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FORM 20-F/A
(MARK ONE)
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR (G)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED: DECEMBER 31, 1999
COMMISSION FILE NUMBER: 0-22320
TRINITY BIOTECH PLC
................................................................................
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
IRELAND
................................................................................
(JURISDICTION OF INCORPORATION OR ORGANIZATION)
IDA BUSINESS PARK, BRAY, CO. WICKLOW, IRELAND
................................................................................
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO
SECTION 12 (B) OF THE ACT:
NONE
................................................................................
(TITLE OF CLASS)
NAME OF EACH EXCHANGE ON WHICH REGISTERED:
NONE
................................................................................
(TITLE OF CLASS)
SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO
SECTION 12 (G) OF THE ACT:
AMERICAN DEPOSITORY SHARES
(REPRESENTING `A' ORDINARY SHARES, PAR VALUE 1 IRISH PENNY)
................................................................................
(TITLE OF EACH CLASS)
SECURITIES FOR WHICH THERE IS A REPORTING OBLIGATION PURSUANT TO
SECTION 15 (D) OF THE ACT:
NONE
................................................................................
(TITLE OF EACH CLASS)
INDICATE THE NUMBER OF OUTSTANDING SHARES OF EACH OF THE ISSUER'S CLASSES OF
CAPITAL OR COMMON STOCK AS OF THE CLOSE OF THE PERIOD COVERED BY THE ANNUAL
REPORT: 28,905,832 CLASS 'A' ORDINARY SHARES AND 700,000 CLASS 'B'
ORDINARY SHARES.
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934
DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT
WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
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INDICATE BY CHECK MARK WHICH FINANCIAL STATEMENT ITEM THE REGISTRANT HAS ELECTED
TO FOLLOW:
ITEM 17 ITEM 18 X
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ITEM 1
BUSINESS
Trinity Biotech plc ("Trinity" or the "Company") develops, manufactures and
markets rapid diagnostic test kits used for the clinical laboratory,
point-of-care ("POC"), and self-testing ("OTC") segments of the diagnostic
market. The Company's rapid tests provide fast and accurate results designed for
home (OTC) and doctor's office (POC) use. In addition, the Company manufactures
and markets a range of diagnostic test kits used in clinical laboratories to
detect infectious diseases and autoimmune disorders. The Company markets over
120 different diagnostic products in over 75 countries.
Trinity was incorporated as a public limited company (plc) registered in Ireland
in 1992. The Company commenced operations in 1992 and in October 1992, completed
an initial public offering of its securities in the United States. The Company
has expanded its product base through internal development and acquisitions in
the areas of pregnancy, infectious disease and autoimmune products. Trinity now
markets these products in the United States and in over 74 countries worldwide
through a network of national and international distributors. Trinity has
manufacturing facilities in Bray, Ireland and in Jamestown, New York in the U.S.
Over the past two years, Trinity has made 6 acquisitions of diagnostic
businesses the details of which are set out below. Four of these acquisitions
have been for solely EIA plate businesses; one has been for a rapid test and EIA
plate business and one for an EIA and IFA business. Through these acquisitions
and new products added through in-house research and development, Trinity now
has a comprehensive portfolio of over 120 products including 12 rapid tests.
ACQUISITION OF MARDX DIAGNOSTICS INC
On February 29, 2000, Trinity acquired all the outstanding share capital of
MarDx Diagnostics Inc. (MarDx) of Carlsbad, California for a consideration of $4
million. MarDx is a world leader in the development and manufacture of
diagnostic products, known as Western Blots, which confirm the primary diagnosis
of certain infectious diseases. Their principal product is a Western Blot test
for Lyme disease, which is an infection carried by deer ticks. The disease
manifests itself as a multi-system inflammatory disease that affects the skin,
joints and nervous system. If diagnosed and treated early with antibiotics, Lyme
disease is readily cured.
The MarDx test was the first Lyme Western Blot assay to receive FDA clearance
and remains the leading selling test in the US. Most of the revenues are
generated in the USA. The acquisition of MarDx gives Trinity an excellent
position in the Western Blot segment of the infectious disease market. Western
Blot confirmatory testing is a natural extension to Trinity's EIA products and
the MarDx Western Blot technology and manufacturing capability can be extended
to other confirmatory test.
ACQUISITION OF THE MICROTRAK(TM) PRODUCT LINE
In September 1998, the MicroTrak(TM) product line was purchased from the Syva
Company, a subsidiary of Dade Behring, Inc. ("Dade Behring"). The purchase
consideration, net of acquisition costs, was US$12 million, which was satisfied
by cash and bank borrowings of US$4.9 million and a two year loan note of
US$5.616 million. US$2.7 million of the loan note was paid in 1999 with the
balance of US$2.916 million to be paid in October 2000. The MicroTrak(TM)
product line is comprised of two tests for Chlamydia trachomatis ("Chlamydia")
as well as tests for other sexually transmitted diseases. The first Chlamydia
test uses standard microtitre EIA plate technology and the other utilises
immunofluoresence ("IFA") technology on a slide. Other IFA products acquired are
tests for CMV, Herpes, and Gonorrhea. All of these products are FDA cleared for
sale and marketing in the US. The tests are being distributed in the US through
Wampole Laboratories and by Dade Behring in Europe, Asia, Canada, Africa and
Latin America.
ACQUISITION OF THE INFECTIOUS DISEASE DIAGNOSTIC BUSINESS OF CAMBRIDGE
DIAGNOSTICS IRELAND LIMITED
In September 1998, the infectious disease diagnostic business of Cambridge
Diagnostics Ireland Limited ("Cambridge"), a subsidiary of Selfcare Inc., was
acquired by Trinity for a consideration of US$4.2 million, net of acquisition
costs. The consideration was satisfied by 555,731 shares of Selfcare Inc. common
stock owned by Trinity, 300,000 shares of Enviromed PLC owned by Trinity and
US$230,000 in cash. The product range comprises three tests for the diagnosis of
HIV antibodies in whole blood. Two are rapid POC tests and are for use in
doctors' offices, emergency rooms, field sites, clinics, and other POC
situations. The third product (Recombigen(TM)) is a microtitre EIA plate assay,
which is used for diagnosis of HIV in clinical and reference laboratories. As
part of this transaction, Trinity has acquired the rights to certain recombinant
antigens which are used in other retroviral diagnostic products cleared for sale
and marketing in the US by the FDA and which will enhance the performance
characteristics of Trinity's Uni-Gold(TM) HIV test. In addition, this gives
TriniTY access to significant HIV testing markets, such as India and Central and
East Africa, where the Company previously had minimal presence. bioMerieux has
challenged licence rights granted to Trinity as part of this acquisition and has
commenced legal proceedings against Trinity and Selfcare (see Item 3 Legal
Proceedings). Management of the Company does not believe that an adverse ruling
in this matter would have a material adverse effect on the business of the
Company.
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ACQUISITION OF THE MACRA LP(A)(TM) PRODUCT LINE
In July 1998, Trinity acquired from Strategic Diagnostics, Inc. an assay that
measures Lipoprotein (a) ("Lp(a)"), a powerful predictor of premature
atherosclerosis and coronary heart disease. The Lp(a) test, called Macra Lp(a),
is the only Lp(a) method cleared for sale and marketing in the US by the FDA for
both diagnosis and risk assessment of coronary heart disease. Trinity sells
Macra Lp(a) in the US through Wampole Laboratories. The consideration was
US$1.26 million satisfied by way of an up front payment of US$600,000 in cash
and a balancing cash payment due on February 29, 2000.
ACQUISITION OF THE MICROZYME(TM) PRODUCT LINE
In June 1998, Trinity acquired the MicrozymeTM product line for hormones and
drugs of abuse from Diatech Diagnostics Inc. ("Diatech"), a Boston-based
diagnostics company which is a subsidiary of Healthcare Technologies Inc.
Trinity paid US$1.534 million net of acquisition costs, of which US$0.35 million
was paid in cash and the balance of US$1.3 million was satisfied with a loan
note. US$600,000 of loan note was paid in January and June 1999 and the balance
of $584,000 was paid in December 1999. This acquisition introduces a range of
complementary tests to Trinity's existing product portfolio. The products are
now manufactured in Trinity's facility in Jamestown, New York. The Directors
expect increased revenues through cross marketing of the MicrozymeTM products to
their existing distribution network and sales of Trinity's products to the
MicrozymeTM distributors. The acquisition provides immediate access to new
distributors in countries where the Company is not currently represented, the
main countries being Ukraine, Lithuania, Honduras and Equador. The MicrozymeTM
product line uses standard microtitre EIA plate technology and includes EIA
tests for hormones such as TSH, T3, T4, and drugs of abuse, including cocaine
and opiates. Trinity already manufactured tests using a similar base technology,
which facilitated the technology transfer from Diatech to Trinity. The
MicrozymeTM tests are all FDA cleared for sale and marketing in the US.
ACQUISITION OF CENTOCOR UK HOLDINGS LIMITED
In June 1997, Trinity purchased the entire outstanding share capital of Centocor
UK Holdings Limited, a company based in Guildford in the U.K. Centocor develops
manufactures and markets infectious disease and auto-immune diagnostic tests in
micro titre enzyme linked immunoassay ("EIA") plate format. The company operated
out of a 17,000 square foot FDA and ISO 9001 approved facility in Guildford,
however, in quarter 1 of 1998, the entire operation was transferred to Trinity's
new manufacturing facility in Bray, Ireland. As a result of this integration,
the Company has closed the facility in the U.K. Certain of the Centocor's tests
are FDA cleared for sale and marketing in the US including tests for
Toxoplasmosis, Rubella, Syphilis and Herpes Simplex Virus 2. The tests are
marketed in the United States, Europe, and Central and South America. Trinity
paid $5.5 million for the business in the form of cash and loan notes.
ACQUISITION OF CLARK LABORATORIES
In February 1997 Trinity acquired all the outstanding share capital of Clark
Laboratories Inc., ("Clark"), based in Jamestown, New York. The company, doing
business as Trinity Biotech (USA) ("Trinity USA") manufactures and markets a
range of enzyme linked immunoassays (EIAs), microtitre plates for the detection
of infectious diseases and auto-immune disorders. Trinity USA sells most of its
products to Wampole Laboratories, a division of Carter Wallace, Inc. ("Carter
Wallace") for which it has an exclusive supply agreement entered into in
December 1995, for all Trinity USA's FDA cleared test kits (approximately 45
kits). Since the acquisition Trinity has consolidated its existing U.S.
pregnancy marketing activities into Trinity USA's facilities in Jamestown, New
York.
DISPOSAL OF SUPPLY AGREEMENT FOR OVER-THE-COUNTER PREGNANCY TESTS
In September 1998, the Company disposed of its interest in the Supply Agreement
between Trinity Biotech Inc., Applied Biotech Inc. and Warner Lambert to Sybron
Inc, a US diagnostics company, for a consideration of US$3,000,000. Revenues
under the supply agreement in 1998 amounted to US$5,723,000.
PRINCIPAL MARKETS
The primary market for Trinity's tests is the U.S. During fiscal 1999 the
Company sold 62% (US$16,161,680) (1998 US$16,600,770 or 72%) of product in the
U.S. Sales to non U.S. (principally European and Asian) countries represented
38% (US$9,942,943) during fiscal 1999 and 28% (US$6,568,750) during fiscal 1998.
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PRINCIPAL PRODUCTS
General
Trinity's product range comprises three distinct types of test kit - rapid
diagnostic tests, in a card format, EIA tests, on a microtitre plate format and
IFA tests, on a slide format. Each type targets a specific user market, be it
the POC and OTC market for rapid tests, or clinical laboratories market for the
more traditional microtitre EIA plate tests.
All of Trinity's products are immunoassays. Immunoassays are medical diagnostic
procedures based upon the interaction of "antigens" and "antibodies". In
general, antigens are foreign substances (including certain drug complexes,
infectious bacteria, or viruses), which stimulate production of antibodies by
the immune system for the purpose of protecting the body from the foreign
substance. Each type of antibody has a unique molecular structure which enables
it to bind with a specific antigen to form an antigen-antibody complex.
Immunodiagnostic testing makes use of the known characteristics of
antigen-antibody binding to determine the concentration of a particular
substance in the body by means of testing blood samples, urine or other body
fluids.
1. Rapid Tests
a. Uni-Gold(TM) and Capillus
Trinity's Uni-Gold(TM) one step assays detect antibodies to various infectious
diseases and conditions in serum and plasma or whole blood based on the
principle of an immuno-chromatographic assay. In an immuno-chromatographic
assay, the sample travels up a membrane strip activating reagents in the process
and, where the sample is positive, allowing a colour forming reaction visible by
eye. Each test device (card) contains a plastic backed membrane strip and
absorber pads in a disposable plastic housing. The housing has two openings: the
smaller forms the sample application well and the larger contains the test and
control region. Trinity currently markets five products based on this
technology, Uni-Gold(TM) HIV, Uni-Gold(TM) Hepatitis B, Uni-Gold(TM) hCG
(pregnancy),UNI-GOLD(TM) Strep A and Uni-Gold H. pylori. In December 1996,
Trinity filed a pre-market application ("PMA") with the U.S. Food and Drug
Administration ("FDA") for clearance to sell its Uni-Gold(TM) HIV test in the
United States for use in the POC segment of the market. The FDA has made several
requests for additional information, which have been and are currently being
addressed by the Company. There are no assurances that the Company will get
clearance from the FDA to market this test in the United States. Trinity
received a 510(k) clearance from the FDA for its Uni-Gold Strep A test in the
second quarter of 1999. Trinity's Uni-Gold(TM) hCG has already received a 510(K)
clearance from the FDA and is currently being marketed in the U.S. in clinics
and doctors offices under the Uni-Gold(TM) brand. The Company received an FDA
510(k) clearance for its Uni-Gold H. pylori test in the firST quarter of 2000.
The Company has decided not to file for approval to sell its Uni-Gold Hepatitis
B test in the United States at this time, however the test, which is
manufactured in Ireland, is approved for sale in 5 other countries outside of
the United States. Trinity's Capillus HIV is a one step HIV test using latex on
a plastic slide as an indicator of the presence of HIV antibodies. During 1999,
Trinity's Uni-Gold(TM) and Capillus produCT range had revenues of US$3 million
dollars.
b. SeroCard(TM)/SalivaCard(TM) HIV
SeroCard(TM)/SalivaCard(TM) are rapid HIV tests. These products are blood and
saliva based card tests using blood, serum or saliva obtained by pricking a
finger with a needle, or collecting saliva by means of a patented saliva
collection device owned by Trinity. These are easy-to-use, seven-minute tests
and are packaged in the form of test kits consisting of a card and vials
containing reagents, which are applied to the card. Successful clinical trials
were completed during 1994 and 1995 and distributors have been appointed in over
40 countries for SeroCard(TM) and 25 countries for SalivaCard(TM). Sales of
these products have been made to date in Ireland, the UK, Greece, Estonia,
Ukraine, Portugal, Russia, Finland, Thailand, China, the UAE, Pakistan, Nepal,
India, Guatemala, Venezuela, Mexico, South Africa, Ivory Coast, Uganda, Kenya
and Nigeria. Trinity's SeroCard and SalivaCard products had revenues of
US$516,000 in 1999.
2. EIA Tests
EIA tests are conducted on plates that can typically enable 96 separate tests to
be conducted simultaneously. Each well is an individual patient test and the
tests are generally run in a laboratory as a batch. Each well is coated with an
antibody or antigen depending on the analyte being tested for. When the test is
run, the first step is to add the sample and a reaction binds the antibody and
antigen to the well wall. After the removal of interfering substances through
washing, a colour-forming reagent is added and the result read on an instrument
with the colour indicating the result.
EIA tests make up the largest proportion of sales, accounting for over US$20.7
million in 1999. Through a combination of acquisition and in-house development,
the Company manufactures and markets in excess of 100 types of microtitre EIA
tests in the following areas:
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a. Sexually transmitted diseases
This category of tests includes tests for Chlamydia, Syphilis and HIV and
represents one of Trinity's largest revenue generators, with 1999 revenues
totalling US$9 million. Chlamydia is the most common sexually transmitted
disease with an estimated 5 million new cases of infection each year in the US
alone. Clinical studies show that many people infected with Chlamydia
demonstrate no symptoms. Chlamydia can make men infertile and in women, if left
untreated, can cause pelvic inflammatory disease, abnormal pregnancies,
miscarriages and infertility. Trinity's test for Chlamydia is the leading EIA
test world-wide. In addition, the Company's test for Syphilis is approved for
use by blood banks in the US.
b. Pregnancy related diseases
Trinity manufactures tests for intra-uterine infections caused by the TORCH
group of diseases. This group of diseases consists of Toxoplasmosis, Rubella,
CMV and Herpes. These diseases can cause serious complications during pregnancy.
Revenues of Trinity's TORCH range in 1999 amounted to US$3.9 million.
Toxoplasmosis is a common disease and many infections are asymptomatic or
accompanied by only mild illness. In extreme cases it can cause infectious
Mononucleosis and complications such as Meningoencephalitis, Pneumonitis and
Myocarditis. Congenital Toxoplasmosis can cause foetal abnormalities and
miscarriage. Rubella causes a mild rash but is of importance because of the
damage it may cause to the foetus if contracted during pregnancy. CMV causes
pulmonary infection and if congenitally contracted can cause foetal brain
damage. All the tests are FDA cleared for sale and marketing in the US. The main
markets for these tests are the US, Europe, South Africa and Australia.
c. Childhood/Adolescent diseases
Trinity has recently developed EIA tests for the measles, mumps, chickenpox,
Epstein Barr Virus ("EBV") and Mycoplasma pneumoniae. EBV causes infectious
Mononucleosis and has been linked to several types of cancers including
Burkitt's lymphoma and nasopharyngeal carcinoma. Mycoplasma pneumoniae is the
second most common causative agent of pneumonia and upper respiratory tract
infections after the influenza virus. It is estimated that 4 million Americans
contract pneumonia each year and approximately 50% of these cases are caused by
Mycoplasma pneumoniae. With the exception of the EBV test, which has a large
European market, the primary market for these products is the US, the main
distributor being Wampole Laboratories. All these tests have FDA clearance.
d. Enteric diseases
Adenovirus, Rotavirus, C. difficile, H. pylori, Cryptosporidium, Giardia and
Entamoeba Histolytica cause gastrointestinal complaints. Rotavirus specifically
causes diarrhoea, especially in children, and is highly contagious, so early
detection is crucial. Quick identification of patients is critical for
appropriate treatment and patient isolation. In the US alone there are more than
3 million reported cases per annum. Trinity's Rotavirus test kit received FDA
clearance in September 1997. The Company's tests for Adenovirus, H. pylori and
C. difficile were also FDA cleared for sale and marketing in the US in 1997 and
further enhanced market penetration. The main markets for these products are the
US and Germany.
e. Other diseases
Trinity has developed tests for Lyme disease, Legionella and others. Lyme
disease is a tick borne infection, which causes chronic fatigue. The main market
for these tests is the US where they have FDA clearance.
f. Hormone tests
Trinity has a range of tests to detect hormones in the bloodstream. They mainly
include tests to establish thyroid activity, specifically TSH, T3 and T4. All
these tests are FDA cleared for sale and marketing in the US. The main markets
for these tests are the US and Europe.
g. Drugs of abuse tests
Trinity has a range of tests to detect certain drugs in urine. They include
tests for cocaine, benzodiazepine, amphetamines, methadone, opiates,
phencyclidine and tetrahydrocannabinol. All these tests are FDA cleared for sale
and marketing in the US. These products are currently being sold mainly in the
US and Europe.
h. Autoimmune tests
These are a range of 22 tests to detect diseases which result from immunological
reactions against the individual's own tissue components. They include tests,
which indicate the diagnosis of Lupus and rheumatoid arthritis. Twenty-ones of
these tests are FDA cleared for sale and marketing in the US. The main markets
for these tests are the US, South Africa and Europe. Autoimmune products account
for US$1.04 million of revenues in 1999.
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3. IFA Tests
These tests utilise antibodies labelled with fluorescent dye with which reacts
with antigens to indicate the presence of a particular disease. Trinity has four
tests, Chlamydia, Gonorrhea, Cytomegalovirus and Herpes, which use this
technology. These tests were acquired as part of the Microtrak(TM) acquisition.
All these tests are FDA cleared for sale and marketing in the US and the main
markets are USA and Europe.
SUPPLY AGREEMENT BETWEEN TRINITY USA AND CARTER WALLACE
Trinity USA entered into a five year supply agreement with the Wampole division
of Carter Wallace on December 18th, 1995. Under the terms of the agreement,
Carter Wallace has exclusive rights to Trinity USA's products in the United
States and Puerto Rico. Trinity USA and Trinity may market certain Trinity USA
products in the U.S. and Puerto Rico, which Carter Wallace has chosen not to
market in those territories. In addition, Trinity and Trinity USA may market all
of Trinity USA's products in all territories outside of the U.S. and Puerto
Rico. As part of the agreement, Carter Wallace paid Trinity USA an amount of
$2,000,000 for the rights to the Trinity USA products in the territories of the
U.S. and Puerto Rico.
SALES AND MARKETING
Trinity currently distributes its product portfolio through over 200
distributors in over 75 countries world-wide. Trinity's main markets are the US,
Germany, UK, Brazil and Africa. The main distributors used by the Company in
these markets are Carter Wallace, Sanofi Diagnostics Pasteur Inc. and Incstar
Inc. in the US, Merlin Diagnostika GmbH ("Merlin") in Germany, Microgen
Bioproducts Dade Limited in the UK, and Sterilab Services cc in South Africa.
Trinity has distribution agreements with all its distributors the largest and
most important of which is the Supply Agreement between Trinity USA and Carter
Wallace, which is described above.
Uni-Gold(TM) Product Line
The primary marketing focus for Trinity's Uni-Gold(TM) range has been to seek
private label opportunities for tHE individual tests within the range. Up to
1998, substantial proportions of Trinity's revenues have been derived from sales
of pregnancy tests to Warner Lambert. Trinity disposed of its interest in this
contract in September 1998. The Company is seeking other partners to distribute
the Uni-Gold(TM) hCG test in territories inside aND outside of the U.S. and to
distribute its range of Uni-Gold(TM) tests for infectious diseases including
HIV, Hepatitis B, Strep A and H. pylori. A number of distribution partners have
been signed however no significant contract has yet been finalised.
