FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

ALBERT D. BOLT, 

No. 05-16282 Plaintiff-Appellee,

D.C. No.

v.  CV-04-00893-WBS

MERRIMACK PHARMACEUTICALS, INC., OPINION Defendant-Appellant. 

Appeal from the United States District Court

for the Eastern District of California

William B. Shubb, Chief District Judge, Presiding

Argued and Submitted

May 18, 2007—San Francisco, California

Filed September 11, 2007

Before: Cynthia Holcomb Hall and Diarmuid F. O’Scannlain,

Circuit Judges, and Irma E. Gonzalez,* Chief District Judge.

Opinion by Judge O’Scannlain

*The Honorable Irma E. Gonzalez, United States Chief District Judge

for the Southern District of California, sitting by designation. 

12245
COUNSEL

Deborah S. Birnbach, Goodwin Procter LLP, Boston, Massachusetts, argued the cause for the defendant-appellant, and

filed briefs; William F. Sheehan, Goodwin Procter LLP, Boston, Massachusetts, and Todd Noonan, Stevens & O’Connell

LLP, Sacramento, California, were on the briefs. 

William R. Warne, Downey Brand LLP, Sacramento, California, argued the cause for the plaintiff-appellee, and filed a

brief; Rhonda Cate Canby, Downey Brand LLP, Sacramento,

California, was on the brief. 

12248 BOLT v. MERRIMACK PHARMACEUTICALS, INC.
OPINION

O’SCANNLAIN, Circuit Judge: 

We are called upon to interpret a corporation’s articles of

organization to decide whether it has an obligation to redeem

certain shares of its stock. 

I

Albert D. Bolt owns 52,488 shares of Series A Redeemable

Preferred Stock (“Series A Stock”) issued by Merrimack

Pharmaceuticals, Inc. (“Merrimack”), a biotechnology company organized under the laws of Massachusetts. Bolt now

wants to redeem those shares. 

The relevant redemption provision of Merrimack’s

Restated Articles of Organization provides: 

At any time from and after December 31, 1997, if

the net worth of the Corporation, determined in

accordance with generally accepted accounting principles and as shown on the balance sheet of the Corporation as of the end of the fiscal quarter then most

recently ended, equals or exceeds five million dollars

($5,000,000.00), then upon the request of the holder

of [the Series A] Preferred Stock, the Corporation

shall redeem at the Redemption Price any and all

shares of [the Series A] Preferred Stock which such

holder, by such request, offers to the Corporation for

redemption. 

The following statement provides a snapshot of Merrimack’s balance sheet as of December 31, 2001: 

Assets 

Total assets $11,331,070

Liabilities, Redeemable Convertible Preferred

Stock and Stockholders’ Deficit

Total liabilities $ 1,270,230

BOLT v. MERRIMACK PHARMACEUTICALS, INC. 12249
Redeemable convertible preferred stock: 

Series A redeemable preferred stock $ 548,380

Series B convertible preferred stock $11,915,267

Total redeemable convertible preferred

stock $12,463,647

Total stockholders’ deficit ( $ 2,402,807)

1

Total liabilities, redeemable convertible preferred stock, and stockholders’ deficit $11,331,070

PricewaterhouseCoopers LLP audited Merrimack’s financial statements, and opined that Merrimack’s balance sheet

referred to above “presents fairly, in all material respects, the

financial position of Merrimack Pharmaceuticals, Inc. at

December 31, 2001 in conformity with accounting principles

generally accepted in the United States of America.” 

During 2001, Merrimack had issued 3,315,201 shares of

Series B Redeemable Convertible Preferred Stock (“Series B

Stock”) with a book value of $11,915,267. The Series B Stock

is redeemable at the option of the holder upon a “deemed liquidation,” defined as (1) a merger with another company,

after which the Merrimack stockholders would no longer hold

a majority of the voting power, or (2) the sale of Merrimack’s

business assets. The Series B Stock appears in the “mezzanine” of the balance sheet, between the liabilities section and

the stockholders’ deficit (equity) section. See David R. Herwitz & Matthew J. Barrett, Accounting for Lawyers 505 (4th

ed. 2006) (explaining that the “section between liabilities and

equity on the balance sheet” is commonly referred to as the

“mezzanine”). 

