|
|
|
|
|
|
|
|
|
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM 8-K/A
AMENDMENT NO. 1
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 3, 1997
FUISZ TECHNOLOGIES LTD.
(Exact name of registrant as specified in its charter)
DELAWARE 0-27082 52-1579474
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
3810 CONCORDE PARKWAY, SUITE 100
CHANTILLY, VIRGINIA 20151
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (703) 803-3260
================================================================================
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBIT.
This Amendment No. 1 to the current report is filed on Form 8-K/A by
Fuisz Technologies Ltd. (the "Company") and amends the Current Report on Form
8-K filed by the Company dated September 3, 1997. Only those items which are
amended are set forth herein.
(a) Consolidated Financial Statements of Clonmel Healthcare Limited
and Subsidiaries for the years ended 31 December 1996 and 1995:
Report of KPMG
Profit and Loss Accounts for the year ended December 31, 1996
and 1995.
Balance Sheets as of December 31, 1996 and 1995.
Statements of Cash Flows for the year ended December 31, 1996
and 1995.
Notes to the Financial Statements.
(b) Unaudited Consolidated Financial Statements of Clonmel
Healthcare Limited and Subsidiaries for the six months ended
30 June 1997 and 1996:
Unaudited Profit and Loss Accounts for the six months ended
June 30, 1997 and 1996.
Unaudited Balance Sheets as of June 30, 1997 and 1996.
Unaudited Statements of Cash Flows for the six months ended
June 30, 1997 and 1996.
Notes to the Unaudited Financial Statements.
(c) Unaudited Pro Forma Financial Information.
Unaudited Pro Forma Condensed Consolidated Balance Sheets as of
June 30, 1997.
Unaudited Pro Forma Condensed Consolidated Statements of
Operations for the six months ended June 30, 1997.
Unaudited Pro Forma Condensed Consolidated Statements of
Operations for the year ended December 31, 1996.
Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements.
(d) Exhibit.
23.1 Consent of KPMG
2
<PAGE> 3
SIGNATURE
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.
FUISZ TECHNOLOGIES LTD.
Dated: October 3, 1997 By: /s/ PATRICK D. SCRIVENS
--------------------------------
Patrick D. Scrivens
Executive Vice President and
Chief Financial Officer
3
<PAGE> 4
EXHIBIT LIST
<TABLE>
<CAPTION>
Exhibit No. Description Sequentially
Numbered Page
<S> <C>
23.1 Consent of KPMG
</TABLE>
<PAGE> 5
Clonmel Healthcare Limited
and subsidiaries
Consolidated financial statements
YEARS ENDED 31 DECEMBER 1996 AND 1995
<PAGE> 6
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
of Clonmel Healthcare Limited
We have audited the accompanying consolidated balance sheets of Clonmel
Healthcare Limited and subsidiaries ("the Group") as of 31 December 1996 and
1995 and the related consolidated profit and loss accounts, consolidated cash
flow statements for the years ended 31 December 1996 and 1995. These
consolidated financial statements are the responsibility of the management of
Clonmel Healthcare Limited ("the Company"). Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in Ireland which do not differ in any material respects from 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Clonmel Healthcare
Limited as of 31 December 1996 and 1995 and the results of its operations and
cash flows for the years ended 31 December 1996 and 1995 in conformity with
generally accepted accounting principles in Ireland.
Generally accepted accounting principles in Ireland vary in certain significant
respects from generally accepted accounting principles in the United States.
Application of generally accepted accounting principles in the United States
would have affected results of operations and shareholders' equity as of and
for the year ended 31 December 1996 to the extent summarised in Note 28 to the
consolidated financial statements.
KPMG
Chartered Accountants
Registered Auditors
Dublin, Ireland
30 April 1997,
except for note 27
which is as of
30 September 1997
1
<PAGE> 7
Clonmel Healthcare Limited and subsidiaries
Consolidated profit and loss accounts
Years ended 31 December 1996 and 1995
<TABLE>
<CAPTION>
Notes 1996 1995
IR POUND IR POUND
<S> <C> <C> <C>
TURNOVER - CONTINUING OPERATIONS 2 12,288,380 13,352,646
Cost of sales (8,243,492) (8,800,177)
---------- -----------
GROSS PROFIT 4,044,888 4,552,469
Other operating expenses (net) 3 (3,745,134) (3,398,527)
Exceptional item 3 (230,000) -
---------- -----------
OPERATING PROFIT - CONTINUING
OPERATIONS 69,754 1,153,942
Deposit interest receivable 3,910 16,017
Interest payable and similar charges 4 (118,688) (123,079)
---------- -----------
(LOSS)/PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION 5 (45,024) 1,046,880
Tax on (loss)/profit on ordinary activities 7 - (126,833)
(LOSS)/PROFIT FOR THE FINANCIAL YEAR (45,024) 920,047
Dividend paid on non-equity shares (30,750) (29,250)
---------- -----------
RETAINED (LOSS)/PROFIT FOR THE FINANCIAL YEAR (75,774) 890,797
Foreign currency translation adjustment (5,849) 5,405
RETAINED PROFIT AT BEGINNING OF YEAR 3,377,774 2,481,572
Transfer to other reserves 20 (300,000) -
---------- -----------
RETAINED PROFIT AT END OF YEAR 2,996,151 3,377,774
========= =========
</TABLE>
There were no gains or losses in the financial year or the preceding financial
year other than those dealt with in the profit and loss account.
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE> 8
Clonmel Healthcare Limited and subsidiaries
Consolidated balance sheets
at 31 December 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
--------------------------------- ----------------------------
Note IR POUND IR POUND
<S> <C> <C> <C> <C> <C>
FIXED ASSETS
Intangible assets 8
- - Licence and intellectual property costs 473,500 -
- - Deferred product development costs 103,500 70,400
--------- ---------
577,000 70,400
Tangible assets 9 4,249,598 4,182,771
Financial fixed assets 10 53,960 53,960
--------- ---------
4,880,558 4,307,131
CURRENT ASSETS
Stocks 11 1,886,295 1,645,253
Debtors 12 3,783,195 3,941,975
Cash at bank and in hand 153,130 634,865
--------- ---------
5,822,620 6,222,093
CREDITORS: amounts falling due
within one year 13 (3,059,024) (3,155,358)
--------- ---------
NET CURRENT ASSETS 2,763,596 3,066,735
--------- ---------
TOTAL ASSETS LESS CURRENT LIABILITIES 7,644,154 7,373,866
CREDITORS: amounts falling due after
more than one year 14 (998,301) (876,613)
GOVERNMENT GRANTS DEFERRED 17 (851,422) (921,199)
PROVISION FOR LIABILITIES AND CHARGES 18 (163,280) (163,280)
--------- ---------
NET ASSETS 5,631,151 5,412,774
========= =========
CAPITAL AND RESERVES
Called up share capital 19 905,000 605,000
Share premium account 85,000 85,000
Other reserves 20 1,500,000 1,200,000
Retained profits 2,996,151 3,377,774
Capital redemption reserve fund 145,000 145,000
--------- ---------
SHAREHOLDERS' FUNDS
- Equity 4,881,151 4,962,774
- Non-equity 750,000 450,000
--------- ---------
TOTAL SHAREHOLDERS' FUNDS 21 5,631,151 5,412,774
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 9
Clonmel Healthcare Limited and subsidiaries
Consolidated cash flow statements
Years ended 31 December 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
Note IR POUND IR POUND
<S> <C> <C> <C> <C> <C>
CASH INFLOW FROM
OPERATING ACTIVITIES 22 296,365 1,986,245
RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE
Interest received 3,910 16,017
Interest paid (101,758) (98,760)
Interest element of finance
lease payments (16,930) (24,319)
Dividends paid on non-equity shares (30,750) (29,250)
------- -------
NET CASH OUTFLOW FROM
RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE (145,528) (136,312)
TAXATION
Corporation tax paid (163,151) (150,277)
INVESTING ACTIVITIES
Purchase of tangible assets (540,970) (1,295,893)
Licencing and intellectual property costs (200,000) -
Expenditure on product development (78,700) -
Purchase of investments - (32,051)
------- -------
CASH OUTFLOW FROM INVESTING
ACTIVITIES (819,670) (1,327,944)
------- ---------
NET CASH (OUTFLOW)/INFLOW
BEFORE FINANCING (831,984) 371,712
FINANCING
Leasing finance 135,812 -
Grants received (3,835) 124,483
Repayment of bank loans (49,145) (89,944)
Capital element of finance lease payments (101,953) (75,571)
New shares issued 300,000 -
------- -------
CASH INFLOW/(OUTFLOW) FROM FINANCING 280,879 (41,032)
------- -------
(DECREASE)/INCREASE IN CASH
AND CASH EQUIVALENTS 22 (551,105) 330,680
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 10
Clonmel Healthcare Limited and subsidiaries
31 December 1996 and 1995
Notes
forming part of the consolidated financial statements
1 SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies have been applied consistently in
dealing with items which are considered material in relation to the
consolidated financial statements.
GROUP FINANCIAL STATEMENTS
The consolidated financial statements include the results of Clonmel
Healthcare Limited and its subsidiaries, ("the Group" or the "Company") up
to 31 December 1996. The Company, a wholly owned subsidiary of the Cross
Group, the principal activities of which are the manufacture and
distribution of veterinary pharmaceutical products (see Note 27). The
subsidiaries' results have been incorporated into the consolidated
financial statements using the average rate of exchange for the year. The
Group's net investment in subsidiaries is translated using the closing
rate of exchange.
BASIS OF PREPARATION
The financial statements have been prepared in accordance with generally
accepted accounting principles ("GAAP") in Ireland under the historical
cost convention and comply with financial reporting standards of the
Accounting Standards Board, as promulgated by the Institute of Chartered
Accountants in Ireland. Note 28 sets out a summary of significant
differences between Irish and United States GAAP as applicable to the
Group.
TURNOVER
Turnover represents the invoiced value of goods sold during the year
(exclusive of value added tax) to third parties, after deduction of
rebates, allowances and external commissions.
DEPRECIATION
Depreciation is calculated to write off the original cost of assets over
their useful lives on a straight line basis at the following annual rates:
<TABLE>
<S> <C>
Long leasehold land Nil
Long leasehold buildings 2.5%
Plant and machinery 12.5%
Office equipment 12.5%
Motor vehicles 30%
</TABLE>
FINANCIAL FIXED ASSETS
Financial fixed assets are shown at cost less provisions for any permanent
diminution in value.
STOCKS
Stocks are valued at the lower of cost and net realisable value on a
first-in, first-out basis. Cost in the case of raw materials comprises
purchase price including duties and freight less trade
5
<PAGE> 11
Clonmel Healthcare Limited and subsidiaries
31 December 1996 and 1995
Notes (continued)
discounts and rebates. Cost in the case of work-in-progress and finished
goods includes cost of raw material and labour together with an
appropriate proportion of production overheads.
DERIVATIVE FINANCIAL INSTRUMENTS
The Group does not enter into any transactions involving financial
instruments, including derivatives, for speculative purposes. Gains and
losses on derivative financial instruments are deferred and recognised in
the profit and loss account when realised along with the effects of the
related transactions.
6
<PAGE> 12
Clonmel Healthcare Limited and subsidiaries
31 December 1996 and 1995
Notes (continued)
1 SIGNIFICANT ACCOUNTING POLICIES
GOVERNMENT GRANTS
Capital grants
Capital grants are shown as deferred income and credited to the profit
and loss account in equal annual instalments over the anticipated lives of
the relevant fixed assets.
Revenue grants
Training grants and product and process development grants are credited to
the profit and loss account in the period in which the expenditure to
which they relate is incurred.
FOREIGN CURRENCIES
Monetary assets and liabilities denominated in foreign currencies are
translated at the rate ruling at the balance sheet date. Gains or losses
on exchange are dealt with in the profit and loss account.
LEASED ASSETS
Expenditure on operating leases is charged to the profit and loss account
on a straight line basis over the lease period. Assets held under finance
leases are capitalised in the balance sheet and are depreciated on a
straight line basis over their useful lives. The interest element of the
leasing obligation is charged to the profit and loss account over the
period of the lease in proportion to the balances outstanding.
RESEARCH AND DEVELOPMENT
Development expenditure incurred in bringing specific products or projects
to the stage prior to commercial production is deferred where the
directors are satisfied as to its future recoverability. The expenditure
is thereafter amortised over the estimated life of the product or the
period of the contract to which the expenditure relates. Accordingly the
unamortised balance is not considered to be a reduction of distributable
profits.
LICENCE AGREEMENTS AND INTELLECTUAL PROPERTY
Initial payments under various product related licence agreements and
payments for the purchase of intellectual property are capitalised as an
intangible fixed asset and are amortised on a straight line basis over the
expected useful lives (currently estimated at 5 years) of the assets
concerned.
TAXATION
The charge for taxation is based on the results for the year.
Full provision for deferred taxation is made in respect of the tax effect
of all timing differences likely to arise in the forseeable future.