EIA Product Line
Since 1996, Trinity developed a number of EIA tests for use in the clinical
laboratory. In addition through the six acquisitions in 1997 and 1998, Trinity
acquired an additional 93 tests for the infectious disease, drugs of abuse and
auto-immune markets. The Company's marketing strategy is concentrated on
distribution through national distributors. Trinity sells 71 of these tests, on
an OEM basis, to the Wampole division of Carter Wallace under an exclusive
supply agreement (see "Carter Wallace Supply Agreement"). In addition Trinity
sells its products to over 200 distributors in over 75 countries outside the
U.S.
SeroCard(TM)/SalivaCard(TM) HIV
Trinity markets these tests primarily through national distributors. The Company
has also entered into a number of private label OEM agreements with
multi-national strategic partners to sell these products in different
territories worldwide. Shipments under these agreements commenced in 1995.
Research and Products Under Development
The Company has invested considerable funds in research and development over the
past number of years. It has developed a platform technology for its rapid
Uni-Gold(TM) tests. In addition, it utilises an established microtitre well
based platform to develop its laboratory based plate tests. Following the
completion of its rapid testing platform, the Company has focused on developing
rapid tests for certain infectious diseases utilising this platform. The Company
has developed the following tests utilising this platform technology:
Pregnancy
HIV
Hepatitis B
Strep A
H. pylori
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The Company has also developed numerous tests utilising the microtitre well
format platform technology for its laboratory-based business. For example, the
Company has developed EIA plate tests for Adenovirus, Rotavirus, C. difficile,
Cryptosporidium and Mycoplasma.
The Company has two research and development groups - one to develop new rapid
tests and one to develop new microtitre based tests. These groups are located in
Dublin, the UK and the US. The company contracts out some research and
development to independent researchers based in the UK and the US. In addition,
the company sponsors various projects in universities in Ireland, the UK and the
US. The groups are currently involved in the following projects.
Microtitre Plate Development Group
Development of a microtitre plate assay for the diagnosis of free and total
prostate specific antigen
Prostate cancer is a leading form of cancer amongst men and the most frequent
cause of death from cancer in men. 165,000 new cases of prostate cancer were
diagnosed in 1993 in the US and more than 35,000 men died from prostrate cancer
that year. Prostate specific antigen (PSA) is a useful indicator of prostate
cancer and it is proposed to develop a microtitre plate test for its detection
and monitoring.
Development of a microtitre plate assay for the diagnosis and monitoring of
breast cancer
Breast cancer is the single most prevalent form of cancer in women and a leading
cause of death. The course of the disease can vary widely, ranging from a
disease that is curable by surgery alone to one characterised by a rapid
metastic progression more or less unresponsive to treatment. Early detection and
monitoring are keys to the management of the disease. Trinity is currently
developing a test using CA-15-3, the tumour market most useful for detecting and
monitoring breast cancer.
Development of a microtitre plate assay for the diagnosis and monitoring of
gastric cancer
The incidence of carcinoma of the stomach has increased steadily to become the
sixth most common cause of cancer death in the US. Gastrectomy, or removing all
or part of the stomach, is the only effective treatment. If the condition is
inoperable, then radiation therapy and anti-cancer drugs can help relieve
symptoms and prolong survival. Trinity is currently developing a test to detect
the CA-19-9 marker, which has been demonstrated as a useful tumour marker in the
early diagnosis and post-operative management of gastric neoplasma.
Development of a microtitre plate assay for the diagnosis and monitoring of
pancreatic cancer
The incidence of pancreatic cancer has been increasing steadily over the past
twenty years and now ranks as one of the most common tumours in the US. Trinity
is currently developing a test using the tumour marker CA-19-9 that has been
shown to be useful in the early diagnosis and post-operative management of
pancreatic cancer.
Development of a microtitre plate assay for the diagnosis and monitoring of
ovarian cancer
Ovarian cancer is the fourth leading cause of cancer death among US women and
has the highest mortality rate of all gynaecologic cancers. Trinity is currently
developing a test using the CA-125 tumour marker that offers early diagnosis and
follow-up monitoring of ovarian cancer.
Development of microtitre plate assay for the detection of HSV-2
The company is developing a HSV-2 specific test to compliment its HSV-1/2 tests.
HSV-2 causes more serious complications to pregnant women and HSV-2 positive
patients are more susceptible to contracting HIV.
Adaptation of assays to Microtrak XL units
During 1998, Trinity acquired the Microtrak Chlamydia business from Dade Behring
Inc. As a result of the acquisition, Trinity acquired instruments to run
Microtitre plate tests. These instruments only ran Chlamydia EIA tests and
Trinity is now adapting its other Microtitre plate assays so that they can be
run on this instrument. The Microtrak XL instruments are placed in a number of
laboratories in the United States and around the rest of the World. The
development of more tests using these instruments will enhance Trinity's ability
to sell these tests.
Rapid Development Group
Development of Recombinant HIV Uni-Gold(TM) Test
This represents a modification of Trinity's Uni-Gold HIV Test using cheaper
recombinant antibodies as opposed to peptides for the test. These antibodies
along with other modifications allow the Uni-Gold(TM) HIV Test to be produced in
a more cost-effective manner which in turn enables greater margins in
third-world markets.
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Clia Wave Strep A tests
Trinity has already developed a rapid Strep A test for the doctor's office
market. However, smaller doctor's practices are not entitled to use the test as
it is considered to be moderately complex under the Clia regulations. Trinity is
developing a simpler form of the test, which will enable it to be sold to all
doctors' offices in the US. The world-wide market for this Strep A test was 90
million in 1998, of which 40 million was in the US.
Uni-Gold(TM) Chlamydia test
Chlamydia is a sexually transmitted disease, which causes infertility and pelvic
inflammation in women. In the US alone, 5 million cases are reported each year.
The Uni-Gold(TM) Chlamydia test currently under development will be able to
detect Chlamydia within 5 minutes. It is expected that it will be used by a
doctor to diagnose Chlamydia. This will complement Trinity's very successful
Chlamydia EIA and IFA tests.
As of December 1999, Trinity employed 26 full-time research and development
professionals at its facilities in Bray, Ireland and Jamestown, New York.
For the 12 months ended December 31, 1999 the Company spent $2,574,000 on
research and development. This was offset to some extent by a grant receivable
of $126,000, resulting in a net charge to the profit and loss account of
$2,448,000. This expenditure was spent on salary costs, reagents, consultancy
fees and other related costs.
MANUFACTURING AND RAW MATERIALS
The primary raw materials required for Trinity's test kits consist of
antibodies, antigens or other reagents, glass fibre and packaging materials. The
reagents used as raw materials have been acquired for the most part from third
parties. Although Trinity is not dependent upon any one source for such raw
materials, alternative sources of antibodies with the specificity and
sensitivity desired by Trinity may not be available. Such unavailability could
affect the quality of its products and its ability to meet orders for specific
products, if such orders are obtained. Trinity's growth may be limited by its
ability to obtain or develop the necessary quantity of antibodies or antigens
required for specific products. Thus, Trinity's strategy is, whenever possible,
to establish alternative sources of supply of antibodies.
COMPETITION
The diagnostic industry is very competitive. There are many companies, both
public and private, engaged in diagnostics-related research and development,
including a number of well-known pharmaceutical and chemical companies.
Competition is based primarily on product reliability, customer service and
price. Many of these companies have substantially greater capital resources and
have marketing and business organisations of substantially greater size than
Trinity. Many companies have been working on immunodiagnostic reagents and
products, including some products believed to be similar to those currently
marketed or under development by the Company, for a longer period of time than
has the Company. The Company believes that its primary competitors in the
diagnostics market include Abbott Laboratories, Boehringer Mannheim, Sanofi
Diagnostics Pasteur, Inc, Ortho Diagnostics, Inc, Selfcare, Inc, Incstar, Inc,
Meridian, Inc, Murex Diagnostics, Inc. and Gull Laboratories Inc. The Company
expects competition within the industry to intensify.
PATENTS AND LICENCES
Patents
Trinity's SeroCard(TM) and SalivaCard(TM) blood and saliva-based diagnostic
tests are based on Trinity Biotech Inc's patent for its "Bi-Directional Lateral
Chromatography Test Device". On 9th April, 1991, a patent was issued to Trinity
Biotech Inc by the US Patent and Trademark Office covering this device. The
patent expires in 2008. This patented technology allows Trinity to concentrate
and detect antibodies or antigens using a whole blood specimen in addition to
serum, urine, or other fluid samples. Trinity had combined revenues for these
products of US$516,000 in the year ending 31st December, 1999.
In February 1993, Trinity filed a patent application with the Irish Patents
Office under the title "Device for the Processing of Saliva for use in an
Immunoassay". The patent describes a saliva collection system for collecting and
analysing immunoglobulins extracted from the oral cavity. This patent was
granted in May 1993. The Company was granted a second patent covering the
mechanics of its Saliva Collection Device in June 1994. Management believes that
these two patents, which expire in 2010, will help protect Trinity's
SalivaCardTM test from being copied by a competitor.
In January 1999 Trinity filed a patent application with the Irish Patents Office
describing a device used in the detection of Strep A in Trinity's Rapid Strep A
test.
In addition, the Company has acquired seven patents as a result of its
acquisitions of the Cambridge and MicroTrakTM products lines, which protect
certain aspects of the product's tests.
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<PAGE> 9
Many of the Company's tests are not protected by specific patents. However, the
Company believes that substantially all of its tests are protected by
proprietary know-how, manufacturing techniques and trade secrets.
From time to time, certain companies have asserted exclusive patent, copyright
and other intellectual property rights to technologies that are important to the
industry in which Trinity operates. In the event that any of such claims relate
to its planned products, Trinity intends to evaluate such claims, and if
appropriate, seek a licence to use the protected technology. There can be no
assurance that Trinity would be able to obtain licences to use such technology
or obtain such licences on terms that would not have a material adverse effect
on Trinity. If Trinity or its suppliers are unable to licence any such protected
technology that might be used in Trinity's products, Trinity could be prohibited
from marketing such products. It could also incur substantial costs to redesign
its products or to defend any legal action taken against it. If Trinity's
products should be found to infringe protected technology, Trinity also could be
required to pay damages to the infringed party.
Licences
Trinity has taken a licence to two US patents held by Becton Dickinson Inc.,
which expire in the financial years 2004 and 2014 respectively, covering the
format of Trinity's Uni-Gold(TM) rapid test device i.e. the visual resuLT given
by its one step strip test. The terms of the agreement provide for the payment
of ongoing royalties at rates from 4% to 8% on the sale of its Uni-Gold(TM)
rapid tests to Becton Dickinson.
The Company has also entered into a number of licence/supply agreements for key
raw materials used in the manufacture of their products.
GOVERNMENT REGULATION
The Company's manufacturing and marketing of diagnostic test kits is subject to
government regulation in the US and in other countries in which the Company's
products are sought to be marketed. The process of obtaining regulatory
clearance varies, depending on the test and the country, from merely notifying
the authorities to lengthy and detailed laboratory and clinical testing and
other costly and time-consuming procedures. The main regulatory bodies which
require extensive clinical testing are the FDA in the US, the Paul Erhlich
Institute in Germany and the Agence du Medicament ("ADM") in France.
The process in each country varies considerably depending on the nature of the
test, where it is intended to be used and other factors. As 62% of Trinity's
1999 revenues were generated in the US, 30% of Trinity's tests are manufactured
in the US and the US represents approximately 35% of the world-wide diagnostics
market, we have included a description of the FDA clearance process which is one
of the most rigorous in the world and is relied upon by other countries in
determining their own approvals.
Currently, Trinity has 91 products which are cleared for sale in the US by the
FDA.
FDA Clearance Process
In vitro monitoring products such as those employing antibodies for the
detection of auto-immune diseases in humans, are generally classified as medical
devices by the FDA. For some in vitro products, the US Food, Drug and Cosmetic
Act provides a process known as a "510(k) review" to enable the manufacturer to
demonstrate that the proposed product is "substantially equivalent" to another
product in commercial distribution in the US before 28th May, 1976 or which has
subsequently been classified as a Class I or Class II medical device. When a
510(k) review is used, a sponsor is required to submit a Pre-Market Notification
("PMA") to the FDA. In the absence of a response from the FDA, the Company would
not be able to proceed with sales of its in vitro product for diagnostic use
unless and until it received notification from the FDA. In the event that the
FDA requests additional information for the PMA, there could be multiple cycles
of submissions until clearance is obtained. The FDA has statutory authority to
also require clinical studies data to support a PMA 510(k) application.
In cases where there are no existing FDA cleared products "substantially
equivalent" to the new product, an approved PMA, which involves a lengthier and
more burdensome process, would be required before the FDA would allow commercial
distribution.
The FDA invariably requires clinical data for a PMA and, although the FDA may
grant 510(k) clearance without supporting clinical data, such data may be
required if the FDA determines that technical differences from existing products
suggest the need for additional evidence of safety or effectiveness of the new
product. If clinical studies are necessary, the FDA may require the Company to
obtain an Investigational Device Exemption ("IDE"). An IDE normally restricts
the distribution of an investigational device to a limited number of
institutions, and use by a limited number of investigators, for the purpose of
performing studies to be submitted to the FDA in a 510(k) PMA.
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<PAGE> 10
The amount that can be charged for use of an investigational device in a
clinical study is generally limited to recovery of costs until a 510(k)
notification is cleared or the FDA grants PMA approval. Accordingly, no
significant return can be expected during the study of investigational devices.
Although certain diagnostic products are exempt from IDE requirements, the
exemption applies only to tests which (a) do not require an invasive sampling
procedure that presents significant risk; (b) do not introduce energy (such as
X-rays) into a subject; and (c) are not used as diagnostics without a
confirmatory diagnosis by a medically established diagnostic product or
procedure. The Company's products would not be used as diagnostics without such
a confirmatory diagnosis unless they had received an exemption from the FDA.
Medical devices may be exported from the US before receiving IDE, 510(k) or PMA
clearance under certain conditions, providing FDA clearance of the proposed
exportation is obtained. The receiving country must certify that the device is
not in conflict with the laws of that country and that the foreign government is
aware of the device's import. In addition, the FDA may require safety data
similar to that required for clearance of an IDE before approving the
exportation of a new device. In countries other than the US, the Company's
distributors are generally responsible for obtaining any required government
consents.
The Company is also required to register with the FDA as a device manufacturer
and list its devices. As such, the Company is subject to inspection on a routine
basis for compliance with the FDA's current Good Manufacturing Practice ("GMP")
Regulations or Quality Systems Regulations. These regulations require that the
Company manufacture its products and maintain its documents in a prescribed
manner with respect to manufacturing, testing and control activities. Failure to
comply with applicable GMP or other regulatory requirements can result in, among
other things, sanctions, fines, delays or suspensions of clearance, injunctions
against further distribution, seizures or recalls of products, operating
restrictions and criminal prosecutions. In addition, the Company is required to
comply with various FDA requirements for labelling. Pursuant to the US Medical
Device Reporting Act, 1997, the Company is also required to notify the FDA of
any deaths or serious injuries alleged to have been associated with the use of
its diagnostic test kits as well as product malfunctions that would likely cause
or contribute to death or serious injury if the malfunction were to recur.
Finally, the FDA prohibits an approved device from being marketed for unapproved
applications.
EMPLOYEES
As of December 31, 1999 Trinity had 263 employees consisting of a research
director and 26 research scientists and technicians, 203 manufacturing and
quality assurance, 20 finance and administration and 14 marketing staff.
Trinity's future hiring levels will depend on the growth of sales revenues.
ITEM 2
FACILITIES
Trinity's executive offices and manufacturing and research and development
facilities consisting of approximately 45,000 square feet are located at IDA
Business Park, Bray, Co. Wicklow, the Republic of Ireland. This facility is ISO
9001 approved and was purchased in December 1997 and has been fitted out to
Trinity's exact requirements. The facilities include offices, research and
development laboratories, three production laboratories, cold storage and drying
rooms and warehouse space. Trinity spent $4.2m on buying and fitting out the
facility. In December 1999, the company sold the facility for net proceeds of
$5.2m and leased it back from the purchaser for 20 years. The current annual
rent which is reviewed every 5 years is set at pounds sterling 309,000
($397,343). TriniTY'S current manufacturing facilities are adequate for its
current manufacturing and operational needs, however the Company needs to obtain
additional space to accommodate its inventory and has entered into an agreement
to lease for a new 25,000 sq ft warehouse. It is expected to be complete in June
2000 and Trinity has agreed to rent it for pounds sterling 150,000 ($192,885)
per annum. (See item 13 - Certain Transactions).
Trinity USA operates out of a 24,000 square foot FDA and ISO 9001 approved
facility in Jamestown, New York. The facility was purchased by Trinity USA in
1994 and is the subject of a 5-year mortgage. The mortgage is repayable in
monthly instalments of $2,292 plus interest at 8 1/2 %.
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<PAGE> 11
ITEM 3
LEGAL PROCEEDINGS
Dispute Regarding the Acquisition from Selfcare Inc.
In September 1998 Trinity acquired substantially all of the assets of Cambridge
and the technical know-how of three products from Cambridge/Selfcare Inc. A
manufacturing and distribution agreement was drawn up enabling Trinity to
benefit from a HIV 2 Licence originally granted to Cambridge by Sanofi
Diagnostic Pasteur Inc. ("Pasteur") in exchange for a royalty of 6%.
After learning of the acquisition of Cambridge's assets by Trinity, bioMerieux
informed Selfcare Inc. and Trinity that in bioMerieux's view the transaction was
unauthorised and that the licence rights granted to Trinity were invalid.
bioMerieux further stated that it was concerned that Pasteur could revoke the
HIV 2 Licence granted to Cambridge Biotech Corporation ("CBC") as a result of
the Trinity/Selfcare Inc. transaction. Management of Trinity believe that it
properly acquired the assets of Cambridge and is entitled to operate the
business activities formerly conducted by Cambridge under the HIV 2 Licence
extended to Cambridge Affiliate Corporation, a company 49% owned by Selfcare
Inc. and 51% owned by CBC.
In January, 1999 bioMerieux, acting through CBC, sued Trinity and Selfcare Inc.
in US Federal Court seeking a Motion in Summary Judgment to prevent Trinity from
selling any products formerly manufactured and distributed by Cambridge. The
Court denied bioMerieux's Motion and directed the parties to mediate their
dispute. To the knowledge of Trinity no further agreements or litigation have
followed this decision.
The Directors believe several outcomes of the situation are possible. If Pasteur
and bioMerieux negotiate a 12% royalty rate it is possible that this revised 12%
royalty would also apply to Trinity's sale of Cambridge products. Based on
current sales of US$3 million this would result in an additional US$180,000 of
royalties payable by Trinity, an amount which the Directors do not consider
material.
If Trinity's sales are not covered under such an agreement or if Pasteur
successfully voids bioMerieux HIV 2 Licence, Trinity still believes it would be
able to sell HIV 2 products into countries not covered by the HIV 2 patent. The
Directors note that most of its current sales of HIV 2 products are made in such
countries.
Management of the Company does not believe that an adverse ruling in this matter
would have a material adverse effect on the business of the Company.
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<PAGE> 12
ITEM 4
PRINCIPAL SHAREHOLDERS
As of February 14, 2000, Trinity has outstanding 30,140,662 `A' Ordinary shares
and 700,000 `B' Ordinary shares. Such totals exclude 4,547,616 shares issuable
upon the exercise of outstanding options and warrants.
The following table sets forth, as of February 14, 2000 the Trinity "A" Ordinary
Shares and B Ordinary Shares beneficially held by (i) each person known by
Trinity to beneficially hold 10% or more or such shares, (ii) each director and
officer of Trinity, and (iii) all officers and directors as a group. Except as
otherwise noted, all of the persons and groups shown below have sole voting and
investment power with respect to the shares indicated. The Company is not
controlled by another corporation or government.
<TABLE>
<CAPTION>
Number of Number of Number of
A Ordinary Percentage B Ordinary Percentage Percentage
Shares Outstanding Shares Outstanding Total
Beneficially A Ordinary Beneficially B Ordinary Voting
Owned Shares Owned Shares Power
------------ ------ ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Ronan O'Caoimh 1,627,321 (1) 5.4% 0 0 5.2%
Brendan Farrell 1,035,376 (2) 3.4% 0 0 3.3%
Jonathan O'Connell 977,000 (3) 3.2% 0 0 3.1%
Jim Walsh 976,441 (4) 3.2% 0 0 3.2%
Denis R. Burger 648,332 (5) 2.2% 0 0 2.1%
Allan Pronovost 0 (6) 0 0 0 *
Potenza Investments, Inc 0 0 500,000 (7) 71.4% 3.5%
("Potenza")
Statenhof Building, Reaal 2A
23 50AA Leiderdorp, Netherlands
Officers and Directors
as a group (6 persons) 5,264,470(1)(2)
(3)(4)(5)(6) 17.5% 0 0 16.7%
</TABLE>
*less than 1%
(1) Includes 256,666 shares issuable upon exercise of options.
(2) Includes 528,541 shares issuable upon exercise of options.
(3) Includes 30,000 shares issuable upon exercise of options.
(4) Includes 256,821 shares issuable upon exercise of options.
(5) Includes 50,000 of 100,000 owned by Sovereign Ventures, a general
partnership owned 50% by Denis Burger which are included in the shares
deemed owned by Dr. Burger and 257,332 shares issuable upon exercise of
options.
(6) Includes shares beneficially owned by SRL (350,000 'B'), Brindisi
Investments Inc. (150,000 'B'). SRL has advised Trinity that Potenza owns
a majority of SRL's common stock. These `B' shares have two votes per
share.
DIVIDEND POLICY
Since its organisation Trinity has not declared or paid dividends on its `A'
Ordinary Shares. Trinity anticipates, for the foreseeable future, that it will
retain any future earnings in order to fund the business operations of the
Company. The Company does not, therefore, anticipate paying any cash or share
dividends on its `A' Ordinary Shares in the foreseeable future.
