Exhibit 99.2
The Audited Financial Statements of Glyko Biomedical Ltd. as of and for the
Year Ended December 31, 2001.
Report of Independent Public Accountants*
To the Shareholders of Glyko Biomedical Ltd.:
We have audited the accompanying balance sheets of Glyko Biomedical Ltd. (a
Canadian company) as of December 31, 2001 and 2000 and the related statements of
operations, shareholders' equity and cash flows for the years ended December 31,
2001, 2000 and 1999. 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 in accordance with auditing standards generally accepted
in the United States. 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. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Glyko Biomedical Ltd. as of
December 31, 2001 and 2000, and the results of its operations and its cash flows
for the years ended December 31, 2001, 2000 and 1999 in conformity with
accounting principles generally accepted in the United States.
/s/ ARTHUR ANDERSEN LLP
San Francisco California
February 21, 2002
* This report is a copy of a previously issued Arthur Andersen LLP report and
this report has not been reissued by Arthur Andersen LLP.
GLYKO BIOMEDICAL LTD.
BALANCE SHEETS
(In U.S. dollars)
December 31, December 31,
2001 2000
--------------------- ---------------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 2,444,424 $ 408,133
Short-term investments - 1,397,217
Interest receivable - 29,876
-------------------- ---------------------
Total current assets 2,444,424 1,835,226
Investment in BioMarin Pharmaceutical Inc. 34,857,531 19,020,505
-------------------- ---------------------
Total assets $ 37,301,955 $ 20,855,731
===================== =====================
Liabilities and Shareholders' Equity
Current liabilities:
Accrued liabilities $ 461,327 $ 315,438
-------------------- ---------------------
Total current liabilities 461,327 315,438
--------------------- ---------------------
Shareholders' equity:
Common shares, no par value, unlimited shares
authorized, 34,352,823 shares issued and
outstanding at both December 31, 2001 and
December 31, 2000. 22,535,096 22,535,096
Additional paid-in capital 70,154,983 39,561,634
Common share warrants - 2,934
Note receivable from shareholder - (804,771)
Accumulated deficit (55,849,451) (40,754,600)
-------------------- ---------------------
Total shareholders' equity 36,840,628 20,540,293
-------------------- ---------------------
Total liabilities and shareholders' equity $ 37,301,955 $ 20,855,731
===================== =====================
The accompanying notes are an integral part of these statements.
Glyko Biomedical Ltd.
Statements of Operations for the Years Ended December 31, 2001, 2000 and 1999
(In U.S. dollars)
Year Ended December 31
2001 2000 1999
--------- ---------- ---------
Expenses:
General and administrative $ 462,022 $ 388,373 $ 199,302
--------- --------- ---------
Total expenses 462,022 388,373 199,302
--------- --------- ---------
Loss from operations (462,022) (388,373) (199,302)
Equity in loss of BioMarin
Pharmaceutical Inc. (14,678,250) (11,312,285) (9,999,581)
Interest income 45,421 65,317 159,352
--------- --------- ---------
Net loss $(15,094,851) $(11,635,341) $(10,039,531)
========= ========= =========
Net loss per common share,
basic and diluted $ (0.44) $ (0.34) $ (0.32)
========= ========= =========
Weighted average common shares
outstanding, basic and diluted 34,352,823 33,915,043 31,065,575
========== ========== ==========
The accompanying notes are an integral part of these statements.
Glyko Biomedical Ltd.