7
<PAGE> 13
Clonmel Healthcare Limited and subsidiaries
31 December 1996 and 1995
Notes (continued)
PENSIONS
Certain employees of the Company participate in the defined benefit
pension scheme of its parent, the Cross Group. The Company makes
contributions to this defined benefit pension scheme which is funded on an
annual premium method basis. Annual contributions are charged to the
profit and loss account as incurred. Pension costs are determined by an
actuary by reference to a funding plan and funding assumptions. The
regular pension cost is expressed as a substantially level proportion of
current and expected future pensionable payroll. The Company also
operates a defined contribution scheme, the costs of which are charged to
the profit and loss account as they arise.
2 TURNOVER
<TABLE>
<CAPTION>
1996 1995
The analysis of turnover by IR POUND IR POUND
geographical area is as follows:
<S> <C> <C>
Ireland 5,412,819 5,671,850
Export 6,875,561 7,680,796
---------- ----------
12,288,380 13,352,646
========== ==========
</TABLE>
All turnover derives from manufacture and distribution of pharmaceutical
products.
3 OTHER OPERATING EXPENSES (NET)
<TABLE>
<CAPTION>
1996 1995
IR POUND IR POUND
<S> <C> <C>
Distribution costs 1,908,595 1,676,499
Administrative expenses - other 996,478 1,058,678
- exceptional 230,000 -
Research and development expenses 906,001 757,456
--------- ---------
4,041,074 3,492,633
Other operating income (65,940) (94,106)
--------- ---------
3,975,134 3,398,527
========= =========
</TABLE>
8
<PAGE> 14
Clonmel Healthcare Limited and subsidiaries
31 December 1996 and 1995
Notes (continued)
The exceptional item above relates to estimated legal costs incurred in
defending an action in the High Court taken by patentees in appealing a
decision by the Controller of Patents, Trademarks and Designs to grant the
company a licence under Section 42 of the Irish Patents Act 1964 to make,
use and vend a certain patented substance. The High Court ruled against
the Controller and the Company on a preliminary issue of law. The Company
is considering an appeal to the Supreme Court.
4 INTEREST PAYABLE AND SIMILAR CHARGES
<TABLE>
<CAPTION>
1996 1995
IR POUND IR POUND
<S> <C> <C>
Interest payable on bank loans, overdrafts and
other loans wholly repayable within five years 77,624 72,923
Interest payable on bank loans repayable
after five years 24,134 25,837
Lease and hire purchase charges 16,930 24,319
------- -------
118,688 123,079
======= =======
</TABLE>
9
<PAGE> 15
Clonmel Healthcare Limited and subsidiaries
31 December 1996 and 1995
Notes (continued)
5 STATUTORY AND OTHER INFORMATION
<TABLE>
<CAPTION>
1996 1995
IR POUND IR POUND
<S> <C> <C>
Government capital grants released 65,942 94,106
DIRECTORS' EMOLUMENTS
Fees - -
Other emoluments including pension contributions 92,065 87,226
Depreciation of tangible fixed assets 474,143 498,984
Amortisation of intangible fixed assets 86,100 -
Auditors' remuneration (including expenses) 20,500 20,500
Operating lease rentals 75,337 86,763
======= =======
</TABLE>
6 STAFF MEMBERS AND COSTS
The average number of employees (including executive directors) during the
year, analysed by category, was as follows:
<TABLE>
<CAPTION>
1996 1995
NUMBER Number
<S> <C> <C>
Production 123 121
Distribution 8 8
Sales 21 22
Research and development 19 20
Administration 13 13
--- ---
184 184
=== ===
The aggregate payroll costs of these
employees were as follows:
1996 1995
IR POUND IR POUND
Wages and salaries 2,849,647 2,921,575
Social welfare costs 286,005 310,099
Other pension costs 150,866 111,362
--------- ---------
3,286,518 3,343,036
========= =========
</TABLE>
10
<PAGE> 16
Clonmel Healthcare Limited and subsidiaries
31 December 1996 and 1995
Notes (continued)
7 TAX ON (LOSS)/PROFIT ON ORDINARY ACTIVITIES
<TABLE>
<CAPTION>
1996 1995
IR POUND IR POUND
<S> <C> <C>
Corporation tax - 165,931
Adjustment to prior year - (1,098)
Deferred taxation (Note 18) - (38,000)
------ -------
- 126,833
====== =======
</TABLE>
Corporation tax is calculated on the results for the year, and is reduced
by manufacturing relief and capital allowances.
8 INTANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
Licence Deferred product
& intellectual property development
costs costs Total
IR POUND IR POUND IR POUND
<S> <C> <C> <C>
COST
At 31 December 1995 - 883,597 883,597
Expenditure in year 514,000 78,700 592,700
------- ------- ---------
31 DECEMBER 1996 514,000 962,297 1,476,297
------- ------- ---------
AMORTISATION
At 31 December 1995 - 813,197 813,197
Charged in year 40,500 45,600 86,100
------- ------- ---------
AT 31 DECEMBER 1996 40,500 858,797 899,297
------- ------- ---------
NET BOOK VALUE
AT 31 DECEMBER 1996 473,500 103,500 577,000
======= ======= =========
At 31 December 1995 - 70,400 70,400
======= ======= =========
</TABLE>
Grants received in respect of expenditure incurred to date totalling IR
POUND 713,177 have been credited against deferred product
development costs (see note 23(c)).
The basis of deferral of expenditure is stated in note 1. Research and
development costs amounting to IR POUND 906,001 (1995: IR POUND
757,456 ) incurred during the year have been expensed.
11
<PAGE> 17
Clonmel Healthcare Limited and subsidiaries
31 December 1996 and 1995
Notes (continued)
9 TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
MAIN PLANT ANTIBIOTIC UNIT
----------------------------------------- ------------------------
LONG PLANT,
LEASEHOLD MACHINERY
LAND AND AND MOTOR LEASED PLANT &
BUILDINGS VEHICLES EQUIPMENT BUILDINGS MACHINERY TOTAL
IR POUND IR POUND IR POUND IR POUND IR POUND IR POUND
<S> <C> <C> <C> <C> <C>
COST
At 31 December 1995 1,716,350 2,195,396 642,904 1,339,944 1,274,612 7,169,206
Additions 9,000 264,982 120,892 35,942 110,154 540,970
Disposals - - - - - -
--------- --------- --------- --------- --------- ---------
AT 31 DECEMBER 1996 1,725,350 2,460,378 763,796 1,375,886 1,384,766 7,710,176
--------- --------- --------- --------- --------- ---------
DEPRECIATION
At 31 December 1995 346,070 1,096,719 418,583 152,468 972,595 2,986,435
Charged during year 43,022 220,400 87,003 43,044 80,674 474,143
Disposals - - - - - -
--------- --------- --------- --------- --------- ---------
AT 31 DECEMBER 1996 389,092 1,317,119 505,586 195,512 1,053,269 3,460,578
--------- --------- --------- --------- --------- ---------
NET BOOK VALUE: 1996 1,336,258 1,143,259 258,210 1,180,374 331,497 4,249,598
========= ========= ========= ========= ========= =========
Net book value: 1995 1,370,280 1,098,677 224,321 1,187,484 302,017 4,182,771
========= ========= ========= ========= ========= =========
</TABLE>
12
<PAGE> 18
Clonmel Healthcare Limited and subsidiaries
31 December 1996 and 1995
Notes (continued)
10 FINANCIAL FIXED ASSETS
(a) INVESTMENTS - AT COST
<TABLE>
<CAPTION>
1996 1995
IR POUND IR POUND
<S> <C> <C> <C>
Other investments 53,960 53,960
====== ======
Analysed as follows:
1996 1995
IR POUND IR POUND
Quoted 53,690 53,690
Unquoted 270 270
------ ------
53,960 53,960
====== ======
</TABLE>
In the opinion of the directors the market value of the investments
is not less than the amount at which they are stated.
(b) SUBSIDIARIES
Subsidiary undertakings of the Company are as follows:
<TABLE>
<CAPTION>
SUBSIDIARIES % HOLDING INCORPORATED ACTIVITY
<S> <C> <C> <C>
Crosspharma Limited 100% N.I. Distribution
Pharmacare (Ireland) Limited 100% Ireland Non-trading
Clonmel (UK) Limited 100% U.K. Non-trading
Clonmel Chemicals Inc. 100% U.S.A. Non-trading
Clonmel Pharma KFT 70% Hungary Non-trading
</TABLE>
11 STOCKS
<TABLE>
<CAPTION>
1996 1995
IR POUND IR POUND
<S> <C> <C>
Raw materials and packing 842,500 671,564
Work in progress 107,064 146,997
Finished goods 936,731 826,692
-------- -------
1,886,295 1,645,253
--------- =========
</TABLE>
There are no material differences between the replacement cost of stocks
and the consolidated balance sheet amounts.
13
<PAGE> 19
Clonmel Healthcare Limited and subsidiaries
31 December 1996 and 1995
Notes (continued)
12 DEBTORS
<TABLE>
<CAPTION>
1996 1995
IR POUND IR POUND
<S> <C> <C>
Trade debtors 2,901,523 3,434,813
Amounts owed by Cross Group companies 167,175 60,000
Other debtors 287,609 359,232
Prepayments and accrued income 426,888 87,930
--------- ---------
3,783,195 3,941,975
========= =========
</TABLE>
Other debtors include VAT recoverable of IR POUND 48,828 (1995:IR
POUND 101,405).
13 CREDITORS: amounts falling due within one year
<TABLE>
<CAPTION>
1996 1995
IR POUND IR POUND
<S> <C> <C>
Bank loans and overdrafts
(Secured - Note 15) 490,201 420,831
Trade creditors 1,039,335 1,432,601
Other creditors 469,409 546,281
Amounts owed to Cross Group companies 72,482 39,897
Obligations under finance leases (Note 16) 76,102 83,076
Accruals and deferred income 911,495 632,672
--------- ---------
3,059,024 3,155,358
========= =========
Tax and social welfare included in
other creditors above:
Corporation tax 2,780 165,931
PAYE/PRSI 91,350 119,617
--------- ---------
94,130 285,548
========= =========
</TABLE>
14
<PAGE> 20
Clonmel Healthcare Limited and subsidiaries
31 December 1996 and 1995
Notes (continued)
14 CREDITORS: amounts falling due after more than one year
<TABLE>
<CAPTION>
1996 1995
IR POUND IR POUND
<S> <C> <C>
Bank loans (Note 15) 690,974 740,119
Obligations under finance leases (Note 16) 177,327 136,494
Obligations under licence agreements 130,000 -
------- -------
998,301 876,613
======= =======
</TABLE>
15 DETAILS OF BORROWINGS
<TABLE>
<CAPTION>
Maturity analysis Within Between Between After
one one and two and five
year two years five years years Total
<S> <C> <C> <C> <C> <C>
Repayable other than
by instalments:
Bank overdrafts 424,232 - - - 424,232
Repayable by instalments:
Bank loans 65,969 65,969 521,673 103,332 756,943
------- ------ ------- ------- ---------
AT END OF YEAR 490,201 65,969 521,673 103,332 1,181,175
======= ====== ======= ======= =========
</TABLE>
Bank loans are secured by specific liens and other general liens over the
Group's fixed and current assets.
Details of the Group's bank loans are as follows:
(i) Bank of Ireland Term Loan
At 31 December 1996, the Group had borrowings of IR POUND
261,545 (1995: IR POUND 287,301) arranged through a term
loan with Bank of Ireland. The loan which is denominated in
sterling and amounted to STG POUND 260,000 is repayable in
annual installments through 2003. The loan bears interest at
LIBOR plus 2.5%.
(ii) ICC Bank Section 84 Loan
At 31 December 1996, the Group had Section 84 borrowings with ICC
Bank amounting to IR POUND 323,862 (1995: IR POUND
323,765). This amount is repayable in one payment prior to 31
December 1999. This loan amounted to IR POUND 400,000 when
drawn down. Interest on the loan accrues at a discounted rate which
depends on DIBOR and the Group's profitability.
(iii) ICC Bank Term Loan
At 31 December 1996, the Group had borrowings of IR POUND
171,633 (1995: IR POUND 192,462) arranged through a term
loan with ICC Bank. The loan amounted to STG POUND 250,000 when
drawn down and is repayable in quarterly installments through
January 1997. The loan bears interest at LIBOR plus 3%.
15
<PAGE> 21
Clonmel Healthcare Limited and subsidiaries
31 December 1996 and 1995
Notes (continued)
16 MATURITY OF OBLIGATIONS UNDER FINANCE LEASES
<TABLE>
<CAPTION>
1996 1995
IR POUND IR POUND
<S> <C> <C>
Within one year 90,073 14,605
In second to fifth year 197,305 229,311
------- -------
287,378 243,916
Less: Future finance charges (33,949) (24,346)
-------- -------
253,429 219,570
Included in creditors:
falling due within one year (Note 13) (76,102) (83,076)
------- -------
Falling due after one year (Note 14) 177,327 136,494
======= =======
</TABLE>
17 GOVERNMENT CAPITAL GRANTS DEFERRED
<TABLE>
<CAPTION>
1996 1995
IR POUND IR POUND
<S> <C> <C>
At 1 January 921,199 880,822
Grants receivable (3,835) 134,483
Amortised during year (65,942) (94,106)
------- -------
At 31 December 851,422 921,199
======= =======
</TABLE>
Details of contingencies arising from government grants received are set
out in Note 23(c).