Any cash dividends or other distributions, if made, are expected to be made in
US Dollars, as provided for by the Articles of Association.
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<PAGE> 13
ITEM 5
MARKET INFORMATION
Trinity's American Depository Receipts ("ADRs") are listed on the Nasdaq Stock
Market Small Cap Market under the symbol "TRIBY". The Company's Class B Warrant
(symbol "TRIZF"), expired on February 28, 1999. Each ADR represents one `A'
Ordinary Share of the Company. The Company's shares ADRs do not trade on any
other stock exchange or trading market but the shares are listed and trade on
the Irish Stock Exchange. The Company's depository bank for the ADRs is The Bank
of New York. On February 14, 1999, the reported closing sale price of the ADRs
was $4.25 per ADR. The following tables sets forth the range of quoted high and
low sale prices of Trinity's ADR, and Class B Warrants for the quarters ended
March 31, June 30, September 30 and December 31, 1998. March 31, June 30,
September 30 and December 31, 1999, and the period January 1 through February
14, 2000 as reported on NASDAQ. These quotes reflect inter-dealer prices without
retail mark-up, mark-down or commission and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
ADR's Class B
--------------------- -----------------
High Low High Low
-------- -------- ------ ------
<S> <C> <C> <C> <C>
1998
Quarter ended March 31 $2 9/16 $1 3/16 $ 5/8 $ 9/32
Quarter ended June 30 $2 9/16 $1 29/32 $ 1/2 $ 1/16
Quarter ended September 30 $2 3/32 $1 1/32 $ 11/32 $ 1/16
Quarter ended December 31 $1 25/32 $ 15/16 $ 3/16 $ 1/32
1999
Quarter ended March 31 $1 23/32 $1 5/32 +$ 1/8 +$ 1/32
Quarter ended June 30 $2 13/32 $1 17/32
Quarter ended September 30 $2 15/32 $1 3/8
Quarter ended December 31 $1 7/8 $1 15/32
Quarter commencing January 1
through February 14, 2000 $5 3/16 $1 11/16
</TABLE>
* Includes trades through October 21, 1997.
+ Includes trades through February 28, 1999.
The approximate number of record holders of Trinity's ADRs amounts to 1,474,
inclusive of those brokerage firms and/or clearing houses holding Trinity's
securities for their clientele (with each such brokerage house and/or clearing
house being considered as one holder). 1,389 of those record holders are located
in the US.
ITEM 6
EXCHANGE CONTROLS AND OTHER LIMITATIONS
AFFECTING SECURITY HOLDERS
Irish exchange control regulations ceased to apply from and after December 31,
1992. Except as indicated below, there are no restrictions on non-residents of
the Republic of Ireland dealing in domestic securities which includes shares or
depository receipts of Irish companies such as Trinity and dividends and
redemption proceeds are freely transferable to non-resident holders of such
securities.
The Financial Transfers Act, 1992 was enacted in December 1992. This Act gives
power to the Minister of Finance of the Republic of Ireland to make provision
for the restriction of financial transfers between the Republic of Ireland and
other countries. Financial transfers are broadly defined and include all
transfers, which would be movements of funds within the meaning of the treaties
governing the European Communities. The acquisition or disposal of ADRs
representing shares issued by an Irish incorporated company and associated
payments may fall within this definition. In addition, dividends or payments on
redemption or purchase of shares and payments on a liquidation of an Irish
incorporated company would fall within this definition. Currently, orders under
this Act prohibit any financial transfer to or by the order of or on behalf of
residents of the
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<PAGE> 14
Federal Republic of Yugoslavia (Serbia and Montenegro), Iraq and Libya unless
permission for the transfer has been given by the Central Bank of Ireland.
Trinity does not anticipate that Irish exchange controls or orders under the
Financial Transfers Act, 1992 will have a material effect on its business.
There are no limitations under the laws of Ireland or under the Memorandum and
Articles of Association of the Company restricting the right of persons not
resident in Ireland to hold or vote Ordinary Shares.
ITEM 7
TAXATION
The following discussion is based on United States and Republic of Ireland tax
law, statutes, treaties, regulations, rulings and decisions now in effect, all
of which are subject to change. This summary does not discuss all aspects of
Irish and United States federal income taxation that may be relevant to a
particular stockholder in light of the stockholder's circumstances or to certain
types of investors subject to special treatment under the tax laws (for example,
financial institutions, life insurance companies, tax-exempt organisations, and
non-U.S. taxpayers) and it does not discuss any tax consequences arising under
the laws of taxing jurisdictions other than the Republic of Ireland and the
United States federal government. This description is for general information
only and is based on the Internal Revenue Code of 1986, as amended. The tax
treatment of a holder of Trinity Stock may vary depending upon his particular
situation. As used herein, references to the Trinity Stock include ADRs
representing such Trinity Stock.
UNITED STATES FEDERAL INCOME TAXATION
Under the Income Tax Treaty currently in effect between the United States and
Ireland (the "Treaty"), Trinity will not be subject to United States federal
income tax (other than withholding tax imposed on U.S. source dividends and
certain interest) unless it engages in a trade or business in the United States
through a permanent establishment in the United States. Trinity's ownership of
its U.S. subsidiaries does not, in itself, constitute a permanent establishment.
Trinity expects to be able to conduct its activities in a manner that will not
result in its being considered to be engaged in a trade or business or to have a
permanent establishment in the United States for U.S. federal income tax
purposes. The law is unclear, however, as to what constitutes being engaged in a
trade or business or a United States permanent establishment, so there can be no
assurance that Trinity will not be held to be in a trade or business or to have
a United States permanent establishment (in which case Trinity would generally
be subject to United States federal income tax on such of its net income as is
effectively connected to the permanent establishment). Trinity's U.S.
subsidiaries, as United States corporations, are subject to United States
taxation.
FEDERAL INCOME TAX CONSEQUENCES OF U.S. INVESTORS
Holders of ADRs will be treated as the owners of the underlying Trinity stock
for United States federal income tax purposes. Distributions to ADR holders from
Trinity will be treated for U.S. tax purposes as dividends to the extent of
Trinity's current and accumulated earnings and profits. Distributions in excess
of current and accumulated earnings and profits will be applied against and
reduce a holder's basis in its ADRs. The excess, if any, of the distribution
remaining after the basis has been reduced to zero will constitute capital gain.
Dividends paid by Trinity generally will not qualify for the dividends received
deduction otherwise available to United States corporate shareholders.
STATE AND LOCAL TAX CONSEQUENCES TO U.S. SHAREHOLDERS
The ownership of the ADRs may result in state or local taxes to United States
investors.
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<PAGE> 15
Republic of Ireland Taxation
TAXATION OF TRINITY
For Irish tax purposes, the residence of a company is in the jurisdiction where
the central management and control of the company is located. Subject to certain
exceptions, all Irish incorporated companies are deemed to be tax resident in
Ireland. Companies which are tax resident in Ireland are subject to Irish
corporation tax on their total profits (wherever arising and, generally, whether
or not remitted to Ireland). The question of residence, by virtue of management
and control, is essentially one of fact. While there can be no certainty that
Trinity will continue to be Irish resident it is the present intention of our
management to manage and control us from Ireland, so that we will be tax
resident in Ireland.
Until December 31, 2010, we are entitled to the 10 per cent. rate of corporation
tax income from the sale of product manufactured by Trinity in Ireland.
In addition, section 234 of the Taxes Consolidation Act, 1997 provides that a
resident of Ireland shall be entitled to have any qualifying income from a
qualifying patent disregarded for income taxation purposes. It should be noted
that there are restrictions on the exemption where patent income is received
from a connected party. A qualifying patent means a patnet in respect of which
the research, planning, processing, experimenting, testing, devising, designing,
developing or similar activities leading to the invention which is the subject
of the patent, was carried out in Ireland. Accordingly, Trinity or its
subsidiaries qualifying income from such qualifying patents is disregarded for
corporation tax purposes in Ireland.
Any other taxable income will be taxed at the standard rates. The standard rate
of corporation tax on trading income is currently 24 per cent. and on
non-trading income is 25 per cent. The Finance Act, 1999 provides that the
standard rate of corporation tax for trading income (with certain exceptions) is
to be reduced as follows:
o 20 per cent. for the year 2001;
o 16 per cent. for the year 2002; and
o 12.5 per cent. for the year 2003 and subsequent years.
Although Trinity has no reason to believe that the Republic of Ireland intends
to change its method of taxation as it relates to patent licensing, royalty or
manufacturing income, there can be no assurance that such changes will not
actually occur. Irish capital duty, a tax on the issuance of share capital by
companies, is payable at the rate of one percent of proceeds received by us in
exchange for such issuance.
TAXATION OF DIVIDENDS
We do not expect to pay dividends for the foreseeable future. Should we begin
paying dividends, such dividends will generally be subject to a 24 per cent.
withholding tax (DWT), which will reduce to 22 per cent. from April 6, 2000.
Under current legislation, where DWT applies we will be responsible for
withholding it at source. DWT will not apply where an exemption applies and
where we have received all necessary documentation from the recipient prior to
payment of the dividend.
DWT EXEMPTIONS FOR OUR U.S. RESIDENT SHAREHOLDERS
Shareholders who are individuals resident in the United States (and certain
other countries) and who are not resident or ordinarily resident in Ireland may
receive dividends free of DWT where the shareholder has provided us with the
relevant declaration and residency certificate required by legislation.
Corporate shareholders that are not resident in the Ireland and who are
ultimately controlled by persons resident in the United States (or certain other
countries) or whose principal class of shares or its 75 per cent. parent's
principal class of shares are substantially or regularly traded on a recognized
stock exchange in a country with which Ireland has a tax treaty may receive
dividends free of DWT where they provide us with the relevant declaration,
auditor's certificate and Irish Revenue Commissioners' certificate as required
by Irish law.
U.S. resident holders of ordinary shares (as opposed to ADRs) should note that
these documentation requirements may be burdensome. As described below, these
documentation requirements do not apply in the case of holders of ADRs. U.S.
resident holders who do not comply with the documentation requirements or
otherwise do not qualify for an exemption may be able to claim treaty benefits
under the Treaty. U.S. resident holders who are entitled to benefits under the
Treaty will be able to claim a partial refund of DWT from the Irish Revenue
Commissioners.
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<PAGE> 16
DWT EXEMPTIONS FOR U.S. RESIDENT HOLDERS OF OUR ADRS
Special DWT arrangements are available in the case of shares held by U.S.
resident holders in Irish companies through American depository banks using ADRs
who enter into intermediary agreements with the Irish Revenue Commissioners.
Under such agreements, American depository banks who receive dividends from
Irish companies and pay the dividends on to the U.S. resident ADR holders are
allowed to receive and pass on a dividend from the Irish company on a gross
basis (without any withholding) if;
o the depository bank's ADR register shows that the direct beneficial owner
has a U.S. address on the register or
o there is an intermediary between the depository bank and the beneficial
shareholder and the depository bank receives confirmation from the
intermediary that the beneficial shareholder's address in the
intermediary's records is in the U.S.
IRISH INCOME TAX FOR OUR NON-IRISH RESIDENT SHAREHOLDERS
Under the Taxes Consolidation Act, 1997, our non-Irish shareholders may, unless
exempted, be liable to Irish income tax on dividends received from us. Such a
shareholder will not have an Irish income tax liability on our dividends from us
if the shareholder is:
o an individual resident in the United States (or certain other countries
with which Ireland has a double taxation treaty) and who is neither
resident nor ordinarily resident in Ireland; or
o a corporation that is not resident in Ireland and which is ultimately
controlled by persons resident in the United States (or certain other
countries); or
o a corporation that is not resident in Ireland and whose principal class of
shares (or its 75 per cent. parent's principal class of shares) are
substantially or regularly traded on a recognized stock exchange; or
o is otherwise entitled to an exemption from DWT.
IRISH INCOME TAX FOR OUR IRISH RESIDENT SHAREHOLDERS
As explained in "Taxation of Dividends" above, DWT applies with some exceptions
to dividends which we pay to our shareholders, including our individual
shareholders resident or ordinarily resident in Ireland. Our Irish individual
shareholders are subject to income tax on the gross dividend, which is the
dividend received plus DWT, at their marginal rate of tax but are entitled to
credit for the DWT deducted against their income tax liability. Our Irish
individual shareholders may also be subject to the Irish health levy of 2 per
cent. in respect of this dividend income. Our Irish individual shareholders may
claim to have the tax withheld refunded by the Irish tax authorities to the
extent that it exceeds the shareholder's Irish income tax liability.
DWT does not apply to dividends paid by us to various Irish resident companies,
pension funds and charities where the shareholder has provided us with the
relevant declaration required by Irish law.
IRISH TAXATION OF CAPITAL GAINS
A non-resident holder is not subject to Irish capital gains tax on the disposal
of our shares or ADRs.
Irish capital gains tax is chargeable at the rate of 20 per cent. of taxable
capital gains with allowance being made for inflation, adjusted acquisition
costs and enhancement expenditure.
Depending on the circumstances, an Irish resident holder may be liable to
capital gains tax on disposals of his or her ordinary shares or ADRs as the case
may be.
IRISH CAPITAL ACQUISITIONS TAX
Irish capital acquisitions tax, referred to as CAT, applies to gifts and
inheritances:
o where either the person making the gift or inheritance or the beneficiary is
resident or ordinarily resident in Ireland at the date of the gift or
inheritance; however, where either the disponer or
o the beneficiary is non-Irish domiciled, that person will not be treated as
resident or ordinarily resident in Ireland unless he or she has been
resident in Ireland for the five consecutive tax years before the gift or
inheritance; and
o to the extent that the property of which the gift or inheritance consists is
situated in Ireland at the date of the gift or inheritance.
Because we are required to maintain our ordinary share register in Ireland,
ordinary shares will be and ADRs may be regarded as located in Ireland.
Accordingly, ordinary shares will be subject to CAT and ADRs may be subject to
CAT notwithstanding the fact that the holder may be domiciled and/or resident
outside of Ireland. Although an estate tax convention between the two
16
<PAGE> 17
countries was ratified in 1951, estate duty was abolished in Ireland in 1975 and
it is not clear whether the estate tax convention is applicable to Irish gift
and inheritance taxes that replaced the former estate duty.
The person who receives the gift or inheritance is primarily liable for CAT.
Persons who are secondarily liable include the donor, his personal
representative and any agent, trustee or other person in whose care the property
constituting the gift or inheritance or the income therefrom is placed. All
taxable gifts and inheritances received by an individual since December 2, 1988
are aggregated and only the excess over a certain tax-free threshold is taxed.
The tax-free threshold amounts currently in force are: (a) IR pounds 15,000 in
the case of persons who are not related to one another, (b) IR pounds 30,000 in
the case of gifts and inheritances received from a brother, sister or from A
brother or sister of a parent or from a grandparent, and (c) IR pounds 300,000
in the case of gifts and inheritances received from a parent and certain
inheritances received by a parent from a child. Gifts and inheritances passing
between spouses are exempt from CAT. CAT is charged at 20 per cent. on both
gifts and inheritances.
IRISH PROBATE TAX
In addition to CAT, a probate tax of 2 per cent. applies to the value of all
assets passing under the will or intestacy of an Irish-domiciled person. Where
the deceased was not domiciled in Ireland, only assets situated in Ireland are
liable for this tax. Because we are required to maintain our ordinary share
register in Ireland, ordinary shares will be and ADRs may be regarded as located
in Ireland for purposes of the probate tax notwithstanding the fact that the
deceased holder may have been domiciled and/or resident outside of Ireland. No
probate tax applies on an inheritance from a spouse. Since probate tax was only
introduced in 1993, it is not clear whether credit relief would be available
under the estate tax convention discussed above.
IRISH STAMP DUTY--ORDINARY SHARES
Irish stamp duty, which is a tax on certain documents, may be payable on all
transfers of our ordinary shares (other than between spouses) wherever the
document of a transfer is executed. Where the transfer is attributable to a
sale, stamp duty will be charged at a rate of 1 per cent. rounded up to the
nearest pounds sterling 1 (the ad valorem rate), of the amount or value of the
purchase price or market value if higher. Where the consideration for the sale
is expressed in a currency other than Irish pounds, the duty will be charged on
the Irish pound equivalent calculated at the rate of exchange prevailing at the
date of the transfer. In the case of a transfer by way of gift (other than to a
spouse, which is exempt) or for a consideration less than the market value of
the ordinary shares transferred, stamp duty will be charged at the ad valorem
rate on such market value.
Transfers of ordinary shares between associated companies will be relieved from
stamp duty in the Ireland provided certain conditions are met. Transfers of
ordinary shares where no beneficial interest passes (e.g. a transfer of shares
from a beneficial owner to his nominee), will generally be exempt from stamp
duty if they contain the appropriate certificate, otherwise a flat rate of
IR pounds 10 (the nominal rate) will apply.
IRISH STAMP DUTY--ADRS REPRESENTING ORDINARY SHARES
A transfer by a shareholder to the Depository of ordinary shares for deposit
under the Deposit Agreement in return for ADRs, and a transfer of ordinary
shares from the Depository upon surrender of ADRs for the purposes of withdrawal
of the underlying ordinary shares in accordance with the terms of the Deposit
Agreement, will be stampable at the ad valorem rate if the transfer relates to a
sale or contemplated sale or any other change in the beneficial ownership of
such ordinary shares, and at the nominal rate where the transfer merely relates
to a transfer where no change in the beneficial ownership in the underlying
ordinary shares is effected.
Transfers of ADR are exempt from Irish stamp duty as long as the ADRs are quoted
on the Nasdaq National Market or any recognized stock exchange in the United
States or Canada.
The person accountable for payment of stamp duty is the transferee or, in the
case of a transfer by way of gift or for a consideration less than the market
value, both parties to the transfer. Stamp duty is normally payable within 30
days after the date of execution of the transfer. Late or inadequate payment of
stamp duty will result in liability for interest, penalties and fines.
17
<PAGE> 18
Item 8
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected financial data for the years ended December 31, 1999,
December 31, 1998, December 31, 1997, December 31, 1996, and December 31, 1995,
are derived from the audited financial statements of Trinity. The data should be
read in conjunction with the financial statements, related notes, and other
financial information included elsewhere herein.
<TABLE>
<CAPTION>
Statement of
Operations Data Year Ended Year Ended Year Ended Year Ended Year Ended
Dec 31, 1999 Dec 31, 1998 Dec 31,1997 Dec 31,1996 Dec 31, 1995
------------ ------------ ----------- ----------- ------------
US$ US$ US$ US$ US$
(Restated) (Restated) (Restated)
<S> <C> <C> <C> <C> <C>
Revenues .............. 26,104,623 23,169,520 17,831,586 6,799,024 9,965,842
Cost of goods sold .... (14,521,619) (15,176,056) (12,058,585) (4,961,496) (7,983,379)
Administrative expenses (3,106,167) (2,271,247) (3,399,803) (2,116,274) (2,269,219)
R.& D. expenses ....... (2,448,372) (2,559,490) (1,876,888) (1,375,166) (1,507,031)
Amortisation .......... (863,068) (178,846)
Other Operating Income -- -- 815,654 553,587 849,935
----------- ----------- ----------- ----------- -----------
Operating profit/(loss) 5,165,397 2,983,881 1,311,964 (1,100,325) (943,852)
Interest expense ...... 723,312 (466,902) (185,744) (17,017) (25,337)
Interest income ....... 69,284 71,011 153,850 364,283 133,597
Profit/Loss on assets 404,328 (37,397) -- -- --
----------- ----------- ----------- ----------- -----------
Net profit/(loss) ..... 4,915,697 2,550,593 1,280,070 (753,059) (835,590)
----------- ----------- ----------- ----------- -----------
Basic earnings
per ordinary share . 0.175 0.10 0.06 (0.05) (0.08)
Diluted earnings
per ordinary share 0.17 0.10 0.06 (0.05) (0.08)
Weighted average
number of shares .. 28,158,184 25,586,050 19,108,363 16,119,559 11,135,753
</TABLE>
<TABLE>
<CAPTION>
Balance Sheet Data Year Ended Year Ended Year Ended Year Ended Year Ended
Dec 31, 1999 Dec 31, 1998 Dec 31,1997 Dec 31,1996 Dec 31,1995
------------ ------------ ----------- ----------- -----------
US$ US$ US$ US$ US$
(Restated) (Restated) (Restated)
<S> <C> <C> <C> <C> <C>
Working Capital ....... 5,553,158 9,073 7,069,628 6,688,270 6,535,258
Long-term Liabilities 8,806,232 12,263,521 8,727,511 76,319 --
Total Assets .......... 45,042,295 45,013,047 24,599,701 13,624,817 9,173,018
Shareholders' Equity .. 22,721,817 14,624,196 7,104,711 10,572,542 7,500,229
</TABLE>
Amounts Adjusted for US GAAP
<TABLE>
<CAPTION>
Balance Sheet Data Year Ended Year Ended Year Ended Year Ended Year Ended
Dec 31, 1999 Dec 31, 1998 Dec 31,1997 Dec 31,1996 Dec 31,1995
------------ ------------ ----------- ----------- -----------
US$ US$ US$ US$ US$
(Restated) (Restated) (Restated)
<S> <C> <C> <C> <C> <C>
Net profit (loss) ..... 988,792 625,088 (1,935,049) (2,639,113) (2,358,730)
Basic earnings
per ordinary share .... 0.04 0.02 (0.10) (0.16) (0.21)
Diluted earnings
per ordinary share ... 0.04 0.02 (0.10) (0.16) (0.21)
Total Assets ......... 55,620,414 60,177,621 40,411,657 21,635,823 17,133,892
</TABLE>
No dividends were declared in any of the periods from December 31, 1995 to
December 31, 1999.
