Note 11 – Subsequent Events

Merger Agreement

On January 18, 2017, PharmAthene, entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”), pursuant to which its wholly owned subsidiary, Mustang Merger Sub, Inc., will be merged with and into Altimmune, Inc., a Delaware corporation (“Altimmune”), with Altimmune as the surviving subsidiary (“Merger 1”), and immediately thereafter, Altimmune will be merged with and into Mustang Merger Sub LLC, with Mustang Merger Sub LLC as the surviving entity in such merger (“Merger 2”, and together with Merger 1, the “Mergers”). Following the consummation of the Mergers, PharmAthene will change its name to “Altimmune, Inc.”.

Pursuant to the terms and conditions of the Merger Agreement, at the effective time of Merger 1 (the “Effective Time”), each of Altimmune’s outstanding shares of common stock and preferred stock (excluding Altimmune treasury shares, shares of Altimmune owned by PharmAthene or its subsidiaries or dissenting shares) will be converted into the right to receive a number of shares of PharmAthene common stock such that the holders of outstanding equity of Altimmune immediately prior to the Effective Time will own 58.2% of the outstanding equity of PharmAthene immediately following the Effective Time and holders of outstanding equity of PharmAthene immediately prior to the Effective Time will own 41.8% of the outstanding equity of PharmAthene immediately following the Effective Time (the “Exchange Ratio”), in each case, on an as converted and fully diluted basis. No fractional shares of PharmAthene common stock will be issued in connection with the Mergers as a result of the conversion described above, and any fractional share of PharmAthene common stock that would thereby be issuable will be rounded up to the next whole share. In addition, all outstanding Altimmune options, as well as Altimmune’s 2001 Employee Stock Option Plan and its Non-Employee Stock Option Plan, each as amended from time to time, will be assumed by PharmAthene. Each option or warrant to purchase one share of Altimmune common stock will be converted into an option or warrant, as the case may be, to purchase a number of shares of PharmAthene common stock representing the number of Altimmune shares for which the exchanged option or warrant was exercisable multiplied by the Exchange Ratio. The exercise price will be proportionately adjusted.

The Merger Agreement provides that at, and immediately after, the Effective Time the size of PharmAthene’s Board of Directors (the “Board”) will initially consist of seven directors. This Board will be comprised of four directors designated by Altimmune and three directors designated by PharmAthene. Altimmune’s current Chief Executive Officer, Bill Enright, is expected to serve as the Chief Executive Officer of the combined company, and Altimmune’s current Chief Financial Officer, Elizabeth Czerepak, is expected to serve as its Chief Financial Officer.

The Merger Agreement also obligates PharmAthene to submit to its stockholders, at a special stockholder meeting, a proposal to approve the Mergers, approve and adopt an amendment to its Certificate of Incorporation to authorize its Board of Directors to effect a reverse stock split prior to the Effective Time at a reverse stock split ratio in the range mutually agreed to by Altimmune and PharmAthene’s Board of Directors, and approve certain other related proposals specified in the Merger Agreement.

Warrant Exercise

Warrants to purchase 903,996 shares of common stock were exercised on January 6, 2017 at an exercise price of $1.63 per share. The fair value of the exercised warrants, which were classified as derivative liabilities, was approximately $1.6 million at the date of exercise.

Dividend Payment

On November 17, 2016, PharmAthene declared a special one-time cash dividend of $2.91 per share of common stock. The special dividend was paid on February 3, 2017 to stockholders of record as of January 24, 2017. The one-time special dividend was funded with approximately 98% of the after tax net cash proceeds that the Company received from SIGA in satisfaction of a judgment owed to PharmAthene by SIGA. In total, PharmAthene received payment of approximately $217.1 million (including interest) from SIGA in connection with the judgment.