UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K/A

(Amendment No. 2)

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 6, 2018

 

 

ALPHATEC HOLDINGS, INC.

(Exact Name of Registrant as Specified in Charter)

 

 

 

Delaware   000-52024   20-2463898

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

5818 El Camino Real

Carlsbad, California 92008

(Address of Principal Executive Offices)

(760) 431-9286

(Registrant’s telephone number, including area code)

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:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14.a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 


EXPLANATORY NOTE

This Amendment No. 2 on Form 8-K/A (this “Second Amendment”) is being filed to provide revised pro forma financial information required by Item 9.01(b) of Form 8-K (the “Pro Forma Financial Information”) with respect to the acquisition by Alphatec Holdings, Inc. (the “Company”) of SafeOp Surgical, Inc. (“SafeOp”) pursuant to the terms of an Agreement and Plan of Merger (the “Merger Agreement”), dated as of March 6, 2018, among the Company, Safari Merger Sub, Inc., SafeOp, certain key stockholders of SafeOp and a stockholder representative. The acquisition was completed on March 8, 2018, as disclosed in the Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on March 12, 2018 (the “Original Form 8-K”). On April 16, 2018, the Company filed Amendment No. 1 on Form 8-K/A (the “First Amendment” and together with the Original Form 8-K, the “Amended Form 8-K”) to provide the financial statements and pro forma financial information required by Item 9.01(a) and (b) of Form 8-K related to the acquisition.

The Company is filing in this Second Amendment revised pro forma financial information related to the acquisition. The pro forma financial information has been revised to increase the purchase price and related goodwill associated with the acquisition to account for transactions expenses that were paid by the Company from the proceeds of the $15 million cash consideration on behalf of SafeOp.

Unless otherwise indicated herein or in the Amended Form 8-K, the disclosures contained herein have not been updated to reflect events, results or developments that have occurred after the filing of the Original Form 8-K or the First Amendment, or to modify or update those disclosures affected by subsequent events. This Second Amendment should be read in conjunction with the Amended Form 8-K and the Company’s other filings made with the Securities and Exchange Commission subsequent to the Original Form 8-K, including any amendments to those filings.

 

Item 9.01. Financial Statements and Exhibits

 

  (b) Pro Forma Financial Information .

Revised unaudited pro forma condensed combined financial statements of the Company as of December 31, 2017 are filed as Exhibit 99.1 and are incorporated herein by reference.

 

  (d) Exhibits .
  99.1    Revised unaudited pro forma condensed combined financial statements of Alphatec Holdings, Inc. as of December 31, 2017


SIGNATURES

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.

 

Date: April 27, 2018

  ALPHATEC HOLDINGS, INC.  
    By:  

/s/ Jeffrey Black

   
    Name: Jeffrey Black    
    Its:      Chief Financial Officer    

Exhibit 99.1

Alphatec Holdings, Inc.

Unaudited Pro Forma Condensed Combined Financial Statements

On March 6, 2018, Alphatec Holdings, Inc. (the “Company”) and its newly-created wholly-owned subsidiary, Safari Merger Sub, Inc. (“Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with SafeOp Surgical, Inc., a Delaware corporation (“SafeOp”), certain Key Stockholders of SafeOp and a Stockholder Representative. The Merger Agreement provides for a reverse triangular merger (the “Merger”), which was consummated on March 8, 2018, in which Sub was merged into SafeOp, with SafeOp being the surviving corporation and a wholly-owned subsidiary of the Company. Under the term of the Merger Agreement, the Company paid $15 million in cash, agreed to issue 3,265,132 shares of Common Stock, issued $3 million of notes that are convertible into 931,667 shares of Common Stock (the “Notes”), and issued warrants to purchase 2.2 million shares of Common Stock at an exercise price of $3.50 per share (the “Merger Warrants”). An additional 1,330,263 shares of Common Stock are issuable upon achievement of post-closing milestones.