Statements of Stockholders' Equity for the Year Ended December 31, 2001
(In U.S. dollars)
Common Share Common Share Note Receivable Accumulated
Shares Amount Paid In Capital Warrants From Shareholder Deficit Total
------ ------ --------------- ------------ ---------------- ----------- -----
Balance at December 31, 1998 28,020,234 $ 17,963,167 $ 11,222,691 $ 547,285 $(721,971) $(19,079,728) $ 9,931,444
Net loss for the year - - - - - (10,039,531) (10,039,531)
Exercise of stock options 280,560 161,633 - - - - 161,633
Exercise of stock warrants 3,534,528 2,647,669 - (397,879) - - 2,249,790
Reclassification of interest on note receivable
from shareholder - - 27,600 - (27,600) - -
Additional paid-in capital resulting from the
sale of common stock by BioMarin Pharmaceutical
Inc. - - 26,814,190 - - - 26,814,190
---------- ------------ ------------ --------- ----------- --------------------------
Balance at December 31, 1999 31,835,322 $ 20,772,469 $ 38,064,481 $ 149,406 $ (749,571) $ (29,119,259)$ 29,117,526
========== ============ ============ ========= =========== ==========================
Net loss for the year - - - - - (11,635,341) (11,635,341)
Exercise of common share options 299,500 269,092 - - - - 269,092
Exercise of common share
warrants 2,218,001 1,493,535 17,609 (149,406) - - 1,361,738
Interest accrued on note receivable
from shareholder - - 55,200 - (52,266) - 2,934
Additional paid-in capital from the
sale of common stock by BioMarin
Pharmaceutical Inc. - - 1,424,344 - - - 1,424,344
---------- ------------------------ ---------- ----------- --------------------------
Balance at December 31, 2000 34,352,823 $ 22,535,096 $39,561,634 $ - $ (801,837) $ (40,754,600)$ 20,540,293
========== ============ =========== ========== =========== ==========================
Net loss for the year - - - (15,094,851) (15,094,851)
Interest accrued on note receivable from shareholder
and other - - 78,073 - (78,073) -
Repayment of note receivable from
shareholder - - - - 879,910 - 879,910
Additional paid-in capital from the
sale of common stock by BioMarin
Pharmaceutical Inc. - - 30,515,276 - - - 30,515,276
---------- ------------------------- ---------- --------- -------------- -----------
Balance at December 31, 2001 34,352,823 $ 22,535,096 $70,154,983 $ - $ - $ (55,849,451) $36,840,628
========== ============= =========== ========== ========= ============== ===========
The accompanying notes are in integral part of these statements
Glyko Biomedical Ltd.
Statements of Cash Flows for the Years Ended December 31, 2001, 2000 and 1999
(In U.S. dollars)
Year Ended December 31,
2001 2000 1999
---------------- --------------- --------------
Cash flows from operating activities:
Net loss $ (15,094,851) $ (11,635,341) $(10,039,531)
Adjustments to reconcile net loss to net cash
used in operating activities:
Equity in loss of BioMarin Pharmaceutical Inc. 14,678,250 11,312,285 9,999,581
Changes in assets and liabilities:
Interest receivable 29,876 (29,876) -
Accrued liabilities 145,889 (50,131) 15,461
---------------- --------------- --------------
Total adjustments 14,854,015 11,232,278 10,015,042
---------------- --------------- --------------
Net cash used in operating activities (240,836) (403,063) (24,489)
---------------- --------------- --------------
Cash flows from investing activities:
Investment in BioMarin Pharmaceutical Inc. - - (4,419,110)
Sale (Purchase) of short-term investments 1,397,217 (1,397,217) -
---------------- --------------- --------------
Net cash provided by (used in) investing activities 1,397,217 (1,397,217) (4,419,110)
---------------- --------------- --------------
Cash flows from financing activities:
Proceeds from exercise of common share options and
warrants - 1,633,765 2,350,423
Repayment of note receivable from shareholder 879,910 - 100,000
---------------- --------------- --------------
Net cash provided by financing activities 879,910 1,633,765 2,450,423
---------------- --------------- --------------
Net increase (decrease) in cash and cash equivalents 2,036,291 (166,515) (1,993,176)
Cash and cash equivalents, beginning of period 408,133 574,648 2,567,824
---------------- --------------- --------------
Cash and cash equivalents, end of period $ 2,444,424 $ 408,133 $ 574,648
================ =============== ==============
The accompanying notes are an integral part of these statements.
