SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-18311
NEUROGEN CORPORATION 401(k) RETIREMENT PLAN
Full title of plan
NEUROGEN CORPORATION
35 Northeast Industrial Road
Branford, Connecticut 06405
(203) 488-8201
(Name of issuer of the securities held pursuant to the plan)
Neurogen Corporation 401(k) Retirement Plan
Financial Statements
Index
Report of Independent Accountants
Financial Statements:
Statements of Net Assets Available for Benefits at December 31, 2000 and 1999
Statement of Changes in Net Assets Available for Benefits for the Year Ended December 31, 2000
Notes to Financial Statements
Supplemental Schedules:
Schedule of Assets (Held at End of Year)
Schedule of Reportable Transactions
Report of Independent Accountants
To the Participants and Administrator of the
Neurogen Corporation 401(k) Retirement Plan
In our opinion, the accompanying statements of net assets available for benefits
and the related statement of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the Neurogen Corporation 401(k) Retirement Plan (the "Plan") at December 31,
2000 and December 31, 1999, and the changes in net assets available for benefits
for the year ended December 31, 2000 in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Plan's 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, 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.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental Schedules of Assets
(Held at End of Year) and Reportable Transactions are presented for the purpose
of additional analysis and are not a required part of the basic financial
statements but are supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. These supplemental schedules are the
responsibility of the Plan's management. The supplemental schedules have been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
The supplemental Schedules of Assets (Held at End of Year) and Reportable
Transactions that accompany the Plan's financial statements do not disclose the
historical cost of non-participant directed Plan assets held by the Plan's
trustee. Disclosure of this information is required by the Department of Labor's
Rules and Regulations for Reporting and Disclosure under the Employee Retirement
Income Security Act of 1974.
PricewaterhouseCoopers LLP
June 21, 2001
Neurogen Corporation 401(k) Retirement Plan
Statements of Net Assets Available for Benefits
December 31,
2000 1999
---- ----
ASSETS:
Investments (See notes 3 and 4) $ 7,850,852 $ 6,071,265
Employer contribution receivable 166,497 131,187
--------- ---------
Net assets available for benefits $ 8,017,349 $ 6,202,452
========= =========
The accompanying notes are an integral part of the financial statements.
Neurogen Corporation 401(k) Retirement Plan
Statement of Changes in Net Assets Available for Benefits
Year Ended
December 31, 2000
=================
Additions to net assets attributed to:
Contributions received or receivable from:
Employees $ 1,308,319
Employer 652,951
-----------
Total contributions 1,961,270
Net appreciation in fair value of investments 540,871
Dividends 62,116
Interest repayments 9,274
-----------
Total additions 2,573,531
Deductions from net assets attributed to:
Benefits paid to participants (738,180)
Administrative expenses (20,454)
-----------
Total deductions (758,634)
-----------
Net increase 1,814,897
Net assets available for benefits:
Beginning of year 6,202,452
-----------
End of year $ 8,017,349
===========
The accompanying notes are an integral part of the financial statements.
Neurogen Corporation 401(k) Retirement Plan
Notes To Financial Statements
1. Description of the Plan:
General
The Neurogen Corporation 401(k) Retirement Plan (the "Plan") is a defined
contribution plan administered by Neurogen Corporation (the "Company"). The Plan
is subject to the provisions of the Employee Retirement Income Security Act of
1974 ("ERISA") and is intended to meet the requirements of Section 401(a),
401(k), and 501(a) of the Internal Revenue Code of 1986, as amended (the
"Code"). All full-time employees of the Company are eligible to participate in
the Plan on the first day of a calendar quarter following the date on which the
employee first completed an hour of service. The following is a brief
description of the Plan. Participants should refer to the Plan document for a
more complete description of the Plan's provisions.