The following unaudited pro forma condensed combined balance sheet as of December 31, 2017 and the unaudited pro forma condensed combined statements of operations for the year ended December 31, 2017 are based on the historical financial statements of the Company and SafeOp using the acquisition method of accounting.

The unaudited condensed combined pro forma balance sheet as of December 31, 2017 is based on the Company’s consolidated balance sheet as of December 31, 2017 and SafeOp’s balance sheet as of December 31, 2017. The unaudited condensed combined pro forma balance sheet gives effect to the Merger and the completed and anticipated financing as if it had occurred on December 31, 2017, and includes all adjustments that give effect to events that are directly attributable to the Merger and are factually supportable. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2017 gives effect to the Merger and the completed and anticipated financing as if it had occurred on January 1, 2017 and includes all adjustments that give effect to events that are directly attributable to the Merger and the completed and anticipated financing, are expected to have a continuing impact, and are factually supportable.

The unaudited pro forma condensed combined financial statements are presented for informational purposes only and are not intended to represent or to be indicative of the results of operations and financial position that the Company would have reported had the Merger been completed as of the date set forth in the unaudited pro forma condensed combined financial statements.

The unaudited pro forma condensed combined financial statements reflect certain adjustments based on management’s preliminary estimates of the fair values of tangible and intangible assets acquired. Upon completion of detailed valuation studies the Company may make additional adjustments to the fair values, and these valuations could change significantly from those used to determine certain adjustments in the pro forma condensed combined financial statements.

In addition to the Merger, the pro forma financial statements include the effect of entering into a securities purchase agreement dated March 8, 2018, pursuant to which the Company sold in a private placement (the “Private Placement”) to certain institutional and accredited investors (collectively, the “Purchasers”), including certain directors and executive officers of the Company, at a purchase price of $1,000 per share, 45,200 shares (the “Preferred Shares”) of newly designated Series B Convertible Preferred Stock (the “Series B Convertible Preferred Stock”) (which Preferred Shares will be converted into approximately 14,349,236 shares (subject to adjustment as described below and in the Certificate of Designations) of the Company’s common stock (“Common Stock”) upon approval by the Company’s stockholders (“Stockholder Approval”), and warrants to purchase up to 12,196,851 shares of Common Stock at an exercise price of $3.50 per share (the “Private Offering Warrants”). The Private Offering Warrants will become exercisable following Stockholder Approval, are subject to certain ownership limitations in certain cases, and expire five years after the date of such Stockholder Approval. The aggregate gross proceeds from the Private Placement were $45.2 million. The Company intends to use the net proceeds from the Private Placement for general corporate and working capital purposes and to fund strategic initiatives, including a portion of the Merger consideration described above.


The pro forma financial statements also include the effect of the Company entering into a Warrant Exercise Agreement (the “Exercise Agreement”) with Armistice Capital Master Fund, Ltd. (“Armistice”) on March 8, 2018, a holder of an outstanding warrant to purchase up to an aggregate of 2,400,000 shares of Common Stock, at an exercise price of $2.00 per share (the “Original Warrant”). Pursuant to the terms of the Exercise Agreement, Armistice has agreed to exercise, from time to time and in accordance with the terms of the Original Warrant, including certain beneficial ownership limitations set forth therein, the Original Warrant for cash (the “Warrant Exercise”). As a result of the Warrant Exercise, the Company received gross proceeds of $3.4 million on March 8, 2018 from the exercise of the 1.7 million shares of the Original Warrant, and expects to receive additional gross proceeds of up to $1.4 million thereafter from additional exercises of the remaining shares under the Original Warrant following Stockholder Approval. The Company expects to use the net proceeds from the exercise of the Original Warrant for general corporate and working capital purposes and to fund strategic initiatives.

These unaudited pro forma condensed combined financial statements should be read in conjunction with:

 

   

The Company’s historical consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 filed with the Securities and Exchange Commission on March 9, 2018;

 

   

The Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 6, 2018;

 

   

SafeOp Surgical Inc.’s Financial Statements with Independent Auditor’s report for the year ended December 31, 2017 filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K/A filed with the Securities and Exchange Commission on April 16, 2018.