GLYKO BIOMEDICAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The Company and Description of the Business
Glyko Biomedical Ltd. (the Company or GBL) is a Canadian company, which was
established in 1992 to acquire all of the outstanding capital stock of Glyko,
Inc., a Delaware corporation. Since its inception in October 1990, Glyko, Inc.
engaged in research and development of new techniques to analyze and manipulate
carbohydrates for research, diagnostic and pharmaceutical purposes. Glyko, Inc.
developed a line of analytic instrumentation laboratory products that include an
imaging system, analysis software and chemical analysis kits.
In October 1996, GBL formed BioMarin Pharmaceutical Inc. (BioMarin), a Delaware
corporation in the development stage, to develop the Company's pharmaceutical
products. BioMarin began business on March 21, 1997 (inception) and subsequently
issued 1.5 million shares of common stock to GBL for $1.5 million. As
consideration for a certain license agreement dated June 1997, BioMarin issued
GBL 7 million shares of BioMarin common stock. Beginning in October 1997,
BioMarin raised capital from third parties. As of December 31, 1997, the Company
began recording its share of BioMarin's net loss utilizing the equity method of
accounting. On June 30, 1998, GBL made an additional $1 million investment in
BioMarin.
On October 7, 1998, GBL sold to BioMarin 100% of the outstanding capital stock
of Glyko, Inc. in exchange for 2,259,039 shares of BioMarin's common stock. In
addition, BioMarin agreed to assume options, previously issued to employees of
Glyko, Inc., to purchase up to 585,969 shares of GBL's common stock (exercisable
into 255,540 shares of BioMarin common stock) and BioMarin paid $500 in cash.
On April 13, 1999, the Company entered into a convertible note arrangement with
BioMarin in the amount of $4.3 million, as part of a $26 million convertible
note financing. This note plus accrued interest was converted into 441,911
shares of BioMarin common stock concurrent with BioMarin's initial public
offering on July 23, 1999.
In May 2001, BioMarin completed two private placements of its securities,
raising total net proceeds of approximately $42.5 million. On May 16, 2001,
BioMarin sold 4,763,712 shares of common stock at $9.45 per share and, for no
additional consideration, issued three-year warrants to purchase 714,554 shares
of common stock at an exercise price of $13.10 per share. On May 17, 2001 a fund
managed by Acqua Wellington purchased 105,821 shares of common stock and
received warrants to purchase 15,873 shares of common stock on the same price
and terms as the May 16, 2001 transaction.
In August 2001, BioMarin signed an amended agreement with Acqua Wellington North
American Equities Fund Ltd. (Acqua Wellington) for an equity investment in
BioMarin. The agreement allows for the purchase of up to $27.7 million
(approximately 2,500,000 shares). Under the terms of the agreement, BioMarin
will have the option to request that Acqua Wellington invest in BioMarin through
sales of registered common stock at a small discount to market price. The
maximum amount that BioMarin may request to be bought in any one month is
dependent upon the market price of the stock (or an amount that can be mutually
agreed-upon by both parties) and is referred to as the "Draw Down Amount."
Subject to certain conditions, Acqua Wellington is obligated to purchase this
amount if requested to do so by BioMarin. In addition, BioMarin may, at its
discretion, grant a "Call Option" to Acqua Wellington for an additional
investment in an amount up to the "Draw Down Amount" which Acqua Wellington may
or may not choose to exercise. During 2001, Acqua Wellington purchased 1,344,194
shares for $13.5 million ($13.2 million net of issuance costs). Under this
agreement, Acqua Wellington may also purchase stock and receive similar terms of
any other equity financing by the BioMarin.
On October 31, 2001, BioMarin purchased from IBEX Technologies Inc. (TSE: IBT)
and its subsidiaries the intellectual property and other assets associated with
the IBEX therapeutic enzyme drug products (including NeutralaseTM and Phenylase)
for $10.4 million, consisting of $2 million in cash and $8.4 million in BioMarin
common stock at $10.218 per share (814,647 shares). The purchase also includes
up to approximately $9.5 million in contingency payments upon regulatory
approval of Neutralase and Phenylase, provided that approval occurs within five
years. The transaction was accounted for using the purchase method of
accounting. All of the purchase price plus related expenses are reflected on
BioMarin's consolidated statements of operations as in-process research and
development expenses totaling $11.6 million.
