<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): September 6, 2000
Commission File Number: 0-27118
PHARMACOPEIA, INC.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-27118 33-0557266
--------------------------------------------------------------------------------
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification
No.)
Cn 5350, Princeton, New Jersey 08543-5350
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(609) 452-3600
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report)
1
<PAGE>
This Form 8-K/A amends the Form 8-K filed on September 20, 2000 to include the
required financial statements and pro forma financial information and exhibits.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
The following financial statements and exhibits are filed as part of this
Report, where indicated.
(a) Financial statements of business acquired.
Attached hereto are audited combined balance sheets of the Oxford
Molecular Group: Software Division as of December 31, 1999 and 1998,
and combined profit and loss accounts and combined cash flow statements
for the years ended December 31, 1999, 1998 and 1997.
Attached hereto are unaudited combined balance sheets of the Oxford
Molecular Group: Software Division as of June 30, 2000 and 1999, and
combined profit and loss accounts and combined cash flow statements for
the six month periods ended June 30, 2000 and 1999.
(b) Pro forma financial information.
Attached hereto is the unaudited pro forma condensed combined balance
sheet of Pharmacopeia as of June 30, 2000, the unaudited pro forma
condensed combined statement of operations for year ended December 31,
1999, and the unaudited pro forma condensed combined statement of
operations for the six months ended June 30, 2000, based on
Pharmacopeia's historical financial statements as adjusted to give
effect to the acquisition of the Oxford Molecular Group: Software
Division.
(c) Exhibits.
Exhibit Number Description
-------------- -----------
2 Agreement for the sale and purchase of the entire
issued share capital of Oxford Molecular Limited and
Chemical Design Holdings plc and all of the
outstanding stock of Oxford Molecular Group, Inc.
dated August 8, 2000 between Oxford Molecular Group
Plc, Molecular Simulations, Inc. and Pharmacopeia,
Inc. (Filed as an exhibit to Pharmacopeia's Current
Report on Form 8-K filed with the Securities and
Exchange Commission on August 16, 2000, and
incorporated herein by reference.)
23 Consent of KPMG LLP, Independent Auditors.
99 Text of press release, dated September 6, 2000,
issued by Pharmacopeia, Inc. (Filed as an exhibit to
Pharmacopeia's Current Report on Form 8-K filed with
the Securities and Exchange Commission on September
20, 2000, and incorporated herein by reference.)
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PHARMACOPEIA, INC.
By: /s/ Bruce C. Myers
---------------------------------------
Bruce C. Myers, Executive Vice
President and Chief Financial Officer
(Duly Authorized Officer and Chief
Accounting Officer)
Date: November 13, 2000
2
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Independent Auditor's Report F-1
Combined Profit and Loss Accounts for the years ended
December 31, 1999, 1998 and 1997 F-2
Combined Balance Sheets as of December 31, 1999 and 1998 F-3
Combined Cash Flow Statements for the years ended December
31, 1999, 1998 and 1997 F-4
Combined Statements of Total Recognised Gains and Losses
for the years ended December 31, 1999, 1998 and 1997 F-5
Reconciliations of Movements in Shareholders' Funds for
the years ended December 31, 1999, 1998 and 1997 F-6
Notes to Combined Financial Statements F-7
Combined Profit and Loss Accounts for the six months ended
June 30, 2000 and 1999 (unaudited) F-40
Combined Balance Sheets as of June 30, 2000 and 1999 (unaudited) F-41
Combined Cash Flow Statements for the six months ended
June 30, 2000 and 1999 (unaudited) F-42
Combined Statements of Total Recognised Gains and Losses
for the six months ended June 30, 2000
and 1999 (unaudited) F-42
Notes to Combined Financial Statements F-43
PHARMACOPEIA, INC.
Unaudited Pro Forma Condensed Combined Financial Information F-45
Unaudited Pro Forma Condensed Combined Balance Sheet as of
June 30, 2000 F-46
Unaudited Pro Forma Condensed Combined Statement of Operations
for the year ended December 31, 1999 F-47
Unaudited Pro Forma Condensed Combined Statement of Operations
for the six months ended June 30, 2000 F-48
Notes to Unaudited Pro Forma Condensed Combined Financial
Information F-49
</TABLE>
3
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Oxford Molecular Group PLC:
We have audited the accompanying combined balance sheets of Oxford Molecular
Limited's software division, Oxford Molecular Group, Inc. and Chemical Design
Holdings PLC and their subsidiaries (the Group) as of December 31, 1999 and
1998, and the related combined profit and loss account, cash flow statement,
statement of total recognised gains and losses and movements in shareholders'
funds for each of the years in the three-year period ended December 31, 1999.
These combined financial statements are the responsibility of the Group's
management. Our responsibility is to express an opinion on these combined
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United Kingdom that are substantially equivalent to 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 combined financial statements referred to above present
fairly, in all material respects, the financial position of the Group as of
December 31, 1999 and 1998, and the results of their operations and their cash
flows for each of the years in the three-year period ended December 31, 1999, in
conformity with generally accepted accounting principles in the United Kingdom.
Accounting principles generally accepted in the United Kingdom vary in certain
significant respects from accounting principles generally accepted in the United
States. Application of accounting principles generally accepted in the United
States would have affected results of operations for each of the years in the
two-year period ended December 31, 1999 and shareholders' funds as of December
31, 1999 and 1998, to the extent summarised in Note 30 to the combined financial
statements.
/s/ KPMG LLP
Portland, Oregon
September 22, 2000
F-1
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Combined Profit and Loss Account
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
BEFORE EXCEPTIONAL ------------------------------------------
EXCEPTIONAL ITEMS 1999 1998 1997
ITEMS (NOTE 3) TOTAL TOTAL TOTAL
NOTE $000 $000 $000 $000 $000
---------- ------------ ------------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Turnover of continuing operations 2 18,306 -- 18,306 25,398 21,494
Cost of sales (2,307) -- (2,307) (2,113) (3,088)
------------ ------------- ------------ ------------ -----------
Gross profit 15,999 -- 15,999 23,285 18,406
------------ ------------- ------------ ------------ -----------
Administrative expenses:
Amortisation and impairment
of goodwill and intangible
fixed assets 10 (2,121) (6,471) (8,592) (1,449) --
Research and development (11,839) -- (11,839) (10,897) (8,098)
Selling and other administration
costs 3 (19,115) (3,800) (22,915) (15,300) (9,961)
------------ ------------- ------------ ------------ -----------
(33,075) (10,271) (43,346) (27,646) (18,059)
------------ ------------- ------------ ------------ -----------
Operating (loss)/income on ordinary
activities before interest and taxation (17,076) (10,271) (27,347) (4,361) 347
============ =============
Interest receivable and similar income 7 159 -- --
Interest payable and similar charges 8 (235) (115) (25)
------------ ------------ -----------
(Loss)/profit on ordinary activities
before taxation 4 (27,423) (4,476) 322
Tax on loss on ordinary activities 9 358 (266) (188)
------------ ------------ -----------
Loss for the financial period
transferred to reserves (27,065) (4,742) 134
============ ============ ===========
</TABLE>
All amounts relate to continuing operations. There were no operations acquired
in 2000.
F-2
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Combined Balance Sheet
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1999 1998
NOTE $000 $000
-------------- ------------------ -----------------
<S> <C> <C> <C>
Fixed assets:
Intangible assets 10 603 9,459
Tangible assets 11 1,707 2,597
------------------ -----------------
2,310 12,056
Current assets:
Stock 13 45 157
Debtors 14 10,420 14,529
Cash at bank and in hand 2,421 2,925
------------------ -----------------
12,886 17,611
Creditors: amounts falling due within one year 15 (58,541) (52,590)
------------------ -----------------
Net current liabilities (45,655) (34,979)
------------------ -----------------
Total assets less current liabilities (43,345) (22,923)
Creditors: amounts falling due after more than one year 16 (2,308) (64)
Provisions for liabilities and charges 17 (2,604) --
------------------ -----------------
Net liabilities (48,257) (22,987)
------------------ -----------------
Capital and reserves:
Called up share capital 19, 20 1,181 1,181
Share premium account 20 28,396 28,245
Other reserves 20 8,271 8,271
Profit and loss account 20 (86,105) (60,684)
------------------ -----------------
Shareholders' funds (48,257) (22,987)
================== =================
</TABLE>
These financial statements were approved by the Board of Directors on September
22, 2000 and were signed on its behalf by:
/s/ Lawrence G. Steingold
LAWRENCE G. STEINGOLD
Director
F-3
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Combined Cash Flow Statement
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1999 1998 1997
NOTE $000 $000 $000
----------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Cash inflow/(outflow) from operating activities 23 237 2,160 1,103
Returns on investments and servicing of finance 24 (121) (115) (25)
Taxation 24 358 (266) (188)
Capital expenditure and financial investment 24 (4,938) (1,223) (984)
Acquisitions 24 -- 172 (20,558)
--------------- -------------- ---------------
Cash (outflow)/inflow before use of liquid (4,464) 728 (20,652)
resources and financing
Management of liquid resources 24 -- -- 338
Financing 24 4,143 9 21,477
--------------- -------------- ---------------
(Decrease)/increase in cash in the period (321) 737 1,163
=============== ============== ===============
</TABLE>
F-4
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Combined Statements of Total
Recognised Gains and Losses
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1999 1998 1997
$000 $000 $000
--------------- --------------- --------------
<S> <C> <C> <C>
Profit/(loss) for the financial period (27,065) (4,742) 134
Foreign currency translation adjustment 1,644 (799) 1,143
--------------- --------------- --------------
Total recognised gains/(losses) relating
to the period (25,421) (5,541) 1,277
=============== =============== ==============
</TABLE>
F-5
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Reconciliations of Movements in
Shareholders' Funds
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1999 1998 1997
$000 $000 $000
---------------- ----------------- ----------------
<S> <C> <C> <C>
Profit/(loss) for the financial year (27,065) (4,742) 134
Movement in exchange reserve 1,644 (799) 1,143
Combination of fellow subsidiaries -- (149) 231
New share capital issued, net 151 32 888
Goodwill and other intangible assets pushed down -- 10,961 --
---------------- ----------------- ----------------
Net (decrease)/increase to shareholders' funds (25,270) 5,303 2,396
Opening shareholders' funds (22,987) (28,290) (30,686)
---------------- ----------------- ----------------
Closing shareholders' funds relating to equity interests (48,257) (22,987) (28,290)
================ ================= ================
</TABLE>
F-6
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Notes to Combined Financial Statements
(1) ACCOUNTING POLICIES
The following accounting policies have been applied consistently,
except as stated below, in dealing with items which are considered
material in relation to the Group's financial statements.
