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Filing
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(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): April 8, 2011
ADVENTRX Pharmaceuticals, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 001-32157 | 84-1318182 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
12390 El Camino Real, Suite 150, San Diego, CA | 92130 | |
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code: (858) 552-0866
Not applicable
(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)) |
EXPLANATORY NOTE
On April 8, 2011, ADVENTRX Pharmaceuticals, Inc. (the Company) completed its acquisition of
SynthRx, Inc. (SynthRx) pursuant to the terms of the Agreement and Plan of Merger, dated February
12, 2011, by and among the Company, SRX Acquisition Corporation, a wholly owned subsidiary of the
Company, SynthRx and, solely with respect to Sections 2 and 8 of the agreement, an individual who
was a principal stockholder of SynthRx, and SynthRx became a wholly owned subsidiary of the
Company. The Companys acquisition of SynthRx and related matters were reported in the Companys
Current Report on Form 8-K filed on April 11, 2011 (the Original Current Report). The Company is
filing this Amendment No. 1 to the Original Current Report as permitted by Item 9.01(a)(4) and
(b)(2) of Form 8-K to provide the financial statements of SynthRx and the pro forma financial
information required by Item 9.01(a)(1) and (b)(1) of Form 8-K. Except as described above, all
information in and exhibits to the Original Current Report remain unchanged.
Important Information
In connection with its 2011 annual meeting of stockholders, which is scheduled for June 15, 2011,
the Company has filed a definitive proxy statement with the U.S. Securities and Exchange Commission
(the SEC) that includes a proposal requesting stockholder approval for the issuance of shares of
the Companys common stock to the former stockholders of SynthRx in lieu of cash payments upon
achievement of performance milestones pursuant to the terms of the Companys merger agreement with
SynthRx (the Stockholder Proposal). INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE
DEFINITIVE PROXY STATEMENT AND OTHER RELEVANT MATERIALS FILED WITH THE SEC CAREFULLY IN THEIR
ENTIRETY BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE STOCKHOLDER PROPOSAL. The definitive
proxy statement, any amendments or supplements to the definitive proxy statement and other relevant
documents filed by the Company with the SEC are available free of charge through the website
maintained by the SEC at www.sec.gov or by calling the SEC at telephone number 1-800-SEC-0330. Free
copies of these documents may also be obtained from the Companys website at www.adventrx.com or by
writing to: ADVENTRX Pharmaceuticals, Inc., 12390 El Camino Real, Suite 150, San Diego, California
92130, Attn: Corporate Secretary. The Company and certain of its directors, executive officers and
other members of management and employees may, under the rules of the SEC, be deemed to be
participants in the solicitation of proxies from stockholders of the Company in favor of the
Stockholder Proposal. Information regarding the Companys directors and executive officers and
other potential participants is included in the definitive proxy statement and the other relevant
documents filed with the SEC.
Item 9.01 | Financial Statements and Exhibits. |
(a) Financial Statements of Businesses Acquired
The following audited financial statements of SynthRx and the report of independent public
accountants thereon are attached as Exhibit 99.2 to this report and are incorporated herein by
reference:
| Audited balance sheets of SynthRx, Inc. (a development stage enterprise) as of December
31, 2010 and 2009 and the related audited statements of operations, stockholders deficit
and cash flows for the years then ended and for the period from inception (January 12,
2004) through December 31, 2010, and the notes related thereto |
(b) Pro Forma Financial Information
The following unaudited pro forma financial information is attached as Exhibit 99.3 to this report
and is incorporated herein by reference:
| Unaudited pro forma condensed combined balance sheet as of December 31, 2010 and the
related unaudited pro forma condensed combined statement of operations for the year then
ended, and the notes related thereto |
(d) Exhibits.
The list of exhibits called for by this Item is incorporated by reference to the Exhibit Index
filed with this report.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned hereunto duly authorized.
