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In a reverse acquisition, the financial statements of the combined entity reflect the capital structure (i.e., share capital, share premium and treasury capital) of the legal acquirer (i.e., accounting acquiree), including the equity interests issued in connection with the reverse acquisition. However, consistent with the nature of a reverse acquisition, the number of common shares outstanding prior to the acquisition date is computed as the weighted-average number of common shares of the legal acquiree (i.e., accounting acquirer) outstanding during the period, multiplied by the exchange ratio established in the merger agreement. In other words, it is as if the legal acquiree underwent a stock-split/reverse stock split, and then issued additional shares on the acquisition date. See BC 2.10.5 for further details.
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