Note 4 – Acquisition

In 2013, Novavax acquired 99.5% of all of the outstanding shares, warrants and stock options of Isconova AB through the issuance of approximately 15.6 million shares of its Common Stock valued at $41.9 million (based on the closing price of Novavax’ Common Stock on the Acquisition Date) and cash of approximately $22,000. Upon the acquisition, Isconova AB was renamed Novavax AB. During the second quarter of 2014, the Company completed its purchase of the remaining 0.5% shares outstanding from the holders of such securities of Novavax AB. This transaction has been accounted for using the purchase method of accounting, with Novavax as the acquirer. The results of Novavax AB’s operations have been included in the consolidated financial statements since the Acquisition Date.

The table below summarizes the final allocation of the purchase price based upon the fair values of assets acquired and liabilities assumed at the Acquisition Date.

	(in thousands)
Cash and cash equivalents	$	3,056
Accounts receivable – billed		447
Prepaid expenses and other assets		1,092
Property and equipment		165
Intangible assets		16,620
Goodwill		25,424
Accounts payable and other current liabilities		(2,994)
Capital leases		(94)
Notes payable		(193)
Other non-current liabilities		(1,559)
Total purchase price	$	41,964

A substantial portion of the assets acquired consisted of intangible assets relating to its proprietary adjuvant technology and collaboration agreements. The fair values of the proprietary technology and agreements were determined based on estimates of expected future discounted net cash flows. The fair value measurements are based on significant unobservable inputs that were developed by the Company using publicly available information, market participant assumptions, cost and development assumptions, expected synergies and other cost savings that a market participant would be expected to realize as a result of the combination and certain other high-level assumptions. Amortization expense for intangible assets is being recorded on a straight-line basis over the expected useful lives of the assets, ranging from seven to 20 years. The weighted average useful lives for the proprietary adjuvant technology and collaboration agreements are 20 years and 12 years, respectively. The weighted average useful life for all acquired intangible assets is 17 years.

The Company incurred approximately $1.3 million in transaction costs related to the acquisition, which is included in general and administrative expenses in the Company’s consolidated statement of operations for the year ended December 31, 2013.

The following unaudited consolidated pro forma financial information is presented as if the acquisition occurred on January 1, 2012. The unaudited pro forma financial information has been presented for comparative purposes only and is not necessarily indicative of results of operations that would have been achieved had the Company completed the acquisition during the periods presented, or the future consolidated results of operations of the combined company. The unaudited pro forma financial information combines the historical results of operations of Novavax and Isconova AB for the periods presented below:

	Year Ended
	December 31,
	2013		2012
	(in thousands)
Revenue	$	22,785	$	24,810
Net loss	$	(55,594)	$	(35,042)
Basic and diluted net loss per share	$	(0.31)	$	(0.24)

Novavax AB entered into a license and collaboration agreement and received research funding prior to the acquisition that is required to be repaid upon notice in the first quarter of 2016. At December 31, 2014, such research funding liability is $1.5 million and is included in other non-current liabilities in the consolidated balance sheet.