Alphatec Holdings, Inc.

Unaudited Pro Forma Condensed Combined Balance Sheet

As of December 31, 2017 (In thousands)

 

     Alphatec
Historical
    SafeOp
Historical
    Pro Forma
Adjustments
Financing
        Pro Forma
Adjustments
SafeOp
Acquisitions
        Pro Forma
Combined
 

Assets

          

Current assets:

              

Cash and cash equivalents

   $ 22,466     $ 301     $ 47,797     A   $ (16,622   E   $ 53,942  

Accounts receivable, net

     14,822       55               14,877  

Inventories

     27,292       218               27,510  

Prepaid expenses and other current assets

     1,767       41               1,808  

Current assets of discontinued operations

     131                 131  
  

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total current assets

     66,478       615       47,797         (16,622       98,268  

Property and equipment, net

     12,670       23               12,693  

Intangible assets, net

     5,248       241           21,560     F     26,808  
             (241   G  

Goodwill

             14,085     H     14,085  

Other assets

     208                 208  

Noncurrent assets from discontinued operations

     56                 56  
  

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total assets

   $ 84,660     $ 879     $ 47,797       $ 18,782       $ 152,118  
  

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Liabilities And Stockholders’ Equity

              

Current liabilities:

              

Accounts payable

   $ 3,878     $ 221     $ 102     B   $ 138     I   $ 4,277  
             (62   J  

Accrued expenses

     22,246       164           62     J     22,472  

Current portion of long-term debt

     3,306                 3,306  

Commitments and contingencies

             3,200     K     3,200  

Current liabilities of discontinued operations

     312                 312  
  

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total current liabilities

     29,742       385       102         3,338         33,567  

Long-term debt less current portion

     37,767             3,000     L     40,767  

Other long-term debt

     20,206                 20,206  

Deferred tax liabilities

             2,189     M     2,189  

Convertible promissory note

       2,401           (2,401   N     —    
  

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total liabilities

     87,715       2,786       102         6,126         96,729  
  

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Redeemable preferred stock

     23,603       11,321           (11,321   N     23,603  

Stockholders’ equity:

              

+Series A convertible preferred stock

     —         —                 —    

Series B convertible preferred stock

     —         —         —       C         —    

Common stock

     2       1       —       D     (1   O     2  
             —       P  

Treasury Stock, 2 shares, at cost

     (97               (97

Additional paid in capital

     436,803       532       35,246     C     (532   O     487,605  
         4,800     D     10,756     P  

Stock warrants

       1       7,649     C     (1   O     9,299  
             1,650     Q  

Shareholder note receivable

     (5,000               (5,000

Accumulated other comprehensive income

     1,093                 1,093  

Accumulated deficit

     (459,459     (13,762         13,762     O     (461,117
             (1,658   R  
  

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total stockholders’ equity

     (26,658     (13,228     47,695         23,976         31,785  
  

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total liabilities and stockholders’ equity

   $ 84,660     $ 879     $ 47,797       $ 18,781       $ 152,117  
  

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 


Alphatec Holdings, Inc.

Unaudited Pro Forma Condensed Combined Statement of Operations

For the year ended December 31, 2017

(In thousands, except per share amounts)

 

     Alphatec
Historical
    SafeOp
Historical
    Pro Forma
Adjustments
Financing
            Pro Forma
Adjustments
SafeOp
Acquisitions
         Pro
Forma
Combined
 

Revenues

   $ 101,739     $ 246     $ —           $ —          $ 101,985  

Cost of Revenues

     39,406       123                  39,529  
  

 

 

   

 

 

              

 

 

 

Gross Profit

     62,333       123                  62,456  

Operating Expenses:

                 

Research and development

     4,920       801                  5,721  

Sales and marketing

     41,158       1,343                  42,501  

General and administrative

     23,220       1,352             (168   S      24,404  

Amortization of intangibles

     688               715     F      1,403  

Restructuring expenses

     2,206                    2,206  

Impairment on intangible assets

     (856                  (856
  

 

