Exhibit 99.3
The Unaudited Financial Statements of Glyko Biomedical Ltd. as of and for the
Six Month Period Ended June 30, 2002.
GLYKO BIOMEDICAL LTD.
BALANCE SHEETS
(In U.S. dollars)
June 30, December 31,
2002 2001
------------------------- -------------------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 1,880,326 $ 2,444,424
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Total current assets 1,880,326 2,444,424
Investment in BioMarin Pharmaceutical Inc. 28,126,058 34,857,531
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Total assets $ 30,006,384 $ 37,301,955
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Liabilities and Shareholders' Equity
Current liabilities:
Accrued liabilities $ 1,035,792 $ 461,327
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Total current liabilities 1,035,792 461,327
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Shareholders' equity:
Common shares, no par value, unlimited
shares authorized, 34,352,823 shares
issued and outstanding at both June 30, 2002
and December 31, 2001.
22,535,096 22,535,096
Additional paid-in capital 72,245,219 70,154,983
Accumulated deficit (65,809,723) (55,849,451)
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Total shareholders' equity 28,970,592 36,840,628
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Total liabilities and shareholders' equity $ 30,006,384 $ 37,301,955
========================= =========================
The accompanying notes are an integral part of these statements.
GLYKO BIOMEDICAL LTD.
STATEMENTS OF OPERATIONS
(In U.S. dollars, unaudited)
Three Months Ended June 30, Six Months Ended June 30,
---------------------------------------- ------------------------------------------
2002 2001 2002 2001
--------------------- ------------------ --------------------- --------------------
Expenses:
General and administrative $ 844,789 $ 89,074 $ 1,139,903 $ 159,409
--------------------- ------------------ --------------------- --------------------
Total expenses 844,789 89,074 1,139,903 159,409
--------------------- ------------------ --------------------- --------------------
Loss from operations (844,789) (89,074) (1,139,903) (159,409)
Equity in loss of BioMarin Pharmaceutical Inc. (3,066,381) (3,099,785) (8,821,750) (5,914,838)
Interest income 695 34,212 1,381 54,374
--------------------- ------------------ --------------------- --------------------
Net loss $ (3,910,475) $ (3,154,647) $ (9,960,272) $ (6,019,873)
===================== ================== ===================== ====================
Net loss per common share, basic and diluted $ (0.11) $ (0.09) $ (0.29) $ (0.18)
===================== ================== ===================== ====================
Common shares outstanding,
basic and diluted 34,352,823 34,352,823 34,352,823 34,352,823
===================== ================== ===================== ====================
The accompanying notes are an integral part of these statements.
GLYKO BIOMEDICAL LTD.
STATEMENTS OF CASH FLOWS
(In U.S. dollars, unaudited)
Six Months Ended June 30,
-----------------------------------------------
2002 2001
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Cash flows from operating activities:
Net loss $ (9,960,272) $ (6,019,873)
Adjustments to reconcile net loss to net cash used in
operating activities:
Equity loss of BioMarin Pharmaceutical Inc. 8,821,750 5,914,838
Changes in assets and liabilities:
Interest receivable - 22,710
Accrued liabilities 574,424 (23,394)
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Total adjustments 9,396,174 5,914,154
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Net cash used in operating activities (564,098) (105,719)
Cash flows from investing activities:
Sale of short-term investments - (52,336)
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Net cash provided by investing activities - (52,336)
Cash flows from financing activities:
Proceeds from exercise of common share options and warrants - -
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Net cash provided by financing activities - -
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Net increase in cash and cash equivalents (564,098) (158,055)
Cash and cash equivalents, beginning of period 2,444,424 408,133
--------------------- -----------------------
Cash and cash equivalents, end of period $ 1,880,326 $ 250,078
===================== =======================
The accompanying notes are an integral part of these statements.
GLYKO BIOMEDICAL LTD.
NOTES TO 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 $1.0 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 $26.0 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 (IPO) on July 23, 1999.
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, the purchase of IBEX Technologies
intellectual property and other assets associated with the IBEX therapeutic
enzyme drug products, and BioMarin's issuance of common stock in March 2002
for Synapse Technologies Inc., GBL's ownership of BioMarin's outstanding
stock on June 30, 2002 was 21.3%.