Effective November 1, 1999, the Plan was amended and restated, as Alliance Trust
Company ("Alliance") was appointed trustee and recordkeeper of the Plan, and the
number of investment options available to participants was increased. Prior to
the transfer of Plan assets to Alliance, Plan participants selected a new
investment mix based on the increased number of investment options available
from Alliance. Plan assets transferred to Alliance were invested either in funds
comparable to those offered by the previous custodians or in cash management
vehicles until Alliance transferred funds to investment elections in which the
previous custodians did not offer a comparable investment option. The conversion
initiated a "Black Out" period beginning November 1, 1999 and continuing through
February 23, 2000. During this period, employee and employer contributions and
investment income earned on Plan assets continued to be recorded by Alliance.
However, participants were not able to withdraw assets from their accounts or
make changes in investment elections. Towards the end of the Black Out period,
Plan assets were invested into the funds selected by each participant.
The Company, as the administrator of the Plan, is responsible for determining
employer contributions, determining limits if any, on loan requests, reviewing
financial hardship requests for participant withdrawals and for setting rules
and administrative policy as it may deem necessary to carry out the provisions
of the Plan.
Contributions
Employees may elect to contribute up to 15% of their earnings or $10,500
whichever is less. Contribution rates may be changed on the first day of a
calendar quarter. Participants direct the investment of their contributions into
various investment options offered by the Plan. The Plan currently offers 19
mutual funds, 5 pooled investment funds and Neurogen common stock as investment
options for participants. The options may be changed daily by participants.
The Plan provides that the Company will match the employee's contribution in an
amount equal to 100% of the participant's contribution up to 6% of the
participant's gross pay. The matching contribution is made on a quarterly basis
and is composed of two parts. One-third of the contribution is in cash that may
be invested in any of the investment funds offered. The other two-thirds is in
Neurogen stock and may not be transferred to another investment fund.
Participant Accounts
Each participant's account is credited with the participant's contribution and
allocations of the Company's matching contribution, Plan earnings and trustee
fees as described in the Plan document. The benefit to which a participant is
entitled is the benefit that can be provided from the participant's vested
account.
Vesting
Participants vest in employer matching contributions at a rate of 25% for each
year of credited service, as defined in the Plan document, and are 100% vested
after four years of credited service. Participants are vested immediately in
their contributions plus actual earnings thereon.
Loans and Withdrawals
Participants may borrow from their fund accounts a minimum of $1,000 up to a
maximum equal to the lesser of $50,000, or 50% of their vested account balance.
Loan terms vary with the maximum being ten years. The loans are collateralized
by the balance in the participant's account and bear interest at a rate of 1%
over the prime rate.
A participant may withdraw all or any portion of his vested account resulting
from his contributions and earnings thereon, subject to proof of hardship due to
an immediate and significant financial need as further described in the Plan
document. The Plan administrator, in accordance with nondiscriminatory standards
applied uniformly to all participants, similarly makes the determination of
financial hardship.
Payment of Benefits
On termination of service due to death, disability or retirement, a participant
will receive a lump-sum amount equal to the value of the participant's vested
interest in his or her account. If a participant terminates employment but
termination is not due to death, disability or retirement, and the participant
is not yet 65, the participant may keep his account balance in the Plan if it is
higher than $5,000 or elect a lump-sum distribution. If the participant chooses
a lump-sum distribution, the distribution will occur as soon as practicable
after the participant has completed the proper form providing instruction as to
where the funds should be transferred.
Forfeited Accounts
Forfeitures are utilized to reduce the employer contribution and/or pay Plan
expenses which would otherwise be paid by the employer. During 2000, $52,896 of
employer contributions were reduced by forfeited nonvested accounts. At December
31, 2000 and 1999, forfeited nonvested accounts totaled $401 and $5,217,
respectively.
2. Summary of Accounting Policies:
Basis of Accounting
The financial statements of the Plan are prepared under the accrual method of
accounting.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, and changes therein, and
disclosure of contingent assets and liabilities. Actual results could differ
from those estimates.
Investment Valuation and Income Recognition
The pooled investment and mutual fund accounts are stated at fair value, which
is based upon quoted market prices that represent the net asset value of shares
held by the Plan at year-end. The Company stock is valued at its quoted market
price.
The Plan presents in the statement of changes in net assets available for
benefits the net appreciation (depreciation) in the fair value of its
investments which consists of the realized gains or losses and the unrealized
appreciation (depreciation) on those investments.