 

   

 

 

   

 

 

       

 

 

      

 

 

 

Total costs and expenses

     71,336       3,496       —             547          75,379  
  

 

 

   

 

 

   

 

 

       

 

 

      

 

 

 

Operating loss

     (9,003     (3,373     —             (547        (12,923

Interest expense, net

     (7,482     (13           (180   L      (7,675

Gain on change of fair value of warrants

     12,044                    12,044  

Other expenses, net

     (133                  (133
  

 

 

   

 

 

   

 

 

       

 

 

      

 

 

 

Loss from continuing operations before tax

   $ (4,574   $ (3,386   $ —           $ (727      $ (8,687
  

 

 

   

 

 

   

 

 

       

 

 

      

 

 

 

Income tax benefit

     (34                  (34
  

 

 

   

 

 

   

 

 

       

 

 

      

 

 

 

Loss from continuing operations

     (4,540     (3,386     —             (727        (8,653

Income from discontinued operations, net

     2,246                    2,246  
  

 

 

   

 

 

   

 

 

       

 

 

      

 

 

 

Net loss

   $ (2,294   $ (3,386   $ —           $ (727      $ (6,407
  

 

 

   

 

 

   

 

 

       

 

 

      

 

 

 

(Loss) Income per share, basic:

                 

Continuing operations

   $ (0.36                $ (0.47

Discontinued operations

     0.18                    0.12  
  

 

 

                

 

 

 

Net loss per share, basic:

   $ (0.18                $ (0.35

(Loss) Income per share, diluted:

                 

Continuing operations

   $ (1.25                $ (0.43

Discontinued operations

     0.17                    0.05  
  

 

 

                

 

 

 

Net loss per share, diluted

   $ (1.08                $ (0.38

Weighted average number of shares outstanding:

                 

Basic

     12,788         2,400        T        3,265     T      18,453  

Diluted

     13,282         28,946        U        6,397     U      48,625  

See the accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Statements, which are an integral part of these financial statements.


Alphatec Holdings, Inc.

Notes to Unaudited Pro Forma Condensed Combined Financial Statements

1. Description of Transaction and Basis of Presentation

Description of Transaction

On March 6, 2018, Alphatec Holdings, Inc. (the “Company”) and its newly-created wholly-owned subsidiary, Safari Merger Sub, Inc. (“Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with SafeOp Surgical, Inc., a Delaware corporation (“SafeOp”), certain Key Stockholders of SafeOp and a Stockholder Representative. The Merger Agreement provides for a reverse triangular merger (the “Merger”), which was consummated on March 8, 2018, in which Sub was merged into SafeOp, with SafeOp being the surviving corporation and a wholly-owned subsidiary of the Company. Under the terms of the Merger Agreement, the Company paid $15 million in cash, agreed to issue 3,265,132 shares of Common Stock, issued $3 million of notes that are convertible into 931,667 shares of Common Stock (the “Notes”), and issued warrants to purchase 2.2 million shares of Common Stock at an exercise price of $3.50 per share (the “Merger Warrants”). An additional 1,330,263 shares of Common Stock are issuable upon achievement of post-closing milestones.

In addition to the Merger, the pro forma financial statements include the effect of entering into a securities purchase agreement dated March 8, 2018, pursuant to which the Company sold in a private placement (the “Private Placement”) to certain institutional and accredited investors (collectively, the “Purchasers”), including certain directors and executive officers of the Company, at a purchase price of $1,000 per share, 45,200 shares (the “Preferred Shares”) of newly designated Series B Convertible Preferred Stock (the “Series B Convertible Preferred Stock”) (which Preferred Shares will be converted into approximately 14,349,236 shares (subject to adjustment as described below and in the Certificate of Designations) of the Company’s common stock (“Common Stock”) upon approval by the Company’s stockholders (“Stockholder Approval”), and warrants to purchase up to 12,196,851 shares of Common Stock at an exercise price of $3.50 per share (the “Private Offering Warrants”). The Private Offering Warrants will become exercisable following Stockholder Approval, are subject to certain ownership limitations in certain cases, and expire five years after the date of such Stockholder Approval. The aggregate gross proceeds from the Private Placement were approximately $45.2 million. The Company intends to use the net proceeds from the Private Placement for general corporate and working capital purposes and to fund strategic initiatives, including a portion of the Merger consideration described above.