ADVENTRX Pharmaceuticals, Inc. |
||||
Dated: June 3, 2011 | By: | /s/ Patrick L. Keran | ||
Name: | Patrick L. Keran | |||
Title: | President and Chief Operating Officer | |||
Exhibit Index
Exhibit | ||||
No. | Description | |||
2.1 | *(1) | Agreement and Plan of Merger, dated February 12, 2011, by and among the
registrant, SRX Acquisition Corporation, SynthRx, Inc. and, solely with
respect to Sections 2 and 8, the Stockholders Agent |
||
10.1 | *(1) | Stockholders Voting and Transfer Restriction Agreement, dated February
12, 2011, by and among the registrant, each of the principal
stockholders of SynthRx, Inc. and, solely with respect to Section 3(c),
the Stockholders Agent |
||
10.2 | *(1) | License Agreement, dated June 8, 2004, between SynthRx, Inc. and CytRx
Corporation, as amended by that certain Letter Agreement Re: Amendment
to License Agreement, dated August 3, 2006, and that certain Agreement
and Amendment No. 2 to License Agreement, dated December 1, 2010 |
||
23.1 | Consent of J.H. Cohn LLP |
|||
99.1 | (1) | Press Release issued by ADVENTRX Pharmaceuticals, Inc. on April 11, 2011 |
||
99.2 | Audited balance sheets of SynthRx, Inc. (a development stage
enterprise) as of December 31, 2010 and 2009 and the related audited
statements of operations, stockholders deficit and cash flows for the
years then ended and for the period from inception (January 12, 2004)
through December 31, 2010, and the notes related thereto |
|||
99.3 | Unaudited pro forma condensed combined balance sheet as of December 31,
2010 and the related unaudited pro forma condensed combined statement
of operations for the year then ended, and the notes related thereto |
* | Certain confidential portions of this exhibit were omitted by means of redacting a portion of
the text. Application has been made to the Securities and Exchange Commission seeking
confidential treatment of such confidential portions under Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. This exhibit has been filed separately with the Securities
and Exchange Commission without redactions in connection with registrants confidential
treatment request. |
|
(1) | Filed with the registrants Current Report on Form 8-K on April 11, 2011 (SEC file number
001-32157-11752769) |
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation
by reference in the registration statements on Form S-8 (No. 333-126551 and No. 333-151903) and the registration
statements on Form S-3 (No. 333-117022, No. 333-127857, No. 333-133824, No. 333-159376,
No. 333-164177, No. 333-165691 and No. 333-174203) of
our report dated March 16, 2011, with respect to our audits of the
financial statements of SynthRx, Inc. 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 in
Amendment No. 1 to the Current Report on Form 8-K of ADVENTRX Pharmaceuticals, Inc. filed with the
Securities and Exchange Commission.
/s/ J.H. Cohn LLP
San Diego, California
June 1, 2011
June 1, 2011
Exhibit 99.2
SYNTHRX, INC.
Report on Financial Statements
(A Development Stage Enterprise)
Report on Financial Statements
(A Development Stage Enterprise)
Index
Page | ||||
Report of Independent Public Accountants |
2 | |||
Balance Sheets December 31, 2010 and 2009 |
3 | |||
Statements of Operations Years Ended December 31, 2010 and 2009 and the Period from Inception (January 12, 2004) through December 31, 2010 |
4 | |||
Statements of Stockholders Deficit Years Ended December 31, 2010 and 2009 and the Period from Inception (January 12, 2004) through December 31, 2010 |
5 | |||
Statements of Cash Flows Years Ended December 31, 2010 and 2009 and the Period from Inception (January 12, 2004) through December 31, 2010 |
6 | |||
Notes to Financial Statements |
7-12 |
1
Report of Independent Public Accountants
To Board of Directors and Stockholders
SynthRx, Inc.
SynthRx, Inc.
We have audited the accompanying balance sheets of SynthRx, Inc. (a development stage enterprise)
as of December 31, 2010 and 2009, and the related statements of operations, stockholders deficit
and cash flows for the years then ended and for the period from inception (January 12, 2004)
through December 31, 2010. 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 SynthRx, Inc. (a development stage enterprise) as of December
31, 2010 and 2009, and its results of operations and cash flows for the years then ended and for
the period from inception (January 12, 2004) through December 31, 2010, in conformity with
accounting principles generally accepted in the United States of America.
