| Reverse Merger | 3 .
REVERSE MERGER We completed the Merger with Regado as discussed in Note 1. Based on the terms of the Merger, Private Tobira was deemed the acquiring company for accounting purposes, and the transaction has been accounted for as a reverse acquisition under the acquisition method of accounting for business combinations in accordance with U.S. GAAP. Accordingly, the assets and liabilities of Regado have been recorded as of the Merger closing date at estimated fair value. Immediately prior to the effective date of the Merger, the principal and accrued interest of outstanding convertible notes of Private Tobira converted into shares of Series B preferred stock of Private Tobira. Further, all outstanding shares of preferred stock of Private Tobira converted into shares of common stock of Private Tobira. Each Private Tobira warrant issued to Square 1 Bank in connection with a Loan and Security Agreement between Square 1 Bank and Private Tobira dated as of November 9, 2011 and Oxford Finance LLC in connection with a Loan and Security Agreement between Oxford Finance LLC and Tobira dated as of June 30, 2014 that were outstanding and unexercised as of and immediately prior to the effective date of the Merger were exchanged for warrants to purchase Regado common stock. All other Private Tobira warrants were terminated and cancelled in full. At the effective date of the Merger, each outstanding share of common stock of Private Tobira was converted into the right to receive 1.4302 shares of Regado common stock as adjusted for the one for nine reverse stock split, or the Exchange Ratio, as determined pursuant to the terms of the Merger Agreement, and all outstanding options, warrants, or other rights to purchase shares of capital stock of Private Tobira were exchanged for rights to acquire Regado common stock, as renamed Tobira. No fractional shares of Regado common stock were issued in connection with the Merger, and holders of Private Tobira capital stock were entitled to receive cash for any fractional share ownership in lieu of stock thereof. After consummation of the Merger, Private Tobira stockholders owned a majority of the fully diluted common stock of Tobira. Purchase Consideration The purchase price for Regado on May 4, 2015, the closing date of the Merger, was as follows (in thousands):
Fair value of Regado common stock outstanding (1)
$
40,667
Fair value of Regado Series F convertible preferred stock outstanding (2)
2,420
Fair value of Regado vested stock options (3)
3,036
Total purchase price
$
46,123
(1)
Comprised of 3,734,536 shares of common stock outstanding at the date of the Merger based on the closing price of $10.89 per share as adjusted for the one for nine reverse stock split on May 4, 2015;
(2)
Comprised of 222,222 shares of common stock equivalents, as converted, at the date of the Merger based on the closing price of $10.89 per share as adjusted for the one for nine reverse stock split on May 4, 2015; and
(3)
Consideration transferred includes 551,363 Regado vested equity awards assumed and deemed attributable to pre-combination services to Regado. Allocation of Purchase Consideration Under the acquisition method of accounting, the total purchase price was allocated to tangible and identifiable intangible assets acquired and liabilities assumed of Regado on the basis of their estimated fair values as of the transaction closing date on May 4, 2015. The Company engaged a third party valuation firm to assist management in its analysis of the fair value of Regado. All estimates, key assumptions, and forecasts were either provided by or reviewed by management. While the Company chose to utilize a third party valuation firm, the fair value analysis and related valuations represent the conclusions of management and not the conclusions or statements of any third party. The excess of the total purchase price over the fair value of assets acquired and liabilities assumed was allocated to goodwill. The following table summarizes the allocation of the purchase consideration to the assets acquired and liabilities assumed based on their fair values as of May 4, 2015 (in thousands):
Cash, cash equivalents and restricted cash
$
33,232
Prepaid expenses and other assets acquired
1,408
In-process research and development
12,205
Goodwill
5,110
Deferred tax liability
(4,393
)
Other liabilities
(1,439
)
Total
$
46,123