Purchases and sales are recorded at the trade date and interest income is
recorded on the accrual basis.
Plan Expenses
Trustee fees are charged to the participants on an allocation basis and
participants pay loan administrative expenses of $75 per loan. In addition, the
Company incurred record keeping expenses of $7,463 for the Plan year 2000, which
were not charged to the Plan.
Payment of Benefits
Benefits are recorded when paid.
3. Investments
The following presents investments that represent 5 percent or more of the
Plan's net assets.
December 31,
2000 1999
Neurogen Corporation restricted common stock, $ 1,827,433 $ 645,810
49,778 and 39,140 shares, respectively
Neurogen Corporation unrestricted common stock, $ 584,167 N/A
15,895 shares
Fidelity Contrafund, 23,218 and 28,156 shares, respectively $ 1,141,655 $ 1,689,906
Fidelity Select Technology Fund, 5,655 shares $ 501,694 N/A
Vanguard Primecap Fund, 17,034 and 16,200 shares respectively $ 1,028,522 $ 1,009,930
UST Diversified Value Fund, 24,164 shares $ 753,667 N/A
American Performance Treasury Fund, 1,650,720 shares N/A $ 1,650,720
During 2000, the Plan's investments (including realized gains and losses and the
unrealized appreciation (depreciation) on those investments, and investment
income from interest and dividends)appreciated in value by $602,987 as follows:
Common stock $ 1,288,089
Pooled investment and mutual funds (685,102)
------------
$ 602,987
============
4. Nonparticipant-Directed Investments
Information about the net assets and the significant components of the changes
in net assets relating to the nonparticipant-directed investments is as follows:
December 31,
2000 1999
Net Assets:
Restricted common stock $ 1,827,433 $ 645,810
Year Ended
December 31, 2000
Changes in Net Assets:
Contributions $ 411,493
Net appreciation 906,450
Benefits paid to participants (132,385)
Administrative expenses (3,935)
----------
$ 1,181,623
==========
5. Related-Party Transactions
Certain Plan investments are shares of short-term investment funds managed by
Alliance Trust Company ("Alliance"). Alliance is the trustee as defined by the
Plan and, therefore, these transactions qualify as party-in-interest
transactions.
6. Plan Termination
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan, subject to the provisions of ERISA. In the event of Plan termination,
participants would become 100 percent vested in their employer contributions.
7. Tax Status
The Internal Revenue Service has determined and informed the Company by a letter
dated October 22, 1996, that the Plan, as then designed, was in compliance with
the applicable requirements of the Internal Revenue Code. The Plan has been
amended since receiving the determination letter. However, the Plan
administrator and the Plan's tax counsel believe that the Plan is currently
designed and being operated in compliance with the applicable requirements of
the Internal Revenue Code.
8. Reconciliation of Financial Statements to Form 5500
The following is a reconciliation of net assets available for benefits per the
financial statements at December 31, 2000 and 1999 to Form 5500:
2000 1999
---------- ----------
Net assets available for benefits per
the financial statements $8,017,349 $6,202,452
Amounts allocated to withdrawing participants - (186,600)
----------- ----------
Net assets available for benefits per the Form 5500 $8,017,349 $6,015,852
=========== ==========
The following is a reconciliation of benefits paid to participants per the
financial statements for the year ended December 31, 2000 to Form 5500:
Benefits paid to participants per the
financial statements $ 738,180
Less: Amounts allocated to withdrawing
participants at December 31, 1999 (186,600)
-----------
Benefits paid to participants per Form 5500 $ 551,580
===========
Amounts allocated to withdrawing participants were recorded on the 1999 Form
5500 for benefit claims that were processed and approved for payment prior to
December 31, 1999, but not yet paid as of that date.