(a) BASIS OF PREPARATION
The financial statements have been prepared in accordance with
applicable accounting standards and under the historical cost
accounting rules in the United Kingdom (UK). Amounts have been
presented in US $, except for certain disclosure items which
relate to the Group's ultimate parent company, i.e. directors'
emoluments, and share price information, which is presented in
UK (pound).
(b) BASIS OF COMBINATION
The Group financial statements combine the accounts of Oxford
Molecular Limited's software division, Oxford Molecular Group,
Inc. and Chemical Design Holdings PLC and all their subsidiary
undertakings. The companies comprising the Group are set out
in note 12. These accounts are made up to December 31, 1999.
All acquisitions have been accounted for using the acquisition
method of accounting and the results of those companies are
included in the combined profit and loss account from the date
of acquisition.
(c) GOODWILL
Purchased goodwill (representing the excess of the fair value
of the consideration given and any associated costs over the
fair value of the separable net assets acquired) arising on
consolidation and business combinations in respect of
acquisitions before January 1998, when Financial Reporting
Standard (FRS) 10 (goodwill and intangible fixed assets) was
adopted, was written off to reserves in the year of
acquisition. When a subsequent disposal occurs any related
goodwill previously written off to reserves is written back
through the profit and loss account as part of the profit and
loss on disposal.
Purchased goodwill arising on consolidation and business
combinations in respect of acquisitions since January 1, 1998
is capitalised. Positive goodwill is amortised to nil by equal
installments over its estimated useful life of 5 years. On the
subsequent disposal or termination of a business acquired
since January 1, 1998, the profit or loss on disposal or
termination is calculated after charging the unamortised
amount of any related goodwill.
To the extent that the Group's ultimate parent company has
capitalised goodwill in respect of acquisition of Group
companies this goodwill has been pushed down into the Group.
(d) INTANGIBLE FIXED ASSETS AND AMORTISATION
Intangible assets acquired as part of an acquisition are
capitalised at their fair value where this can be measured
reliably and are amortised to nil by equal installments over
their estimated useful economic lives of 5 years.
F-7
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Notes to Combined Financial Statements
(e) TANGIBLE FIXED ASSETS AND DEPRECIATION
Depreciation is provided to write off the cost less estimated
residual value of fixed assets by equal installments over
their estimated useful economic lives as follows:
<TABLE>
<S> <C>
Leasehold improvements the period of the lease
Computer equipment 3 years
Fixtures, fittings and equipment 4-5 years
</TABLE>
(f) FOREIGN CURRENCIES
Transactions in foreign currencies are recorded using the rate
of exchange at the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies are
translated using the rate of exchange ruling at the balance
sheet date and the gains or losses on translation are included
in the profit and loss account.
For combination purposes, the assets and liabilities of
overseas subsidiary undertakings are translated at the closing
exchange rates. Profit and loss accounts of such undertakings
are consolidated at the average rates of exchange that existed
during the year. Exchange differences arising on these
translations are taken to reserves, net of exchange
differences arising on related foreign currency borrowings.
(g) LEASES
Where the Group enters into a lease which entails taking
substantially all the risks and rewards of ownership of an
asset, the lease is treated as a "finance lease." The asset is
recorded in the balance sheet as a tangible fixed asset and is
depreciated over its estimated useful life or the term of the
lease, whichever is shorter. Future installments under such
leases, net of finance charges, are included within creditors.
Rentals payable are apportioned between the finance element,
which is charged to the profit and loss account, and the
capital element which reduces the outstanding obligation for
future installments. All other leases are accounted for as
operating leases and the rental charges are charged to the
profit and loss account on a straight-line basis over the life
of the lease.
(h) PENSION BENEFITS
The Group does not operate a pension scheme, however it does
make contributions to personal pension or savings plans. The
amounts charged against profits represent the contributions
payable in respect of the accounting period.
(i) RESEARCH AND DEVELOPMENT EXPENDITURE
Expenditure on research and development is written off as it
is incurred.
(j) STOCKS
Stocks are stated at the lower of cost and net realizable
value.
F-8
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Notes to Combined Financial Statements
(k) TAXATION
The charge for taxation is based on the result for the year
and takes into account taxation deferred because of timing
differences between the treatment of certain items for
taxation and accounting purposes. Provision is made for
deferred tax only to the extent that it is probable that an
actual liability will crystallize.
(l) TURNOVER
Turnover represents the amounts (excluding value added tax)
derived from the provision of goods and services to customers
during the year. It represents all income invoiced in the
period except for certain license, maintenance and support
contracts where the benefits accrue during the contract period
and which accordingly have been time apportioned between
accounting periods.
(m) CASH AND LIQUID RESOURCES
Cash, for the purpose of the cash flow statement, comprises
cash in hand and deposits repayable on demand less overdrafts
payable on demand. Liquid resources comprise term deposits of
less that one year (other than cash).
(2) SEGMENTAL ANALYSIS BY GEOGRAPHICAL AREA AND CLASS OF BUSINESS
Geographical analysis of turnover and loss before interest and
taxation:
<TABLE>
<CAPTION>
JAPAN AND
REST OF 1999
UK EUROPE USA THE WORLD TOTAL
$000 $000 $000 $000 $000
------------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
TURNOVER BY DESTINATION
Sales to third parties 2,545 3,346 10,453 1,962 18,306
------------- ------------- ------------- ------------ ------------
TURNOVER BY ORIGIN
Sales to third parties 4,101 -- 14,205 -- 18,306
------------- ------------- ------------- ------------ ------------
LOSS ON ORDINARY ACTIVITIES
BEFORE INTEREST (23,050) (209) (4,088) -- (27,347)
============= ============= ============= ============
Net interest payable (76)
------------
LOSS BEFORE TAX (27,423)
============
NET ASSETS/(LIABILITIES)
EMPLOYED (64,176) (1,411) 17,330 -- (48,257)
============= ============= ============= ============ ============
</TABLE>
F-9
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Notes to Combined Financial Statements
<TABLE>
<CAPTION>
JAPAN AND
REST OF 1998
UK EUROPE USA THE WORLD TOTAL
$000 $000 $000 $000 $000
------------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
TURNOVER BY DESTINATION
Sales to third parties 5,208 5,293 12,735 2,162 25,398
------------- ------------- ------------- ------------ ------------
TURNOVER BY ORIGIN
Sales to third parties 10,448 5 14,945 -- 25,398
------------- ------------- ------------- ------------ ------------
PROFIT/(LOSS) ON ORDINARY
ACTIVITIES BEFORE
INTEREST (13,138) 71 8,706 -- (4,361)
============= ============= ============= ============
Net interest payable (115)
------------
LOSS BEFORE TAX (4,476)
============
NET ASSETS/(LIABILITIES)
EMPLOYED (42,598) (1,422) 21,033 -- (22,987)
============= ============= ============= ============ ============
</TABLE>
<TABLE>
<CAPTION>
JAPAN AND
REST OF 1997
UK EUROPE USA THE WORLD TOTAL
$000 $000 $000 $000 $000
------------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
TURNOVER BY DESTINATION
Sales to third parties 4,976 2,907 11,687 1,924 21,494
------------- ------------- ------------- ------------ ------------
TURNOVER BY ORIGIN
Sales to third parties 6,967 180 14,347 -- 21,494
------------- ------------- ------------- ------------ ------------
PROFIT/(LOSS) ON ORDINARY
ACTIVITIES BEFORE
INTEREST (9,046) (96) 9,489 -- 347
============= ============= ============= ============
Net interest payable (25)
------------
LOSS BEFORE TAX 322
============
NET ASSETS/(LIABILITIES)
EMPLOYED (39,735) (1,385) 12,830 -- (28,290)
============= ============= ============= ============ ============
</TABLE>
F-10
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Notes to Combined Financial Statements
(3) EXCEPTIONAL ITEMS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1999 1998 1997
$000 $000 $000
---------------- ---------------- ----------------
<S> <C> <C> <C>
Charged in arriving at operating loss:
Costs of reorganization 2,604 -- --
Impairment of tangible fixed assets 1,196 -- --
Impairment of intangible fixed assets on
strategic review of the business (see
note 10) 6,471 -- --
---------------- ---------------- ----------------
Exceptional items within loss on ordinary
activities before taxation 10,271 -- --
================ ================ ================
</TABLE>
During 1999, the Group commenced restructuring action. An exceptional
provision of $3,800,000 for the restructuring has been charged against
1999's results. The restructuring provision includes the costs of
employee termination, vacating properties in the United States and
United Kingdom as well as the write down of related assets. Most of the
provision is expected to be spent within 2000.
The exceptional items above did not give rise to any tax credits in the
period as the Group has tax losses to carry forward (see note 9).
F-11
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Notes to Combined Financial Statements
(4) LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1999 1998 1997
$000 $000 $000
---------------- ---------------- ----------------
<S> <C> <C> <C>
Loss on ordinary activities before
taxation is stated after charging:
Auditors' remuneration:
Audit 78 88 54
Other fees paid to the auditors
and their associates 151 293 308
Depreciation and other amounts
written off tangible fixed assets:
Owned 2,380 1,045 652
Leased 165 70 38
Amortisation and impairment of
goodwill and other intangible
fixed assets 8,592 1,449 --
Loss on sale of tangible fixed assets 10 -- --
Hire of plant and machinery -
rentals payable under operating
leases 58 58 118
Hire of other assets - rentals
payable under operating
leases 1,563 1,198 1,062
</TABLE>
In addition, in 1998 $14,000 (1997: $123,000) of non-audit fees were
included within acquisition costs.
F-12
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Notes to Combined Financial Statements
(5) REMUNERATION OF DIRECTORS
The following were directors of the Group's ultimate parent company and
thus were responsible for the Group's overall strategic direction and
control.
