| Accounting Policies and Merger Pro Forma Adjustments |
| 3. |
Accounting Policies and Merger Pro Forma Adjustments |
Based on the Company’s review
of pre-Merger MyMD Florida’s summary of significant accounting policies disclosed in pre-Merger MyMD Florida’s financial statements,
the nature and amount of any adjustments to the historical financial statements of pre-Merger MyMD Florida to conform its accounting policies
to those of the Company are not expected to be significant. Upon consummation of the Merger, further review of pre-Merger MyMD Florida’s
accounting policies and financial statements may result in required revisions to pre-Merger MyMD Florida’s policies and classifications
to conform to the Company’s accounting policies.
The adjustments included in the
pro forma condensed combined balance sheet are as follows:
| |
(a) |
To record the disbursement of the $1,500,000 investment in Oravax under the Contribution and Assignment Agreement to be paid by the Company. |
| Description |
|
Debit |
|
|
Credit |
|
| Trade and Other Payables |
|
$ |
1,500,000 |
|
|
|
|
|
| Marketable Securities |
|
|
|
|
|
$ |
1,500,000 |
|
| |
(b) |
To record the effect on the Consolidated Balance Sheets from the reduction of research and development expense incurred during the three months ended March 31, 2021 that are non-recurring as the result of the Contribution Transaction. |
| Description |
|
Debit |
|
|
Credit |
|
| Accumulated Deficit |
|
$ |
10,290 |
|
|
|
|
|
| Common Stock |
|
|
|
|
|
$ |
10,290 |
|
| |
(1) |
To record the payoff of the Starwood Line of Credit plus accumulated interest upon close of the Merger. |
| Description |
|
Debit |
|
|
Credit |
|
| Starwood Line of Credit |
|
$ |
2,936,626 |
|
|
|
|
|
| Due to Related Party |
|
|
185,577 |
|
|
|
|
|
| Starwood Line of Credit – Accrued Interest |
|
|
257,411 |
|
|
|
|
|
| Marketable Securities |
|
|
|
|
|
$ |
3,379,614 |
|
| |
(2) |
To record interest expense on the Company/pre-Merger MyMD Florida Bridge Loan. |
| Description |
|
Debit |
|
|
Credit |
|
| Accumulated Deficit |
|
$ |
26,137 |
|
|
|
|
|
| Other Receivables |
|
|
|
|
|
$ |
26,137 |
|
| |
(3) |
To reclassify the pre-Merger MyMD Florida Common Stock and Additional Paid-In Capital |
| Description |
|
Debit |
|
|
Credit |
|
| Pre-Merger MyMD Florida Common Stock |
|
$ |
4,004 |
|
|
|
|
|
| Pre-Merger MyMD Florida Additional Paid-In Capital |
|
|
43,411,488 |
|
|
|
|
|
| Common Stock |
|
|
|
|
|
$ |
43,415,492 |
|
| |
(4) |
To eliminate the Company/pre-Merger MyMD Florida Bridge Loan. |
| Description |
|
Debit |
|
|
Credit |
|
| Bridge Loan – Related Party |
|
$ |
3,026,137 |
|
|
|
|
|
| Other Receivables |
|
|
|
|
|
$ |
3,026,137 |
|
| |
(5) |
To record the expenses related to the modification of the outstanding pre-Merger MyMD Florida stock options’ expiration dates to comply with the Merger Agreement. |
| Description |
|
Debit |
|
|
Credit |
|
| Accumulated Deficit |
|
$ |
37,373,172 |
|
|
|
|
|
| Common Stock |
|
|
|
|
|
$ |
37,373,172 |
|
| |
(6) |
To record the expenses related to the accelerated vesting of the outstanding unvested Restricted Stock Units pursuant to the terms of the restricted stock unit agreements and record the federal and state withholding liability. |
| Description |
|
Debit |
|
|
Credit |
|
| Accumulated Deficit |
|
$ |
979,757 |
|
|
|
|
|
| Trade and Other Payables |
|
|
|
|
|
$ |
688,913 |
|
| Common Stock |
|
|
|
|
|
|
290,844 |
|
| |
(7) |
To reclassify the Company’s deficit account. |
| Description |
|
Debit |
|
|
Credit |
|
| Common Stock |
|
$ |
139,662,586 |
|
|
|
|
|
| Accumulated Deficit |
|
|
|
|
|
$ |
139,662,449 |
|
| |
(8) |
To record the acquisition value of the Merger in excess of tangible assets acquired. |
| Description |
|
Debit |
|
|
Credit |
|
| Goodwill |
|
$ |
18,467,102 |
|
|
|
|
|
| Common Stock |
|
|
|
|
|
$ |
18,467,102 |
|
The adjustment included in the
pro forma condensed combined statement of comprehensive loss is as follows:
| |
(aa) |
To record the interest on the Company/pre-Merger MyMD Florida Bridge Loan for the three months ended March 31, 2021. |
| Description |
|
Debit |
|
|
Credit |
|
| Interest and Dividend Expense |
|
|
|
|
|
$ |
26,137 |
|
| |
|
|
|
|
|
|
|
|
| |
(bb) |
To record the elimination of a credit balance in research and development expense incurred during the three months ended March 31, 2021 that are non-recurring as the result of the Contribution Transaction. (Note 3) |
| Description |
|
Debit |
|
|
Credit |
|
| Research and Development Expense |
|
$ |
10,290 |
|
|
$ |
|
|
| |
|
|
|
|
|
|
|
|
The pro forma condensed combined
basic and diluted earnings per share from continuing operations have been adjusted to reflect the pro forma condensed combined net loss
for the three months ended March 31, 2021. In addition, the numbers of shares used in calculating the pro forma condensed combined basic
