |
Pro Forma Adjustments |
Pro Forma Combined |
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REVENUES |
$ | 5,869,118 | $ | 2,347,056 | $ | (5,825,000 | ) | (15 | ) | $ | 2,391,174 | |||||||||
COST OF GOODS SOLD |
| 763,080 | | 763,080 | ||||||||||||||||
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GROSS PROFIT |
5,869,118 | 1,583,976 | (5,825,000 | ) | 1,628,094 | |||||||||||||||
OPERATING EXPENSES |
3,870,881 | 3,937,146 | (2,501,237 | ) | (15 | ) | 5,306,790 | |||||||||||||
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INCOME (LOSS) FROM OPERATIONS |
1,998,237 | (2,353,170 | ) | (3,323,763 | ) | (3,678,696 | ) | |||||||||||||
OTHER INCOME (EXPENSE) |
27,413 | (1,615,894 | ) | 1,193,660 | (9 | ) | (394,821 | ) | ||||||||||||
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INCOME (LOSS) BEFORE INCOME TAXES |
2,025,650 | (3,969,064 | ) | (2,130,103 | ) | (4,073,517 | ) | |||||||||||||
INCOME TAX EXPENSE |
(870,000 | ) | | 870,000 | (12 | ) | | |||||||||||||
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NET INCOME (LOSS) |
$ | 1,155,650 | $ | (3,969,064 | ) | $ | (1,260,103 | ) | $ | (4,073,517 | ) | |||||||||
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WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: |
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Basic |
4,305,026 | 10,938,247 | ||||||||||||||||||
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Diluted |
4,309,578 | 10,938,247 | ||||||||||||||||||
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INCOME (LOSS) PER COMMON SHARE: |
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Basic |
$ | 0.27 | $ | (0.37 | ) | |||||||||||||||
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Diluted |
$ | 0.27 | $ | (0.37 | ) | |||||||||||||||
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See notes to pro forma condensed combined financial statements.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
For the Twelve Months Ended December 31, 2010
LecTec Corporation |
AxoGen Corporation |
Pro Forma Adjustments |
Pro Forma Combined |
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REVENUES |
$ | 91,273 | $ | 3,004,445 | $ | | $ | 3,095,718 | ||||||||||||
COST OF GOODS SOLD |
| 1,378,936 | | 1,378,936 | ||||||||||||||||
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GROSS PROFIT |
91,273 | 1,625,509 | | 1,716,782 | ||||||||||||||||
OPERATING EXPENSES |
1,939,798 | 6,107,079 | | 8,046,877 | ||||||||||||||||
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LOSS FROM OPERATIONS |
(1,848,525 | ) | (4,481,570 | ) | | (6,330,095 | ) | |||||||||||||
OTHER INCOME (EXPENSE) |
23,179 | (941,591 | ) | 1,352,687 | (9 | ) | (684,819 | ) | ||||||||||||
(1,119,094 | ) | (16 | ) | |||||||||||||||||
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LOSS BEFORE INCOME TAXES |
(1,825,346 | ) | (5,423,161 | ) | 233,593 | (7,014,914 | ) | |||||||||||||
INCOME TAX BENEFIT |
509,047 | | (509,047 | ) | (12 | ) | | |||||||||||||
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NET LOSS |
$ | (1,316,299 | ) | $ | (5,423,161 | ) | $ | (275,454 | ) | $ | (7,014,914 | ) | ||||||||
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WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: |
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Basic |
4,304,204 | 10,922,310 | ||||||||||||||||||
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Diluted |
4,304,204 | 10,922,310 | ||||||||||||||||||
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LOSS PER COMMON SHARE: |
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Basic |
$ | (0.31 | ) | $ | (0.64 | ) | ||||||||||||||
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Diluted |
$ | (0.31 | ) | $ | (0.64 | ) | ||||||||||||||
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See notes to pro forma condensed combined financial statements.
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
1. | The Merger and Basis of Presentation |
On May 31, 2011, LecTec entered into an Agreement and Plan of Merger with Nerve Merger Sub Corp., a wholly owned subsidiary of LecTec (Merger Sub), and AxoGen, as subsequently amended by Amendment No. 1 to Agreement and Plan of Merger, dated as of June 30, 2011, and Amendment No. 2 to Agreement and Plan of Merger, dated as of August 9, 2011, among LecTec, Merger Sub and AxoGen (the Merger Agreement). AxoGen is a privately held company that develops and markets surgical products for the reconstruction and protection of peripheral nerves. Pursuant to the terms of the Merger Agreement, Merger Sub merged with and into AxoGen and AxoGen is the surviving corporation and a wholly owned subsidiary of LecTec (the Merger). On September 30, 2010, the Merger was completed. Immediately following the Merger, LecTec changed its name to AxoGen, Inc.