The Company believes that the historical values of Regado’s current assets and current liabilities approximate fair value based on the short-term nature of such items. IPR&D consists of intellectual property related to Regado’s Aptamer platform and the estimated net present value of future cash flows expected to be generated from commercialization. The valuation of the Aptamer platform technology was valued using the income approach which values the asset by estimating the present value of future economic benefits that the asset is expected to produce. The Company will not amortize IPR&D until research and development is complete and the asset is reclassified to a definite-lived amortizable asset. Goodwill is calculated as the difference between the fair value of the consideration expected to be transferred and the values assigned to the identifiable tangible and intangible assets acquired and liabilities assumed. Goodwill is not expected to be deductible for tax purposes. The deferred tax liability of $4.4 million relates to the temporary difference associated with the $12.2 million value of IPR&D. The deferred tax liability was recorded based on an effective tax rate of 35.99%. Other liabilities include $0.9 million liability for the settlement of common stock for Merger related fees to financial advisors that were settled by the issuance of 78,213 shares of common stock. The fair value of the liability was determined based upon the fair value of Regado common stock using the closing price of $10.89 per share, as adjusted for the one for nine reverse stock split on May 4, 2015. The Company’s operating results include operating expenses of $0.3 million attributable to the former Regado business activities for the period of May 5, 2015 to June 30, 2015 and are included in the Company’s condensed financial statements for the three and six months ended June 30, 2015. The unaudited financial information in the following table summarizes the combined results of operations of the Company and Regado, on a pro forma basis, as if the Merger had occurred at the beginning of the periods presented (in thousands):
Three Months Ended June 30,
Six Months Ended June 30,
2015
2014
2015
2014
Net loss
$
(10,449
)
$
(26,655
)
$
(23,853
)
$
(45,109
)
Deemed dividend
—
—
—
(14,890
)
Net loss attributable to stockholders
$
(10,449
)
$
(26,655
)
$
(23,853
)
$
(59,999
)
Net loss attributable to preferred stockholders
$
—
$
(454
)
$
—
$
(1,041
)
Net loss attributable to common stockholders, basic and diluted
$
(10,449
)
$
(26,201
)
$
(23,853
)
$
(58,958
)
Net loss per share, basic and diluted
$
(0.70
)
$
(2.02
)
$
(1.60
)
$
(4.65
) The above unaudited pro forma information was determined based on historical GAAP results of the Company and Regado. The unaudited pro forma combined results are not necessarily indicative of what the Company’s combined results of operations would have been if the acquisition was completed on January 1, 2014. The unaudited pro forma combined net loss includes pro forma adjustments primarily relating to the following non-recurring items directly attributable to the business combination:
·
Elimination of transaction costs of $2.5 million and $5.2 million for the three and six months ended June 30, 2015, respectively;
·
Elimination of stock-based compensation expense of $1.8 million related to the acceleration of vesting and modification of post-termination exercise periods of Regado stock option awards in connection with the Merger for the three and six months ended June 30, 2015;
·
Elimination of $1.4 million expense related to severance agreements and transaction bonuses directly attributable to the Merger for the three and six months ended June 30, 2015;
·
Elimination of interest expense of $0.8 million and $1.7 million for the three and six months ended June 30, 2015, respectively, and $1.2 million and $2.2 million for the three and six months ended June 30, 2014, respectively, related to the conversion of Private Tobira’s convertible notes in connection with the Merger; and
·
Elimination of the change in fair value of preferred stock warrant liabilities of $0.1 million of expense and $1.9 million of income for the three and six months ended June 30, 2015, respectively, and $1.5 million of expense and $0.7 million of expense for the three and six months ended June 30, 2014, respectively to reflect 1) the net exercise and cancellation of warrants issued in connection with the convertible notes payable and 2) the conversion of the Oxford Finance LLC, Square 1, and Comerica warrants from warrants on preferred stock to warrants on common stock eliminating the terms that caused the preferred stock warrants to be classified as a liability. The combined transaction costs of the Company were $6.8 million which were expensed as incurred. |