The pro forma financial statements also include the effect of the Company entering into a Warrant Exercise Agreement (the “Exercise Agreement”) with Armistice Capital Master Fund, Ltd. (“Armistice”) on March 8, 2018, a holder of an outstanding warrant to purchase up to an aggregate of 2,400,000 shares of Common Stock, at an exercise price of $2.00 per share (the “Original Warrant”). Pursuant to the terms of the Exercise Agreement, Armistice has agreed to exercise, from time to time and in accordance with the terms of the Original Warrant, including certain beneficial ownership limitations set forth therein, the Original Warrant for cash (the “Warrant Exercise”). As a result of the Warrant Exercise, the Company received gross proceeds of $3.4 million on March 8, 2018 from the exercise of the 1.7 million shares of the Original Warrant, and expects to receive additional gross proceeds of up to $1.4 million thereafter from additional exercises of the remaining shares under the Original Warrant following Stockholder Approval. The Company expects to use the net proceeds from the exercise of the Original Warrant for general corporate and working capital purposes and to fund strategic initiatives.

Basis of Presentation

The unaudited pro forma condensed combined financial statement have been prepared based on the Company’s and SafeOp’s historical financial information, giving effect to the Merger and related adjustments described in these notes. The Company and SafeOp prepares its financial statement in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). Certain note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted as permitted by the Securities and Exchange Commission rules and regulations.

The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2017, gives effect to the Merger and the completed and anticipated financing as if they were completed on January 1, 2017


and the unaudited pro forma condensed combined balance sheet as of December 31, 2017, gives effect to the Merger and the completed and anticipated financing as if they had occurred on that date.

The historical financial information is adjusted in the unaudited pro forma condensed combined financial information to give effect to pro forma events and are based on (i) the historical consolidated results of operations and financial condition of the Company; (ii) the historical consolidated results of operations and financial condition of SafeOp; and (iii) pro forma events directly attributable to the proposed merger and with respect to the unaudited condensed combined statements of operations are expected to have a continuing impact on the combined results, as further described below.

The Company accounts for business combinations in accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 805, “Business Combinations.” The purchase price for the Merger has been allocated to the assets and liabilities acquired based on management’s preliminary estimates of the fair values of tangible and intangible assets acquired. Upon completion of detailed valuation studies the Company may make additional adjustments to the fair values, and these valuations could change significantly from those used to determine certain adjustments in the pro forma condensed combined financial statements.

Certain reclassifications have been made to the historical presentation of SafeOp to conform to the presentation used in the unaudited pro forma condensed combined financial information. These reclassifications have no net impact on the historical operating loss, loss from continuing operations, total assets, liabilities, or shareholders’ equity reported by the Company or SafeOp.

2. Purchase Price

In connection with the Merger, the Company agreed to pay $15 million in cash (subject to a working capital adjustment), agreed to issue 3,265,132 shares of Common Stock, issued Notes for $3 million, and issued Merger Warrants to purchase 2.2 million shares of Common Stock at an exercise price of $3.50 per share. In accordance with the terms of the Merger Agreement, the price per share of the Common Stock was based on the per share price at the time of entering into the Letter of Intent and the volume weighted average price per share of the Company’s Common Stock for the period commencing on December 31, 2017 and ending March 5, 2018. For accounting purposes, such shares were valued as of March 12, 2018, the date of issuance, at a per share price of $3.30; a total of $10.8 million. The Merger Warrants were fair valued at $1.6 million using the Black-Scholes valuation model. Additionally, a portion of the consideration transferred was to pay for certain SafeOp transaction costs incurred related to the Merger. As such, payments related to these reimbursements are included in the purchase price below.