Pursuant to the terms of the Merger Agreement, each share of AxoGens common stock that was issued and outstanding at such time was cancelled and converted into the right to receive 0.03727336 shares of LecTecs common stock. 6,211,759 shares of LecTecs common stock were issued in exchange for the stock of AxoGen, giving effect to the conversion of all of AxoGens outstanding convertible securities, as discussed in more detail below, and that 567,586 shares of LecTecs common stock were reserved for issuance upon exercise of AxoGens outstanding stock options which were converted into LecTec stock options. As a result of the Merger, all of AxoGens outstanding convertible securities were converted to shares of LecTecs common stock, because (i) prior to the execution of the Merger Agreement, greater than 60% of the aggregate outstanding shares of AxoGens Series B, Series C and Series D preferred stock agreed to the automatic conversion of all outstanding shares of AxoGens preferred stock (including the Series A preferred stock) into shares of AxoGens common stock immediately prior to the effective time of the Merger (which is the required threshold to trigger such conversion under Article 6 of AxoGens Second Amended and Restated Certificate of Incorporation); and (ii) the Convertible Notes were automatically converted into AxoGens common stock immediately prior to the effective time of the Merger pursuant to their terms which provide for such conversion immediately prior to the effective time of the Merger. These shares of AxoGens common stock issued pursuant to the conversion of the preferred stock and the Convertible Notes were then cancelled and converted into the right to receive LecTecs common stock pursuant to the Merger Agreement. Additionally, all of the outstanding warrants expired unexercised because, pursuant to their terms, all such warrants will expire immediately prior to the effective time of the Merger, and over 98% of the warrants have exercise prices greater than the value of the per share consideration in the Merger with the remainder having exercise prices equal to such per share consideration. In addition, current security holders of AxoGen have agreed to purchase, immediately following the Merger, an additional 423,709 shares of LecTecs common stock at a price per share of $2.36. Upon consummation of these transactions, current AxoGen security holders will own approximately 60% of LecTecs common stock on a fully diluted basis.
Upon the closing of the transaction AxoGen stockholders will own a majority of the voting stock of the combined company, pre-Merger officers of AxoGen will assume key management positions at the combined company and pre-Merger directors of AxoGen will hold a majority of the board of directors of the combined company. As a result, AxoGen will be deemed to be the acquiring company for accounting purposes and the transaction will be accounted for as a reverse acquisition in accordance with FASB Accounting Standards Codification (ASC) Topic 805, Business Combinations. Accordingly, the assets and liabilities of LecTec will be recorded at their estimated fair values as of the Merger closing date.
2. | Estimate of Consideration Expected to be Transferred |
After consideration of the historical market price of LecTecs common stock, on September 29, 2011 (i.e. $2.75 per share), the last practicable date to allow for preparation of this filing, the purchase price of LecTec was estimated at $13 million. The purchase price represents the sum of (i) the $11,839,000 estimated fair value of the 4,305,026 shares of LecTecs common stock, $.01 par value, to be retained by the existing common stockholders of LecTec, plus (ii) the $1,196,000 estimated fair value of the 454,000 vested LecTec stock options. The estimated value of LecTec stock options as of September 29, 2011 was determined by applying the Black-Scholes-Merton Model using the stock price of $2.75 per common share, a weighted average exercise price of $3.79, a weighted average estimated life of 6.19 years, a risk free rate of 1.30% and an expected stock price volatility of 167.50%.
3. | Allocation of Cost of the Acquired Entity |
Based on the June 30, 2011 estimated purchase price allocation, the $1.2 million excess of the $13 million estimated purchase price over the $11.8 million estimated fair valve of LecTecs net assets has been allocated to goodwill. The allocation of the estimated purchase price is included in the pro forma condensed combined balance sheet at June 30, 2011 and subject to adjustment upon a post-Merger detailed review of net assets to be acquired and their estimated fair values.