16
<PAGE> 22
Clonmel Healthcare Limited and subsidiaries
31 December 1996 and 1995
Notes (continued)
18 PROVISION FOR LIABILITIES AND CHARGES
<TABLE>
<CAPTION>
1996 1995
IR POUND IR POUND
<S> <C> <C>
DEFERRED TAXATION
At 1 January 163,280 201,280
Released during the year (Note 7) - (38,000)
------- -------
At 31 December 163,280 163,280
======= =======
</TABLE>
The full potential liability for deferred taxation in respect of timing
differences relating to tangible and intangible fixed assets was provided
against at 31 December 1995 and 1996.
19 SHARE CAPITAL
<TABLE>
<CAPTION>
1996 1995
IR POUND IR POUND
<S> <C> <C>
AUTHORISED:
1,200,000 ordinary shares of 25p each 300,000 300,000
======= =======
450,000 6.5% cumulative redeemable
preference shares of IR POUND 1 each 450,000 450,000
======= =======
600,000 3% cumulative redeemable
preference shares of IR POUND 1 each 600,000 -
======= =======
ALLOTTED, CALLED UP AND FULLY PAID:
620,000 ordinary shares of 25p each 155,000 155,000
450,000 6.5% cumulative redeemable
preference shares of IR POUND 1 each 450,000 450,000
300,000 3% cumulative redeemable
preference shares of pound sterling 1 each 300,000 -
======= =======
905,000 605,000
======= =======
</TABLE>
The 6.5% cumulative redeemable preference shares may be redeemed by the
Company at any time. The holders may request redemption of the shares at
any time after 2 October 1998. The redemption price is calculated as the
total amount paid up on the shares at the date of redemption plus any
arrears of preferential dividend.
17
<PAGE> 23
Clonmel Healthcare Limited and subsidiaries
31 December 1996 and 1995
Notes (continued)
19 SHARE CAPITAL (continued)
The 3% cumulative redeemable preference shares were issued for cash at par
on 31 October 1996 and may be redeemed by the Company as follows:
DATE NO. OF SHARES
31 October 2002 300,000
The redemption price is calculated as the total amount paid up on the
shares at the date of redemption plus any arrears of preferential
dividend. The holders of these shares are entitled to receive dividends
in priority to the payment of dividends to ordinary shareholders
The holders of cumulative redeemable preference shares are entitled to
receive dividends in priority to the payment of dividends to any other
class of shares. In the event of a winding up, they have the right to the
repayment of capital and any accrued dividends in priority to any payments
to other shareholders.
20 OTHER RESERVES
<TABLE>
<CAPTION>
1996 1995
IR POUND IR POUND
<S> <C> <C>
At 1 January 1,200,000 1,200,000
Transfer from revenue reserve 300,000 -
--------- ---------
At 31 December 1,500,000 1,200,000
========= =========
</TABLE>
In accordance with the terms of an agreement with Forbairt, an Irish
Government industrial development agency, the Group was required to
transfer IR POUND 300,000 to a non distributable capital reserve
being the equivalent of the amount of equity received from Forbairt.
Under the agreement the Company is precluded from distributing this
reserve for the duration of the agreement. The agreement expires in
April 2004.
21 RECONCILIATION OF CONSOLIDATED SHAREHOLDERS' FUNDS AND RESERVE MOVEMENTS
<TABLE>
<CAPTION>
1996 1995
IR POUND IR POUND
<S> <C> <C> <C>
(A) CONSOLIDATED SHAREHOLDERS' FUNDS
Shareholders' funds at beginning of year 5,412,774 4,516,572
Total reserve movements (Note 21(b)) 218,377 896,202
--------- ---------
Shareholders' funds at the end of year 5,631,151 5,412,774
========= =========
</TABLE>
18
<PAGE> 24
Clonmel Healthcare Limited and subsidiaries
31 December 1996 and 1995
Notes (continued)
21 RECONCILIATION OF CONSOLIDATED SHAREHOLDERS' FUNDS AND RESERVE MOVEMENTS
(continued)
(B) RESERVE MOVEMENTS
<TABLE>
<CAPTION>
CAPITAL SHARE
CALLED UP REDEMPTION OTHER PREMIUM
SHARE CAPITAL RESERVE FUND RESERVES ACCOUNT
IR POUND IR POUND IR POUND IR POUND
<S> <C> <C> <C> <C>
DEALT WITH IN THE
CONSOLIDATED PROFIT
AND LOSS ACCOUNT:
Retained loss for the
financial year - - - -
Foreign exchange
adjustment - - - -
Transfer to undistributable
reserves - - 300,000 -
New shares issued 300,000 - - -
------- ------- --------- ------
Total movements 300,000 - 300,000 -
Reserves at beginning
of year 605,000 145,000 1,200,000 85,000
------- ------- --------- ------
Reserves at end of
year 905,000 145,000 1,500,000 85,000
======= ======= ========= ======
</TABLE>
<TABLE>
<CAPTION>
RETAINED PROFITS TOTAL
IR POUND IR POUND
<S> <C> <C>
DEALT WITH IN THE
CONSOLIDATED PROFIT
AND LOSS ACCOUNT:
Retained loss for the
financial year (75,774) (75,774)
Foreign exchange
adjustment (5,849) (5,849)
Transfer to undistributable
reserves (300,000) -
New shares issued - 300,000
-------- ---------
Total movements (381,623) 218,377
Reserves at beginning
of year 3,377,774 5,412,774
--------- ---------
Reserves at end of
year 2,996,151 5,631,151
========= =========
</TABLE>
22 RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
<TABLE>
<CAPTION>
1996 1995
IR POUND IR POUND
<S> <C> <C>
Operating profit 69,754 1,153,942
Depreciation 474,143 498,984
Amortisation/write off
of development expenditure 86,100 45,600
Amortisation of capital grants (65,942) (94,106)
Foreign exchange (loss)/gain (5,849) 5,405
(Increase)/decrease in stocks (241,042) 62,280
Decrease in debtors 158,780 144,891
(Decrease)/increase in creditors (179,579) 169,249
-------- ---------
Net cash inflow from operating activities 296,365 1,986,245
======== =========
</TABLE>
19
<PAGE> 25
Clonmel Healthcare Limited and subsidiaries
31 December 1996 and 1995
Notes (continued)
22 RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES (continued)
Analysis of changes in cash and cash equivalents as shown in the balance
sheet:
<TABLE>
<CAPTION>
CHANGE
1996 1995 IN YEAR
IR POUND IR POUND IR POUND
<S> <C> <C> <C>
Cash at bank and in hand 153,130 634,865 (481,735)
Bank overdraft (490,201) (420,831) (69,370)
-------- -------- --------
(337,071) 214,034 (551,105)
======== ======== ========
</TABLE>
23 COMMITMENTS AND CONTINGENCIES
(a) CAPITAL COMMITMENTS
Future capital expenditure approved by the directors but not
provided for in these consolidated financial statements is as
follows:
<TABLE>
<CAPTION>
1996 1995
IR POUND 000 IR POUND 000
<S> <C> <C>
Contracted - 136
Authorised but not contracted - 84
--- ---
- 220
=== ===
</TABLE>
OPERATING LEASE COMMITMENTS
Annual commitments exist under non cancellable operating leases on
motor vehicles as follows:
<TABLE>
<CAPTION>
1996 1995
IR POUND IR POUND
<S> <C> <C>
Expiring:
Within one year 53,424 16,676
Between two and five years 47,129 43,393
------- ------
100,553 60,069
======= ======
</TABLE>
The total operating lease rentals for the year were IR POUND
75,337 (1995: IR POUND 86,763).
20
<PAGE> 26
Clonmel Healthcare Limited and subsidiaries
31 December 1996 and 1995
Notes (continued)
23 COMMITMENTS AND CONTINGENCIES (continued)
(b) TREASURY COMMITMENTS
The Group is committed to forward exchange contracts entered into
for 1997 whereby the Group is obliged to sell approximately Stg
POUND 500,000 and under separate contracts to buy US$800,000 in
exchange for Irish pound amounts. The unrealised loss on these
instruments of December 31, 1996 was IR POUND 44,664 which has been
deferred in accordance with the Group's accounting policies.
During 1995 the Group entered into an interest rate swap in
respect of the ICC Bank Term Loan (Note 15), whereby the Group is
committed to pay fixed interest on a principal of Stg POUND
180,000. This contract matures in May 1997.
(c) CONTINGENCIES
Under the terms of agreements entered into with Forbairt, an Irish
Government industrial development agency, a liability would arise
to repay grants totalling approximately IR POUND 400,000 if
certain events occur including the cessation of trade or the
appointment of a liquidator.
The Group is engaged in litigation arising in the ordinary course of
business. Management does not believe that any such litigation
will individually or in the aggregate have a material adverse effect
on the financial position of the Group.
24 PENSIONS
The Group operates three pension schemes the assets of which are vested in
independent trustees for the benefit of employees and dependents.
Employees of the Group participate in a contributory defined benefit
scheme which is operated by the Group's parent, the Cross Group. Pension
costs are assessed in accordance with the advice of a professionally
qualified actuary. The most recent actuarial valuation carried out in
1995 indicated that the scheme was adequately funded on a discontinuance
basis and that at that date the funding rate of 17% of pensionable
salaries, if maintained, would result in the final salary funding level
reaching 100% in approximately 12 years.
The principal actuarial assumptions in calculating the funding rate are:
(a) Pensionable salaries increase by 7% per annum
(b) The funding will earn an investment yield of 8% per annum
(c) At retirement pensions will be purchased at a yield of 8% per annum
The method of funding used is the Projected Unit method. The actuarial
valuation is available for public inspection.
The pension charge for the year amounted to IR POUND 82,000
(1995: IR POUND 80,800).
Separate arrangements which are operated for a limited number of
executives are defined benefit schemes. The charge for the year was IR
POUND 33,000 (1995: IR POUND 30,600).
The most recent actuarial valuation of this scheme was carried out at
1 January 1997 and indicated that the scheme assets at that date were
sufficient to cover 86% of the liabilities arising in the event of
discontinuance of the scheme. Payment of the recommended funding rate of
44% of pensionable salaries will increase this figure to 100% over time.
The principal actuarial assumptions in calculating the funding rate are:
(a) Pensionable salaries increase by 6% per annum
(b) The funding will earn an investment yield of 8% per annum
(c) At retirement, pensions will be purchased at a yield of 7% per annum
The method of funding used is the Aggregate method. The actuarial
valuation is available for inspection to the members of the scheme.
The third scheme, which commenced in 1996, is a defined contribution
scheme for plant employees and pension costs are charged, as incurred,
during the year. The charge for the year was IR POUND 34,789
(1995: IR POUND Nil).
21
<PAGE> 27
Clonmel Healthcare Limited and subsidiaries
31 December 1996 and 1995
Notes (continued)
The pension provision included in the balance sheet at 31 December 1996
amounted to IR POUND 8,000 (1995: IR POUND 3,000).
22
<PAGE> 28
Clonmel Healthcare Limited and subsidiaries
31 December 1996 and 1995
Notes (continued)
25 RELATED PARTY TRANSACTIONS
The company's ultimate parent undertaking is The Cross Group, a company
incorporated in the Republic of Ireland. The largest and smallest group
in which the results of the Company and its subsidiary undertakings are
consolidated is that headed by The Cross Group.
<TABLE>
<CAPTION>
1996 1995
IR POUND IR POUND
<S> <C> <C>
Charges made by The Cross Group 365,000 336,000
======= =======
</TABLE>
These charges represent an allocation of the cost of central services
including management, legal, company secretarial services and the
provision of office accommodation and may not be indicative of the cost of
obtaining these services from a third party.
At 31 December 1996 the Group was owed IR POUND 167,175 (1995: IR
POUND 60,000) from The Cross Group and owed IR POUND 72,425 (1995: IR
POUND 39,897) to The Cross Group which arose from transactions within the
Cross Group. No interest is charged in respect of amounts due to or from
The Cross Group.
26 COMPARATIVE AMOUNTS
Comparative amounts have been restated, where necessary, on the same basis
as those for the current year.
27 SUBSEQUENT EVENT
On 1 September 1997 the whole of the issued share capital of Clonmel
Healthcare Limited was acquired by Fuisz Technologies Limited.
