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
Page
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Report of Independent Accountants 1
Financial Statements:
Statements of Net Assets Available for Benefits as of
December 31, 1999 and 1998 2
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 1999 3
Notes to Financial Statements 4-7
Supplemental Schedules:
Schedule of Assets Held for Investment Purposes At
End of Year 8
Schedule of Reportable Transactions 9
Schedule of Nonexempt Transactions 10
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,
1999 and December 31, 1998, and the changes in net assets available for benefits
for the year ended December 31, 1999 in conformity with accounting principles
generally accepted in the United States. 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, 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 the opinion expressed above.
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
for Investment Purposes At End of Year, Reportable Transactions and Nonexempt
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 schedule of Assets Held for Investment Purposes At End of Year
that accompanies the Plan's financial statements does not disclose the
historical cost of non-participant directed Plan assets held by the Plan's
custodians. 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 29, 2000
Neurogen Corporation 401(k) Retirement Plan
Statements of Net Assets Available for Benefits
December 31,
1999 1998
---- ----
ASSETS:
Employer contribution receivable $ 131,187 $ 47,103
Employee contribution receivable - 18,954
Investments (See notes 3 and 4) 6,071,265 4,617,741
--------- ---------
Net assets available for benefits $ 6,202,452 $ 4,683,798
========= =========
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, 1999
=================
Additions to net assets available for benefits:
Contributions received or receivable from:
Employer $ 551,820
Employees 825,085
-----------
Total contributions 1,376,905
Net appreciation in fair value of investments 453,935
Interest repayments 8,221
-----------
Total additions 1,839,061
Deductions from net assets available for benefits:
Benefits paid to participants (308,420)
Administrative expenses (11,987)
-----------
Total deductions (320,407)
-----------
Net increase 1,518,654
Net assets available for benefits:
Beginning of year 4,683,798
-----------
End of year $ 6,202,452
===========
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 agreement 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 elected 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 to set 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 $10,000
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 21
pooled equity funds, 3 pooled fixed income 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, and Plan earnings 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 on employer matching contributions at a rate of 25% for each
whole year of service 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
may elect to 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. If the participant chooses 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
- ------------------
Any forfeitures will first be applied to pay expenses under the Plan which would
otherwise be paid by the employer. Remaining forfeitures, if any, will be
utilized to reduce the employer contribution. During 1999, administrative fees
for the Plan were reduced by $2,284 from forfeited nonvested accounts. At
December 31, 1999, forfeited nonvested accounts totaled $5,217.
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 equity and fixed income 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, and investment income from the
pooled accounts.
Purchases and sales are recorded at the trade date and interest income is
recorded on the accrual basis.
Plan Expenses
- -------------
Transaction fees are offset by forfeitures, with any expenses in excess of the
forfeiture being paid by the Company. The Company incurred recordkeeping
expenses of $49,122 and $49,338 for the Plan years 1999 and 1998, respectively,
which were not charged to the Plan. Trustee fees are charged to the participants
on an allocation basis. In addition, the participant pays loan administrative
expenses of $75 per loan.
Payment of Benefits
- -------------------
Benefits are recorded when paid.
Adoption of Recent Accounting Guidance
- --------------------------------------
In 1999, Statement of Position 99-3, Accounting for and Reporting of Certain
Defined Contribution Benefit Plan Investments and Other Disclosure Matters (SOP
99-3), was issued and is effective for financial statements with plan years
ending after December 15, 1999. The Plan's financial statements and footnotes
reflect the provisions of SOP 99-3.
3. Investments
The following presents investments that represent 5 percent or more of the
Plan's net assets.
December 31,
1999 1998
---- ----
Neurogen Corporation common stock, $ 949,938 $ 614,320
57,572 and 35,104 shares, respectively
Fidelity Contrafund, 28,156 shares $ 1,689,906 N/A
Vanguard/Primecap Fund, 16,200 shares $ 1,009,930 N/A
American Performance Treasury Fund, 1,650,720 shares $ 1,650,720 N/A
Manulife Money Market Fund, 3,122 shares N/A $ 260,058
Manulife Growth & Income Fund, 21,320 shares N/A $ 767,683
Manulife Growth Opportunities Fund, 18,907 shares N/A $1,215,470
Manulife Contra Fund, 13,145 shares N/A $1,049,217
During 1999, 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 $453,935 as follows:
Pooled funds $ 404,987
Common stock 48,948
------------
$ 453,935
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,
1999 1998
---- ----
Net Assets:
Restricted common stock $ 645,810 $ 299,915
Year Ended
December 31, 1999
-----------------
Changes in Net Assets:
Contributions $ 312,555
Net appreciation 47,888
Benefit paid to participants (8,705)
Transfer to participant-directed (5,843)
investments ----------
$ 345,895
==========
5. Related-Party Transactions
Certain Plan investments are shares of pooled 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, 1999 to Form 5500:
1999
-----------
Net assets available for benefits per
the financial statements $6,202,452
Amounts allocated to withdrawing participants (186,600)
-----------
Net assets available for benefits per the Form 5500 $6,015,852
===========
The following is a reconciliation of benefits paid to participants per the
financial statements for the year ended December 31, 1999 to Form 5500:
Benefits paid to participants per the
financial statements $ 308,420
Add: Amounts allocated to withdrawing
participants at December 31, 1999 186,600
-----------
Benefits paid to participants per Form 5500 $ 495,020
===========
Amounts allocated to withdrawing participants are recorded on the Form 5500 for
benefit claims that have been 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 for Investment Purposes At End of Year
December 31, 1999
(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 ** $ 645,810
* Neurogen Corporation Unrestricted common stock, par value $.025 *** 304,128
* Participants Participant loans with interest
rates between 8.75% and 9.75%,
collaterized by participant
account balances *** 116,359
Fidelity Group Fidelity Contrafund *** 1,689,906
Harbor Fund Harbor International Fund *** 222,483
Janus Janus Worldwide Fund *** 178,902
Vanguard Group Vanguard/Primecap Fund *** 1,009,930
Harbor Fund Harbor Bond Fund *** 67,778
Vanguard Group Vanguard High Yield Corporate Fund *** 180,169
* Alliance Trust Company American Performance Treasury Fund *** 1,650,720
* Alliance Trust Company American Performance Cash Management Fund *** 5,080
* 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, 1999
Series of transactions exceeding 5% of current value of Plan assets as of January 1, 1999
(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 $ 298,007 N/A $ - $ -
(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 $ 298,007 $ 298,007 $ -
Neurogen Corporation 401(k) Retirement Plan
Supplemental Schedule
Schedule of Nonexempt Transactions
For the Year Ended December 31, 1999
(c)Description of transactions
(b)Relationship to Plan, including maturity date, rate
(a) Identity of employer or other of interest , collerateral, par (d) Purchase (e) Selling (f) Lease
party involved party-in-interest or maturity value price price rental
- --------------- -------------------------- ----------------------------------- ------------- ------------ ----------
Neurogen Corporation Plan sponsor January-June loan repayments for $ - $ - $ -
one Plan participant were deposited
into the Plan on June 30, 1999
(b) Relationship to Plan, (g) Expenses incurred (j) Net gain or
(a) Identity of employer or other in connection (h) Cost (i) Current value (loss) on each
party involved party-in-interest with transaction of asset of asset transaction
- --------------- -------------------------- ---------------------- --------- ----------------- -----------------
Neurogen Corporation Plan Sponsor $ - $ 1,347 $ 1,347 $ -
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 30, 2000 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 the Neurogen Corporation of our report
dated June 29, 2000 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 29, 2000