The following is a summary of the estimated purchase price allocation and goodwill:
Cash and cash equivalents |
$ | 7,840,329 | ||
Certificates of deposit |
1,714,848 | |||
Other current assets |
19,761 | |||
Notes and accrued interest receivable |
2,520,712 | |||
Property and equipment |
2,358 | |||
Intangible assets |
300,000 | |||
Accounts payable and accrued expenses |
(611,571 | ) | ||
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Estimated fair value of LecTecs net assets |
11,786,437 | |||
Estimated purchase price |
13,035,000 | |||
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Estimated goodwill |
$ | 1,248,563 | ||
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The following is a summary of LecTecs estimated net asset fair value adjustment and goodwill:
Increase in fair value of intangible assets |
$ | 255,441 | ||
Estimated goodwill |
1,248,563 | |||
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Adjustment to additional paid-in capital |
$ | 1,504,004 | ||
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4. | Common Stock, Additional Paid-in Capital and Stock Options |
The following is a summary of LecTec common stock outstanding after the Merger:
Common Stock |
Shares | |||
Shares held by existing LecTec common stockholders as of June 30, 2011 |
4,305,026 | |||
Shares of LecTec common stock to be issued to AxoGen stockholders |
6,211,759 | |||
Additional shares of LecTec common stock to be purchased by certain AxoGen stockholders |
423,709 | |||
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Total shares outstanding after the Merger |
10,940,494 | |||
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The unaudited pro forma condensed combined financial statements reflect the issuance of 6,211,759 shares of LecTecs common stock ($0.01 par value per share) to AxoGen shareholders in exchange for the following AxoGen debt and equity instruments:
| Convertible Debt 3,005,672 shares of LecTecs common stock: |
The conversion of AxoGens outstanding convertible debt of:
| $1,338,455 and $2,359,090, accrued interest of $213,124, and estimated future interest of $50,246 using a conversion price of $0.0572 (as defined in the convertible debt agreement, the conversion price is 65% of the price per share paid at the next equity financing or $0.088) into 69,271,003 shares of AxoGens common stock or 2,581,963 shares of LecTecs common stock using the 0.03727336 exchange ratio. |
| $500,000 and an additional note of $500,000 to be issued into 423,709 shares of LecTecs common stock using the $0.088 conversion price and 0.03727336 exchange ratio. |
| Preferred Stock 1,996,206 shares of LecTecs common stock: |
Each share of AxoGens preferred stock is convertible into one share of AxoGens common stock. The pro forma balance sheets include the conversion of AxoGens:
| Series A convertible preferred stock of 2,544,750 shares, |
| Series B convertible preferred stock of 9,782,609 shares, |
| Series C convertible preferred stock of 11,072,239 shares, and |
| Series D convertible preferred stock of 30,156,259 shares. |
for a total of 53,555,857 shares into 1,996,206 LecTecs common shares using the 0.03727336 exchange ratio.
| Common Stock 1,209,881 shares of LecTecs common stock: |
The conversion of 32,459,676 shares of AxoGens common stock into 1,209,881 shares of LecTecs common stock using the 0.03727336 exchange ratio.
Additionally, the pro forma condensed combined financial statements reflect 423,709 shares of LecTec common stock to be purchased by certain AxoGens stockholders immediately after the closing of the Merger at a price of $2.36 per share.
The pro forma condensed combined financial statements also reflect elimination of LecTecs historical accumulated deficit as a result of the Merger.
The following summary reflects the conversion of AxoGens convertible debt and equity into 6,211,759 shares of LecTecs common stock and the elimination of LecTecs accumulated deficit:
Accrued interest included in accounts payable and accrued expenses |
$ | 213,124 | ||
Long-term debt, related party |
1,338,455 | |||
Long-term debt |
2,359,090 | |||
Long-term debt |
500,000 | |||
Series B convertible preferred stock |
4,243,948 | |||
Series C convertible preferred stock |
8,092,568 | |||
Series D convertible preferred stock |
3,075,523 | |||
Series A convertible preferred stock |
1,125,000 | |||
Common Stock |
325 | |||
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AxoGens convertible debt and equity |
20,948,033 | |||
Issuance of LecTecs common stock6,211,759 shares at $.01 par value |
(62,118 | ) | ||
Elimination of LecTecs accumulated deficit |
(1,794,599 | ) | ||
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Adjustment to additional-paid-in capital |
$ | 19,091,316 | ||
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5. | Purchase of Common Stock |
This adjustment represents the purchase of 423,709 shares of LecTec common stock by certain AxoGen stockholders at approximately $2.36 per share immediately after closing of the Merger.
6. | Deferred Financing Cost and Warrant Liability |
This adjustment reflects the elimination of deferred financing cost and warrant liability as a result of the conversion of the related debt and preferred stock in accordance with the Merger.
7. | Preferred Stock Dividend |
This adjustment represents the elimination of the preferred stock dividend on AxoGens outstanding Preferred Stock since the Preferred Stock dividend will be forfeited in accordance with the Merger.
8. | Stock-based Compensation |
Upon Merger, 15,227,654 shares of AxoGen common stock reserved for issuance pursuant to AxoGen stock options will no longer be subject to such reservation and LecTec will reserve 567,586 shares of LecTec common stock for LecTec stock options to be exchanged for AxoGen stock options. The incremental cost of approximately $68,000 resulting from the stock option modification is not included in the unaudited pro forma condensed combined statements of operations.
9. | Interest Expense and Change in Fair Value of Warrants |
This adjustment reflects the reversal of the following expenses as they would not be incurred assuming the Merger had been completed at the beginning of the period:
Six Months Ended June 30, 2011 |
Year Ended December 31, 2010 |
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Interest expense related to amortization of deferred financing cost |
$ | 1,031,406 | $ | 1,322,413 | ||||
Interest expense related to amortization of debt discount on AxoGens warrants |
11,435 | 108,580 | ||||||
Interest expense related to convertible notes |
213,124 | | ||||||
Change in fair value of warrant liability |
(62,305 | ) | (78,306 | ) | ||||
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|
|
|
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$ | 1,193,660 | $ | 1,352,687 | |||||
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10. | Merger Related Charges |
The total Merger related costs have been preliminarily estimated to be approximately $1.40 million and are not included in the unaudited pro forma condensed combined statements of operations.
11. | Basic and Diluted Income (Loss) per Share |
Basic income (loss) per common share is computed by dividing net income (loss) by the weighted average common shares outstanding. Diluted income (loss) per common shares is computed by dividing net income (loss) by the weighted average common shares outstanding and common shares equivalents related to stock options when dilutive. The effect of any outstanding common stock equivalents for the six months ended June 30, 2011 and the year ended December 31, 2010 has not been included in the pro forma per share amounts as it would be anti-dilutive.
Pro forma weighted average shares outstanding were as follows:
Six Months Ended June 30, 2011 |
Year Ended December 31, 2010 |
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LecTecs historical weighted average shares |
4,305,026 | 4,304,204 | ||||||
LecTecs shares issued from conversion of AxoGens convertible debt, preferred stock, and common stock |
|
6,209,512 |
|
|
6,194,397 |
| ||
Additional shares of LecTec common stock to be purchased by AxoGen stockholders |
423,709 | 423,709 | ||||||
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|
|
|
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Weighted average shares outstandingbasic and diluted |
10,938,247 | 10,922,310 | ||||||
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12. | Income Taxes |
No income tax benefit was included in the unaudited pro forma condensed combined statements of operations because a full valuation allowance has been established on the deferred tax asset as it is more likely than not that future tax benefits will not be realized.
13. | Non-recurring Charges |
The unaudited pro forma condensed combined statements of operations do not include the impact of the following non-recurring (income) expense items directly related to the Merger:
Merger related charges |
$ | 1,400,000 | ||
AxoGens incremental cost on stock option modification |
68,000 | |||
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|
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Total |
$ | 1,468,000 | ||
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14. | LecTecs Notes Receivable and AxoGens Long-Term Debt |
This adjustment represents elimination of $2,000,000 and $500,000 notes issued by AxoGen to LecTec outstanding at June 30, 2011 and the related interest of $20,712 for the six months ended June 30, 2011.
LecTec also had a commitment to loan an additional $2,000,000 to AxoGen on the earlier of (a) 90 days after the date of the initial $2,000,000 loan on May 31, 2011 or (b) receipt of all required shareholder approvals of the Merger. On August 29, 2011, AxoGen issued an additional subordinated secured convertible promissory note in the principal amount of $2,000,000 to LecTec on the same terms as the $2,000,000 and $500,000 notes issued by AxoGen to LecTec in May 2011.
Subsequent to the Merger, LecTec forgave these notes.
15. | Infringement Revenue |
This adjustment represents elimination of $5,825,000 of infringement revenue of LecTec and the related expenses of $2,501,237 for the six months ended June 30, 2011. Those revenue and expenses were excluded since they were considered to be non-recurring items.
16. | Gain from Termination of Distribution Agreement |
This adjustment represents elimination of $1,119,094 of AxoGens gain from termination of distribution agreement since it was considered to be a non-recurring item.
17. | Loan and Security Agreement |
On September 30, 2011, AxoGen and its parent company, AxoGen, Inc., as borrower, entered into a $5 million Loan and Security Agreement with Midcap Financial SBIC, LP, as administrative agent. The lenders received warrants to purchase 89,686 shares of AxoGen, Inc.s common stock at $2.23 per share.