/s/ J.H. Cohn LLP
San Diego, California
March 16, 2011
March 16, 2011
2
SYNTHRX, INC.
(A Development Stage Enterprise)
(A Development Stage Enterprise)
BALANCE SHEETS
December 31, | ||||||||
2010 | 2009 | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash |
$ | 54,533 | $ | 31,663 | ||||
Certificates of deposit |
12,270 | | ||||||
Total current assets |
66,803 | 31,663 | ||||||
Equipment, net |
19,257 | | ||||||
Long-term investments in certificates of deposit |
| 12,088 | ||||||
Total assets |
$ | 86,060 | $ | 43,751 | ||||
LIABILITIES AND STOCKHOLDERS DEFICIT |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 24,587 | $ | 2,000 | ||||
Accrued expenses |
7,050 | 2,577 | ||||||
Total current liabilities |
31,637 | 4,577 | ||||||
Notes payable stockholder |
275,000 | 75,000 | ||||||
Total liabilities |
306,637 | 79,577 | ||||||
Commitments and contingencies |
||||||||
Stockholders deficit: |
||||||||
Common stock, $0.001 par value; 100,000 shares
authorized; 1,000 shares issued and outstanding |
1 | 1 | ||||||
Additional paid-in capital |
1,045,268 | 1,045,268 | ||||||
Deficit accumulated during the development stage |
(1,265,846 | ) | (1,081,095 | ) | ||||
Total stockholders deficit |
(220,577 | ) | (35,826 | ) | ||||
Total liabilities and stockholders deficit |
$ | 86,060 | $ | 43,751 | ||||
See
Notes to Financial Statements.
3
SYNTHRX, INC.
(A Development Stage Enterprise)
(A Development Stage Enterprise)
STATEMENTS OF OPERATIONS
Period from | ||||||||||||
Inception | ||||||||||||
Years Ended December 31, | (January 12, 2004) through | |||||||||||
2010 | 2009 | December 31, 2010 | ||||||||||
Net sales |
$ | | $ | | $ | | ||||||
Cost of goods sold |
| | | |||||||||
Gross margin |
| | | |||||||||
Operating expenses: |
||||||||||||
Research and development |
139,570 | 17,100 | 289,655 | |||||||||
General and administrative |
40,890 | 8,460 | 561,927 | |||||||||
In-process research and development |
| | 409,068 | |||||||||
Total operating expenses |
180,460 | 25,560 | 1,260,650 | |||||||||
Loss from operations |
(180,460 | ) | (25,560 | ) | (1,260,650 | ) | ||||||
Interest income |
182 | 324 | 1,854 | |||||||||
Interest expense |
(4,473 | ) | (2,577 | ) | (7,050 | ) | ||||||
Loss before income taxes |
(184,751 | ) | (27,813 | ) | (1,265,846 | ) | ||||||
Provision for income taxes |
| | | |||||||||
Net loss |
$ | (184,751 | ) | $ | (27,813 | ) | $ | (1,265,846 | ) | |||
See
Notes to Financial Statements.
4
SYNTHRX, INC.
(A Development Stage Enterprise)
(A Development Stage Enterprise)
STATEMENTS
OF STOCKHOLDERS DEFICIT
YEARS ENDED DECEMBER 31, 2010 AND 2009 AND THE PERIOD FROM
INCEPTION (JANUARY 12, 2004) THROUGH DECEMBER 31, 2010
YEARS ENDED DECEMBER 31, 2010 AND 2009 AND THE PERIOD FROM
INCEPTION (JANUARY 12, 2004) THROUGH DECEMBER 31, 2010
Deficit | ||||||||||||||||||||
Accumulated | ||||||||||||||||||||
Additional | During the | Total | ||||||||||||||||||
Common Stock | Paid-in | Development | Stockholders | |||||||||||||||||
Shares | Amount | Capital | Stage | Deficit | ||||||||||||||||
Balance at January 12, 2004 (date of inception) |
| $ | | $ | | $ | | $ | | |||||||||||
Common stock issued (June 8, 2004) |
1,000 | 1 | 909,068 | | 909,069 | |||||||||||||||
Stock-based compensation |
| | 136,200 | | 136,200 | |||||||||||||||
Net loss January 12, 2004 through December 31, 2008 |
(1,053,282 | ) | (1,053,282 | ) | ||||||||||||||||
Balance, December 31, 2008 |
1,000 | 1 | 1,045,268 | (1,053,282 | ) | (8,013 | ) | |||||||||||||
Net loss |
(27,813 | ) | (27,813 | ) | ||||||||||||||||
Balance, December 31, 2009 |
1,000 | 1 | 1,045,268 | (1,081,095 | ) | (35,826 | ) | |||||||||||||
Net loss |
(184,751 | ) | (184,751 | ) | ||||||||||||||||
Balance, December 31, 2010 |
1,000 | $ | 1 | $ | 1,045,268 | $ | (1,265,846 | ) | $ | (220,577 | ) | |||||||||
See
Notes to Financial Statements.