On April 11, 2001, and again on March 28, 2002, Bolt sent

written requests to Merrimack for the redemption of his

shares of Series A Stock. In a letter dated June 13, 2002, Merrimack rejected Bolt’s demands for redemption. Bolt filed suit

1We employ parentheses throughout the disposition to represent a negative number. 

12250 BOLT v. MERRIMACK PHARMACEUTICALS, INC.
in federal district court seeking a declaratory judgment that

Merrimack’s net worth exceeded $5 million as of December

31, 2001. On cross-motions for summary judgment, the district court granted summary judgment for Bolt, concluding

that Merrimack’s net worth exceeded $5 million as of that

date. 

Merrimack timely appealed. 

II

We are faced with the task of interpreting Merrimack’s

Restated Articles of Organization to determine if it indeed has

an obligation to redeem the Series A Stock held by Bolt. The

dispositive issue, of course, is whether Merrimack’s net

worth, determined in accordance with generally accepted

accounting principles (“GAAP”) and as shown on the balance

sheet, equaled or exceeded $5 million as of December 31,

2001. The district court held that it did. We agree. 

A

[1] We must first determine the meaning of the term “net

worth,” the threshold yardstick to determine whether Merrimack has an obligation to redeem the Series A Stock as Bolt

requests. Merrimack’s Restated Articles of Organization fail

to define that term. Nor does GAAP define that term. And no

item on Merrimack’s balance sheet is specifically labeled “net

worth.” 

[2] Merrimack is organized under Massachusetts law, and

therefore we apply that state’s body of law here. See Order of

United Commercial Travelers of Am. v. Wolfe, 331 U.S. 586,

614 (1947). Moreover, because articles of organization are

contractual in nature, see Willson v. Laconia Car Co., 176

N.E. 182, 184 (Mass. 1931), we look to Massachusetts general contract principles. “Where the language of a contract is

not ambiguous,” we are instructed to give words “their plain

BOLT v. MERRIMACK PHARMACEUTICALS, INC. 12251
meaning, or their well established meaning.” City of Haverhill

v. George Brox, Inc., 716 N.E.2d 138, 141 (Mass. App. Ct.

1999) (internal citations omitted); see also Erhard v. F.W.

Woolworth Co., 372 N.E.2d 1277, 1279 (Mass. 1978); Freelander v. G. & K. Realty Corp., 258 N.E.2d 786, 788 (Mass.

1970); Restatement (Second) of Contracts § 202(3) (1981). 

[3] The common and well-established meaning of the term

“net worth” is the difference between a corporation’s total

assets and its total liabilities.2 Merrimack’s total assets and

total liabilities, as shown on its December 31, 2001 balance

sheet, equal $11,331,070 and $1,270,230, respectively.

Accordingly, employing the well-established meaning, Merrimack’s net worth equals $10,060,840, well in excess of the $5

million threshold set by the Restated Articles of Organization.

Merrimack suggests that net worth is sometimes referred to

as stockholders’ equity.3 This reference is often accurate

because a balance sheet generally involves only three basic

accounting elements—assets, liabilities, and equity—and

equity by definition equals the residual interest in the assets

after subtracting liabilities.4 Yet, under this reasoning, Merrimack’s net worth would still exceed $5 million. 