and diluted net loss per share have been adjusted to reflect the estimated total number of shares of common stock of the combined company
outstanding as of the closing of the Merger. The estimated total numbers of shares of common stock of the combined company outstanding
as of the closing of the Merger was calculated as the estimated adjusted total shares of common stock issued and outstanding of the combined
company of 37,282,520, plus 4,188,315 shares reserved for pre-Merger MyMD Florida stock options assumed by the Company at closing, 986,486
shares reserved for pre-funded warrants of the Company, and 36,496 shares reserved for the Series D Convertible Preferred stock as described
in Note 2, “Preliminary Purchase Price.” The following table sets forth the calculation of the pro forma weighted average
number of common shares outstanding — basic and diluted:
| |
|
|
|
|
Pro Forma
Weighted Average Shares |
|
| |
|
All Shares
Issued/Issuable
upon Merger
|
|
|
Pro Forma Weighted Average Shares for the
Year Ended
March 31, 2021(3)
|
|
| Pre-Merger MyMD Florida: |
|
|
|
|
|
|
|
|
| Common shares issued and outstanding |
|
|
73,991,413 |
|
|
|
- |
|
| Stock options outstanding |
|
|
10,853,360 |
|
|
|
- |
|
| Total pre-Merger MyMD Florida share basis |
|
|
84,844,773 |
|
|
|
- |
|
| Post conversion basis at the Exchange Ratio of 0.7718 |
|
|
65,479,931 |
|
|
|
|
|
| Effect of 1-for-2 reverse stock split |
|
|
(32,738,309 |
) |
|
|
|
|
| Post reverse split basis at the Exchange Ratio of 0.7718 |
|
|
32,741,622 |
|
|
|
- |
|
| Recapitalization/Conversion of pre-Merger MyMD Florida common shares into Company common shares based on the Exchange Ratio: |
|
|
28,553,307 |
|
|
|
28,553,307 |
|
| Recapitalization/Conversion of pre-Merger MyMD Florida stock options into Company common shares based on the Exchange Ratio(1) |
|
|
4,188,315 |
|
|
|
- |
|
| |
|
|
32,741,622 |
|
|
|
28,553,307 |
|
| |
|
|
|
|
|
|
|
|
| The Company pre-Merger: |
|
|
|
|
|
|
|
|
| Common shares: issued and outstanding(2) |
|
|
8,326,730 |
|
|
|
8,544,298 |
|
| Post-merger: |
|
|
|
|
|
|
|
|
| Series D Convertible Preferred stock converted to common stock |
|
|
36,496 |
|
|
|
- |
|
| Restricted Stock Units converted to common stock; vesting accelerated to the effective date |
|
|
402,483 |
|
|
|
402,483 |
|
| Pre-funded warrants convertible to common stock |
|
|
986,486 |
|
|
|
- |
|
| |
|
|
9,752,195 |
|
|
|
8,946,781 |
|
| Estimated adjusted total shares of common stock for the combined entity |
|
|
42,493,817 |
|
|
|
37,500,088 |
|
| (1) |
Pursuant to the terms of the Merger Agreement, shares have been allocated to pre-Merger MyMD Florida’s outstanding stock options, however, there is no requirement for these options to be exercised as of the effective date of the Merger and are therefore being treated as unissued shares for the purposes of calculating the weighted-shares outstanding. |
| (2) |
The Company’s pre-Merger common shares issued and outstanding of 8,326,730 was the actual number of common shares issued and outstanding as of March 31, 2021. |
| (3) |
All outstanding stock options, Series D convertible preferred stock and pre-funded warrants exercisable for the combined company’s common stock are anti-dilutive and therefore excluded from the weighted-average shares calculation for the three months ended March 31, 2021 as referenced in the pro forma condensed combined Statement of Comprehensive Loss. |
Liquidity
As of March 31, 2021, the Company’s cash on
hand was $569,366 and marketable securities were $30,480,537. The Company has incurred a net loss from continuing operations of $1,447,271
and a net loss from discontinued operations of $35,392 for the three months ended March 31, 2021. As of March 31, 2021, the Company had
working capital of $31,923,792, stockholders’ equity of $33,423,792 and an accumulated deficit of $138,646,402. During the three
months ended March 31, 2021, cash flows used in operating activities were $2,482,947, consisting primarily of a net loss of $1,482,663
and a decrease in trade and other payables of $1,368,151 offset by non-cash share-based compensation of $326,989. Since its inception,
the Company has met its liquidity requirements principally through the sale of its common stock in public and private placements.
The Company evaluated the
current cash requirements for operations in conjunction with management’s strategic plan and believes that the Company’s current
financial resources as of the date of the issuance of these condensed consolidated financial statements, are sufficient to fund its current
operating budget and contractual obligations as of March 31, 2021 as they fall due within the next twelve-month period, alleviating any
substantial doubt raised by the Company’s historical operating results and satisfying its estimated liquidity needs for twelve months
from the issuance of these condensed consolidated financial statements.
|