18
<PAGE> 19
ITEM 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
GENERAL
Trinity was incorporated in Ireland in January 1992. The Company was organised
to acquire, develop and market technologies for rapid in vitro blood and saliva
diagnostics for HIV and other infectious diseases. In October 1992 Trinity
completed an initial public offering in the United States in which it raised net
proceeds in excess of $5 million. In October 1993, Trinity took a controlling
interest in DDI and in October 1994 merged Trinity's wholly-owned subsidiary
into DDI so that DDI became a wholly-owned subsidiary of Trinity. DDI was the
surviving legal entity in the merger and was subsequently renamed Trinity
Biotech Inc ("TBI"). In December 1994 Trinity acquired the remaining 50% of FHC
which its subsidiary TBI did not own. During 1995 Trinity raised net proceeds of
in excess of $6 million as a result of a private placements of the Company's
shares. In February 1997, the Company purchased the entire share capital of
Clark Laboratories Inc ("Clark"), which now trades as Trinity Biotech USA, and
in June 1997 the company purchased the entire share capital of Centocor UK
Holdings Ltd ("Centocor"). In 1998, the Company made four product line
acquisitions. The acquisition of the Microzyme and Macra Lp(a) product lines in
June 1998 and the acquisition of the MicroTrak and Cambridge Diagnostics HIV
product lines in September 1998. The manufacture of these product lines has been
transferred to the Company's Jamestown, NY and Bray, Ireland manufacturing
facilities. The group financial statements include the attributable results of
Trinity USA, Centocor, TBI and Trinity Biotech Manufacturing Limited, which are
engaged in manufacture and sale of diagnostic test kits. This discussion covers
the years ended December 31, 1999, December 31, 1998 and December 31, 1997.
The following discussion should be read in conjunction with the Consolidated
Financial Statements and notes thereto appearing elsewhere in this Form 20-F.
The financial statements have been prepared in accordance with Irish generally
accepted accounting principals which differ from US GAAP as indicated in Note 27
to the Consolidated Financial Statements.
RESULTS OF OPERATIONS
Year Ended December 31, 1999 Compared to the Year Ended December 31, 1998
Trinity's consolidated revenues for the year ended December 31, 1999 were
$26,105,000, an increase of $2,935,000 compared to consolidated revenues of
$23,170,000 for the year ended December 31, 1998. The growth in revenues is due
to an increase in the growth in the level of sales of Trinity's existing product
lines along with a full years contribution from the four product line
acquisitions in 1998. The 1999 revenues did not include any revenues from the
sales of pregnancy tests to Warner Lambert, a contract that the company disposed
of in September 1998 and which contributed $6,084,000 in 1998. Management
expects that revenues of Trinity's products will continue to increase due to
further regulatory approvals and increased sales from our existing distribution
network.
Interest and other income decreased to $69,000 for the year ended December 31,
1999 compared to $71,000 in the year ended December 31, 1998. This small
decrease reflects the lower cash reserves of the group during the period.
The gross margin from product sales for the year ended December 31, 1999 was 44%
compared to 34% for the year ended December 31, 1998. This is due largely to the
disposal in September 1998 of the Company's low margin contract with Warner
Lambert, which had a margin of 15%.
Administrative expenses for the year ended December 31, 1999 amounted to
$3,969,000 compared to $2,450,000 for the year ended December 31, 1998. This
increase of $1,519,000 is attributable to the expansion of the Group's
activities in Ireland and the US. Research and development expenditure decreased
to $2,448,000 from $2,559,000 during the period reflecting the reallocation of
resources to assist in the transfer of the four product line acquisitions
completed in 1998. The research and development resources were utilised to
develop the Company's Uni-Gold one-step range of tests and to add further
products to the Company's increasing laboratory test product lines. In December,
the company finalized the sale and leaseback of its headquarters in Ireland,
realising a gain of $1,014,000. In addition, the Company wrote down its
investment in CLI Oncology to zero resulting in a once off charge to the profit
and loss account of $610,000. During 1998 the Company realised a gain of
$458,000 on the disposal of its investment in Selfcare Inc, offset by a loss on
the disposal of the Warner Lambert contract of $495,000.
The net profit for the year ended December 31, 1999 was $4,916,000 compared to
$2,551,000 for the year ended December 31, 1998. This improvement in results was
brought about primarily by increased revenues as a result of the inclusion of
revenues of the four new product lines for the full year and the additional
revenues contributed by the Company's existing product lines. In addition the
combination of the profit on the sale and leaseback of the Company's
headquarters in Ireland and the write down of the CLI Oncology investment
resulted in a net non-recurring exceptional profit of $404,000.
19
<PAGE> 20
Year Ended December 31, 1998 Compared to the Year Ended December 31, 1997
Trinity's consolidated revenues for the year ended December 31, 1998 were
$23,170,000, an increase of $5,338,000 compared to consolidated revenues of
$17,832,000 for the year ended December 31, 1997. The growth in revenues is due
to an increase of $1,299,000 relating to the growth in the level of sales of
Trinity's existing product lines and the effect of new product introductions.
The rest of the increase amounting to $4,039,000 relates to revenues from the
Company's four newly acquired product lines. Included in product sales for the
year ended December 31, 1998 are sales of pregnancy tests in the amount of
$6,084,000 compared to sales of $7,142,000 for these tests in the previous year.
This decrease of $1,058,000 has been caused by the sale of the Warner Lambert
contract at the end of September 1998. Of the pregnancy tests sold by Trinity,
approximately 94% were attributable to revenues of FHC to Warner-Lambert and 6%
were pregnancy tests sold by Trinity to the professional markets.
Revenues for the year ended December 31, 1998, from the sale of the Company's
other tests were $17,086,000 compared to $10,690,000 for the year ended December
31, 1997, an increase of $6,396,000. Of the total increase, $4,039,000 was due
to the inclusion of sales from the Company's four newly acquired product lines.
The remaining increase of $2,357,000 was due to increasing sales from the
Company's existing product lines and the impact from sales of newly launched
products. Management expects that revenues of Trinity's products will continue
to increase due to further regulatory approvals and increased sales from our
existing distribution network.
Interest and other income decreased to $71,000 for the year ended December 31,
1998 compared to $154,000 in the year ended December 31, 1997. This decrease
reflects the lower cash reserves of the group during the period.
The gross margin from product sales for the year ended December 31, 1998 was 34%
compared to 32% for the year ended December 31, 1997. This is mainly due to the
fact that the Company's lower margin pregnancy sales now make up a smaller
proportion of overall sales than the higher margin products. The gross margin on
the sale of pregnancy tests was 15% and the margin on the sale of the Company's
other tests was 41%.
Administrative expenses for the year ended December 31, 1998 amounted to
$2,450,000 compared to $3,400,000 for the year ended December 31, 1997. This
significant decrease of $950,000 is mainly attributable to the closure of the
Centocor UK plant in the UK at the end of the first quarter of 1998. Research
and development expenditure increased to $2,559,000 from $1,877,000 during the
period reflecting the allocation of increased resources. The resources were
utilised to develop the Company's Uni-Gold one step range of tests and to add
further products to the Company's increasing laboratory test product lines.
During the year the Company realised a gain of $458,000 on the disposal of its
investment in Selfcare Inc. This compares to a gain of $816,000 in 1997. This
gain was offset by a loss on the disposal of the Warner Lambert contract of
$495,000.
The net profit for the year ended December 31, 1998 was $2,551,000 compared to
$1,280,000 for the year ended December 31, 1997. This improvement in results was
brought about primarily by increased revenues as a result of the inclusion of
revenues of Centocor UK products for the full year and the additional revenues
contributed by the four product line acquisitions made during the year.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1999 Trinity's consolidated cash and cash equivalents were
$3,064,000. This compares to cash and cash equivalents of $1,302,000 at December
31, 1998. The increase is due to increased cash flows from operation, additional
bank and debenture borrowings and the issue of shares, offset by the repayment
of bank borrowings and deferred consideration and the purchase of fixed assets.
This resulted in net cash inflows of $1,762,000 during the year.
As a result of the supply agreement between Trinity USA and Carter Wallace,
Trinity USA received $2,000,000 in return for Carter Wallace having exclusive
rights to its products in the U.S. The final $500,000 was paid in December 1997.
If sales of products to Carter Wallace exceed certain levels, Trinity is
entitled to a 40% share in the gross profit received by Carter Wallace on sales
in excess of the stated levels.
In connection with the acquisition of Centocor, on June 25, 1997, the Company
completed a private placement of (i) $3,000,000 principal amount of 4%
Convertible Debentures (the "Debentures") and (ii) 50,000 warrants to purchase
`A' Ordinary Shares of the Company (the "Warrants"), which resulted in aggregate
gross proceeds to the Company of $3,000,000.
The Debentures bear interest at the rate of 4% per annum, payable quarterly, and
mature on December 24, 1999. The Debentures were convertible into `A' Ordinary
Shares of the Company at a price equal to the lower of (i) the average closing
bid price of the Company's ADRs on the five trading days prior to conversion,
subject to a discount which ranges from 10% for conversions made within the
first 120 days after issuance to 22.5% for conversions made on or after 181 days
after issuance, or (ii) $3.78. As of December 31, 1999 all of the $3,000,000
principal amount of the debentures have been converted resulting in the issuance
of 2,487,968 shares.
The Warrants are each exercisable to purchase one `A' Ordinary Share of the
Company at $3.78 per share until June 25, 2000.
20
<PAGE> 21
On December 25, 1999, the Company completed a private placement of (i)
$3,500,000 principal amount of 7.5% Convertible Debentures (the "Debentures")
and (ii) 483,701 warrants to purchase `A' Ordinary shares of the Company (the
"Warrants"), which resulted in aggregate gross proceeds to the Company of
$3,500,000.
The Debentures bear interest at the rate of 7.5% per annum, payable quarterly.
$2,500,000 of the principal amount matures on December 18, 2001 with the
remaining $1,000,000 maturing on December 18, 2002. The Debentures are
convertible into `A' Ordinary Shares of the Company at a price $1.80. As of
December 31, 1999 none of the $3,500,000 principal amount of the debentures has
been converted.
333,701 of the Warrants are each exercisable to purchase one `A' Ordinary Share
of the Company at $1.74 per share until June 25, 2002 and the remaining 150,000
are each exercisable to purchase one `A' Ordinary Share of the Company at $1.80
per share until June 25, 2002
Trinity paid $12 million, $4.2 million, $1.8 million and $1.7 million (net of
acquisition costs), respectively, in respect of its acquisitions of the
MicroTrak(TM), Cambridge Diagnostics, Macra(TM) Lp(a) and Diatech product lines
in 1998. The net effect of the acquisitions has had a positive impact on
Trinity's gross margins and operating results in 1998 and 1999. The products
acquired in the acquisitions are sold at margins in line with those of Trinity's
higher margin, non-pregnancy rapid products and as such provide a positive
overall impact on margins within the company.
Trinity has one additional payment of $516,250 in June 2000 to complete its
acquisition of Centocor. In relation to the four product line acquisitions in
1998, the Company has the following payments to make to complete the
acquisitions:
One payment of $2,916,000 to be paid in October 2000 to complete its acquisition
of the MicroTrak(TM) product line.
One payment to Strategic Diagnostics Inc which is based on a multiple of 2.05
times sales for A) the fourth calendar quarter of 1999 times four or, B) the
third calendar quarter plus the fourth calendar quarter of 1999 times two,
whichever is greater. Trinity has calculated this to be $663,000 and has
provided for this amount in the financial statements to December 31, 1999. The
payment is due to be paid on the 29th February 2000.
Trinity believes that, with further funds generated from operations, it will
have sufficient funds to meet these commitments and continue operations for the
foreseeable future. If operating margins of sales were to decline substantially
or the Company was to make a large and unanticipated cash outlay, the Company
would have further funding requirements. If this were the case, there can be no
assurance that financing will be available at attractive terms, or at all. The
Company believes that success in raising additional capital or obtaining
profitability will be dependent on the viability of its products and their
success in the market place.
In February 1999, the Company's `B' Warrant expired. This resulted in the
cancellation of 1,279,151 unexercised `B' Warrants.
Reconciliation to US GAAP
The Consolidated Financial Statements are prepared in accordance with accounting
principles generally accepted in the Republic of Ireland ("Irish GAAP"), which
differ in certain significant respects from accounting principles generally
accepted in the United States ("US GAAP"). Those items affecting Net Profit
(Loss) are as follows:
In prior years Irish GAAP, goodwill was be either written off immediately on
completion of the acquisition against shareholders' equity, or capitalised in
the balance sheet and amortised through the income statement on a systematic
basis over its useful economic life. From 1998, goodwill must be capitalised and
amortised over the period of its expected useful life, however historic goodwill
continues to remain an offset against shareholders' equity. Under US GAAP,
accounting for goodwill as an offset against shareholders' equity is not
permitted, rather, goodwill must be amortised over the period of its expected
useful life, subject to a maximum write off period of 40 years, through the
income statement. For goodwill arising prior to 1998, a useful life of 10 years
has been adopted for the purposes of the reconciliation. In the year to December
31, 1999 the amount that would have been amortised to the profit and loss was
US$2,177,688, December 31, 1998 US$2,175,505 and December 31, 1997 US$1,786,869.
Share Capital Not Paid; Under Irish GAAP, unpaid share capital is classified as
a receivable under current assets. Under US GAAP, share capital receivable
should be reported as a reduction to Shareholders' Equity.
Recognition of Escrow Income; Under Irish GAAP, the Company has recognised as
revenue amounts due to be released from an Escrow account in 1997. Under US GAAP
such amounts are not recognisable until received. The escrow account was
transferred as part of the disposal of the Supply Agreement between Warner
Lambert Inc., Applied Biotech Inc. and Trinity Biotech Inc., and as such the
escrow account has been realised and is included as a reconciling item in the
current year US GAAP reconciliation.
Deferred Set-Up Costs; Under Irish GAAP, certain costs arising on the
integration of acquired businesses or product lines may capitalised and
amortised over set periods. Under US GAAP, these costs must be expensed in the
period in which they occur.
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<PAGE> 22
Pre-Paid Offering Expenses; Under Irish GAAP, share issue expenses arising as a
result of fundraising activities, where no funds have yet been raised, may be
included in prepayments and written off to share premium on the finalisation of
the fundraising. Under US GAAP, if the fundraising has been suspended for more
than a 90 days period the costs must be expensed to the profit and loss account.
Sale and Leaseback; Under Irish GAAP, the Company's sale and leaseback
transaction was treated as a disposal of assets with the gain on the disposal of
US$1,014,080 being credited to the profit and loss in the period. Under US GAAP,
this amount would be deferred and released to the profit and loss account over
the period of the lease (20 years).
Deferred Development Costs; Under Irish GAAP, payments made for patents or
licences acquired for the purpose of developing products or services may be
capitalised and written off over their expected useful lives. Under US GAAP,
these costs may only be capitalised where a direct revenue stream is available
from the use of these patents or licences immediately and must be expenses where
further development work is required before an income stream is generated.
Debt Securities; Under US GAAP, the fair value of detachable warrants issued in
connection with debt securities, are accounted for as debt discount the amount
of which is amortised over the term of the debt under the interest method. Under
Irish GAAP, no interest is imputed.
IMPACT OF INFLATION
Although Trinity's operations are influenced by general economic trends, Trinity
does not believe that inflation has a material effect on its operations for the
periods presented.
IMPACT OF CURRENCY FLUCTUATION
Trinity's revenue and expenses are affected by fluctuations in currency exchange
rates especially the exchange rate between the US Dollar and the Irish Pound.
Trinity's revenues are primarily denominated in US Dollars, its expenses are
incurred principally in Irish Pounds and US Dollars. The revenues and costs
incurred by US subsidiaries are denominated in US Dollars.
Trinity holds most of its cash assets in U.S. dollars. As Trinity reports in US
Dollars, fluctuations in exchange rates do not result in exchange differences on
these cash assets.
EXCHANGE RATES
Fluctuations in the exchange rate between the Irish pound (as part of the
European Monetary System) and the U.S. dollar may impact on the Company's Irish
pound monetary assets and liabilities and on Irish pound expenses and
consequently the Company's earnings.
YEAR 2000
In prior years, the Company discussed the nature and progress of its plans to
become Year 2000 ready. In late 1999, the Company completed its remediation and
testing of systems. As a result of those planning and implementation efforts,
the Company experienced no significant disruptions in mission critical
information technology systems and believes those systems successfully responded
to the Year 2000 date change. The Company expensed approximately $20,000 during
1999 in connection with remediating its systems. The Company is not aware of any
material problems resulting from Year 2000 issues, either with its products, its
internal systems, or the products and services of third parties. The Company
will continue to monitor its mission critical computer applications and those of
its suppliers and vendors throughout the year 2000 to ensure that any latent
Year 2000 matters that may arise are addressed promptly.
ITEM 9A QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
QUALITATIVE INFORMATION ABOUT MARKET RISK
The Group's treasury policy is to manage financial risks arising in relation to
or as a result of underlying business needs. The activities of the treasury
function, which does not operate as a profit centre, are carried out in
accordance with Board approved policies and are subject to regular audit. These
activities include the Group making use of spot and forward foreign exchange
markets and forward interest rate agreements.
The Group uses financial instruments throughout its businesses: borrowings, cash
and liquid resources are used to finance the Groups operations. The Group does
not use derivatives such as interest rate and currency swaps.
The Group's policy, which has been in force throughout recent years and has been
approved by the Board, is not to trade in financial instruments.
22
<PAGE> 23
The Group's reported net income, net assets and gearing (net debt expressed as a
percentage of shareholders' equity) are all affected by movements in foreign
exchange rates.
Interest rate exposure is managed within parameters agreed by the Board.
Year-end borrowings, net of cash, totaled US$12.8 million (1998: US$21.3
million) and including US$3,500,000 of fixed rate debt (1998: US$447,994. In
broad terms, a one-percentage point increase in interest rates would increase
the net interest charge by US$71,000.
Long-term borrowing requirements are met by funding in the U.S. and Ireland.
Short-term borrowing requirements are primarily drawn under committed bank
facilities. At the year-end, 51% of gross debt fell due for repayment within one
year. The Group continues to comply with all of its borrowing covenants, none of
which represents a restriction on funding or investment policy in the
foreseeable future.
The vast bulk of the Group's activities are conducted in US Dollars. The primary
foreign exchange risk arises from the fluctuating value of the Group's Irish
pound expenses as a result of the movement in the exchange rate between the US
Dollar and the Irish Pound. With the introduction of the Euro in 1999, the
Company believes it will be in a position to match certain of its non-us
expenses with non US revenues.
QUANTITATIVE INFORMATION ABOUT MARKET RISK
INTEREST RATE SENSITIVITY
The Group monitors its exposure to changes in interest and exchange rates by
estimating the impact of possible changes on reported profit before tax and net
worth. The Group accepts interest rate and currency risk as part of the overall
risks of operating in different economies and seeks to manage these risks by
following the policies set above.
The Group estimates that the maximum effect of a rise of one percentage point in
one of the principal interest rates to which the Group exposed, without making
any allowance for the potential impact of such a rise on the exchange rates,
would be reduction in profit before tax for 1999 of less than one per cent.
The table below provides information about the Group's debt obligations that are
sensitive to changes in interest rates. For long-term debt obligations, the
table presents principal cash flows and related weighted average interest rates
by expected maturity dates. Weighted average variable rates are based on rates
set at the balance sheet date. The information is presented in US Dollars, which
is the Group's reporting currency. The actual currencies of the instruments are
as indicated.
<TABLE>
<CAPTION>
MATURITY AFTER FAIR
BEFORE DECEMBER 31 2000 2001 2002 2003 2004 2004 TOTAL VALUE*
- ---------------------------- ----- ----- ----- ----- ----- ----- ------ --------
US$000 (except percentages)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LONG-TERM DEBT
Variable rate - US$000 8,158 544 544 446 68 2,654 12,414 12,414
Average interest rate 8.77% 8.97% 5.41% 5.02% 5.00% 6.49% 6.09%
Fixed rate - US$000 - 2,500 1,000 - - - 3,500 3,500
Average interest rate - 7.5% 7.5% - - - 7.5%
</TABLE>
*Represents the net present value of the expected cash flows discounted at
current market rates of interest.
Exchange rate sensitivity
At year-end 1999, approximately 5% of the Group's US$22,954 million net worth
(shareholders' equity) was denominated in currencies other than the US$,
principally the Irish Pound (5%).
A strengthening of the US Dollar by 10% against all the other currencies the
group operates in would, when reported in Dollars, reduce the Group's year-end
1999 net worth by an estimated US$110,000.
23
<PAGE> 24
ITEM 10
MANAGEMENT OF TRINITY
DIRECTORS AND EXECUTIVE OFFICERS
Name Age Title
- ---- --- -----
Ronan O'Caoimh 43 Chairman of the Board of Directors
Chief Executive Officer
Brendan K. Farrell 52 Director, President, CEO Trinity USA
James Walsh Ph.D. 41 Director, Chief Operating Officer
Jonathan O'Connell 34 Director, Chief Financial Officer, Company
Secretary
Denis R. Burger, Ph.D. 56 Non Executive Director
Allan Pronovost, Ph.D. 48 Non Executive Director
BOARD OF DIRECTORS
RONAN O'CAOIMH, CHAIRMAN AND CHIEF EXECUTIVE OFFICER, co-founded Trinity in June
1992 and acted as Chief Financial Officer until March 1994 when he became Chief
Executive Officer. He has been Chairman since May 1995. Prior to joining
Trinity, Mr. O'Caoimh was Managing Director of Noctech Limited, an Irish
diagnostics company. Mr. O'Caoimh was Finance Director of Noctech Limited from
1988 until January 1991 when he became Managing Director following its
acquisition. Between 1984 and 1988 Mr. O'Caoimh was Finance Director and
subsequently Managing Director of Laird Food Products, an Irish food
manufacturer. Mr. O'Caoimh holds a Bachelor of Commerce degree from University
College, Dublin and is a Fellow of the Institute of Chartered Accountants in
Ireland.
BRENDAN FARRELL, PRESIDENT, joined Trinity in July 1994. He was previously
Marketing Director of B.M. Browne Limited, a company involved in the marketing
and distribution of medical and diagnostic products. Prior to that he was Chief
Executive of Noctech Limited, an Irish based diagnostics company, following six
years with American Hospital Supply Corporation where he was Director of
European Business Development. Mr. Farrell has a Masters degree in Biochemistry
from University College, Cork.