The Company agreed to issue additional shares of Common Stock for up to $4.3 million upon achievement of post-closing milestones (the “Contingent Consideration”). The first milestone includes payment of up to $1.4 million 10 days after 501(k) submission of an application for regulatory clearance for an indication for use of a product that includes specifically recording of muscle activity, also known as electromyography (“EMG”). The second milestone includes a payment of up to $2.9 million 10 days after the receipt of 501(k) clearance from any regulatory authority for an indication for use of a product specifically EMG. The Contingent Consideration is recorded as a liability and measured at fair value using a probability-weighted income approach, utilizing significant unobservable inputs including the probability of achieving each of the potential milestones and an estimated discount rate related to the risks of the expected cash flows attributable to the milestones. The material factors that may impact the fair value of the Contingent Consideration, and therefore, this liability, are the probabilities of achieving the related milestones and the discount rate. Significant increases or decreases in any of the probabilities of success would result in a significantly higher or lower fair value, respectively. The fair value of the Contingent Consideration, and the associated liability relating to the Contingent Consideration at each reporting date, will be re-estimated with the changes in fair value reflected in earnings.

The total estimated purchase price is presented below (in thousands):

 

Cash

   $ 15,103  

Common Stock

     10,756  

Note

     3,000  

Warrants

     1,650  

Contingent Consideration

     3,200  
  

 

 

 

Total

   $ 33,709  
  

 

 

 

Pro Forma Adjustments

 

  A.

Reflects the consideration received from the Private Placement and the Warrant Exercise, net of issuance costs paid to date summarized as follows (in thousands):

 

Private Placement

   $ 45,200  

Issuance Costs

     (2,203

Warrant Exercise

     4,800  
  

 

 

 

Total

   $ 47,797  
  

 

 

 

 

  B.

Reflects the amount of the Private Placement issuance costs that were incurred but not yet paid as of the issuance date.

 

  C.

Reflects the issuance of 45,200 shares of Series B Convertible Preferred Stock with a par value of $0.0001 and the Private Offering Warrants, net of issuance costs. The total consideration received of $45.2 million and the issuance costs incurred of $2.3 million is allocated to the Series B Convertible Preferred Stock and the Private Offering Warrants on a relative fair value basis.

 

     Par Value      APIC  

Series B Convertible Preferred Stock

   $ —        $ 37,140  

Series B Convertible Preferred Stock Issuance Costs

        (1,894
  

 

 

    

 

 

 

Total

   $ —        $ 35,246  
  

 

 

    

 

 

 

Private Offering Warrants

     —          8,060  

Private Offering Warrants Issuance Costs

        (411
  

 

 

    

 

 

 

Total

   $ —        $ 7,649  
  

 

 

    

 

 

 


  D. Reflects the issuance of 2,400,000 shares of Common Stock with a par value of $0.0001 for $2 per share related to the Warrant Exercise (in thousands).

 

     Par value      APIC  

Common Stock

   $ —        $ 4,800  

 

  E. Reflects the amount of cash consideration paid for the Merger, plus cash paid for transaction related costs as follows (in thousands):

 

Cash consideration

   $ 15,103  

The Company’s transaction costs

     1,520  
  

 

 

 

Total

   $ 16,622  
  

 

 

 

The cash paid for the Company’s transaction costs includes $1.8 million paid on behalf of SafeOp.

