Exhibit 99.3
CryoGen, Inc.
Consolidated Balance Sheets
December 31, 2001 and September 30, 2002
<Table>
<Caption>
December 31, September 30,
2001 2002
----------------- -----------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 7,857,656 $ 1,802,792
Accounts receivable, net of allowance for doubtful accounts of
$60,000 and $49,828, respectively 496,154 693,081
Inventories, net 1,152,240 2,382,134
Other current assets 152,725 164,438
----------------- -----------------
Total current assets 9,658,775 5,042,445
Property and equipment, net 1,657,191 1,409,594
Intangible assets 458,635 410,600
Other non-current assets 26,300 56,170
----------------- -----------------
Total assets $ 11,800,901 $ 6,918,809
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current liabilities:
Accounts payable $ 661,899 $ 470,712
Accrued liabilities 1,689,385 1,686,887
Capital lease obligations, current portion 120,194 28,742
Bank loans -- 430,004
----------------- -----------------
Total current liabilities 2,471,478 2,616,345
Capital lease obligations, less current portion 14,470 --
Redeemable convertible preferred stock, no par value; 38,200,000
shares authorized, 35,437,749 shares issued and outstanding at
December 31, 2001 and September 30, 2002
Series D, E, and F 45,045,364 47,564,371
Shareholders' equity (deficit):
Convertible preferred stock, no par value; 7,614,286 shares authorized,
7,094,845 shares issued and outstanding at December 31, 2001 and September
30, 2002
Series A, B and C 13,500,797 13,500,797
Common stock, no par value; 63,000,000 shares authorized;
2,153,502 and 2,172,502 shares issued and outstanding at
December 31, 2001 and September 30, 2002, respectively 433,352 435,914
Accumulated comprehensive loss -- --
Accumulated deficit (49,664,560) (57,198,618)
----------------- -----------------
Total shareholders' equity (deficit) (35,730,411) (43,261,907)
----------------- -----------------
Total liabilities and shareholders' equity (deficit) $ 11,800,901 $ 6,918,809
================= =================
</Table>
See accompanying notes.
CryoGen, Inc.
Consolidated Statements of Operations
Nine Months Ended September 30, 2001 and 2002
<Table>
<Caption>
Nine Months Ended September 30,
2001 2002
---------------- ----------------
(unaudited)
Net sales $ 1,052,250 $ 2,047,927
Costs and expenses:
Cost of sales 3,499,086 442,260
Research and development 1,351,136 957,725
General and administrative 1,557,347 2,209,637
Sales and marketing, including depreciation of demonstration and
field capital equipment of $382,045 and $523,615 for the nine
months ended September 30, 2001 and 2002, respectively 4,129,190 3,497,791
---------------- ----------------
Total costs and expenses 10,536,759 7,107,413
---------------- ----------------
Operating loss (9,484,509) (5,059,486)
Interest and other (income) expense, net (33,779) 44,435
---------------- ----------------
Net loss (9,518,288) (5,015,051)
Accrued preferred stock dividends (2,057,932) (2,519,007)
---------------- ----------------
Net loss applicable to common shareholders $ (11,576,220) $ (7,534,058)
================ ================
Basic and diluted net loss per share (5.71) (3.57)
================ ================
Shares used to compute basic and diluted net loss per share 2,027,896 2,107,822
================ ================
</Table>
See accompanying notes.
CryoGen, Inc.
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2001 and 2002
<Table>
<Caption>
Nine Months Ended September 30,
2001 2002
---------------- ----------------
(unaudited)
OPERATING ACTIVITIES
Net loss $ (9,518,288) $ (5,015,051)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 614,859 832,525
Changes in operating assets and liabilities:
Accounts receivable, net (273,950) (196,927)
Inventories, net (452,598) (1,229,894)
Other current assets (76,577) (11,713)
Accounts payable 555,810 (191,187)
Accrued liabilities 502,402 (2,498)
Deferred rent (16,107) --
---------------- ----------------
Net cash used in operating activities (8,664,449) (5,814,745)
INVESTING ACTIVITIES
Additions to property and equipment (1,409,437) (536,893)
Other non-current assets (75,185) (29,870)
---------------- ----------------
Net cash used in investing activities (1,484,622) (566,763)
FINANCING ACTIVITIES
Proceeds from bank borrowings -- 430,004
Repayment of notes payable (918,936) --
Repayment of capital lease obligations (66,948) (105,922)
Net proceeds from an issuance of preferred stock 10,990,037 --
Proceeds from exercise of stock options, net of repurchase 62,865 2,562
---------------- ----------------
Net cash provided by financing activities 10,067,018 326,644
---------------- ----------------
Net decrease in cash and cash equivalents (82,053) (6,054,864)
Cash and cash equivalents at beginning of the period 1,503,240 7,857,656
---------------- ----------------
Cash and cash equivalents at end of the period $ 1,421,187 $ 1,802,792
================ ================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 87,513 $ 13,102
================ ================
Accrued dividend $ 2,057,932 $ 2,519,007
================ ================
</Table>
See accompanying notes.
CryoGen, Inc.
Notes to Consolidated Financial Statements
September 30, 2002
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
CryoGen, Inc. ("CryoGen" or the "Company") was incorporated in California on
December 29, 1993. The Company is a medical device company engaged in the
development, manufacture and sale of cryotherapy tools for gynecologic and other
indications. In April 2001, the Federal Drug Administration ("FDA") approved the
Company's Pre-Marketing Applications for its "Her Option(TM)" device and the
Company commenced sales and marketing of the device at that time. The Company's
primary customers are hospitals and physician offices in the United States.
The Company has entered into a merger agreement with American Medical Systems
("AMS") on December 13, 2002. The merger was completed on December 31, 2002 (see
note 5).
BASIS OF PRESENTATION
These consolidated financial statements include the accounts of CryoGen and its
wholly-owned European subsidiary located in France. All intercompany balances
and transactions have been eliminated in consolidation.
In the opinion of management, all adjustments, consisting of normal recurring
adjustments necessary to present the financial position, the results of
operations and the cash flows fairly, have been made. The results of operations
for the nine months are not necessarily indicative of the results for the full
fiscal year.
The accompanying consolidated financial statements have been prepared in
accordance with accounting principles general accepted in the United States for
interim financial statements and with instructions of Regulation S-X.
Accordingly, they do not include all information the disclosures required by
accounting principles generally accepted in the United States for complete
financial statements. The accompanying consolidated financial statements should
be read in conjunction with the audited financial statements and notes thereto
for the year ended December 31, 2001 included elsewhere herein.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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.
NET LOSS PER SHARE
The computations for basic and diluted net loss per share for the nine-months
ended September 30, 2001 and 2002 are as follows:
<Table>
<Caption>
NINE MONTHS ENDED SEPTEMBER 30,
2001 2002
---------------- ----------------
(UNAUDITED)
Numerator:
Net loss $ (9,516,288) $ (5,015,051)
Accrued preferred stock dividends (2,057,932) (2,519,007)
---------------- ----------------
Net loss applicable to common stockholders (11,576,220) (7,534,058)
================ ================
Denominator
Weighted average common shares 2,090,323 2,167,026
Weighted average restricted common shares subject to
repurchased (62,427) (59,203)
---------------- ----------------
Denominator for basic and diluted earnings per share 2,027,896 2,107,822
================ ================
Basic and diluted net loss per share $ (5.71) $ (3.57)
================ ================
</Table>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENTLY ISSUED ACCOUNTING STANDARDS
In October 2002, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. This
statement superceded SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of, and amends Accounting
Principles Board Statement No. 30, Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions ("APB 30"). SFAS No. 144 requires that long-lived assets
that are to be disposed of by sale be measured at the lower of book value or
fair value less costs to sell. SFAS No. 144 retains the fundamental provisions
of SFAS No. 121 for (a) recognition and measurement of the impairment of
long-lived assets to be held and used and (b) measurement of long-lived assets
to be disposed of by sale. This statement also retains APB 30's requirement that
companies report discontinued operations separately from continuing operations.
All provisions of SFAS No. 144 were effective for the Company on January 1,
2002. The adoption of SFAS No. 144 did not have an impact on the Company's
financial position or results of operations.
In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with
Exit or Disposal Activities. This statement supercedes Emerging Issue Task Force
(EITF) Issue No. 94-3, Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit and Activity (including Certain Costs Incurred
in a Restructuring). SFAS No. 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized when the liability is
incurred. Under EITF 94-3, a liability is recognized at the date an entity
commits to an exit plan. SFAS No. 146 also establishes that the liability should
initially be measured and recorded at fair value. The provisions of SFAS No. 146
will be effective for any exit and disposal activities initiated after December
31, 2002.
In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation - Transition and Disclosure - an amendment of FASB Statement No.
123. This statement amends SFAS No. 123, Accounting for Stock Based
Compensation, to provide alternative methods of voluntarily transitioning to the
fair value based method of accounting for stock-based employee compensation and
also provides additional disclosures about the method of accounting for
stock-based employee compensation. Amendments are effective for financial
statements for the Company beginning January 1, 2003. The Company has currently
chosen not to adopt the voluntary change to the fair value based method of
accounting for stock-based employee compensation. The Company does not believe
the adoption of such method pursuant to SFAS No. 148 will materially impact its
financial position or results of operations.
CryoGen, Inc.
Notes to Consolidated Financial Statements (continued)
2. BALANCE SHEET INFORMATION
INVENTORY
Inventories consist of the following:
<Table>
<Caption>
DECEMBER 31, SEPTEMBER 30,
2001 2002
--------------- ---------------
(UNAUDITED)
Raw materials $ 1,145,885 $ 1,558,439
Work-in-process 594,881 129,002
Finished goods 491,591 778,971
Inventory reserves (1,080,117) (84,278)
--------------- ---------------
$ 1,152,240 $ 2,382,134
=============== ===============
</Table>
3. BANK LOANS
In May 2002, the Company entered into a loan agreement (the "Loan Agreement")
with a bank for a $1,500,000 revolving line of credit. Borrowings under the line
of credit accrue interest at Prime Rate plus 1.5% (6.25% at September 30, 2002).
The Company is required to make monthly interest payments. The revolving line of
credit expires May 13, 2003, with any unpaid balance due upon expiration. The
outstanding balance on the line of credit was $360,000 at September 30, 2002.
The Loan Agreement also provided the Company with an equipment advance for up to
$250,000. Borrowings under the equipment advance bear interest at Prime Rate
plus 1.5% (6.25% at September 30, 2002). Interest payment is due monthly. There
is no principal payment until June 15, 2003, when outstanding advance balance
will be repaid in 36 equal monthly installments. The outstanding balance on the
equipment advance was $70,004 at September 30, 2002.
Substantially all of the Company's assets have been pledged as collateral.
The Company's bank loans are generally subject to financial and other
restrictive covenants. In accordance with the bank covenant, the bank loans were
repaid when the merger with AMS was completed.
CryoGen, Inc.
Notes to Consolidated Financial Statements (continued)
4. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY (DEFICIT)
In December 2002, the Company issued 3,787,030 shares of Series G preferred
stock (7,200,000 shares authorized) at $0.001 per share. Series G is
non-convertible and dividends are not required.
In the event of a sale of the Company (which occurred in the merger with AMS),
the holders of the Series G preferred stock would receive the first $1.5 million
from the initial net proceeds. The remaining initial net proceeds will be
distributed to the holders of the Series D, E and F preferred stock prior to and
in preference to any other distributions.
Any future earnout payments from AMS will be distributed first to the holders of
the Series D, E and F preferred stock to complete their liquidation preference.
After the full D, E and F preference is paid, the remaining funds will be
distributed to the Series A, B, and C preferred stock holders.
If there are any remaining funds after the full payment to satisfy the
liquidation preference of the Series A, B, C, D, E, F, and G preferred holders,
it will be paid to the holders of common shares and common equivalent in
proportion to their holdings.
5. SUBSEQUENT EVENT
The Company has entered into a merger agreement with American Medical Systems on
December 13, 2002 for an initial consideration of $40,000,000 subject to certain
purchase price adjustments. In addition, the Company's shareholders are entitled
to future earnout payment on a formula based on Net Product Revenues as defined
in the Merger Agreement less $40,000,000. The merger was consummated on December
30, 2002.