2

See, e.g., Herwitz & Barrett, supra, at 3 (“The difference between what

a business owns—its assets—and what it owes—its liabilities—represents

its net worth, which accountants sometimes refer to as equity.”); Black’s

Law Dictionary (4th ed. 2004) (defining net worth as “[a] measure of

one’s wealth, usu. calculated as the excess of total assets over total liabilities”); see also Am. Pac. Concrete Pipe Co., Inc. v. N.L.R.B., 788 F.2d

586, 590-91 (9th Cir. 1986) (calculating net worth for purposes of the

Equal Access to Justice Act by “subtracting total liabilities from total

assets”); Overnite Transp. Co. v. Comm’r of Revenue, 764 N.E.2d 363,

365 n.1 (Mass. App. Ct. 2002) (defining net worth for purposes of Massachusetts’s tax revenue laws as “the book value of [the company’s] total

assets less its liabilities”). 

3

See, e.g., Howard v. Everex Sys., Inc., 228 F.3d 1057, 1064 (9th Cir.

2004) (equating net worth with shareholders’ equity); Nelson v. Serwold,

687 F.2d 278, 280 (9th Cir. 1982) (same); Herwitz & Barrett, supra, at 3.

4Elements of Financial Statements, Statement of Fin. Accounting Concepts No. 6 § 49, at 21 (Fin. Accounting Standards Bd. 1985) (“Equity or

12252 BOLT v. MERRIMACK PHARMACEUTICALS, INC.
[4] But Merrimack goes further, arguing that the definition

of net worth for purposes of its Restated Articles of Organization equals only Merrimack’s total stockholders’ deficit of

$2,402,807, excluding Merrimack’s total redeemable convertible preferred stock of $12,463,647.5

 Merrimack contends that

limiting the meaning of net worth to this amount is appropriate here because the Restated Articles of Organization point

to net worth “as shown on the balance sheet” and call for no

further calculations. While this argument has surface appeal,

we ultimately are unpersuaded. The Restated Articles of

Organization indeed point us to “net worth . . . as shown on

the balance sheet.” (emphasis added.) But there is no item so

labeled on the balance sheet involved here. Thus, such an

interpretation of net worth is “shown” on the balance sheet

only to the extent that we accept an additional premise necessary to connect it to the net worth reference in the Restated

Articles of Organization. Either we accept Merrimack’s premise that net worth is limited to total stockholders’ equity (deficit) on the balance sheet, or we accept Bolt’s premise that net

worth is commonly defined as the difference between total

assets and liabilities. Regrettably, the Restated Articles of

Organization provide no further guidance as to the proper definition of the term. Given the common and well-established

meaning of the term “net worth” as the difference between

total assets and total liabilities, we cannot accept that the document reflects an intentionally narrower, more nuanced definition of that term that would equal only total stockholders’

equity (deficit) simply because it employed the phrase “as

net assets is the residual interest in the assets of an entity that remains after

deducting its liabilities.”) [hereinafter “Concept No. 6”]; id. § 50, at 21

(“The equity or net assets of both a business enterprise and a not-for-profit

organization is the difference between the entity’s assets and its liabilities.”). 

5We agree with the district court and likewise reject Merrimack’s

renewed attempt on appeal to tie Bolt’s hands to this limited definition of

net worth based on allegations in his complaint. 

BOLT v. MERRIMACK PHARMACEUTICALS, INC. 12253
shown on the balance sheet.” We therefore decline to adopt

Merrimack’s definition here. 

B

Nevertheless, our analysis does not end with our construction of the term “net worth.” The Restated Articles of Organization specify that the balance sheet relied upon must be

determined in accordance with GAAP.6 If the balance sheet

6Unfortunately, GAAP is not found in a single source. See Herwitz &

Barrett, supra, at 182. Instead, in the United States, GAAP consists of a

hodgepodge of accounting sources, which find their respective places in

the hierarchical structure established by the American Institute of Certified

Public Accountants (“AICPA”). See The Meaning of “Present Fairly in

Conformity with Generally Accepted Accounting Principles” in the Independent Auditor’s Report, Statement on Auditing Standards No. 69 § 7

(Am. Inst. of Certified Pub. Accountants 1992). There are five categories

in the GAAP hierarchy. Officially established accounting principles,

referred to as Category (a) authority, are the highest level and include the

Financial Accounting Standards Board (“FASB”) Statements of Financial

Accounting Standards and Interpretations, Accounting Principles Board

(“APB”) Opinions, and AICPA Accounting Research Bulletins. Id. § 10.