Neurogen Corporation 401(k) Retirement Plan
Supplemental Schedule
Schedule of Assets (Held at End of Year)
December 31, 2000
(b) Identity of issue, (c) Description of investment
borrower,lessor or including maturity date, rate of interest,
(a) similar party collateral,par, or maturity value (d) Cost (e) Current value
- --- ---------------------- ------------------------------------------ -------- -----------------
* Neurogen Corporation Restricted common stock, par value $.025 ** $ 1,827,433
* Neurogen Corporation Unrestricted common stock, par value $.025 *** 584,167
* Neurogen Corporation Cash *** 28,354
* Participants Participant loans with interest rates
between 8.75% and 10.50%, maturity
dates ranging from July 2002-October
2009, collaterized by participant
account balances - 86,417
Fidelity Group Fidelity Contrafund *** 1,141,655
Fidelity Group Fidelity Select Technology Fund *** 501,694
Franklin Group of Funds Franklin Small Cap Growth Fund *** 54,144
Harbor Fund Harbor International Fund *** 174,387
Harbor Fund Harbor Bond Fund *** 72,831
Janus Janus Worldwide Fund *** 351,291
Janus Janus Olympus Fund *** 141,712
Janus Janus Mercury Fund *** 271,236
Janus Janus Balanced Fund *** 97,593
T. Rowe Price Funds T. Rowe Price Equity Income Fund *** 8,037
T. Rowe Price Funds T. Rowe Price Mid-Cap Growth Fund *** 32,853
Royce Funds Royce Total Return Fund *** 2,952
Vanguard Group Vanguard Specialized Energy Fund *** 65,028
Vanguard Group Vanguard Health Care Fund *** 138,337
Vanguard Group Vanguard Wellington Fund *** 23,793
Vanguard Group Vanguard Primecap Fund *** 1,028,522
Vanguard Group Vanguard Long Term Bond Index Fund *** 9,163
Vanguard Group Vanguard 500 Index Fund *** 173,108
Vanguard Group Vanguard High Yield Corporate Fund *** 94,806
U.S. Trust Company, N.A. UST Balanced Global 70/30 Fund *** 64,523
U.S. Trust Company, N.A. UST Diversified Value Fund *** 753,667
U.S. Trust Company, N.A. UST Balanced Global 20/80 Fund *** 39,852
U.S. Trust Company, N.A. UST Capital Preservation Fund *** 78,022
Sanford C. Bernstein Sanford Bernstein Intermediate Duration Bond Fund *** 4,876
& Co., Inc.
* Alliance Trust Company American Performance Cash Management Fund *** 399
-----------------
$ 7,850,852
=================
* Identified as a party in interest
** Information not available from recordkeeper
*** Cost information has been omitted for participant-directed investments
Neurogen Corporation 401(k) Retirement Plan
Supplemental Schedule
Schedule of Reportable Transactions
Year Ended December 31, 2000
Series of transactions exceeding 5% of current value of Plan assets as of January 1, 2000
(b)Description of asset
(a)Identity of (include interest rate and (c)Purchase (d)Selling (e)Lease (f)Expense incurred
party involved maturity in case of a loan) price price rental with transaction
- -------------------- ------------------------------------- ----------- ---------- ---------- ----------------
Neurogen Corporation Neurogen Corporation Restricted Stock $ 411,694 N/A $ - $ -
Neurogen Corporation Neurogen Corporation Restricted Stock N/A $ 136,521 $ - $ -
(b)Description of asset (h)Current value
(a)Identity of (include interest rate and (g)Cost of of asset on (i)Net gain
party involved maturity in case of a loan) asset transaction date or (loss)
- -------------------- -------------------------------------- ---------- ----------------- ----------
Neurogen Corporation Neurogen Corporation Restricted Stock $ 411,694 $ 411,694 $ -
Neurogen Corporation Neurogen Corporation Restricted Stock * $ 136,521 *
* Information not available from record keeper
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the plan) have duly caused this annual
report to be signed on its behalf by the undersigned hereunto duly authorized.
Neurogen Corporation 401(k)Retirement Plan
Administrator: Neurogen Corporation
Date: June 28, 2001 By: /s/ STEPHEN R. DAVIS
Stephen R. Davis
Senior Vice President and Chief Business Officer
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-07957) of Neurogen Corporation of our report
dated June 21, 2001 relating to the financial statements of the Neurogen
Corporation 401(k) Retirement Plan, which appears in this Form 11-K.
PricewaterhouseCoopers LLP
Hartford, Connecticut
June 21, 2001