GLYKO BIOMEDICAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On December 13, 2001, BioMarin completed a public offering of its common stock.
In the offering, BioMarin sold 8,050,000 shares, including 1,050,000 shares to
cover over-allotments, at a price to the public of $12.00 per share, or a total
offering price of $96.6 million. The net proceeds to BioMarin were approximately
$90.4 million.
In February 2002, BioMarin decided to close the carbohydrate analytical business
portion of Glyko, Inc., which provided all of Glyko, Inc.'s revenues.
Accordingly, BioMarin recorded a Glyko, Inc. closure expense of $7.9 million in
the 2001 consolidated statements of operations. This charge consisted primarily
of an impairment reserve against the unamortized balance of goodwill and other
intangible assets related to the acquisition of Glyko, Inc. The majority of the
Glyko, Inc. employees will be incorporated into the BioMarin business and such
employees will continue to provide necessary analytic and diagnostic support to
BioMarin's therapeutic products
As a result of BioMarin's IPO, concurrent with the conversion of the notes from
GBL and other noteholders, the sale by BioMarin of common stock to Acqua
Wellington, the sales by BioMarin of common stock in the private placements and
a follow-on offering, the exercise of BioMarin stock options and warrants by
third parties, and the purchase of IBEX Technologies intellectual property and
other assets associated with the IBEX therapeutic enzyme drug products, GBL's
ownership of BioMarin's outstanding stock on December 31, 2001 was 21.7%.
Since our inception, we have incurred a cumulative deficit of $55.8 million and
we expect to continue to incur losses due to our share of BioMarin's net loss
resulting from the ongoing research and development of BioMarin's pharmaceutical
product candidates through the second quarter of 2002 (up until the proposed
purchase of us by BioMarin discussed in Footnote 8). Accordingly, without
further investment in other companies or technologies, management believes that
GBL has sufficient cash to sustain planned operations for the foreseeable
future.
2. Summary of Significant Accounting Policies
The accompanying financial statements and related footnotes have been prepared
in conformity with U.S. generally accepted accounting principles using U.S.
dollars as substantially all of the Company's operations were located in the
United States. The financial statements include the accounts and operations of
the Company and Glyko, Inc for the period from January 1, 1998 through October
7, 1998, the date of the sale of Glyko, Inc. All significant intercompany
accounts and transactions have been eliminated. BioMarin's consolidated results
of operations have been reported in the accompanying financial statements based
on the equity method of accounting. The results of operations of BioMarin have
been reported in the Company's financial statements for the years ended December
31, 2001, 2000 and 1999, based on the equity method of accounting. Subsequent to
October 7, 1998, the results of operations of Glyko, Inc. have been consolidated
into the results of operations of BioMarin.
Use of Estimates:
The preparation of the Company's financial statements in conformity with U.S.
generally accepted accounting principles requires management to make certain
estimates and assumptions that effect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the dates
of the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates.
Cash and Cash Equivalents:
Cash and cash equivalents consist of amounts held with banks and short-term
investments with original maturities of less than three months when purchased.
Short-term Investments:
GBL records its investments as held-to-maturity. Short-term investments were
recorded at cost at December 31, 2000, which approximated fair market value.
These securities were comprised mainly of A1/P1 grade commercial paper. As of
December 31, 2001, there are no short-term investments.
