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
For the fiscal year ended December 31, 2001
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
and the address of its principal executive office)
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, 2001 and 2000
Statement of Changes in Net Assets Available for Benefits for the Year Ended December 31, 2001
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,
2001 and December 31, 2000, and the changes in net assets available for benefits
for the year ended December 31, 2001 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 14, 2002
Neurogen Corporation 401(k) Retirement Plan
Statements of Net Assets Available for Benefits
December 31,
2001 2000
---- ----
Assets:
Investments (See Notes 3 and 4) $ 7,392,426 $ 7,850,852
Receivables:
Employer contributions 173,296 166,497
Participant contributions 27,605 -
--------- ---------
Total receivables 200,901 166,497
--------- ---------
Net assets available for benefits $ 7,593,327 $ 8,017,349
========= =========
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, 2001
=================
Additions to net assets attributed to:
Contributions received or receivable from:
Employees $ 1,199,420
Employer 787,957
-----------
Total contributions 1,987,377
Net depreciation in fair value of investments (1,946,172)
Dividends 51,013
Interest repayments 9,276
-----------
Total additions 101,494
Deductions from net assets attributed to:
Benefits paid (503,995)
Administrative expenses (21,521)
-----------
Total deductions (525,516)
-----------
Net decrease (424,022)
Net assets available for benefits:
Beginning of year 8,017,349
-----------
End of year $ 7,593,327
===========
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.
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 their vested account resulting
from their 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 their 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 their account balance in the Plan if it
is greater 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 2001, $16,020 of
employer contributions were reduced by forfeited nonvested accounts. At December
31, 2001 and 2000, forfeited nonvested accounts totaled $12,931 and $401,
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, unrealized
appreciation (depreciation) and interest income 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 $7,055 for the Plan year 2001, 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,
2001 2000
Neurogen Corporation restricted common stock,
70,462 and 49,778 shares, respectively $ 1,241,309 $ 1,827,433
Neurogen Corporation unrestricted common stock,
15,895 shares N/A $ 584,167
Fidelity Contrafund, 26,726 and 23,218 shares,
respectively $ 1,143,090 $ 1,141,655
Fidelity Select Technology Fund, 8,024 and 5,655 shares,
respectively $ 486,252 $ 501,694
Vanguard Primecap Fund, 15,650 and 17,034 shares,
respectively $ 806,266 $ 1,028,522
UST Diversified Value Fund, 21,805 and 24,164 shares,
respectively $ 692,315 $ 753,667
During 2001, the Plan's investments (including realized gains and losses and the
unrealized appreciation (depreciation) on those investments) depreciated in
value by $1,946,172 as follows:
Common stock $ (1,293,051)
Pooled investment and mutual funds (653,121)
------------
$ (1,946,172)
============
4. Nonparticipant-Directed Investment
Information about the net assets and the significant components of the changes
in net assets relating to the nonparticipant-directed investment is as follows:
December 31,
2001 2000
Net Assets:
Restricted common stock $ 1,241,309 $ 1,827,433
Year Ended
December 31, 2001
Changes in Net Assets:
Contributions $ 520,310
Net depreciation (1,004,501)
Benefits paid to participants (97,569)
Administrative expenses (4,364)
----------
$ (586,124)
==========
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.
Neurogen Corporation 401(k) Retirement Plan
Supplemental Schedule
Schedule of Assets (Held at End of Year)
December 31, 2001
(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 ** $ 1,241,309
* Neurogen Corporation Unrestricted common stock, par value $.025 *** 202,789
* Participants Participant loans with interest rates
between 6.0% and 10.5%, maturity
dates ranging from June 2002-March
2008, collaterized by participant
account balances - 152,357
Fidelity Group Fidelity Contrafund *** 1,143,090
Fidelity Group Fidelity Select Technology Fund *** 486,252
Franklin Group of Funds Franklin Small Cap Growth Fund *** 76,883
Harbor Fund Harbor International Fund *** 155,151
Harbor Fund Harbor Bond Fund *** 126,570
Janus Janus Worldwide Fund *** 336,022
Janus Janus Olympus Fund *** 155,329
Janus Janus Mercury Fund *** 222,041
Janus Janus Balanced Fund *** 151,076
T. Rowe Price Funds T. Rowe Price Equity Income Fund *** 141,498
T. Rowe Price Funds T. Rowe Price Mid-Cap Growth Fund *** 43,936
Royce Funds Royce Total Return Fund *** 89,014
Vanguard Group Vanguard Specialized Energy Fund *** 45,874
Vanguard Group Vanguard Health Care Fund *** 281,827
Vanguard Group Vanguard Wellington Fund *** 82,973
Vanguard Group Vanguard Primecap Fund *** 806,266
Vanguard Group Vanguard Long Term Bond Index Fund *** 83,272
Vanguard Group Vanguard 500 Index Fund *** 297,246
Vanguard Group Vanguard High Yield Corporate Fund *** 118,638
U.S. Trust Company, N.A. UST Balanced Global 70/30 Fund *** 80,715
U.S. Trust Company, N.A. UST Diversified Value Fund *** 692,315
U.S. Trust Company, N.A. UST Balanced Global 20/80 Fund *** 47,926
U.S. Trust Company, N.A. UST Capital Preservation Fund *** 103,631
Sanford C. Bernstein Sanford Bernstein Intermediate Duration Bond Fund *** 15,495
& Co., Inc.
* Alliance Trust Company American Performance Cash Management Fund *** 12,931
-----------------
$ 7,392,426
=================
* 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, 2001
Series of transactions exceeding 5% of current value of Plan assets as of January 1, 2001
(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 $ 520,711 N/A $ - $ -
Neurogen Corporation Neurogen Corporation Restricted Stock N/A $ 132,792 $ - $ -
(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 $ 520,711 $ 520,711 $ -
Neurogen Corporation Neurogen Corporation Restricted Stock * $ 132,792 *
* Information not available from record keeper
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed by the undersigned hereunto duly
authorized.
Neurogen Corporation 401(k)Retirement Plan
Date: June 27, 2002 By: /s/ STEPHEN R. DAVIS
Stephen R. Davis
Executive 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 14, 2002 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 14, 2002