23
<PAGE> 29
Clonmel Healthcare Limited and subsidiaries
31 December 1996 and 1995
Notes (continued)
28 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN IRISH AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
(a) SIGNIFICANT DIFFERENCES
The financial statements of Clonmel Healthcare Limited are prepared in
accordance with generally accepted accounting principles ("GAAP")
applicable in Ireland which differ significantly in certain respects from
those generally accepted in the United States. This summary should not
be taken as a complete list of all differences between Irish GAAP and US
GAAP. The significant differences between Irish GAAP and US GAAP which
affect the Company's net loss and shareholders' funds are set out below:
(i) PRODUCT DEVELOPMENT COSTS
Under Irish GAAP, Clonmel Healthcare Limited capitalises product
development costs as an intangible asset and amortises this asset
by reference to the estimated life of the products or the period
of the contracts to which the expenditure relates. Under US GAAP,
as set out in Statement of Financial Accounting Standards (SFAS)
No. 68 "Research and Development Arrangements," such product
development costs may not be capitalised and should be charged to
expenses as incurred.
(ii) FORWARD EXCHANGE CONTRACTS
Certain outstanding foreign currency forward exchange contracts
which hedge anticipated future transactions and qualify for hedge
accounting treatment under Irish GAAP would not qualify as hedges
under US GAAP. Under US GAAP such contracts should be recorded at
fair value at each balance sheet date based on the forward rates
of exchange ruling at that date and the corresponding unrealised
gain or loss would be included in the determination of net income.
(iii) INVESTMENTS IN MARKETABLE SECURITIES
Under Irish GAAP the Company's investments in financial fixed
assets are carried at the lower of cost and net realisable value.
Under US GAAP these marketable securities have been classified as
"available for sale", and accordingly, the unrealised appreciation
has been recorded as a direct adjustment to shareholders' equity.
24
<PAGE> 30
Clonmel Healthcare Limited and subsidiaries
31 December 1996 and 1995
Notes (continued)
(iv) PREFERENCE SHARES
Under Irish GAAP Redeemable Preference Shares are included in
shareholders' funds and dividends paid or proposed on such shares
are shown as an appropriation of profit. Under US GAAP,
Preference Shares, which have a mandatory redemption date may not
be included in shareholders' equity and are instead classified
outside of shareholders' equity.
25
<PAGE> 31
Clonmel Healthcare Limited and subsidiaries
31 December 1996 and 1995
Notes (continued)
28 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN IRISH AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
(b) NET LOSS UNDER US GAAP
<TABLE>
<CAPTION>
YEAR ENDED
31 DECEMBER
1996
IR POUND
<S> <C>
NET LOSS AS REPORTED IN THE
CONSOLIDATED PROFIT AND LOSS ACCOUNT
IN ACCORDANCE WITH IRISH GAAP (45,024)
ADJUSTMENTS:
Product development costs (33,100)
Unrealised (loss) on
forward exchange contracts (52,661)
Tax effect of above adjustments 10,291
--------
NET LOSS IN ACCORDANCE
WITH US GAAP (120,494)
========
</TABLE>
<TABLE>
<CAPTION>
(c) SHAREHOLDERS' EQUITY
YEAR ENDED
31 DECEMBER
1996
IR POUND
<S> <C> <C>
SHAREHOLDERS' FUNDS AS REPORTED
IN THE CONSOLIDATED BALANCE
SHEET IN ACCORDANCE WITH IRISH GAAP 5,631,151
ADJUSTMENTS:
Non-equity preference shares (750,000)
Product development costs (103,500)
Unrealised loss on forward exchange contracts (44,664)
Unrealised gain on marketable securities 66,362
Tax effect of above adjustments 17,780
---------
SHAREHOLDERS' EQUITY AS ADJUSTED
TO ACCORD WITH US GAAP 4,817,129
=========
</TABLE>
26
<PAGE> 32
Clonmel Healthcare Limited and subsidiaries
31 December 1996 and 1995
Notes (continued)
28 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN IRISH AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
(d) CASH FLOWS
In accordance with Irish GAAP, the Company complies with Financial
Reporting Standard No. 1 - "Cash flow statements" (FRS 1). Its objective
and principles are similar to those set out in SFAS No. 95 "Statement of
Cash Flows". The principal difference between the standards is in respect
of classification. Under FRS 1, the Company presents its cash flows for
(a) operating activities; (b) returns on investments and servicing of
finance; (c) taxation; (d) capital expenditure; (e) acquisitions and
disposals; and (f) financing activities. SFAS No. 95 requires only three
categories of cash flow activity (a) operating activities; (b) investing
activities; and (c) financing activities.
Cash flows arising from taxation and returns on investments and servicing
of finance under FRS 1 would be included as operating activities under
SFAS No .95. In addition, under FRS 1, cash and cash equivalents include
short term borrowings repayable on demand. SFAS No. 95 requires movements
in such borrowings to be included in financing activities. SFAS No. 95
also requires that assets acquired under finance lease be treated as
non-cash transactions.
A summarised consolidated cash flow under US GAAP is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
31 DECEMBER
1996
IR POUND
<S> <C>
Cash (outflow) from operating activities (91,014)
Cash (outflow) from investing activities (605,158)
Cash inflow from financing activities 214,437
--------
(Decrease) in cash and cash equivalents (481,735)
Cash and cash equivalents at beginning of year 634,865
--------
Cash and cash equivalents at end of year 153,130
========
</TABLE>
27
<PAGE> 33
Clonmel Healthcare Limited and subsidiaries
31 December 1996 and 1995
Notes (continued)
28 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN IRISH AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
The following table reconciles cash and cash equivalents as presented
under US GAAP with cash and cash equivalents as presented under Irish
GAAP:
<TABLE>
<CAPTION>
YEAR ENDED
31 DECEMBER
1996
IR POUND
<S> <C>
Cash and cash equivalents under US GAAP 153,130
Bank overdraft (490,201)
--------
Cash and cash equivalents under Irish GAAP (337,071)
========
</TABLE>
28
<PAGE> 34
Clonmel Healthcare Limited
and subsidiaries
Unaudited Consolidated financial statements
SIX MONTH PERIOD ENDED 30 JUNE 1997 AND 1996
1
<PAGE> 35
Clonmel Healthcare Limited and Subsidiaries
Unaudited consolidated profit and loss accounts
for the six month periods ended 30 June 1997 and 30 June 1996
<TABLE>
<CAPTION>
UNAUDITED Unaudited
--------- ---------
SIX MONTH Six month
PERIOD ENDED period ended
30 JUNE 30 June
1997 1996
Notes IR POUND IR POUND
<S> <C> <C> <C>
TURNOVER - CONTINUING OPERATIONS 2 7,048,256 6,430,757
Cost of sales (4,930,471) (4,147,890)
--------------- ---------------
GROSS PROFIT 2,117,785 2,282,867
Other operating expenses (net) 3 (2,275,991) (2,011,472)
--------------- ---------------
OPERATING (LOSS)/PROFIT - CONTINUING OPERATIONS (158,206) 271,395
Deposit interest receivable 3,910 2,413
Interest payable and similar charges 4 (81,357) (78,369)
--------------- ---------------
(LOSS)/PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION 5 (235,653) 195,439
Tax on (loss)/profit on ordinary activities 7 (19,946) (24,430)
--------------- ---------------
(LOSS)/PROFIT FOR THE FINANCIAL PERIOD (255,599) 171,009
Dividend paid on non-equity shares (19,305) (14,618)
--------------- ---------------
RETAINED (LOSS)/PROFIT FOR THE FINANCIAL PERIOD (274,904) 156,391
Foreign currency translation adjustment (10,234) (439)
RETAINED PROFIT AT BEGINNING OF PERIOD 2,996,151 3,377,774
---------------- -----------------
RETAINED PROFIT AT END OF PERIOD 2,711,013 3,533,726
================ ================
</TABLE>
There were no gains or losses in the financial period or the comparative
financial period other than those dealt with in the profit and loss account.
See notes to unaudited consolidated financial statements.
2
<PAGE> 36
Clonmel Healthcare Limited and Subsidiaries
Unaudited consolidated balance sheets
at 30 June 1997 and 30 June 1996
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED
-------------------------------------------- --------------------------------------
30 JUNE 1997 30 June 1996
Notes IR POUND IR POUND
<S> <C> <C> <C> <C> <C>
FIXED ASSETS
Intangible assets 8
- - Licence and intellectual property costs 433,000 -
- - Deferred product development costs 90,900 47,600
---------- ----------
523,900 47,600
Tangible assets 9 4,149,260 4,192,172
Financial fixed assets 10 75,994 53,960
---------- ----------
4,749,154 4,293,732
CURRENT ASSETS
Stocks 11 2,393,932 2,015,347
Debtors 12 4,280,251 4,054,406
Cash at bank and in hand 475,170 355,435
---------- ----------
7,149,353 6,425,188
CREDITORS: amounts falling due
within one year 13 (4,667,303) (3,302,691)
---------- ----------
NET CURRENT ASSETS 2,482,050 3,122,497
---------- ----------
TOTAL ASSETS LESS CURRENT LIABILITIES 7,231,204 7,416,229
CREDITORS: amounts falling due after
more than one year 14 (896,889) (806,824)
GOVERNMENT GRANTS DEFERRED 17 (825,022) (877,399)
PROVISION FOR LIABILITIES AND CHARGES 18 (163,280) (163,280)
---------- ----------
NET ASSETS 5,346,013 5,568,726
========== ==========
CAPITAL AND RESERVES
Called up share capital 19 905,000 605,000
Share premium account 85,000 85,000
Other reserves 20 1,500,000 1,200,000
Retained profit 2,711,013 3,533,726
Capital redemption reserve fund 145,000 145,000
---------- ----------
SHAREHOLDERS' FUNDS
- Equity 4,596,013 5,118,726
- Non-equity 750,000 450,000
--------- ---------
TOTAL SHAREHOLDERS' FUNDS 21 5,346,013 5,568,726
========= =========
</TABLE>
See notes to unaudited consolidated financial statements.
3
<PAGE> 37
Clonmel Healthcare Limited and Subsidiaries
Unaudited consolidated cash flow statements
for the six month periods ended 30 June 1997 and 30 June 1996
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED
---------------------------- --------------------------
SIX MONTH Six month
PERIOD ENDED period ended
30 JUNE 30 June
1997 1996
IR IR IR IR
Notes POUND POUND POUND POUND
<S> <C> <C> <C> <C> <C>
CASH INFLOW FROM OPERATING ACTIVITIES 22 620,954 504,009
RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE
Interest received 3,910 2,413
Interest paid (76,488) (71,128)
Interest element of finance
lease payments (4,869) (7,241)
Dividends paid on non-equity shares (19,305) (14,618)
--------- ---------
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS
AND SERVICING OF FINANCE (96,752) (90,574)
TAXATION
Corporation tax paid - (165,931)
INVESTING ACTIVITIES
Purchase of tangible assets (173,720) (298,584)
Purchase of investments (22,034) -
--------- ---------
CASH OUTFLOW FROM INVESTING ACTIVITIES (195,754) (298,584)
--------- ---------
NET CASH INFLOW/(OUTFLOW) BEFORE FINANCING 328,448 (51,080)
FINANCING
Repayment of bank loans (43,954) (49,667)
Capital element of finance lease payments (41,461) (36,616)
--------- ---------
CASH (OUTFLOW) FROM FINANCING (85,415) (86,283)
--------- ---------
INCREASE/(DECREASE) IN CASH
AND CASH EQUIVALENTS 22 243,033 (137,363)
========= =========
</TABLE>
See notes to unaudited consolidated financial statements.
4
<PAGE> 38
Clonmel Healthcare Limited and Subsidiaries
30 June 1997 and 1996
Notes
on unaudited consolidated financial statements
1 SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies have been applied consistently in
dealing with items which are considered material in relation to the
consolidated unaudited financial statements.
UNAUDITED GROUP FINANCIAL STATEMENTS
The unaudited consolidated financial statements include the results of
Clonmel Healthcare Limited and its subsidiaries (the "Group" or the
"Company"), up to 30 June 1997 and 30 June 1996. The Company
is a wholly owned subsidiary of The Cross Group, the principal activities
of which are the manufacture and distribution of veterinary pharmaceutical
products (see note 26). The subsidiaries' results have been incorporated
into the consolidated unaudited financial statements using the average
rate of exchange. The Group's net investment in subsidiaries is translated
using the closing rate of exchange.
BASIS OF PREPARATION
The unaudited financial statements have been prepared in accordance with
generally accepted accounting principles ('GAAP') in Ireland under the
historical cost convention and comply with financial reporting standards
of the Accounting Standards Board, as promulgated by the Institute of
Chartered Accountants in Ireland. Note 27 sets out a summary of
significant differences between Irish and United States GAAP as applicable
to the Group.
TURNOVER
Turnover represents the invoiced value of goods sold during the period
(exclusive of value added tax) to third parties, after deduction of
rebates, allowances and external commissions.
DEPRECIATION
Depreciation is calculated to write off the original cost of assets over
their useful lives on a straight line basis at the following annual rates:
<TABLE>
<S> <C>
Long leasehold land Nil
Long leasehold buildings 2.5%
Plant and machinery 12.5%
Office equipment 12.5%
</TABLE>
FINANCIAL FIXED ASSETS
Financial fixed assets are shown at cost less provisions for any permanent
diminution in value.