<TABLE>
<CAPTION>
COMPENSATION
SALARY FOR LOSS 1999 1998 1997 1999 1998 1997
AND FEES BENEFITS OF OFFICE TOTAL TOTAL TOTAL PENSION PENSION PENSION
(pound)000 (pound)000 (pound)000 (pound)000 (pound)000 (pound)000 (pound)000 (pound)000 (pound)000
---------- --------- ------------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dr AF Marchington 245 7 -- 252 251 130 31 31 16
Professor WG Richards 24 -- -- 24 24 24 -- -- --
Professor DE Jackson 125 1 83 209 126 95 16 17 11
DR Marsh 100 1 62 163 111 83 13 14 10
Dr AP Marchington 125 1 -- 126 28 -- 16 2 --
CA Nalbantian 124 1 -- 125 26 -- 1 -- --
Professor AR Rees 25 --
LG Steingold 46 1 -- 47 -- -- 6 -- --
---------- --------- --------------- --------- --------- ---------- ---------- ---------- ----------
789 12 145 946 566 357 83 64 37
Non-executive directors:
ND Brown 30 -- -- 30 -- -- -- -- --
Dr RA DePaul -- --
Dr P Doyle 25 -- -- 25 25 21 -- -- --
Dr JN Hiddleston 25 -- -- 25 25 8 -- -- --
M Hauck 10 -- -- 10 -- -- -- -- --
RCM Hall 4 5 8 17 20 20 -- -- --
CJ Weston 4 -- 4 8 8 8 -- -- --
---------- --------- --------------- --------- --------- ---------- ---------- ---------- ----------
98 5 12 115 78 57 -- -- --
---------- --------- --------------- --------- --------- ---------- ---------- ---------- ----------
Total emoluments 887 17 157 1,061 644 414 83 64 37
========== ========= =============== ========= ========= ========== ========== ========== ==========
</TABLE>
No director exercised any share options during the year and, as such,
there were no gains made (1998: nil, 1997: nil).
The emoluments of the highest paid director in 1999 were (pound)252,000
(1998: (pound)251,000, 1997: (pound)130,000).
Details of share option schemes are given in note 19.
None of the directors had any material interest in contracts of
significance subsisting during the three-year period to December 31,
1999.
Except for Mr. CA Nalbantian, the remuneration costs of the directors
were borne by companies outside the Group. The basis on which overall
management costs have been recharged to the Group is set out in note
27.
F-13
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Notes to Combined Financial Statements
(6) STAFF NUMBERS AND COSTS
The average number of persons employed by the Group (including
executive directors) during the year, analysed by category, was as
follows:
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF NUMBER OF
EMPLOYEES EMPLOYEES EMPLOYEES
1999 1998 1997
---------------- ---------------- ---------------
<S> <C> <C> <C>
Technical 112 97 73
Sales and marketing 57 68 42
Administration 43 54 27
Product management 5 25 19
---------------- ---------------- ---------------
217 244 161
================ ================ ===============
</TABLE>
The aggregate payroll costs of these persons were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1999 1998 1997
$000 $000 $000
---------------- ---------------- ---------------
<S> <C> <C> <C>
Wages and salaries 14,162 13,103 8,622
Social security costs 1,200 1,049 778
Other pension costs (see note 22) 1,715 1,364 891
---------------- ---------------- ---------------
17,077 15,516 10,291
================ ================ ===============
</TABLE>
(7) INTEREST RECEIVABLE AND SIMILAR INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1999 1998 1997
$000 $000 $000
---------------- ---------------- ---------------
<S> <C> <C> <C>
Income from short-term cash deposits 70 -- --
Interest from sub-leases 89 -- --
---------------- ---------------- ---------------
159 -- --
================ ================ ===============
</TABLE>
F-14
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Notes to Combined Financial Statements
(8) INTEREST PAYABLE AND SIMILAR CHARGES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1999 1998 1997
$000 $000 $000
---------------- ---------------- ---------------
<S> <C> <C> <C>
Interest payable on bank loans and
overdrafts 101 -- --
Finance charges payable in respect of
finance leases and hire purchase
contracts 134 115 25
---------------- ---------------- ---------------
235 115 25
================ ================ ===============
</TABLE>
(9) TAXATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1999 1998 1997
$000 $000 $000
---------------- ---------------- ---------------
<S> <C> <C> <C>
US income tax -- 502 188
Adjustment in respect of prior periods (358) (236) --
---------------- ---------------- ----------------
(358) 266 188
================ ================ ================
</TABLE>
The Group has unrelieved tax losses available to carry forward against
future trading income of approximately $60 million.
F-15
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Notes to Combined Financial Statements
(10) INTANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
INTELLECTUAL
PROPERTY
GOODWILL RIGHTS TOTAL
$000 $000 $000
---------------- ---------------- ----------------
<S> <C> <C> <C>
COST
At January 1, 1998 -- -- --
Exchange difference (10) (38) (48)
Additions 2,391 8,570 10,961
---------------- ---------------- ----------------
At December 31, 1998 2,381 8,532 10,913
Exchange difference (75) (267) (342)
---------------- ---------------- ----------------
At December 31, 1999 2,306 8,265 10,571
---------------- ---------------- ----------------
AMORTISATION AND IMPAIRMENT
At January 1, 1998 -- -- --
Charge for year 315 1,134 1,449
Exchange difference 1 4 5
---------------- ---------------- ----------------
At December 31, 1998 316 1,138 1,454
Exchange difference (16) (62) (78)
Charge for year 463 1,658 2,121
Impairment in year 940 5,531 6,471
---------------- ---------------- ----------------
At December 31, 1999 1,703 8,265 9,968
---------------- ---------------- ----------------
NET BOOK VALUE
At December 31, 1999 603 -- 603
================ ================ ================
At December 31, 1998 2,065 7,394 9,459
================ ================ ================
At December 31, 1997 -- -- --
================ ================ ================
</TABLE>
Goodwill of $2,391,000 and intellectual property rights of $8,570,000
arising during 1998 on the acquisition of Chemical Design Holdings PLC
(CDH) were being amortised over a period of 5 years. At the end of the
year, after an impairment review by the directors, all of the remaining
value of CDH intellectual property rights was written off to the profit
and loss account, resulting in a total amortisation and impairment
charge for the year of $7,189,000. In addition, a further write off of
$940,000 was made for CDH goodwill resulting in a full year charge of
$1,403,000. The remaining value of CDH goodwill will be written off in
full to the profit and loss account in 2000.
F-16
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Notes to Combined Financial Statements
(11) TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
FIXTURES,
COMPUTER FITTINGS AND LEASEHOLD
EQUIPMENT EQUIPMENT IMPROVEMENTS TOTAL
$000 $000 $000 $000
--------------- --------------- ------------------ ----------------
<S> <C> <C> <C> <C>
COST
At January 1, 1998 3,350 1,273 253 4,876
Exchange difference (3) (14) 3 (14)
Arising on acquisition 145 246 17 408
Additions 782 586 -- 1,368
Disposals (43) (141) -- (184)
--------------- --------------- ------------------ ----------------
At December 31, 1998 4,231 1,950 273 6,454
Exchange difference (471) 31 (5) (445)
Additions 598 590 543 1,731
Disposals (297) (158) -- (455)
--------------- --------------- ------------------ ----------------
At December 31, 1999 4,061 2,413 811 7,285
--------------- --------------- ------------------ ----------------
DEPRECIATION
At January 1, 1998 1,979 676 138 2,793
Exchange difference (9) (11) 1 (19)
Charge for year 684 384 47 1,115
Disposals (5) (27) -- (32)
--------------- --------------- ------------------ ----------------
At December 31, 1998 2,649 1,022 186 3,857
Exchange difference (449) 40 (3) (412)
Charge for year 1,090 1,067 388 2,545
Disposals (293) (119) -- (412)
--------------- --------------- ------------------ ----------------
At December 31, 1999 2,997 2,010 571 5,578
--------------- --------------- ------------------ ----------------
NET BOOK VALUE
At December 31, 1999 1,064 403 240 1,707
=============== =============== ================== ================
At December 31, 1998 1,582 928 87 2,597
=============== =============== ================== ================
At December 31, 1997 1,371 597 115 2,083
=============== =============== ================== ================
</TABLE>
Included within fixed assets are items held under existing finance
lease or hire purchase agreements with a year-end net book value of
$243,000 (1998: $122,000, 1997: $158,000). The depreciation charge for
the year on these assets was $164,000 (1998: $67,000, 1997: $61,000).
F-17
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Notes to Combined Financial Statements
(12) INVESTMENTS
(a) ACQUISITION OF GENETICS COMPUTER GROUP INC. (GCG)
On June 10, 1997, the Group acquired the entire share capital
of Genetics Computer Group Inc. (GCG). The consideration was
$20.6 million paid in cash including $5 million to fund
employee incentive compensation agreements and costs of
acquisition. At the date of acquisition the fair value of the
net liabilities of the company was $288,000 after the write
off of in respect of works of art of $251,000 and the write
back of support revenues of $1,334,000 as an accounting policy
alignment (see the table below). There were no other fair
value adjustments. The acquisition has been accounted for
using the acquisition method of accounting. Goodwill arising
on acquisition of $20.8 million has been written off against
reserves.
<TABLE>
<CAPTION>
ADJUSTED NET
ASSETS
ACCOUNTING AS AT
JUNE 10, POLICY JUNE 10,
1997 ALIGNMENT 1997
---------------- ---------------- ---------------
$000 $000 $000
---------------- ---------------- ---------------
<S> <C> <C> <C>
Fixed assets 184 -- 184
Current assets:
Stock 30 -- 30
Debtors 561 -- 561
Cash on deposit 338 -- 338
Other assets 251 (251) --
Cash 2 -- 2
Creditors: amounts falling due
within one year (49) (1,334) (1,383)
---------------- ---------------- ---------------
Net assets 1,297 (1,585) (288)
================ ================ ---------------
Consideration 20,558
---------------
Goodwill arising on
acquisition 20,846
===============
</TABLE>
The profit of GCG for the year ended December 31, 1996 was
$166,000. The result for the period from January 1, 1997 to
June 9, 1997 was a profit of $138,000. The profit of GCG for
the period from June 10, 1997 to December 31, 1997 was
$530,000.
F-18
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Notes to Combined Financial Statements
(b) ACQUISITION OF THE SOFTWARE BUSINESS OF MLR AUTOMATION (MLR)
The consideration in respect of MLR Automation (MLR) was $2.5
million paid in cash. At the date of acquisition June 10,
1997, the fair value of the net assets of the company was
$46,000. There were no fair value adjustments. The acquisition
has been accounted for using the acquisition method of
accounting. Goodwill arising on acquisition of $2.5 million
has been written off against reserves. The profit of MLR for
the year ended December 31, 1996 was $126,000. The result for
the period from January 1, 1997 to June 9, 1997 was a profit
of $135,000. The profit of MLR business for the period from
June 10, 1997 to December 31, 1997 was $118,000.