5
SYNTHRX, INC.
(A Development Stage Enterprise)
(A Development Stage Enterprise)
STATEMENTS OF CASH FLOWS
Period from | ||||||||||||
Inception | ||||||||||||
Years Ended December 31, | (January 12, 2004) through | |||||||||||
2010 | 2009 | December 31, 2010 | ||||||||||
Operating activities: |
||||||||||||
Net loss |
$ | (184,751 | ) | $ | (27,813 | ) | $ | (1,265,846 | ) | |||
Write off of in-process research and development |
| | 409,068 | |||||||||
Stock-based compensation |
| | 136,200 | |||||||||
Adjustments to reconcile net loss to net cash
used in operating activities: |
||||||||||||
Depreciation and amortization |
1,878 | | 1,878 | |||||||||
Increase (decrease) in: |
||||||||||||
Accounts payable |
22,587 | (7,699 | ) | 24,588 | ||||||||
Accrued expenses |
4,473 | 2,577 | 7,050 | |||||||||
Net cash used in operating activities |
(155,813 | ) | (32,935 | ) | (687,062 | ) | ||||||
Investing activities: |
||||||||||||
Investments in certificates of deposit |
(182 | ) | (324 | ) | (12,270 | ) | ||||||
Purchase of equipment |
(21,135 | ) | | (21,135 | ) | |||||||
Net cash used in investing activities |
(21,317 | ) | (324 | ) | (33,405 | ) | ||||||
Financing activities: |
||||||||||||
Capital contribution |
| | 500,000 | |||||||||
Stockholder loans |
200,000 | 50,000 | 275,000 | |||||||||
Net cash provided by financing activities |
200,000 | 50,000 | 775,000 | |||||||||
Net increase in cash |
22,870 | 16,741 | 54,533 | |||||||||
Cash at beginning of period |
31,663 | 14,922 | | |||||||||
Cash at end of period |
$ | 54,533 | $ | 31,663 | $ | 54,533 | ||||||
See
Notes to Financial Statements.
6
SYNTHRX,
INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
Note 1 Business organization and summary of significant accounting policies:
Nature of operations:
SynthRx, Inc., a Delaware corporation (SynthRx or the Company), is a
development-stage enterprise developing a purified form of a rheologic and
antithrombotic agent, Poloxamer 188, or P188. During the period from January 12,
2004 (date of inception) through December 31, 2010, the Company has devoted
substantially all of its efforts to business planning and research and development.
Accordingly, the Company is considered to be in the development stage. The Company
is an early stage enterprise and is subject to all of the risks associated with
development stage companies.
Management is evaluating various strategic options, including the sale or exclusive
license of the Companys product candidate program, a strategic business merger and
other similar transactions, certain of which may result in a change of control of
the Company. There can be no assurances that the Company will be successful in
consummating a strategic transaction on a timely basis or at all.
Use of estimates:
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America (GAAP) requires management to
make estimates and assumptions that affect the reported amounts and disclosures.
Accordingly, actual results may differ from those estimates.
Cash equivalents:
Cash equivalents include all cash balances and highly-liquid investments with a
maturity of three months or less when acquired. At December 31, 2010 and 2009, the
Company did not have any cash equivalents.
