EX-99.3 3 dex993.htm UNAUDITED PRO FORMA FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Unaudited Pro Forma Financial Statements and Supplementary Data

Exhibit 99.3

Index to Pro Forma Financial Statements and Supplementary Data

 

     Page  

Unaudited Pro Forma Combined and Consolidated Financial Information

     F-2   

Unaudited Pro Forma Combined and Consolidated Statement of Operations

     F-3   

Notes to the Unaudited Pro Forma Combined and Consolidated Statement of Operations

     F-4   

 

F-1


Unaudited Pro Forma Combined and Consolidated Financial Information

On December 29, 2010, Transgenomic, Inc. (“TBIO”) completed the acquisition from Clinical Data, Inc (“CLDA”) of substantially all of CLDA’s assets and rights relating to the FAMILION Product Line, a family of proprietary genetic tests for cardiac syndromes, including cardiac channelopathies and cardiomyopathies and an expanded menu of genetic tests for these inherited cardiac syndromes. In addition, it has expertise in the development and commercialization of other genetic and pharmacogenetic biomarker tests related to these inheritable diseases and to drug response.

The pro forma combined and consolidated financial statements should be read in conjunction with TBIO’s historical audited consolidated financial statements and notes thereto in Form 10-K filed on March 14, 2011, TBIO’s Current Report Form 8-K filed on January 4, 2011 and the historical audited special-purpose carve out financial statements and notes thereto of the FAMILION Product Line, A Product Line Owned by CLDA, as of and for the years ended March 31, 2010 and 2009 which are included as Exhibit 99.2 to this Current Report on Form 8-K/A.

The unaudited pro forma combined and consolidated financial information, while helpful in illustrating the financial characteristics of the acquisition of the FAMILION Product Line to the combined and consolidated company under one set of assumptions, it does not reflect the benefits of any potential cost savings or opportunities to earn additional revenue and, accordingly, does not attempt to predict or suggest future results. It also is not necessarily indicative of the combined and consolidated financial condition or results of operations of future periods or the combined and consolidated financial condition or results of operations that actually would have been realized had the acquisition occurred during this period.

 

F-2


Transgenomic, Inc. and Subsidiaries

Unaudited Pro Forma Combined and Consolidated Statements of Operations

(Dollars in thousands, except per share amounts)

 

     For the Year Ended December 31,
2010
             
     Transgenomic,
Inc.
    FAMILION
Product  Line
    Pro forma
Adjustments
    Pro forma
Combined
 

NET SALES

   $ 20,048      $ 13,685        —        $ 33,733   

COST OF GOODS SOLD

     10,284        5,052        —          15,336   
                                

Gross profit

     9,764        8,633        —          18,397   

OPERATING EXPENSES:

        

Selling, general and administrative

     11,071        10,566        (1,005 ) (a)      20,632   

Research and development expense

     2,305        3,280        —          5,585   
                                

Total costs and expenses

     13,376        13,846        (1,005     26,217   
                                

(Loss) from operations

     (3,612     (5,213     1,005        (7,820

Other Income (expense):

        

Interest income (expense), net

     (4     (9     (1,332 ) (b)      (1,345

Fair value adjustment

     —          —          967   (c)      967   

Other income

     632        —          —          632   
                                

Other income (expense), net

     628        (9     (365     254   
                                

(Loss) from continuing operations before provision for income taxes

     (2,984     (5,222     640        (7,566

Less: Provision for income taxes

     150        —          —     (d)      150   
                                

Net (loss)

     (3,134     (5,222     640        (7,716

Preferred Dividends

         600   (e)      600   
                                

Net (loss) attributable to the common shareholders

   $ (3,134   $ (5,222   $ 40      $ (8,316
                                

(Loss) per share of common stock:

        

Basic and fully diluted

   $ (0.06       $ (0.17
                    

Weighted average number of shares outstanding:

        

Basic and fully diluted

     49,243,839            49,243,839   
                    

See accompanying notes to unaudited pro forma combined and consolidated statements of operations.

 

F-3


Transgenomic, Inc. and Subsidiaries

Unaudited Pro Forma Combined and Consolidated Statements of Operations

(Dollars in thousands, except per share amounts)

 

1. Basis of Presentation

The statements contained in this section are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. Such statements are intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically identified by the words “believe,” “expect, “anticipate,” “intend,” “estimate” and similar expressions. These forward-looking statements are based largely on management’s expectations and are subject to a number of uncertainties. Actual results could differ materially from these forward-looking statements. We do not undertake any obligation to update publicly or revise any forward-looking statements.