GLYKO BIOMEDICAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Sale of Glyko, Inc. and Investment in BioMarin Pharmaceutical Inc.:
BioMarin acquired Glyko, Inc. from GBL through the exchange of BioMarin stock
for Glyko, Inc. stock and accounted for the acquisition based upon the fair
market value of the BioMarin stock issued. In consolidating Glyko, Inc.,
BioMarin recorded intangible assets, including goodwill, to the extent that the
fair market value of the stock issued exceeded the fair market value of the
tangible assets of Glyko, Inc. acquired. However, as GBL exchanged one
investment for another, it recorded the stock of BioMarin received at the
historical cost basis of its investment in Glyko. GBL accounts for its
investment in BioMarin using the equity method of accounting. However, GBL does
not record its share of the losses recorded by BioMarin related to the
amortization of intangible assets recorded in connection with the acquisition of
Glyko. For the years ended December 31, 2000 and 2001, BioMarin recoded a charge
to operations for the amortization of goodwill and other intangible assets of
$1.6 million and $1.2 million, respectively. In February 2002, BioMarin decided
to close the carbohydrate analytical business portion of Glyko, Inc., which
provided all of Glyko, Inc.'s revenues. Accordingly, BioMarin recorded a Glyko,
Inc. closure expense of $7.9 million in the 2001 consolidated statements of
operations. This charge consisted primarily of an impairment reserve against the
unamortized balance of goodwill and other intangible assets related to the
acquisition of Glyko, Inc.
In addition, to the extent that the issuance of stock by BioMarin to third
parties results in a change in the Company's ownership interest in the net
assets of BioMarin, the Company reflects this change in its paid-in capital and
its investment in BioMarin. The Company recorded an increase to its additional
paid-in capital of approximately $30.6 million and $1.4 million as a result of
its share in BioMarin funds raised by third parties for the years ended December
31, 2001 and 2000, respectively.
Foreign Exchange:
As substantially all of the Company's operations are located in the United
States, the Company has adopted the U.S. dollar as its functional currency. In
accordance with Statement of Financial Accounting Standard No. 52, "Foreign
Currency Translation", any assets and liabilities denominated in foreign
currency are translated into U.S. dollars at the current rate of exchange
existing at year end and revenues and expenses are translated at the average
monthly exchange rates. Transaction gains and losses included in the statements
of operations are not material.
Net Loss per Share:
Potentially dilutive securities outstanding at December 31, 2001, 2000 and 1999,
respectively, include options for the purchase of 45,000, 7,750 and 291,000
shares of common stock and warrants for the purchase of zero, zero and 2.2
million shares of common stock. These securities were not considered in the
computation of dilutive loss per share because their effect would be
anti-dilutive for the years ended December 31, 2001, 2000 and 1999.
3. New Accounting Pronouncements
SFAS 141 and 142:
On June 29, 2001, the Financial Accounting Standards Board (FASB) approved for
issuance Statement of Financial Accounting Standards (SFAS) No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Intangible Assets. Major provisions
of these Statements are as follows: all business combinations initiated after
June 30, 2001 must use the purchase method of accounting; the pooling of
interests method of accounting is prohibited except for transactions initiated
before July 1, 2001; intangible assets acquired in a business combination must
be recorded separately from goodwill if they arise from contractual or other
legal rights or are separable from the acquired entity and can be sold,
transferred, licensed, rented or exchanged, either individually or as part of a
related contract, asset or liability; all acquired goodwill must be assigned to
reporting units for purposes of impairment testing and segment reporting;
effective January 1, 2002, goodwill and intangible assets with indefinite lives
will not be amortized but will be tested for impairment annually using a fair
value approach, except in certain circumstances, and whenever there is an
impairment indicator; other intangible assets will continue to be valued and
amortized over their estimated lives; in-process research and development
acquired in business combinations will continue to be written off immediately;
goodwill arising between June 29, 2001 and December 31, 2001 will not be subject
to amortization. Management is currently assessing the impact of the new
standards. The adoption of SFAS No. 142 in January 2002 will not have a material
impact on the Company's financial statements.
SFAS 143:
In June 2001, the FASB approved for issuance SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143 requires that the fair value of a
liability for an asset retirement obligation be recognized in the period in
which it is incurred and that the associated asset retirement costs be
capitalized as part of the carrying value of the related long-lived asset. SFAS
No. 143 will be effective January 1, 2002 for GBL. Management does not expect
this standard to have a material impact on GBL's financial position or results
of operations.
GLYKO BIOMEDICAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SFAS 144:
In August 2001, the FASB approved for issuance SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 broadens the
presentation of discontinued operations to include more transactions and
eliminates the need to accrue for future operating losses. Additionally, SFAS
No. 144 prohibits the retroactive classification of assets as held for sale and
requires revisions to the depreciable lives of long-lived assets to be
abandoned. SFAS No. 144 will be effective January 1, 2002 for GBL. Management
does not expect this standard to have a material impact on GBL's financial
position or results of operations. During the year ended December 31, 1999, the
Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information". The Company concluded that it has only one operating
segment.
4. Income Taxes
In connection with the sale of Glyko, Inc., the U.S. federal and state net tax
operating loss carryforwards and the related valuation allowances were
consolidated into the financial statements of BioMarin.
At December 31, 2001, the Company has net operating loss carryforwards for
Canadian income tax purposes of approximately $1.7 million, which began to
expire in 2000. A valuation allowance is placed on the net deferred tax assets
to reduce them to an assumed net realizable value of zero.
5. Note Receivable
In November 1998, per the terms of the BioMarin acquisition of Glyko, Inc., GBL
loaned $712,261 to an officer of the Company to exercise expiring stock options.
The loan matured in May 2001 and the note plus accrued interest was repaid in
the third quarter of 2001.
6. Common Share Option Plan
The Company has a common share option plan (the Plan) under which options to
purchase common stock may be granted by the Board of Directors to directors,
officers, consultants and key employees at not less than fair market value, less
any permissible discounts, on the date of grant. . Options are exercisable over
a number of years specified at the time of the grant, which cannot exceed ten
years. The maximum aggregate number of shares that may be granted and sold under
the Plan is 3 million shares.
The Company accounts for the Plan such that no compensation cost has been
recognized, except for options granted to consultants, because, under the Option
Plan, the option exercise price equals the market value of stock on the date of
grant. In general, the Plan options vest over 48 months and all options expire
after 5 years or 90 days after employee termination.
GLYKO BIOMEDICAL LTD.
NOTES TO FINANCIAL STATEMENTS
Had compensation cost for the Plan been determined consistent with FASB
Statement No. 123, the Company's net loss would have been increased to the
following pro forma amounts:
2001 2000 1999
---- ---- ----
Net loss As reported $(15,094,851) $(11,635,341) $(10,039,531)
Pro forma (15,264,594)
(11,829,182) (10,324,435)
Net loss per As reported $(0.44) $(0.34) $(0.32)
common share Pro forma (0.44) (0.35) (0.33)
The fair value of each option granted is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 2001 and 2000, respectively: risk-free weighted
average interest rates of 4.9% and 5.8%; expected dividend yield of zero
percent; expected life of 4 years for the Plans' options; expected volatility of
78% and 193%.
Because the Statement 123 method of accounting has not been applied to options
granted prior to January 1, 1995, the resulting pro forma compensation cost may
not be representative of that to be expected in future years.
A summary of the status of the Company's Plan at December 31, 2001 and 2000 and
changes during the years then ended is presented in the table and narrative
below:
2001 2000
Shares Wtd. Avg. ex Shares Wtd. Avg. ex
price (1) price
---------------- ---------------- ---------------- --------------
Outstanding beginning
of year 7,750 Cdn.$5.85 291,000 Cdn.$1.24
Granted 45,000 Cdn.$4.50 30,000 Cdn.$5.70
Exercised Nil (299,500) Cdn.$1.37
Canceled (7,750) Cdn.$5.85 (13,750) Cdn.$5.70
---------------- ----------------
Outstanding at end of
Year 45,000 Cdn.$4.50 7,750 Cdn.$5.85
================ ================
================ ================
Exercisable at end of year 45,000 7,750
================ ================
================ ================
(1) The US$ equivalent of Canadian $1.00 at December 31, 2001 was approximately
$0.6287.
There are 857,324 options available for grant under the plan at December 31,
2001. The average remaining contractual life of the options outstanding at
December 31, 2001 is 3 years.
GLYKO BIOMEDICAL LTD.
NOTES TO FINANCIAL STATEMENTS
7. Related Party Transactions
For the year ended December 31, 2001 and 2000, we paid legal fees to Blake,
Cassels and Graydon LLP in which two of our directors, Mr. Kolada and Mr.
Trossman are partners. During the years ended December 31, 2001 and 2000, we
incurred expenses of $248,483 and $142,208, respectively, payable to Blake,
Cassels and Graydon LLP, relating to general corporate services and, with
respect to legal fees paid for the year ended December 31, 2001, expenses
incurred also related to the transaction with BioMarin that has been discussed
herein.
Since October 8, 1998, we have agreed to pay BioMarin a monthly management and
reporting fee for its services to us primarily relating to management,
accounting, finance and government reporting. BioMarin had accrued receivables
relating to these services of zero and $9,000 at December 31, 2001 and 2000,
respectively.
Mr. Sager is entitled to receive Cdn.$1,500.00 per month in connection with fees
and expenses incurred as the Company's President and Chief Executive Officer,
which entitlement commenced in June 2000. Mr. Sager received a lump sum
pre-payment of approximately Cdn.$42,300 in late 2000 for these fees and
expenses. As a result, as of February 2002, Mr. Sager has an outstanding prepaid
balance of Cdn.$10,800.
8. Subsequent Events (unaudited)
In December 2001, BioMarin signed a definitive agreement with Synapse
Technologies Inc. (a privately held Canadian company) to acquire all of its
outstanding capital stock for approximately $10.2 million in BioMarin common
stock plus future contingent milestone payments totaling $6 million payable in
cash or common stock at BioMarin's discretion. BioMarin will issue approximately
885,000 shares of common stock for the purchase. The acquisition will be
recorded upon closing in the first quarter of 2002 using the purchase method of
accounting. All of the purchase price along with related expenses will be
expensed as in-process research and development costs.
On February 7, 2002, we signed a definitive agreement with BioMarin to sell all
of our outstanding capital stock in exchange for approximately 11.4 million
shares of freely tradable BioMarin's common stock. There will be no net effect
to BioMarin's outstanding common stock, as BioMarin plans to retire the existing
shares of its restricted common stock currently held by us upon closing. If the
proposed purchase by BioMarin is approved by stockholders of BioMarin and our
shareholders and relevant regulatory authorities, we will become a wholly-owned
indirect subsidiary of BioMarin and will concurrently repatriate to British
Columbia as a private company with no operations.
9. Quarterly Financial Data (unaudited)
The Company's quarterly operating results have fluctuated in the past and may
continue to do so in the future as a result of a number of factors including,
but not limited to, our share of BioMarin's net losses, which could fluctuate
due to the completion of development projects and variations in levels of
production and our ownership share of BioMarin due to BioMarin's sale of common
stock in the future.
The Company's common shares have been traded on the Toronto Stock Exchange since
1992. There were 112 common shareholders of record at December 31, 2001. No
dividends were paid for the years ended December 31, 2001 and, 2000.
Quarter Ended
------------------------------------------------------------------
March 31, June 30, September 30, December 31,
2001 --------- -------- ------------- ------------
Total revenue $ - $ - $ - $ -
Loss from operations (70,335) (89,074) (158,208) (144,405)
Net loss (2,865,226) (3,154,647) (2,995,952) (6,079,026)
Net loss per share, basic and diluted $ (0.08) $(0.09) $(0.09) $(0.18)
Common share price per share:
High $ 5.70 $ 6.45 $ 7.00 $ 7.00
Low $ 3.80 $ 3.85 $ 3.75 $ 3.75
Quarter Ended
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2000 March 31, June 30, September 30, December 31,
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Total revenue $ - $ - $ - $ -
Loss from operations (52,605) (80,226) (150,500) (105,002)
Net loss (3,736,387) (2,246,263) (2,498,602) (3,154,089)
Net loss per share, basic and diluted $ (0.11) $ (0.07) $ (0.07) $ (0.09)
Common share price per share:
High $ 13.55 $ 9.75 $ 9.00 $ 7.90
Low $ 5.30 $ 6.80 $ 7.00 $ 3.75