JONATHAN O'CONNELL, CHIEF FINANCIAL OFFICER, joined Trinity in January 1993 as
Group Financial Controller and was appointed Chief Financial Officer in January
1995. He also assumed the position of Company Secretary in June 1994. Prior to
joining Trinity Mr. O'Connell practiced as a chartered accountant with Arthur
Andersen & Co., Dublin. He has a degree in Business Studies from Trinity
College, Dublin.
JIM WALSH, PH.D., CHIEF OPERATING OFFICER, joined Trinity in October 1995. Prior
to joining the Company, Dr. Walsh was Managing Director of Cambridge Diagnostic
Ireland Limited (CDIL). He was employed with CDIL since 1987. Before joining
CDIL he worked with Fleming GmbH as Research & Development Manager. Dr. Walsh
has a degree in Chemistry and a Ph.D. in Microbiology from University College,
Galway.
DENIS BURGER, PH.D., NON-EXECUTIVE DIRECTOR, was Chairman of Trinity from June
1992 to May 1995 and is currently a non-executive Director. Dr. Burger is
President, Chief Executive Officer and a director of AVI Biopharma Inc., an
Oregon biotechnology company. Dr. Burger is also a 50% partner in Sovereign
Ventures, a healthcare consulting and funding firm based in Portland, Oregon. He
was a co-founder and, from 1981 to 1990, Chairman of the Board of Epitope Inc.
In addition, Dr. Burger has held a professorship in the Department of
Microbiology and Immunology and Surgery (Surgical Oncology) at the Oregon Health
Sciences University in Portland. Dr. Burger received his degree in Bacteriology
and Immunology from the University of California in Berkeley in 1965 and his
Master of Science and Ph.D. in 1969 in Microbiology and Immunology from the
University of Arizona.
ALLAN PRONOVOST, PH.D., NON-EXECUTIVE DIRECTOR, joined the Board of Trinity in
December 1997 as a non-executive Director. Since June 1997, Dr. Pronovost has
been a self-employed consultant in the diagnostics industry. From March 1987 to
June 1997 Dr. Pronovost was Vice-President - Research and Development at Quidel
Corporation. Previously he had various key research and development positions at
Eastman Kodak from 1986 to March 1987, Ortho Diagnostic Systems, Inc. from 1983
to 1986, and E.I. duPont Corporation from 1980 to 1983. Dr. Pronovost received
his post-doctoral clinical training at Yale University School of Medicine and
received his Ph.D. in virology from the University of Rhode Island.
24
<PAGE> 25
The Articles of Association of Trinity provide that one third of the directors
in office (other than the Managing Director or a director holding an executive
office with Trinity) or, if their number is not three or a multiple of three,
then the number nearest to but not exceeding one third, shall retire from office
at every annual general meeting. If at any annual general meeting the number of
directors who are subject to retirement by rotation is two, one of such
directors shall retire and if the number of such directors is one that director
shall retire. Retiring directors may offer themselves for re-election. The
directors to retire at each annual general meeting shall be the directors who
have been longest in office since their last appointment. As between directors
of equal seniority the directors to retire shall, in the absence of agreement,
be selected from among them by lot.
ITEM 11
COMPENSATION OF DIRECTORS AND OFFICERS
The Compensation Committee is responsible for determining the remuneration of
the executive Directors. The committee determines all aspects of remuneration,
salary, company cars, bonuses, pension contributions, share options and other
benefits. The Compensation Committee consists of Dr. Denis Burger, Dr. Allan
Pronovost and Ronan O'Caoimh. The aggregate compensation paid to the directors
and executive officers of the company for the period ended December 31, 1999
totalled of $807,626. This included an amount of $48,270 paid on behalf of the
Directors into the Company pension plan.
No director of the Company is compensated in his capacity as a director, but
members of the Board received compensation for serving as officers or
consultants of the Company. Each director is reimbursed for expenses incurred in
attending meetings of the Board of Directors.
ITEM 12
STOCK OPTION PLAN
The Board of Directors has adopted the Employee Share Option Plan (the "Plan"),
the purpose of which is to provide Trinity's employees, consultants, officers
and directors with additional incentives to improve Trinity's ability to
attract, retain and motivate individuals upon whom Trinity's sustained growth
and financial success depends. The Plan is administered by a compensation
committee designated by the Board of Directors. The aggregate maximum number of
`A' Ordinary shares of Trinity available for awards under the Plan is 11,500,000
subject to adjustments to reflect changes in Trinity's capitalisation. Options
under the Plan may be awarded only to employees, officers, directors and
consultants of Trinity.
The exercise price of options is determined by the compensation committee. The
term of an option will be determined by the compensation committee, provided
that the term may not exceed seven years from the date of grant. All options
will terminate 90 days after termination of the option holders employment,
service or consultancy with Trinity (or one year after such termination because
of death or disability). Under certain circumstances involving a change in
control of Trinity, the committee may accelerate the exercise ability and
termination of the options. As of February 14, 2000 of the options outstanding,
2,771,030 were held as a group by directors and officers of Trinity.
As of February 14, 2000 the following options were outstanding:
<TABLE>
<CAPTION>
Range of
Number of `A' Ordinary Shares Exercise Price
Subject to Option per Share
----------------------------- --------------
<S> <C> <C>
Total Options Outstanding 4,424,283 $0.81-$5.00
</TABLE>
In addition, the Company granted warrants to purchase 890,405 Class 'A' Ordinary
Shares at prices ranging from $1.50 to $2.75 to agents who were involved in the
Company's Private Placements in 1994, 1995 and 1999 and the debenture issues in
1997 and 1999. At February 14, 2000 603,525 warrants were still outstanding. A
further warrant to purchase 100,000 Class `A' Ordinary Shares price of $2.00 was
granted in 1995 to a consultant of the Company. As of February 14, 2000, 30,000
are still outstanding.
25
<PAGE> 26
ITEM 13
CERTAIN TRANSACTIONS
The Company has entered into various arrangements with JRJ Investments, (JRJ) a
partnership owned by Mr. O'Caoimh, Mr. O'Connell and Mr. Walsh, directors of
Trinity to provide for current and potential future needs to extend its premises
at IDA business Park, Bray, Co. Wicklow, Ireland. It has entered into and
Agreement for Lease with JRJ pursuant to which, the Company will take a Lease of
such premises for a term of 20 years at a rent of IR pounds sterling 6.00 per
square foot ("the Current Extension"). It is anticipated that the 25,000 square
foot building, which is under construction, will be completed by June 2000 and
that the Lease accordingly will commence at that time. The Company also
envisages that a further premises may potentially be required by it and for that
purpose has entered into a four years eleven month lease at IR pounds sterling
20,000 per annum over adjacent lands with JRJ. The Company has further entered
into an option with JRJ exercisable for the next three years under which it may
require JRJ to construct a further premises, as may be specified by the Company,
on such lands. If this option is exercised, the Company will be obliged to take
a 20 year Lease (in terms similar to that for the Current Extension) in respect
of such additional premises. Independent Valuers have advised the Company that
the rent fixed in respect of the Current Extension and the adjacent lands
represents a fair market rent. The rent for any future property constructed will
be set at the then open market value. The Company and its Directors (excepting
Mr. O'Caoimh, Mr. O'Connell and Mr. Walsh who express no opinion on this point)
believe that the arrangements entered into represent the most favourable basis
on which the Company can meet its ongoing requirements for premises.
PART II
ITEM 14
DESCRIPTION OF SECURITIES TO BE REGISTERED
Not applicable.
PART III
ITEM 15
DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 16
CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED
SECURITIES
Not applicable.
PART IV
ITEM 17
FINANCIAL STATEMENTS
The registrant has responded to Item 18 in lieu of responding to the item.
ITEM 18
FINANCIAL STATEMENTS
26
<PAGE> 27
REPORT OF INDEPENDENT AUDITORS
To: The Board of Directors of Trinity Biotech plc
We have audited the consolidated balance sheets of Trinity Biotech plc as of
December 31, 1998 and December 31, 1999 and the related consolidated statements
of operations, movement in shareholders' equity and cash flows for each of the
three years in the period ended December 31, 1999. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with Irish Auditing Standards and United
States generally accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free from material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Trinity Biotech
plc at December 31, 1998 and December 31, 1999, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the Republic of Ireland, which differ in certain respects from those
followed in the United States (see note 29 of Notes to Consolidated Financial
Statements).
Dublin, Ireland Ernst & Young
February 8, 1999 Registered Auditors
27
<PAGE> 28
CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1999
<TABLE>
<CAPTION>
31 December 31 December
1999 1998
Notes US$ US$
----- ----------- -----------
<S> <C> <C> <C>
ASSETS
Current investments ...................... 2 -- 62,422
Inventories .............................. 3 9,510,542 10,048,662
Accounts receivable and prepayments ...... 4 7,212,419 6,721,661
Cash and cash equivalents ................ 3,064,443 1,301,658
----------- -----------
19,787,404 18,134,403
Intangible assets, net ................... 5 20,559,223 17,893,082
Property, plant & equipment, net ......... 6 4,695,668 8,375,810
Financial assets ......................... 7 -- 609,752
----------- -----------
TOTAL ASSETS ............................. 45,042,295 45,013,047
----------- -----------
LIABILITIES & SHAREHOLDER'S EQUITY
Accounts payable and accrued expenses .... 8 14,234,246 18,125,330
Long term liabilities .................... 9 8,086,232 12,263,521
SHAREHOLDERS' EQUITY
Called up share capital
Class 'A' Ordinary shares ............. 10 447,974 413,044
Class 'B' Ordinary shares ............. 10 12,255 12,255
Share premium account .................... 47,863,861 44,204,606
Currency adjustment ...................... (4,637,484) (4,357,472)
Profit and loss reserve .................. (20,732,540) (25,648,237)
Minority Interest ........................ (232,249) --
----------- -----------
22,721,817 14,624,196
----------- -----------
Total Liabilities and Shareholders' Equity 45,042,295 45,013,047
----------- -----------
</TABLE>
See Notes to Consolidated Financial Statements
28
<PAGE> 29
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
31 December 31 December 31 December
1999 1998 1997
Notes US$ US$ US$
----- ----------- ----------- -----------
(Restated)
<S> <C> <C> <C> <C>
Revenues
- Continuing operations .................... 26,104,623 13,407,282 4,282,772
- Acquisitions ............................. -- 4,038,773 7,013,214
- Disposals ................................ -- 5,723,465 6,535,600
----------- ----------- -----------
13 26,104,623 23,169,520 17,831,586
Cost of sales ............................... (14,521,619) (15,176,056) (12,058,585)
----------- ----------- -----------
Gross profit ................................ 11,583,004 7,993,464 5,773,001
Research & development expenses ............. (2,448,372) (2,559,490) (1,876,888)
Administrative expenses - normal
- Continuing operations .................... (3,969,235) (2,450,093) (2,034,858)
- Acquisitions ............................. -- -- (1,467,224)
----------- ----------- -----------
(3,969,235) (2,450,093) (3,502,082)
Administrative expenses - exceptional ....... 15 -- -- 102,279
Other operating income ...................... 15 -- -- 815,654
----------- ----------- -----------
Operating profit
- Continuing operations .................... 5,165,397 1,648,881 (757,713)
- Acquisitions ............................. -- 602,831 1,334,123
- Disposals ................................ -- 732,169 735,554
----------- ----------- -----------
13 5,165,397 2,983,881 1,311,964
Net profit (loss) on disposal of assets ..... 16 1,014,080 (37,397) --
Write down of financial asset ............... 7 (609,752) -- --
Interest receivable and similar income ...... 69,284 71,011 153,850
Interest payable and similar charges ........ (723,312) (466,902) (185,744)
----------- ----------- -----------
Profit on ordinary activities before taxation 14 4,915,697 2,550,593 1,280,070
Tax on profit on ordinary activities ........ 17 -- -- --
----------- ----------- -----------
Retained profit for the financial period .... 4,915,697 2,550,593 1,280,070
----------- ----------- -----------
Basic earnings per ordinary share ........... 18 0.175 0.10 0.06
Diluted earnings per ordinary share ......... 18 0.170 0.10 0.06
</TABLE>
Movements on reserves are shown in the "Consolidated Statement of Movement in
Shareholders' Funds" on page 30.
STATEMENT OF RECOGNISED GAINS AND LOSSES
<TABLE>
<CAPTION>
31 December 31 December 31 December
1999 1998 1997
US$ US$ US$
----------- ----------- -----------
(Restated)
<S> <C> <C> <C>
Profit for the financial period attributable to group shareholders 4,915,697 2,550,593 1,280,070
Currency adjustment (280,012) (264,893) (2,097,646)
--------- --------- ----------
Total recognised gains (losses) for the period 4,635,685 2,285,700 (817,576)
--------- --------- ----------
</TABLE>
1997 figures have been restated to reflect the change in the reporting currency
of the Company to the US Dollar on January 1 1998.
29
<PAGE> 30
CONSOLIDATED STATEMENT OF MOVEMENT IN SHAREHOLDERS' EQUITY FOR THE YEAR ENDED
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Class 'A' Ordinary Shares Class 'B' Ordinary Shares
------------------------- -------------------------
Share Share
capital capital Premium
Number of IR(L)0.01 Number of IR(L)0.01 in excess
shares each shares each of par
US$ US$ US$
<S> <C> <C> <C> <C>
Authorised 50,000,000 712,250 700,000 12,255
Issued:
Balance as at December 31, 1996 15,598,849 255,163 700,000 12,255 30,049,205
----------- ----------- ----------- ----------- -----------
Class 'A' shares issued for cash 175,548 2,774 -- -- 344,980
Class `A' shares issued for the purchase
of Clark Laboratories 1,427,142 22,560 -- -- 3,740,225
Class `A' shares issued for the purchase
of financial asset 153,202 2,422 -- -- 401,507
Class `A' Warrants exercised 396,065 5,766 -- -- 1,185,818
Options exercised 4,440,965 63,260 -- -- 4,298,936
Goodwill arising on acquisition of Clark -- -- -- -- --
Goodwill arising on acquisition of Centocor -- -- -- -- --
Share issue expenses -- -- -- -- (489,518)
Currency adjustment -- -- -- -- --
Profit and loss account -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Balance as at December 31, 1997 22,191,771 351,945 700,000 12,255 39,531,153
----------- ----------- ----------- ----------- -----------
Class 'A' shares issued for cash 717,054 10,331 -- -- 1,063,632
Class `A' issued on conversion of debenture 1,989,677 28,498 -- -- 2,471,502
Options exercised 868,461 12,321 -- -- 1,057,319
Class `A' shares issued for the purchase
of financial asset 675,773 9,949 -- -- 665,826
Additional goodwill arising
on acquisition of Clark -- -- -- -- --
Additional goodwill arising on
acquisition of Centocor -- -- -- -- --
Goodwill written back to profit and
loss on disposal of Warner Lambert contract -- -- -- -- --
Share issue expenses -- -- -- -- (584,826)
Currency adjustment -- -- -- -- --
Profit and loss account -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Balance as at December 31, 1998 26,442,736 413,044 700,000 12,255 44,204,606
----------- ----------- ----------- ----------- -----------
Class 'A' shares issued for cash 1,364,805 19,418 -- -- 2,027,081
Class `A' issued on conversion of debenture 498,291 7,098 -- -- 492,902
Options exercised 750,000 10,816 -- -- 1,201,816
Shares cancelled (150,000) (2,402) -- -- 2,402
Share issue expenses -- -- -- -- (64,946)
Currency adjustment -- -- -- -- --
Minority interest in Benen Trading -- -- -- -- --
Profit and loss account -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Balance as at December 31, 1999 28,905,832 447,974 700,000 12,255 47,863,861
----------- ----------- ----------- ----------- -----------
Retained Currency Goodwill Minority
deficit Adjustment Reserve Interest Total
US$ US$ US$ US$ US$
----------- ----------- ----------- ----------- -----------
Authorised
Issued:
Balance as at December 31, 1996 (7,702,217) (1,994,932) (10,046,932) -- 10,572,542
----------- ----------- ----------- ----------- -----------
Class 'A' shares issued for cash -- -- -- -- 347,754
Class `A' shares issued for the purchase
of Clark Laboratories -- -- -- -- 3,762,785
Class `A' shares issued for the purchase
of financial asset -- -- -- -- 403,929
Class `A' Warrants exercised -- -- -- -- 1,191,584
Options exercised -- -- -- -- 4,362,196
Goodwill arising on acquisition of Clark -- -- (6,249,177) -- (6,249,177)
Goodwill arising on acquisition of Centocor -- -- (5,979,807) -- (5,979,807)
Share issue expenses -- -- -- -- (489,518)
Currency adjustment -- (2,097,647) -- -- (2,097,647)
Profit and loss account 1,280,070 -- -- -- 1,280,070
----------- ----------- ----------- ----------- -----------
Balance as at December 31, 1997 (6,422,147) (4,092,579) (22,275,916) -- 7,104,711
----------- ----------- ----------- ----------- -----------
Class 'A' shares issued for cash -- -- -- -- 1,073,963
Class `A' issued on conversion of debenture -- -- -- -- 2,500,000
Options exercised -- -- -- -- 1,069,640
Class `A' shares issued for the purchase
of financial asset -- -- -- -- 675,775
Additional goodwill arising
on acquisition of Clark -- -- (214,234) -- (214,234)
Additional goodwill arising on
acquisition of Centocor -- -- (1,368,827) -- (1,368,827)
Goodwill written back to profit and
loss on disposal of Warner Lambert contract -- -- 2,082,294 -- 2,082,294
Share issue expenses -- -- -- -- (584,826)
Currency adjustment -- (264,893) -- -- (264,893)
Profit and loss account 2,550,593 -- -- -- 2,550,593
----------- ----------- ----------- ----------- -----------
Balance as at December 31, 1998 (3,871,554) (4,357,472) (21,776,683) -- 14,624,196
----------- ----------- ----------- ----------- -----------
Class 'A' shares issued for cash -- -- -- -- 2,046,499
Class `A' issued on conversion of debenture -- -- -- -- 500,000
Options exercised -- -- -- -- 1,212,632
Shares cancelled -- -- -- -- --
Share issue expenses -- -- -- -- (64,946)
Currency adjustment -- (280,012) -- -- (280,012)
Minority interest in Benen Trading -- -- -- (232,249) (232,249)
Profit and loss account 4,915,697 -- -- -- 4,915,697
----------- ----------- ----------- ----------- -----------
Balance as at December 31, 1999 1,044,143 (4,637,484) (21,776,683) (232,249) 22,721,817
----------- ----------- ----------- ----------- -----------
</TABLE>
See Notes to Consolidated Financial Statements
30
<PAGE> 31
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
31 December 31 December 31 December
1999 1998 1997
Notes US$ US$ US$
(Restated)
<S> <C> <C> <C> <C>
Net cash inflow (outflow) from operating activities 20 4,475,552 (614,926) (1,491,193)
----------- ----------- -----------
Returns on investments and servicing of finance
Interest received 69,284 71,011 153,850
Interest paid (638,455) (385,042) (185,010)
Finance interest paid (84,857) (7,212) (735)
----------- ----------- -----------
(654,028) (321,243) (31,895)
----------- ----------- -----------
Taxation
Taxation paid -- (90,000) --
----------- ----------- -----------
Capital expenditure and financial investment
Purchase of tangible fixed assets (1,445,728) (2,797,528) (3,484,449)
Purchase of intangible fixed assets (60,219) (1,179,952) (320,549)
Purchase of financial fixed assets -- -- (630,855)
Purchase of goodwill for product line net of
deferred consideration -- -- (114,129)
Loan to unconnected party -- 180,166 204,013
Sale of tangible fixed assets 5,783,902 -- --
----------- ----------- -----------
Net cash inflow (outflow) from investing activities 4,277,955 (3,797,314) (4,345,969)
----------- ----------- -----------
Acquisitions
Acquisition of subsidiary undertakings (2,769,835) (7,719,433) (4,973,584)
Deferred consideration paid (7,205,259) (1,459,754) --
Disposal of business -- 2,926,943 --
Deferred set up costs (536,000) -- --
----------- ----------- -----------
(10,511,094) (6,252,244) (4,973,584)
----------- ----------- -----------
Cash outflow before use of liquid resources
and financing (2,411,615) (11,075,727) (10,842,641)
----------- ----------- -----------
Management of liquid resources (271,912) (80,985) 56,815
Financing
Loan from unconnected third party (947,225) 2,124,592 198,530
Issue of shares 3,311,136 2,673,153 4,288,162
Expenses paid in respect of share issues (64,946) (584,826) (489,518)
Capital element of finance lease payments (203,164) (103,014) (16,537)
Increase (decrease) in long term debt (1,483,823) 4,883,917 2,133,796
Issue of 7.5% convertible debenture 3,500,000 -- --
Issue of 4% convertible debenture -- -- 3,058,640
----------- ----------- -----------
Net cash inflow from financing 4,111,978 8,993,822 9,173,073
----------- ----------- -----------
Increase (decrease) in cash 1,428,451 (2,162,890) (1,612,753)
----------- ----------- -----------
Reconciliation of net cash flow to movement
in net funds
Increase (decrease) in cash 1,428,451 (2,162,890) (1,612,753)
Decrease (increase) in long term debt 1,483,823 (4,883,917) (2,133,796)
Decrease (increase) in liquid resources 271,912 80,985 (56,815)
Capital element of finance leases repaid 203,164 103,014 16,537
----------- ----------- -----------
Change in net funds (debt) resulting from cash flows 3,387,350 (6,862,808) (3,786,827)
----------- ----------- -----------
New finance leases (472,132) (471,606) (81,095)
Loans acquired with subsidiary undertakings -- -- (1,712,133)
Other non cash movements -- 3,158,952 1,037,621
Liquid resources used to acquire
subsidiary undertaking -- (3,987,861) --
Translation difference 45,380 -- (663,153)
----------- ----------- -----------
Movement in net (debt) funds in the year 2,960,598 (8,163,323) (5,205,587)
Net (debt) funds at January 1 (7,772,725) 390,598 5,596,185
----------- ----------- -----------
Net (debt) funds at December 31 (4,812,127) (7,772,725) 390,598
</TABLE>
1997 figures have been restated to reflect the change in the reporting currency
of the Company to the US Dollar on January 1 1998.