(c) ACQUISITION OF CHEMICAL DESIGN HOLDINGS PLC (CDH)
On April 29, 1998, the Group acquired the whole of the issued
share capital and outstanding share options of Chemical Design
Holdings PLC (CDH). The consideration for the acquisition of
CDH comprised 3,229,889 ordinary shares of the Group's
ultimate parent undertaking at 184p ($3.08) and cash of
$880,000, giving total consideration of $10,812,000 including
costs of acquisition.
At the date of acquisition the fair value of the net assets of
the company was $8,421,000 after the recognition of
intellectual property rights of $8,570,000 (see the table
below). There were no other fair value adjustments. The
acquisition has been accounted for using the acquisition
method of accounting. Goodwill arising on acquisition of
$2,391,000 is being amortised over a period of 5 years.
Intellectual property rights are also being amortised over 5
years. This period has been used after the directors have
considered the expected benefit and life of the acquired
business and software respectively.
F-19
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Notes to Combined Financial Statements
The book values of the net assets at the date of acquisition and the
fair values of the net assets at the date of acquisition were as
follows:
<TABLE>
<CAPTION>
FAIR VALUE
BOOK VALUE ADJUSTMENT FAIR VALUE
$000 $000 $000
---------------- ---------------- ----------------
<S> <C> <C> <C>
Intangible fixed assets -- 8,570 8,570
Tangible fixed assets 408 -- 408
Stock 17 -- 17
Debtors 299 -- 299
Cash 172 -- 172
Creditors (1,045) -- (1,045)
---------------- ---------------- ----------------
Net assets (149) 8,570 8,421
================ ================
Goodwill 2,391
----------------
Total consideration 10,812
================
Satisfied by:
Shares issued 9,932
Cash 880
----------------
Total consideration 10,812
================
</TABLE>
A summarised profit and loss account of CDH from the beginning of the
company's financial year covering the period from January 1, 1998 to
the date of acquisition, is detailed below:
<TABLE>
<CAPTION>
$000
<S> <C>
Turnover 761
------------------
Operating loss (721)
------------------
Loss before taxation (723)
Taxation (12)
------------------
Loss after taxation (735)
==================
</TABLE>
There were no other gains or losses in the period other than those
included in the profit and loss accounts.
The loss after taxation incurred by CDH for the year ended December 31,
1997 was $972,000.
F-20
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Notes to Combined Financial Statements
(d) GROUP UNDERTAKINGS:
<TABLE>
<CAPTION>
COUNTRY OF % HOLDING
REGISTRATION OR (ALL CLASSES
INCORPORATION OF SHARES)
------------------------ ---------------
<S> <C> <C>
FELLOW SUBSIDIARIES:
Oxford Molecular Limited England and Wales 100%
Oxford Molecular Group, Inc. Delaware, USA 100%
Chemical Design Holdings PLC England and Wales 100%
HELD BY MEMBERS OF THE GROUP:
Oxford Molecular SA France 100%
Health Designs, Inc. New York, USA 100%
Genetics Computer Group, Inc. Wisconsin, USA 100%
Chemical Design Limited England and Wales 100%
Chemical Design International Limited England and Wales 100%
Chemical Design Supplies Limited England and Wales 100%
Chemical Design SARL France 100%
Chemical Design Inc. New Jersey, USA 100%
Chemical Design (West Coast) Inc. New Jersey, USA 100%
</TABLE>
The above companies, all of which are combined into the Group
results, operate principally in the countries of
incorporation. All are engaged in the development and sale of
bioinformatics software, computer-aided molecular design and
cheminformatics software.
(13) STOCKS
Stocks comprise goods for resale.
F-21
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Notes to Combined Financial Statements
(14) DEBTORS
<TABLE>
<CAPTION>
1999 1998
$000 $000
------------------ -----------------
<S> <C> <C>
AMOUNTS FALLING DUE WITHIN ONE YEAR
Trade debtors 5,859 12,835
Other debtors 977 505
Prepayments and accrued income 806 945
Amounts due from Oxford Molecular Group PLC
and its non-software divisions 785 133
------------------ -----------------
8,427 14,418
AMOUNTS FALLING DUE AFTER MORE THAN
ONE YEAR
Trade debtors 132 111
Other debtors 891 --
Amounts due from Oxford Molecular Group PLC
and its non-software divisions 970 --
------------------ -----------------
10,420 14,529
================== =================
</TABLE>
(15) CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
1999 1998
$000 $000
----------------- -----------------
<S> <C> <C>
Obligations under finance leases
and hire purchase contracts 1,794 50
Trade creditors 1,936 2,235
Other creditors - taxation and
social security 1,097 1,424
Accruals and deferred income 8,771 7,481
Amounts due to Oxford Molecular Group PLC
and its non-software divisions 44,943 41,400
----------------- -----------------
58,541 52,590
================= =================
</TABLE>
F-22
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Notes to Combined Financial Statements
(16) CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
1999 1998
$000 $000
----------------- -----------------
<S> <C> <C>
Obligations under finance leases and
hire purchase contracts 2,308 64
================= =================
</TABLE>
All obligations under finance leases and hire purchase contracts fall
due in less than five years.
(17) PROVISIONS FOR LIABILITIES AND CHARGES
<TABLE>
<CAPTION>
1999 1998
$000 $000
----------------- -----------------
<S> <C> <C>
At beginning of year -- --
Exceptional reorganization costs
(see note 3) 2,604 --
----------------- -----------------
At end of year 2,604 --
================= =================
</TABLE>
(18) DEFERRED TAXATION
The Group has a deferred tax asset. This asset has not been recognised
in the financial statements due to the Group's ongoing losses.
F-23
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Notes to Combined Financial Statements
(19) CALLED UP SHARE CAPITAL
<TABLE>
<CAPTION>
1999 1998
NUMBER $000 NUMBER $000
------------ ----------- ------------ ----------
<S> <C> <C> <C> <C>
OXFORD MOLECULAR LIMITED:
Authorised ordinary shares:
Ordinary shares 1,700,000 29 1,700,000 29
Preferred ordinary shares 300,000 5 300,000 5
B preferred ordinary shares 1,500,000 26 1,500,000 26
============ =========== ============ ==========
Allotted, called up and fully
paid ordinary shares:
Ordinary shares 1,540,715 26 1,533,215 26
Preferred ordinary shares 300,000 5 300,000 5
B preferred ordinary shares 1,431,963 24 1,431,963 24
============ =========== ============ ==========
OXFORD MOLECULAR GROUP, INC.:
Authorised ordinary shares:
Class A common stock 300,000 -- 300,000 --
Class B common stock 100,000 -- 100,000 --
============ =========== ============ ==========
Allotted, called up and fully
paid ordinary shares
Class A common stock 135,424 -- 135,424 --
Class B common stock 40,000 -- 40,000 --
============ =========== ============ ==========
CHEMICAL DESIGN HOLDINGS PLC:
Authorised ordinary shares 16,000,000 2,738 16,000,000 2,738
============ =========== ============ ==========
Allotted, called up and fully
paid ordinary shares 6,580,095 1,126 6,580,095 1,126
============ =========== ============ ==========
</TABLE>
All the issued share capital is held by the Group's ultimate parent
company.
F-24
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Notes to Combined Financial Statements
Directors' share options under the Oxford Molecular Group PLC's
approved executive share option scheme 1994 (AESO), unapproved
executive share option scheme 1994 (UESO) and SAYE share option scheme
1994 (SAYE) were:
1999
<TABLE>
<CAPTION>
NUMBER OF
OPTIONS
GRANTED WEIGHTED DATE FOR DATE FOR
DURING THE EXERCISE EARLIEST LATEST
DIRECTOR SCHEME 1998 YEAR 1999 PRICE EXERCISE EXERCISE
--------------------- --------- ---------- ------------ ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Dr AF Marchington AESO 9,136 surrendered -- 327.73p 25.4.99 24.4.06
UESO 1,472,315 surrendered -- 264.21p 25.4.99 7.1.05
DR Marsh AESO 9,136 lapsed -- 327.73p 25.4.99 24.4.06
UESO 197,323 lapsed -- 282.80p 25.4.99 24.4.06
SAYE 3,625 lapsed -- 268.95p 9.9.99 9.3.00
Professor DE Jackson AESO 231,258 surrendered -- 48.28p 25.5.98 24.5.05
UESO 434,482 surrendered -- 269.26p 25.4.99 7.1.05
LG Steingold AESO -- 68,430 68,430 43.84p 13.9.02 13.9.09
UESO -- 331,570 331,570 36.40p 13.9.02 29.12.09
CA Nalbantian UESO 150,000 200,000 350,000 46.00p 22.10.01 29.12.09
</TABLE>
1998
<TABLE>
<CAPTION>
NUMBER OF
OPTIONS
GRANTED WEIGHTED DATE FOR DATE FOR
DURING THE EXERCISE EARLIEST LATEST
DIRECTOR SCHEME 1997 YEAR 1998 PRICE EXERCISE EXERCISE
--------------------- --------- ---------- ------------ ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Dr AF Marchington AESO 9,136 -- 9,136 327.73p 25.4.99 24.4.06
UESO 131,197 1,341,118 1,472,315 264.21p 25.4.99 7.1.05
DR Marsh AESO 9,136 -- 9,136 327.73p 25.4.99 24.4.06
UESO 70,192 127,131 197,323 282.80p 25.4.99 24.4.06
SAYE 3,625 -- 3,625 268.95p 9.9.99 9.3.00
Professor DE Jackson AESO 231,258 -- 231,258 48.28p 25.5.98 24.5.05
UESO 70,141 364,341 434,482 269.26p 25.4.99 7.1.05
CA Nalbantian UESO -- 150,000 150,000 137.14p 24.4.01 21.10.05
</TABLE>
Directors' interests in options under the Oxford Molecular Limited 1990
share option scheme were:
<TABLE>
<CAPTION>
NUMBER OF
OPTIONS
GRANTED DATE FOR DATE FOR
1997 AND DURING THE EXERCISE EARLIEST LATEST
1998 YEAR 1999 PRICE EXERCISE EXERCISE
---------- ------------ ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Professor WG Richards 20,000 lapsed -- 38.57p 8.4.97 15.4.01
</TABLE>
The market price of the Group's shares as at December 31, 1999 was 30p
(1998: 48.5p, 1997: 240p). The price during the year ranged from 25p to
68p (1998: 44p to 260p, 1997: 194p to 439p).