STOCKS
Stocks are valued at the lower of cost and net realisable value on a
first-in, first-out basis. Cost in the case of raw materials comprises
purchase price including duties and freight less trade discounts and
rebates. Cost in the case of work-in-progress and finished goods includes
cost of raw material and labour together with an appropriate proportion of
production overheads.
DERIVATIVES
5
<PAGE> 39
Clonmel Healthcare Limited and Subsidiaries
30 June 1997 and 1996
Notes
on unaudited consolidated financial statements
The Group does not enter into any transactions involving financial
instruments, including derivatives, for speculative purposes. Gains and
losses on derivative financial instruments are recognised along with the
effects of the related transactions in the profit and loss account when
realised as an offset to the related income or expense .
6
<PAGE> 40
Clonmel Healthcare Limited and Subsidiaries
30 June 1997 and 1996
Notes
on unaudited consolidated financial statements
1 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
GOVERNMENT GRANTS
Capital grants
Capital grants are shown as deferred income and credited to the profit
and loss account in equal annual instalments over the anticipated lives of
the relevant fixed assets.
Revenue grants
Training grants and product and process development grants are credited to
the profit and loss account in the period in which the expenditure to
which they relate is incurred.
FOREIGN CURRENCIES
Monetary assets and liabilities denominated in foreign currencies are
translated at the rate ruling at the balance sheet date. Gains or losses
on exchange are dealt with in the profit and loss account.
LEASED ASSETS
Expenditure on operating leases is charged to the profit and loss account
on a straight line basis over the lease period. Assets held under finance
leases are capitalised in the balance sheet and are depreciated on a
straight line basis over their useful lives. The interest element of the
leasing obligation is charged to the profit and loss account over the
period of the lease in proportion to the balances outstanding.
RESEARCH AND DEVELOPMENT
Development expenditure incurred in bringing specific products or projects
to the stage prior to commercial production is deferred where the
directors are satisfied as to its future recoverability. The expenditure
is thereafter amortised over the estimated life of the product or the
period of the contract to which the expenditure relates. Accordingly the
unamortised balance is not considered to be a reduction of distributable
profits.
LICENCE AGREEMENTS AND INTELLECTUAL PROPERTY
Initial payments under various product related licence agreements and
payments for the purchase of intellectual property are capitalised as an
intangible fixed asset and are amortised on a straight line basis over the
expected useful lives (currently estimated at 5 years) of the assets
concerned.
TAXATION
The charge for taxation is based on the results for the period.
Full provision for deferred taxation is made in respect of the tax effect
of all timing differences likely to arise in the forseeable future.
PENSIONS
Certain employees of the Company participate in the defined benefit
pension scheme of its parent,
7
<PAGE> 41
Clonmel Healthcare Limited and Subsidiaries
30 June 1997 and 1996
Notes
on unaudited consolidated financial statements
The Cross Group. The Company makes contributions to this defined
benefit pension scheme which is funded on an annual premium method basis.
Annual contributions are charged to the profit and loss account as
incurred. Pension costs are determined by an actuary by reference to a
funding plan and funding assumptions. The regular pension cost is
expressed as a substantially level proportion of current and expected
future pensionable payroll. The Company also operates a defined
contribution scheme, the costs of which are charged to the profit and loss
account as they arise.
8
<PAGE> 42
Clonmel Healthcare Limited and Subsidiaries
30 June 1997 and 1996
Notes
on unaudited consolidated financial statements
2 TURNOVER
<TABLE>
<CAPTION>
UNAUDITED Unaudited
--------- ---------
SIX MONTH Six month
PERIOD ENDED period ended
30 JUNE 30 June
1997 1996
The analysis of turnover by IR POUND IR POUND
geographical area is as follows:
<S> <C> <C>
Ireland 3,193,677 2,903,131
Export 3,854,579 3,527,626
---------- ----------
7,048,256 6,430,757
---------- ==========
</TABLE>
All turnover derives from manufacture and distribution of pharmaceutical
products.
3 OTHER OPERATING EXPENSES (NET)
<TABLE>
<CAPTION>
UNAUDITED Unaudited
--------- ---------
SIX MONTH Six month
PERIOD ENDED period ended
30 JUNE 30 June
1997 1996
IR POUND IR POUND
<S> <C> <C>
Distribution costs 948,187 994,135
Administrative expenses - other 941,473 516,725
Research and development expenses 412,731 544,412
---------- ----------
2,302,391 2,055,272
Other operating income (26,400) (43,800)
---------- ----------
2,275,991 2,011,472
========== ==========
</TABLE>
9
<PAGE> 43
Clonmel Healthcare Limited and Subsidiaries
30 June 1997 and 1996
Notes
on unaudited consolidated financial statements
4 INTEREST PAYABLE AND SIMILAR CHARGES
<TABLE>
<CAPTION>
UNAUDITED Unaudited
--------- ---------
SIX MONTH Six month
PERIOD ENDED period ended
30 JUNE 30 June
1997 1996
IR POUND IR POUND
<S> <C> <C>
Interest payable on bank loans, overdrafts and
other loans wholly repayable within five years 57,781 46,846
Interest payable on bank loans repayable
after five years 18,707 24,282
Lease and hire purchase charges 4,869 7,241
------- -------
81,357 78,369
======= =======
</TABLE>
5 OTHER INFORMATION
<TABLE>
<CAPTION>
UNAUDITED Unaudited
--------- ---------
SIX MONTH Six month
PERIOD ENDED period ended
30 JUNE 30 June
1997 1996
IR POUND IR POUND
<S> <C> <C>
Auditors' remuneration 12,000 12,000
Directors' emoluments
Fees - -
Other emoluments including
pension contributions 46,030 47,940
Government capital grants released 26,400 43,800
Depreciation of tangible fixed assets 274,058 289,183
Amortisation of intangible fixed assets 53,100 22,800
Operating lease rentals 41,614 40,436
======= =======
</TABLE>
10
<PAGE> 44
Clonmel Healthcare Limited and Subsidiaries
30 June 1997 and 1996
Notes
on unaudited consolidated financial statements
6 STAFF MEMBERS AND COSTS
The average number of employees (including executive directors) during
the period, analysed by category, was as follows:
<TABLE>
<CAPTION>
UNAUDITED Unaudited
--------- ---------
SIX MONTH Six month
PERIOD ENDED period ended
30 JUNE 30 June
1997 1996
NUMBER Number
<S> <C> <C>
Production 110 122
Distribution 8 8
Sales 23 23
Research and development 20 20
Administration 11 13
---- ----
172 186
==== ====
</TABLE>
<TABLE>
<CAPTION>
The aggregate payroll costs of these
employees were as follows:
IR IR
POUND POUND
<S> <C> <C>
Wages and salaries 1,406,427 1,440,066
Social welfare costs 135,083 146,375
Other pension costs 84,320 76,115
---------- ----------
1,625,830 1,662,556
========== ==========
</TABLE>
7 TAX ON (LOSS)/PROFIT ON ORDINARY ACTIVITIES
<TABLE>
<CAPTION>
UNAUDITED Unaudited
--------- ---------
SIX MONTH Six month
PERIOD ENDED period ended
30 JUNE 30 June
1997 1996
IR POUND IR POUND
<S> <C> <C>
Corporation tax 19,946 24,430
Deferred taxation (Note 18) - -
------ ------
19,946 24,430
====== ======
</TABLE>
Corporation tax is calculated on the results for the period, and is
reduced by manufacturing relief and capital allowances.
11
<PAGE> 45
Clonmel Healthcare Limited and Subsidiaries
30 June 1997 and 1996
Notes
on unaudited consolidated financial statements
8 INTANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
Licence Deferred product
& intellectual property development
costs costs Total
IR POUND IR POUND IR POUND
<S> <C> <C> <C>
COST
At beginning of period 514,000 962,297 1,476,297
Expenditure in period - - -
-------- -------- ----------
AT END OF PERIOD 514,000 962,297 1,476,297
-------- -------- ----------
AMORTISATION
At beginning of period 40,500 858,797 899,297
Charged in period 40,500 12,600 53,100
-------- -------- ----------
AT END OF PERIOD 81,000 871,397 952,397
-------- -------- ----------
NET BOOK VALUE:
AT 30 JUNE 1997 433,000 90,900 523,900
======== ======== ==========
At 30 June 1996 - 47,600 47,600
======== ======== ==========
</TABLE>
Grants received in respect of expenditure incurred to date totalling IR
POUND 581,177 have been credited against deferred product
development costs (see note 23 (e)).
The basis of deferral of expenditure is stated in note 1. Research and
development costs amounting to IR POUND 412,731 (1996: IR POUND
544,412) incurred during the period have been expensed.
12
<PAGE> 46
Clonmel Healthcare Limited and Subsidiaries
30 June 1997 and 1996
Notes
on unaudited consolidated financial statements
9 TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
MAIN PLANT ANTIBIOTIC UNIT
LONG PLANT,
LEASEHOLD MACHINERY 30 JUNE 30 JUNE
LAND AND AND MOTOR LEASED PLANT & 1997 1996
BUILDINGS VEHICLES EQUIPMENT BUILDINGS MACHINERY TOTAL TOTAL
IR POUND IR POUND IR POUND IR POUND IR POUND IR POUND IR POUND
<S> <C> <C> <C> <C> <C> <C> <C>
COST
At beginning of period 1,725,350 2,460,378 763,796 1,375,886 1,384,766 7,710,176 7,169,206
Additions 80,334 92,405 - - 981 173,720 298,584
--------- --------- ------- --------- ------- --------- ---------
AT END OF PERIOD 1,805,684 2,552,783 763,796 1,375,886 1,385,747 7,883,896 7,467,790
--------- --------- ------- --------- ------- --------- ---------
DEPRECIATION
At beginning of period 389,092 1,317,119 505,586 195,512 1,053,269 3,460,578 2,986,435
Charged during period 22,199 132,999 41,460 21,600 55,800 274,058 289,183
--------- --------- ------- --------- ------- --------- ---------
AT END OF PERIOD 411,291 1,450,118 547,046 217,112 1,109,069 3,734,636 3,275,618
--------- --------- ------- --------- ------- --------- ---------
NET BOOK VALUE:
AT 30 JUNE 1997 1,394,393 1,102,665 216,750 1,158,774 276,678 4,149,260
========= ========= ======= ========= ======= ========= =========
At 30 June 1996 1,348,082 1,148,312 187,736 1,186,889 321,153 4,192,172
========= ========= ======= ========= ======= =========
</TABLE>
13
<PAGE> 47
Clonmel Healthcare Limited and Subsidiaries
30 June 1997 and 1996
Notes
on unaudited consolidated financial statements
<TABLE>
<CAPTION>
10 FINANCIAL FIXED ASSETS
UNAUDITED Unaudited
--------- ---------
30 JUNE 1997 30 June 1996
IR POUND IR POUND
(a) INVESTMENTS - AT COST
<S> <C> <C>
Other investments 75,994 53,960
====== ======
ANALYSED AS FOLLOWS:
<CAPTION>
30 JUNE 30 June
1997 1996
IR POUND IR POUND
<S> <C> <C>
Quoted 75,724 53,690
Unquoted 270 270
------- -------
75,994 53,960
======= =======
</TABLE>
In the opinion of the directors the market value of the investments
is not less than the amount at which they are stated.
(b) SUBSIDIARIES
Subsidiary undertakings of the Company are as follows:
<TABLE>
<CAPTION>
SUBSIDIARIES % HOLDING INCORPORATED ACTIVITY
<S> <C> <C> <C>
Crosspharma Limited 100% N.I. Distribution
Pharmacare (Ireland) Limited 100% Ireland Non-trading
Clonmel (UK) Limited 100% U.K. Non-trading
Clonmel Chemicals Inc. 100% U.S.A. Non-trading
Clonmel Pharma KFT 70% Hungary Non-trading
</TABLE>
11 STOCKS
<TABLE>
<CAPTION>
UNAUDITED Unaudited
--------- ---------
30 JUNE 1997 30 June 1996
IR POUND IR POUND
<S> <C> <C>
Held at period end 2,393,932 2,015,347
========= =========
</TABLE>
There are no material differences between the replacement cost of stocks
and the consolidated balance sheet amounts.
14
<PAGE> 48
Clonmel Healthcare Limited and Subsidiaries
30 June 1997 and 1996
Notes
on unaudited consolidated financial statements
12 DEBTORS
<TABLE>
<CAPTION>
UNAUDITED Unaudited
--------- ---------
30 JUNE 1997 30 June 1996
IR POUND IR POUND
<S> <C> <C>
Trade debtors 3,068,623 3,127,102
Amounts owed by Cross Group companies 142,808 168,391
Other debtors 173,565 95,989
Prepayments and accrued income 895,255 662,924
---------- ----------
4,280,251 4,054,406
========== ==========
</TABLE>
Other debtors include VAT recoverable of IR POUND 76,713 (1996:IR
POUND 71,876).