31
<PAGE> 32
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999
1. ACCOUNTING POLICIES
The financial statements have been prepared in United States Dollars
under the historical cost convention and are in accordance with
generally accepted accounting principles in Ireland. The principal
accounting policies adopted by the Group are as follows:
(a) Basis of Consolidation
The consolidated financial statements include the financial statements
of the Company and its subsidiary undertakings made up to the end of
the financial year. Where a subsidiary undertaking is acquired during
the financial year the group financial statements include the
attributable results from the date of acquisition up to the end of the
financial year. All inter-company transactions and balances have been
eliminated in the preparation of these consolidated financial
statements.
(b) Goodwill
Goodwill arising on consolidation (representing the excess of the fair
value of consideration for an acquisition over the fair value of the
separable net assets acquired) is capitalised in the balance sheet and
amortised over an appropriate period. In accordance with the
transitional arrangements set out in Financial Reporting Standard No.
10, all goodwill previously written off against reserves under the
Group's former accounting policy remains eliminated against those
reserves and has not been restated in the Group balance sheet.
(c) Tangible Fixed Assets
Tangible fixed assets are stated at cost less accumulated depreciation.
Depreciation is provided on a straight line basis to write off the cost
of the assets over their expected useful lives as follows:
<TABLE>
<S> <C> <C> <C>
Leasehold improvements 5 - 10 years Computer equipment 5 years
Office equipment and fittings 10 years Plant and equipment 5 - 10 years
Buildings 50 years
</TABLE>
(d) Intangible Assets
Patents, licences and purchased intangibles are stated at cost and are
amortised over the lesser of their expected useful lives or their
statutory lives which range between 3 and 20 years. The carrying value
of intangibles is reviewed annually by the directors to determine
whether there should be a reduction to reflect any permanent diminution
in value.
Research and development expenditure is written off as incurred.
(e) Investments
The company adopted Statement of Financial Accounting Standard (SFAS)
No. 115 "Accounting for Certain Investments in Debt and Equity
Securities" at December 31, 1996. The company has classified long and
short term marketable investment securities and certain investments as
either held to maturity, trading or available for sale in accordance
with the terms of SFAS No. 115. Realised gains and losses are
determined using specific identification. Debt securities which the
company has the positive intent and ability to hold to maturity are
classified as held to maturity securities and reported at amortised
cost. Non-marketable equity securities are classified as long-term
securities and reported at cost.
Debt and equity securities which are bought and held principally for
the purpose of selling them in the near term are classified as trading
securities and reported at fair value, with realised and unrealised
gains and losses included in income for the period.
Debt and equity securities not classified as either held to maturity or
trading securities are classified as available for sale securities and
reported at fair value, with unrealised gains or losses reported in a
separate component of shareholders' equity and disclosed in the
Statement of Recognised Gains and Losses.
(f) Inventories
Inventories are stated at the lower of cost and net realisable value on
a first-in first-out basis. Cost includes all expenditure which has
been incurred in bringing the products to their present location and
condition, and includes an appropriate allocation of manufacturing
overhead based on the actual level of activity. Net realisable value is
the estimated selling price of inventory on hand less all further costs
to completion and costs expected to be incurred in marketing,
distribution and selling.
(g) Taxation
Taxation, which is based on the results for the year, is reduced where
appropriate by manufacturing companies relief. Deferred taxation on
differences between the treatment of certain items for accounting and
taxation purposes, is accounted for to the extent that a liability is
expected to crystallise within the foreseeable future.
32
<PAGE> 33
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999 (CONTINUED)
1. ACCOUNTING POLICIES (Continued)
(h) Sales and Revenue Recognition
Sales of products are recorded as of the date of shipment. Sales
represent the value of goods supplied to external customers and exclude
sales taxes.
(i) Pension Costs
The Group operates a defined contribution pension scheme. Contributions
to the scheme are expensed as incurred.
(j) Leases
Where tangible assets are financed by leasing agreements which give
rights approximating to ownership ('finance leases'), they are treated
as if they had been purchased outright at the present values of the
minimum lease payments; the corresponding obligations are shown in the
balance sheet as obligations under finance leases.
The present value of the minimum payments under a lease is derived by
discounting those payments at the interest rate implicit in the lease,
and is normally the price at which the asset could be acquired in an
arm's length transaction.
Depreciation is calculated in order to write off the amounts
capitalised over the estimated useful lives of the assets by equal
annual instalments.
The excess of the total rentals under a lease over the amount
capitalised is treated as interest, which is charged to the profit and
loss account in proportion to the amount outstanding under the lease.
Leases other than finance leases are "operating leases" and the rentals
thereunder are charged to the profit and loss account on a straight
line basis over the periods of the leases.
(k) Government Grants
Research and development and training grants are credited to the profit
and loss account against related expenditure in the period in which the
expenditure is incurred.
(l) Foreign Currency
As of January 1 1998, the functional currency of the Company is the
United States Dollar. Concurrent with the change in functional
currency, at January 1, 1998 the Company changed its reporting currency
from the Irish Pound, the Company's functional currency in
periods before January 1, 1998, to the United States Dollar. A
cumulative currency adjustment of US$4,092,579 arises at December 31,
1997 from the change in reporting currency and is included in the
balance sheet at that date under Shareholders' Funds.
Each year, where applicable, the local currency financial statements of
the Company's subsidiaries have been translated into the Company's
functional currency and the Company's 1997 Irish Pound functional
currency consolidated financial statements have been translated into
the reporting currency as follows:
o Balance Sheet accounts were translated at foreign currency exchange
rates in effect at the balance sheet date;
o Statement of Operations accounts were translated at the weighted
average exchange rate for the period.
Foreign currency transactions are translated at the rates of exchange
ruling at the dates of the transactions. Monetary assets and
liabilities denominated in foreign currencies are translated at the
rates of exchange ruling at the balance sheet date. The resulting gains
and losses are included in the profit and loss account.
(m) Advertising
Advertising expense is charged to the profit and loss account in the
period in which the expense is incurred.
(n) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principals requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from
those estimates.
(o) Liquid Resources
Liquid resources are current asset investments, which are held as
readily disposable stores of value. Liquid resources include
investments in equity investments and short term deposits.
33
<PAGE> 34
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999 (CONTINUED)
2. CURRENT INVESTMENTS
<TABLE>
<CAPTION>
31 December 31 December
1999 1998
US$ US$
<S> <C> <C>
Listed abroad -- 62,422
-------- --------
-- 62,422
-------- --------
</TABLE>
The company disposed of its remaining current investments during 1999.
These securities were classified as trading securities and were marked
to market.
3. INVENTORIES
<TABLE>
<CAPTION>
31 December 31 December
1999 1998
US$ US$
<S> <C> <C>
Raw materials 4,123,534 5,196,009
Work in progress 4,103,634 3,413,208
Finished goods 1,283,374 1,439,445
--------- ---------
9,510,542 10,048,662
--------- ----------
</TABLE>
The replacement cost of inventory is not materially different from that
stated.
4. ACCOUNTS RECEIVABLE AND PREPAYMENTS
(Amounts falling due within one year)
<TABLE>
<CAPTION>
31 December 31 December
1999 1998
US$ US$
<S> <C> <C>
Debtors 4,166,651 4,016,840
Prepayments 1,392,437 1,399,224
Value Added Tax 407,890 365,682
Called up share capital not paid 419,061 206,511
Grants receivable 826,380 711,850
Other debtors -- 21,554
--------- ---------
7,212,419 6,721,661
--------- ---------
</TABLE>
5. INTANGIBLE ASSETS
<TABLE>
<CAPTION>
31 December 31 December
1999 1998
US$ US$
<S> <C> <C>
Cost
Patents and Licenses 2,074,316 2,014,097
Goodwill 19,528,462 16,561,628
Deferred set-up costs 536,000 --
---------- ----------
22,138,778 18,575,725
Less Accumulated Amortisation (1,579,555) (682,643)
---------- ----------
20,559,223 17,893,082
---------- ----------
</TABLE>
34
<PAGE> 35
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999 (CONTINUED)
6. PROPERTY PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
31 December 31 December
1999 1998
Cost US$ US$
---------- ----------
<S> <C> <C>
Land & Buildings 1,415,343 5,515,311
Leasehold Improvements 336,996 336,996
Computer & Office Equipment 1,033,258 716,683
Plant and Equipment 5,580,313 4,934,391
---------- ----------
8,365,910 11,503,381
Less Accumulated Depreciation (3,670,242) (3,127,571)
---------- ----------
4,695,668 8,375,810
---------- ----------
</TABLE>
A mortgage amounting to US$252,255 is secured by a charge over the
Company's plant in Jamestown, New York.
7. FINANCIAL ASSETS
<TABLE>
<CAPTION>
31 December 31 December
1999 1998
US$ US$
-------- --------
<S> <C> <C>
Unlisted investment in CLI Oncology 609,752 609,752
Provision for diminution in value (609,752) --
-------- --------
-- 609,752
-------- --------
</TABLE>
Due to uncertainty as to the recoverability of the investment, the
Company has provided against the carrying amount in full.
8. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
<TABLE>
<CAPTION>
31 December 31 December
(Amounts falling due within one year) 1999 1998
US$ US$
---------- ----------
<S> <C> <C>
Trade creditors 2,367,098 2,578,257
Income tax deducted under PAYE 101,358 77,717
Employee related social insurance 90,336 66,677
Accrued liabilities 2,388,072 2,626,577
Accrued relocation costs -- 638,573
Accrued royalties 609,334 600,000
Obligations under finance leases 322,743 178,082
Loan from unconnected third party - current portion 1,364,761 2,107,845
Long term debt - current portion 2,894,538 2,306,443
Deferred consideration - current portion 4,096,006 5,697,165
Deferred income -- 800,000
4% convertible debenture -- 447,994
---------- ----------
14,234,246 18,125,330
---------- ----------
</TABLE>
In June 1998, the Company purchased a product line from Diatech
Diagnostics Inc. Under the terms of the purchase agreement US$1,680,500
of the total consideration of US$2,139,059 was paid by a two-year loan
note bearing no interest. Repayments under the loan were made in five
semi-annual instalments beginning on June 30, 1998. The final balance
due on this loan note was paid in December 1999.
In June 1998, the Company purchased a product line from Strategic
Diagnostics Inc. Under the terms of the purchase agreement $1,200,000
of the total consideration of US$1,800,000 had been deferred to March
1, 2000. This portion of the consideration was calculated based on two
times estimated sales in 1999. At December 31, 1999, the amount has
been revised to $663,000 and is included in current liabilities under
deferred consideration - current portion.
35
<PAGE> 36
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999 (CONTINUED)
8. ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Continued)
(Amounts falling due within one year)
In September 1998, the Company purchased a product line from Dade
Behring Inc. Under the terms of the purchase agreement, US$5,616,256 of
the total consideration of US$12,995,559 is being paid by a two-year
loan note bearing no interest. Repayments under the loan will be made
in 2 instalments, which commenced on October 31, 1999. Included in the
line "Deferred Consideration - current portion" is an amount of
US$2,916,000, which is deferred consideration arising on the
acquisition of this product line.
9. LONG TERM LIABILITIES
<TABLE>
<CAPTION>
31 December 31 December
(Amounts falling due after more than one year) 1999 1998
US$ US$
--------- ----------
<S> <C> <C>
7.5% convertible debenture 3,500,000 --
Bank loans 4,255,857 6,400,832
Loan from unconnected party -- 204,141
Lease creditors 330,375 251,448
Deferred consideration (see note 8) -- 5,407,100
--------- ----------
8,086,232 12,263,521
--------- ----------
</TABLE>
All amounts are repayable in instalments and within five years.
In December 1999, the Company completed a private placement of
$3,500,000 principal amount of 7.5 % Convertible Debentures. The
debentures have terms of between two and three years. They can be
converted to Trinity Biotech plc Class `A' Ordinary Shares at a price
of $1.80.
10. CALLED UP SHARE CAPITAL
(a) Class 'B' Ordinary Shares have two votes per share and have rights to
participate in dividends and in any liquidation or sale of Trinity
Biotech plc as if each Class 'B' Ordinary Share were two Class 'A'
Ordinary Shares.
(b) In December 1999, the Company completed a private placement of
1,334,805 Class 'A' Ordinary Shares.
(c) In June 1997, the Company completed a private placement of US$3,000,000
principal amount of 4% Convertible Debentures. During 1999, the
remaining balance of US$500,000 of the US$3,000,000 principal amount of
the debenture was converted into 498,291 Class `A' Ordinary Shares of
Trinity.
(d) Since its incorporation Trinity has not declared or paid dividends on
its `A' Ordinary Shares. Trinity anticipates, for the foreseeable
future, that it will retain any future earnings in order to fund the
business operations of the Company. The Company does not, therefore,
anticipate paying any cash or share dividends on its `A' Ordinary
Shares in the foreseeable future.
As provided in the Articles of Association of the Company, dividends or
other distributions will be declared and paid in U.S. Dollars.
36
<PAGE> 37
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999 (CONTINUED)
11. SHARE OPTIONS AND WARRANTS
Under the terms of Trinity's Employee Share Option Plan options to
purchase 4,205,947 Class 'A' Ordinary Shares were outstanding at
December 31, 1999. Under the plan options are granted to officers,
employees and consultants of the Company at the discretion of the
compensation committee of the Board of Directors. In addition the
Company granted warrants over 890,405 Class 'A' Ordinary Shares in the
Company to agents of the Company who were involved in the Company's
private placements in 1994 and 1995 and the debenture issues in 1997
and 1999. A further warrant over 100,000 Class 'A' Ordinary Shares was
granted to agents of the Company. At December 31, 1999 678,525 warrants
were still outstanding.
On February, 1999 the Company's Class 'B' Warrants expired.
As of December 31, 1999 2,295,689 Options were exercisable. The share
options and warrants outstanding at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
Options & Warrants 'A' Warrants 'B' Warrants
Shares Range Shares Range Shares Range
Outstanding US$ US$ US$
--------- --------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
January 1,1997 4,517,925 0.50-5.00 1,201,914 3.00 883,086 3.00
Granted 3,284,797 0.50-2.10 -- -- 396,065 3.00
Exercised (4,440,965) 0.50-2.10 (396,065) 3.00 -- --
Cancelled -- -- (805,849) 3.00 -- --
--------- --------- ---------- ---------- ---------- ------------
December 31, 1997 3,361,757 0.50-5.00 -- -- 1,279,151 3.00
Granted 1,158,000 0.81-4.50 -- -- -- --
Exercised (868,461) 0.50-1.90 -- -- -- --
Cancelled (104,466) 0.50-2.50 -- -- -- --
--------- --------- ---------- ---------- ---------- ------------
December 31, 1998 3,546,830 0.81-5.00 -- -- 1,279,151 3.00
Granted 2,188,358 1.13-2.75 -- -- -- --
Exercised (750,000) 1.40-1.80 -- -- -- --
Cancelled (100,716) 0.90-2.75 -- -- (1,279,151) 3.00
--------- --------- ---------- ---------- ---------- ------------
December 31, 1999 4,884,472 0.81-5.00 -- -- -- --
--------- --------- ---------- ---------- ---------- ------------
</TABLE>
12. PROFIT AND LOSS RESERVE
<TABLE>
<CAPTION>
31 December 31 December
1999 1998
US$ US$
----------- -----------
<S> <C> <C>
Accumulated reserve (deficit) 1,044,143 (3,871,554)
Goodwill reserve (21,776,683) (21,776,683)
----------- -----------
(20,732,540) (25,648,237)
----------- -----------
</TABLE>
Due to the adoption of Financial Reporting Standard No. 10 by the
Company, the goodwill reserve is disclosed as part of the Profit and
Loss reserve on the face of the Balance Sheet. This adoption does not
effect the potential distributable reserves of the Company.
37
<PAGE> 38
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999 (CONTINUED)
13. ANALYSIS OF REVENUE, OPERATING INCOME, MAJOR CUSTOMERS AND ASSETS
a) Trinity operates in one business segment, the market for rapid
diagnostic tests for infectious diseases and other medical conditions,
and in three reportable segments, which are based on a geographical
split. The information presented below relates to these operating
segments and is presented in a manner consistent with information
presented to the Company's chief operating decision maker. The basis
of accounting for each segment is the same basis as used in the
preparation of the consolidated financial statements.
b) The distribution of revenue by geographical area was as follows:
<TABLE>
<CAPTION>
31 December 31 December 31 December
1999 1998 1997
US$ US$ US$
(Restated)
---------- ---------- ----------
<S> <C> <C> <C>
Ireland 15,762,409 7,967,618 3,088,408
United States 10,342,214 14,301,873 12,933,018
United Kingdom -- 900,029 1,810,160
---------- ---------- ----------
26,104,623 23,169,520 17,831,586
---------- ---------- ----------
</TABLE>
c) The distribution of revenue by customers' geographical area was as
follows:
<TABLE>
<CAPTION>
31 December 31 December 31 December
1999 1998 1997
US$ US$ US$
(Restated)
---------- ---------- ----------
<S> <C> <C> <C>
U.S.A 16,342,915 16,600,770 12,821,451
Central and South America 833,974 854,574 774,404
Asia 1,213,902 1,588,363 1,575,944
Europe 4,636,803 2,928,498 1,946,142
Africa 2,996,270 1,032,737 611,389
Ireland 80,759 164,578 102,256
---------- ---------- ----------
26,104,623 23,169,520 17,831,586
---------- ---------- ----------
</TABLE>
d) The distribution of revenue by major product group was as follows:
<TABLE>
<CAPTION>
31 December 31 December 31 December
1999 1998 1997
US$ US$ US$
(Restated)
---------- ---------- ----------
<S> <C> <C> <C>
Rapid tests (excluding pregnancy ) 3,084,476 1,921,365 646,005
Rapid pregnancy 458,834 6,083,217 7,141,874
Syphilis EIA 1,320,218 1,321,149 688,315
Chlamydia EIA 7,430,306 2,511,236 --
Autoimmune EIA 1,044,417 1,051,213 728,766
TORCH EIA 3,959,765 3,821,243 3,097,420
Measles, Mumps & Rubella 2,173,307 1,622,768 974,214
Other EIA 6,633,300 4,837,329 3,843,992
Escrow revenues -- -- 711,000
---------- ---------- ----------
26,104,623 23,169,520 17,831,586
---------- ---------- ----------
</TABLE>
38
<PAGE> 39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999 (CONTINUED)
13. ANALYSIS OF REVENUE, OPERATING INCOME, MAJOR CUSTOMERS AND ASSETS
(continued)
e) The distribution of intersegmental sales is as follows:
<TABLE>
<CAPTION>
31 December 31 December 31 December
1999 1998 1997
US$ US$ US$
(Restated)
----------- ----------- -----------
<S> <C> <C> <C>
Ireland 9,761,708 5,668,721 3,199,975
Ireland - Intersegmental Sales 12,153,121 5,424,880 2,112,896
United States 10,342,214 14,301,873 12,933,018
United Kingdom -- 900,029 1,810,160
Less Intercompany Sales (6,152,420) (3,125,983) (2,224,463)
----------- ----------- -----------
26,104,623 23,169,520 17,831,586
----------- ----------- -----------
</TABLE>
f) The distribution of operating income by geographical area was as
follows:
<TABLE>
<CAPTION>
31 December 31 December 31 December
1999 1998 1997
US$ US$ US$
(Restated)
----------- ----------- -----------
<S> <C> <C> <C>
Ireland 3,819,549 2,687,967 (2,247,160)
United States 1,345,848 1,096,122 2,728,152
United Kingdom -- (800,208) 830,972
----------- ----------- -----------
Total operating income 5,165,397 2,983,881 1,311,964
----------- ----------- -----------
</TABLE>
g) The distribution of consolidated total assets by geographical area was
as follows:
<TABLE>
<CAPTION>
31 December 31 December 31 December
1999 1998 1997
US$ US$ US$
(Restated)
----------- ----------- -----------
<S> <C> <C> <C>
Ireland 33,888,275 34,414,690 13,651,073
United States 11,154,020 10,598,357 8,819,107
United Kingdom -- -- 2,129,521
----------- ----------- -----------
Total assets 45,042,295 45,013,047 24,599,701
----------- ----------- -----------
</TABLE>
h) The distribution of consolidated long-lived assets by geographical
area was as follows:
<TABLE>
<CAPTION>
31 December 31 December 31 December
1999 1998 1997
US$ US$ US$
(Restated)
----------- ----------- -----------
<S> <C> <C> <C>
Ireland 2,762,828 6,399,263 3,845,720
United States 1,932,840 1,976,547 1,722,866
United Kingdom -- -- 231,58
----------- ----------- -----------
Total assets 4,695,668 8,375,810 5,800,169
----------- ----------- -----------
</TABLE>
39
<PAGE> 40
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999 (CONTINUED)
13. ANALYSIS OF REVENUE, OPERATING INCOME, MAJOR CUSTOMERS AND ASSETS
(continued)
i) The concentrations of revenues to customers representing 10% or more of
total revenues is as follows:
31 December 31 December 31 December
1999 1998 1997
----------- ----------- -----------
Customer A 0% 25% 37%
Customer B 44% 40% 38%
j) The distribution of depreciation and amortisation by geographical area
is as follows:
<TABLE>
<CAPTION>
31 December 31 December 31 December
1999 1998 1997
US$ US$ US$
(Restated)
--------- --------- ---------
<S> <C> <C> <C>
Ireland 1,050,536 426,119 313,612
United States 453,997 327,134 159,776
United Kingdom -- -- --
--------- --------- ---------
Total assets 1,504,533 753,253 473,388
--------- --------- ---------
</TABLE>
k) The distribution of unusual items by geographical area is as follows:
<TABLE>
<CAPTION>
31 December 31 December 31 December
1999 1998 1997
US$ US$ US$
(Restated)
---------- ---------- ----------
<S> <C> <C> <C>
Ireland 1,014,080 457,954 917,933
United States (609,752) (495,351) --
United Kingdom -- -- --
---------- ---------- ----------
Total unusual items 404,328 (37,397) 917,933
---------- ---------- ----------
</TABLE>
14. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
<TABLE>
<CAPTION>
31 December 31 December 31 December
1999 1998 1997
US$ US$ US$
Directors' emoluments (Restated)
<S> <C> <C> <C>
-------- -------- --------
Fees -- -- --
Remuneration 807,626 845,029 682,957
Auditors' remuneration 70,000 64,152 60,260
Depreciation 607,620 574,407 464,665
Amortisation 896,913 178,846 8,723
Operating lease rentals in respect of premises 121,274 401,779 252,625
Research and development grants (126,387) (78,478) (282,469)
-------- -------- --------
</TABLE>
15. EXCEPTIONAL ITEMS
<TABLE>
<CAPTION>
31 December 31 December 31 December
1999 1998 1997
US$ US$ US$
(Restated)
------- ------- -------
<S> <C> <C> <C>
Administrative expenses
Exchange gain -- -- 102,279
------- ------- -------
Other operating income
Gain on investments -- -- 815,654
------- ------- -------
</TABLE>
40
<PAGE> 41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999 (CONTINUED)
16. NET PROFIT (LOSS) ON DISPOSAL OF ASSETS
(i) The net profit on disposal of assets of US$1,014,080 for the year
ended December 31, 1999 is as follows:
<TABLE>
<CAPTION>
Land &
Buildings
US$
<S> <C>
Disposal proceeds 5,783,902
Fees and expenses (550,873)
----------
Net disposal proceeds 5,233,029
Net assets disposed (4,218,949)
----------
Profit on sale of assets 1,014,080
Taxation -
----------
Profit on sale of assets after tax 1,014,080
----------
</TABLE>
In December 1999, the company entered into a sale and leaseback
transaction for the disposal of its factory and offices at Bray,
Ireland. Under the terms of the transaction, the Company entered into a
20 year operating lease at an annual rent of IR(Pound )309,000
(US$397,343).
