Full Press Release Details
Unaudited Pro Forma Condensed Combined Financial Statements
of Matinas BioPharma Holdings Inc.
The following unaudited pro forma condensed combined financial
information has been prepared to reflect adjustments to the financial condition and results of operations of Matinas Biopharma
Holdings, Inc. (the "Company" or "Matinas") to give the estimated effects of our acquisition of Aquarius
Biotechnologies Inc., a Delaware corporation ("Aquarius").
On January 29, 2015, Matinas entered into an Agreement
and Plan of Merger (the "Merger Agreement") with Aquarius, Saffron Merger Sub, Inc., a Delaware corporation and a wholly-owned
subsidiary of the Company ("Merger Sub") and J. Carl Craft, as the stockholder representative. Aquarius is a clinical-stage
biopharmaceutical company focused on the development and commercialization of new drugs using its innovative drug delivery platform
with an initial focus on developing drugs with application in infectious diseases. The Aquarius drug delivery platform is based
on its proprietary cochleate technology. Aquarius' lead product candidate is an application of cochleate technology to a
broad spectrum anti-fungal drug called amphotericin B, for which Aquarius has completed its single-dose Phase 1 study.
The merger contemplated by the Merger Agreement (the "Merger")
became effective on January 29, 2015, following the satisfaction or waiver of the conditions described in the Merger Agreement,
including approval of the transaction by 100% of Aquarius' stockholders pursuant to the Merger, the Merger Sub merged with
and into Aquarius, with Aquarius surviving the Merger as a wholly-owned subsidiary of the Company. The Merger is intended to qualify
as a tax-free reorganization for U.S. federal income tax purposes.
At the effective time of the Merger, each issued and outstanding
share of Aquarius' common stock (including each share of Aquarius' common stock underlying outstanding convertible
notes, which shares were deemed issued and outstanding at the effective time) was converted into and the right to receive an amount,
without interest, equal to the per share merger consideration, which is the sum of the per share closing consideration and the
per share milestone consideration, and each share of Aquarius' common stock held in treasury was cancelled and extinguished
without any payment or distribution. Pursuant to the terms of the Merger Agreement, the Company is obligated to issue an aggregate
of up to 5,000,000 shares of the Company's common stock, par value $0.0001 per share stock (the "Common Stock")
at closing, subject to adjustment as set forth in the Merger Agreement. At closing, the Company issued 4,608,020 shares (the "Closing
Shares") of the Company's Common Stock as closing consideration at a price per share of $0.46 representing the close
of trading price on the day of the closing. The number of Closing Shares may be adjusted after the closing under the terms of the
Merger Agreement but in no event shall the number of Closing Shares exceed 5,000,000 shares of the Company's Common Stock.
In addition, subject to the Company's right of setoff for indemnification claims, the Company may issue up to an additional
3,000,000 shares (the "Additional Shares") of Common Stock upon the achievement of certain milestones. The milestone
consideration consists of (i) 1,500,000 shares issuable upon the dosing of the first patient in a phase III trial sponsored by
the Company for a product utilizing Aquarius' proprietary drug cochleate technology and (ii) 1,500,000 shares issuable upon
FDA approval of the first NDA submitted by the Company for a product utilizing Aquarius' proprietary drug cochleate technology.
As of the effective time of the Merger, following the issuance
of the Closing Shares, the former Aquarius stockholders collectively own approximately 8% of the aggregate number of shares of
the Common Stock outstanding (on a fully diluted basis), and the stockholders of the Company as of immediately prior to the Merger
(the "Company Stockholders") own approximately 92% of the aggregate number of shares of the Common Stock outstanding
(on a fully diluted basis). These percentage figures do not take into account the potential issuance of the additional shares or
the potential effect of indemnification claims.
Under certain limited circumstances, the Company will be required
to transfer Aquarius' cochleate technology back to the former shareholders of Aquarius. This transfer would be required under
the Merger Agreement in the event the following conditions are met: (i) no milestone events have occurred on or before the two-year
anniversary of the effective time of the Merger (the "Transfer Date"), (ii) during such period the Company shall
have discontinued efforts to develop or commercialize the cochleate technology (as conclusively demonstrated by Company's
omission of the cochleate technology in at least two consecutive royalty, progress and payment reports delivered to Rutgers University
pursuant to the license agreement entered into between Aquarius and Rutgers) and (iii) as of the Transfer Date, no unresolved indemnification
claims for the Company and its indemnified parties are pending. If the foregoing conditions are met, the Company would transfer
the cochleate technology to the stockholder representative or to a newly formed entity as directed by the stockholder representative
(in either case for the benefit of the former Aquarius stockholders) following receipt of any necessary third party consents required
for the transfer, which the Company shall use its commercially reasonable efforts to obtain.