Equipment:
Equipment is stated at cost. Depreciation is calculated using the straight-line
method over estimated useful lives of the assets. Repairs and maintenance are
expensed as incurred.
Research and development expenses:
Research and development expenses (R&D) are comprised of costs incurred in
performing R&D activities including consulting and development costs. Research and
development costs are expensed as incurred.
7
Note 1 Business organization and summary of significant accounting policies (continued):
General and administrative expenses:
General and administrative expenses include legal, finance and facilities. In
addition, general and administrative expenses include fees for professional
services, intellectual property protection and occupancy costs. These costs are
expensed as incurred.
Purchased in-process research and development:
The Company entered into a license agreement with CytRx Corporation (CytRx) in
June 2004 in exchange for 199 shares of the Companys common stock and a cash
payment of $228,164. CytRx granted SynthRx an exclusive license to certain
identified CytRx patent rights. The estimated fair value of the license agreement,
which had not reached technological feasibility, had no alternative future use, and
had uncertainty in generating future economic benefits, was expensed. Accordingly,
in 2004, the Company wrote off $409,068 of acquired R&D.
Patent costs:
Legal costs in connection with patent applications are expensed as incurred and
classified as general and administrative expenses.
Income taxes:
The Company accounts for income taxes pursuant to the asset and liability method
which requires deferred income tax assets and liabilities to be computed for
temporary differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in future periods
based on enacted laws and rates applicable to the periods in which the temporary
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected to
be realized. The income tax provision is the tax payable or refundable for the
period plus or minus the change during the year in deferred tax assets and
liabilities.
The Company adopted the new accounting for uncertainty in income taxes guidance on
January 1, 2009. The adoption of that guidance did not result on the recognition of
any unrecognized tax benefits and the Company has no unrecognized tax benefits at
December 31, 2010 and 2009. The Companys U.S. Federal and state income tax returns
prior to fiscal year 2008 are closed. Management continually evaluates expiring
statutes of limitations, audit, proposed settlements, changes in tax law and new
authoritative rulings.
8
Note 1 Business organization and summary of significant accounting policies (concluded):
Subsequent events:
The Company has evaluated events and transactions for potential recognition or
disclosures through March 16, 2011, which is the date the financial statements were
available to be issued.
Note 2 Investments:
At December 31, 2010 and 2009, total Federally insured certificates of deposits were
$12,270 and $12,088, respectively. Income from certificates of deposit held during the
years ended December 31, 2010 and 2009 were $182 and $324, respectively.
Note 3 Equipment:
Equipment consists of the following at December 31, 2010 and 2009:
2010 | 2009 | |||||||
Microscope |
$ | 21,135 | $ | | ||||
Less accumulated depreciation |
(1,878 | ) | | |||||
Totals |
$ | 19,257 | $ | | ||||
Depreciation expense for the years ended December 31, 2010 and 2009 amounted to
$1,878 and $0, respectively.
Note 4 Notes payable stockholder:
Notes payable stockholder consists of the following:
2010 | 2009 | |||||||
Loan (A) |
$ | 25,000 | $ | 25,000 | ||||
Loan (B) |
50,000 | 50,000 | ||||||
Loan (C) |
100,000 | | ||||||
Loan (D) |
100,000 | | ||||||
Totals |
275,000 | 75,000 | ||||||
Less current portion |
| | ||||||
Long-term portion |
$ | 275,000 | $ | 75,000 | ||||
9
Note 4 Notes payable stockholder (concluded):
(A) | On June 30, 2008, the Company borrowed $25,000 from Dr.
Robert Hunter. The note payable is due in full on or before June 30, 2013.
Interest at 3.84% is due annually beginning July 1, 2010. |
(B) | On January 31, 2009, the Company borrowed $50,000 from Dr.
Robert Hunter. The note payable is due in full on or before December 2013.
Interest at 2.48% is due annually beginning January 1, 2011. |
(C) | On March 29, 2010, the Company borrowed $100,000 from Dr.
Robert Hunter. The note payable is due in full on or before December 31, 2014.