In February 2002, GBL signed a definitive agreement with BioMarin whereby
BioMarin would purchase (subject to shareholder and regulatory approval)
all of GBL's outstanding capital stock in exchange for approximately 11.4
million shares of freely tradable common stock of BioMarin. The proposed
purchase, including the issuance of the 11.4 million freely tradable
shares, was voted upon and approved by BioMarin's stockholders on August
13, 2002. The proposed purchase was voted upon and approved by GBL
shareholders on August 15, 2002.
Since our inception, we have incurred a cumulative deficit of $65.8 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 third quarter of 2002 (up
until the proposed purchase of us by BioMarin). Accordingly, without
further investment in other companies or technologies, management believes
that GBL has sufficient cash to sustain planned operations for the
foreseeable future.
GLYKO BIOMEDICAL LTD.
NOTES TO FINANCIAL STATEMENTS
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 major transaction
are in U.S. dollars. BioMarin's consolidated results of operations have
been reported in the accompanying financial statements based on the equity
method of accounting. All significant intercompany accounts and
transactions have been eliminated.
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.
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. 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 and disposition of Glyko, Inc. Due to BioMarin's decision to
close Glyko, Inc., BioMarin did not record any amortization of these
intangible assets in 2002.
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 $2.1 million and an increase of
approximately $10.1 million as a result of its share in BioMarin funds
raised by third parties for the six months ended June 30, 2002 and 2001,
respectively.
Foreign Exchange:
As the majority of the Company's major transactions are in U.S. dollars,
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.
GLYKO BIOMEDICAL LTD.
NOTES TO FINANCIAL STATEMENTS
Net Loss per Share:
Potentially dilutive securities outstanding at June 30, 2002 and 2001,
respectively, include options for the purchase of 81,397 and 45,000 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
three months and six months ended June 30, 2002 and 2001.
3. Investment in BioMarin Pharmaceutical Inc.
Results of the Company's unconsolidated affiliate, BioMarin, a development
stage company, are summarized as follows for the three month and six month
periods ended June 30, 2002 and 2001 and for the period from March 21, 1997
(Inception) to June 30, 2002 (unaudited, in thousands):
Three Months Ended June 30,
---------------------------------------------
2002 2001
--------------------- ----------------------
Revenues:
Revenues from BioMarin/Genzyme LLC $ 3,423 $ 2,852
Revenues - other - 160
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Total revenues 3,423 3,012
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Operating Costs and Expenses:
Research and development 13,336 11,506
General and administrative 3,062 1,536
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Total operating costs and expenses 16,398 13,042
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Loss from operations (12,975) (10,030)
Interest income 1,024 436
Interest expense (161) (1)
Loss from BioMarin/Genzyme LLC (2,461) (1,736)
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Net loss from continuing operations (14,573) (11,331)
Income (loss) from discontinued operations 172 (638)
Loss from disposal of discontinued operations (10) -
--------------------- ----------------------
Net loss $ (14,411) $ (11,969)
===================== ======================
GBL's equity in loss of BioMarin $ (3,066) $ (3,100)
3. Investment in BioMarin Pharmaceutical Inc., continued
Period from
March 21, 1997
Six Months Ended June 30, (Inception) to
------------------------------------------
2002 2001 June 30, 2002
--------------------- -------------------- ----------------------
Revenues:
Revenues from BioMarin/Genzyme LLC $ 7,215 $ 5,542 $ 34,413
Revenues - other - 160 369
--------------------- -------------------- ----------------------
Total revenues 7,215 5,702 34,782
--------------------- -------------------- ----------------------
Operating Costs and Expenses:
Research and development 26,554 21,163 144,837
General and Administrative 6,988 3,010 29,032
In-process research and development 11,223 - 22,870
Facility closure - - 4,423
--------------------- -------------------- ----------------------
Total operating costs and expenses 44,765 24,173 201,162
--------------------- -------------------- ----------------------
Loss from operations (37,550) (18,471) (166,380)
Interest income 1,404 904 8,836
Interest expense (252) (3) (1,008)
Loss from BioMarin/Genzyme LLC (4,759) (2,844 (16,724)
--------------------- -------------------- ----------------------
Net loss from continuing operations (41,157) (20,414) (175,276)
Income (loss) from discontinued operations 294 (1,255) (5,794)
Loss from disposal of discontinued operations (151) - (8,063)
--------------------- -------------------- ----------------------
Net loss $ (41,014) $ (21,669) $ (189,133)
===================== ==================== ======================
GBL's equity in loss of BioMarin $ (8,822) $ (5,915) $ (48,970)