13 CREDITORS: amounts falling due within one year
<TABLE>
<CAPTION>
UNAUDITED Unaudited
--------- ---------
30 JUNE 1997 30 June 1996
IR POUND IR POUND
<S> <C> <C>
Bank loans and overdrafts
(Secured - Note 15) 572,155 278,765
Trade creditors 1,726,133 1,765,197
Other creditors 1,033,078 505,248
Amounts owed to Cross Group companies 157,987 103,347
Obligations under finance
leases (Note 16) 89,152 66,591
Accruals and deferred income 1,088,798 583,543
---------- ----------
4,667,303 3,302,691
========== ==========
Tax and social welfare included in
other creditors above:
Corporation tax 22,726 24,430
PAYE/PRSI 76,958 83,388
---------- ----------
99,684 107,818
========== ==========
</TABLE>
15
<PAGE> 49
Clonmel Healthcare Limited and Subsidiaries
30 June 1997 and 1996
Notes
on unaudited consolidated financial statements
14 CREDITORS: amounts falling due after more than one year
<TABLE>
<CAPTION>
UNAUDITED Unaudited
--------- ---------
30 JUNE 30 June
1997 1996
IR POUND IR POUND
<S> <C> <C>
Bank loans (Note 15) 644,073 690,461
Obligations under finance leases (Note 16) 122,816 116,363
Obligations under licence agreements 130,000 -
-------- --------
896,889 806,824
======== ========
</TABLE>
15 DETAILS OF BORROWINGS
<TABLE>
<CAPTION>
(i) Maturity analysis Within Between Between After
30 June 1997 one one and two and five
year two years five years years Total
<S> <C> <C> <C> <C> <C>
Repayable other than
by instalments
Bank overdrafts 503,239 - - - 503,239
Repayable by instalments
Bank loans 68,916 68,914 530,515 44,644 712,989
-------- ------- -------- ------- ----------
AT END OF PERIOD 572,155 68,914 530,515 44,644 1,216,228
======== ======= ======== ======= ==========
</TABLE>
Bank loans are secured by specific liens and other general liens
over the Group's fixed and current assets.
<TABLE>
<CAPTION>
(ii) Maturity analysis Within Between Between After
30 June 1996 one one and two and five
year two years five years years Total
<S> <C> <C> <C> <C> <C>
Repayable other than
by instalments:
Bank overdrafts 215,358 - - - 215,358
Repayable by
instalments:
Bank loans 63,407 63,407 190,221 436,833 753,868
------- ------ ------- ------- -------
AT END OF PERIOD 278,765 63,407 190,221 436,833 969,226
============ ============= ============== ========= =============
</TABLE>
Bank loans are secured by specific liens and other general liens
over the Group's fixed and current assets.
16
<PAGE> 50
Clonmel Healthcare Limited and Subsidiaries
30 June 1997 and 1996
Notes
on unaudited consolidated financial statements
15 DETAILS OF BORROWINGS
Details of the Group's bank loans are as follows:
(i) Bank of Ireland Term Loan
At 30 June 1997, the Group had borrowings of IR POUND 228,804
(1996: IR POUND 251,388) arranged through a term loan with Bank
of Ireland. The loan which is denominated in Sterling and amounted
to STG POUND 260,000 is repayable in annual installments through
2003. The loan bears interest at LIBOR plus 2.5%.
(ii) ICC Bank Section 84 Loan
At 30 June 1997, the Group had Section 84 borrowings with ICC Bank
amounting to IR POUND 323,862 (1996: IR POUND 323,765). This
amount is repayable in one payment prior to 31 December 1999.
This loan amounted to IR POUND 400,000 when drawndown. Interest on
the loan accrues at a discounted rate which depends on DIBOR
and the Group's profitability.
(iii) ICC Bank Term Loan
At 30 June 1997, the Group had borrowings of IR POUND 160,420
(1996: IR POUND 178,715) arranged through a term loan with ICC
Bank. The loan amounted to STG POUND 250,000 when drawndown and is
repayable in quarterly installments through 30 January 1997.
The loan bears interest at LIBOR plus 3%.
16 MATURITY OF OBLIGATIONS UNDER FINANCE LEASES
<TABLE>
<CAPTION>
UNAUDITED Unaudited
--------- ---------
30 JUNE 30 June
1997 1996
IR POUND IR POUND
<S> <C> <C>
Within one year 90,073 14,605
In second to fifth year 146,584 187,442
--------- --------
236,657 202,047
Less: Future finance charges (24,689) (19,093)
--------- --------
211,968 182,954
Included in creditors:
Falling due within one year (Note 13) (89,152) (66,591)
--------- --------
Falling due after one year (Note 14) 122,816 116,363
========= ========
</TABLE>
17
<PAGE> 51
Clonmel Healthcare Limited and Subsidiaries
30 June 1997 and 1996
Notes
on unaudited consolidated financial statements
17 GOVERNMENT CAPITAL GRANTS DEFERRED
<TABLE>
<CAPTION>
UNAUDITED Unaudited
--------- ---------
30 JUNE 30 June
1997 1996
IR POUND IR POUND
<S> <C> <C>
At beginning of period 851,422 921,199
Amortised during period (26,400) (43,800)
-------- --------
AT END OF PERIOD 825,022 877,399
======== ========
</TABLE>
Details of contingencies arising from government grants received are set
out in note 23(e).
18 PROVISION FOR LIABILITIES AND CHARGES
<TABLE>
<CAPTION>
UNAUDITED Unaudited
--------- ---------
30 JUNE 30 June
1997 1996
IR POUND IR POUND
<S> <C> <C>
DEFERRED TAXATION
At beginning of period 163,280 163,280
Charged during the period (Note 7) - -
-------- --------
AT END OF PERIOD 163,280 163,280
======== ========
</TABLE>
The full potential liability for deferred taxation in respect of timing
differences relating to tangible and intangible fixed assets was provided
against at 30 June 1997 and 30 June 1996.
18
<PAGE> 52
Clonmel Healthcare Limited and Subsidiaries
30 June 1997 and 1996
Notes
on unaudited consolidated financial statements
19 SHARE CAPITAL
<TABLE>
<CAPTION>
UNAUDITED Unaudited
--------- ---------
30 JUNE 30 June
1997 1996
IR POUND IR POUND
<S> <C> <C>
AUTHORISED:
1,200,000 ordinary shares of 25p each 300,000 300,000
======== ========
450,000 6.5% cumulative redeemable
preference shares of IR POUND 1 each 450,000 450,000
======== ========
600,000 3% cumulative redeemable
preference shares of IR POUND 1 each 600,000 -
======== ========
ALLOTTED, CALLED UP AND FULLY PAID:
620,000 ordinary shares of 25p each 155,000 155,000
450,000 6.5% cumulative redeemable
preference shares of IR POUND 1 each 450,000 450,000
300,000 3% cumulative redeemable
preference shares of IR POUND 1 each 300,000 -
-------- --------
905,000 605,000
======== ========
</TABLE>
The 6.5% cumulative redeemable preference shares may be redeemed by the
company at any time. The holders may request redemption of the shares at
any time after 2 October 1998. The redemption price is calculated as the
total amount paid up on the shares at the date of redemption plus any
arrears of preferential dividend.
The 3% cumulative redeemable preference shares were issued for cash at par
on 31 October 1996 and may be redeemed by the company as follows:
<TABLE>
<CAPTION>
DATE NO. OF SHARES
<S> <C>
31 October 2002 300,000
</TABLE>
The redemption price is calculated as the total amount paid up on the
shares at the date of redemption plus any arrears of preferential
dividend, declared or not. The holders of these shares are entitled to
receive dividends in priority to the payment of dividends to ordinary
shareholders
19
<PAGE> 53
Clonmel Healthcare Limited and Subsidiaries
30 June 1997 and 1996
Notes
on unaudited consolidated financial statements
The holders of cumulative redeemable preference shares are entitled to
receive dividends in priority to the payment of dividends to any other
class of shares. In the event of a winding up, they have the right to the
repayment of capital and any accrued dividends in priority to any payments
to other shareholders.
20
<PAGE> 54
Clonmel Healthcare Limited and Subsidiaries
30 June 1997 and 1996
Notes
on unaudited consolidated financial statements
20 OTHER RESERVES
GROUP AND COMPANY
<TABLE>
<CAPTION>
UNAUDITED Unaudited
--------- ---------
30 JUNE 30 June
1997 1996
IR POUND IR POUND
<S> <C> <C>
At beginning and end of period 1,500,000 1,200,000
========= =========
</TABLE>
In accordance with the terms of an agreement with Forbairt, an Irish
Government industrial development agency, the Company was required to
transfer IR POUND 300,000 to a non distributable capital reserve
being the equivalent of the amount of equity received from Forbairt.
Under the agreement the Company is precluded from distributing this
reserve for the duration of the agreement. The agreement expires in
April 2004.
21 RECONCILIATION OF CONSOLIDATED SHAREHOLDERS' FUNDS AND RESERVE MOVEMENTS
<TABLE>
<CAPTION>
UNAUDITED Unaudited
--------- ---------
30 JUNE 30 June
1997 1996
IR POUND IR POUND
<S> <C> <C> <C>
(a) CONSOLIDATED SHAREHOLDERS' FUNDS
Shareholders' funds at beginning of period 5,631,151 5,412,774
Total reserve movements (Note 21(b)) (285,138) 155,952
---------- ----------
Shareholders' funds at end of period 5,346,013 5,568,726
========== ==========
</TABLE>
21
<PAGE> 55
Clonmel Healthcare Limited and Subsidiaries
30 June 1997 and 1996
Notes
on unaudited consolidated financial statements
21 RECONCILIATION OF CONSOLIDATED SHAREHOLDERS' FUNDS AND RESERVE MOVEMENTS
(CONTINUED)
(b) RESERVE MOVEMENTS
(i) Six months ended 30 June 1997
<TABLE>
<CAPTION>
CAPITAL SHARE
CALLED UP REDEMPTION OTHER PREMIUM
SHARE CAPITAL RESERVE FUND RESERVES ACCOUNT RETAINED PROFIT TOTAL
IR POUND IR POUND IR POUND IR POUND IR POUND IR POUND
<S> <C> <C> <C> <C> <C> <C>
DEALT WITH IN THE
CONSOLIDATED PROFIT
AND LOSS ACCOUNT:
Retained loss for the
financial period - - - - (274,904) (274,904)
Foreign exchange
adjustment - - - - (10,234) (10,234)
-------- -------- ---------- ------- ---------- ----------
Total movements - - - - (285,138) (285,138)
Reserves at beginning
of period 905,000 145,000 1,500,000 85,000 2,996,151 5,631,151
-------- -------- ---------- ------- ---------- ----------
Reserves at end of
period 905,000 145,000 1,500,000 85,000 2,711,013 5,346,013
======== ======== ========== ======= ========== ==========
</TABLE>
(ii) Six months ended 30 June 1996
<TABLE>
<CAPTION>
CAPITAL SHARE
CALLED UP REDEMPTION OTHER PREMIUM
SHARE CAPITAL RESERVE FUND RESERVES ACCOUNT RETAINED PROFIT TOTAL
IR POUND IR POUND IR POUND IR POUND IR POUND IR POUND
<S> <C> <C> <C> <C> <C> <C>
DEALT WITH IN THE
CONSOLIDATED PROFIT
AND LOSS ACCOUNT:
Retained profit for the
financial period - - - - 156,391 156,391
Foreign exchange
adjustment - - - - (439) (439)
-------- -------- ---------- ------- ---------- ----------
Total movements - - - - 155,952 155,952
Reserves at beginning
of period 605,000 145,000 1,200,000 85,000 3,377,774 5,412,774
-------- -------- ---------- ------- ---------- ----------
Reserves at end of
period 605,000 145,000 1,200,000 85,000 3,533,726 5,568,726
======= ======= ========= ====== ========= =========
</TABLE>
22
<PAGE> 56
Clonmel Healthcare Limited and Subsidiaries
30 June 1997 and 1996
Notes
on unaudited consolidated financial statements
22 RECONCILIATION OF OPERATING (LOSS)/PROFIT TO NET CASH INFLOW FROM
OPERATING ACTIVITIES
<TABLE>
<CAPTION>
UNAUDITED Unaudited
--------- ---------
SIX MONTH Six month
PERIOD ENDED period ended
30 JUNE 30 June
1997 1996
IR POUND IR POUND
<S> <C> <C>
Operating (loss)/profit (158,206) 271,395
Depreciation 274,058 289,183
Amortisation of development expenditure 53,100 22,800
Amortisation of capital grants (26,400) (43,800)
Foreign exchange (loss) (10,234) (439)
(Increase) in stocks (507,637) (370,094)
(Increase) in debtors (497,056) (112,431)
Increase in creditors 1,493,329 447,395
---------- ---------
Net cash inflow from operating activities 620,954 504,009
========== =========
</TABLE>
Analysis of changes in cash and cash equivalents as shown in the balance
sheet:
SIX MONTHS ENDED 30 JUNE 1997:
<TABLE>
<CAPTION>
UNAUDITED
---------
30 JUNE 31 December CHANGE
1997 1996 IN PERIOD
IR POUND IR POUND IR POUND
<S> <C> <C> <C>
Cash at bank and in hand 475,170 153,130 322,040
Bank overdraft (503,239) (424,232) (79,007)
--------- --------- --------
Cash and cash equivalents (28,069) (271,102) 243,033
========= ========= ========
</TABLE>
SIX MONTHS ENDED 30 JUNE 1996:
<TABLE>
<CAPTION>
UNAUDITED
---------
30 JUNE 31 December CHANGE
1996 1995 IN PERIOD
IR POUND IR POUND IR POUND
<S> <C> <C> <C>
Cash at bank and in hand 355,435 634,865 (279,430)
Bank overdraft (215,358) (357,425) 142,067
-------- -------- --------
Cash and cash equivalents 140,077 277,440 (137,363)
======== ======== ========
</TABLE>
23
<PAGE> 57
Clonmel Healthcare Limited and Subsidiaries
30 June 1997 and 1996
Notes
on unaudited consolidated financial statements
23 COMMITMENTS AND CONTINGENCIES
(a) CAPITAL COMMITMENTS
Future capital expenditure approved by the directors but not
provided for in these consolidated financial statements is as
follows:
<TABLE>
<CAPTION>
UNAUDITED Unaudited
--------- ---------
30 JUNE 30 June
1997 1996
IR POUND 000 IR POUND 000
<S> <C> <C>
Contracted - -
Authorised but not contracted 375 -
---- ---
375 -
==== ===
</TABLE>
(b) OPERATING LEASE COMMITMENTS
Annual commitments exist under non cancellable operating leases on
motor vehicles as follows:
<TABLE>
<CAPTION>
UNAUDITED Unaudited
--------- ---------
30 JUNE 30 June
1997 1996
IR POUND IR POUND
<S> <C> <C>
Expiring:
Within one year 59,261 43,388
Between two and five years 53,601 45,261
-------- -------
112,862 88,649
======== =======
</TABLE>
(c) TREASURY COMMITMENTS
The Group is committed to forward exchange contracts entered into
for 1997 whereby it is obliged to sell Stg POUND 128,340 (1996:
Stg883,908) and under separate contracts to buy US$200,000 (1996:
US$600,000) in exchange for Irish pound amounts. The unrealised
loss on these instruments at 30 June 1997 was IR POUND 7,915 (1996:
gain IR POUND 9,737) and has been deferred in accordance with the
Group's accounting policies.