(ii) The net loss on disposal of assets of US$37,397 for the year ended
December 31, 1998 is as follows:
<TABLE>
<CAPTION>
(i) Investment in (ii) Supply
Selfcare Inc. Agreement
with Warner
Lambert Total
US$ US$ US$
---------- ---------- ----------
<S> <C> <C> <C>
Disposal proceeds 4,303,319 3,000,00 7,303,319
Fees and expenses (64,768) (73,057) (137,825)
---------- ---------- ----------
Net disposal proceeds 4,238,551 2,926,943 7,165,494
Net assets disposed (3,780,597) (1,250,000) (5,030,597)
---------- ---------- ----------
457,954 1,676,943 2,134,897
Goodwill previously written off -- (2,082,294) (2,082,294)
---------- ---------- ----------
Profit (loss) on sale of assets 457,954 (405,351) 52,603
Taxation -- (90,000) (90,000)
---------- ---------- ----------
Profit (loss) on sale of assets after tax 457,954 (495,351) (37,397)
---------- ---------- ----------
</TABLE>
(i) The disposal of the Company's investment in Selfcare Inc. was
completed on September 30, 1998.
(ii) The disposal of the Company's interest in the Supply Agreement
between Applied Biotech Inc., Warner Lambert Inc. and Trinity
Biotech Inc., was completed on September 30, 1998.
41
<PAGE> 42
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999 (CONTINUED)
17. INCOME TAXES
(a) There was no income tax charge as trading losses carried forward
were offset against the current year's profit.
(b) The distribution of profits (losses) before taxes by geographical
area was as follows:
<TABLE>
<CAPTION>
31 December 31 December 31 December
1999 1998 1997
US$ US$ US$
---------- ---------- ----------
<S> <C> <C> <C>
Ireland 3,967,248 2,441,082 (2,196,081)
United States 948,449 909,719 2,689,325
United Kingdom -- (800,208) 786,826
---------- ---------- ----------
Total profits before taxation 4,915,697 2,550,593 1,280,070
---------- ---------- ----------
</TABLE>
(a) The tax effects of temporary differences that give rise to
significant portions of deferred tax assets relate principally to
net operating losses in the amount of US$865,814 (December 31, 1998
US$1,998,800). There are no significant deferred tax liabilities as
of December 31, 1999. The valuation allowance for deferred tax
assets at December 31, 1999 was US$865,814 (December 31, 1998
US$1,998,800).
(b) At December 31, 1999, the Company had Irish net operating
losses of US$6,267,000. The utilisation of these net operating loss
carryforwards is limited to offset against the future profits
earned by the Company arising from the same trade and in the tax
jurisdiction in which they arose. These losses carry forward
indefinitely.
At December 31, 1999, the Company had U.S. net operating loss
carryforwards of approximately $7 million for U.S. federal income
tax purposes, which will expire in 2008 if not previously utilised.
Utilisation of the U.S. net operating loss carryforward may be
subject to an annual limitation due to the change in ownership
rules provided by the Internal Revenue Code of 1986. This
limitation and other restrictions provided by the Internal Revenue
Code of 1986 may reduce the net operating loss carryforward such
that it would not be available to offset future taxable income of
the U.S. subsidiaries.
18. NET PROFIT PER SHARE
(a) Basic earnings per share Net profit per share is computed by
dividing the profit on ordinary activities after taxation of
US$4,915,697 (December 31, 1998, US$2,550,593 and December 31,
1997, US$1,280,070) for the financial year by the weighted average
number of ordinary shares in issue of 28,158,184 (December 31, 1998
- 25,586,050 and December 31, 1997 - 19,108,363).
(b) Fully diluted earnings per share Fully diluted earnings per share
is computed by dividing the profit on ordinary activities after
taxation of US$4,915,697 (December 31, 1998, US$2,550,593 and
December 31, 1997, US$1,280,070) by the fully diluted weighted
average number of ordinary shares in issue of 28,990,725 (December
31, 1998, 26,437,695 and December 31, 1997, 22,803,985).
The basic weighted average number of shares may be reconciled to
the number used in the fully diluted earnings per ordinary share
calculation as follows:
<TABLE>
<CAPTION>
31 December 31 December 31 December
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Basic earnings per share denominator 28,158,184 25,586,050 19,108,363
Issuable on exercise of options 832,541 360,281 1,760,139
Issuable on conversion of debenture -- 491,364 1,935,483
---------- ---------- ----------
Fully diluted earnings per share denominator 28,990,725 26,437,695 22,803,985
---------- ---------- ----------
</TABLE>
42
<PAGE> 43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 (CONTINUED)
19. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
31 December 31 December 31 December
1999 1998 1997
US$ US$ US$
---------- ---------- ----------
<S> <C> <C> <C>
(a) Purchase of tangible fixed assets
Additions to tangible fixed assets 1,917,860 3,269,134 3,565,544
Less new finance leases (472,132) (471,606) (81,095)
---------- ---------- ----------
1,445,728 2,797,528 3,484,449
---------- ---------- ----------
</TABLE>
(b) Management of liquid resources
Cash flows from the use of liquid resources have primarily arisen from
the sale of equity investments.
Cash flows from the use of liquid resources in 1999 arose from the sale
of equity investments of US$62,422, less the placing of US$334,334 cash
on deposit. Cash flows from the use of liquid resources in 1998 arose
from the sale of equity investments of US$781,999, less the purchase of
equity investments of US$225,687 and placing cash on deposit of
US$637,297.
20. RECONCILIATION OF OPERATING
PROFIT TO NET CASH INFLOW (OUTFLOW)
FROM OPERATING ACTIVITIES
<TABLE>
<CAPTION>
31 December 31 December 31 December
1999 1998 1997
US$ US$ US$
(Restated)
---------- ---------- ----------
<S> <C> <C> <C>
Operating profit 5,165,397 2,983,881 1,311,964
Depreciation and amortisation 1,504,533 753,253 473,388
Profit on investments (62,422) -- (656,176)
Increase in debtors and prepayments (490,758) (782,200) (2,113,275)
Decrease (increase) in creditors (2,105,989) (1,100,401) (29,874)
(Increase) decrease in inventory 538,120 (2,156,848) (478,460)
Translation adjustments (73,329) (312,611) 1,240
---------- ---------- ----------
Net cash inflow (outflow) from operating activities 4,475,552 (614,926) (1,491,193)
---------- ---------- ----------
</TABLE>
21. ANALYSIS OF NET FUNDS
<TABLE>
<CAPTION>
31 December Cashflow Acquisitions/ Non-cash Exchange 31 December
1998 disposals changes movements 1999
US$ US$ US$ US$ US$ US$
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Cash 664,361 1,428,451 -- -- -- 2,092,812
Liquid resources 699,719 334,334 (62,422) -- -- 971,631
Long term debt
- current portion (2,306,443) 1,186,446 -- (1,847,598) -- (2,967,595)
Long term debt (6,400,832) 297,377 -- 1,847,598 -- (4,255,857)
Finance leases (429,530) (268,968) -- -- 45,380 (653,118)
---------- ---------- ---------- ---------- ---------- ----------
Net (debt) funds (7,772,725) 2,977,640 (62,422) -- 45,380 (4,812,127)
---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
43
<PAGE> 44
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 (CONTINUED)
21. ANALYSIS OF NET FUNDS (Continued)
<TABLE>
<CAPTION>
31 December Cashflow Acquisitions Non-cash Exchange 31 December
1997 changes movements 1998
US$ US$ US$ US$ US$ US$
(Restated) (Restated)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Cash 2,827,251 (2,162,890) -- -- -- 664,361
Liquid resources 1,447,643 80,985 (3,987,861) 3,158,952 -- 699,719
Long term debt
- current portion (223,993) (2,082,450) -- -- -- (2,306,443)
Long term debt (3,599,365) (2,801,467) -- -- -- (6,400,832)
Finance leases (60,938) 103,014 -- (471,606) -- (429,530)
---------- ---------- ---------- ---------- ---------- ----------
Net (debt) funds 390,598 (6,862,808) (3,987,861) 2,687,346 -- (7,772,725)
---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
31 December Cashflow Acquisitions Non-cash Exchange 31 December
1996 changes movements 1997
US$ US$ US$ US$ US$ US$
(Restated) (Restated) (Restated) (Restated) (Restated) (Restated)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Cash 4,915,001 (1,612,753) -- -- (474,997) 2,827,251
Liquid resources 681,184 (56,815) -- 1,037,621 (214,347) 1,447,643
Long term debt --
- current portion -- (237,304) -- -- 13,311 (223,993)
Long term debt -- (1,896,492) (1,712,133) -- 9,260 (3,599,365)
Finance leases -- 16,537 -- (81,095) 3,620 (60,938)
---------- ---------- ---------- ---------- ---------- ----------
Net funds 5,596,185 (3,786,827) (1,712,133) 956,526 (663,153) 390,598
---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
22. ACQUISITION OF SUBSIDIARY UNDERTAKINGS
During 1998, the Group acquired the Microzyme and EZ Bead product lines
from Diatech Diagnostics Inc, the Macra Lp(a) product line from
Strategic Diagnostics Inc, the MicroTrak Chlamydia product line from
Dade Behring Inc. and the HIV product lines from Cambridge Diagnostics
Ireland Limited, a subsidiary of Selfcare Inc. Following the completion
of the fair value exercises in 1999, amendments have been made to the
fair values reported in last years statements.
The difference has been taken as an adjustment to goodwill on
acquisition. Provisional and final values of net assets acquired and
consideration paid are as follows:
<TABLE>
<CAPTION>
Provisional Consideration Accounting Total Final
Fair value 1998 and costs policy adjustments fair value
adjustment alignment to goodwill 1999
US$ US$ US$ US$ US$
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
MICROZYME
Consideration and costs (2,139,059) (127,263) -- (127,263) (2,266,322)
----------- ----------- ----------- ----------- -----------
LP(A)
Consideration and costs (1,854,824) 465,744 -- 465,744 (1,389,080)
----------- ----------- ----------- ----------- -----------
MICROTRAK
Tangible fixed assets 40,970 -- -- -- 40,970
Working capital 3,818,909 -- (1,495,478) (1,495,478) 2,323,431
----------- ----------- ----------- ----------- -----------
Net Assets 3,859,879 -- (1,495,478) (1,495,478) 2,364,401
----------- ----------- ----------- ----------- -----------
Consideration and costs (9,135,680) (970,800) -- (970,800) (10,106,480)
----------- ----------- ----------- ----------- -----------
</TABLE>
44
<PAGE> 45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 (CONTINUED)
22. ACQUISITION OF SUBSIDIARY UNDERTAKINGS (Continued)
CAMBRIDGE
<TABLE>
<S> <C> <C> <C> <C> <C>
Working capital 837,778 -- (284,900) (284,900) 552,878
---------- ---------- ---------- ---------- ----------
Net Assets 837,778 -- (284,900) (284,900) 552,878
---------- ---------- ---------- ---------- ----------
Consideration and costs (4,269,843) (357,138) -- (357,138) (4,626,981)
---------- ---------- ---------- ---------- ----------
</TABLE>
23. COMMITMENTS AND CONTINGENCIES
(a) Capital Commitments
The capital commitments of the Group were as follows:
<TABLE>
<CAPTION>
31 December 31 December 31 December
1999 1998 1997
US$ US$ US$
(Restated)
--------- --------- ---------
<S> <C> <C> <C>
Contracted for -- -- 1,493,100
Authorised, not contracted for 350,000 -- 213,300
--------- --------- ---------
350,000 -- 1,706,400
--------- --------- ---------
</TABLE>
(b) Operating lease commitments payable during the next twelve months
amount to US$483,092 payable on leases of buildings at Dublin,
Ireland which expire after more than five years.
Future minimum operating and finance lease commitments with non
cancellable terms in excess of one year are as follows:
<TABLE>
<CAPTION>
Operating Leases Finance Leases
US$ US$
<S> <C> <C>
2000 483,092 352,743
2001 483,092 260,200
2002 483,092 105,062
2003 483,092 --
Later years 9,445,332 --
Interest element of finance leases -- (64,887)
---------- ----------
11,377,700 653,118
---------- ----------
</TABLE>
(c) Under agreements between group companies and Enterprise Ireland, grants
amounting to US$826,380 are receivable which may be revoked, cancelled
or abated in certain circumstances. At December 31, 1999 the company
was in compliance with the terms of the grant.
(d) Under agreements between group companies and The Irish Trade Board, a
loan amounting to US$312,639 is payable in instalments which may be
payable in full in certain circumstances. At December 31, 1999, the
company was in compliance with the terms of the loan.
(e) As a result of the disposal by the Company of its interest in the
Supply Agreement between Warner Lambert Inc., Applied Biotech Inc. and
Trinity Biotech Inc., certain future events may result in additional
consideration being paid to the Company. No amounts have been reflected
in this years financial statements due to its uncertain nature.
(f) The Company has guaranteed the bank borrowings of subsidiary
undertakings up to the amount of US$4,200,000.
45
<PAGE> 46
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 (CONTINUED)
23. COMMITMENTS AND CONTINGENCIES (Continued)
(g) Pursuant to the provisions of Section 17, Companies (Amendment) Act,
1986, the Company has guaranteed the liabilities of certain of its
subsidiary undertakings in the Republic of Ireland for the financial
year to December 31, 1999 and as a result such subsidiary undertakings
have been exempted from the filing provisions of Section 7, Companies
(Amendment) Act, 1986.
(h) The Company's bank borrowings are secured by specific tangible assets.
24. SIGNIFICANT CONCENTRATIONS AND BUSINESS RISKS
The Company maintains cash and cash equivalents with various financial
institutions. These financial institutions are located in a number of
countries and Company policy is designed to limit exposure to any one
institution. The Company performs periodic evaluations of the relative
credit standing of those financial institutions that are considered in
the Company's investment strategy.
The carrying amount reported in the balance sheet for cash and cash
equivalents approximates its fair value.
Due to the large numbers of customers and the geographical dispersion
of these customers, the Company has no significant concentrations of
accounts receivable.
25. PENSION SCHEME
The Group operates a defined contribution pension scheme for its
full-time employees. The benefits under this scheme are financed by
Group and employee contributions. Total contributions made by the Group
in the financial period and charged against income amounted to
US$330,627 (December 31, 1998, US$336,633 and December 31, 1997,
US$273,737).
26. RELATED PARTY TRANSACTIONS
The Company has entered into various arrangements with JRJ Investments,
(JRJ) a partnership owned by Mr. O'Caoimh, Mr. O'Connell and Mr. Walsh,
directors of Trinity to provide for current and potential future needs
to extend its premises at IDA business Park, Bray, Co. Wicklow,
Ireland. It has entered into and Agreement for Lease with JRJ pursuant
to which, the Company will take a Lease of such premises for a term of
20 years at a rent of IR(pound)6.00 per square foot ("the Current
Extension"). It is anticipated that the 25,000 square foot building,
which is under construction, will be completed by June 2000 and that
the Lease accordingly will commence at that time. The Company also
envisages that a further premises may potentially be required by it and
for that purpose has entered into a four years eleven month lease at
IR(Pound )20,000 per annum over adjacent lands with JRJ. The
Company has further entered into an option with JRJ exercisable for the
next three years under which it may require JRJ to construct a further
premises, as may be specified by the Company, on such lands. If this
option is exercised, the Company will be obliged to take a 20 year
Lease (in terms similar to that for the Current Extension) in respect
of such additional premises. Independent Valuers have advised the
Company that the rent fixed in respect of the Current Extension and the
adjacent lands represents a fair market rent. The rent for any future
property constructed will be set at the then open market value. The
Company and its Directors (excepting Mr. O'Caoimh, Mr. O'Connell and
Mr. Walsh who express no opinion on this point) believe that the
arrangements entered into represent the most favourable basis on which
the Company can meet its ongoing requirements for premises.
27. POST BALANCE SHEET EVENTS
On February 29, 2000 the Company completed the acquisition of all the
outstanding share capital MarDx Inc of Carlsbad, California, for a
consideration of $4.0 million.
46
<PAGE> 47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 (CONTINUED)
28. DERIVITIVES AND FINANCIAL INSTRUMENTS
The Group uses financial instruments throughout its businesses: bank
borrowings, cash, liquid resources and finance leases are used to
finance the Groups operations. The Group does not use derivatives such
as interest rate and currency swaps.
The Group has various other financial instruments such as trade debtors
and trade creditors, that arise directly from its operations.
The Group's policy, which has been in force throughout recent years and
has been approved by the Board, is not to trade in financial
instruments.
The main liquidity risks from the Group's financial instruments are
interest rate risk, liquidity risk and foreign exchange risk.
INTEREST RATE RISK
The Group borrow in appropriate currencies at floating rates of
interest Year-end borrowings, net of cash, totalled US$12.8 million
(1998: US$21.3 million) at interest rates ranging from 7.37% to 9.50%
and including US$3,500,000 of fixed rate debt at a rate of 7.50% (1998:
US$447,944 at 4%). In broad terms, a one-percentage point increase
ininterest rates would increase the net interest charge by US$71,000.
LIQUIDITY RISK
The Group's operations are cash generating. Short term flexibility is
achieved by the use of overdraft facilities.
FOREIGN EXCHANGE RISK
The vast bulk of the Group's activities are conducted in US Dollars.
The primary foreign exchange risk arises from the fluctuating value of
the Group's Irish pound expenses as a result of the movement in the
exchange rate between the US Dollar and the Irish Pound. With the
introduction of the Euro in 1999, the Company believes it will be in a
position to match certain of its non-US expenses with non US revenues.
The disclosures below exclude short term debtors and creditors
INTEREST RATE PROFILE OF FINANCIAL LIABILITIES
The interest rate profile of financial liabilities of the group was as
follows:
<TABLE>
<CAPTION>
31 December 31 December
1999 1998
US$ US$
---------- ----------
<S> <C> <C>
Financial liabilities on which no interest is paid 5,385,957 13,680,942
Floating rate financial liabilities 7,028,205 8,442,584
Fixed rate financial liabilities 3,500,000 447,994
---------- ----------
15,914,162 22,571,520
---------- ----------
</TABLE>
Financial liabilities on which no interest is paid, comprise deferred
acquisition consideration and loans from unconnected third parties and
have a weighted average period until maturity of 1 year.
Floating rate financial liabilities comprise overdrafts and other
borrowings that bear interest at rates of between 7.37% and 9.5%.
<TABLE>
<CAPTION>
<S> <C> <C>
31 December 31 December
1999 1998
----------- -----------
Fixed rate financial liabilities
- - weighted average interest rate 7.50% 4.00%
- - weighted average period for which rate is fixed 2.28 years 1 year
</TABLE>
MATURITY OF FINANCIAL LIABILITIES
The maturity profile of the Group's financial liabilities was as
follows:
<TABLE>
<CAPTION>
31 December 31 December
1999 1998
US$ US$
---------- ----------
<S> <C> <C>
In one year or less, or on demand 8,158,305 10,763,589
In more than one year, but not more than two 3,044,004 6,143,764
In more than two years, but not more than five 1,544,004 1,810,533
In more than five years 3,167,849 3,853,634
---------- ----------
15,914,162 22,571,520
</TABLE>
FAIR VALUES OF FINANCIAL LIABILITIES
The Group considers that the fair values of its financial assets and financial
liabilities are not significantly different from the book values included in the
Group balance sheet.
47
<PAGE> 48
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 (CONTINUED)
29. DIFFERENCES BETWEEN IRISH AND US GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
The Consolidated Financial Statements are prepared in accordance with
accounting principles generally accepted in the Republic of Ireland
("Irish GAAP"), which differ in certain significant respects from
accounting principles generally accepted in the United States ("US
GAAP"). These differences relate principally to the following items and
the material adjustments are shown in the table set out below;
(1)Goodwill:
In prior years Irish GAAP goodwill would be either written off
immediately on completion of the acquisition against shareholders'
equity, or capitalised in the balance sheet and amortised through the
income statement on a systematic basis over its useful economic life.
From 1998, goodwill must be capitalised and amortised over the period
of its expected useful life, however historic goodwill continues to
remain an offset against shareholders' equity. Under US GAAP,
accounting for goodwill as a offset against shareholders' equity is not
permitted. Rather, goodwill must be amortised over the period of its
expected useful life, subject to a maximum write off period of 40
years, through the income statement. For goodwill arising prior to
1998, a useful life of 10 years has been adopted for the purposes of
the reconciliation. The carrying value of goodwill arising on the
acquisition of subsidiaries is reviewed on each balance sheet date on
the basis of estimated future profits. If the review indicates a
shortfall in the estimated future profits then the goodwill is written
down by the amount of the shortfall. Management believes no adjustment
to the carrying value is required in the current period.
