EXHIBIT 99.2
INOVIO AS
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
(in Norwegian Kroner)
[PRICEWATERHOUSECOOPERS LOGO]
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of Inovio AS
In our opinion, the accompanying balance sheets and the related income
statements and cash flow statements present fairly, in all material respects,
the financial position of Inovio AS at December 31, 2004 and 2003, and the
results of its operations and its cash flows for the years then ended in
conformity with accounting principles generally accepted in Norway. These
financial statements are the responsibility of the Company'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. Those
standards 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.
/s/ PricewaterhouseCoopers AS
PricewaterhouseCoopers AS
Oslo, Norway
April 8, 2005
INOVIO AS
FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
BALANCE SHEET 31.12 (NOK) NOTE 2004 2003
- -------------------------------------- -------- --------- ------------
ASSETS
Fixed assets:
INTANGIBLE FIXED ASSETS:
Intellectual property rights 1 113,160 249,663
TANGIBLE FIXED ASSETS:
Machinery and equipment 1 521,038 687,646
--------- ------------
TOTAL FIXED ASSETS 634,198 937,309
--------- ------------
CURRENT ASSETS:
RECEIVABLES:
Accounts receivable 154,411 8,680
Other short-term receivables 9 1,151,086 1,235,866
FINANCIAL CURRENT ASSETS:
Cash and cash equivalents 7 5,470,578 10,885,112
--------- ------------
TOTAL CURRENT ASSETS 6,776,075 12,129,658
--------- ------------
TOTAL ASSETS 7,410,273 13,066,967
========= ============
EQUITY AND LIABILITIES
EQUITY:
PAID-IN CAPITAL:
Share capital 2 516,260 516,260
Own shares (3,800) (3,800)
Share premium reserve 5 4,324,695 11,098,433
--------- ------------
TOTAL EQUITY: 4,837,155 11,610,893
--------- ------------
LIABILITIES:
OTHER LONG-TERM LIABILITIES:
Other long-term liabilities 10 69,191 --
--------- ------------
TOTAL LONG-TERM LIABILITIES 69,191 --
--------- ------------
CURRENT LIABILITIES:
Accounts payable 355,921 507,730
VAT, social security costs, etc. 270,699 345,629
Other current liabilities 1,877,307 602,715
--------- ------------
TOTAL CURRENT LIABILITIES 2,503,927 1,456,074
--------- ------------
TOTAL LIABILITIES 2,573,118 1,456,074
--------- ------------
TOTAL EQUITY AND LIABILITIES 7,410,273 13,066,967
========= ============
The accompanying notes are an integral part of these financial statements.
INOVIO AS
FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
INCOME STATEMENT 01.01 - 31.12 (NOK) NOTE 2004 2003
- --------------------------------------- ------ ----------- -----------
OPERATING REVENUES:
Sales revenues 1,768,461 580,634
----------- -----------
OPERATING EXPENSES:
Payroll and related costs 3 3,199,253 2,726,171
Depreciation 1 303,108 303,108
Other operating expenses 6,493,416 4,585,360
R&D support 9 (1,305,000) (1,444,851)
----------- -----------
Total operating expenses 8,690,777 6,169,788
----------- -----------
OPERATING INCOME (LOSS) (6,922,316) (5,589,154)
----------- -----------
FINANCIAL ITEMS:
Other interest income 167,519 521,782
Other financial income 894 2,537
Other interest expenses (8,048) (28,067)
Other financial expenses (11,787) (9,544)
----------- -----------
Net financial items 148,578 486,708
----------- -----------
INCOME (LOSS) BEFORE TAX (6,773,738) (5,102,446)
Income tax expense 4 -- --
----------- -----------
NET INCOME (LOSS) (6,773,738) (5,102,446)
=========== ===========
DISTRIBUTION OF PROFIT AND FUNDS:
Share premium account 5 (6,773,738) (5,102,446)
TOTAL DISTRIBUTION OF PROFIT AND FUNDS (6,773,738) (5,102,446)
The accompanying notes are an integral part of these financial statements.
INOVIO AS
FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
CASH FLOW STATEMENT 01.01 - 31.12 (NOK) 2004 2003
- -------------------------------------------------- ----------- -----------
CASH FLOW FROM OPERATIONS:
Net loss (6,773,738) (5,102,446)
Depreciation and amortization 303,108 303,108
Change in trade debtors (145,731) (8,680)
Change in trade creditors (151,809) 229,675
Changes in other working capital amounts 1,284,445 (180,325)
----------- -----------
NET CASH FLOW USED IN OPERATIONS (5,483,725) (4,758,668)
----------- -----------
CASH FLOW FROM FINANCING:
Proceeds from long term loans 69,191 (4,000,000)
New equity received -- 18,181,030
----------- -----------
NET CASH FLOW PROVIDED BY FINANCING 69,191 14,181,030
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (5,414,534) 9,422,362
Cash and cash equivalents at the beginning of the
period 10,885,112 1,462,750
----------- -----------
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 5,470,578 10,885,112
=========== ===========
The accompanying notes are an integral part of these financial statements.