During 1995 the Group entered into an interest rate swap, whereby
the Group is committed to pay fixed interest on a principal of Stg
POUND 180,000. This contract matured in May 1997.
24
<PAGE> 58
Clonmel Healthcare Limited and Subsidiaries
30 June 1997 and 1996
Notes
on unaudited consolidated financial statements
(d) RAW MATERIAL COMMITMENTS
At 30 June 1997 the Company had agreed to purchase specified raw
materials at contracted prices on 31 July 1997 for a total
consideration of US$200,000 (1996: US$Nil).
25
<PAGE> 59
Clonmel Healthcare Limited and Subsidiaries
30 June 1997 and 1996
Notes
on unaudited consolidated financial statements
23 COMMITMENTS AND CONTINGENCIES (CONTINUED)
(e) CONTINGENCIES
Under the terms of agreements entered into with Forbairt, an
Irish Government industrial development agency, under which the
company received grants a liability would arise to repay grants
totalling approximately IR POUND 400,000 if certain events
occur including the cessation of trade or the appointment of a
liquidator.
The Group is engaged in litigation arising in the ordinary course of
business. Management does not believe that any such litigation will
individually or in the aggregate have a material adverse effect on
the financial position of the Group.
24 PENSIONS
The Group operates three pension schemes the assets of which are vested in
independent trustees for the benefit of the employees and dependents.
Employees of the Group participate in a contributory defined benefit scheme
which is operated by the Group's parent, the Cross Group. Pension costs
are assessed in accordance with the advice of a professionally qualified
actuary. The most recent actuarial valuation carried out on 1 August
1995 indicated that the scheme was adequately funded on a discontinuance
basis and that at that date the funding rate of 17% of pensionable
salaries, if maintained, would result in the final salary funding level
reaching 100% in approximately 12 years.
The principal actuarial assumptions in calculating the funding rate are:
(a) Pensionable salaries increase by 7% per annum
(b) The funding will earn an investment yield of 8% per annum
(c) At retirement pensions will be purchased at a yield of 8% per annum
The method of funding used is the Projected Unit method. The actuarial
valuation is available for public inspection.
The pension charge for the period amounted to IR POUND 45,200
(1996: IR POUND 42,900).
Separate arrangements which are operated for a limited number of
executives are defined benefit schemes. The pension charge in the period
for these schemes amounted to IR POUND 17,000 (1996: IR POUND
17,000).
The most recent actuarial valuation of this scheme was carried out at 1
January 1997 and indicated that the scheme assets at that date were
sufficient to cover 86% of the liabilities arising in the event of
discontinuance of the scheme. Payment of the recommended funding rate of
44% of pensionable salaries will increase this figure to 100% over time.
The principal actuarial assumptions in calculating the funding rate are
(a) Pensionable salaries increase by 6% per annum
(b) The funding will earn an investment yield of 8% per annum
(c) At retirement pensions will be purchased at a yield of 7% per annum
The method of funding used is the Aggregate method. The actuarial
valuation is available for inspection to the members of the scheme.
The third scheme, which commenced in 1996, is a defined contribution
scheme for plant employees and pension costs are charged, as incurred,
during the period. The charge for the period was IR POUND 22,576
(1996: IR POUND 16,117).
The pension provision included in the balance sheet at 30 June 1997
amounted to IR POUND 18,000 (1996: IR POUND 7,500).
26
<PAGE> 60
Clonmel Healthcare Limited and Subsidiaries
30 June 1997 and 1996
Notes
on unaudited consolidated financial statements
25 RELATED PARTY TRANSACTIONS
The Company's ultimate parent undertaking is The Cross Group, a company
incorporated in the Republic of Ireland. The largest and smallest group in
which the results of the Company and its subsidiary undertakings are
consolidated is that headed by The Cross Group.
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED
--------- ---------
SIX MONTHS SIX MONTHS
ENDED ENDED
30 JUNE 30 JUNE
1997 1996
IR POUND IR POUND
<S> <C> <C>
Charges made by The Cross Group 228,185 189,736
======= =======
</TABLE>
These charges represent an allocation of the cost of central services
including management, legal, company secretarial services and the
provision of office accommodation and may not be indicative of the cost of
obtaining these services from a third party.
At 30 June 1997 the Group was owed IR POUND 142,808 (1996: IR
POUND 168,391) from The Cross Group and owed IR POUND 157,987
(1996: IR POUND 103,347) to The Cross Group which arose from transactions
within the Cross Group. No interest is charged in respect of amounts due
to or from The Cross Group.
26 POST BALANCE SHEET EVENT
On 1 September 1997 the whole of the issued share capital of the company
was acquired by Fuisz Technologies Limited.
27 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN IRISH AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
(a) SIGNIFICANT DIFFERENCES
The unaudited financial statements of Clonmel Healthcare Limited are
prepared in accordance with generally accepted accounting principles
("GAAP") applicable in Ireland which differ significantly in certain
respects from those generally accepted in the United States. This summary
should not be taken as a complete list of all differences between Irish
GAAP and US GAAP. The significant differences between Irish GAAP and US
GAAP which affect the Company's net profit and shareholders' funds are set
out below:
(i) PRODUCT DEVELOPMENT COSTS
27
<PAGE> 61
Clonmel Healthcare Limited and Subsidiaries
30 June 1997 and 1996
Notes
on unaudited consolidated financial statements
Under Irish GAAP, Clonmel Healthcare Limited capitalises product
development costs as an intangible asset and amortises this asset
by reference to the estimated life of the products or the period
of the contracts to which the expenditure relates. Under US GAAP,
as set out in Statement of Financial Accounting Standards (SFAS)
No. 68 'Research and Development Arrangements,' such product
development costs may not be capitalised and should be charged to
expenses as incurred.
28
<PAGE> 62
Clonmel Healthcare Limited and Subsidiaries
30 June 1997 and 1996
Notes
on unaudited consolidated financial statements
27 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN IRISH AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)
(ii) FORWARD EXCHANGE CONTRACTS
Certain outstanding foreign currency forward exchange contracts
which hedge anticipated future transactions and qualify for hedge
accounting treatment under Irish GAAP would not qualify as hedges
under US GAAP. Under US GAAP such contracts should be recorded at
fair value at each balance sheet date based on the forward rates
of exchange ruling at that date and the corresponding unrealised
gain or loss would be included in the determination of net income.
(iii) INVESTMENTS IN MARKETABLE SECURITIES
Under Irish GAAP the company's investments in marketable
securities are carried at the lower of cost and net realisable
value. Under US GAAP these marketable securities have been
classified as'available for sale', and accordingly, the unrealised
appreciation has been recorded as a direct adjustment to
shareholders' equity.
(iv) PREFERENCE SHARES
Under Irish GAAP Redeemable Preference Shares are included in
shareholders' funds and dividends paid or proposed on such shares
are shown as an appropriation of profit. Under US GAAP,
Preference Shares, which have a mandatory redemption date may not
be included in shareholders' equity and are instead classified
outside of shareholders' equity.
29
<PAGE> 63
Clonmel Healthcare Limited and Subsidiaries
30 June 1997 and 1996
Notes
on unaudited consolidated financial statements
27 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN IRISH AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)
(b) NET (LOSS)/PROFIT UNDER US GAAP
<TABLE>
<CAPTION>
UNAUDITED Unaudited
--------- ---------
SIX MONTH Six month
PERIOD ENDED period ended
30 JUNE 30 June
1997 1996
IR POUND IR POUND
<S> <C> <C>
NET(LOSS)/PROFIT AS REPORTED IN THE
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
IN ACCORDANCE WITH IRISH GAAP (255,599) 171,009
ADJUSTMENTS:
Product development costs 12,600 22,800
Unrealised gain on foreign exchange contracts 36,749 1,740
Tax effect of above adjustments (5,922) (2,945)
--------- --------
NET (LOSS)/PROFIT IN ACCORDANCE
WITH US GAAP (212,172) 192,604
========= ========
</TABLE>
30
<PAGE> 64
Clonmel Healthcare Limited and Subsidiaries
30 June 1997 and 1996
Notes
on unaudited consolidated financial statements
27 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN IRISH AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)
(c) SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNAUDITED Unaudited
--------- ---------
AS OF As of
30 JUNE 30 June
1997 1996
IR POUND IR POUND
<S> <C> <C>
SHAREHOLDERS' FUNDS AS REPORTED
IN THE CONSOLIDATED BALANCE
SHEET IN ACCORDANCE WITH IRISH GAAP 5,346,013 5,568,726
ADJUSTMENTS:
Product development costs (90,900) (47,600)
Unrealised (loss)/gain on forward
exchange contracts (7,915) 9,737
Unrealised gain on marketable securities 74,806 75,566
Preference shares (750,000) (450,000)
Tax effect of above adjustments 11,858 4,544
--------- ----------
SHAREHOLDERS' EQUITY AS ADJUSTED
TO ACCORD WITH US GAAP 4,583,862 5,160,973
========= ==========
</TABLE>
(d) CASH FLOWS
In accordance with Irish GAAP, the Company complies with Financial
Reporting Standard No. 1 - "Cash flow statements" (FRS 1). Its objective
and principles are similar to those set out in SFAS No. 95 "Statement of
Cash Flows". The principal difference between the standards is in respect
of classification. Under FRS 1, the Company presents its cash flows for
(a) operating activities; (b) returns on investments and servicing of
finance; (c) taxation; (d) capital expenditure; (e) acquisitions and
disposals; and (f) financing activities. SFAS No. 95 requires only three
categories of cash flow activity (a) operating; (b) investing; and (c)
financing.
Cash flows arising from taxation and returns on investments and servicing
of finance under FRS 1 would be included as operating activities under
SFAS No .95. In addition, under FRS 1, cash and cash equivalents include
short term borrowings repayable on demand. SFAS No. 95 requires movements
in such borrowings to be included in financing activities. SFAS No. 95 also
requires that assets acquired under finance lease be treated as non-cash
transactions.