 

  F. Reflects fair value adjustments for intangibles acquired in the Merger and related pro forma amortization adjustments. Pro forma amortization expense is based on an estimated useful life of one year for the EPAD Tradename. The in-process research and development (“IPR&D”) for the EMG technology is considered to have an indefinite life until the development is completed (i.e. once FDA clearance is obtained), at which point the Company will determine the intangible asset’s estimated useful life. The intangible assets acquired in the Merger are detailed below (in thousands):

 

     Fair
Value
     Remaining
Useful
Life (Years)
   Pro Forma
Amortization
Expense
 

EPAD Tradename

   $ 60      1    $ 60  

IPR&D

     8,400      N/A   

Developed technology

     13,100      20      655  
  

 

 

       

 

 

 

Total

   $ 21,560         $ 715  
  

 

 

       

 

 

 

 

  G. Reflects the elimination of SafeOp’s historical intangible asset value.

 

  H. Reflects the estimated amount of goodwill to be recorded (in thousands):

 

Purchase Price

   $ 33,709  

Less: Estimated fair value of the assets acquired:

  

Current assets

     (615

Property and equipment

     (23

EPADtradename

     (60

IPR&D

     (8,400

Developed technology

     (13,100

Plus: Estimated fair value of the liabilities assumed

  

Current liabilities

     385  

Deferred tax liability

     2,189  
  

 

 

 

Goodwill

   $ 14,085  
  

 

 

 

 

  I. Reflects the amount of the Merger transaction costs that were incurred but not yet paid as of the transaction date.

 

  J. Represents a reclassification of SafeOp accrued expenses from accounts payable into a separate line item, consistent with the Company’s presentation.

 

  K. Reflects the estimated fair value of the Contingent Consideration (refer to Note 2).


  L. Reflects the Notes issued as part of the consideration transferred and related estimated interest (in thousands). The Company determined that the issuance costs were not material and expensed the costs as incurred.

 

     Value      Annual
Interest
Rate
    Interest
Expense
 

Note

   $ 3,000        6   $ 180  

 

  M. Reflects the deferred tax liability recorded as part of the acquisition of the IPR&D.

 

  N. Reflects the conversion of the SafeOp convertible promissory notes and redeemable preferred stock into SafeOp equity prior to the Merger.

 

  O. Reflects the elimination of SafeOp’s shareholders equity. These adjustments include the net effect of converting the SafeOp convertible promissory notes and redeemable preferred stock into equity plus the elimination of those equity amounts.

 

  P. Reflects the issuance of 3,265,132 shares of Common Stock with a par value of $0.0001 and a closing price of $3.30, as part of the consideration transferred (refer to Note 2) (in thousands).

 

     Par Value      APIC  

Common Stock

   $ —        $ 9,818  

 

  Q. Reflects the issuance of the warrants as part of the consideration transferred (refer to Note 2).

 

  R. Reflects the recognition of transaction expense incurred as part of the Merger as follows (in thousands):

 

Cash

   $ 1,520  

Accounts Payable

     138  
  

 

 

 

Total

   $ 1,658  
  

 

 

 

 

  S. Reflects the elimination of transaction expenses related to the Merger recognized in the historical financial statements.

 

  T. Reflects the changes in the basic shares outstanding for the shares of Common Stock issued as part of the Warrant Exercise and Merger (in thousands).

 

Pro forma basic weighted average shares

  

Historical weighted average shares outstanding

     12,788  

Shares issued from Warrant Exercise

     2,400  

Shares issued as part of Merger consideration

     3,265  
  

 

 

 

Pro forma weighted average shares (basic)

     18,453  
  

 

 

 


  U. Reflects the changes in the diluted shares outstanding for the issuance of the Series B Convertible Preferred Stock, the Private Placement Warrants, the Notes, and the Merger Warrants (in thousands).

 

Pro forma diluted weighted average shares

  

Historical weighted average shares outstanding

     13,282  

Shares issued from Warrant Exercise

     2,400  

Shares issues as part of Merger consideration

     3,265  

Shares converted from Series B Convertible Preferred

     14,349  

Shares converted from Private Placement Warrants

     12,197  

Shares converted from Notes

     932  

Shares converted from Merger Warrants

     2,200  
  

 

 

 

Pro forma weighted average shares (diluted)

     48,625  
  

 

 

 

Income Taxes

Due to the Company’s ongoing operating losses, and the resulting inability to recognize any income tax benefit, there is no provision for income taxes in the pro forma condensed combined financial statement.