INOVIO AS
NOTES TO THE ACCOUNTS 2004 (NOK)
- --------------------------------------------------------------------------------
DESCRIPTION OF THE COMPANY
Inovio AS (the "Company") is a privately owned biotech company with delivery
technology for gene therapy and DNA vaccines. Its headquarters are in Oslo,
Norway with licensing and business development operations in the United States
of America.
The Company offers technologies for the delivery of genetic materials and other
bio-therapeutics to mammalian skeletal muscles in vivo (within the body).
ACCOUNTING PRINCIPLES
The annual accounts are based on the Norwegian Accounting Act and Norwegian
generally accepted accounting principles (NGAAP) for small companies.
ESTIMATES
The preparation of financial statements in accordance with generally accepted
accounting principles requires that management make estimates and assumptions
affecting 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.
OPERATING REVENUES
Revenues are recognized when earned, which normally is the time of delivery of
services. The Company licenses its proprietary gene delivery technology for use
in testing gene-based vaccines and medicines. Revenues from licenses are
recognized ratably over the period of the license. The Company also performs
research and development to further enhance its technology for new vaccines and
medicines being tested by partners. Revenues from research and development
projects are recognized in proportion to the estimated total costs to be
incurred on the project. Costs are recognized in the same period as the
corresponding revenues are recognized.
SHORT-TERM ASSETS/CURRENT LIABILITIES
Short-term assets and current liabilities comprise items due within one year
after the balance sheet date. Short-term assets are valued at the lower of
historical cost and the assessed fair market value.
FIXED ASSETS
Fixed assets comprise assets meant for long-term ownership and use. Fixed assets
are valued at historical cost. Fixed assets are capitalized and depreciated over
their economical useful life. Fixed assets are written down to their fair market
value in cases of impairment that are not expected to be temporary. Write-downs
are reversed when the basis for the impairment is no longer valid. The Company
has not been required to recognize any impairments.
TAXES
Income taxes comprise corporate taxes payable and deferred taxes. Deferred taxes
are calculated on the basis of temporary differences between accounting and
taxable balance sheet values. Future tax benefits are recognized to the extent
that realization of such benefits is more likely than not.
NOTE 1 INTELLECTUAL PROPERTY RIGHTS/FIXED ASSETS
TYPE PATENTS MACHINERY IT EQUIPMENT TOTAL
- ----------------------------- ---------- ---------- ------------ ----------
Total historical cost as of 01/01/04 682,500 1,013,971 73,081 1,769,552
New investments -- -- -- --
Divestitures -- -- -- --
---------- ---------- ---------- ----------
Total historical cost as of 01/01/04 682,500 1,013,971 73,081 1,769,552
Accumulated depreciation and amortization (569,340) (518,115) (47,899) (1,135,354)
---------- ---------- ---------- ----------
Book value 31/12/04 113,160 495,856 25,182 634,198
========== ========== ========== ==========
2004 depreciation 136,500 151,992 14,616 303,108
---------- ---------- ---------- ----------
Economic useful life 5 yrs 8 yrs/3 yrs 5 yrs
NOTE 2 NUMBER OF SHARES, SHAREHOLDERS, ETC.
SHAREHOLDER SHARES SHARE OF OWNERSHIP RELATED PARTIES
- ------------------ -------- -------------------- --------------------------------
KS Teknoinvest VII 138,630 26.9% Andreas Mollatt, Chairman
Iacob Mathiesen 99,000 19.2% Chief Executive Officer
Terje Lomo 87,500 16.9%
Ojada AS 70,963 13.7%
AS Selvaag Invest 66,667 12.9% Jens Petter Falck, Board member
Inovio AS 3,800 0.7%
Allegro AS 1,000 0.2% Erling Lind, Board member
----------
90.5%
==========
Except for Inovio AS and Allegro AS, information regarding shareholders with
less than 1% ownership share is not disclosed. Allegro AS is 100% owned by Board
member, Erling Lind. Andreas Mollatt is employed at Teknoinvest Management AS,
which manages the investments of Teknoinvest VII. Jens Petter Falck is a partner
at Selvaag Venture Capital. All shares have one voting right. The articles of
the Company do not contain any other clauses regarding voting rights.
Inovio AS has issued 124,297 warrants at a strike price of 90 NOK/share. The
warrants were to mature on January 31, 2005, and were in accordance with the
Board's power of attorney given by the General Assembly on January 31, 2003.
Warrants were distributed as follows:
KS Teknoinvest VII 35,482
Ojada AS 35,482
AS Selvaag Invest 33,333
Lagopus AS 3,333
Wingana AS 16,667
----------
TOTAL WARRANTS 124,297
==========
All warrants have, subsequent to December 31, 2004, been cancelled as a result
of the acquisition of Inovio AS on January 25, 2005 by Genetronics Biomedical
Corporation.
NOTE 3 SALARIES, EMPLOYEES, ETC.
PAYROLL AND RELATED COSTS 2004 2003
---------- ---------
Salary 2,615,982 2,238,901
Employer's tax 373,493 376,323
Other salary-related expenses 209,778 110,947
---------- ----------
TOTAL 3,199,253 2,726,171
========== ==========
The company had six employees at the end of 2004. In 2004, NOK 216,582 was
recognized in fees paid to the Company's board members. Fees to the Company's
auditor were NOK 18,200, of which NOK 4,200 related to consulting services.
Salary paid in 2004 to the Company's Chief Executive Officer was NOK 608,384.
NOTE 4 TAX EXPENSE
DEFERRED TAX 2004 2003
----------- -----------
Positive differences 23,484 62,350
Negative differences 23,424,235 15,883,156
Basis for tax loss carryforward (23,400,751) (15,820,806)
28% deferred tax liability 6,576 17,458
28% of tax loss carry forward (deferred tax
assets) 6,558,786 4,447,284
The Company has chosen not to include the tax loss carryforward benefit as an
asset in the balance sheet, as it is more likely than not that these benefits
will not be realized.
NOTE 5 EQUITY
SHARE PREMIUM
SHARE CAPITAL OWN SHARES RESERVE TOTAL
------------- ----------- ------------- ----------
EQUITY JANUARY 1 516,260 (3,800) 11,098,433 11,610,893
Distribution of profit
and funds -- -- (6,773,738) (6,773,738)
----------- ----------- ----------- ---------
EQUITY DECEMBER 31 516,260 (3,800) 4,324,695 4,837,155
=========== =========== =========== =========
NOTE 6 SUBSIDIARY
The company has a subsidiary in the United States of America, Inovio Inc. The
subsidiary does not have any share capital nor any employees.
NOTE 7 BANK DEPOSITS
2004 2003
----------- ----------
Bank deposits 5,470,578 10,885,112
Of which are restricted bank deposits related to
employees tax withholdings 156,836 191,637
NOTE 8 RELATED PARTIES
The Company has hired the law firm Wiersholm, Melbye & Bech AS. Board Director,
Erling Lind, is a partner in this law firm. Total fees to the law firm in 2004
were NOK 209,387 (NOK 309,672 in 2003).
NOTE 9 "SKATTEFUNN"/GRANTS
The Company recognizes government grants as an offset to operating expenses when
those amounts are realizable. Government grants are realizable when the amounts
have been approved by the government entity and the related costs have been
incurred.
The Company has received approval from the Norwegian Research Counsel for a
research and development ("R&D") project under the "Skattefunn" program. The
project was approved from 2002 through the end of 2004. The approval provided
the Company with the opportunity to receive a tax credit of NOK 800,000 per year
for costs incurred from internal R&D activities. In addition, the Company may
receive a tax credit for R&D services purchased from external parties. The
company has cooperated with a Swedish company on the development of the puls
generator. The Company has applied for approval of this company as an external
R&D institution under the "Skattefunn" program, which may come into effect in
2005 at the earliest.
Tax credits under the "Skattefunn" program are not contingent upon generating
taxable income. The Company received the following grants in 2004:
Skattefunn 805,000
Medcap 500,000
-----------
Total 1,305,000
===========
NOTE 10 LONG TERM LIABILITIES
The Company has been granted a loan from NOPEF (Nordic Project Fund) of up to
EUR 25,000. In 2004, the Company drew EUR 8,440 (NOK 69,191) on this loan. The
loan is not bearing any interest as long as the Company complies with NOPEF's
standard terms of such loan agreement. The loan is expected to be converted to a
grant at the end of the project funded by NOPEF. In the event that the Company
should fail to comply with the terms of the loan agreement, NOPEF may call the
loan due for immediate repayment. In such event, NOPEF will charge interest from
the date the loan was paid out to the Company until the date of repayment, and
the interest rate will be the Norwegian Interbank Official Rate (NIBOR) on the
day of the breach of the contract plus 2%.
NOTE 11 SUBSEQUENT EVENT
Subsequent to December 31, 2004, the Company was acquired 100% by Genetronics
Biomedical Corporation, an American corporation. All warrants of the Company,
ref note 2, have been terminated as a result of the acquisition. On March 31,
2005, Genetronics Biomedical Corporation changed its corporate name to "Inovio
Biomedical Corporation."
NOTE 12 UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
There are no significant differences in net income (loss) or shareholders'
equity between Norwegian generally accepted accounting principles and United
States generally accepted accounting principles when applied to the financial
statements of Inovio AS.