Moreover, Securities Exchange Commission (“SEC”) rules and interpretative releases take an authoritative weight similar to Category (a) authority

for companies registered with the SEC. Category (b) authority, the next

highest level, consists of FASB Technical Bulletins and, if cleared by

FASB, AICPA Industry Audit and Accounting Guides and AICPA Statements of Position. Id. The third level of authority, Category (c), consists

of AICPA Accounting Standards Executive Committee Practice Bulletins

that have been cleared by FASB and consensus positions of the FASB

Emerging Issue Task Force. Category (d), the fourth level of authority,

consists of AICPA accounting interpretations and implementation guides

published by the FASB staff, and practices that are widely recognized and

prevalent either generally or in the industry. Id. In the absence of established accounting principles, auditors may consider accounting literature

in the fifth and final level of authority, which includes FASB Statements

of Financial Accounting Concepts; APB Statements; AICPA Issues

Papers; International Accounting Standards of the International Accounting Standards Committee (“IASC”); Governmental Accounting Standards

Board (“GASB”) Statements, Interpretations, and Technical Bulletins;

pronouncements of other professional associations or regulatory agencies;

AICPA Technical Practice Aids; and accounting textbooks, handbooks,

and articles. Id. § 11. 

12254 BOLT v. MERRIMACK PHARMACEUTICALS, INC.
incorrectly reports total assets or total liabilities under GAAP,

our determination of net worth necessarily would be affected.

To determine whether the balance sheet is prepared in

accordance with GAAP, we do not take off our judicial black

robes and reach for the accountant’s green eyeshade. Rather,

because “ ‘generally accepted accounting principles’ are far

from being a canonical set of rules that will ensure identical

accounting treatment of identical transactions[, and] tolerate

a range of ‘reasonable’ treatments,” we generally defer to the

professional judgment of the accountant who audited or prepared the financial statements, unless a GAAP authority

demands a contrary accounting treatment. See Thor Power

Tool Co. v. Comm’r, 439 U.S. 522, 544 (1979); see also

United States v. Basin Elec. Power Coop., 248 F.3d 781, 798

(8th Cir. 2001) (en banc); Godchaux v. Conveying Techniques, Inc., 846 F.2d 306, 315 (5th Cir. 1998). 

1

Merrimack argues on appeal that the Series B Stock, which

is presented in the mezzanine section of the balance sheet, is

akin to a liability under GAAP authorities. Of course, if the

Series B Stock were considered a liability, Merrimack’s net

worth would not equal or exceed $5 million. But Merrimack’s

balance sheet does not show the Series B Stock to be part of

total liabilities. Nor do we believe that GAAP requires such

accounting classification. 

a

First, Merrimack claims to find support in Regulation S-X

of the SEC, which requires certain stock to be presented on

the balance sheet under the caption “redeemable preferred

stock” and expressly prohibits including such stock under a

general caption “stockholders’ equity” or combined in a total

with non-redeemable preferred stocks, common stocks, or

other stockholders’ equity. Regulation S-X, 17 C.F.R.

BOLT v. MERRIMACK PHARMACEUTICALS, INC. 12255
§ 210.5-02. That regulation applies to any class of stock with

the following characteristics: 

(1) it is redeemable at a fixed or determinable price

on a fixed or determinable date or dates, whether by

operation of a sinking fund or otherwise; (2) it is

redeemable at the option of the holder; or (3) it has

conditions for redemption which are not solely

within the control of the issuer, such as stocks which

must be redeemed out of future earnings. Amounts

attributable to preferred stock which is not redeemable or is redeemable solely at the option of the

issuer shall be included under § 210.5-02.29 unless

it meets one or more of the above criteria. 

Id. § 210.5-02.28(a) (emphasis added). 

The parties do not dispute on appeal that Merrimack’s

Series B Stock falls within the scope of Regulation S-X and

therefore is presented properly in the mezzanine section of the

balance sheet. Merrimack, however, places great weight on

the fact that Regulation S-X requires such stock to be presented “outside” of stockholders’ equity, implicitly suggesting, Merrimack urges, that it should be considered akin to a

liability for purposes of determining net worth. 

[5] In our view, Merrimack reads too much into Regulation

S-X, which only requires that the Series B stock be presented

in a separate caption in the mezzanine section of the balance

sheet, not that such stock be classified as part of total liabilities. Indeed, in Accounting Series Release No. 268, the SEC

expressly emphasized that these “rules are intended to highlight the future cash obligations attached to redeemable preferred stock through appropriate balance sheet presentation

and footnote disclosure. They do not attempt to deal with the

conceptual question of whether such security is a liability.”

Presentation in Financial Statements of Redeemable Preferred

Stock, Accounting Series Release No. 268, [1937-1982 Trans12256 BOLT v. MERRIMACK PHARMACEUTICALS, INC.
fer Binder] Fed. Sec. L. Rep. (CCH) ¶ 72,290, at 62,751 (July

27, 1979) (emphasis added). Accordingly, we are not persuaded that Regulation S-X requires the Series B Stock to be

classified as part of total liabilities on the balance sheet for

purposes of calculating net worth. By reporting the Series B

Stock in the mezzanine section, the balance sheet properly

followed the presentation requirements set forth in Regulation

S-X, which forms part of GAAP. 

b

[6] Second, both parties claim to draw support from

Accounting Standards No. 150. See Accounting for Certain

Financial Instruments with Characteristics of both Liabilities

and Equity, Statement of Fin. Accounting Standards No. 150

(Fin. Accounting Standards Bd. 2003) [hereinafter “Statement

No. 150”]. We recognize, as does Merrimack, that Statement

No. 150 was not effective until after the balance sheet

involved in this case was prepared. However, we believe that

this statement offers helpful guidance that confirms our conclusion. Statement No. 150 requires that a mandatorily

redeemable financial instrument, defined as a financial instrument that “embodies an unconditional obligation requiring the

issuer to redeem the instrument by transferring its assets at a

specified or determinable date (or dates) or upon an event certain to occur,” be reclassified as a liability. Id. § 9, at 10

(emphasis added). Even if Statement No. 150 applied in this

case, the parties agree that it would not require the Series B

Stock to be classified as a liability because redemption of that

stock is conditional and expressly beyond the statement’s

scope. See id. at 5. A redeemable preferred stock conditioned

“upon an event not certain to occur becomes mandatorily

redeemable—and, therefore, becomes a liability—if that

event occurs, the condition is resolved, or the event becomes

certain to occur.” Id. § 10, at 10 (emphasis added). Thus,

while not applicable to the balance sheet at issue in this case,

Statement No. 150’s requirement that conditionally redeemable stock be classified as a liability upon the resolution of the

BOLT v. MERRIMACK PHARMACEUTICALS, INC. 12257
conditional event suggests that under GAAP such stock, like

the Series B Stock here, should not be classified as a liability

before that event. 

c

[7] Finally, we have two additional GAAP authorities to

consider. Merrimack points us to International Accounting

Standards No. 32. See Financial Instruments: Disclosure and

Presentation, International Accounting Standards No. 32 (Int’l

Accounting Standards Bd. amended 2004) [hereinafter “International Standard No. 32”]. That standard provides that conditionally redeemable preferred stock, like the Series B Stock in

this case, should be classified as a liability.7 While International Standard No. 32 is on point, we do not believe that it

compels Merrimack to restate the Series B Stock, which is

presented in the mezzanine section of the balance sheet, as

part of total liabilities. International Accounting Standards fall

on the lowest rung of the GAAP hierarchy in the United

States. See supra n.6. Moreover, FASB, the organization

charged with establishing GAAP in the United States, has

expressly declined to adopt International Standard No. 32’s

position with respect to classifying conditionally redeemable

preferred stock as a liability.8

7

See id. § 18(a) (“[A] preference share that provides for mandatory

redemption by the issuer for a fixed or determinable amount at a fixed or

determinable future date, or gives the holder a right to require the issuer

to redeem the instrument at or after a particular date for a fixed or determinable amount, is a financial liability.” (emphasis added)); id. § 19(b)

(“[A] contractual obligation that is conditional on a counterparty exercising its right to redeem is a financial liability because the entity does not

have the unconditional right to avoid delivering cash or another financial

asset.”). 

8

See Statement No. 150, supra, § B79, at 53 (“IAS 32 requires the same

accounting for conditional redeemable instruments as for mandatorily

redeemable instruments. This Statement does not go that far. The Board

acknowledges that the conditional obligation embedded in such shares

may, if accounted for separately, meet the definition of a liability; however, the accounting for such compound instruments is beyond the scope

of this Statement.” (emphasis added)). 

12258 BOLT v. MERRIMACK PHARMACEUTICALS, INC.
[8] The parties also direct us to FASB’s Concept No. 6. But

we do not believe the conceptual definitions found therein

require a conclusion that the Series B Stock must be classified

as part of total liabilities, contrary to the presentation on Merrimack’s balance sheet. Concept No. 6 defines “liabilities” as

“probable future sacrifices of economic benefits arising from

present obligations of a particular entity to transfer assets or

provide services to other entities in the future as a result of

past transactions or events,” id. § 35, at 18, and “equity” as

“the residual interest in the assets of an entity that remains

after deducting its liabilities,” id. § 49, at 21. Moreover, and

more importantly, Concept No. 6 recognizes the conceptual

difficulties with classifying certain hybrid securities like the

Series B Stock at the nub of this case,9 and instructs in such

cases that the conceptual definitions are the starting point and

“provide a basis for assessing, for example, the extent to

which a particular application meets the qualitative characteristic of representational faithfulness, which includes the

notion of reporting economic substance rather than legal

form.” Id. § 59, at 24 (emphasis added). 

Merrimack argues that the Series B Stock should not be

considered equity pursuant to Concept No. 6 because that

stock is not a “residual interest.” We appreciate, as do the parties, that the Series B Stock has a number of hybrid characteristics: Series B stockholders have (1) a right to vote, together

with the common stock as a single class, on all actions to be

taken by the stockholders; (2) a right to elect one board member; (3) a dividend of four percent per annum of purchase

9

Id. § 55, at 23-24 (“Although the line between equity and liabilities is

clear in concept, it may be obscured in practice. Applying the definitions

to particular situations may involve practical problems because several

kinds of securities issued by business enterprises seem to have characteristics of both liabilities and equity in varying degrees or because the names

given some securities may not accurately describe their essential characteristics. . . . Preferred stock [for example] often has both debt and equity

characteristics, and some preferred stocks may effectively have maturity

amounts and dates at which they must be redeemed for cash.”). 

BOLT v. MERRIMACK PHARMACEUTICALS, INC. 12259
price; (4) a liquidation preference before common stock, but

after debts and liabilities and the Series A Stock preference;

(5) a cash redemption right upon a “deemed liquidation” and

at the election of the holder; (6) a right to convert such stock

into common stock at any time according to a specified formula; (7) covenants and restrictions on certain actions by

Merrimack; and (8) a preemptive right. However, while recognizing that the Series B Stock does not fit neatly into either

the definition of liabilities or equity under Concept No. 6, we

are unpersuaded that Merrimack’s balance sheet, by not classifying that stock as part of total liabilities, is contrary to

GAAP. 

2

[9] In sum, finding no GAAP authority that requires classifying Merrimack’s Series B Stock as part of total liabilities,

we defer to PricewaterhouseCooper’s conclusion that Merrimack’s balance sheet “presents fairly, in all material respects,

the financial position of Merrimack Pharmaceuticals, Inc. at

December 31, 2001 in conformity with accounting principles

generally accepted in the United States of America.” We

therefore agree with the district court’s conclusion that Merrimack’s balance sheet as of December 31, 2001 was determined according to GAAP.10

10Merrimack’s argument that the district court’s decision must be interpreted to have concluded otherwise is unpersuasive. Merrimack selectively alters a quotation from the decision to assert that the district court

ruled expressly, in direct conflict with Regulation S-X, that Merrimack’s

“argument that the Series B shares should be classified outside [equity] is

an argument against generally accepted accounting principles.” (alteration

in brief) But the district court actually stated that the “Series B shares must

be classified as either an asset, a liability, or equity. Defendant’s argument that the Series B shares should be classified outside those categories

is an argument against generally accepted accounting principles.” (emphasis added.) Because FASB has expressly declined to expand on those three

accounting elements on the balance sheet, Merrimack missteps by latching

onto this statement to allege that the district court concluded that the bal12260 BOLT v. MERRIMACK PHARMACEUTICALS, INC.
III

[10] Merrimack has an obligation to redeem Bolt’s Series

A Stock if its net worth equals or exceeds $5 million. Because

we conclude that the term “net worth” for purposes of the

Restated Articles of Organization should be given its wellance sheet was not prepared in accordance with GAAP. See Statement No.

150, supra, §§ B56 & B57, at 47 (“Certain financial instruments were

presented between the liabilities section and the equity section of the statement of financial position before the issuance of this Statement. Because

Concepts Statement 6 does not accommodate classification of items outside the elements of assets, liabilities, and equity, developing a model that

would permit that practice would require the Board to define a new element of financial statements. The Board elected not to pursue that course

of action, in part because, among other concerns, adding another element

would set an undesirable precedent of adding elements whenever new

instruments are created that are difficult to classify. The Board instead

elected to develop an approach that would address the issues related to

determining the appropriate classification of financial instruments with

characteristics of liabilities, equity, or both. . . .” (emphasis added)). 

Nor is Merrimack’s argument that the district court afforded no deference to PricewaterhouseCoopers, its auditors, of any moment. PricewaterhouseCoopers simply certified that the balance sheet—which reflects total

assets of $11,331,070, total liabilities of $1,270,230, total redeemable convertible preferred stock of $12,463,647, and total shareholders’ deficit of

($2,402,807)—presents Merrimack’s financial position as of December

31, 2001 fairly in all material respects in accordance with GAAP. Even in

a subsequent declaration submitted for purposes of this lawsuit, PricewaterhouseCoopers never opined that net worth equaled stockholders’

equity or that the Series B Stock should be classified as a liability, but

simply reaffirmed that “the classification of the Series B convertible preferred stock outside of permanent equity, or stockholder’s [sic] equity

(deficit) was presented in conformance with GAAP.” As such, contrary to

Merrimack’s argument, we have no opinion by PricewaterhouseCoopers

that net worth equals stockholders’ equity to which to defer. Accordingly,

we defer only to PricewaterhouseCoopers’s conclusions that the balance

sheet presents fairly in all material respects Merrimack’s financial position

as of December 31, 2001, in conformity with GAAP, and that the Series

B Stock was properly presented outside of stockholders’ equity in compliance with GAAP. 

BOLT v. MERRIMACK PHARMACEUTICALS, INC. 12261
established meaning as the difference between total assets and

total liabilities, and because Merrimack’s total assets and total

liabilities equaled $11,331,070 and $1,270,230, respectively,

as shown on the December 31, 2001 balance sheet calculated

in conformity with GAAP, Merrimack’s net worth exceeded

$5 million. Accordingly, the district court’s grant of summary

judgment in favor of Bolt is 

AFFIRMED.

12262 BOLT v. MERRIMACK PHARMACEUTICALS, INC.