Interest at 2.48% is due annually beginning April 1, 2011. |
(D) | On October 29, 2010, the Company borrowed $100,000 from Dr.
Robert Hunter. The note payable is due in full on or before December 31, 2014.
Interest at 2.48% is due annually beginning November 1, 2011. |
Principal payments on the above obligations in each of the fiscal years subsequent to
December 31, 2010 are as follows:
Fiscal | ||||
Year | Amount | |||
2011 |
$ | | ||
2012 |
| |||
2013 |
75,000 | |||
2014 |
200,000 | |||
Total |
$ | 275,000 | ||
Note 5 Stockholders equity:
The Company is authorized to issue 200,000 shares of stock consisting of 100,000
shares of common stock, par value $0.001 per share and 100,000 shares of preferred
stock.
On October 20, 2003, Dr. Robert L. Hunter and CytRx entered into an agreement to
provide for the formation and operation of SynthRx. In consideration with the
agreement, SynthRx issued Dr. Robert Hunter 801 shares of its common stock equal to
80.1% of the total outstanding capital stock of SynthRx and issued CytRx 199 shares of
its common stock equal to 19.9% of the total outstanding capital stock of SynthRx.
10
Note 5 Stockholders equity (concluded):
On October 28, 2004, Dr. Robert L. Hunter issued 150 shares of common stock to two
individuals for services they had performed for the Company. The fair
value of these shares at the time they were issued was $136,200 which was recorded as additional
paid-in capital and general and administrative expenses.
Note 6 Income taxes:
Due to the Companys historical net loss position, and as a full valuation allowance
against deferred tax assets has been recorded, there is no provision or benefit for
income taxes recorded for the years ended December 31, 2010 and 2009.
Deferred income taxes reflect the net tax effect of temporary differences between the
carrying amount of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes. Significant components of deferred tax assets
and liabilities at December 31, 2010 and 2009 are as follows:
Deferred tax assets: | 2010 | 2009 | ||||||
Net operating loss carryforward |
$ | 245,848 | $ | 179,506 | ||||
Intangible assets |
73,486 | 78,658 | ||||||
Other |
2,522 | 876 | ||||||
Total deferred tax assets |
321,856 | 259,040 | ||||||
Less: valuation allowance |
(321,856 | ) | (259,040 | ) | ||||
Total deferred tax assets, net of valuation allowance |
$ | | $ | | ||||
The Company has established a full valuation allowance against the deferred tax assets
due to the uncertainty surrounding the realization of such assets. The Company has
determined it is more likely than not that the deferred tax assets are not realizable
due to its historical loss position.
At December 31, 2010, the Company had Federal income tax net operating loss
carryforwards of approximately $723,000. The Federal tax loss carryforwards will begin
expiring in 2024. Under Section 382 of the Internal Revenue Code of 1986, as amended,
substantial changes in the Companys ownership may limit the amount of net operating
loss carryforwards that could be utilized annually in the future to offset taxable
income. Any such annual limitation may significantly reduce the utilization of the net
operating losses before they expire.
11
Note 7 License agreement:
On June 8, 2004, the Company entered into a license agreement with CytRx in
exchange for 199 shares of the Companys common stock and a non-refundable cash
payment of $228,164. The fair value of common stock issued in exchange for these
rights and the cash payment, in the amount of $409,069, were charged to research
and development expense in the year ended December 31, 2004 (see Note 1).
Upon attainment of certain milestones, which include regulatory approvals and
first commercial sales, the Company may be obligated to pay fees of up to
$8,000,000.
The Company is obligated to pay a royalty of 5% of sales under the license to
FlOCOR Intellectual Property, 5% of sales under the license for Anti-Infectives
Intellectual Property and 4% of sales under the license for OptiVax Intellectual
Property.
Note 8 Subsequent events:
In February 2011, the Company entered into an agreement and plan of merger to be
acquired by Adventrx Pharmaceuticals, Inc. and Subsidiaries (Adventrx). Under
the proposed merger, all shares of the Company will be purchased for 2,938,773
shares of Adventrx common stock and potentially an aggregate of 13,478,050 shares
if certain milestones are achieved.
12
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