31
<PAGE> 65
Clonmel Healthcare Limited and Subsidiaries
30 June 1997 and 1996
Notes
on unaudited consolidated financial statements
27 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN IRISH AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)
A summarised consolidated cash flow under US GAAP is as follows:
<TABLE>
<CAPTION>
UNAUDITED Unaudited
--------- ---------
SIX MONTH Six month
PERIOD ENDED period ended
30 JUNE 30 June
1997 1996
IR POUND IR POUND
<S> <C> <C>
Cash inflow from operating activities 524,202 247,504
Cash (outflow) from investing activities (195,754) (298,584)
Cash (outflow) from financing activities (6,408) (228,350)
-------- ---------
Increase/(decrease) in cash and cash equivalents 322,040 (279,430)
Cash and cash equivalents at beginning of period 153,130 634,865
-------- ---------
Cash and cash equivalents at end of period 475,170 355,435
======== =========
</TABLE>
The following table reconciles cash and cash equivalents as presented
under US GAAP with cash and liquid resources and restricted bank balances
as presented under Irish GAAP:
<TABLE>
<CAPTION>
30 JUNE 30 June
1997 1996
IR POUND 000 IR POUND 000
<S> <C> <C>
Cash and cash equivalents under US GAAP 475,170 355,435
Bank overdraft (503,239) (215,358)
--------- ---------
Cash and cash equivalents under Irish GAAP (28,069) 140,077
========= =========
</TABLE>
32
<PAGE> 66
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial
statements are based on the historical consolidated financial statements of
Fuisz Technologies Ltd. and the historical financial statements of Clonmel
Healthcare Limited ("Clonmel"). The unaudited pro forma adjustments are based
upon available information and certain assumptions that management of the
Company believes are reasonable. These pro forma financial statements have
been prepared to illustrate the effects of the consummation of the acquisition
of Clonmel by the Company. The pro forma financial information and accompanying
notes thereto should be read in conjunction with the historical consolidated
financial statements of the Company and historical financial statements of
Clonmel.
The unaudited pro forma condensed consolidated balance sheet as of June
30, 1997 has been prepared as if the acquisition of Clonmel had occurred on
that date. The unaudited pro forma condensed consolidated statements of
operations for the six month period ended June 30, 1997 and the year ended
December 31, 1996 give effect to the acquisition of Clonmel as if it had
occurred on January 1, 1996 and carried forward through the interim period
presented.
The unaudited pro forma condensed consolidated financial statements do not
purport to be indicative of what the Company's consolidated financial position
or consolidated results of operations would actually have been had the
acquisition been completed on such date, or to project the Company's
consolidated financial position for any future period or the Company's
consolidated results of operations for any future period.
The acquisition will be accounted for as a purchase. The purchase
costs have been allocated to the Company's assets and liabilities based on
their respective fair values. The final allocation of the purchase price is
subject to the receipt of certain information related to the acquired assets,
but that allocation is not expected to differ materially from the preliminary
allocation.
<PAGE> 67
FUISZ TECHNOLOGIES, LTD. AND SUBSIDIARIES AND CLONMEL HEALTHCARE LIMITED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
as of June 30, 1997
(in thousands)
<TABLE>
<CAPTION>
------------------------------------------ ---------------------------------
HISTORICAL FINANCIAL STATEMENTS PRO FORMA FINANCIAL STATEMENTS
------------------------------------------ ---------------------------------
FUISZ TECHNOLOGIES CLONMEL
LTD. AND SUBSIDIARIES HEALTHCARE LIMITED ADJUSTMENTS CONSOLIDATED
--------------------- ------------------ ---------------- --------------
ASSETS (a)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 7,299 $ 720 $ (100)(f) $ 7,919
Marketable securities 35,430 227 (16,522)(m) 19,135
Accounts receivable 2,910 6,486 - 9,396
Inventory 405 3,628 - 4,033
Restricted marketable securities - - 7,226 (m) 7,226
Other current assets 611 - 1,613 (g) 2,224
--------------- ------------- ----------- ------------
Total current assets 46,655 11,061 (7,783) 49,933
Property & equipment 9,381 6,288 - 15,669
Intangibles, net 7,691 656 12,395 (i) 20,742
Restricted marketable securities - - 9,296 (m) 9,296
Other assets 2,723 18 100 (f) 3,501
660 (g)
--------------- ------------- ----------- ------------
Total assets $ 66,450 $ 18,023 $ 14,668 $ 99,141
=============== ============= =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdraft $ - $ 762 $ - $ 762
Line of credit 164 - - 164
Current portion of long-term debt - 239 4,962 (c) 5,201
Accounts payable 2,730 4,421 150 (d) 7,301
Accrued liabilities and other 3,462 259 606 (e) 4,327
Deferred revenue 663 1,402 - 2,065
--------------- ------------- ----------- ------------
Total current liabilities 7,019 7,083 5,718 19,820
--------------- ------------- ----------- ------------
Long-term liabilities:
Notes payable 246 1,359 6,384 (c) 7,989
Deferred revenue - 1,250 - 1,250
Other liabilities - 247 - 247
--------------- ------------- ----------- ------------
Total long-term liabilities 246 2,856 6,384 9,486
--------------- ------------- ----------- ------------
Total liabilities 7,265 9,939 12,102 29,306
--------------- ------------- ----------- ------------
Commitments and contingencies - - - -
Stockholders' equity:
Preferred stock - 1,137 (1,137)(h) -
Common stock 208 235 (235)(h) 218
10 (b)
Additional paid-in capital 93,724 2,622 (2,622)(h) 104,364
10,640 (b)
Deficit accumulated during the development stage (34,747) 4,090 (4,090)(h) (34,747)
Current year (deficit) earnings
--------------- ------------- ----------- ------------
Total stockholders' equity 59,185 8,084 2,566 69,835
--------------- ------------- ----------- ------------
Total liabilities and stockholders' equity $ 66,450 $ 18,023 $ 14,668 $ 99,141
=============== ============= =========== ============
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated
financial statements.
<PAGE> 68
FUISZ TECHNOLOGIES, LTD. AND SUBSIDIARIES AND CLONMEL HEALTHCARE LIMITED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the six months ended June 30, 1997
(in thousands, except per share data)
<TABLE>
<CAPTION>
----------------------------------------- -------------------------------------
HISTORICAL FINANCIAL STATEMENTS PRO FORMA FINANCIAL STATEMENTS
----------------------------------------- -------------------------------------
FUISZ TECHNOLOGIES CLONMEL
LTD. AND SUBSIDIARIES HEALTHCARE LIMITED ADJUSTMENTS CONSOLIDATED
--------------------- ------------------ --------------- ---------------
(j)
<S> <C> <C> <C> <C>
Operating revenues:
Research and development $ 3,572 $ - $ - $ 3,572
Licensing Fees 2,980 - - 2,980
Royalties 460 - - 460
Product sales 733 10,996 - 11,729
------------ ------------ ------------- ------------
Total operating revenues 7,745 10,996 - 18,741
------------ ------------ ------------- ------------
Operating expenses:
Research and development 6,327 626 - 6,953
Selling, general and administrative 4,741 2,908 165 (l) 7,814
Cost of sales 342 7,636 - 7,978
Depreciation and amortization 572 - 310 (k) 882
Other operating expenses 2,400 - - 2,400
------------ ------------ ------------- ------------
Total operating expenses 14,382 11,170 475 26,027
------------ ------------ ------------- ------------
Net operating income (loss) (6,637) (174) (475) (7,286)
Net interest income (expense) 1,350 (120) (276) (n) 954
------------ ------------ ------------- ------------
Net income (loss) before income taxes (5,287) (294) (751) (6,332)
Provision for income taxes - (39) - (39)
------------ ------------ ------------- ------------
Net income (loss) $ (5,287) $ (333) $ (751) $ (6,371)
============ ============ ============= ============
Net income (loss) per common share $ (0.26) $ (0.29)
============ ============
Weighted average common shares and
common share equivalents outstanding 20,719 21,719
============ ============
</TABLE>
<PAGE> 69
FUISZ TECHNOLOGIES, LTD. AND SUBSIDIARIES AND CLONMEL HEALTHCARE LIMITED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the year ended December 31, 1996
(in thousands, except per share data)
<TABLE>
<CAPTION>
-------------------------------------------- ---------------------------------
HISTORICAL FINANCIAL STATEMENTS PRO FORMA FINANCIAL STATEMENTS
-------------------------------------------- ---------------------------------
FUISZ TECHNOLOGIES CLONMEL
LTD. AND SUBSIDIARIES HEALTHCARE LIMITED ADJUSTMENTS CONSOLIDATED
--------------------- -------------------- -------------- ---------------
(j)
<S> <C> <C> <C> <C>
Operating revenues:
Research and development $ 2,426 $ - $ - $ 2,426
Licensing Fees 5,760 - - 5,760
Royalties 292 - - 292
Product sales 48 19,659 - 19,707
----------- ------------ ---------- ------------
Total operating revenues 8,526 19,659 - 28,185
----------- ------------ ---------- ------------
Operating expenses:
Research and development 8,740 1,502 - 10,242
Selling, general and administrative 8,862 4,894 1,613 (l) 15,369
Cost of sales - 13,271 - 13,271
Depreciation and amortization 703 - 620 (k) 1,323
Other operating expenses - - - -
----------- ------------ ---------- ------------
Total operating expenses 18,305 19,667 2,233 40,205
----------- ------------ ---------- ------------
Net operating income (loss) (9,779) (8) (2,233) (12,020)
Net interest income (expense) 2,973 (184) (1,053)(n) 1,736
----------- ------------ ---------- ------------
Net income (loss) before income taxes (6,806) (192) (3,286) (10,284)
Provision for income taxes - - - -
----------- ------------ ---------- ------------
Net income (loss) $ (6,806) $ (192) $ (3,286) $ (10,284)
=========== ============ ========== ============
Net income (loss) per common share $ (0.35) $ (0.50)
=========== ============
Weighted average common shares and common
share equivalents outstanding 19,496 20,496
=========== ============
</TABLE>
<PAGE> 70
FUISZ TECHNOLOGIES LTD. AND SUBSIDIARIES AND CLONMEL HEALTHCARE LIMITED
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
a. The historical balance sheet of Clonmel has been converted to U.S.
dollars at 0.66 IR POUNDS for $1.00, the exchange rate at June 30,
1997. Certain reclassifications and adjustments have been made to the
historical balance sheet of Clonmel to conform to the Company's
financial statement presentation and U.S. GAAP, respectively.
b. Adjustment reflects the issuance of 1,000,000 shares of Fuisz Common
Stock to the prior Clonmel shareholders valued at $10.65 per share
($10,650). The $10.65 share value is the approximate weighted average
price (based on volume of shares traded) during the period from July
25, 1997 to July 31, 1997. The transaction was announced publicly on
July 29, 1997.
c. Adjustment reflects the issuance of an 8,335 IR POUNDS non-interest
bearing note payable by the Company to the former shareholder of
Clonmel as part of the purchase consideration and certain consulting
fees to be provided to the Company (see note g). The face amount
of the note has been discounted using the Company's incremental
borrowing rate of 10%.
d. Adjustment reflects the accrual of estimated transaction costs
related to the acquisition.
e. Adjustment reflects the assumption of the unfunded liability
associated with Clonmel's defined benefit pension plan.
f. Adjustment reflects the capitalization of the deferred financing
costs associated with the Company's guarantee of the 8,335 IR
POUNDS non-interest bearing note payable, in the form of a fully
secured letter of credit. These costs will be amortized over the
remaining life of the note (28 months). Certain reclassifications and
adjustments have been made to the historical statements of operations
of Clonmel to conform to the Company's financial statement
presentation and U.S. GAAP, respectively.
g. Adjustment reflects consulting fees amounting to 1,500 IR POUNDS
that will be provided to the Company over the 36 month period
commencing September 1, 1997.
h. Adjustment reflects the elimination of Clonmel's net equity.
i. Adjustment reflects the excess of the acquisition cost over the
assigned value of Clonmel's assets, computed as follows:
<TABLE>
<S> <C>
1,000,000 shares of Fuisz common stock at $10.65 per share $ 10,650
Note payable 11,346
Acquisition costs 150
Assumption of defined benefit pension plan liability 606
Consulting services to be provided to the Company (2,273)
----------
Purchase consideration 20,479
Clonmel net assets (8,084)
----------
Net write-up of net assets preliminarily allocated to goodwill $ 12,395
==========
</TABLE>
<PAGE> 71
j. The historical statements of operations of Clonmel have been
converted to U.S. dollars at the weighted average exchange rate for
the periods presented: 0.64 IR POUNDS for $1.00 for the six month
period ended June 30, 1997 and 0.63 IR POUNDS for $1.00 for the year
ended December 31, 1996.
k. Adjustment reflects the amortization of the goodwill arising from the
acquisition, based upon a 20 year life.
l. Adjustment reflects the recognition of consulting services provided
to the Company based upon the terms of the agreement ($165 for the
six months and $1,613 for the year).
m. Adjustment reflects the marketable securities pledged by the Company
as collateral for the portion of the purchase consideration
attributable to the installment note (see Note c.).
n. Adjustment reflects the interest expense on the note payable issued
in connection with the acquisition of Clonmel (see Note c.).
<PAGE> 1
Consent of Independent Chartered Accountants
The Board of Directors
Clonmel Healthcare Limited:
We consent to the incorporation by reference in the Offering Memorandum dated 3
October 1997 of Fuisz Technologies Ltd. of our report dated 30 April 1997
except for note 27 which is as at 30 September 1997 with respect to the
consolidated balance sheets of Clonmel Healthcare Limited and subsidiaries as
of 31 December 1996 and 1995 and the related consolidated profit and loss
accounts and cash flow statements for each of the years in the two year period
ended 31 December 1996, which report appears in the Form 8-K of Fuisz
Technologies Ltd. dated 3 October 1997.
KPMG
Chartered Accountants
Dublin, Ireland
3 October 1997
|
|