F-25
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Notes to Combined Financial Statements
(20) SHARE CAPITAL AND RESERVES
<TABLE>
<CAPTION>
CALLED UP SHARE PROFIT
SHARE PREMIUM OTHER AND LOSS
CAPITAL ACCOUNT RESERVES ACCOUNT
$000 $000 $000 $000
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
At January 1, 1998 54 26,799 -- (55,143)
Employee share options exercised 1 31 -- --
Loss for the year -- -- -- (4,742)
Exchange movement -- -- -- (799)
Pre-acquisition reserves of fellow
subsidiaries combined 1,126 1,415 (2,690) --
Goodwill and other intangible assets pushed
down -- -- 10,961 --
------------- ------------- ------------- -------------
At December 31, 1998 1,181 28,245 8,271 (60,684)
Employee share options exercised -- 151 -- --
Loss for the year -- -- -- (27,065)
Exchange movement -- -- -- 1,644
------------- ------------- ------------- -------------
At December 31, 1999 1,181 28,396 8,271 (86,105)
============= ============= ============= =============
</TABLE>
The cumulative amount of positive goodwill arising from acquisitions in
earlier financial years which has been written off within the reserves
of the ultimate parent company and not reflected in the financial
statements of the Group is $67,160,000. In addition, in accordance with
the requirements of FRS 10, $10,041,000 (1998: $1,449,000) of goodwill
has been written off through the profit and loss account since the
adoption of FRS 10 in January 1998.
(21) COMMITMENTS
Annual commitments under non-cancelable operating leases are as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------------------- ----------------------- ------------------------
LAND AND LAND AND LAND AND
BUILDINGS OTHER BUILDINGS OTHER BUILDINGS OTHER
$000 $000 $000 $000 $000 $000
---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Operating leases which
expire:
Within one year 434 24 103 30 471 7
In the second to fifth
years
inclusive 777 16 1,053 15 -- --
After five years 287 -- 193 -- 1,118 7
---------- ---------- ---------- ---------- ---------- -----------
1,498 40 1,349 45 1,589 14
========== ========== ========== ========== ========== ===========
</TABLE>
F-26
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Notes to Combined Financial Statements
(22) PENSION SCHEME
The Group does not operate a pension scheme. The pension cost charge
for the period represents contributions payable by the Group to
personal pension plans and amounted to $1,715,000 (1998: $1,364,000,
1997: $891,000) of which $34,000 (1998: $40,000, 1997: $67,000) is
included in creditors at the year end.
(23) RECONCILIATION OF OPERATING LOSS TO OPERATING CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1999 1998 1997
$000 $000 $000
---------------- ---------------- --------------
<S> <C> <C> <C>
Operating (loss)/profit (27,347) (4,361) 347
Depreciation of tangible fixed assets 2,545 1,115 810
Loss on disposal of tangible fixed assets -- -- --
Amortisation of intangible fixed assets 8,592 1,449 --
Decrease/(increase) in stock 112 (68) 179
Decrease/(increase) in debtors 6,393 (5,367) (4,456)
Increase in creditors and provisions 9,942 9,392 4,223
---------------- ---------------- --------------
Net cash inflow/(outflow) from
operating activities 237 2,160 1,103
================ ================ ==============
</TABLE>
F-27
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Notes to Combined Financial Statements
(24) ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT
Returns on investment and servicing of finance:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1999 1998 1997
$000 $000 $000
---------------- ---------------- --------------
<S> <C> <C> <C>
Interest received -- -- --
Interest paid (76) -- (25)
Finance lease interest paid (134) (115) --
Interest received on finance lease receivable 89 -- --
---------------- ---------------- --------------
Net cash (outflow)/inflow for returns on
investment and servicing of finance (121) (115) (25)
================ ================ ==============
</TABLE>
Taxation:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1999 1998 1997
$000 $000 $000
---------------- ---------------- --------------
<S> <C> <C> <C>
Net cash inflow/(outflow) for taxation 358 (266) (188)
================ ================ ==============
</TABLE>
Capital expenditure and financial investment:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1999 1998 1997
$000 $000 $000
---------------- ---------------- ----------------
<S> <C> <C> <C>
Purchases of tangible fixed assets (1,828) (1,223) (984)
Sales of tangible fixed assets -- -- --
Net finance lease investment with subsidiary
and trade investment
of parent undertaking (3,110) -- --
---------------- ---------------- ----------------
Net cash outflow for capital expenditure
and financial investment (4,938) (1,223) (984)
================ ================ ================
</TABLE>
F-28
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Notes to Combined Financial Statements
Acquisitions:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1999 1998 1997
$000 $000 $000
---------------- ---------------- ---------------
<S> <C> <C> <C>
Purchase of subsidiary undertakings
(see note 12) -- -- (20,588)
Cash acquired with subsidiary
undertakings -- 172 30
---------------- ---------------- ---------------
Net cash inflow for acquisitions
and disposals -- 172 (20,558)
================ ================ ===============
</TABLE>
Management of liquid resources:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1999 1998 1997
$000 $000 $000
---------------- ---------------- --------------
<S> <C> <C> <C>
Sales of short term deposit certificates -- -- 338
---------------- ---------------- --------------
Net cash inflow from management
of liquid resources -- -- 338
================ ================ ==============
</TABLE>
Financing:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1999 1998 1997
$000 $000 $000
---------------- ---------------- ----------------
<S> <C> <C> <C>
New shares issued 151 31 889
Capital element of finance lease
repayments (1,528) (22) --
Finance raised from sale and leaseback
transactions 5,520 -- --
Funding from parent for acquisition -- -- 20,588
---------------- ---------------- ----------------
Net cash inflow/(outflow) from financing 4,143 9 21,477
================ ================ ================
</TABLE>
F-29
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Notes to Combined Financial Statements
(25) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1999 1998 1997
$000 $000 $000
---------------- ---------------- --------------
<S> <C> <C> <C>
Increase/(decrease) in cash in year (321) 737 1,133
Cash (inflow)/outflow on finance leases (3,992) 22 --
Cash inflow from decrease in liquid
resources -- -- (338)
---------------- ---------------- --------------
Change in net funds resulting from
cash flows (4,313) 759 795
New finance leases -- (45) (89)
Liquid resources acquired with
subsidiary -- -- 338
Translation difference (179) 5 (22)
---------------- ---------------- --------------
Movement in net funds in year (4,492) 719 1,022
Net funds at beginning of year 2,811 2,092 1,070
---------------- ---------------- --------------
Net funds at end of year (1,681) 2,811 2,092
================ ================ ==============
</TABLE>
F-30
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Notes to Combined Financial Statements
(26) ANALYSIS OF NET FUNDS
<TABLE>
<CAPTION>
ACQUISITIONS
AT (EXCLUDING NEW AT
JANUARY 1, CASH CASH AND FINANCE EXCHANGE DECEMBER 31,
1998 FLOWS OVERDRAFTS) LEASES MOVEMENTS 1998
$000 $000 $000 $000 $000 $000
------------- ------------- -------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Cash 2,181 737 -- -- 7 2,925
Overdraft -- -- -- -- -- --
-------------
737
Cash on deposit -- -- -- -- -- --
Finance leases (89) 22 -- (45) (2) (114)
------------- ------------- -------------- --------------- -------------- ---------------
Total 2,092 759 -- (45) 5 2,811
============= ============= ============== =============== ============== ===============
</TABLE>
<TABLE>
<CAPTION>
AT NEW AT
JANUARY 1, CASH FINANCE EXCHANGE DECEMBER 31,
1999 FLOWS LEASES MOVEMENTS 1999
$000 $000 $000 $000 $000
-------------- ------------- ---------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Cash 2,925 (321) -- (183) 2,421
Overdraft -- -- -- -- --
-------------
(321)
Cash on deposit -- -- -- -- --
Finance leases (114) (3,992) (5,520) 4 (4,102)
-------------- ------------- ---------------- -------------- --------------
Total 2,811 (3,671) (5,520) (179) (1,681)
============== ============= ================ ============== ==============
</TABLE>
During 1999 the Group, acting as principal, entered into a sale and
leaseback transaction involving certain of its own assets and those of
other subsidiaries and trade investments of its ultimate parent
undertaking which are outside of the Group. As of December 31, 1999,
included within debtors is $3.1 million of receivables due from the
parent company's other subsidiaries and trade investments in respect of
subleases entered into by these companies as part of the sale and
leaseback transaction.
F-31
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Notes to Combined Financial Statements
(27) RELATED PARTY TRANSACTIONS
The Group has transacted with its ultimate parent company and with
fellow subsidiary companies that do not comprise part of the Group.
Transactions with these related parties are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1999 1998 1997
$000 $000 $000
------------- ------------- -------------
<S> <C> <C> <C> <C>
Sales to parent and fellow
subsidiary companies A -- -- --
Sales to trade investments
of parent A -- 1,457 3,600
Purchases from parent and fellow
subsidiaries A -- -- --
Purchases from trade investments
of parent A -- 55 --
Management costs recharged from parent
undertaking B 1,681 583 529
Costs recharged to parent and
fellow subsidiary companies B 968 1,053 1,214
</TABLE>
A) Sales and purchases of software and services to the Group's ultimate
parent undertaking, fellow subsidiary undertakings and trade
investments of the ultimate parent company were made on an arms length
basis.
B) The ultimate parent company has borne central management costs which
related to the Group in respect of directors and other central
administration that have been recharged to the Group.
(28) ULTIMATE PARENT UNDERTAKING
As at December 31, 1999, the ultimate parent undertaking of the Group
was Oxford Molecular Group PLC, a company incorporated in the United
Kingdom. The consolidated financial statements of Oxford Molecular
Group PLC can be obtained from Companies House.
(29) POST BALANCE SHEET EVENT
Oxford Molecular Group PLC sold its entire interest in the Group to
Molecular Simulations Incorporated (a wholly owned subsidiary of
Pharmacopeia Inc.) on September 20, 2000.