The Merger has been accounted for as a
business combination (in accordance with ASC 805 Business Combinations) and, as such, the Aquarius assets acquired and liabilities
assumed have been recorded at their respective fair values as of the effective date of the merger. The determination of fair value
for the identifiable tangible and intangible assets acquired and liabilities assumed requires extensive use of accounting estimates
and judgments. Significant estimates and assumptions include, but are not limited to: determining the timing and estimated costs
to complete the in-process research and development projects, projecting the likelihood and timing of obtaining regulatory approval,
estimating future cash flows and determining the appropriate discount rate and the likelihood of successfully achieving the contingent
consideration clinical and regulatory milestones. The estimated fair values of the assets acquired and liabilities assumed on the
Merger date included in the Unaudited Pro Forma Condensed Combined Financial Statements (the "Statements") are provisional.
As used herein, the terms "the Company," "we,"
and "our" refer to Matinas BioPharma Holdings Inc., and, where applicable, its consolidated subsidiaries. The Unaudited
Pro Forma Condensed Combined Balance Sheet as of December 31, 2014 gives effect to the Merger as if it had occurred on that date
and includes historical data as reported by the separate companies as well as adjustments that give effect to events that are directly
attributable to the Merger that are factually supportable. The Unaudited Pro Forma Condensed Combined Statements of Operations
for the years ended December 31, 2014 and 2013 give effect to the Merger as if it had been consummated on January 1,
2014 and January 1, 2013, respectively and include historical data as reported by the separate companies as well as adjustments
that give effect to events that are directly attributable to the Merger.
The pro forma adjustments reflecting the consummation of the
Merger are based upon the acquisition method of accounting in accordance with U.S. generally accepted accounting principles and
upon the assumptions set forth in the Notes included in this section. The Statements have been prepared based on available information,
using estimates and assumptions that our management believes are reasonable. These estimates and assumptions affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions are preliminary and
have been made solely for purposes of developing this unaudited pro forma condensed combined financial information. The Unaudited
Pro Forma Condensed Combined Balance Sheet has been adjusted to reflect the allocation of the purchase price to identifiable net
assets acquired and of the excess purchase price to goodwill.
The pro forma adjustments are based on
currently available information and upon assumptions that the Company believes are reasonable under the circumstances. A final
determination of the allocation of the purchase price to the assets acquired and the liabilities assumed has not been made, therefore,
the allocation reflected in the unaudited pro forma condensed combined financial statements should be considered preliminary and
is subject to the completion of a more comprehensive valuation of the assets acquired and liabilities assumed. The final allocation
of purchase price could differ from the pro forma allocation included herein. Amounts preliminarily allocated to intangible assets
and goodwill may change significantly, and amortization methods and useful lives may differ from the assumptions that have been
used in this unaudited pro forma condensed combined financial information, any of which could result in a material change in depreciation
and amortization expense.
The unaudited pro forma condensed combined
statements of operations and comprehensive loss are provided for illustrative purposes only. The unaudited pro forma condensed
combined statements of operations and comprehensive loss are not necessarily, and should not be assumed to be, an indication of
the results that would have been achieved had the acquisition been completed as of the dates indicated or that may be achieved
in the future and should not be taken as representative of future combined results of operations or financial condition of the
Company. Furthermore, no effect has been given in the unaudited pro forma condensed combined statements of operations for synergistic
benefits and potential cost savings, if any, that may be realized through the consolidation of the two companies or the costs that
may be incurred in integrating their operations.
The assumptions used and adjustments made in preparing the Statements
are described in the Notes, which should be read in conjunction with the Statements. The Statements and related Notes contained
herein should be read in conjunction with the Consolidated Financial Statements and related Notes included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2014 to be filed on or before March 31, 2015.
MATINAS BIOPHARMA HOLDINGS INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET