UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___ TO ___
Commission file number 0-21392
7 Curzon Street
London W1J 5HG
England
(Address of Principal Executive Offices)
SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of Each Exchange | ||
Title of Each Class | On Which Registered | |
|
||
None | None |
SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
American Depositary Shares, each representing one Ordinary Share
Ordinary Shares, £1.00 par value per share
(Title of Class)
SECURITIES FOR WHICH THERE IS A REPORTING OBLIGATION PURSUANT TO SECTION 15(d) OF THE ACT:
None.
Indicate the number of outstanding shares of each of the issuers classes of capital or common stock as of the close of the period covered by the annual report.
9,838,158 Ordinary Shares, £1.00 par value per share
2,000,000 Preference Shares, £1.00 par value per share
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES [X] NO [ ] |
Indicate by check mark which financial statement item the registrant has elected to follow.
ITEM 17 [ ] ITEM 18 [X] |
EXPLANATORY NOTE
Amarin Corporation plc (the Company) hereby amends its Annual Report on Form 20-F for the fiscal year ended December 31, 2002 pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended, to include in Item 18 of the Form 20-F note 39 R) relating to the Companys acquisition of certain rights to Permax. Note 39 R) appears at page F-47 of this Form 20-F/A.
This amendment also amends Item 18 of the Form 20-F to include an additional note 40, appearing at page F-48 of this Form 20-F/A, relating to events subsequent to the date of the original Form 20-F relating to trading, cash flow and going concern.
This amendment also amends Item 18 of the Form 20-F by making additional disclosure in note 17 regarding the accounting for the acquisition of Permax.
This amendment also amends Item 18 of the Form 20-F by deleting the reference to £000 in the first section of note 7.
This amendment also amends Item 18 of the Form 20-F to include an updated report of the independent accountants, which appears at page F-1 of this Form 20-F/A.
This amendment also includes in Item 19, and as Exhibit 10.1 and 10.2 to the Form 20-F, a new Certification of Richard A.B. Stewart and a new Certification of Ian R. Garland pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
This amendment also includes in Item 19, and as Exhibit 10.3 to the Form 20-F, the Consent of the Independent Accountants of Amarin Corporation plc to the incorporation by reference of the Report of the Independent Accountants on page F-1 of this Form 20-F/A in the registration statements of the Company on Form F-3 (nos. 333-12642 and 333-13200).
This amendment also amends footnote to the list of Exhibits in Item 19 and in the Exhibit Index to reflect that the Companys request for confidential treatment was granted.
Other than as expressly set forth above, this Form 20-F/A does not, and does not purport to, amend, update or restate the information in any other Item of the Form 20-F or reflect any events that have occurred after the date on which the Form 20-F was filed.
1
PART III
Item 18. Financial Statements
The Report of Independent Accountants and the accompanying consolidated financial statements of Amarin Corporation plc and its subsidiaries are found at pages F-1 to F-48 of this Form 20-F/A.
Item 19. Exhibits
Exhibits filed as part of this annual report:
1.1 | Memorandum of Association of the Company* | |
1.2 | Articles of Association of the Company* | |
2.1 | Form of Deposit Agreement, dated as of March 29, 1993, among the Company, Citibank, N.A., as Depositary, and all holders from time to time of American Depositary Receipts issued thereunder (1) | |
2.2 | Amendment No. 1 to Deposit Agreement, dated as of October 8, 1998, among the Company, Citibank, N.A., as Depositary, and all holders from time to time of the American Depositary Receipts issued thereunder (2) | |
2.3 | Amendment No. 2 to Deposit Agreement, dated as of September 25, 2002 among the Company, Citibank N.A., as Depositary, and all holders from time to time of the American Depositary Receipts issued thereunder (3) | |
2.4 | Form of Ordinary Share certificate* | |
2.5 | Form of American Depositary Receipt evidencing ADSs (included in Exhibit 2.3) (3) | |
2.6 | Registration Rights Agreement, dated as of October 21, 1998, by and among Ethical Holdings plc and Monksland Holdings B.V.* | |
2.7 | Amendment No. 1 to Registration Rights Agreement and Waiver, dated January 27, 2003, by and among the Company, Elan International Services, Ltd. and Monksland Holdings B.V.* | |
2.8 | Second Subscription Agreement, dated as of November 1999, among Ethical Holdings PLC, Monksland Holdings B.V. and Elan Corporation PLC (4) | |
2.9 | Purchase Agreement, dated as of June 16, 2000, by and among the Company and the Purchasers named therein (4) | |
2.10 | Registration Rights Agreement, dated as of November 24, 2000, by and between the Company and Laxdale Limited (5) | |
2.11 | Form of Subscription Agreement, dated as of January 27, 2003 by and among the Company and the Purchasers named therein* (The Company entered into twenty separate Subscription Agreements on January 27, 2003 all substantially similar in form and content to this form of Subscription Agreement.) | |
2.12 | Form of Registration Rights Agreement, dated as of January 27, 2003 between the Company and the Purchasers named therein* (The Company entered into twenty separate Registration Rights Agreements on January 27, 2003 all substantially similar in form and content to this form of Registration Rights Agreement.) | |
4.1 | Amended and Restated Asset Purchase Agreement dated September 29, 1999 between Elan Pharmaceuticals Inc. and the Company* | |
4.2 | Variation Agreement, undated, between Elan Pharmaceuticals Inc. and the Company* | |
4.3 | License Agreement, dated November 24, 2000, between the Company and Laxdale Limited (6) | |
2
4.4 | Option Agreement, dated as of June 18, 2001, between Elan Pharma International Limited and the Company (7) | |
4.5 | Deed of Variation, dated January 27, 2003, between Elan Pharma International Limited and the Company* | |
4.6 | Lease, dated August 6, 2001, between the Company and LB Strawberry LLC (7) | |
4.7 | Amended and Restated Distribution, Marketing and Option Agreement, dated September 28, 2001, between Elan Pharmaceuticals, Inc. and the Company (8) | |
4.8 | Amended and Restated License and Supply Agreement, dated March 29, 2002, between Eli Lilly and Company and the Company* | |
4.9 | Deed of Variation, dated January 27, 2003, between Elan Pharmaceuticals Inc. and the Company* | |
4.10 | Stock and Intellectual Property Right Purchase Agreement, dated November 30, 2001, by and among Abriway International S.A., Sergio Lucero, Francisco Stefano, Amarin Technologies S.A., Amarin Pharmaceuticals Company Limited and the Company (7) | |
4.11 | Stock Purchase Agreement, dated November 30, 2001, by and among Abriway International S.A., Beta Pharmaceuticals Corporation and the Company (7) | |
4.12 | Novation Agreement, dated November 30, 2001, by and among Beta Pharmaceuticals Corporation, Amarin Technologies S.A. and the Company (7) | |
4.13 | Loan Agreement, dated September 28, 2001, between Elan Pharma International Limited and the Company (8) | |
4.14 | Deed of Variation, dated July 19, 2002, amending certain provisions of the Loan Agreement between the Company and Elan Pharma International Limited* | |
4.15 | Deed of Variation No. 2, dated December 23, 2002, between the Company and Elan Pharma International Limited* | |
4.16 | Deed of Variation No. 3, dated January 27, 2003, between the Company and Elan Pharma International Limited* | |
4.17 | The Company 2002 Stock Option Plan (9) | |
4.18 | Agreement Letter, dated October 21, 2002, between the Company and Security Research Associates, Inc.* | |
4.19 | Agreement, dated January 27, 2003, among the Company, Elan International Services, Ltd. and Monksland Holdings B.V.* | |
4.20 | Master Agreement, dated January 27, 2003, between Elan Corporation, plc., Elan Pharma International Limited, Elan International Services, Ltd., Elan Pharmaceuticals, Inc., Monksland Holdings B.V. and the Company* | |
4.21 | Form of Warrant Agreement, dated March 19, 2003, between the Company and individuals designated by Security Research Associates, Inc.* (The Company entered into seven separate Warrant Agreements on March 19, 2003 all substantially similar in form and content to this form of Warrant Agreement.) | |
4.22 | Sale and Purchase Agreement, dated March 14, 2003, between F. Hoffmann La Roche Ltd., Hoffmann La Roche Inc. and the Company* | |
8.1 | Subsidiaries of the Company* | |
10.1 | Certification of Richard A. B. Stewart pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002** | |
10.2 | Certification of Ian R. Garland pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002** | |
3
10.3 | Consent of PricewaterhouseCoopers LLP, Chartered Accountants and Registered Auditors** |
* Previously filed as an exhibit to the Companys Annual Report on Form 20-F for the year ended December 31, 2002, filed with the Securities and Exchange Commission on April 24, 2003.
** Filed herewith.
Confidential treatment was granted by the Securities and Exchange Commission (the confidential portions of such exhibits have been omitted and filed separately with the Securities and Exchange Commission).
(1) | Incorporated herein by reference to certain exhibits to the Companys Registration Statement on Form F-1, File No. 33-58160, filed with the Securities and Exchange Commission on February 11, 1993. | |
(2) | Incorporated herein by reference to Exhibit(a)(i) to the Companys Registration Statement on Post-Effective Amendment No. 1 to Form F-6, File No. 333-5946, filed with the Securities and Exchange Commission on October 8, 1998. | |
(3) | Incorporated herein by reference to Exhibit(a)(ii) to the Companys Registration Statement on Post-Effective Amendment No. 2 to Form F-6, File No. 333-5946, filed with the Securities and Exchange Commission on September 26, 2002. | |
(4) | Incorporated herein by reference to certain exhibits to the Companys Annual Report on Form 20-F for the year ended December 31, 1999, filed with the Securities and Exchange Commission on June 30, 2000. | |
(5) | Incorporated herein by reference to certain exhibits to the Companys Registration Statement on Form F-3, File No. 333-13200, filed with the Securities and Exchange Commission on February 22, 2001. | |
(6) | Incorporated herein by reference to certain exhibits to the Companys Annual Report on Form 20-F for the year ended December 31, 2000, filed with the Securities and Exchange Commission on July 2, 2001. | |
(7) | Incorporated herein by reference to certain exhibits to the Companys Annual Report on Form 20-F for the year ended December 31, 2001, filed with the Securities and Exchange Commission on May 9, 2002. | |
(8) | Incorporated herein by reference to certain exhibits to the Companys Registration Statement on Pre-Effective Amendment No. 2 to Form F-3, File No. 333-13200, filed with the Securities and Exchange Commission on November 19, 2001. | |
(9) | Incorporated herein by reference to certain exhibits to the Companys Registration Statement on Form S-8, File No. 333-101775, filed with the Securities and Exchange Commission on December 11, 2002. |
4
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this amendment no. 1 to the annual report on its behalf.
AMARIN CORPORATION PLC | ||||
By: | /s/ RICHARD A. B. STEWART | |||
Richard A. B. Stewart Chief Executive Officer |
July 31, 2003
5
CERTIFICATIONS
I, Richard A. B. Stewart, certify that:
1. | I have reviewed this annual report on Form 20-F/A of Amarin Corporation plc; | |
2. | Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; | |
4. | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: |
(a) | Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; | ||
(b) | Evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the Evaluation Date); and | ||
(c) | Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; |
5. | The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent function): |
(a) | All significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and | ||
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and |
6. | The registrants other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. |
Date: July 31, 2003
/s/ RICHARD A. B. STEWART
Richard A. B. Stewart Chief Executive Officer |
6
I, Ian R. Garland, certify that:
1. | I have reviewed this annual report on Form 20-F/A of Amarin Corporation plc; | |
2. | Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; | |
4. | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: |
(a) | Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; | ||
(b) | Evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the Evaluation Date); and | ||
(c) | Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date: |
5. | The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent function): |
(a) | All significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and | ||
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and |
6. | The registrants other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. |
Date: July 31, 2003
/s/ IAN R. GARLAND
Ian R. Garland Chief Financial Officer |
7
Report of independent accountants
To the Board of Directors and Shareholders of
Amarin Corporation plc
In our opinion, the accompanying balance sheets and the related consolidated profit and loss accounts, statements of total recognised gains and losses, reconciliations of movements in shareholders funds and cashflow statements present fairly, in all material respects, the financial position of Amarin Corporation plc and its subsidiaries at December 31, 2002, December 31, 2001 and December 31, 2000, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles which, as described in Note 2, are generally accepted in the United Kingdom. These financial statements are the responsibility of the Companys management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America and in the United Kingdom, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 40 to the financial statements, the Company has suffered adverse trading conditions since the year end which raise substantial doubt about its ability to continue as a going concern. Managements plans in regard to these matters are also described in Note 40. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Accounting principles generally accepted in the United Kingdom vary in certain important respects from accounting principles generally accepted in the United States of America. The application of the latter would have affected the determination of consolidated net income for each of the three years in the period ended December 31, 2002 and the determination of consolidated shareholders equity at December 31, 2002, 2001 and 2000 to the extent summarized in Note 39 to the consolidated financial statements.
/s/ PRICEWATERHOUSE COOPERS LLP
PricewaterhouseCoopers LLP Chartered Accountants and Registered Auditors |
Cambridge, England
24 April 2003, except as to the information presented in note 40, for which the date is 31 July 2003
F-1
Consolidated profit and loss account for the year ended 31 December
Note | 2002 | 2001 | 2000 | |||||||||||||
£000 | £000 | £000 | ||||||||||||||
Turnover |
||||||||||||||||
Continuing operations |
40,649 | 36,927 | 10,526 | |||||||||||||
Discontinued operations |
| 2,225 | 7,013 | |||||||||||||
3 | 40,649 | 39,152 | 17,539 | |||||||||||||
Cost of sales |
||||||||||||||||
Continuing operations |
4 | (18,696 | ) | (14,734 | ) | (3,089 | ) | |||||||||
Discontinued operations |
| (1,004 | ) | (1,403 | ) | |||||||||||
(18,696 | ) | (15,738 | ) | (4,492 | ) | |||||||||||
Gross profit |
||||||||||||||||
Continuing operations |
21,953 | 22,193 | 7,437 | |||||||||||||
Discontinued operations |
| 1,221 | 5,610 | |||||||||||||
21,953 | 23,414 | 13,047 | ||||||||||||||
Operating expenses |
||||||||||||||||
Continuing operations |
(42,221 | ) | (25,680 | ) | (9,206 | ) | ||||||||||
Discontinued operations |
| (763 | ) | (914 | ) | |||||||||||
5 | (42,221 | ) | (26,443 | ) | (10,120 | ) | ||||||||||
Operating (loss)/profit |
||||||||||||||||
Continuing operations |
(20,268 | ) | (3,487 | ) | (1,769 | ) | ||||||||||
Discontinued operations |
| 458 | 4,696 | |||||||||||||
(20,268 | ) | (3,029 | ) | 2,927 | ||||||||||||
Exceptional income/(costs) of restructuring |
||||||||||||||||
Discontinued operations |
11 | 669 | 735 | (2,108 | ) | |||||||||||
(Loss)/profit on disposal of operations |
||||||||||||||||
Discontinued operations |
8 | | (893 | ) | 759 | |||||||||||
(Loss)/profit on ordinary activities before
interest |
||||||||||||||||
Continuing operations |
(20,268 | ) | (3,487 | ) | (1,769 | ) | ||||||||||
Discontinued operations |
669 | 300 | 3,347 | |||||||||||||
(19,599 | ) | (3,187 | ) | 1,578 | ||||||||||||
Interest receivable and similar income |
9 | 242 | 547 | 608 | ||||||||||||
Interest payable and similar charges |
10 | (1,459 | ) | (296 | ) | (257 | ) | |||||||||
(Loss)/profit on ordinary activities before
taxation |
3,12 | (20,816 | ) | (2,936 | ) | 1,929 | ||||||||||
Tax on (loss)/profit on ordinary activities |
13 | (2,196 | ) | (333 | ) | (229 | ) | |||||||||
(Loss)/profit for the financial year |
(23,012 | ) | (3,269 | ) | 1,700 | |||||||||||
Dividends non-equity |
16 | (76 | ) | (124 | ) | (124 | ) | |||||||||
Retained (loss)/profit for the financial year |
29 | (23,088 | ) | (3,393 | ) | 1,576 | ||||||||||
Pence | Pence | Pence | ||||||||||||||
*Restated | *Restated | |||||||||||||||
Basic (loss)/earnings per ordinary share |
15 | (247.5 | ) | (45.9 | ) | 43.0 | ||||||||||
Fully diluted (loss)/earnings per ordinary
share |
15 | (247.5 | ) | (45.9 | ) | 20.2 | ||||||||||
There is no difference between the (loss)/profit on ordinary activities before taxation and the retained (loss)/profit for the year stated above, and their historical cost equivalents.
F-2
Statement of group total recognised gains and losses
2002 | 2001 | 2000 | ||||||||||
£000 | £000 | £000 | ||||||||||
(Loss)/profit for the year |
(23,012 | ) | (3,269 | ) | 1,700 | |||||||
Transfer of warrant proceeds reserve |
| | 705 | |||||||||
Exchange adjustments offset in reserves |
(1,011 | ) | (23 | ) | 14 | |||||||
(24,023 | ) | (3,292 | ) | 2,419 | ||||||||
Reconciliation of movements in group shareholders (deficit)/funds
2002 | 2001 | 2000 | ||||||||||
£000 | £000 | £000 | ||||||||||
(Loss)/profit for the financial year |
(23,012 | ) | (3,269 | ) | 1,700 | |||||||
Dividends non equity |
(76 | ) | (124 | ) | (124 | ) | ||||||
New share capital issued |
123 | 2,942 | 10,659 | |||||||||
Exchange adjustments offset in reserves |
(1,011 | ) | (23 | ) | 14 | |||||||
Share issuance costs |
(252 | ) | | | ||||||||
Share option compensation charge |
| | 1,058 | |||||||||
Net change in shareholders (deficit)/funds |
(24,228 | ) | (474 | ) | 13,307 | |||||||
Opening shareholders funds |
20,372 | 20,846 | 7,539 | |||||||||
Closing shareholders (deficit)/funds |
(3,856 | ) | 20,372 | 20,846 | ||||||||
F-3
Balance sheets at 31 December
Group | Company | ||||||||||||||||||||||||||||
Note | 2002 | 2001 | 2000 | 2002 | 2001 | 2000 | |||||||||||||||||||||||
£000 | £000 | £000 | £000 | £000 | £000 | ||||||||||||||||||||||||
Intangible assets |
17 | 29,477 | 32,378 | 15,119 | 29,387 | 32,363 | 14,027 | ||||||||||||||||||||||
Tangible assets |
18 | 1,482 | 1,530 | 960 | 255 | 312 | 114 | ||||||||||||||||||||||
Investments |
19 | | | | 1,031 | 1,031 | 1,031 | ||||||||||||||||||||||
30,959 | 33,908 | 16,079 | 30,673 | 33,706 | 15,172 | ||||||||||||||||||||||||
Current assets |
|||||||||||||||||||||||||||||
Stock |
20 | 4,799 | 2,438 | 1,878 | 4,759 | 2,423 | 1,868 | ||||||||||||||||||||||
Debtors |
21 | 9,694 | 5,408 | 3,133 | 21,011 | 22,177 | 4,907 | ||||||||||||||||||||||
Investments |
22 | | 44 | 10,064 | | 44 | 10,064 | ||||||||||||||||||||||
Cash at bank and in hand |
15,072 | 20,688 | 1,348 | 12,044 | 19,405 | 1,055 | |||||||||||||||||||||||
29,565 | 28,578 | 16,423 | 37,814 | 44,049 | 17,894 | ||||||||||||||||||||||||
Creditors: amounts falling due
within one year |
23 | 41,557 | 36,902 | 3,037 | 43,414 | 52,885 | 4,468 | ||||||||||||||||||||||
Net current
(liabilities)/assets |
(11,992 | ) | (8,324 | ) | 13,386 | (5,600 | ) | (8,836 | ) | 13,426 | |||||||||||||||||||
Total assets less current
liabilities |
18,967 | 25,584 | 29,465 | 25,073 | 24,870 | 28,598 | |||||||||||||||||||||||
Creditors: amounts falling due
after more than one year |
24 | 22,792 | 4,466 | 6,458 | 28,884 | 4,466 | 6,266 | ||||||||||||||||||||||
Provisions for liabilities and
charges |
25 | 31 | 746 | 2,161 | 31 | 746 | 2,161 | ||||||||||||||||||||||
Net (liabilities)/assets |
(3,856 | ) | 20,372 | 20,846 | (3,842 | ) | 19,658 | 20,171 | |||||||||||||||||||||
Capital and reserves |
|||||||||||||||||||||||||||||
Called up share capital |
27 | 11,838 | 11,804 | 10,944 | 11,838 | 11,804 | 10,944 | ||||||||||||||||||||||
Share premium account |
29 | 37,981 | 38,144 | 36,062 | 36,288 | 36,451 | 34,369 | ||||||||||||||||||||||
Merger reserve |
29 | (1,027 | ) | (1,027 | ) | (1,027 | ) | | | | |||||||||||||||||||
Profit and loss account |
29 | (52,648 | ) | (28,549 | ) | (25,133 | ) | (51,968 | ) | (28,597 | ) | (25,142 | ) | ||||||||||||||||
Total shareholders
(deficit)/funds |
(3,856 | ) | 20,372 | 20,846 | (3,842 | ) | 19,658 | 20,171 | |||||||||||||||||||||
Analysis of shareholders
(deficit)/funds
|
|||||||||||||||||||||||||||||
Equity |
(10,062 | ) | 7,560 | 8,034 | (10,048 | ) | 6,846 | 7,359 | |||||||||||||||||||||
Non-equity |
6,206 | 12,812 | 12,812 | 6,206 | 12,812 | 12,812 | |||||||||||||||||||||||
(3,856 | ) | 20,372 | 20,846 | (3,842 | ) | 19,658 | 20,171 | ||||||||||||||||||||||
F-4
Consolidated cash flow statement
for the year ended 31 December
Note | 2002 | 2001 | 2000 | |||||||||||||
£000 | £000 | £000 | ||||||||||||||
Net cash inflow from operating activities |
3,811 | 11,670 | 3,531 | |||||||||||||
Returns on investment and servicing of finance |
||||||||||||||||
Dividends paid on non-equity shares |
| | (124 | ) | ||||||||||||
Interest received |
242 | 526 | 454 | |||||||||||||
Interest paid on loans and overdrafts |
(52 | ) | (287 | ) | (47 | ) | ||||||||||
Interest paid on finance leases |
(3 | ) | (9 | ) | (15 | ) | ||||||||||
Other interest paid |
| | (8 | ) | ||||||||||||
Net cash inflow from returns on investments and
servicing of finance |
187 | 230 | 260 | |||||||||||||
Taxation |
||||||||||||||||
Corporation tax paid |
(529 | ) | (284 | ) | (30 | ) | ||||||||||
Capital expenditure and financial investment |
||||||||||||||||
Purchase of intangible fixed assets |
(6,776 | ) | (32,385 | ) | (3,887 | ) | ||||||||||
Purchase of tangible fixed assets |
(444 | ) | (1,027 | ) | (457 | ) | ||||||||||
Proceeds on sale of tangible fixed assets |
102 | 7 | 68 | |||||||||||||
Net cash outflow from capital expenditure and
financial investment |
(7,118 | ) | (33,405 | ) | (4,276 | ) | ||||||||||
Acquisitions and disposals |
||||||||||||||||
Cash received on disposal of South American transdermal
business |
| 7 | | |||||||||||||
Cash balance eliminated on disposal of South American
transdermal business |
| (98 | ) | | ||||||||||||
Net cash acquired with return of transdermal
contracts |
| | 4,635 | |||||||||||||
Cash (outflow)/inflow before management of liquid
resources and financing |
(3,649 | ) | (21,880 | ) | 4,120 | |||||||||||
Management of liquid resources |
||||||||||||||||
Decrease/(increase) in short term deposits with
banks |
| 10,020 | (10,020 | ) | ||||||||||||
Proceeds on sale of current asset investments |
| | 242 | |||||||||||||
Financing |
||||||||||||||||
Issue of ordinary share capital |
27 | 123 | 2,746 | 6,382 | ||||||||||||
Expenses of issue of ordinary share capital |
(252 | ) | (223 | ) | | |||||||||||
New bank and other loans |
| 30,919 | | |||||||||||||
Restructuring costs paid |
| (704 | ) | | ||||||||||||
Repayment of principal on bank and other loans |
34 | (1,600 | ) | (1,493 | ) | (5 | ) | |||||||||
Repayment of principal under finance leases |
34 | (120 | ) | (163 | ) | (92 | ) | |||||||||
Net cash (outflow)/inflow from financing |
(1,849 | ) | 31,082 | 6,285 | ||||||||||||
(Decrease)/increase in cash |
33 | (5,498 | ) | 19,222 | 627 | |||||||||||
F-5
Reconciliation of operating loss to net cash inflow from operating activities
2002 | 2001 | 2000 | ||||||||||
£000 | £000 | £000 | ||||||||||
Continuing operations |
||||||||||||
Operating loss from continuing operations |
(20,268 | ) | (3,487 | ) | (1,769 | ) | ||||||
Amounts written off investments |
| | (25 | ) | ||||||||
Depreciation on tangible fixed assets |
538 | 394 | 439 | |||||||||
Amortisation of intangible fixed assets |
4,609 | 14,177 | 1,181 | |||||||||
Impairment of intangible fixed assets |
24,090 | | | |||||||||
(Gain)/loss on translation of foreign currency balances |
(6,300 | ) | 112 | | ||||||||
Loss/(gain) on sale of tangible fixed assets |
7 | 9 | (3 | ) | ||||||||
(Increase)/decrease in stocks |
(2,361 | ) | (612 | ) | 338 | |||||||
(Increase)/decrease in trade debtors |
(4,300 | ) | (2,386 | ) | 2,450 | |||||||
Decrease/(increase) in other debtors |
410 | (2,236 | ) | 69 | ||||||||
(Increase) in prepayments and accrued income |
(236 | ) | (221 | ) | (31 | ) | ||||||
(Decrease)/increase in trade creditors |
(168 | ) | 1,282 | (891 | ) | |||||||
Increase/(decrease) in other creditors |
3,236 | 1,974 | (331 | ) | ||||||||
Increase/(decrease) in other taxation and social security |
10 | (248 | ) | 4 | ||||||||
Increase/(decrease) in accruals and deferred income |
4,590 | 468 | (1,554 | ) | ||||||||
(Decrease)/increase in provisions |
(46 | ) | 24 | 53 | ||||||||
Share option compensation charge |
| | 1,058 | |||||||||
Net cash inflow from continuing operating activities |
3,811 | 9,250 | 988 | |||||||||
Discontinued operations |
||||||||||||
Operating profit from discontinued operations |
| 458 | 4,696 | |||||||||
Decrease/(increase) in stocks |
| 52 | (52 | ) | ||||||||
(Increase) in trade debtors |
| (192 | ) | (287 | ) | |||||||
Decrease/(increase) in other debtors |
| 2,480 | (229 | ) | ||||||||
Increase/(decrease) in trade creditors |
| 39 | (370 | ) | ||||||||
(Decrease) in other creditors |
| (417 | ) | (1,215 | ) | |||||||
Net cash inflow from discontinued operating activities |
| 2,420 | 2,543 | |||||||||
Total net cash inflow from operating activities |
3,811 | 11,670 | 3,531 | |||||||||
F-6
Notes to the financial statements for the three years ended 31 December 2000, 2001 and 2002
1. | Basis of preparation |
The Group has focused its efforts on the establishment of a leading marketing and distribution company focused on neurology and pain management. In implementing this strategy, the Group has acquired US rights to products currently marketed and products presently in development. These acquisitions have been financed by the issue of securities, the sale of assets and loans and deferred payment terms from a related party, Elan Pharma International Limited (EPIL).
The Directors have prepared cash flow projections, which reflect the fund raising in January 2003 (see note 37), for the Group through to 30 April 2004 that are based on managements current best estimates of future sales and take into consideration recent trends in performance since the end of the year. Based on these sales assumptions, the cash flow projections show adequate cash resources to fund the Groups existing commercial activities and to meet its Permax short-term deferred payment obligations. These projections show a need to increase the level of cash resources to fund the acquisition and launch of new products such as Zelapar.
The Directors aim to increase the level of cash resources through a combination of the sale of non-core assets, external financing, reductions in costs and re-negotiation of terms of existing loan and deferred payment obligations. Under an agreement with EPIL, cash generated from the sale of non-core assets and external financing must be utilized in repayment of certain amounts due to EPIL. This includes amounts currently not falling due in the period to 30 April 2004.
The extent to which the Directors are able to sell non-core assets, raise external finance and/or re-negotiate terms with EPIL is largely unknown in terms of both timing and amount raised. Management is actively monitoring trends in sales and trading performance and will take cost reduction and or strategic actions to ensure that the business infrastructure remains in line with the level of sales generated.
Based on current sales expectations, the Directors believe that there are adequate funds to finance the Groups current operations and there is a reasonable prospect of being able to secure sufficient additional funds from a combination of actions to fund the acquisition and launch of products currently in development. Consequently, the Directors have prepared these financial statements on the going concern basis.
2. | Principal accounting policies |
The financial statements have been prepared in accordance with applicable accounting standards in the United Kingdom. A summary of the more important group accounting policies, which have been reviewed by the Board in accordance with Financial Reporting Standard (FRS) 18 Accounting Policies and which have been applied consistently, is set out below.
Basis of accounting
The financial statements are prepared in accordance with the historical cost convention.
Adoption of FRS 19 Deferred tax
FRS 19, Deferred tax has been adopted in the year, but its implementation has had no impact on the amounts included in the profit and loss account and balance sheets. The presentational requirements of FRS 19 for the current and prior year are disclosed in notes 13 and 25.
Basis of consolidation
The consolidated financial statements include the Company and all its subsidiary undertakings. The turnover and results of subsidiary companies are included in the financial statements from the date of acquisition,
F-7
except where merger accounting principles are applied, in which case the turnover and results of the Company being merged are included for a full year.
In the case of disposals, turnover and results are included up to the date of disposal.
Goodwill
Goodwill arising on consolidation represents the excess of the fair value of the consideration given over the fair value of the identifiable net assets acquired. Goodwill thus arising is capitalised and amortised over its useful economic life.
Tangible fixed assets and intangible fixed assets
Tangible and intangible fixed assets are stated at cost, being their purchase cost, together with any incidental expenses of acquisition.
Depreciation/amortisation is calculated so as to write off the cost of tangible/intangible fixed assets less their estimated residual values, on a straight line basis over the expected useful economic lives of the assets concerned. The principal annual rates used for this purpose are:
Plant and equipment |
10-20 | % | ||
Motor vehicles |
25 | % | ||
Fixtures and fittings |
20 | % | ||
Computer equipment |
33.33 | % |
Leasehold land and buildings are amortised over the period of the lease.
Intangible fixed assets are amortised on a straight line basis over the period in which the Group is expected to benefit from these assets, not exceeding 20 years.
Evaluation of assets for impairment
The Company reviews its long-lived assets for possible impairment by comparing their discounted expected future cash flows to their carrying amount. An impairment loss is recognised if the discounted expected future cash flows are less than the carrying amount of the asset and the impaired asset is written down to its recoverable amount.
Provision is made against the carrying value of tangible or intangible fixed assets where an impairment in value is deemed to have occurred.
Research and development expenditure
On a continuous basis the Group undertakes various clinical trials to establish and provide evidence of product efficacy.
All research and development costs are written off as incurred, except as provided in the following paragraph.
For a number of products under development, income is triggered under licence agreements by the submission of registration dossiers once trials have been completed, or simply by evidence of trials results alone. In these circumstances it is the Companys policy that the direct external costs of specific trials required to fulfil these criteria will be carried forward as work-in-progress up to the value of the income to be generated, where that income is expected to be received within twelve months of the balance sheet date. At present, the Company has no costs meeting these criteria and no work-in-progress is being carried forward.
F-8
Pre-launch costs
Prior to launch of a new pharmaceutical product, the Company may incur significant pre-launch marketing costs. Such costs are expensed as incurred.
Advertising costs
The Company has adopted an accounting policy for advertising costs whereby they are expensed as incurred. For the year ended 31 December 2002 costs incurred were £234,000 (31 December 2001: £589,000, 31 December 2000: £126,000).
Stocks and work in progress
Stocks and work in progress are stated at the lower of cost and net realisable value. In general, cost is determined on a first in, first out basis and includes transport and handling costs. In the case of manufactured products, cost includes all direct expenditure and production overheads based on the normal level of activity. Where necessary, provision is made for obsolete, slow moving and defective stocks.
Finance and operating leases
Costs in respect of operating leases are charged on a straight-line basis over the lease term. Where fixed assets are financed by leasing arrangements, which transfer to the Group substantially all the benefits and risks of ownership, the assets are treated as if they had been purchased outright and are included in tangible fixed assets. The capital element of the leasing commitments is shown as obligations under finance leases. The lease rentals are treated as consisting of capital and interest elements. The capital element is applied to reduce the outstanding obligations and the interest element is charged against profit in proportion to the reducing capital element outstanding. Assets held under finance leases are depreciated over the shorter of the lease terms and the useful lives of equivalent owned assets.
Foreign currencies
Assets and liabilities of foreign subsidiaries are translated into sterling at rates of exchange ruling at the end of the financial year and the results of foreign subsidiaries are translated at the average rate of exchange for the year. Differences on exchange arising from the retranslation of the opening net investment in subsidiary companies, and from the translation of the results of those companies at average rate, are taken to reserves and are reported in the statement of total recognised gains and losses. All other foreign exchange differences are taken to the profit and loss account in the year in which they arise.
Financial instruments
Current asset investments are stated at the lower of cost and market value. If there is no longer any market available for them, then the carrying value will be written down accordingly. Gains or losses on sale of such items will be recognised in the period in which the transaction takes place.
All borrowings are initially stated at the amount of consideration received. Finance costs are charged to the profit and loss account over the term of the borrowing and represent a constant proportion of capital repayment outstanding.
Turnover
Revenues exclude value added tax, sales between group companies and trade discounts. Revenues from pharmaceutical product sales and royalties now comprise the main element of the Companys income. This revenue represents the invoice value of products delivered to the customer, less trade discounts. The Company makes provisions for product returns based on specific product by product sales history and the value of product returns is taken as a deduction from revenue.
F-9
Royalty income is recognised when earned, based on related sales of products under agreements providing for royalties and is included under the heading royalties and product sales. Product sales income is recognised on the delivery of the related goods.
Income under license agreements is recognised when amounts have been earned through the achievement of specific milestones set forth in those agreements and the costs to attain those milestones have been incurred by the Company. A minority of the license agreements provide that if the Company materially breaches the agreement or fails to achieve required milestones, the Company would be required to refund all or a specified portion of the income received under the agreement. No provision is included for repayments of such income if the directors consider that this eventuality is remote.
Deferred taxation
Provision is made for deferred taxation in accordance with FRS 19, Deferred taxation on all material timing differences. Deferred tax assets are recognised to the extent that they are regarded as recoverable. Deferred tax assets and liabilities are not discounted.
Pension costs
The Group contributes a set proportion of certain employees gross salary to defined contribution money purchase pension schemes. The pension costs charged to the profit and loss account represent the amount of contributions payable in respect of the accounting period.
The Company provides no other post retirement benefits to its employees.
Short term investments
Bank deposits which are not repayable on demand are treated as short term investments in accordance with FRS 1 (Revised 1996) Cashflow statements. Movements in such investments are included under Management of liquid resources in the Groups cash flow statement.
Share schemes
In accordance with the provisions of Urgent Issues Task Force Abstract 17 Employee share schemes, the Group makes charges to the profit and loss account when options are granted, the charge being the estimated market value of the shares at the date of grant less the exercise price of the options. The charge is reflected in the consolidated profit and loss account with an offsetting credit to reserves.
Employers National Insurance and similar taxes arise on the exercise of certain share options. In accordance with Urgent Issues Task Force Abstract 25 National Insurance contributions on share options gains a provision is made, calculated using the market price at the balance sheet date, pro-rated over the vesting period of the options.
Discontinued operations
During 2002, a provision for costs associated with discontinued operations was released. During 2001, the Group disposed of all of its 99.16% equity interest in its South American transdermal business. This business has been included within discontinued operations in the profit and loss account. Discontinued operations also include some transactions related to the disposal of the main UK-based transdermal business in 1999.
Risks and uncertainties
The value of the Companys patent and proprietary rights will be affected by its ability to obtain and preserve patent protection for its products and trade secrets, and by the emergence of competing technologies over
F-10
time. In particular, the value of the intangible assets described in note 17 could be severely affected by changes in the status of the Companys patent and proprietary rights.
In addition, as the Companys products are highly regulated, any withdrawal of approval could impact the carrying value of the related inventory.
We currently rely on a single source of supply for most of our products. In the case of Permax, we received notice in March 2003 that the supplier has elected to terminate its manufacturing and supply obligations to us, with effect from 4 March 2006. There is therefore a risk that the Company will be unable to transfer manufacturing arrangements to an alternative provider in a timely or cost effective manner.
Use of estimates
The preparation of financial statements in conformity with UK GAAP requires management to make estimates and assumptions that 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. Actual results could differ from those estimates.
Nature of operations
The principal activities of the Company comprise the marketing and distribution of pharmaceutical products and the provision of drug delivery and development services to third party pharmaceutical companies. Currently the Companys principal products consist of a portfolio of products which were acquired on September 29, 1999 from Elan Pharmaceuticals Inc, a related party, (see note 38). During 2001, the Company entered the neurology market with the acquisition of the exclusive US marketing and distribution rights to Permax, a product approved by the US Food and Drug Administration (FDA) as a treatment for Parkinsons disease. In 2002, the Company exercised an option to acquire continuing marketing and distribution rights to Permax (see note 38).
An analysis of performance by geographical segment is given in note 3.
Restatement of comparatives
During the period ended 31 December 2001 the Company sold all of its 99.16% equity interest in its South American transdermal patch business. Consequently, this business has been shown in the profit and loss account as a discontinued operation and the comparatives have been restated to be consistent with this.
During 2002 the nominal value of ordinary shares was converted from 10p to £1 resulting in the number of shares reducing by a factor of 10, accordingly the comparatives for 2001 and 2000 have been restated.
3. | Analysis by geographical segment |
The Company operates in, and is managed as, a single segment. The majority of European sales are made to companies based in France and the majority of sales elsewhere are made to companies based in the United States. The following analysis is of revenue by geographical segment, origin, of net (loss)/profit and net (liabilities)/assets by companies in each territory. Analysis is also provided of revenue by class and also of long lived assets by geographical location.
F-11
Sales by destination
2002 | 2001 | 2000 | ||||||||||
£000 | £000 | £000 | ||||||||||
Geographical segment |
||||||||||||
United Kingdom |
532 | 678 | | |||||||||
Europe |
2,964 | 3,273 | 3,032 | |||||||||
North America |
36,348 | 32,682 | 7,494 | |||||||||
Rest of the world |
805 | 294 | | |||||||||
40,649 | 36,927 | 10,526 | ||||||||||
Discontinued operation |
| 2,225 | 7,013 | |||||||||
40,649 | 39,152 | 17,539 | ||||||||||
Sales by origin
2002 | 2001 | 2000 | ||||||||||
£000 | £000 | £000 | ||||||||||
Geographical segment |
||||||||||||
United Kingdom |
70 | 60 | | |||||||||
North America |
36,348 | 32,523 | 7,201 | |||||||||
Europe |
4,231 | 4,344 | 3,325 | |||||||||
40,649 | 36,927 | 10,526 | ||||||||||
Discontinued operation |
| 2,225 | 7,013 | |||||||||
40,649 | 39,152 | 17,539 | ||||||||||
(Loss)/profit before taxation
2002 | 2001 | 2000 | ||||||||||
£000 | £000 | £000 | ||||||||||
Geographical segment |
||||||||||||
United Kingdom |
(21,686 | ) | (4,401 | ) | (1,117 | ) | ||||||
Europe |
(207 | ) | 286 | (3 | ) | |||||||
North America |
1,077 | 879 | (189 | ) | ||||||||
(20,816 | ) | (3,236 | ) | (1,309 | ) | |||||||
Discontinued operation |
| 300 | 3,238 | |||||||||
(20,816 | ) | (2,936 | ) | 1,929 | ||||||||
Net (liabilities)/assets
2002 | 2001 | 2000 | ||||||||||
£000 | £000 | £000 | ||||||||||
Geographical segment |
||||||||||||
United Kingdom |
(3,241 | ) | 19,900 | 20,161 | ||||||||
Europe |
(694 | ) | (261 | ) | (670 | ) | ||||||
North America |
79 | 733 | 183 | |||||||||
Rest of the world |
| | 1,172 | |||||||||
(3,856 | ) | 20,372 | 20,846 | |||||||||
Analysis by class of business
2002 | 2001 | 2000 | ||||||||||
£000 | £000 | £000 | ||||||||||
Turnover |
||||||||||||
Licensing and development fees |
2,069 | 1,472 | 817 | |||||||||
Services |
394 | 104 | 76 | |||||||||
Royalties and product sales |
38,186 | 35,351 | 9,633 | |||||||||
40,649 | 36,927 | 10,526 | ||||||||||
Discontinued operations |
| 2,225 | 7,013 | |||||||||
40,649 | 39,152 | 17,539 | ||||||||||
F-12
Long lived assets by geographical location
2002 | 2001 | 2000 | ||||||||||
£000 | £000 | £000 | ||||||||||
United Kingdom |
29,642 | 32,675 | 14,141 | |||||||||
Europe |
711 | 580 | 665 | |||||||||
North America |
606 | 653 | 157 | |||||||||
Rest of world |
| | 1,116 | |||||||||
30,959 | 33,908 | 16,079 | ||||||||||
Significant customers
During the year ended 31 December 2002, approximately 23% of the Groups revenues were from one major customer and the next four largest customers accounted for a further 56% of revenues.
Approximately 10% of the Companys revenues in the year ended 31 December 2001 were from one major customer and the next four largest customers accounted for a further 26% of revenues. Approximately 13% of the Companys revenues in the year ended 31 December 2000 were from one major customer and the next four largest customers accounted for a further 37% of revenues. For each of these three periods, the significant customers are located in the United States of America.
The majority of operating costs and assets and liabilities serve the three classes of business, therefore it is not possible to analyse profit or loss before taxation or net assets between classes of business. The directors do not regard the level of sales between segments of the business to be significant and as a result these are not separately classified. These sales between group companies have been eliminated on consolidation.
4. Cost of sales
2002 | 2001 | 2000 | ||||||||||
£000 | £000 | £000 | ||||||||||
Cost of sales |
15,805 | 15,738 | 4,492 | |||||||||
Inventory write-off |
2,891 | | | |||||||||
18,696 | 15,738 | 4,492 | ||||||||||
Analysed: |
||||||||||||
Continuing operations |
18,696 | 14,734 | 3,089 | |||||||||
Discontinued operations |
| 1,004 | 1,403 | |||||||||
Total operating expenses |
18,696 | 15,738 | 4,492 | |||||||||
During 2002, the Company recorded a non-recurring charge for inventory write-offs due to the generic competition against Phrenilin with Caffeine and Codeine.
5. Operating expenses
Note | 2002 | 2001 | 2000 | |||||||||||||
£000 | £000 | £000 | ||||||||||||||
Administrative expenses |
||||||||||||||||
Administrative and general expenses |
7,485 | 5,107 | 4,731 | |||||||||||||
Selling and marketing expenses |
7,197 | 4,012 | 362 | |||||||||||||
Foreign exchange gain |
(5,019 | ) | | | ||||||||||||
Amortisation of intangible fixed assets |
17 | 1,779 | 1,725 | 1,181 | ||||||||||||
Amortisation of Permax sales and marketing rights |
17 | 2,830 | 12,452 | | ||||||||||||
Impairment of Moraxen carrying value |
17 | 294 | | | ||||||||||||
Impairment of Permax carrying value |
17 | 23,796 | | | ||||||||||||
38,362 | 23,296 | 6,274 | ||||||||||||||
Analysed: |
||||||||||||||||
Continuing operations |
38,362 | 22,839 | 5,839 | |||||||||||||
Discontinued operations |
| 457 | 435 | |||||||||||||
38,362 | 23,296 | 6,274 |
F-13
Note | 2002 | 2001 | 2000 | |||||||||||||
£000 | £000 | £000 | ||||||||||||||
Research and development costs |
||||||||||||||||
Continuing operations |
3,859 | 2,841 | 3,367 | |||||||||||||
Discontinued operations |
| 306 | 479 | |||||||||||||
3,859 | 3,147 | 3,846 | ||||||||||||||
Total operating expenses |
42,221 | 26,443 | 10,120 | |||||||||||||
6. Directors emoluments
2002 | 2001 | 2000 | ||||||||||
£000 | £000 | £000 | ||||||||||
Aggregate emoluments |
873 | 758 | 401 | |||||||||
Company pension contributions to money purchase schemes |
22 | 18 | 15 | |||||||||
895 | 776 | 416 | ||||||||||
The Company paid pension contributions to money purchase pension schemes on behalf of one director (year to 31 December 2001: one director, year to 31 December 2000: one director).
T G Lynch waived emoluments in respect of the year ended 31 December 2002 amounting to £25,000 (year to 31 December 2001: £25,000, year to 31 December 2000: £25,000). Also, J Groom waived emoluments in respect of the year ended 31 December 2002 amounting to £25,000 (year to 31 December 2001: £14,000).
Total remuneration of directors (including benefits in kind) includes amounts paid to:
Highest paid director
2002 | 2001 | 2000 | ||||||||||
£000 | £000 | £000 | ||||||||||
Aggregate emoluments |
873 | 758 | 401 | |||||||||
Company pension contributions to money purchase schemes |
22 | 18 | 15 | |||||||||
895 | 776 | 416 | ||||||||||
7. Employee information
The average monthly number of persons (including executive directors) employed by the Group during the year was:
2002 | 2001 | 2000 | ||||||||||
Marketing and administration |
58 | 30 | 16 | |||||||||
Clinical and registration |
6 | 7 | 6 | |||||||||
Research and development |
24 | 29 | 27 | |||||||||
Computing |
2 | 2 | 2 | |||||||||
Laboratory |
16 | 16 | 14 | |||||||||
106 | 84 | 65 | ||||||||||
2002 | 2001 | 2000 | ||||||||||
£000 | £000 | £000 | ||||||||||
Staff costs (for the above persons): |
||||||||||||
Wages and salaries |
5,386 | 3,489 | 2,192 | |||||||||
Social security costs |
1,053 | 489 | 431 | |||||||||
Other pension costs |
233 | 155 | 153 | |||||||||
6,672 | 4,133 | 2,776 | ||||||||||
F-14
8. (Loss)/profit on disposal of discontinued operations
2002 | 2001 | 2000 | ||||||||||
£000 | £000 | £000 | ||||||||||
(Loss) on disposal of South American transdermal business |
| (893 | ) | | ||||||||
Profit on sale of transdermal business |
| | 759 | |||||||||
| (893 | ) | 759 | |||||||||
There were no disposals during 2002.
Profit of £759,000 for the year ended 31 December 2000 related to the reversal of a payable balance, arising on the 1999 sale of the UK transdermal patch business, which was paid on behalf of the Company by Elan. The Company is not obliged to repay Elan any of this amount.
On 30 November 2001 the Company and its subsidiary, Amarin Pharmaceuticals Company Limited, concluded the sale of its 99.16% share of its South American transdermal patch product development business comprising the Companys entire interest in the business. The South American transdermal patch business was discontinued from that date.
The consolidated profit and loss account contains a combined profit/(loss) on discontinued operations calculated as follows:
Year ended | Year ended | Year ended | ||||||||||
31 December | 31 December | 31 December | ||||||||||
2002 | 2001 | 2000 | ||||||||||
£000 | £000 | £000 | ||||||||||
Revenue |
||||||||||||
Royalties and product sales |
| 2,036 | 3,072 | |||||||||
Licensing and development fees |
| 146 | 3,870 | |||||||||
Services |
| 43 | 71 | |||||||||
Total revenues from discontinued operations |
| 2,225 | 7,013 | |||||||||
Cost of sales |
| 1,004 | 1,403 | |||||||||
Gross profit |
| 1,221 | 5,610 | |||||||||
Operating expenses |
||||||||||||
Research and development |
| 306 | 479 | |||||||||
Selling, general and administrative expenses |
| 457 | 435 | |||||||||
Total operating expenses from discontinued
operations |
| 763 | 914 | |||||||||
Operating profit |
| 458 | 4,696 | |||||||||
Exceptional cost of restructuring (see note 11) |
669 | 735 | (2,108 | ) | ||||||||
Profit from discontinued operations |
669 | 1,193 | 2,588 | |||||||||
9. Interest receivable and similar income
2002 | 2001 | 2000 | ||||||||||
£000 | £000 | £000 | ||||||||||
Bank interest receivable and similar income |
240 | 526 | 365 | |||||||||
Other interest receivable |
2 | | 1 | |||||||||
Gain on disposal of current asset investments |
| 21 | 242 | |||||||||
242 | 547 | 608 | ||||||||||
10. Interest payable and similar charges
2002 | 2001 | 2000 | ||||||||||
£000 | £000 | £000 | ||||||||||
On bank overdrafts |
3 | 14 | 9 | |||||||||
On other loans |
1,153 | 273 | 162 | |||||||||
On finance leases |
3 | 9 | 17 | |||||||||
Other interest payable |
300 | | 69 | |||||||||
1,459 | 296 | 257 | ||||||||||
F-15
Other interest payable comprises of interest payable on the under-provision of UK corporation tax relating to prior years (see note 13).
11. Exceptional items
2002 | 2001 | 2000 | ||||||||||
£000 | £000 | £000 | ||||||||||
Exceptional costs restructuring: |
||||||||||||
Discontinuing operations |
(669 | ) | (735 | ) | 2,108 | |||||||
The costs shown above in 2000 represented the estimated costs incurred in terminating the contracts that were not assumed by Elan Pharma International Limited as part of the sale to them of the transdermal assets and liabilities. This expense formed part of the overall programme of restructuring the business towards a pharmaceuticals products marketing and distribution focus and reducing research and development activities. In December 2000 the Company was informed that Elan Pharma International Limited would not be assuming certain of these contracts. As this area of the business had been discontinued, certain costs were estimated to be incurred in terminating a number of contracts, and the provision represented the directors estimate of the costs that were expected to be incurred. £735,000 of this provision was released during 2001. The remaining £669,000 of this provision was released during 2002 (see note 25).
12. (Loss)/profit on ordinary activities before taxation
2002 | 2001 | 2000 | |||||||||||
£000 | £000 | £000 | |||||||||||
(Loss)/profit on ordinary activities before taxation is
stated after charging: |
|||||||||||||
Depreciation/amortisation charge for the period: |
|||||||||||||
Intangible fixed assets |
4,609 | 14,177 | 1,181 | ||||||||||
Tangible owned fixed assets |
448 | 299 | 348 | ||||||||||
Tangible fixed assets held under finance leases |
90 | 95 | 91 | ||||||||||
Auditors remuneration for audit (company £154,000, year to
31 December 2001: £113,000, year to 31 December 2000;
£50,000) |
166 | 133 | 81 | ||||||||||
Auditors remuneration for non-audit work |
83 | 178 | 123 | ||||||||||
Operating lease charges |
|||||||||||||
Plant and machinery |
10 | 3 | | ||||||||||
Other |
1,022 | 390 | 307 | ||||||||||
Loss/(gain) on disposal of fixed assets |
7 | 9 | (3 | ) | |||||||||
13. Taxation
2002 | 2001 | 2000 | |||||||||||
£000 | £000 | £000 | |||||||||||
Tax on (loss)/profit on ordinary activities: |
|||||||||||||
United Kingdom corporation tax at 30%
Current year |
| 165 | 55 | ||||||||||
(Over)/under provision in respect of prior years |
1,622 | (12 | ) | 42 | |||||||||
Overseas taxation: current |
574 | 180 | 132 | ||||||||||
Total current tax |
2,196 | 333 | 229 | ||||||||||
During 2002, the Company provided for £1,622,000 in respect of prior years corporation tax payable. Of this, £1,605,000 relates to the gain arising on the disposal of the transdermal business in 1999. The charge attributable to continuing operations is:
F-16
2002 | 2001 | 2000 | ||||||||||
£000 | £000 | £000 | ||||||||||
United Kingdom corporation tax
Current year |
| 115 | 60 | |||||||||
Prior year |
107 | (12 | ) | 42 | ||||||||
Overseas tax |
574 | 180 | 127 | |||||||||
Attributable to continuing operations |
681 | 283 | 229 | |||||||||
The following items represent the principal reasons for the differences between corporate income taxes computed at the United Kingdom statutory tax rate and the total current tax charge for the year.
2002 | 2001 | 2000 | |||||||||||
£000 | £000 | £000 | |||||||||||
(Loss)/profit on ordinary activities before tax |
(20,816 | ) | (2,936 | ) | 1,929 | ||||||||
(Loss)/profit on ordinary activities multiplied by
standard rate of corporate tax in the UK of 30% (2001: |
|||||||||||||
30%, 2000: 30%) |
(6,245 | ) | (881 | ) | 579 | ||||||||
Overseas tax and adjustments in respect of foreign tax
rates |
583 | 180 | 8 | ||||||||||
Accelerated capital allowances and other short term timing
differences |
2,087 | 895 | (441 | ) | |||||||||
Expenses not deductible for tax purposes |
4,149 | 151 | 41 | ||||||||||
Adjustments to tax charge in respect of previous period |
1,622 | (12 | ) | 42 | |||||||||
Current tax charge |
2,196 | 333 | 229 | ||||||||||
In the UK, the applicable statutory rate for Corporate income tax was 30% for the year ended 31 December 2000, 2001 and 2002.
The corporate tax rate in Sweden is 28%. A loss sustained in any income year may be carried forward and deducted from taxable income during the next and subsequent years. No carryback is permitted. The corporate tax rate in the United States is 34%. For tax years beginning after August 5, 1997, companies may generally carry back net operating losses two years and forwards twenty years.
Losses carried forward in the continuing UK Company at 31 December 2002 were £33,533,000 (31 December 2001: £28,845,000, 31 December 2000: £20,718,000) subject to confirmation by UK tax authorities. Under UK tax law, these losses can be carried forward indefinitely for set off against future profits of the same trade.
The Company has recognised a full valuation allowance against deferred tax assets as the likelihood of realising these assets is uncertain.
During the year ended 31 December 2001, the main reconciling item in arriving at the current tax charge related to accelerated capital allowances and other short term timing differences. The main timing difference related to losses that were carried forward for set off against future profits of the same trade. During the year ended 31 December 2002 the main reconciling items in arriving at the current tax charge related to accelerated capital allowances, other short term timing differences and expenses not deductible for tax purposes. The main timing difference related to losses that were carried forward for set off against future profits of the same trade. The expenses not deductible for tax purposes principally related to the diminution in value of intangible fixed assets.
14. Loss for the financial period
As permitted by section 230 of the Companies Act 1985, the Companys profit and loss account has not been included in these financial statements. Of the consolidated loss attributable to the shareholders of Amarin Corporation plc a loss of £23,371,000 (31 December 2001: loss of £3,455,000, 31 December 2000: loss of £11,729,000) has been dealt with in the financial statements of the Company.
15. (Loss)/earnings per ordinary share
F-17
The (loss)/earnings per ordinary share are as follows:
2002 | 2001 | 2000 | ||||||||||
*Restated | *Restated | |||||||||||
Net (loss)/earnings attributable to ordinary
shareholders (£000) |
(23,012 | ) | (3,269 | ) | 1,700 | |||||||
Basic (loss)/earnings per ordinary share (pence) |
(247.5 | ) | (45.9 | ) | 43.0 | |||||||
Fully diluted (loss)/earnings per ordinary share
(pence) |
(247.5 | ) | (45.9 | ) | 20.2 | |||||||
Weighted average number of ordinary shares in issue |
9,297,200 | 7,124,700 | 3,953,100 | |||||||||
Dilutive impact of cumulative preference shares |
2,000,000 | 4,129,800 | 4,129,800 | |||||||||
Dilutive impact of share options outstanding |
565,500 | 765,800 | 345,700 | |||||||||
Fully diluted average number of ordinary shares in
issue |
11,862,700 | 12,020,300 | 8,428,600 | |||||||||
* During 2002 the nominal value of ordinary shares was converted from 10p to £1 resulting in the number of shares reducing by a factor of 10, accordingly the comparatives for 2001 and 2000 have been restated. |
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue in the year.
Fully diluted earnings per share is calculated using the weighted average number of ordinary shares in issue adjusted to reflect the effect were the cumulative preference shares to be converted to additional ordinary shares, together with the effect of exercising those share options granted where the exercise price is less than the average market price of the ordinary shares during the year. Because the Company reported a net loss in 2002 and 2001, the loss per share is not reduced by dilution.
16. Dividends non-equity
In 2002 the Company has proposed and accrued £76,000 relating to non-equity dividends on the 3% convertible preference shares of £1 nominal value. In 2001 and 2000 the Company has accrued £124,000 relating to non-equity dividends on 4,129,819 3% convertible preference shares of £1 nominal value. During 2002, 2,129,819 of the shares were converted into ordinary shares (see note 27).
17. Intangible fixed assets
Group | £000 | |||
Cost |
||||
At 1 January 2000 |
17,720 | |||
Additions |
3,887 | |||
At 31 December 2000 and at 1 January 2001 |
21,607 | |||
Additions |
32,385 | |||
Disposals |
(6,066 | ) | ||
At 31 December 2001 and at 1 January 2002 |
47,926 | |||
Additions |
25,798 | |||
At 31 December 2002 |
73,724 | |||
Amortisation |
||||
At 1 January 2000 |
5,307 | |||
Charge for year |
1,181 | |||
At 31 December 2000 and at 1 January 2001 |
6,488 | |||
Charge for year |
14,177 | |||
Eliminated on disposal |
(5,117 | ) | ||
At 31 December 2001 and at 1 January 2002 |
15,548 | |||
Charge for the year |
4,609 | |||
Impairment charge |
24,090 | |||
At 31 December 2002 |
44,247 | |||
F-18
Group | £000 | |||
Net Book Value |
||||
Net book value at 31 December 2002 |
29,477 | |||
Net book value at 31 December 2001 |
32,378 | |||
Net book value at 31 December 2000 |
15,119 | |||
On May 17, 2001, the Group entered into an agreement with Elan to license US rights to Permax, a dopamine agonist marketed for the treatment of Parkinsons disease. Under this agreement, the Group acquired limited exclusive US distribution, sales and marketing rights for an initial period of time, together with a fixed price option to acquire unrestricted US rights. The initial period of exclusive distribution rights expired the earlier of 12 months from the date of the agreement or upon closing of the exercise of the purchase option to acquire all of Elans US rights to Permax. The exercise of the option expanded the Groups rights to Permax in a number of ways, including (1) removing the limited duration of distribution, sales and marketing rights, (2) providing the Group with the rights to develop Permax further (eg new formulations) and (3) enabling the Group to sell some or all of its rights to a third party at some future date.
In 2001, the Group paid Elan £32,348,000 ($47,500,000) in consideration for the combination of these rights. A further £25,733,000 ($37,500,000) would become payable on the exercise of the option. The Group capitalized the consideration paid to Elan in 2001 as two separate intangible assets: (1) an exclusive US distribution right (£19,943,000) and (2) an option to acquire US rights to Permax (£12,405,000). The initial payment of £32,348,000 ($47,500,000) was allocated between the two assets. The value ascribed to the distribution right was determined using the present value of projected cash flows anticipated over the 12 month period of the distribution agreement. The balance of the initial payment was allocated to the option. Prior to the exercise of the option, the value attributed to the distribution right was being amortized over its 12 month term. The value attributed to the option was not amortized as this amount represents a component of purchase consideration, subject to any impairment.
In 2002, the Group exercised its option to acquire Elans entire US Permax rights, triggering the further consideration of £25,733,000 ($37,500,000). The Permax asset has been recorded at an amount equal to the total consideration paid, which included both the £25,733,000 ($37,500,000) in payments arising from the exercise of the option in 2002, as well as the £12,405,000 in value attributed to the option originally in 2001. In addition, with the exercise of the option, management reassessed the useful life of the distribution right and concluded that the remaining carrying amount of £7,491,000 (being the original £19,943,000 cost amortized up to the date the option was deemed to have been exercised January 1, 2002) should be amortised over a remaining period of 14 years to match the life assigned to the Permax intangible acquired in March 2002.
During 2002, the Group recorded an impairment charge in relation to the value of Permax (£23,826,000), following the introduction of generic competition. The impairment charge was calculated in accordance with FRS11 (UK GAAP) Impairment of fixed assets and goodwill. As prescribed in FRS11 the launch of a generic is a trigger event which necessitates, where appropriate, a revision of the carrying value of the intangible. Subsequent to this impairment charge, the Permax estimated economic useful life has been reduced to 10 years.
In 2001, the Company paid £327,000 to acquire exclusive US rights for Moraxen, a product in development by CeNeS plc for treatment of pain. During 2002, CeNeS experienced financial difficulty and has ceased further development work on Moraxen. Consequently, included in the Group impairment charge is the write-off of £294,000, the entire carrying value of this intangible.
In 2002, the Company paid £65,000 to Elan for an option to acquire exclusive US rights to Zelapar, a product in development for Parkinsons disease.
Company
£000 | ||||
Cost |
||||
At 1 January 2000 |
11,758 | |||
Additions |
3,860 | |||
At 31 December 2000 and at 1 January 2001 |
15,618 |
F-19
£000 | ||||
Additions |
32,349 | |||
At 31 December 2001 and at 1 January 2002 |
47,967 | |||
Additions |
25,798 | |||
At 31 December 2002 |
73,765 | |||
Amortisation |
||||
At 1 January 2000 |
415 | |||
Charge for year |
1,176 | |||
At 31 December 2000 and at 1 January 2001 |
1,591 | |||
Charge for year |
14,013 | |||
At 31 December 2001 and at 1 January 2002 |
15,604 | |||
Charge for the year |
4,684 | |||
Impairment charge |
24,090 | |||
At 31 December 2002 |
44,378 | |||
Net Book Value |
||||
Net book value at 31 December 2002 |
29,387 | |||
Net book value at 31 December 2001 |
32,363 | |||
Net book value at 31 December 2000 |
14,027 | |||
18. Tangible fixed assets
Short | Plant and | Motor | Fixtures | Computer | ||||||||||||||||||||
Group | leasehold | equipment | vehicles | and fittings | equipment | Total | ||||||||||||||||||
£000 | £000 | £000 | £000 | £000 | £000 | |||||||||||||||||||
Cost |
||||||||||||||||||||||||
At 1 January 2000 |
33 | 2,133 | 57 | 28 | 344 | 2,595 | ||||||||||||||||||
Additions |
| 264 | 39 | 70 | 84 | 457 | ||||||||||||||||||
Disposals |
| (97 | ) | (16 | ) | (7 | ) | | (120 | ) | ||||||||||||||
At 31 December 2000 and at 1 January
2001 |
33 | 2,300 | 80 | 91 | 428 | 2,932 | ||||||||||||||||||
Additions |
407 | 164 | | 379 | 77 | 1,027 | ||||||||||||||||||
Disposals |
(33 | ) | (100 | ) | (27 | ) | (4 | ) | (44 | ) | (208 | ) | ||||||||||||
At 31 December 2001 and at 1 January
2002 |
407 | 2,364 | 53 | 466 | 461 | 3,751 | ||||||||||||||||||
Additions |
| 318 | | 125 | 156 | 599 | ||||||||||||||||||
Disposals |
| (98 | ) | | (108 | ) | (15 | ) | (221 | ) | ||||||||||||||
At 31 December 2002 |
407 | 2,584 | 53 | 483 | 602 | 4,129 | ||||||||||||||||||
Accumulated depreciation |
||||||||||||||||||||||||
At 1 January 2000 |
16 | 1,249 | 57 | 3 | 263 | 1,588 | ||||||||||||||||||
Charge for the year |
3 | 366 | 7 | 17 | 46 | 439 | ||||||||||||||||||
Eliminated on disposals |
| (39 | ) | (16 | ) | | | (55 | ) | |||||||||||||||
At 31 December 2000 and at 1 January
2001 |
19 | 1,576 | 48 | 20 | 309 | 1,972 | ||||||||||||||||||
Charge for the year |
22 | 255 | 9 | 55 | 53 | 394 | ||||||||||||||||||
Eliminated on disposals |
(21 | ) | (60 | ) | (27 | ) | (2 | ) | (35 | ) | (145 | ) | ||||||||||||
At 31 December 2001 and at 1 January
2002 |
20 | 1,771 | 30 | 73 | 327 | 2,221 | ||||||||||||||||||
Charge for the year |
18 | 282 | 10 | 87 | 141 | 538 | ||||||||||||||||||
Eliminated on disposals |
| (31 | ) | | (70 | ) | (11 | ) | (112 | ) | ||||||||||||||
At 31 December 2002 |
38 | 2,022 | 40 | 90 | 457 | 2,647 | ||||||||||||||||||
Net book value |
||||||||||||||||||||||||
At 31 December 2002 |
369 | 562 | 13 | 393 | 145 | 1,482 | ||||||||||||||||||
At 31 December 2001 |
387 | 593 | 23 | 393 | 134 | 1,530 | ||||||||||||||||||
At 31 December 2000 |
14 | 724 | 32 | 71 | 119 | 960 | ||||||||||||||||||
Plant and equipment includes assets held under finance leases and purchase contracts as follows:
Group | £000 | |||
Cost |
||||
At 1 January 2000 |
577 | |||
At 31 December 2000 and at 1 January 2001 |
577 | |||
Disposals |
(62 | ) | ||
At 31 December 2001 and at 1 January 2002 |
515 | |||
Additions |
137 | |||
Disposals |
(92 | ) | ||
At 31 December 2002 |
560 | |||
Accumulated depreciation |
F-20
Group | £000 | |||
At 1 January 2000 |
258 | |||
Charge for year |
91 | |||
At 31 December 2000 and at 1 January 2001 |
349 | |||
Charge for year |
95 | |||
At 31 December 2001 and at 1 January 2002 |
444 | |||
Charge for year |
90 | |||
Disposals |
(35 | ) | ||
At 31 December 2002 |
499 | |||
Net book value |
||||
At 31 December 2002 |
61 | |||
At 31 December 2001 |
71 | |||
At 31 December 2000 |
228 | |||
Short | Plant and | Motor | Fixtures | Computer | ||||||||||||||||||||
Company | leasehold | equipment | vehicles | and fittings | equipment | Total | ||||||||||||||||||
£000 | £000 | £000 | £000 | £000 | £000 | |||||||||||||||||||
Cost |
||||||||||||||||||||||||
At 1 January 2000 |
33 | 97 | 42 | 4 | 103 | 279 | ||||||||||||||||||
Additions |
| | 38 | | 27 | 65 | ||||||||||||||||||
Disposals |
| (97 | ) | (16 | ) | | | (113 | ) | |||||||||||||||
At 31 December 2000 and at 1 January
2001 |
33 | | 64 | 4 | 130 | 231 | ||||||||||||||||||
Additions |
182 | | | 52 | 42 | 276 | ||||||||||||||||||
Disposals |
(33 | ) | | (27 | ) | (2 | ) | (35 | ) | (97 | ) | |||||||||||||
At 31 December 2001 and at 1 January
2002 |
182 | | 37 | 54 | 137 | 410 | ||||||||||||||||||
Additions |
| | | 5 | 25 | 30 | ||||||||||||||||||
At 31 December 2002 |
182 | | 37 | 59 | 162 | 440 | ||||||||||||||||||
Accumulated depreciation |
||||||||||||||||||||||||
At 1 January 2000 |
16 | 33 | 42 | 4 | 37 | 132 | ||||||||||||||||||
Charge for the year |
3 | 6 | 6 | | 25 | 40 | ||||||||||||||||||
Eliminated on disposals |
| (39 | ) | (16 | ) | | | (55 | ) | |||||||||||||||
At 31 December 2000 and at 1 January
2001 |
19 | | 32 | 4 | 62 | 117 | ||||||||||||||||||
Charge for the year |
16 | | 9 | 7 | 34 | 66 | ||||||||||||||||||
Eliminated on disposals |
(21 | ) | | (27 | ) | (2 | ) | (35 | ) | (85 | ) | |||||||||||||
At 31 December 2001 and at 1 January
2002 |
14 | | 14 | 9 | 61 | 98 | ||||||||||||||||||
Charge for the year |
18 | | 10 | 10 | 49 | 87 | ||||||||||||||||||
At 31 December 2002 |
32 | | 24 | 19 | 110 | 185 | ||||||||||||||||||
Net book value |
||||||||||||||||||||||||
At 31 December 2002 |
150 | | 13 | 40 | 52 | 255 | ||||||||||||||||||
At 31 December 2001 |
168 | | 23 | 45 | 76 | 312 | ||||||||||||||||||
At 31 December 2000 |
14 | | 32 | | 68 | 114 | ||||||||||||||||||
The Company had no tangible fixed assets under finance leases at 31 December 2002, 31 December 2001 or 31 December 2002.
19. Fixed asset investments
Group
The Group had no fixed asset investments as 31 December 2002, 2001 or 2000.
Company
Group | ||||
undertakings | ||||
£000 | ||||
Cost or valuation |
||||
At 31 December 2002, 2001 and 2000 |
1,031 | |||
F-21
Interest in group undertakings
Proportion of | ||||||||||||
nominal value of | ||||||||||||
issued share capital | ||||||||||||
Country of | held by the | |||||||||||
incorporation | ||||||||||||
Name of undertaking | or registration | Description of shares held | Group | Company | ||||||||
% | % | |||||||||||
Amarin
Pharmaceuticals Company Limited |
England and Wales | 1,599,925 £1 ordinary shares |
100 | 100 | ||||||||
Ethical
Pharmaceuticals (UK) Limited |
England and Wales | 16,262 £1 ordinary shares |
100 | 100 | ||||||||
11,735 £1 A ordinary shares | 100 | 100 | ||||||||||
375,050 £1 redeemable cumulative preference shares |
100 | 100 | ||||||||||
5,421 £1 redeemable convertible cumulative preference shares |
100 | 100 | ||||||||||
Gacell Holdings AB | Sweden | 1,000 SEK 100 ordinary shares |
100 | | ||||||||
Amarin
Development (Sweden) AB |
Sweden | 1,000 SEK 100 ordinary shares |
100 | | ||||||||
Amarin Pharmaceuticals Inc. | United States | 10 US $0.01 common stock | 100 | |
All the above subsidiary undertakings have been consolidated in the financial statements using the acquisition method except for Gacell Holdings AB which has been accounted for as a merger.
Sales and marketing companies
Amarin Pharmaceuticals Inc.
Research and development of pharmaceutical products and new drug delivery systems
Amarin Development (Sweden) AB.
Intermediate holding companies
Gacell Holdings AB and Amarin Pharmaceuticals Company Limited.
Non trading companies
Ethical Pharmaceuticals (UK) Limited.
20. Stock
Group | Company | |||||||||||||||||||||||
2002 | 2001 | 2000 | 2002 | 2001 | 2000 | |||||||||||||||||||
£000 | £000 | £000 | £000 | £000 | £000 | |||||||||||||||||||
Raw materials and consumables |
497 | 704 | 794 | 496 | 704 | 784 | ||||||||||||||||||
Finished goods and goods for resale |
4,302 | 1,734 | 1,084 | 4,263 | 1,719 | 1,084 | ||||||||||||||||||
4,799 | 2,438 | 1,878 | 4,759 | 2,423 | 1,868 | |||||||||||||||||||
F-22
21. Debtors
Group | Company | |||||||||||||||||||||||
2002 | 2001 | 2000 | 2002 | 2001 | 2000 | |||||||||||||||||||
£000 | £000 | £000 | £000 | £000 | £000 | |||||||||||||||||||
Amounts falling due within one
year |
||||||||||||||||||||||||
Trade debtors |
8,360 | 4,060 | 1,961 | 8,180 | 3,661 | 1,469 | ||||||||||||||||||
Amounts owed by group undertakings |
| | | 12,017 | 17,821 | 2,801 | ||||||||||||||||||
Other debtors |
650 | 900 | 945 | 207 | 327 | 488 | ||||||||||||||||||
Prepayments and accrued income |
684 | 448 | 227 | 607 | 368 | 149 | ||||||||||||||||||
9,694 | 5,408 | 3,133 | 21,011 | 22,177 | 4,907 | |||||||||||||||||||
No provision or charge against bad or doubtful debts has been made during 2002, 2001, 2000.
22. Current asset investments
The Group holds an investment in Antares Pharma Inc. (Antares) (formerly Medi-Ject Corporation), which is listed on the NASDAQ Exchange in the United States. In 2002, the directors have written off the carrying value of the investment in Antares.
In 2001 the carrying value was £44,000 against a market value of £39,000, the directors did not consider it necessary to reduce the year end carrying value to the market value as they considered the reduction to be a temporary diminution. The investment was held at its market value, being £44,000 at 31 December 2000.
At 31 December 2000, £10,020,000 of current asset investments was represented by cash held on short term deposit.
23. Creditors: amounts falling due within one year
Group | Company | |||||||||||||||||||||||
2002 | 2001 | 2000 | 2002 | 2001 | 2000 | |||||||||||||||||||
£000 | £000 | £000 | £000 | £000 | £000 | |||||||||||||||||||
Bank overdraft |
| 118 | | | | | ||||||||||||||||||
Current portion of other loans |
17,082 | 30,919 | | 10,870 | 30,919 | | ||||||||||||||||||
Obligations under finance leases |
12 | 97 | 166 | | | | ||||||||||||||||||
Trade creditors |
1,907 | 2,075 | 1,226 | 1,770 | 1,886 | 844 | ||||||||||||||||||
Amounts owed to group undertakings |
| | | 8,614 | 16,910 | 2,621 | ||||||||||||||||||
Corporation tax payable |
1,980 | 153 | 104 | 1,970 | 153 | 55 | ||||||||||||||||||
Other taxation and social security
payable |
239 | 229 | 477 | 165 | 167 | 234 | ||||||||||||||||||
Other creditors |
14,457 | 2,021 | 366 | 14,405 | 1,782 | 179 | ||||||||||||||||||
Accruals and deferred income |
5,880 | 1,290 | 698 | 5,620 | 1,068 | 535 | ||||||||||||||||||
41,557 | 36,902 | 3,037 | 43,414 | 52,885 | 4,468 | |||||||||||||||||||
(a) | At 31 December 2002, the Current portion of other loans comprises an unsecured loan from related parties, with a total principal amount of £26,399,000 (US$42,500,000) of which $27,500,000 (£17,082,000) is shown as due within one year. Of this amount, $17,500,000 (£10,870,240) was repayable at 31 December 2002, with the remaining $10,000,000 (£6,212,000) due in 2003. The loan carries interest at 2% above dollar LIBOR. On January 16, 2003 US$17,500,000 was paid. The remaining US$10,000,000 has been restructured and deferred by one year and is now due in 2004. | |
(b) | As further discussed in Note 24, £7,764,000 of the current portion of Other creditors relates to the deferred fixed payments due as a result of the exercise of the option with Permax. These payments do not bear interest. |
There is a right of set off between all of the Companys United Kingdom bank accounts and each company cross guarantees every other company within the UK group. In Sweden, the average outstanding line of credit in the year to 31 December 2002, 2001, 2000 was £nil, £54,000 and £118,000 respectively. The available line of credit in
F-23
each of these years was £285,000. The average bank interest rate in Sweden for the year ended 31 December 2002 was 5% (31 December 2001 5.3%, 31 December 2000 5%).
24. Creditors: amounts falling due after more than one year
Group | Company | |||||||||||||||||||||||
2002 | 2001 | 2000 | 2002 | 2001 | 2000 | |||||||||||||||||||
£000 | £000 | £000 | £000 | £000 | £000 | |||||||||||||||||||
Other loans |
13,354 | 4,466 | 6,266 | 19,566 | 4,466 | 6,266 | ||||||||||||||||||
Other creditors |
9,318 | | 98 | 9,318 | | | ||||||||||||||||||
Obligations under finance leases |
120 | | 94 | | | | ||||||||||||||||||
22,792 | 4,466 | 6,458 | 28,884 | 4,466 | 6,266 | |||||||||||||||||||
Long-term debt is made up of loans which are repayable as shown below;
In 2002, other loans comprises of:
a) | a non-interest bearing loan, with a related party, of £4,037,000 (US$6,500,000) which is repayable in one lump sum on September 29, 2004 and is unsecured; | |
b) | the longer term portion of the loan further described in Note 23(a) is £9,317,000 (US$15,000,000) with a related party and repayable on September 30, 2004. The loan bears interest at LIBOR dollar rate plus 2% per annum and is unsecured. As discussed in Note 23(a) $17,500,000 due at 31 December 2002 was paid in January 2003. In addition, in 2003 the loan was restructured and the longer term portion due previously on September 30, 2004 has been deferred by one year to September 30, 2005 (see note 23(a)); |
In 2002, Other creditors include amounts due to a related party, in respect of deferred consideration arising on the purchase of the remaining US rights to Permax. £7,764,000 (US$12,500,000) was due within one year, while £9,318,000 (US$15,000,000) was due after one year. This liability is interest free and repayable by quarterly instalments. Since the year end, a repayment of US$2,500,000 has been made and an amount of US$7,500,000 in future option payments has been waived by a related party as part of a debt restructuring.
In 2001, other loans comprises of:
c) | non-interest bearing loan, with a related party, of £4,466,000 (US$6,500,000) which was repayable at 30 September 2000 has been renegotiated and is now repayable by 29 September 2004 and is unsecured; and | |
d) | a loan with an outstanding amount of £419,000 at 31 December 2000 (31 December 1999: £336,000 (US$542,000)) which was repayable on 30 June 2005, was converted into 1,000,000 ordinary shares during the year ended 31 December 2001. |
In 2000, other loans include:
a) | a loan with an outstanding amount of £4,354,000, which was repayable by 29 September 2004, was non-interest bearing and is unsecured; | |
b) | a loan with an outstanding amount of £1,493,000, which was repayable on 6 April 2003, bears interest at LIBOR dollar rate plus 2% per annum and was unsecured; and | |
c) | a loan with an outstanding amount of £419,000, which was repayable on 30 June 2005, was unsecured and bears interest at 11% per annum. |
Analysis of repayments
Bank overdrafts, bank loans and other loans are repayable as follows:
F-24
Group | Company | |||||||||||||||||||||||
2002 | 2001 | 2000 | 2002 | 2001 | 2000 | |||||||||||||||||||
£000 | £000 | £000 | £000 | £000 | £000 | |||||||||||||||||||
Within one year or on demand |
24,847 | 31,037 | | 24,847 | 30,919 | | ||||||||||||||||||
Between one and two years |
19,567 | | | 19,567 | | | ||||||||||||||||||
Between two and five years |
3,105 | 4,466 | 6,266 | 3,105 | 4,466 | 6,266 | ||||||||||||||||||
47,519 | 35,503 | 6,266 | 47,519 | 35,385 | 6,266 | |||||||||||||||||||
The future minimum lease payments to which the Group and the Company are committed under finance leases are as follows:
Group | Company | |||||||||||||||||||||||
2002 | 2001 | 2000 | 2002 | 2001 | 2000 | |||||||||||||||||||
£000 | £000 | £000 | £000 | £000 | £000 | |||||||||||||||||||
Less than one year |
13 | 98 | 176 | | | | ||||||||||||||||||
Between one and two years |
144 | | 99 | | | | ||||||||||||||||||
Between two and five years |
| | | | | |||||||||||||||||||
Less: interest |
(25 | ) | (1 | ) | (15 | ) | | | | |||||||||||||||
132 | 97 | 260 | | | | |||||||||||||||||||
Less: current maturities |
(12 | ) | (97 | ) | (166 | ) | | | | |||||||||||||||
Long-term maturity |
120 | | 94 | | | | ||||||||||||||||||
25. Provisions for liabilities and charges
Group and Company
Deferred | National | Transdermal | ||||||||||||||
Taxation | Insurance | Provision | Total | |||||||||||||
£000 | £000 | £000 | £000 | |||||||||||||
At 1 January 2000 |
| | | | ||||||||||||
Charged to the profit and loss account |
| 53 | 2,108 | 2,161 | ||||||||||||
At 31 December 2000 and at 1 January 2001 |
| 53 | 2,108 | 2,161 | ||||||||||||
Payments made in the year |
| | (704 | ) | (704 | ) | ||||||||||
Charged/(released) to the profit and loss
account |
| 24 | (735 | ) | (711 | ) | ||||||||||
At 31 December 2001 and at 1 January 2002 |
| 77 | 669 | 746 | ||||||||||||
(Released) to the profit and loss account |
| (46 | ) | (669 | ) | (715 | ) | |||||||||
At 31 December 2002 |
| 31 | | 31 | ||||||||||||
The provision for employers National Insurance contributions shown above relates to amounts due on the exercise of certain share options held by employees provided in accordance with UITF 25 and will accumulate over the vesting period of relevant options.
The Transdermal provision shown above represents the estimated costs to be incurred in terminating the contracts which were not assumed by Elan Pharma International Limited as part of the sale to them of the transdermal assets and liabilities. In December 2000 the Company was informed that Elan Pharma International Limited would not be assuming certain of these contracts. As this area of the business had been discontinued, certain costs were likely to be incurred in terminating a number of contracts, and the provision represents the directors estimate of the costs which would be incurred.
During the year ended 31 December 2001, the Company incurred costs of £704,000 in respect of terminating the contracts and released £735,000 of the provision. During the year ended 31 December 2002 the directors have reviewed the remaining provision and £669,000 has been credited to the discontinued operations section of the consolidated profit and loss account, as the likelihood of these liabilities crystallising is considered to be remote.
Deferred taxation
No deferred tax asset has been recognised by the Company or the Group in 2002, 2001 or 2000 as the Company has a high level of corporate tax losses carried forward and insufficient certainty of future profitability. The unrecognised potential deferred tax asset amounted to £18,265,000 (2001: £8,400,000, 2000: £6,500,000).
F-25
26. Financial instruments
The Groups financial instruments comprise preference shares, borrowings, finance leases, provisions, cash and other liquid resources, and various items, such as trade debtors, trade creditors etc, that arise directly from its operations. The main purpose of these financial instruments is to raise finance for the Groups operations.
It is, and has been throughout the year under review, the Groups policy not to enter into derivative transactions. This was also the case in the 2001 and 2000 financial years. The Group holds ordinary shares in other companies as current asset investments and these are shown on the balance sheet. However, the holding of investments in other companies is no longer a principal activity of the Group and during the last three years the majority of these holdings have been provided against where no market exists for them or sold where possible. At 31 December 2002 the value of traded shares in other companies was £Nil (2001: £44,000, 2000: £44,000) and the gain made in the year on the sale of current asset investments credited to the profit and loss account was £Nil (2001: £21,000, 2000: £Nil).
The main risks arising from the Groups financial instruments are the interest rate risk, liquidity risk and foreign currency risk. It has been, and continues to be the policy of the Board throughout this process to minimise the exposure of the Group to these risks. The Group finances its operations through a number of loan facilities. The Group has, where possible, entered into long term borrowing facilities in order to protect short term liquidity.
The Group has two principal overseas operations in different territories: the USA and Sweden. The revenues and expenses of the operations in the USA are denominated in US dollars and those of the Swedish operation in Swedish Kroner. In 2002 sales to the US accounted for approximately 89% (2001:88%, 2000:68%) of the Groups revenues from continuing operations. In order to protect the Groups liquidity from fluctuations in the US dollar/sterling exchange rate, the bulk of the Groups borrowings are denominated in US dollars.
The Swedish subsidiary is supported by a bank overdraft when necessary denominated in Swedish Kroner. Further financing for it is provided out of group funds. The US business is supported by US dollar loans held by group companies with sterling as their functional currency.
The balance sheet positions at 31 December 2002, 2001 and 2000 are not representative of the position throughout the period as cash and short-term investments, loans and shares fluctuate considerably depending on when fund-raising activities have occurred. Short-term debtors and creditors have been excluded from all the following disclosures, other than currency risk disclosures, as permitted by Financial Reporting Standard 13 (Derivatives and other financial instruments).
Interest rate risk profile of financial liabilities
The Groups financial liabilities, other than short-term creditors which have been excluded comprise provisions, finance leases, loans and preference shares.
2002 | 2001 | 2000 | ||||||||||||||||||||||||||||||||||||||||||||||
Floating | Fixed | No | Floating | Fixed | No | Floating | Fixed | No | ||||||||||||||||||||||||||||||||||||||||
rate | rate | interest | Total | rate | rate | interest | Total | rate | rate | interest | Total | |||||||||||||||||||||||||||||||||||||
£000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | |||||||||||||||||||||||||||||||||||||
Sterling |
| | 31 | 31 | | | 746 | 746 | | | 2,161 | 2,161 | ||||||||||||||||||||||||||||||||||||
Swedish Kroner |
132 | | | 132 | 215 | | | 215 | 260 | | | 260 | ||||||||||||||||||||||||||||||||||||
US Dollar |
9,317 | | 13,357 | 22,674 | | | 4,466 | 4,466 | 1,493 | 419 | 4,354 | 6,266 | ||||||||||||||||||||||||||||||||||||
Financial
liabilities |
9,449 | | 13,388 | 22,837 | 215 | | 5,212 | 5,427 | 1,753 | 419 | 6,515 | 8,687 | ||||||||||||||||||||||||||||||||||||
Preference shares |
| 2,000 | | 2,000 | | 4,130 | | 4,130 | | 4,130 | | 4,130 | ||||||||||||||||||||||||||||||||||||
Total |
9,449 | 2,000 | 13,388 | 24,837 | 215 | 4,130 | 5,212 | 9,557 | 1,753 | 4,549 | 6,515 | 12,817 | ||||||||||||||||||||||||||||||||||||
The floating rate financial liabilities comprise loans, finance lease obligations and bank overdrafts. These bear interest at rates based on national LIBID equivalents.
The interest free liabilities are composed of provisions (see note 25), other loans and deferred consideration (see note 24). The maturity of the provisions depends on when certain employee share options are exercised, and when certain agreements are terminated. The interest free loan is repayable by 29 September 2004. The deferred
F-26
consideration at the year end as payable in quarterly instalments between January 2004 and June 2005 (see note 24 and 37 for details of the renegotiation of this deferred consideration since the year end).
The preference shares bear interest at 3% per annum and are not redeemable but are convertible on, or after, 30 December 2001. During 2002, 2,129,819 of these shares were converted into ordinary shares (see note 27).
Interest rate risk profile of financial assets
The Groups financial assets, other than short-term debtors and stock, which have been excluded, comprise cash, short-term deposits and current asset investments.
2002 | 2001 | 2000 | ||||||||||||||||||||||||||||||||||||||||||||||
Floating | Fixed | No | Total | Floating | Fixed | No | Floating | Fixed | No | |||||||||||||||||||||||||||||||||||||||
rate | rate | interest | £000 | rate | rate | interest | Total | rate | rate | interest | Total | |||||||||||||||||||||||||||||||||||||
£000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | |||||||||||||||||||||||||||||||||||||
Sterling |
1,998 | | | 1,998 | 962 | | | 962 | | | | | ||||||||||||||||||||||||||||||||||||
Euro |
| | | | 1,000 | | | 1,000 | 710 | | | 710 | ||||||||||||||||||||||||||||||||||||
Swedish Kroner |
57 | | | 57 | 26 | | | 26 | 50 | | | 50 | ||||||||||||||||||||||||||||||||||||
US Dollar |
13,017 | | | 13,017 | 18,700 | | 44 | 18,744 | 588 | 10,020 | 44 | 10,652 | ||||||||||||||||||||||||||||||||||||
Total |
15,072 | | | 15,072 | 20,688 | | 44 | 20,732 | 1,348 | 10,020 | 44 | 11,412 | ||||||||||||||||||||||||||||||||||||
The floating rate financial assets comprise cash balances. The majority of cash is generally held in floating rate accounts earning interest based on relevant national LIBID equivalents. The 2001 and 2000 interest free financial asset was a current asset investment in the shares of another company (see note 22), which was fully provided for in 2002.
Foreign currency risk profile
Group companies with sterling as their functional currency are the only ones to have significant monetary assets and liabilities in currency other than their local currency. At 31 December 2002 they held US dollar monetary assets of £29,256,000 (2001: £21,530,000, 2000: £934,000), US dollar monetary liabilities of £37,304,000 (2001: £38,795,000, 2000: £5,893,000), various EU monetary assets of £637,000 (2001: £1,000,000, 2000: £Nil) and various EU monetary liabilities of £544,000 (2001: £Nil, 2000: £Nil).
Fair values
The preference shares described in note 27 are not traded on an organised market. It is therefore not practicable to estimate their fair value with sufficient reliability, as the future cash flows associated with them depend on when they are converted into ordinary shares.
The fair value of the US$6,500,000 non-interest bearing loan currently carried at £4,037,000 and repayable by 29 September 2004 is £3,608,000 based on discounting at LIBOR plus 4%.
The fair value of the US$15,000,000 non-interest bearing deferred consideration currently carried at £9,317,000 and repayable by quarterly instalments through to 4 June 2005 is £8,271,000 based on discounting at LIBOR plus 4%.
The fair value of the US$15,000,000 interest bearing loan currently carried at £9,317,000 and repayable 30 September 2004 is £8,327,000 based on discounting at LIBOR plus 4%.
In the opinion of the directors, the carrying amount of all other significant financial instruments approximates to their fair value, due to their short maturity periods or floating rate interest rates.
Maturity risk profile
F-27
2002 | 2001 | 2000 | ||||||||||||||||||||||||||||||||||
Finance | Finance | Finance | ||||||||||||||||||||||||||||||||||
Debt | leases | Total | Debt | leases | Total | Debt | leases | Total | ||||||||||||||||||||||||||||
£000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | ||||||||||||||||||||||||||||
In one year or less |
24,847 | 12 | 24,859 | 30,919 | 97 | 31,016 | | 166 | 166 | |||||||||||||||||||||||||||
In more than one year but
less than two years |
19,567 | | 19,567 | | | | | 94 | 94 | |||||||||||||||||||||||||||
In more than two years but
not more than five
years |
3,106 | 120 | 3,226 | 4,466 | | 4,466 | 6,266 | | 6,266 | |||||||||||||||||||||||||||
Total |
47,520 | 132 | 47,652 | 35,385 | 97 | 35,482 | 6,266 | 260 | 6,526 | |||||||||||||||||||||||||||
The Groups preference shares and provisions have not been included in the above table, as the preference shares are not redeemable but are convertible on or after 30 December 2001 (see note 27), and the maturity of the provisions depends on when certain employee share options are exercised, and when certain agreements are terminated.
The Group has overdraft facilities of £285,000, of which £285,000 was undrawn at 31 December 2002. This facility expires within one year.
See note 24 and 37 for details of the renegotiation of the other loan and deferred consideration subsequent to the year end.
27. Called-up share capital
2002 | 2001 | 2000 | |||||||||||
£000 | £000 | £000 | |||||||||||
Authorised |
|||||||||||||
50,000,000 (31 December 2001 and 2000: 500,000,000 ordinary |
|||||||||||||
shares of 10p each) ordinary shares of £1 each |
50,000 | 50,000 | 50,000 | ||||||||||
5,000,000 (31 December 2001 and 2000: 5,000,000) 3%
cumulative convertible preference shares of £1 each |
5,000 | 5,000 | 5,000 | ||||||||||
55,000 | 55,000 | 55,000 | |||||||||||
Allotted, called up and fully paid |
|||||||||||||
9,838,158 (31 December 2001:76,743,893, 31 December 2000: |
|||||||||||||
68,145,760 ordinary shares of 10p each) ordinary shares of
£1 each |
9,838 | 7,674 | 6,814 | ||||||||||
2,000,000 (31 December 2001 and 2000: 4,129,819) 3%
cumulative convertible preference shares of £1 each |
2,000 | 4,130 | 4,130 | ||||||||||
11,838 | 11,804 | 10,944 | |||||||||||
During the year ended 31 December 2002, the nominal value of the ordinary shares was converted from 10p to £1 and 2,129,819 of the 3% cumulative convertible preference shares of £1 each were converted into ordinary shares.
Issue of share capital
During the year ended 31 December 2002, 34,000 £1 ordinary shares (£34,000) were issued in respect of share options (2001: 7,598,133 10p shares, 2000: 290,000 10p shares) being £34,000 nominal value in aggregate (2001: £760,000, 2000: £29,000) for a total consideration of £123,000 (2001: £2,746,000, 2000: £62,000).
In 2001, 1,000,000 10p ordinary shares (£100,000) were issued to Lehman Brothers International (Europe) upon conversion of an unsecured loan note of US$500,000, valued at £419,000.
During the year ended 31 December 2000, 38,333,327 10p shares (£3,833,000) were issued via a private placement, 6,507,971 10p shares (£651,000) were issued to Laxdale Limited as part consideration for acquisition of product rights. Further stock issuances and royalty payments on future sales of the product are contingent on the achievement of specified milestones in accordance with the license agreement. 4,000,000 10p shares (£400,000) were issued to Schein Pharmaceuticals Inc. in part consideration of the termination of the multiproduct agreement. The remaining obligation to Schein was settled by a cash payment of US$1,250,000.
F-28
The preference shares confer to the holders the right to receive fixed cumulative preferential dividends at a rate of 3% per annum (net of withholding taxes) on the amount paid up on such shares. Such a dividend is paid if in the reasonable opinion of the Directors the profits justify such payments. The preference shares shall rank for dividend in priority to any other shares issued from time to time by the Company.
On a return of capital on a winding up or otherwise, the preference share holders will be repaid the amounts paid up on their preference shares, together with any arrears and accruals of the fixed cumulative preferential dividend. The preference shares do not entitle the holders to vote at general meetings except on any specific resolution directly and adversely affecting their rights, when they are entitled to such number of votes as they would have had had their preference shares been converted into ordinary shares. Each £1 preference share is convertible into one ordinary share of £1 each, on or after the second anniversary of the date of issue, or earlier on the occurrence of certain trigger events. These shares were issued in 1999. As indicated above certain of the preference shares were converted during 2002 and the balance were converted in February 2003.
F-29
28. Options and warrants over shares of Amarin Corporation Plc
Number of share options | ||||||||||||||||||||
Exercise price | which were repriced at | |||||||||||||||||||
Date Option | per Ordinary | US$5.00 per | ||||||||||||||||||
Number of share options outstanding* | Note | Granted | Share | Ordinary Share | ||||||||||||||||
£ | US$ | (Note 19) | ||||||||||||||||||
4,150 |
1,18 | 22 June 1994 | 38.08 | 61.30 | 4,150 | |||||||||||||||
300 |
1 | 22 December 1994 | 43.48 | 70.00 | | |||||||||||||||
1,125 |
1,18 | 30 November 1995 | 53.60 | 86.30 | 1,025 | |||||||||||||||
3,275 |
1,18 | 30 November 1996 | 35.72 | 57.50 | 3,050 | |||||||||||||||
12,500 |
2,18 | 9 May 1997 | 38.82 | 62.50 | 12,500 | |||||||||||||||
5,500 |
3,18 | 10 July 1997 | 31.06 | 50.00 | 5,500 | |||||||||||||||
1,500 |
3,18 | 10 July 1997 | 3.73 | 6.00 | 1,500 | |||||||||||||||
100,000 |
3,18 | 23 November 1998 | 15.53 | 25.00 | 100,000 | |||||||||||||||
450,000 |
4 | 23 November 1998 | 3.11 | 5.00 | | |||||||||||||||
19,800 |
5 | 23 November 1998 | 0.93 | 1.50 | | |||||||||||||||
9,250 |
6 | 31 December 1998 | 3.11 | 5.00 | | |||||||||||||||
5,000 |
7 | 2 March 1999 | 4.47 | 7.20 | | |||||||||||||||
5,500 |
8 | 7 September 1999 | 1.86 | 3.00 | | |||||||||||||||
10,000 |
7 | 9 February 2000 | 1.86 | 3.00 | | |||||||||||||||
38,000 |
7 | 9 February 2000 | 1.86 | 3.00 | | |||||||||||||||
10,000 |
7 | 9 February 2000 | 4.10 | 6.60 | | |||||||||||||||
90,000 |
7 | 1 March 2000 | 1.86 | 3.00 | | |||||||||||||||
37,500 |
8 | 1 April 2000 | 1.86 | 3.00 | | |||||||||||||||
10,000 |
7 | 7 April 2000 | 1.86 | 3.00 | | |||||||||||||||
6,250 |
7 | 18 May 2000 | 1.86 | 3.00 | | |||||||||||||||
5,000 |
8 | 23 May 2000 | 1.86 | 3.00 | | |||||||||||||||
10,000 |
9 | 29 May 2000 | 1.86 | 3.00 | | |||||||||||||||
3,293 |
8 | 26 September 2000 | 1.86 | 3.00 | | |||||||||||||||
34,682 |
10 | 24 October 2000 | 2.42 | 3.90 | | |||||||||||||||
30,000 |
11 | 11 December 2000 | 3.35 | 5.40 | | |||||||||||||||
30,000 |
7 | 19 February 2001 | 3.79 | 6.10 | | |||||||||||||||
10,000 |
9 | 12 March 2001 | 3.73 | 6.00 | | |||||||||||||||
2,000 |
9 | 4 April 2001 | 4.04 | 6.50 | | |||||||||||||||
2,334 |
9 | 1 May 2001 | 5.40 | 8.70 | | |||||||||||||||
45,000 |
12 | 4 June 2001 | 5.40 | 8.70 | | |||||||||||||||
395,000 |
12 | 2 July 2001 | 6.21 | 10.00 | | |||||||||||||||
6,000 |
12 | 27 July 2001 | 8.01 | 12.90 | | |||||||||||||||
10,000 |
12 | 10 August 2001 | 13.85 | 22.30 | | |||||||||||||||
10,000 |
12 | 14 August 2001 | 11.80 | 19.00 | | |||||||||||||||
47,000 |
13 | 20 August 2001 | 10.37 | 16.70 | | |||||||||||||||
15,000 |
12 | 31 August 2001 | 10.55 | 17.00 | | |||||||||||||||
4,000 |
12 | 27 September 2001 | 10.81 | 17.40 | | |||||||||||||||
15,000 |
12 | 12 December 2001 | 9.94 | 16.00 | | |||||||||||||||
228,000 |
14 | 12 December 2001 | 9.94 | 16.00 | | |||||||||||||||
4,000 |
15 | 2 January 2002 | 10.62 | 17.10 | | |||||||||||||||
420,650 |
12,16 | 23 January 2002 | 11.00 | 17.70 | | |||||||||||||||
80,000 |
12 | 18 February 2002 | 8.26 | 13.30 | | |||||||||||||||
20,000 |
17 | 1 May 2002 | 9.78 | 15.75 | | |||||||||||||||
20,000 |
17 | 1 May 2002 | 8.24 | 13.26 | | |||||||||||||||
20,000 |
17 | 1 May 2002 | 10.96 | 17.65 | | |||||||||||||||
20,000 |
17 | 1 May 2002 | 12.24 | 19.70 | | |||||||||||||||
15,000 |
17 | 1 May 2002 | 13.23 | 21.30 | | |||||||||||||||
20,000 |
17 | 1 May 2002 | 10.44 | 16.80 | | |||||||||||||||
60,000 |
17 | 1 May 2002 | 10.79 | 17.37 | | |||||||||||||||
23,000 |
17 | 1 May 2002 | 7.93 | 12.77 | | |||||||||||||||
98,070 |
17,20 | 19 July 2002 | 2.17 | 3.50 | | |||||||||||||||
2,000 |
17 | 19 July 2002 | 8.32 | 13.40 | | |||||||||||||||
3,500 |
17 | 19 July 2002 | 7.45 | 12.00 | | |||||||||||||||
5,000 |
17 | 19 July 2002 | 5.47 | 8.80 | | |||||||||||||||
262,200 |
17 | 5 September 2002 | 2.05 | 3.30 | | |||||||||||||||
100,000 |
7 | 6 November 2002 | 1.74 | 2.80 | | |||||||||||||||
60,000 |
17 | 6 November 2002 | 2.17 | 3.50 | | |||||||||||||||
387,167 |
17 | 6 November 2002 | 1.93 | 3.10 | | |||||||||||||||
3,342,546 |
127,725 | |||||||||||||||||||
Share options granted to date are denominated in US dollars. For disclosure purposes the exercise price of these options has been retranslated into Sterling at the year end exchange rate of US$1.6099/£1.
During 2002, the Company introduced a new option plan. The terms of this plan are substantially the same as existing plans.
F-30
Notes:
* During 2002, the nominal value of ordinary shares was converted from 10p to £1 each, resulting in the number of shares reducing by a factor of 10.
(1) | These options may be exercised after four years and before ten years from the date of grant. Certain options held by ex-directors and ex-employees are exercisable immediately and expire at dates up to 54 months from the date of grant. | |
(2) | These options are now exercisable and remain so until they expire on 9 May 2007. | |
(3) | When granted these options were to become exercisable in tranches upon the Companys share price achieving certain pre-determined levels. On 9 February 2000, the Companys remuneration committee approved the re-pricing of the remaining 100,000 options to an exercise price of US$0.50 per share (now US$5.00 per share following the conversion of the nominal value of ordinary shares from 10p to £1), exercisable immediately and lapsing ten years from the date of grant. | |
(4) | Of these options 80% became exercisable immediately and 20% after six months from date of grant. 200,000 of the total options granted remain exercisable until 54 months from date of grant and 250,000 until ten years from date of grant. | |
(5) | These options can be exercised after three years but before ten years from the date the option is granted, with the exception of 8,000 options granted to employees of Amarin Technologies SA, disposed of on 29 November 2001. These options will expire on 30 June 2003. | |
(6) | These options are exercisable immediately and remain exercisable until 30 June 2003. | |
(7) | These options are exercisable now and remain exercisable until ten years from date of grant. | |
(8) | These options were granted to a former employee of Amarin Corporation plc, are now exercisable and expire on 30 November 2008. | |
(9) | These options were granted to former API New Jersey employees and became exercisable in tranches of 33% each on the date of grant, the first anniversary and the second anniversary of the date of grant. All the options were exercisable at 31 December 2002. Following the closure of the New Jersey office, the expiry date of these options has been brought forward to 20 July 2003. | |
(10) | 4,682 of the total options granted on this date were to former API New Jersey employees, the expiry date for these options has been brought forward to 20 July 2003. 15,000 of the total options granted were to a former Amarin Development AB employees and the expiry date for these options has been brought forward to 31 October 2003. The remaining options granted on this date are exercisable in tranches of 33% from the date of grant then on the first and second anniversary of the date of grant. | |
(11) | These options were exercisable in tranches of 33% over three years, all are exercisable at 31 December 2002. The expiry date of the options has been brought forward to 3 December 2004. | |
(12) | These options become exercisable in tranches of 33% over three years on the date of the grant then on the first and second anniversaries of the date of grant and remain exercisable for a period of ten years from the date of grant. | |
(13) | These options were granted to a former Amarin Development AB employee, all are exercisable at 31 December 2002 and the expiry date has been brought forward to 31 October 2003. | |
(14) | These options become exercisable in tranches of 33% over three years on the first, second and third anniversary of the date of grant and expire 10 years from the date of the grant. |
F-31
(15) | These options were granted to a former API New Jersey employee and became exercisable in tranches of 33% each on the date of grant, the first anniversary and the second anniversary of the date of grant. 1,333 options were exercisable at 31 December 2002. Following the closure of the New Jersey office, the expiry date of these options has been brought forward to 20 July 2003. | |
(16) | 15,050 of the total options were granted to former API New Jersey employees. None were exercisable at 31 December 2002 and the expiry date has been brought forward to 20 July 2003. 9,900 of the total options were granted to a former API New Jersey employee, the expiry date for this grant has been brought forward to 3 December 2004. | |
(17) | These options become exercisable in tranches of 33% over three years on the first, second and third anniversary of the date employment commences. The options expire 10 years from the date of the grant. | |
(18) | 648,770 options were granted on 8 December 1999, in order to effect the re-pricing mentioned in Note 19 below. The options vest and expire at the same dates as those attaching to the original grants except in the case of certain ex-employees where the options expired on 29 December 2000. It is a condition of the award of these options that, upon exercise, the awardee will surrender a like number of options from the original grant. Therefore the original grant has been shown as being repriced in the table above, and the replacement grant has been excluded. | |
(19) | As disclosed in a Shareholders Circular dated 30 October 1998, the Board decided that all existing share options held by current employees and current directors as at 21 October 1998, who were not serving notice would be repriced at US$0.50 per share (now US$5.00 per share following the conversion of the nominal value of ordinary shares from 10p to £1). Other terms of the grants affected by this re-pricing were left unchanged. For certain options this change was effected at the directors discretion, with the remainder being effected by grant described at Note 18 above (Note 3 applies to those options which were granted on 23 November 1998). | |
(20) | 3,130 of the options granted on the 19 July 2002 were to ex-API employees and in accordance with the termination agreement with the employees, the expiry date has been brought forward to 20 July 2003. At that date 1,042 of these options will have vested. 1,980 of the options granted on 19 July 2002 were to a former API New Jersey employee and the expiry date has been brought forward to 3 December 2004. |
Warrants in shares of Amarin Corporation plc
At 31 December 2002, warrants have been granted over ordinary shares as follows:
Number of warrants | ||||||||||||
outstanding | Note | Date warrant granted | Exercise price per ordinary share | |||||||||
Restated* |
||||||||||||
30,000 |
1 | 20 July 1999 | US$8.00 (£5.00) |
* During 2002, the nominal value of ordinary shares was converted from 10p to £1 each, resulting in the number of shares reducing by a factor of 10.
Warrants granted to date are denominated in US dollars. For disclosure purposes these warrants have been re-translated into sterling at the year end rate of US$1.6099/£1.
Notes:
1) | The Company issued 30,000 warrants on 20 July 1999 as a retainer for financial advisory services from Petkevich & Partners for the period 20 July 1999 to 20 July 2000. On the date of grant the |
F-32
warrants were fully vested, nonforfeitable and exercisable from 20 July 1999 until 20 July 2004. No warrants were exercised at 31 December 2002. | |||
2) | 5,000 warrants issued by the company on 13 September 1999, expired on 13 September 2002. None of the warrants had been exercised by the date they lapsed. |
29. Share premium account and reserves
Group
Share | ||||||||||||||||||||
premium | Warrant | Merger | Profit and loss | |||||||||||||||||
account | proceeds | Reserve | account | Total | ||||||||||||||||
£000 | £000 | £000 | £000 | £000 | ||||||||||||||||
At 1 January 2000 |
30,316 | 705 | (1,027 | ) | (28,486 | ) | 1,508 | |||||||||||||
Reserve transfer |
| (705 | ) | | 705 | | ||||||||||||||
Profit for the year |
| | | 1,576 | 1,576 | |||||||||||||||
Premium on share issue |
5,746 | | | | 5,746 | |||||||||||||||
Exchange difference on
consolidation |
| | | 14 | 14 | |||||||||||||||
Share option compensation charge |
| | | 1,058 | 1,058 | |||||||||||||||
At 31 December 2000 and at 1 January
2001 |
36,062 | | (1,027 | ) | (25,133 | ) | 9,902 | |||||||||||||
(Loss) for the year |
| | | (3,393 | ) | (3,393 | ) | |||||||||||||
Premium on share issue |
2,082 | | | | 2,082 | |||||||||||||||
Exchange difference on
consolidation |
| | | (23 | ) | (23 | ) | |||||||||||||
At 31 December 2001 and at 1 January
2002 |
38,144 | | (1,027 | ) | (28,549 | ) | 8,568 | |||||||||||||
Premium on share issue |
89 | | | | 89 | |||||||||||||||
Share issuance costs |
(252 | ) | | | | (252 | ) | |||||||||||||
(Loss) for the year |
| | | (23,088 | ) | (23,088 | ) | |||||||||||||
Exchange difference on
consolidation |
| | | (1,011 | ) | (1,011 | ) | |||||||||||||
At 31 December 2002 |
37,981 | | (1,027 | ) | (52,648 | ) | (15,694 | ) | ||||||||||||
The cumulative value of goodwill written off to reserves up until 31 December 2002 was £1,868,000 (31 December 2001: £1,868,000, 31 December 2000: £1,868,000).
Company
Share | ||||||||||||||||
premium | Warrant | Profit and loss | ||||||||||||||
account | proceeds | account | Total | |||||||||||||
£000 | £000 | £000 | £000 | |||||||||||||
At 1 January 2000 |
28,623 | 705 | (15,176 | ) | 14,152 | |||||||||||
Reserve transfer |
| (705 | ) | 705 | | |||||||||||
Loss for the year |
| | (11,729 | ) | (11,729 | ) | ||||||||||
Premium on share issue |
5,746 | | | 5,746 | ||||||||||||
Share option compensation charge |
| | 1,058 | 1,058 | ||||||||||||
At 31 December 2000 and at 1 January 2001 |
34,369 | | (25,142 | ) | 9,227 | |||||||||||
Loss for the year |
| | (3,455 | ) | (3,455 | ) | ||||||||||
Premium on share issue |
2,082 | | | 2,082 | ||||||||||||
At 31 December 2001 and at 1 January 2002 |
36,451 | | (28,597 | ) | 7,854 | |||||||||||
Premium on share issue |
89 | | | 89 | ||||||||||||
Share issuance costs |
(252 | ) | | | (252 | ) | ||||||||||
Loss for the year |
| | (23,371 | ) | (23,371 | ) | ||||||||||
At 31 December 2002 |
36,288 | | (51,968 | ) | (15,680 | ) | ||||||||||
Merger reserve
The business combination of the Company and Gacell Holdings AB has been treated as a merger. The merger reserve arising on consolidation consists of the cost of the investment by the Company in Gacell Holdings AB less the share capital of Gacell Holdings AB.
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30. Capital commitments
Capital expenditure that has been contracted for but has not been provided for in the financial statements amounted to £Nil at 31 December 2002 (31 December 2001: £Nil, 31 December 2000: £Nil).
31. Financial commitments
(a) | The Group had annual commitments under non-cancellable operating leases as follows: |
2002 | 2001 | 2000 | ||||||||||||||||||||||
£000 | £000 | £000 | ||||||||||||||||||||||
Land and Buildings | Land and Buildings | Land and Buildings | ||||||||||||||||||||||
Group | Company | Group | Company | Group | Company | |||||||||||||||||||
Expiring between two and five years
inclusive |
19 | | 112 | | 44 | | ||||||||||||||||||
Expiring in over five years |
604 | 274 | 668 | 274 | 686 | 168 | ||||||||||||||||||
623 | 274 | 780 | 274 | 730 | 168 | |||||||||||||||||||
(b) | The Company operates a group arrangement with its bankers for all UK group companies such that all balances are drawn down each night into one bank account. There is a right of set off between all the UK Groups bank accounts and each company cross guarantees every other company within the UK Group. At 31 December 2002 there was no potential liability under this arrangement (2001: £Nil, 2000: £Nil). |
Minimum payments under non-cancellable operating leases for the next five years are as set forth below:
Land and | Land and | |||||||
Buildings | Buildings | |||||||
£000 | £000 | |||||||
Group | Company | |||||||
2003 |
623 | 274 | ||||||
2004 |
623 | 274 | ||||||
2005 |
623 | 274 | ||||||
2006 |
613 | 274 | ||||||
2007 |
613 | 274 | ||||||
3,095 | 1,370 | |||||||
Minimum payments under non-cancellable operating leases for the years 2008 and beyond are £1,978,000 (Company: £1,318,000) which are for land and buildings.
(1) | No new leases were signed during 2002. | ||
(2) | On October 15, 2001 the Group acquired a six year lease, with an option for a further six years, on office premises in San Francisco, California. The rental is £225,000 per annum and increases after three years in line with the Consumer Price Index. Rent expense for the year 2001 was £47,000. | ||
(3) | On April 27, 2001 the Company acquired a nine year lease for premises in London, UK. The rental is £105,500 per annum and is subject to review in 2005. Rent expense for 2001 was £70,000. | ||
(4) | Further consideration may become payable upon completion of certain milestones in relation to product rights acquired in 2000 (see notes 17 and 38). |
32. Contingent liabilities
As shown in note 25, during 2000 the Company established a provision relating to the termination of certain contracts not assigned on disposal of the transdermal business. During 2001 and 2002 this provision has been fully utilised or released and at 31 December 2002 the directors consider the possibility of future liabilities arising in connection with these contracts remote.
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The Company is not presently subject to any litigation alleging product liability. The Company has, however, recently received two notices of claims of personal injury and/or death from valvular heart disease allegedly associated with Permax. The Company can not predict whether litigation will follow, or the outcome of any such litigation. The Company intends to take all appropriate action to protect its interests with respect to these claims.
33. Reconciliation of net cash flow to movement in net debt
2002 | 2001 | 2000 | ||||||||||||||||||||||
£000 | £000 | £000 | £000 | £000 | £000 | |||||||||||||||||||
(Decrease)/increase in cash in the
period |
(5,498 | ) | 19,222 | 627 | ||||||||||||||||||||
Cash outflow/(inflow) from
decrease/(increase) in
borrowings |
1,720 | (29,263 | ) | 97 | ||||||||||||||||||||
Cash outflow/(inflow) from
decrease in current asset
investments |
| (10,020 | ) | 9,778 | ||||||||||||||||||||
Change in net debt resulting from
cash flows |
(3,778 | ) | (20,061 | ) | 10,502 | |||||||||||||||||||
Other non-cash items |
(7,590 | ) | | | ||||||||||||||||||||
Foreign exchange differences on
borrowings |
(6,300 | ) | (112 | ) | (657 | ) | ||||||||||||||||||
Conversion of debt to equity |
| 419 | | |||||||||||||||||||||
Mark to market of current asset
investments |
(44 | ) | | 267 | ||||||||||||||||||||
Movement in net debt in the
period |
(17,712 | ) | (19,754 | ) | 10,112 | |||||||||||||||||||
Net debt at 1 January |
(14,868 | ) | 4,886 | (5,226 | ) | |||||||||||||||||||
Net debt at 31 December |
(32,580 | ) | (14,868 | ) | 4,886 | |||||||||||||||||||
34. Analysis of net debt
At | Other | At | Other | At | Other | At | ||||||||||||||||||||||||||||||||||
31 December | Cash | non cash | 31 December | Cash | non cash | 31 December | Cash | non cash | 31 December | |||||||||||||||||||||||||||||||
1999 | flow | changes | 2000 | flow | changes | 2001 | flow | changes | 2002 | |||||||||||||||||||||||||||||||
£000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | |||||||||||||||||||||||||||||||
Cash at bank and in
hand |
994 | 354 | | 1,348 | 19,340 | | 20,688 | (5,616 | ) | | 15,072 | |||||||||||||||||||||||||||||
Overdrafts |
(273 | ) | 273 | | | (118 | ) | | (118 | ) | 118 | | | |||||||||||||||||||||||||||
721 | 627 | | 1,348 | 19,222 | | 20,570 | (5,498 | ) | | 15,072 | ||||||||||||||||||||||||||||||
Debt due after one
year |
(336 | ) | | (5,930 | ) | (6,266 | ) | 1,493 | 307 | (4,466 | ) | | (18,208 | ) | (22,674 | ) | ||||||||||||||||||||||||
Debt due within one
year |
(5,278 | ) | 5 | 5,273 | | (30,919 | ) | | (30,919 | ) | 1,600 | 4,473 | (24,846 | ) | ||||||||||||||||||||||||||
Finance leases due
after one year |
(247 | ) | | 153 | (94 | ) | | 94 | | | (120 | ) | (120 | ) | ||||||||||||||||||||||||||
Finance leases due
within one year |
(105 | ) | 92 | (153 | ) | (166 | ) | 163 | (94 | ) | (97 | ) | 120 | (35 | ) | (12 | ) | |||||||||||||||||||||||
(5,966 | ) | 97 | (657 | ) | (6,526 | ) | (29,263 | ) | 307 | (35,482 | ) | 1,720 | (13,890 | ) | (47,652 | ) | ||||||||||||||||||||||||
Current asset
investments |
19 | 9,778 | 267 | 10,064 | (10,020 | ) | | 44 | | (44 | ) | | ||||||||||||||||||||||||||||
Total |
(5,226 | ) | 10,502 | (390 | ) | 4,886 | (20,061 | ) | 307 | (14,868 | ) | (3,778 | ) | (13,934 | ) | (32,580 | ) | |||||||||||||||||||||||
35. Major non-cash transactions
During 2002, 2,129,819 3% cumulative preference shares of £1 each were converted into 2,129,819 ordinary shares of £1 each.
During 2001, an unsecured loan with an outstanding amount of £419,000 repayable on 30 June 2005, bearing 11% interest was converted into 100,000 ordinary £1 shares.
36. Pensions
The Company operates a number of defined contribution money purchase pension schemes for certain eligible employees. The assets of the schemes are held separately from those of the Company in independently administered funds. The pension cost charge represents contributions paid and payable by the Company to the fund
F-35
and amounted to £233,000 (year to 31 December 2001: £155,000, year to 31 December 2000: £153,000). At the year end there was a prepaid amount of £Nil (31 December 2001: £1,000, 31 December 2000: £Nil).
37. Post balance sheet events
Subsequent to the end of the year, the Company has raised £12,882,000 of additional funds through the issue of 6,093,728 of new ordinary shares at $3.4785 per share. The proceeds together with cash on hand at the year end were partially utilised to repay the following amounts to Elan Pharma International Limited (EPIL), a related party:
| $2,459,880 in respect of interest accrued to 16 January 2003; | ||
| $17.5 million in part repayment of the loans from EPIL; and | ||
| $8,641,387 in respect of other amounts related to Permax. |
EPIL also agreed to further defer the instalments under the loan by one year with $10 million now due September 2004 (originally 2003) and $15 million September 2005 (originally 2004). EPIL also agreed to waive three quarterly instalments for the purchase of Permax totalling $7.5 million (see note 38).
In February 2003, the remaining preference shares (2,000,000) were converted into 2,000,000 £1 ordinary shares.
38. Related party transactions
A. Elan
During the years ended 31 December 2000, 2001 and 2002, the Company entered into certain contracts with Elan Corporation plc, (Elan), which is also a significant shareholder. The directors consider that transactions with Elan have been entered into on an arms length basis. Details of transactions involving Elan are given below.
1. Unsecured loans
On 6 April 2000 amounts of £1,241,000 (US$2,000,000) in respect of unsecured loans were converted into 4,000,000 ordinary shares of 10 pence each, and £1,240,000 (US$2,000,000) was renegotiated to bear interest at 2% above base rate from that date. The interest up to that date was deemed to be £62,000 (US$101,000). The outstanding loan originally repayable on 6 April 2003, was repaid during the year ended 31 December 2001.
2. Sale of transdermal business
During 1999, the Group sold its transdermal patch business to Elan Pharma International Limited (EPIL) a wholly owned subsidiary of Elan.
As of 31 December 2000, EPIL elected not to assume any licensing and development agreement rights relating to this business. Therefore, the Company remained obligated to perform these contracts. Since the Company no longer intended to operate a transdermal patch business, EPIL had agreed to assist the Company in seeking to terminate such agreements or transfer them to licensees. Given the uncertainty over the Companys ability to terminate or transfer all contracts successfully (as it requires the consent of each counterparty to do so), the Company took an exceptional charge in 2000 of £2,108,000 to cover the estimated cost to terminate its obligations under these contracts.
To the extent the Company provides future services on the one remaining
contract the Company is dependent upon Elan or, in their place, the Company
would be required to find another party willing to undertake this commitment to
provide such services. During 2001 the provision was partially utilised and
partially released to the profit and loss account. With the exception of one
contract, by the end of 2002 the Company had negotiated the
F-36
termination of its obligations under these arrangements and the remaining
provision of £669,000 was released to the profit and loss under discontinued
activities.
Following the decision taken by Elan not to assume the licensing and
development contracts, the Company became entitled to certain licensing and
development revenues in connection with the discontinued transdermal business.
£3,743,000 of license and development revenues were recognised during 2000. All
direct and operating costs incurred in connection with this revenue totalling
£1,160,000 were charged by Elan to the Company during 2000 and this was
reflected in the results of the discontinued operation. In light of the sale of
the transdermal business the Company no longer had the facilities and staff to
service its obligations under transdermal contracts.
3. Acquisition of product portfolio and matters related to those products
a) Unsecured loan
On 6 April 2000, the Company entered into an agreement to convert a loan,
representing part of the consideration to purchase certain product rights from
Elan, into equity. On conversion the Company would have made a cash payment of
US$150,000, issue 870,000 preference shares and 4,000,000 ordinary shares to a
subsidiary of Elan. Although agreed, this conversion never occurred. At 31
December 2002 and 2001 the loan of US$6,500,000 was still outstanding (see Note
24).
b) Sales and Purchases with Elan
During the year ended 31 December 2001, the Group made sales to Elan
companies amounting to £687,000 (US$1,000,000) for goods, services and
research. During the year ended 31 December 2002, the Group made sales to Elan
companies amounting to £621,000 (US$1,000,000) for goods, services and
research. The Group also purchased services amounting to £155,000 (US$250,000)
in 2002.
c) Withdrawal from the market of certain products
On 6 November 2000, the US Food and Drug Administration (FDA) issued a
warning regarding all decongestant products containing the active ingredient
phenylpropanolamine (PPA), and initiated steps to remove these products from
the marketplace. The Company accepted returns through 31 December 2001, of
£893,000 (US$1,299,000). During 2002, PPA returns were £327,000 (US$526,000). A
decision was taken in early 2001 to accept returns in certain circumstances
even where customers did not have legal right of return. The Company accounts
for these returns as part of operating expense. Elan made a contribution to the
Company of US$500,000 to cover PPA returns during the year ended 31 December
2000. This contribution was offset against the cost of PPA product returns.
4. Permax
During 2002 the Company exercised a purchase option to acquire the
remaining U.S. rights to Permax (pergolide mesylate) from Elan. Following the
close of the transaction, the Company replaced Elan as the exclusive licensee
for Permax in the United States. The Company obtained the purchase option as a
part of its marketing, sales and distribution agreement with Elan, signed in
2001.
In 2001 the Company made an initial payment of US$47.5 million to Elan (of
which $45 million was represented by a loan note and remains outstanding at 31
December 2002). Following the exercise of its $37.5 million option referred to
above, the Company has made further payments totalling US$10 million during
2002 and $27.5 million remained outstanding at 31 December 2002 as disclosed in
Note 24. In addition, the Company paid royalties to Elan of between 3.0% and
3.5% on US net sales of Permax in 2002 and will pay royalties to Elan of 10% on
US net sales of Permax thereafter. In addition, the Company has received
contributions from Elan towards the cost of product returns relating to sales
made prior to the Companys acquisition of the Permax sales rights. If net
sales of Permax in 2003 and 2004 exceed specified dollar amounts, the Company
will be required to pay Elan a percentage of the amount by which net sales
exceed such levels. Conversely, if net sales in 2003 and 2004 fall
below
F-37
the specified levels, the Company will be entitled to credit against
future royalties payable to Elan a percentage of the amount by which net sales
fall short of such levels.
During 2002, the Group recorded a one-time impairment charge of
£23,796,000 in relation to the value of the Permax intangible fixed asset
following the introduction of generic competition. The charge was calculated in
accordance with FRS11 (UK GAAP) Impairment of Fixed Assets and Goodwill and
also meets the requirements of FAS144 (US GAAP) Accounting for Impairment and
disposal of Long-Lived assets. As prescribed in FRS11 the launch of a generic
is a trigger event that necessitates, where appropriate, a revision of the
carrying value of the intangible.
5. Restructuring of Elan Loan
In July 2002 the Company restructured its US$45 million loan from Elan
originally scheduled for repayment in full on 30 September 2002. Under the
revised payment schedule, the loan was to be repaid in four installments of
US$2.5 million, US$17.5 million, US$10 million and US$15 million, beginning in
the third quarter of 2002. The loan was incurred in 2001 as part of the
Companys acquisition of marketing and purchase option rights to Permax. These
loan obligations were further restructured in January 2003 (see below). As part
of the debt restructuring agreement with Elan, the Company received a waiver of
its obligation to make debt repayments due 31 December 2002.
6. Restructuring of Elan Obligations
In conjunction with the closing of the private placement on 27 January
2003, the Company restructured certain of its debt and milestone payments due
or potentially due to Elan as indicated below.
a) Loan Agreement
The Company paid $2,459,880 in cash out of its cash reserves to EPIL as
interest accrued on its $42.5 million interest bearing loan from Elan to 16
January 2003. The Companys loan agreement with Elan was varied so that the
installments of the loan were rescheduled as follows:
In accordance with the terms of the loan agreement, on 16 January 2003 the
Company paid $17.5 million to Elan that was previously due on 31 December 2002.
b) Permax
The Company paid $8,641,387 to Elan Pharmaceuticals, Inc. in discharge of
the current outstanding balance relating to Permax inventory.
The Amended and Restated Distribution and Option Agreement, dated 28
September 2001, between Elan Pharmaceuticals, Inc. and the Company was amended
so that the deferred consideration for Permax payable by way of quarterly
installments of $2.5 million was reduced by $7.5 million.
c) Zelapar
The option agreement dated 18 June 2001 and made between the Company and
EPIL was amended so that the first sales milestone payable by the Company to
EPIL became $17.5 million rather than $12.5 million. The Company also agreed to
pay approved reasonable and verifiable out-of-pocket costs incurred by Elan
after 31 December 2002 in respect of any further development costs incurred for
Zelapar. One-half of the Companys or
F-38
EPILs out-of-pocket costs paid by the Company under this arrangement will
be credited (up to $5 million) against the $17.5 million first milestone
payable under the option agreement.
The option agreement was varied so that EPIL shall be at liberty to
reclaim the rights to Zelapar where such rights have been previously
transferred to the Company if the Company either:
The option agreement was also varied so that the Company is at liberty to
defer $8 million of the $10 million payable by it on exercise of the option to
a period not later than the later of the exercise of the option and 30
September 2003. In consideration of such deferral, the Company is obligated to
pay $2.25 million to EPIL upon closing of the option to make a total option
payment of $10.25 million rather than $10 million as had previously been the
case. Alternatively, the Company can pay $10 million on closing of the option
as had previously been the case. This variation had been sought by the Company
to provide the Company with more flexibility going forward.
d) Elan Equity Stake in Amarin
In March 2002, Elan converted 2,129,819 preference shares into an
equivalent number of ordinary shares. Effective February 2003, Elan converted
2,000,000 preference shares into 2,000,000 ordinary shares. Elan has the right
to include these shares, together with its remaining 2,653,819 ordinary shares
and ADS in a registration statement filed by the Company.
Elan agreed with the Company that until October 1, 2003, Elan would not
sell, transfer or otherwise dispose of any of the ordinary shares, ADSs or
preference shares currently held by it; provided that Elan is not prevented
from:
Elan has additional registration rights that are based on rights it
acquired in 1998. These include the right to demand further registrations of
its ordinary shares and ADSs. Such a registration may, at Elans request,
involve an underwritten offering, which Elan could commence at any time after 1
January 2004 if it includes in such offering at least 1,000,000 ordinary shares
and ADSs and determines in good faith that such an underwritten offering is in
its best economic interest.
e) Additional Amarin Obligations to Elan
As part of its ongoing asset disposal program, subject to the fiduciary
obligations of its directors, the Company agreed with Elan to use the Companys
commercial best efforts to sell all or substantially all of its primary care
portfolio and Amarin AB, in each case as expeditiously as is reasonably
practicable and for a reasonable sum. The Company agreed with Elan to apply the
net proceeds from such sale or sales as follows:
F-39
Elan has the right, in its sole discretion, to redirect the order in which
the net proceeds of any such sales are applied as between the uses set out
above. Additionally, after having paid the first $35 million of the net
proceeds of any sale in the manner set out above, the Company may at its option
defer payment of 50% of any balance due to Elan for a period of six months from
the closing of such sale or sales.
7. Approval of Transactions with Elan
All of the above transactions were approved in accordance with the
Companys policy for related party transactions. The Companys policy in 2002
was to require audit committee review of all transactions involving a potential
conflict of interest, followed by the approval of a majority of the directors
who do not have a material interest in the transaction.
8. Mr Ziegler
On 10 December 1999, S A Ziegler became a director of the Company and was
a partner of Ziegler, Ziegler and Altman LLC, Counsellors at Law in the United
States who provided professional services to the Group in the sum of £252,000
during the year ended 31 December 2001 (year ended 31 December 2000: £202,000.
Mr Ziegler resigned as a director of the Company on 29 May 2001 and is no
longer considered to be a related party. At 31 December 2001 a balance of
£90,000 (US$113,000) (31 December 2000: £Nil) was outstanding.
39. Differences between UK GAAP and US GAAP
The financial statements of the Company have been prepared in conformity
with UK GAAP which differs in certain significant respects from generally
accepted accounting principles in the US (US GAAP). These differences have a
significant effect on net income and the composition of shareholders equity
and are described below.
Summary of material adjustments to net (loss)/income and shareholders equity
1. Net (loss)/income
Table of Contents
Table of Contents
(1)
the $10 million due and payable on 30 September 2003,
together with accrued interest, became due and payable on 30
September 2004; and
(2)
the $15 million due and payable on 30 September 2004,
together with accrued interest, became due and payable on 30
September 2005.
Table of Contents
materially breaches the terms of any agreement between the
Company and any member of the Elan group of companies and the
Company fails to remedy such breach within 90 days of receiving
written notice of such breach; or
becomes insolvent.
converting preference shares into ordinary shares;
accepting any offer made to all holders of the Companys
ordinary shares to acquire all or part of the issued ordinary share
capital of the Company;
transferring any securities to a subsidiary or holding
company of such shareholder; or
selling ordinary shares or ADSs where the purchaser enters
into a written agreement confirming its intention to hold such
ordinary shares for a period ending not earlier than 30 September
2003 and the per share sale price of such ordinary shares is not
less than 90% of the closing sale price of the Companys ADSs on
NASDAQ for the five trading days immediately prior to the date of
such sale.
Table of Contents
$5 million will be payable to Elan, which amount would, if
paid, be credited against the Zelapar milestone of $17.5 million
referred to above;
prepayment of remaining Permax deferred payments due under
the Permax agreement; and
prepayment of the $6.5 million loan due to Elan
Pharmaceuticals, Inc. relating to the Carnrick group of products
acquired from Elan Pharmaceuticals, Inc. in September 1999;
prepayment of all sums then due under the loan agreement;
payment of any additional amounts due Elan and its affiliates; and
if there is any remainder, applied in the Companys sole discretion.
Year Ended | Year ended | Year ended | ||||||||||||||
31 December | 31 December | 31 December | ||||||||||||||
Note | 2002 | 2001 | 2000 | |||||||||||||
£000 | £000 | £000 | ||||||||||||||
Net (loss)/profit in accordance with UK GAAP |
(23,012 | ) | (3,269 | ) | 1,700 | |||||||||||
Adjustment for treatment of goodwill |
A | | | (19 | ) | |||||||||||
Adjustment for gain/(loss) on securities
available-for-sale |
C | 9 | (5 | ) | | |||||||||||
Adjustment for stock-based compensation and
National Insurance |
F | 1,041 | (987 | ) | 108 |
F-40
Year Ended | Year ended | Year ended | ||||||||||||||
31 December | 31 December | 31 December | ||||||||||||||
Note | 2002 | 2001 | 2000 | |||||||||||||
£000 | £000 | £000 | ||||||||||||||
Adjustment for treatment of intangible fixed
asset |
I | 517 | 408 | (3,860 | ) | |||||||||||
Adjustment for revenue recognition |
J | 70 | 60 | 106 | ||||||||||||
Gain on extinguishment of a trade creditor |
K | | | (759 | ) | |||||||||||
Imputed interest on non-interest bearing debt |
L | (290 | ) | (268 | ) | (414 | ) | |||||||||
Accrual for PPA returns |
M | | 336 | (336 | ) | |||||||||||
Reversal of transdermal accrual |
N | (233 | ) | | 233 | |||||||||||
Adjustment for revenue recognition |
P | (216 | ) | | | |||||||||||
Adjustment to Permax purchase consideration |
Q | 1,333 | | | ||||||||||||
Net loss as adjusted to US GAAP |
(20,781 | ) | (3,725 | ) | (3,241 | ) | ||||||||||
£ | £ | £ | ||||||||||||||
US GAAP net loss per ordinary share (assuming
dilution) |
(2.24 | ) | *(0.52 | ) | *(0.82 | ) | ||||||||||
US GAAP net loss per ordinary share (basic) |
(2.24 | ) | *(0.52 | ) | *(0.82 | ) | ||||||||||
* During 2002 the nominal value of ordinary shares was converted from 10p to £1 each resulting in the number of shares reducing by a factor of 10, accordingly comparatives have been restated. |
31 December | 31 December | 31 December | ||||||||||||||
Note | 2002 | 2001 | 2000 | |||||||||||||
000 | 000 | 000 | ||||||||||||||
Shares used in computing per ordinary share
amounts assuming dilution |
H | 11,896 | *12,035 | *8,609 | ||||||||||||
Shares used in computing per basic ordinary
share amounts |
H | 9,297 | *7,125 | *3,953 |
2. Shareholders equity
Note | 31 December 2002 | 31 December 2001 | 31 December 2000 | |||||||||||||
£000 | £000 | £000 | ||||||||||||||
Shareholders equity in accordance
with UK GAAP |
(3,856 | ) | 20,372 | 20,846 | ||||||||||||
Adjustment for gain/(loss) on
securities available-for-sale |
C | 4 | (5 | ) | | |||||||||||
Adjustment for National Insurance
on stock options |
F | 31 | 77 | 53 | ||||||||||||
Adjustment for treatment of
intangible fixed asset |
I | (2,935 | ) | (3,452 | ) | (3,860 | ) | |||||||||
Adjustment for revenue
recognition |
J | (383 | ) | (453 | ) | (513 | ) | |||||||||
Imputed interest on non-interest
bearing debt |
L | 279 | 569 | 837 | ||||||||||||
Accrual for PPA returns |
M | | | (336 | ) | |||||||||||
Reversal of transdermal accrual |
N | | 233 | 233 | ||||||||||||
Adjustment for preferred
dividend |
O | 324 | 248 | 124 | ||||||||||||
Adjustment for revenue
recognition |
P | (216 | ) | | | |||||||||||
Adjustment to Permax purchase
consideration |
Q | 1,333 | | | ||||||||||||
Shareholders equity in accordance
with US GAAP |
(5,419 | ) | 17,589 | 17,384 | ||||||||||||
Notes:
F-41
A) Treatment of goodwill
Historically, UK GAAP permitted goodwill arising on acquisition to be charged directly to retained earnings in the year of acquisition. For the year ended 31 December 2000, US GAAP required goodwill to be capitalised and amortised to income over the period of expected benefit.
B) Disclosures related to deferred taxes
Management of the Company evaluated the positive and negative evidence impacting the realisability of the Companys net operating loss carryforwards. Due to the Companys history of generating operating losses, significant changes in its underlying products offering and limited periods of profitability, management concluded that a full valuation allowance is required with respect to its net operating loss carryforwards. Following the introduction of FRS19 Deferred Tax, UK GAAP is now similar to existing US GAAP in this area.
C) Treatment of marketable equity securities
Under UK GAAP investments (including listed investments) held on current and long-term basis are stated at the lower of cost or estimated fair value, less any permanent diminution in value. Under US GAAP the carrying value of our marketable equity securities is adjusted to reflect unrealized gains and losses resulting from movements in the prevailing market value. During 2002, the value of our current asset investments was written off to zero under UK GAAP and to the current market value under US GAAP.
Under US GAAP the fair value of current asset investments was £4,000, £39,000 and £44,000 for the periods ended December 31, 2002, 2001 and 2000, respectively.
D) Consolidated statement of cash flows
The consolidated statement of cash flows prepared in accordance with UK GAAP, Financial Reporting Standard No. 1 and presents substantially the same information as that required under US GAAP. Under US GAAP, however, there are certain differences from UK GAAP with regard to classification of items within the cash flow statement.
Under UK GAAP, cash flows are presented separately for operating activities, returns on investments and servicing of finance, taxation, capital expenditure and financial investment, and financing activities. Under US GAAP, however, only three categories of cash flow activity are reported, being operating activities, investing activities and financing activities. Cash flows from taxation and payments for interest would be included as operating activities under US GAAP. The financing proceeds and debt repayments would be included under financing activities under US GAAP. Additionally the cashflow represents only the change in cash and cash equivalents which would exclude overdrafts under US GAAP.
F-42
Set out below, for illustrative purposes, is a summary consolidated statement of cash flows under US GAAP:
Year Ended | Year Ended | Year Ended | ||||||||||
31 December | 31 December | 31 December | ||||||||||
2002 | 2001 | 2000 | ||||||||||
£000 | £000 | £000 | ||||||||||
Net provided by operating activities |
3,469 | 10,912 | 3,761 | |||||||||
Net cash (used in)/provided by investing
activities |
(7,118 | ) | (33,496 | ) | 601 | |||||||
Net cash (used in)/provided by financing
activities |
(1,967 | ) | 31,904 | 6,285 | ||||||||
Net (decrease)/increase in cash and cash
equivalents |
(5,616 | ) | 9,320 | 10,647 | ||||||||
Cash and cash equivalents at the beginning of the
year |
20,688 | 11,368 | 721 | |||||||||
Cash and cash equivalents at the end of the year |
15,072 | 20,688 | 11,368 | |||||||||
Net (decrease)/increase in cash and cash
equivalents |
(5,616 | ) | 9,320 | 10,647 | ||||||||
There is no significant effect of foreign exchange movements on cash balances.
E) Discontinued operations
In the years ended 31 December 2000 and 2001, the transdermal patch business has been classified as discontinued operations under UK GAAP and the comparatives restated to reflect this. Under US GAAP this would have been shown as continuing operations. During 2002, a restructuring provision relating to the transdermal patch business disposal was released giving rise to a gain to the results for the year.
F) Stock-based compensation and National Insurance
Under UK GAAP the Company has recorded a provision for £31,000 (31 December 2001: £77,000, 31 December 2000: £53,000) relating to National Insurance (NI) amounts payable on stock option gains at the time of grant. Under UK GAAP NI contributions are accrued over the vesting period of the underlying option. Under US GAAP payroll taxes on stock options are accrued when the liability is incurred.
The Company has re-priced certain stock options issued to directors and employees. Under US GAAP these have been accounted for using variable plan accounting as directed by FIN 44, leading to an increased in net income of £1,087,000 in 2002 (2001: decrease of £1,011,000 in net income).
In 2002, the Company accelerated the vesting of 6,100 options held by terminated employees. This modification has been considered a re-pricing and will be accounted for using variable accounting. The impact of this in 2002 was minimal.
The Company applies APB Opinion No. 25 and related interpretations in accounting for its US share option plans. Had compensation for the Companys share option plans been determined based on the fair value at the grant dates for awards under those plans consistent with the method of SFAS No. 123, the Companys net (loss) and net (loss) per share under US GAAP would have been reduced to the pro forma amounts indicated below:
F-43
Year Ended | Year Ended | Year Ended | ||||||||||||||||||||||||||
31 December | 31 December | 31 December | ||||||||||||||||||||||||||
2002 | 2001 | 2000 | ||||||||||||||||||||||||||
£000 | £000 | £000 | ||||||||||||||||||||||||||
Net (loss) as reported |
(20,781 | ) | (3,725 | ) | (3,241 | ) | ||||||||||||||||||||||
Deduct: Stock-based employee compensation expense
determined under fair value based method for all
awards, net of related tax effect |
(2,300 | ) | (3,154 | ) | 1,687 | |||||||||||||||||||||||
Add back total stock based compensation expense
determined under the intrinsic value based
method |
(1,087 | ) | 1,011 | 1,058 | ||||||||||||||||||||||||
Proforma net (loss) |
(24,168 | ) | (5,868 | ) | (496 | ) | ||||||||||||||||||||||
£ | £ | £ | ||||||||||||||||||||||||||
Basic and diluted (loss) per ordinary share as
reported |
(2.24 | ) | (0.52 | ) | (0.82 | ) | ||||||||||||||||||||||
Proforma |
(2.60 | ) | (0.80 | ) | (0.20 | ) | ||||||||||||||||||||||
£ | £ | £ | ||||||||||||||||||||||||||
Weighted average grant date fair value Options
granted at the market price |
4.04 | 5.00 | 2.70 | |||||||||||||||||||||||||
Options granted at a premium to the market price |
| | | |||||||||||||||||||||||||
Options granted at a discount to the market price |
| 9.70 | 4.20 |
The fair value for options granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions and no dividends.
Year Ended | Year Ended | Year Ended | ||||||||||
31 December | 31 December | 31 December | ||||||||||
2002 | 2001 | 2000 | ||||||||||
Options granted at the market price
|
||||||||||||
Risk free interest rate (percentage) |
5.00 | 5.13 | 6.34 | |||||||||
Expected life (in years) |
4.00 | 3.52 | 1.20 | |||||||||
Volatility (percentage) |
100 | 60 | 60 | |||||||||
Options granted at a premium to the market price
|
||||||||||||
Risk free interest rate (percentage) |
5.00 | 5.13 | 6.34 | |||||||||
Expected life (in years) |
4.00 | 3.52 | 1.20 | |||||||||
Volatility (percentage) |
100 | 60 | 60 |
Year Ended | Year Ended | Year Ended | ||||||||||
31 December | 31 December | 31 December | ||||||||||
2002 | 2001 | 2000 | ||||||||||
Options granted at a discount to the market price
|
||||||||||||
Risk free interest rate (percentage) |
5.00 | 5.13 | 6.34 | |||||||||
Expected life (in years) |
4.00 | 3.52 | 1.20 | |||||||||
Volatility (percentage) |
100 | 60 | 60 |
G) Recently issued accounting standards
Exit and disposals
In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities (FAS 146). This Statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). This Statement requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred and can be measured at fair value. The provisions of this Statement are effective prospectively for exit or disposal activities initiated after 31 December 2002. The Company does not expect this statement to have a material impact on the financial statements.
F-44
Guarantees
In November 2002, the FASB issued Interpretation No. 45 (FIN 45), Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. The Interpretation expands on the accounting guidance of FAS 5, Accounting for Contingencies, FAS 57, Related Party Disclosures, and FAS 107, Disclosures about Fair Value of Financial Instruments, and incorporates without change the provisions of FIN 34, Disclosure of Indirect Guarantees of Indebtedness of Others, an interpretation of FASB Statement No. 5, which is being superseded. FIN 45 elaborates on the existing disclosure requirements for most guarantees, including loan guarantees, such as standby letters of credit. It also clarifies that at the time a company issues a guarantee, the company must recognize an initial liability for the fair value, or market value, of the obligations it assumes under that guarantee and must disclose that information in its interim and annual financial statements. FIN 45 will be effective to the Company on a prospective basis to guarantees issued or modified after 31 December 2002. The disclosure requirements in this Interpretation are effective for financial statements of periods ending after 15 December 2002. The standard has no material impact on the financial statements.
Variable interest entities
In January 2003, the Financial Accounting Standards Board issued FASB Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46). Under that interpretation, certain entities known as Variable Interest Entities (VIE) must be consolidated by the primary beneficiary of the entity. The primary beneficiary is generally defined as having the majority of the risks and rewards arising from the VIE. For VIEs in which a significant (but not majority) variable interest is held, certain disclosures are required. The measurement principles of this interpretation will be effective for the Companys 31 December 2003 financial statements. Amarin currently is evaluating its potential VIEs under FIN 46 but does not believe that it will be considered the primary beneficiary for any such entities or that it will be required to disclose a significant interest in a VIE.
H) Earnings per share
31 December | ||||||||||||
2002 | 2001 | 2000 | ||||||||||
£ | £ | £ | ||||||||||
US GAAP net (loss) available to common
stockholders |
(20,781,000 | ) | (3,725,000 | )* | (3,241,000 | )* | ||||||
Basic weighted-average shares |
9,297,216 | 7,124,275 | 3,953,084 | |||||||||
Plus: Incremental share from assumed conversions
Options |
565,492 | 765,816 | 525,843 | |||||||||
Warrants |
33,750 | 14,925 | 182 | |||||||||
Convertible preferred stock |
2,000,000 | 4,129,819 | 4,129,819 | |||||||||
Adjusted weighted-average shares |
11,896,458 | 12,035,285 | 8,608,928 |
* During 2002 the nominal value of ordinary shares was converted from 10p to £1 each resulting in the number of shares reducing by a factor of 10, accordingly comparatives have been restated. |
Year Ended | Year Ended | Year Ended | ||||||||||
31 December | 31 December | 31 December | ||||||||||
2002 | 2001 | 2000 | ||||||||||
£ | £ | £ | ||||||||||
Basic (loss) per share |
(2.24 | ) | (0.52 | ) | (0.82 | ) | ||||||
Diluted earnings per share |
a | a | a |
The dilutive effect of the Companys option, warrants and convertible preferred stock have been excluded as the impact would have been antidilutive for the periods indicated above. Please refer to Notes (28) and (27) for more information with regard to these securities. 290,000 shares were issued during 2000 upon the exercise of certain options. 7,598,133 shares were issued in 2001 upon the exercise of certain options. 34,000 were issued in 2002 upon the exercise of certain options.
F-45
I) Treatment of intangible fixed assets
Under UK GAAP pharmaceutical products which are in the clinical trials phase of development can be capitalized and amortized where there is a sufficient likelihood of future economic benefit. Under US GAAP specific guidance relating to pharmaceutical products in the development phase requires such amounts to be expensed unless they have attained certain regulatory milestones.
Under UK GAAP the Company has capitalised £2,935,000 at December 31, 2002 (December 31, 2001: £3,452,000, 31 December, 2000: £3,860,000) relating to LAX-10 and Zelapar both of which would have been expensed under US GAAP. In addition, the adjustment in 2002 includes a reversal of the impairment recognized under UK GAAP with respect to Moraxen which had been expensed when incurred under US GAAP.
J) Adjustment for revenue recognition
Under UK GAAP milestone payments have been recognized when achieved. Under US GAAP, the Companys adoption of SAB 101 resulted in a £619,000 cumulative adjustment in respect of its accounting for certain up-front payments and refundable milestone payments. This change increased sales £70,000, £60,000, £106,000 for the years ended 31 December, 2002, 2001 and 2000, respectively.
K) Gain on extinguishment of a trade payable
Under UK GAAP the Company has recognised a gain on the reversal of a third party payable by a related party as discussed in note 8. Under US GAAP the payment of a third party liability by a related party is considered a contribution to capital.
L) Imputed interest on non-interest bearing debt
In connection with the Companys acquisition of the product portfolio from Elan, the Company obtained a no interest bearing loan for a period of one year in the amount of £4,466,000 to fund the acquisition of such portfolio. Under UK GAAP the face value of the note is included in the fair value of the portfolio acquired. Under US GAAP the note payable and the product portfolio are recorded at the present value of amounts to be paid determined using an appropriate interest rate. The note payable is then accreted up to its face value over the term of the loan with a corresponding charge to interest expense.
In June 2000, the entire loan amount referred to above of £4,466,000 was extended for a period of approximately 4 years (see Note 24). Under UK GAAP there is no accounting impact as a result of the extension of the loan term. Under US GAAP the modification resulted in an extraordinary gain for fiscal 2000 of £1,251,000, computed as the difference between the face value of the loan and the present value of the amounts to be paid using the appropriate interest rate, which has been accounted for as a capital contribution from a related party. For US GAAP the loan will be carried at its present value and accreted up to its face value over the term of the loan with a corresponding charge to interest expense, accordingly a charge of £290,000 under US GAAP has been charged to interest expense for the year ended 31 December 2002 (31 December 2001: £268,000).
M) Accrual for PPA returns
Under UK GAAP the Company did not accrue for the estimated costs expected to be incurred during the year ended 31 December 2000. Under US GAAP the Company was required to accrue for the estimated costs of returns. During the year ended 31 December 2001 the accrual made under US GAAP has been utilised so no GAAP difference remains.
N) Reversal of transdermal accrual
Under UK GAAP the Company accrued for the estimated costs of terminating its transdermal contracts. Under US GAAP a portion of this amount relates to revenues reflected as deferred revenue under SAB 101. This accrual has now been utilised or released under UK GAAP during 2002, eliminating the reconciling difference.
F-46
O) Preference dividends
Under UK GAAP cumulative preferred dividends are accrued whether paid or not. Under US GAAP, preferred dividends are not accounted for until declared.
P) Revenue recognition
Under UK GAAP revenue is recognised on dispatch of goods. Under US GAAP revenue is recognised on delivery to the customer, when title is deemed to pass. Normally, there is an insignificant timing difference between dispatch and delivery to the customer and hence no adjustment is recorded. However, during the last week of December 2002, such a delay occurred and accordingly an adjustment of £216,000 was made in 2002 to reflect the profit element of sales (£457,000) recognised under UK GAAP but deferred under US GAAP. The associated adjustment to cost of sales would be £241,000.
Q) Adjustment to Permax purchase consideration
Under UK GAAP purchase consideration paid by means of a note payable is measured at its principal amount. Under US GAAP purchase consideration is measured by reference to the fair value of the liability assumed. At the date of the option exercise the fair value of our obligation to Elan was £1,909,000 lower than the face amount of the liability as determined by discounting future cash flows at US dollar LIBOR plus 4% being 5.66%.
As of December 31, 2002, the basis difference is eliminated as a result of the impairment recognized with respect to Permax and discussed elsewhere in these financial statements. However, as a result of the initial basis difference, impairment under US GAAP is £1,909,000 lower that that recognized under UK GAAP, partly offset by an additional £576,000 in interest recognised using the effective interest method.
R) 2001 Proforma Combined Historical Results for Permax Product Line
The unaudited proforma combined historical results, as if the Company had acquired its rights to Permax with effect from January 1, 2001 for the year ended December 31, 2001, are estimated to be:
PROFORMA | |||||
For the year | |||||
ended | |||||
December 31, | |||||
2001 | |||||
£000 | |||||
Turnover |
45,708 | ||||
Net Loss |
(4,504 | ) | |||
The proforma results include amortization of purchase consideration from January 1, 2001 to December 31, 2001 as well as interest expense on the interest bearing portion of the related party loan from Elan and royalty payments on Permax sales from January 1, 2001. Proforma results have not been presented for the year ended December 31, 2002 as Permax has been included for the entire period. The proforma results are for illustrative purposes only and are not necessarily indicative of what actually would have occurred if the agreement had been effective from January 1, 2001, nor are they necessarily indicative of future consolidated results.
F-47
40. Events subsequent to April 24, 2003
Subsequent to April 24, 2003, the date of the independent auditors report and the filing of the original Form 20-F, additional information has become available relating to Permax inventories at wholesalers and the impact of generic competition. The inventories are higher than initially understood and generic competition is greater.
As indicated in Note 1, concurrent with the signing of the original Form 20-F, cash flow projections had been prepared indicating the Group had adequate cash resources to fund operations for the period to April 2004. Note 1 also indicated that these projections were based on then current sales expectations. On the basis of these projections, the Directors prepared the financial statements on a going concern basis.
As a result of the reduced expectations for sales of Permax, which was explained in the Groups first quarter financial results filed with the Securities and Exchange Commission on June 3, 2003 on Form 6-K, the Directors have prepared updated cash flow projections that indicate it no longer has adequate cash resources to fund operations through April 2004. In fact, these projections indicate that it is necessary for the Group to restructure its debt obligations and raise additional funding in order to fund ongoing operations from September 2003 onwards.
Management has already commenced implementing an action plan to achieve these needs. This includes negotiating a moratorium with Elan on debt and interest payments, negotiating a reduced debt settlement with Elan, negotiating reduced and re-phased consideration for the acquisition of Zelapar and seeking third party finance. In addition, management is actively considering third party collaborations and potential strategic alternatives.
Although the Group has historically been able to satisfy its cash requirements, there can be no assurance that efforts to obtain sufficient financing for operations will be successful in the future.
The timing and ability to restructure existing debt and raise additional finance will impact the Groups ability to execute its strategy and sustain its infrastructure at its current level. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amount and classification of liabilities or any other adjustments that might be necessary should the Group be unable to continue as a going concern.
F-48
EXHIBIT INDEX
Exhibit | ||
Number | Description | |
1.1 | Memorandum of Association of the Company* | |
1.2 | Articles of Association of the Company* | |
2.1 | Form of Deposit Agreement, dated as of March 29, 1993, among the Company, Citibank, N.A., as Depositary, and all holders from time to time of American Depositary Receipts issued thereunder (1) | |
2.2 | Amendment No. 1 to Deposit Agreement, dated as of October 8, 1998, among the Company, Citibank, N.A., as Depositary, and all holders from time to time of the American Depositary Receipts issued thereunder (2) | |
2.3 | Amendment No. 2 to Deposit Agreement, dated as of September 25, 2002 among the Company, Citibank N.A., as Depositary, and all holders from time to time of the American Depositary Receipts issued thereunder (3) | |
2.4 | Form of Ordinary Share certificate* | |
2.5 | Form of American Depositary Receipt evidencing ADSs (included in Exhibit 2.3) (3) | |
2.6 | Registration Rights Agreement, dated as of October 21, 1998, by and among Ethical Holdings plc and Monksland Holdings B.V.* | |
2.7 | Amendment No. 1 to Registration Rights Agreement and Waiver, dated January 27, 2003, by and among the Company, Elan International Services, Ltd. and Monksland Holdings B.V.* | |
2.8 | Second Subscription Agreement, dated as of November 1999, among Ethical Holdings PLC, Monksland Holdings B.V. and Elan Corporation PLC (4) | |
2.9 | Purchase Agreement, dated as of June 16, 2000, by and among the Company and the Purchasers named therein (4) | |
2.10 | Registration Rights Agreement, dated as of November 24, 2000, by and between the Company and Laxdale Limited (5) | |
2.11 | Form of Subscription Agreement, dated as of January 27, 2003 by and among the Company and the Purchasers named therein* (The Company entered into twenty separate Subscription Agreements on January 27, 2003 all substantially similar in form and content to this form of Subscription Agreement.) | |
2.12 | Form of Registration Rights Agreement, dated as of January 27, 2003 between the Company and the Purchasers named therein* (The Company entered into twenty separate Registration Rights Agreements on January 27, 2003 all substantially similar in form and content to this form of Registration Rights Agreement.) | |
4.1 | Amended and Restated Asset Purchase Agreement dated September 29, 1999 between Elan Pharmaceuticals Inc. and the Company* | |
4.2 | Variation Agreement, undated, between Elan Pharmaceuticals Inc. and the Company* | |
4.3 | License Agreement, dated November 24, 2000, between the Company and Laxdale Limited (6) | |
4.4 | Option Agreement, dated as of June 18, 2001, between Elan Pharma International Limited and the Company (7) | |
4.5 | Deed of Variation, dated January 27, 2003, between Elan Pharma International Limited and the Company* | |
4.6 | Lease, dated August 6, 2001, between the Company and LB Strawberry LLC (7) | |
4.7 | Amended and Restated Distribution, Marketing and Option Agreement, dated September 28, 2001, between Elan |
Exhibit | ||
Number | Description | |
Pharmaceuticals, Inc. and the Company (8) | ||
4.8 | Amended and Restated License and Supply Agreement, dated March 29, 2002, between Eli Lilly and Company and the Company* | |
4.9 | Deed of Variation, dated January 27, 2003, between Elan Pharmaceuticals Inc. and the Company* | |
4.10 | Stock and Intellectual Property Right Purchase Agreement, dated November 30, 2001, by and among Abriway International S.A., Sergio Lucero, Francisco Stefano, Amarin Technologies S.A., Amarin Pharmaceuticals Company Limited and the Company (7) | |
4.11 | Stock Purchase Agreement, dated November 30, 2001, by and among Abriway International S.A., Beta Pharmaceuticals Corporation and the Company (7) | |
4.12 | Novation Agreement, dated November 30, 2001, by and among Beta Pharmaceuticals Corporation, Amarin Technologies S.A. and the Company (7) | |
4.13 | Loan Agreement, dated September 28, 2001, between Elan Pharma International Limited and the Company (8) | |
4.14 | Deed of Variation, dated July 19, 2002, amending certain provisions of the Loan Agreement between the Company and Elan Pharma International Limited* | |
4.15 | Deed of Variation No. 2, dated December 23, 2002, between the Company and Elan Pharma International Limited* | |
4.16 | Deed of Variation No. 3, dated January 27, 2003, between the Company and Elan Pharma International Limited* | |
4.17 | The Company 2002 Stock Option Plan (9) | |
4.18 | Agreement Letter, dated October 21, 2002, between the Company and Security Research Associates, Inc.* | |
4.19 | Agreement, dated January 27, 2003, among the Company, Elan International Services, Ltd. and Monksland Holdings B.V.* | |
4.20 | Master Agreement, dated January 27, 2003, between Elan Corporation, plc., Elan Pharma International Limited, Elan International Services, Ltd., Elan Pharmaceuticals, Inc., Monksland Holdings B.V. and the Company* | |
4.21 | Form of Warrant Agreement, dated March 19, 2003, between the Company and individuals designated by Security Research Associates, Inc.* (The Company entered into seven separate Warrant Agreements on March 19, 2003 all substantially similar in form and content to this form of Warrant Agreement.) | |
4.22 | Sale and Purchase Agreement, dated March 14, 2003, between F. Hoffmann La Roche Ltd., Hoffmann La Roche Inc. and the Company* | |
8.1 | Subsidiaries of the Company* | |
10.1 | Certification of Richard A. B. Stewart pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002** | |
10.2 | Certification of Ian R. Garland pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002** | |
10.3 | Consent of PricewaterhouseCoopers LLP, Chartered Accountants and Registered Auditors** |
* Previously filed as an exhibit to the Companys Annual Report on Form 20-F for the year ended December 31, 2002, filed with the Securities and Exchange Commission on April 24, 2003. |
** Filed herewith.
Confidential treatment was granted by the Securities and Exchange Commission (the confidential portions of such exhibits have been omitted and filed separately with the Securities and Exchange Commission).
(1) | Incorporated herein by reference to certain exhibits to the Companys Registration Statement on Form F-1, File No. 33-58160, filed with the Securities and Exchange Commission on February 11, 1993. | ||
(2) | Incorporated herein by reference to Exhibit(a)(i) to the Companys Registration Statement on Post-Effective Amendment No. 1 to Form F-6, File No. 333-5946, filed with the Securities and Exchange Commission on October 8, 1998. | ||
(3) | Incorporated herein by reference to Exhibit(a)(ii) to the Companys Registration Statement on Post- Effective Amendment No. 2 to Form F-6, File No. 333-5946, filed with the Securities and Exchange Commission on September 26, 2002. | ||
(4) | Incorporated herein by reference to certain exhibits to the Companys Annual Report on Form 20-F for the year ended December 31, 1999, filed with the Securities and Exchange Commission on June 30, 2000. | ||
(5) | Incorporated herein by reference to certain exhibits to the Companys Registration Statement on Form F-3, File No. 333-13200, filed with the Securities and Exchange Commission on February 22, 2001. | ||
(6) | Incorporated herein by reference to certain exhibits to the Companys Annual Report on Form 20-F for the year ended December 31, 2000, filed with the Securities and Exchange Commission on July 2, 2001. | ||
(7) | Incorporated herein by reference to certain exhibits to the Companys Annual Report on Form 20-F for the year ended December 31, 2001, filed with the Securities and Exchange Commission on May 9, 2002. | ||
(8) | Incorporated herein by reference to certain exhibits to the Companys Registration Statement on Pre- Effective Amendment No. 2 to Form F-3, File No. 333-13200, filed with the Securities and Exchange Commission on November 19, 2001. | ||
(9) | Incorporated herein by reference to certain exhibits to the Companys Registration Statement on Form S-8, File No. 333-101775, filed with the Securities and Exchange Commission on December 11, 2002. |