F-32
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Notes to Combined Financial Statements
(30) UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The combined financial statements have been prepared in accordance with
United Kingdom generally accepted accounting principles (UK GAAP) which
differ in certain significant respects from United States generally
accepted accounting principles (US GAAP). A description of the
significant differences between UK GAAP and US GAAP, including
presentation differences, that are applicable to the Group is set out
below:
(a) GOODWILL AND U.S. PURCHASE ACCOUNTING
Under UK GAAP, purchased goodwill arising in respect of
acquisitions before January 1, 1998 (including any additional
goodwill estimated to arise from contingent capital payments),
when FRS 10 was adopted, was written off to reserves in the
year of acquisition. A charge would be recognised in respect
of any permanent diminution in the value of goodwill
previously written off directly to reserves. Purchased
goodwill arising from acquisitions on or after January 1, 1998
has been capitalised as an intangible fixed asset and
amortised over its useful economic life. In the year following
an acquisition, or if there is an indication that goodwill or
intangible assets have been impaired, management reviews the
carrying value of goodwill and identifiable intangibles for
impairment by a comparison of the carrying amount of an asset
to future net cash flows expected to be generated by the
asset. If such assets are considered to be impaired, the
impairment to be recognised is measured by the amount by which
the carrying amount of the assets exceed the fair value of the
assets.
Under UK GAAP the gain or loss on disposal is calculated after
taking account of goodwill previously written off to reserves
for acquisitions prior to January 1,1998. Under US GAAP, the
gain or loss on disposal is calculated after taking account of
any related unamortised goodwill and intangible assets. For
acquisitions on or after January 1, 1998 the profit or loss on
disposal under both US and UK GAAP is calculated after taking
account of unamortised goodwill and intangible assets.
Under US GAAP, goodwill and identifiable intangible assets
acquired are capitalised and amortised against income;
identified intangible assets acquired in business combinations
which are accounted for under the purchase method, are being
amortised over their economic lives of 5 years and the
remaining goodwill amortised over 5 years. In addition to
systematic amortisation, management also review on an annual
basis the carrying value of goodwill and identifiable
intangibles for impairment by a comparison of the carrying
amount of an asset to future net cash flows expected to be
generated by the asset. If such assets are considered to be
impaired, the impairment to be recognised is measured by the
amount by which the carrying amount of the assets exceeds the
fair value of the assets.
F-33
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Notes to Combined Financial Statements
(b) DEFERRED TAXATION
UK GAAP requires that no provision for deferred taxation
should be recorded if there is reasonable evidence that such
taxation will not be payable in the foreseeable future.
Deferred tax assets are only recognised when they are expected
to be recoverable without replacement by equivalent deferred
tax assets.
US GAAP requires full provision of deferred taxation
liabilities and permits deferred tax assets to be recognised
if their realization is considered to be more likely than not.
There are no differences in respect of deferred taxation
presented in the reconciliation below because the Group has
net deferred tax assets and considers that it is more likely
than not that they will not be recovered.
(c) REVENUE RECOGNITION
UK GAAP requires that revenue be recognised based on an
assessment of the substance of a transaction and whether the
transaction has given rise to new assets or liabilities for
the reporting entity or has changed the entity's existing
assets or liabilities. Where a transaction incorporates one or
more options, guarantees or conditional provisions, their
commercial effect should be assessed in the context of all the
aspects and implications of the transaction, including
assessment of the inherent risks and the likelihood of those
risks having a commercial effect in practice, in order to
determine what assets and liabilities arise from the
transaction. Furthermore, in order to recognise
assets/liabilities arising from a transaction there must be
sufficient evidence of the existence of these items and their
monetary amount must be measurable with sufficient
reliability.
US GAAP has specific revenue recognition criteria that apply
to the sale of software products. In particular, where
software and other services are sold as part of a bundled
contract US GAAP prescribes rules as to the allocation of
revenue between the elements of the contract based on vendor
specific objective evidence of the fair value of each element
of the contract. US GAAP allows that, where vendor specific
objective evidence of fair values exists in respect of all
undelivered elements of a contract (i.e. elements where the
seller has commitments for future performance) but not in
respect of delivered elements, revenue can be recognised in
respect of the delivered elements using the residual method
(i.e. the fair value of the undelivered elements is deferred
and the balance of the fee is recognised in respect of the
delivered elements). Where the residual method is followed,
any discounts given must be allocated entirely against the
delivered elements of the contract.
Furthermore, if payment of a significant portion of a software
licensing fee is not due until after expiration of the license
or more than twelve months after delivery, the licensing fee
should be presumed not to be fixed or determinable unless this
presumption may be overcome by evidence that the vendor has a
standard business practice of using long-term or installment
contracts and has a history of successfully collecting under
the original payment terms without making concessions. If it
cannot be concluded that a fee is fixed or determinable at the
outset of an arrangement, revenue should be recognised as
payments from customers become due (assuming all other
conditions for revenue recognition have been satisfied).
F-34
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Notes to Combined Financial Statements
(d) RESTRUCTURING ACTIONS AND ASSET IMPAIRMENTS
Under UK GAAP, the point of time at which a restructuring
provision can be recognised arises when an entity establishes
a constructive obligation to carry out the restructuring
actions. A constructive obligation arises only when an entity
has created a formal plan in specified detail and has raised a
valid expectation in those affected by the restructuring that
it will be carried out. Such an expectation can be created
either by commencing the actions or by publicly announcing the
plan to those affected by it.
Under US GAAP, commitment to a restructuring action occurs
when management having the appropriate level of authority
approves and commits to the actions, a sufficiently detailed
plan exists setting out all the significant steps to complete
the plan and commencement and completion of the plan are such
that changes in the plan are not likely. In addition, in order
to recognise restructuring costs in respect of involuntary
employee redundancies the redundancy benefit package must be
communicated to the employees affected in sufficient detail to
enable them to determine the type and amount of the benefit
that they will receive if made redundant.
Under UK GAAP where assets are impaired as a direct result of
a restructuring action and the requirements to recognise a
provision for other costs of that restructuring action have
been met then the impairment to the asset's value should be
recognised.
Under US GAAP, where it is intended that an asset will be
abandoned or disposed of as a result of restructuring actions
an immediate impairment to the asset's value as a result of
these actions should be recognised only if management has the
current ability to remove the asset from use. Where an asset
cannot currently be removed from operations, management must
assess the recoverability of the asset's carrying amount and
reconsider its expected useful life and salvage value to
assess the appropriate depreciation charge up to the period
that it can be considered as being held for abandonment or
disposal.
F-35
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Notes to Combined Financial Statements
(e) CASH FLOWS
The Consolidated Cash Flow Statement is prepared in accordance
with Financial Reporting Standard No. 1 (revised) `Cash Flow
Statements' ("FRS 1"). Its objectives and principles are
similar to those set out in SFAS 95. The principal difference
between the standards relates to classification. Under FRS 1,
the Group presents its cash flows for: (a) operating
activities; (b) exceptional non-operating items; (c) dividends
from associated undertakings; (d) returns on investments and
servicing of finance; (e) taxation; (f) capital expenditure
and financial investment; (g) acquisition and disposals; (h)
equity dividend paid; and (i) financing. SFAS 95 requires only
three categories of cash flow activity:(a) operating; (b)
investing; and (c) financing. Cash flows from exceptional
non-operating items, dividends from associated undertakings,
returns on investments and servicing of finance, and taxation
shown under FRS 1 would be included as operating activities
under SFAS 95. The payment of dividends would be included as a
financing activity under SFAS 95. Changes in overdrafts are
included within cash equivalents under FRS 1 and would be
considered a financing activity under SFAS 95. Under US GAAP,
capital expenditure and financial investment and acquisitions
and disposals are reported within investing activities. Had
overdrafts been shown as a financing activity in the
Consolidated Cash Flow Statement the overdrafts (drawn) repaid
would have been $nil million. $nil million and $nil million in
the years ended December 31, 1999, 1998 and 1997 respectively.
Under UK GAAP, short-term investments include short-term money
market deposits of $nil million in 1999, $nil million in 1998
and $nil million in 1997 that would be classified as cash
equivalents under US GAAP.
(f) STATEMENT OF COMPREHENSIVE INCOME
Under UK GAAP, the Group presents a statement of Total
Recognised Gains and losses, which is equivalent to a
Statement of Comprehensive Income under US GAAP.
F-36
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Notes to Combined Financial Statements
(g) PROSPECTIVE ACCOUNTING CHANGES
In June 1998, the FASB issued Statement of Financial
Accounting Standards, ("SFAS") No. 133, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. SFAS No. 133
establishes accounting and reporting standards for derivative
financial instruments and hedging activities related to those
instruments, as well as other hedging activities. Because the
Group does not currently hold any derivative instruments and
does not engage in hedging activities, the Group expects that
SFAS No. 133 would not create significant differences between
its financial position, results of operations or cash flows
prepared on UK GAAP and US GAAP bases. SFAS No. 133 would
apply to the Group in respect of its year ending December 31,
2000 in accordance with SFAS No. 137, which delays the
required implementation of SFAS No. 133 for one year.
In December 1999, the Securities and Exchange Commission
issued Staff Accounting Bulletin ("SAB") 101, REVENUE
RECOGNITION IN FINANCIAL STATEMENTS, which provides guidance
related to revenue recognition based on interpretations and
practices followed by the SEC. SAB 101 was effective the first
fiscal quarter of fiscal years beginning after December 15,
1999 and requires companies to report any changes in revenue
recognition as cumulative change in accounting principle at
the time of implementation in accordance with Accounting
Principles Board Opinion 20, "ACCOUNTING CHANGES." In March
2000, the SEC issued SAB 101A, "AMENDMENT: REVENUE RECOGNITION
IN FINANCIAL STATEMENTS," and in June 2000, the SEC issued SAB
101B, "SECOND AMENDMENT: REVENUE RECOGNITION IN FINANCIAL
STATEMENTS," which delay the implementation of SAB 101 until
the Group's year ending December 31, 2000. The Group expects
that SAB 101 would not create significant differences between
its financial position, results of operations or cash flows
prepared on UK GAAP and US GAAP bases.
In March 2000, the FASB issued Interpretation No. 44, ("FIN
44"), ACCOUNTING FOR CERTAIN TRANSACTIONS INVOLVING STOCK
COMPENSATION - AN INTERPRETATION OF APB 25. This
Interpretation clarifies (a) the definition of employee for
purposes of applying Opinion 25, (b) the criteria for
determining whether a plan qualifies as a non compensatory
plan, (c) the accounting consequence of various modifications
to the terms of a previously fixed stock option or award, and
(d) the accounting for an exchange of stock compensation
awards in a business combination. This Interpretation is
effective July 1, 2000, but certain conclusions in this
Interpretation cover specific events that occur after either
December 15, 1998, or January 12, 2000. To the extent that
this Interpretation covers events occurring during the period
after December 15, 1998, or January 12, 2000, but before the
effective date of July 1, 2000, the effects of applying this
Interpretation are recognised on a prospective basis from July
1, 2000. The Group expects that FIN 44 would not create
significant differences between its financial position,
results of operations or cash flows prepared on UK GAAP and US
GAAP bases.
The Group does not believe that the effect of the adoption of
FRS 16 "Current Taxation" for UK GAAP purposes in the year
ending December 31, 2000 will be material.
F-37
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Notes to Combined Financial Statements
Effects on net earnings of differences between US and UK GAAP:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1999 1998
$000 $000
------------------- -------------------
<S> <C> <C> <C>
Profit/(loss) for the year
in conformity with
UK GAAP (27,065) (4,742)
US GAAP adjustments:
Amortization of re-instated
goodwill (a) (7,684) (8,295)
Amortization of intellectual
property rights (a) (5,137) (5,137)
Impairment of goodwill (a) 1,375 (1,375)
Current year revenue
recognition adjustments (c) 2,999 (2,450)
Charges for restructuring (d) 1,350 --
Impairments arising from
restructuring (d) 1,196 --
------------------- -------------------
Profit/(loss) for the year in
conformity with US GAAP (32,966) (21,999)
=================== ===================
</TABLE>
Due to the availability of tax losses within the Group, the
above adjustments would not give rise to deferred tax
differences between US and UK GAAP financial statements.
F-38
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Notes to Combined Financial Statements
Cumulative effect on shareholders' funds of differences between US and
UK GAAP:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1999 1998
$000 $000
---------------- --------------
<S> <C> <C> <C>
Shareholders' funds in conformity with UK
GAAP (48,257) (22,987)
US GAAP adjustments:
Reinstate goodwill and intellectual
property rights written off
directly to reserves (a) 67,160 67,160
Cumulative amortization charges - in
respect of reinstated goodwill and
intellectual property rights (a) (49,793) (38,347)
Cumulative effect of revenue
recognition adjustments: (d)
Deferred revenue (69) (2,835)
Accounts receivable (79) (374)
Restructuring provision (e) 2,546 --
---------------- --------------
Shareholders' funds in conformity
with US GAAP (28,492) 2,617
================ ==============
</TABLE>
F-39
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Combined Profit and Loss Account
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
BEFORE ----------------------------------
EXCEPTIONAL EXCEPTIONAL 2000 1999
ITEMS ITEMS TOTAL TOTAL
$000 $000 $000 $000
---------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
Turnover of continuing operations 8,438 -- 8,438 9,869
Cost of sales (512) -- (512) (770)
---------------- ---------------- --------------- ----------------
Gross profit 7,926 -- 7,926 9,099
---------------- ---------------- --------------- ----------------
Administrative expenses:
Amortisation of goodwill and
intangible fixed assets (610) -- (610) (2,108)
Research and development (3,436) -- (3,436) (3,436)
Selling and other administration
costs (3,643) (4,083) (7,726) (10,135)
---------------- ---------------- --------------- ----------------
Operating loss 237 (4,083) (3,846) (6,580)
================ ================ --------------- ----------------
Interest receivable and similar income -- 22
Interest payable and similar charges (805) (164)
--------------- ----------------
Loss on ordinary activities before
taxation (4,651) (6,722)
Tax on loss on ordinary activities (17) (212)
--------------- ----------------
Loss for the financial period
transferred to reserves (4,668) (6,934)
=============== ================
</TABLE>
All amounts relate to continuing operations. There were no operations
acquired in 2000.
F-40
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Combined Balance Sheet
<TABLE>
<CAPTION>
JUNE 30,
--------------------------------------
2000 1999
$000 $000
------------------ -----------------
<S> <C> <C>
Fixed assets:
Intangible assets -- 7,392
Tangible assets 2,037 2,809
------------------ -----------------
2,037 10,201
Current assets:
Stock 56 89
Debtors 6,624 14,169
Cash at bank and in hand 816 3,414
------------------ -----------------
7,496 17,672
Creditors: amounts falling due within one year (60,893) (53,514)
------------------ -----------------
Net current liabilities (53,397) (35,842)
------------------ -----------------
Total assets less current liabilities (51,360) (25,641)
Creditors: amounts falling due after more than one year -- (1,328)
Provisions for liabilities and charges (1,241) --
------------------ -----------------
Net liabilities (52,601) (26,969)
------------------ -----------------
Capital and reserves:
Called up share capital 1,181 1,181
Share premium account 28,396 28,245
Other reserves 8,271 8,271
Profit and loss account (90,449) (64,666)
------------------ -----------------
Shareholders' funds (52,601) (26,969)
================== =================
</TABLE>
F-41
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Combined Cash Flow Statement
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------------------
2000 1999
$000 $000
------------------- -------------------
<S> <C> <C>
Cash (outflow)/inflow from operating activities (810) 1,654
Returns on investments and servicing of finance (102) (142)
Taxation (17) (212)
Capital expenditure and financial investment (676) (811)
------------------- -------------------
Cash (outflow)/inflow before use of liquid
resources and financing (1,605) 489
Management of liquid resources -- --
Financing -- --
------------------- -------------------
(Decrease)/increase in cash in the period (1,605) 489
=================== ===================
</TABLE>
Combined Statements of Total
Recognised Gains and Losses
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------------------
2000 1999
$000 $000
------------------- -------------------
<S> <C> <C>
Loss for the financial period (4,668) (6,934)
Foreign currency translation adjustment 324 2,952
------------------- -------------------
Total recognised losses relating to the period (4,344) (3,982)
=================== ===================
</TABLE>
F-42
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Notes to Combined Financial Statements
June 30, 2000 and 1999
(1) ACCOUNTING POLICIES
The combined profit and loss account and balance sheet for the half
year periods ended June 30, 2000 and June 30, 1999 have been prepared
on a basis consistent with the accounting policies disclosed in the
combined financial statements of the Oxford Molecular Group Software
Division for the three years ended December 31, 1999.
(2) EXCEPTIONAL CHARGES
Exceptional charges represent costs of reorganising the business
operations, including relocation costs and duplicated operating costs.
These costs did not qualify to be recognised as part of the
restructuring provision recorded as of December 31, 1999.
(3) UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The combined financial statements have been prepared in accordance with
United Kingdom generally accepted accounting principles (UK GAAP) which
differ in certain significant respects from generally accepted
accounting principles in the United States of America (US GAAP). A
description of the significant differences between UK GAAP and US GAAP,
including presentation differences, that are applicable to the Group,
is set out in the combined financial statements for the three years
ended December 31, 1999.
Effects on net earnings of differences between US and UK GAAP:
<TABLE>
<CAPTION>
PERIOD ENDED JUNE 30,
------------------------------------
2000 1999
$000 $000
---------------- ----------------
<S> <C> <C>
Loss for the period in conformity
with UK GAAP (4,668) (6,934)
US GAAP adjustments:
Amortization of re-instated
goodwill (2,479) (3,842)
Amortization of intellectual
property rights (2,568) (2,568)
Impairment of goodwill -- 688
Current year revenue recognition
adjustments:
Deferred revenue 69 1,213
Accounts receivable (156) 197
Charges for restructuring (2,546) --
---------------- ----------------
Profit/(loss) for the period in
conformity with US GAAP (12,348) (11,246)
================ ================
</TABLE>
Due to the availability of tax losses within the Group, the above
adjustments would not give rise to deferred tax differences between US
and UK GAAP financial statements.
F-43
<PAGE>
OXFORD MOLECULAR GROUP: SOFTWARE DIVISION
Notes to Combined Financial Statements
June 30, 2000 and 1999
Cumulative effect on shareholders' funds of differences between US and
UK GAAP:
<TABLE>
<CAPTION>
PERIOD ENDED JUNE 30,
----------------------------------
2000 1999
$000 $000
--------------- ---------------
<S> <C> <C>
Shareholders' funds in conformity with
UK GAAP (52,601) (26,969)
US GAAP adjustments:
Reinstate goodwill and intellectual
property rights written off directly
to reserves 67,160 67,160
Cumulative amortization charges - in
respect of reinstated goodwill and
intellectual property rights (54,840) (44,069)
Cumulative effect of revenue recognition adjustments:
Deferred revenue -- (1,622)
Accounts receivable (235) (177)
--------------- ---------------
Shareholders' funds in conformity with
US GAAP (40,516) (5,677)
=============== ===============
</TABLE>
(4) STATUS OF COMBINED FINANCIAL STATEMENTS FOR THE PERIOD ENDED JUNE 30,
2000
The financial information included in these half year combined
financial statements does not comprise statutory financial statements
within the meaning of Section 240 of the United Kingdom Companies act
1985.
F-44
<PAGE>
PHARMACOPEIA, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANICAL INFORMATION
The following unaudited pro forma condensed combined financial
statements give effect to the acquisition by Pharmacopeia
("Acquisition") of the Oxford Molecular Group: Software Division
("Oxford"), which consists of the entire issued share capital of Oxford
Molecular Limited and Chemical Design Holdings plc and all the
outstanding stock of Oxford Molecular Group, Inc.
The unaudited pro forma condensed combined financial information is
based on the consolidated financial statements of Pharmacopeia giving
effect to the Acquisition under the assumptions and adjustments
outlined in the accompanying notes to unaudited pro forma condensed
combined financial information. Such pro forma adjustments are based
upon available information and upon certain assumptions that
Pharmacopeia's management believes are reasonable under the
circumstances. These pro forma financial statements are presented
for illustrative purposes only and therefore are not necessarily
indicative of the operating results or financial position that might
have been achieved had the Acquisition occurred as of an earlier date,
nor are they necessarily indicative of operating results or financial
position which may occur in the future.
The unaudited pro forma condensed combined balance sheet is provided as
of June 30, 2000, giving effect to the Acquisition as though it had
been consummated on that date. The unaudited pro forma combined
condensed statements of operations are provided for the year ended
December 31, 1999 and the six months ended June 30, 2000, giving effect
to the Acquisition as though it had occurred as of January 1, 1999.
Pharmacopeia's condensed financial information included in these pro
forma financial statements is derived from its June 30, 2000 unaudited
consolidated financial statements included in its Form 10-Q for the
same period, and from its December 31, 1999 audited consolidated
financial statements included in its most recent Form 10-K/A. Oxford's
financial information included in these pro forma financial statements
is derived from its June 30, 2000 unaudited combined financial
statements, and from its December 31, 1999 audited combined financial
statements both of which are included as exhibits to this filing.
Oxford's financial statements included in the pro forma information
as of all dates and for all periods presented have been adjusted,
where appropriate, to present Oxford's financial position and
results of operations in accordance with generally accepted
accounting principles in the United States. These adjustments are
more fully described in Oxford's June 30, 2000 unaudited combined
financial statements, and in its December 31, 1999 audited combined
financial statements, both of which are included as exhibits to this
filing.
Pharmacopeia's unaudited condensed consolidated financial statements as
of June 30, 2000 and for the six months then ended, and Oxford's
unaudited combined financial statements as of June 30, 2000 and for the
six months then ended, have been prepared in accordance with generally
accepted accounting principles applicable to interim financial
information, after giving effect to adjustments to present Oxford's
financial statements in accordance with accounting principles in the
United States, and in the opinions of Pharmacopeia's and Oxford's
respective management, include all adjustments necessary for a fair
presentation of financial information for such interim periods.
F-45
<PAGE>
PHARMACOPEIA, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 2000
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
US GAAP PRO FORMA
PHARMACOPEIA OXFORD ADJUSTMENTS ADJUSTMENTS PRO FORMA
---------------------------------------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 65,568 $ 816 - $(19,618) 3 $ 46,766
Marketable securities 112,803 - - - 112,803
Trade receivables, net 19,096 6,624 (235) (250) 2 25,235
Other current assets 3,768 56 - (75) 2 3,749
---------------------------------------------- ------------ ------------
Total current assets 201,235 7,496 (235) (19,943) 188,553
Property and equipment, net 10,883 2,037 - (275) 2 12,645
Capitalized software, net 6,169 - - 11,700 4 17,869
Goodwill and other intangibles, net 23,530 - 12,320 8,923 4 44,773
Other assets 1,108 - - - 1,108
---------------------------------------------- ------------ ------------
Total assets $242,925 $ 9,533 $12,085 $ 405 $264,948
============================================== ============ ============
Current liabilities:
Accounts payable $ 2,904 $ 732 - - $ 3,636
Accrued liabilities 15,024 57,931 - (37,536) 5 35,419
Deferred revenue, current portion 21,425 3,471 - - 24,896
---------------------------------------------- ------------ ------------
Total current liabilities 39,353 62,134 - (37,536) 63,951
Other long term liabilities 262 - - - 262
Deferred revenue - long term 4,846 - - - 4,846
Stockholders' Equity:
Common stock 2 1,181 - (1,181) 1 2
Additional paid in capital 271,484 36,667 - (36,667) 1 271,484
Accumulated deficit (71,777) (90,449) 12,085 75,789 1 (74,352)
Accumulated comprehensive loss (1,245) - - - (1,245)
---------------------------------------------- ------------ ------------
Total stockholders' equity 198,464 (52,601) 12,085 37,941 195,889
---------------------------------------------- ------------ ------------
Total liabilities and stockholders' equity $242,925 $ 9,533 $12,085 $ 405 $264,948
============================================== ============ ============
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined
Financial Information
F-46
<PAGE>
PHARMACOPEIA, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
US GAAP PRO FORMA
PHARMACOPEIA OXFORD ADJUSTMENTS ADJUSTMENTS PRO FORMA
--------------------------------------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue:
Drug discovery services $ 34,581 $ - $ - $ - $ 34,581
Software license, service and other 60,943 18,306 2,999 - 82,248
Hardware 8,435 - - - 8,435
--------------------------------------------- ------------ ------------
Total revenue 103,959 18,306 2,999 - 125,264
Cost of revenue:
Drug discovery services 20,814 - - - 20,814
Software license, service and other 7,430 2,307 5,137 3,900 4 18,774
Hardware 7,512 - - - 7,512
--------------------------------------------- ------------ ------------
Total cost of revenue 35,756 2,307 5,137 3,900 47,100
Gross margin 68,203 15,999 (2,138) (3,900) 78,164
Operating costs and expenses:
Research and development 27,282 11,839 - - 39,121
Sales, general and administrative 40,404 19,115 - 700 4 60,219
Restructuring costs - 3,800 (2,546) - 1,254
Impairment of Goodwill and intangible
fixed assets - 6,471 - - 6,471
Goodwill amortization 368 2,121 6,309 3,829 4 12,627
--------------------------------------------- ------------ ------------
Total operating costs and expenses 68,054 43,346 3,763 4,529 119,692
Operating income (loss) 149 (27,347) (5,901) (8,429) (41,528)
Interest and other income, net 4,122 (76) - (1,663) 6 2,383
--------------------------------------------- ------------ ------------
Income (loss) before provision (benefit)
for income taxes 4,271 (27,423) (5,901) (10,092) (39,145)
Provision (benefit) for income taxes 500 (358) - - 142
--------------------------------------------- ------------ ------------
Net income (loss) $ 3,771 $(27,065) $(5,901) $ (10,092) $ (39,287)
============================================= ============ ============
Earnings per share - basic $ 0.19 ($2.00)
Weighted average shares outstanding - basic 19,684 19,684
Earnings per share - diluted $ 0.19 ($2.00)
Weighted average shares outstanding - diluted 20,294 19,684
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined
Financial Information
F-47
<PAGE>
PHARMACOPEIA, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
US GAAP PRO FORMA
PHARMACOPEIA OXFORD ADJUSTMENTS ADJUSTMENTS PRO FORMA
------------------------------------------ -------------- --------------
<S> <C> <C> <C> <C> <C>
Revenue:
Drug discovery services $ 22,767 $ - $ - $ - $ 22,767
Software license, service and other 26,246 8,438 (87) - 34,597
Hardware 2,728 - - - 2,728
------------------------------------------ -------------- --------------
Total revenue 51,741 8,438 (87) - 60,092
Cost of revenue:
Drug discovery services 12,099 - - - 12,099
Software license, service and other 3,987 512 2,568 1,950 4 9,017
Hardware 2,429 - - - 2,429
------------------------------------------ -------------- --------------
Total cost of revenue 18,515 512 2,568 1,950 23,545
Gross margin 33,226 7,926 (2,655) (1,950) 36,547
Operating costs and expenses:
Research and development 11,790 3,436 - - 15,226
Sales, general and administrative 20,036 3,643 - 350 4 24,029
Restructuring costs - 4,083 2,546 - 6,629
In process R&D write off 6,400 - - - 6,400
Goodwill amortization 1,072 610 2,479 1,914 4 6,075
------------------------------------------ -------------- --------------
Total operating costs and expenses 39,298 11,772 5,025 2,264 58,359
Operating loss (6,072) (3,846) (7,680) (4,214) (21,812)
Interest and other income, net 3,862 (805) - (65) 6 2,992
------------------------------------------ -------------- --------------
Loss before provision for income taxes (2,210) (4,651) (7,680) (4,279) (18,820)
Provision for income taxes 519 17 - - 536
------------------------------------------ -------------- --------------
Net loss $ (2,729) $(4,668) $(7,680) $(4,279) $(19,356)
========================================== ============== ==============
Earnings per share - basic $ (0.12) $ (0.88)
Weighted average shares outstanding - basic 22,051 22,051
Earnings per share - diluted $ (0.12) $ (0.88)
Weighted average shares outstanding - diluted 22,051 22,051
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined
Financial Information
F-48
<PAGE>
PHARMACOPEIA, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANICAL INFORMATION
1. To eliminate Oxford's historical equity accounts. The accumulated deficit
is also adjusted for $2,340,000 of the purchase price representing the
estimated fair value of Oxford's in-process research and development,
which was immediately expensed upon consummation of the acquisition.
2. To adjust certain acquired assets to market value and in the period
subsequent to June 30, 2000 through September 6, 2000 (acquisition date),
Oxford recorded a charge of $250,000 to increase the allowance for
doubtful accounts.
3. To record the portion of the total cash paid to the sellers of
$18,704,000, and cash paid for acquisition costs and expenses of $914,000.
4. Pharmacopeia expects amounts assigned to identifiable intangible assets in
the purchase price allocation to be approximately $32,943,000.
Pharmacopeia expects annual and semi-annual amortization thereof to be
approximately $8,429,000 and $4,214,000, respectively. The identifiable
intangible assets and their value and respective useful lives are as
follows:
<TABLE>
<S> <C> <C>
Existing Technology $11,700,000 3 years
Assembled Work Force 2,100,000 3 years
Goodwill 19,143,000 5 years
</TABLE>
5. To reflect the capitalization of intercompany payables Oxford owed to its
previous parent of $47,251,000, and to record estimated costs of office
consolidations, severance and relocation associated with the acquisition
of $4,308,000.
6. To reduce interest expense related to Oxford interest bearing
liabilities to be repaid soon after the acquisition, and to reflect lost
interest income on cash of $19,618,000 used to complete the acquisition,
and on cash of $6,008,000 which will be used to settle certain liabilities
shortly after the acquisition.
F-49
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
2 Agreement for the sale and purchase of the entire
issued share capital of Oxford Molecular Limited and
Chemical Design Holdings plc and all of the
outstanding stock of Oxford Molecular Group, Inc.
dated August 8, 2000 between Oxford Molecular Group
Plc, Molecular Simulations, Inc. and Pharmacopeia,
Inc. (Filed as an exhibit to Pharmacopeia's Current
Report on Form 8-K filed with the Securities and
Exchange Commission on August 16, 2000, and
incorporated herein by reference.)
23 Consent of KPMG LLP, Independent Auditors.
99 Text of press release, dated September 6, 2000,
issued by Pharmacopeia, Inc. (Filed as an exhibit to
Pharmacopeia's Current Report on Form 8-K filed with
The Securities and Exchange Commission on September
20, 2000, and incorporated herein by reference.)
</TABLE>