We acquired the FAMILION Product Line (family of genetic tests and biomarkers) from PGxHealth (“PGx”) with total consideration of $18.8 million. PGx is a subsidiary of Clinical Data, Inc. (NasdaqGM:CLDA). We secured $6.0 million of financing from entities affiliated with Third Security, LLC, a leading life sciences investment firm, to fund the cash portion of our acquisition of the FAMILION Product Line (“Third Security Financing”). This strategic acquisition provides us with proprietary genetic commercial tests that have an established revenue base, proprietary biomarker assays, an additional CLIA-certified laboratory operation and established test reimbursement and coverage policies that offer access to testing for an estimated 280 million patients. Total consideration also included assumed liabilities of $.453 million and incurred contingent liabilities of $2.7 million.

Under the terms of the Third Security Financing, We issued an aggregate of 2,586,205 shares of the Company’s newly created Series A convertible preferred stock to certain affiliates of Third Security for an aggregate purchase price of $6.0 million. Additionally We issued such affiliates of Third Security warrants to purchase an aggregate of up to 1,293,102 shares of Series A preferred stock at an exercise price of $2.32 per share. The Series A preferred shares issuable pursuant to the purchase agreement and upon exercise of the warrants are convertible into shares of our common stock at a conversion price of $0.58 per share, for an aggregate of 15,517,228 million shares of common stock. Upon full exercise of the warrants, We will receive approximately $3.0 million.

The pro forma combined and consolidated financial statements should be read in conjunction with our historical audited consolidated financial statements and notes thereto in Form 10-K filed on March 14, 2011, (ii) our Current Report Form 8-K filed on January 4, 2011 and (iii) the historical audited special-purpose carve out financial statements and notes thereto of the FAMILION Product Line, as of and for the years ended March 31, 2010 and 2009, which are included as Exhibit 99.2 to this Current Report on Form 8-K/A.

The unaudited pro forma combined and consolidated financial information, while helpful in illustrating the financial characteristics of the acquisition of FAMILION Product Line to the combined and consolidated company under one set of assumptions, does not reflect the benefits of any potential cost savings or opportunities to earn additional revenue and, accordingly, does not attempt to predict or suggest future results. It also is not necessarily indicative of the combined and consolidated financial condition or results of operations of future periods or the combined and consolidated financial condition or results of operations that actually would have been realized had the acquisition occurred during this period.

 

F-4


Transgenomic, Inc. and Subsidiaries

Unaudited Pro Forma Combined and Consolidated Statements of Operations

(Dollars in thousands, except per share amounts)

 

2. Purchase Price

 

Consideration

   Dollars  in
Thousands
 

Cash

   $ 6,000   

Notes payable

     9,628   

Assumed Liabilities

     452   

Contingent Liabilities

     2,736   
        

Fair value of consideration transferred

   $ 18,816   
        

The following represents the purchase price allocation:

 

     Dollars in
Thousands
     Estimated
Useful Life
 

Accounts Receivable, net

   $ 3,222      

Property and Equipment

     639         3 years   

Identifiable Intangible assets – acquired technology

     6,535         7 - 8 years   

Identifiable Intangible assets – third party payor relationships

     367         N/A   

Identifiable Intangible assets – assay royalties

     1,434         7 years   

Identifiable Intangible assets – trade names and trademarks

     344         7 years   

Unidentifiable Intangible assets – goodwill

     6,275         N/A   
           

Total Purchase Price

   $ 18,816      
           

Acquisition related costs included in selling, general and administrative expenses in our Income Statement (TBIO December 31, 2010 Form 10-K) for the year ended December 31, 2010 were $0.8 million. We incurred $0.2 million in acquisition related costs to issue preferred stock which were recorded against our preferred stock (TBIO December 31, 2010 Form 10-K).

 

F-5


Transgenomic, Inc. and Subsidiaries

Unaudited Pro Forma Combined and Consolidated Statements of Operations

(Dollars in thousands, except per share amounts)

 

3. Proforma Adjustments

Adjustments included in the column under the heading “Pro Forma Adjustments” in the Unaudited Pro Forma Combined and Consolidated Statements of Operations correspond with the following:

 

(a)

   Expense for acquisition related costs    $ (800
   Annual amortization expense recognized on identified intangible assets (see Note 2 above) resulting from acquisition assuming that the useful life is 7 - 8 years.      1,165   
   Annual depreciation expense recognized on identified property and equipment (see Note 2 above) resulting from acquisition assuming that the useful life is 3 years      213   
   Remove historical FAMILION amortization and depreciation    $ (1,583
           
      $ (1,005
           

(b)

   Annual interest expense based on notes to seller    $ 899   
   Estimated preferred stock, warrant and conversion feature accretion      433   
           
      $ 1,332   
           

(c)

   Estimated warrant and conversion feature fair value adjustment    $ (967
           

(d)

   There is no pro forma income tax provision.    $ —     
           

(e)

   Preferred stock dividend    $ 600   
           

 

F- 6