(2)Cash Flow Statements:
The cash flow statement prepared in conformity with the Irish Financial
Reporting Standard Number 1 is set out on page 29. A cash flow
statement prepared under FAS 95 is shown below. The company considers
all highly liquid investments with a maturity of three months or less
when acquired to be cash equivalents.
(3)Share Capital Not Paid:
Under Irish GAAP, unpaid share capital is classified as a receivable
under current assets. Under US GAAP, share capital receivable should be
reported as a reduction to Shareholders' Equity.
(4)Recognition of Escrow Income:
Under Irish GAAP in prior years, the Company has recognised as revenue
amounts due to be released from an escrow account under the Supply
Agreement between Warner Lambert Inc., Applied Biotech Inc. and Trinity
Biotech Inc. Under US GAAP such amounts are not recognisable until
received. The escrow account was transferred as part of the disposal of
the Supply Agreement in 1998 and as such the escrow account was
realised and was included as a reconciling item in the 1998 US GAAP
reconciliation.
(5)Accounting for the Impairment of Long-Lived Assets:
The Company reviews its long-term assets when changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
For the purposes of this US GAAP reconciliation the Company considers
the requirements of FASB Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of." SFAS 121 requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are
present and the undiscounted cash flows estimated to be generated by
those assets are less than the assets' carrying amount.
(6)Statement of Comprehensive Income:
The Company prepares a "Statement of Recognised Gains and Losses" which
is essentially the same as the "Statement of Comprehensive Income"
required under US GAAP.
(7)Contingent Consideration:
Under Irish GAAP, consideration for the purchase of a business which is
contingent on one or more future events, may be estimated and included
as part of the overall cost at the time of purchase and then adjusted
to take account of the future events. Under US GAAP, this consideration
would not be included in the purchase price until the amount could be
calculated with certainty. In 1998, contingent consideration of
$1,200,000 was included for the purchase of the Macra Lp(a) product
line. The amortisation charge for this deferred consideration is
therefore a reconciling item for us GAAP purposes in the Net Profit for
1998 and 1999. For the year ended December 31, 1999, the amount of the
contingent consideration has been accurately calculated and has been
revised to $663,000.
48
<PAGE> 49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 (CONTINUED)
29. DIFFERENCES BETWEEN IRISH AND US GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (Continued)
(8) Earnings per Share:
Under Irish GAAP, diluted earnings per share is calculated using stock
options and other convertible securities whether their inclusion is
dilutive or anti-dilutive. Under US GAAP diluted earnings per share
does not include stock options and other convertible securities in the
calculation when the effect of their inclusion would be anti-dilutive.
(9) Deferred Set-Up Costs:
Under Irish GAAP, certain costs arising on the integration of acquired
businesses or product lines may be capitalised and amortised over set
periods. Under US GAAP, these costs must be expensed in the period in
which they occur.
(10)Pre-Paid Offering Expenses:
Under Irish GAAP, share issue expenses arising as a result of
fundraising activities, where no funds have yet been raised, may be
included in prepayments and written off to share premium on the
finalisation of the fundraising. Under US GAAP, if the fundraising has
suspended for a period of more than 90 days the costs must be expensed
to the profit and loss account.
(11)Sale and Leaseback:
Under Irish GAAP, the Company's sale and leaseback transaction was
treated as a disposal of assets with the gain on the disposal of
US$1,014,080 being credited to the profit and loss in the period. Under
US GAAP, this amount would be deferred and released to the profit and
loss account over the period of the lease (20 years).
(12)Deferred Income Taxes:
Under Irish GAAP, deferred income taxes are provided only where it is
probable that the taxation liability will crystallise within the
foreseeable future. Under SFAS 109 - "Accounting for Income Taxes",
deferred taxation is computed using the liability method under which
deferred income tax liabilities are fully provided and deferred tax
assets are recognised to the extent that their realisation is more
likely than not. In addition, deferred taxation would also be provided
under US GAAP on the difference between the accounting and tax bases of
assets and liabilities of subsidiaries acquired.
(13)Deferred Development Costs:
Under Irish GAAP, payments made for patents or licences acquired for
the purpose of developing products or services may be capitalised and
written off over their expected useful lives. Under US GAAP, these
costs may only be capitalised where a direct revenue stream is
available from the use of these patents or licences immediately and
must be expenses where further development work is required before an
income stream is generated.
(14)Debt Securities:
Under US GAAP, the fair value of detachable warrants issued in
connection with debt securities, are accounted for as debt discount the
amount of which is amortised over the term of the debt under the
interest method. Under Irish GAAP, no interest is imputed.
Also, under US GAAP, the fair value of the beneficial conversion
feature of the Company's 1997 4% Convertible Debentures is accounted
for as debt discount the amount of which is amortised over the period
from the date of issue to the date it first becomes convertible under
conversion terms that are the most beneficial to the investor. Under
Irish GAAP, no interest is imputed. The 1997 reconciliation to US GAAP
net income has been restated from amounts previously reported to
include the additional interest charge resulting from the beneficial
conversion feature. This adjustment had no effect on shareholders'
equity under US GAAP as the debt discount is allocated to the share
premium account.
(15)Minority Interests:
Under Irish GAAP, Minority Interests are included as a portion of
Shareholders' Equity. Under US GAAP, Minority Interests are excluded
from Shareholders' Equity.
49
<PAGE> 50
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999 (CONTINUED)
29. DIFFERENCES BETWEEN IRISH AND US GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (Continued)
CUMULATIVE EFFECT ON SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
31 December 31 December 31 December
1999 1998 1997
US$ US$ US$
(Restated)
----------- ----------- -----------
<S> <C> <C> <C>
Total shareholders' equity before
Minority Interests under Irish GAAP 22,954,066 14,624,196 7,104,711
US GAAP adjustments:
Goodwill 12,943,417 15,121,085 17,795,823
Share capital not paid (419,061) (206,511) (736,061)
Adjustment for amount due from escrow account -- 1,250,000 (1,247,806)
Adjustment for capitalised licence fee -- (1,000,000) --
Adjustment for amortisation of
contingent consideration 26,850 30,000 --
Adjustment for deferred set-up costs (536,000) -- --
Adjustment for pre-paid offering expenses (226,007) -- --
Adjustment for sale and leaseback (1,014,080) -- --
Adjustment for debt discount -- -- (675,000)
----------- ----------- -----------
Shareholders' equity under US GAAP 33,729,185 29,788,770 22,241,667
----------- ----------- -----------
</TABLE>
EFFECT ON NET PROFIT
<TABLE>
<CAPTION>
31 December 31 December 31 December
1999 1996 1997
US$ US$ US$
(Restated)
----------- ----------- -----------
<S> <C> <C> <C>
Profit on ordinary activities after taxation
under Irish GAAP 4,915,697 2,550,593 1,280,070
US GAAP adjustments:
Goodwill amortisation (2,177,668) (2,175,505) (1,786,869)
adjustment for amount due from escrow account -- 1,250,000 (753,250)
Adjustment for capitalised licence fee -- (1,000,000) --
Adjustment for amortisation of
contingent consideration 26,850 30,000 --
Adjustment for deferred set-up costs (536,000) -- --
Adjustment for pre-paid offering expenses (226,007) -- --
Adjustment for sale and leaseback (1,014,080) -- --
Adjustment for debt discount -- -- (675,000)
----------- ----------- -----------
Profit (loss) under US GAAP 988,792 625,088 (1,935,049)
----------- ----------- -----------
Basic profit (loss) per ordinary share 0.04 0.02 (0.10)
Diluted profit (loss) per ordinary share 0.04 0.02 (0.10)
Weighted average number of shares 28,158,184 25,586,050 19,108,363
</TABLE>
50
<PAGE> 51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999 (CONTINUED)
29. DIFFERENCES BETWEEN IRISH AND US GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (Continued)
Consolidated Statement of Cash Flows
For The PERIOD Ended DECEMBER 31, 1999
<TABLE>
<CAPTION>
31 December 31 December 31 December
1999 1998 1997
US$ US$ US$
<S> <C> <C> <C>
Operating Activities
Net profit under Irish GAAP 4,915,697 2,550,593 1,280,070
Adjustments to reconcile net profit to cash
provided (required) by operating activities;
Depreciation and amortisation 1,504,533 753,253 473,388
(Profit) loss on disposal of assets (1,014,080) 37,397 --
Write down of financial assets 609,752
Taxation paid -- (90,000) --
Gain on investments -- -- (656,176)
(Purchase) sale of current investments -- 556,312 56,815
Increase in accounts receivable and prepayments (490,758) (782,200) (2,113,275)
Decrease in accounts payable & accrued expenses (2,105,989) (1,025,753) (29,874)
Decrease (increase) in inventory 538,120 (2,156,848) (478,460)
Translation adjustments (73,329) (312,611) 1,240
----------- ----------- -----------
Net cash inflow (outflow) from operating activities 3,883,946 (469,857) (1,466,272)
----------- ----------- -----------
Investing activities
Acquisition of subsidiary undertakings (2,769,835) (7,719,433) (4,973,584)
Deferred consideration paid (7,205,259) (1,459,754) --
Disposal of business -- 2,926,943 --
Payment for patents and deferred development costs (60,219) (1,179,952) (320,549)
Payment for tangible fixed assets (1,445,728) (2,797,528) (3,484,449)
Payment for financial fixed assets -- -- (630,855)
Disposal of tangible fixed assets 5,783,902 -- --
Deferred set up costs (536,000) -- --
Purchase of goodwill for product line
net of deferred consideration -- -- (114,129)
(Loan to) / repayments from unconnected party -- 180,166 204,013
----------- ----------- -----------
Net cash inflow (outflow) from investing activities (6,233,139) (10,049,558) (9,319,553)
----------- ----------- -----------
Financing Activities
Loan from unconnected third party (947,225) 2,124,592 198,530
Issue of ordinary share capital including premium 3,311,136 2,673,153 4,288,162
Expenses paid in connection with share issue (64,946) (584,826) (489,518)
Increase (decrease) in long term debt (1,483,823) 4,883,917 2,133,796
Capital element of finance lease payments (203,164) (103,014) (16,537)
Issue of 7.5% convertible debenture 3,500,000 -- --
Issue of 4% convertible debenture -- -- 3,058,640
----------- ----------- -----------
Net cash inflow from financing 4,111,978 8,993,822 9,173,073
----------- ----------- -----------
Effect of exchange rate changes on cash -- -- (474,998)
----------- ----------- -----------
Increase/(decrease) in cash and cash equivalents 1,762,785 (1,525,593) (2,087,750)
Cash and cash equivalents at beginning of year 1,301,658 2,827,251 4,915,001
----------- ----------- -----------
Cash and cash equivalents at end of year 3,064,443 1,301,658 2,827,251
----------- ----------- -----------
</TABLE>
51
<PAGE> 52
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 (CONTINUED)
29. DIFFERENCES BETWEEN IRISH AND US GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (Continued)
NON CASH TRANSACTIONS
In June 1997, the Company purchased the entire share capital of
Centocor UK Holdings Limited. Under the terms of the purchase agreement
US$3,135,021 of the total consideration of US$6,270,926 is being paid
by a three year loan note with an interest rate of 7.5% (Deferred
Consideration). Repayments under the loan will be made in three equal
annual instalments commencing on December 31, 1998. This transaction
relates to the Irish reportable segment.
In June 1998, the Company purchased a product line from Diatech
Diagnostics Inc. Under the terms of the purchase agreement US$1,680,500
of the total consideration of US$2,139,059 is being paid by a two-year
loan note bearing no interest. Repayments under the loan will be made
in five instalments commencing on June 30, 1998. The balance due on
this loan note was paid in December 1999. This transaction relates to
the United States reportable segment.
In June 1998, the Company purchased a product line from Strategic
Diagnostics Inc. Under the terms of the purchase agreement $1,200,000
of the total consideration of US$1,800,000 has been deferred to March
31, 2000. This portion of the consideration was calculated based on two
times estimated sales in 1999. At December 31, 1999, the amount has
been revised to $663,000 and is included in current liabilities. This
transaction relates to the United States reportable segment.
In September 1998, the Company purchased a product line from Dade
Behring Inc. Under the terms of the purchase agreement, US$5,616,256 of
the total consideration of US$12,995,559 is being paid by a two-year
loan note bearing no interest. Repayments under the loan will be made
in 2 instalments, which commenced on October 31, 1999. Included in the
line "Deferred Consideration - current portion" is an amount of
US$2,916,000, which is deferred consideration arising on the
acquisition of this product line. This transaction relates to the Irish
reportable segment.
SHARE OPTION SCHEME - ADDITIONAL INFORMATION REQUIRED BY SFAS 123
The company has elected to follow Accounting Principles Board Opinion
No. 25 "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options because,
as discussed below, the alternative fair value accounting provided for
under FASB Statement No. 123, "Accounting for Stock-Based
Compensation," requires use of option valuation models that were not
developed for use in valuing employee stock options. Under APB 25,
where the exercise price of the Company's employee stock options is
less than the market price of the underlying stock on the grant date,
compensation expense in recognised in the US GAAP reconciliation over
the vesting period.
Pro forma information regarding net income and earnings per share is
required by Statement 123, and has been determined as if the Company
had accounted for its employee stock options under the fair value
method of that statement. The fair value for these options was
estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted average assumptions:
1999 1998 1997
Expected option life (years) 4.2 4.5 4.5
Risk-free weighted average interest rate 7.5% 6.1% 7.9%
Stock price volatility 0.617 0.831 0.631
Dividend yield 0% 0% 0%
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions including the
expected stock price volatility. Because the Company's employee stock
options have characteristics significantly different from those of
traded options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's opinion,
the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
52
<PAGE> 53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 (CONTINUED)
29. DIFFERENCES BETWEEN IRISH AND US GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (Continued)
For purposes of pro forma disclosures, the estimated fair value of the
options is amortised to expense over the options' vesting period. The
Company's pro forma information follows:
<TABLE>
<CAPTION>
31 December 31 December 31 December
1999 1998 1997
US$ US$ US$
<S> <C> <C> <C>
Pro forma net profit 4,615,796 2,272,996 975,068
Pro forma basic and diluted profit per share 0.16 0.09 0.05
</TABLE>
A summary of the Company's stock option activity, and related
information for the years ended December 31 follows:
<TABLE>
<CAPTION>
1999 Weighted-Average 1998 Weighted-Average 1997 Weighted-Average
Options Exercise Price Options Exercise Price Options Exercise Price
<S> <C> <C> <C>
Outstanding-beginning of year 3,546,830 $1.25 3,361,757 $2.51 4,517,925 $1.67
Granted 2,188,358 $1.35 1,158,000 $1.35 3,284,797 $1.15
Exercised (750,000) $1.54 (868,461)$1.23 (4,440,965)$0.7
Forfeited 100,716) $2.12 (104,466)$2.15 -- --
Outstanding-end of year 4,884,472 $1.39 3,546,830 $1.25 3,361,757 $2.51
Exercisable at end of year 2,974,214 $1.46 1,621,383 $1.32 1,282,722 $2.19
Weighted average fair value
of options granted during the year 1.47 1.31 1.53
</TABLE>
The weighted average remaining contractual life of options outstanding
at December 31, 1999 is 4.5 years.
A summary of the range of prices for the Company's stock options for
the year ended December 31 1998 follows:
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
Option price range No. of Shares Weight. Av. Weight. Av. No. of Shares Weight. Av. Weight. Av.
exercise price contractual exercise price contractual
life remaining life remaining
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$0.75 - $1.15 2,424,698 $0.95 4.8 years 1,857,156 $0.91 4.7 years
$1.13 - $1.69 893,666 $1.59 6.7 years 583,571 $1.44 6.7 years
$1.69 - $2.53 690,083 $2.14 3.3 years 335,987 $2.14 3.8 years
$2.53 - $3.80 107,500 $2.68 1.5 years 107,500 $2.68 1.5 years
$3.80 - $5.00 90,000 $4.78 5.1 years 90,000 $4.78 5.1 years
</TABLE>
53
<PAGE> 54
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 (CONTINUED)
29. DIFFERENCES BETWEEN IRISH AND US GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (Continued)
INVESTMENTS
The following is a summary of trading securities:
<TABLE>
<CAPTION>
Gross Gross Estimated
Cost Unrealised Unrealised Fair
Gains Losses Value
<S> <C> <C> <C> <C>
December 31, 1999
U.S. Equity securities -- -- -- --
Other Equity securities -- -- -- --
------ ------ ------ ------
-- -- -- --
------ ------ ------ ------
December 31, 1998
U.S. Equity securities -- -- -- --
Other Equity securities 99,673 -- 37,251 62,422
------ ------ ------ ------
99,673 -- 37,251 62,422
------ ------ ------ ------
</TABLE>
The gross realised gains on sales of trading securities 1999 was
US$19,042 (1998: US$457,954).
The Company had no "available for sale" or "held to maturity
securities" as December 31, 1999 or December 31, 1998.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amount reported in the balance
sheet for cash and cash equivalents approximates its fair value.
Investment securities: The values for marketable equity securities are
based on quoted market prices.
Long and short-term debt: The carrying amounts of the Companies
borrowings approximate their fair value as the substantially all of the
debt bears interest at market rates.
The carrying amounts and fair values of the Company's financial
instruments at December 31, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
Carrying Fair Carrying Fair
Amount Value Amount Value
US$ US$ US$ US$
<S> <C> <C> <C> <C>
Cash and cash equivalents 3,064,443 3,064,443 1,301,658 1,301,658
Investment Securities
Marketable equities -- -- 62,422 62,422
Short term debt 8,643,105 8,643,105 10,559,447 10,559,447
Long term debt 8,086,232 8,086,232 12,263,521 12,263,521
</TABLE>
54
<PAGE> 55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 (CONTINUED)
29. DIFFERENCES BETWEEN IRISH AND US GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (Continued)
RECONCILIATION OF INCOME TAX EXPENSE
The reconciliation of tax computed by applying the statutory income tax
rate to pre-tax income is:
<TABLE>
<CAPTION>
31 December 31 December 31 December
1999 1998 1997
US$ US$ US$
<S> <C> <C> <C> <C>
Tax at Irish Statutory rate of 10% 491,570 255,059 128,007
Foreign tax rate differences 777,949 771,312 413,289
Net operating losses and temporary
differences not recognised -- -- --
Utilisation of operating losses brought forward (1,269,519) (936,371) (541,296)
---------- ---------- ----------
-- 90,000 --
---------- ---------- ----------
</TABLE>
The tax charge for 1998 relates to tax paid on the disposal of the
Warner Lambert contract (see note 16).
DEFERRED TAX ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
31 December 31 December 31 December
1999 1998 1997
US$ US$ US$
<S> <C> <C> <C>
Deferred tax assets 865,814 1,998,800 642,768
Deferred tax liabilities -- -- --
Valuation allowance (865,814) (1,998,800) (642,768)
---------- ---------- ----------
Net Deferred tax asset (liability) -- -- --
---------- ---------- ----------
</TABLE>
Deferred tax assets comprise, primarily, the unrealised tax benefit of
the Company's net operating loss carryforwards. Due to the Company's
history of losses, no portion of the valuation allowance has been
reversed in 1999.
ADDITION PROFORMA INFORMATION FOR ACQUISITIONS MADE IN 1997 AND 1998
The information below presents the proforma effect of the acquisitions
made in 1997 and 1998 as if they had occurred on January 1, 1997.
<TABLE>
<CAPTION>
31 December 31 December 31 December
1999 1998 1997
US$ US$ US$
<S> <C> <C> <C>
Revenues -- 32,827,463 33,922,423
Net Income -- 4,865,595 5,158,183
Earnings per share -- 0.19 0.27
</TABLE>
55
<PAGE> 56
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 (CONTINUED)
30. GROUP UNDERTAKINGS
Principal
Country of
Name and Principal incorporation Group %
registered office activity and operation holding
Holding Company
Trinity Biotech plc Investment
IDA Business Park and holding
Bray, company Ireland
Co. Wicklow, Ireland
Subsidiary Undertakings Sale of pregnancy U.S.A. 100%
Trinity Biotech Inc. and diagnostic tests
(Formerly Disease Detection
International Inc.)
Jamestown
New York, USA
Trinity Biotech (USA) Corp. Manufacture and sale U.S.A. 100%
(Formerly Clark of diagnostic test kits
Laboratories Inc.)
Jamestown
New York, USA
FHC Corporation Non-trading U.S.A. 100%
Girts Road Jamestown
New York, USA
Trinity Biotech Manufacturing Manufacture and sale Ireland 100%
Limited IDA Business Park of diagnostic test kits
Bray
Co. Wicklow, Ireland
Trinity Research Limited Research and Ireland 100%
IDA Business Park development
Bray
Co. Wicklow, Ireland
Trinity Biotech Sales Limited Non-trading Ireland 100%
IDA Business Park
Bray
Co. Wicklow, Ireland
Flambelle Limited Non-trading Ireland 100%
16 Fitzwilliam Place
Dublin, Ireland
Eastcourt Limited Non-trading UK 100%
Chichester House
278/282 High Holborn
London, UK
Trinity Biotech UK Holdings Ltd Holding Company UK 100%
(Formerly Centocor UK
Holdings Ltd)
Shalford
Guildford, Surrey, UK
Trinity Biotech UK Ltd Non-trading UK 100%
(Formerly Centocor UK Ltd)
Shalford
Guildford, Surrey, UK
Benen Trading Ltd Manufacture and Ireland 10%
IDA Business Park sale of diagnostic
Bray test kits
Co. Wicklow, Ireland
Reddinview Ltd Property Holding Company Ireland 100%
IDA Business Park
Bray
Co. Wicklow, Ireland
56
<PAGE> 57
SIGNATURES
Pursuant to the requirement of Section 12 of the Securities Exchange Act of
1934, the Registrant certifies that it meets all of the requirements for filing
on Form 20-F and has duly caused this annual report to be signed on its behalf
by the undersigned thereunto duly authorised.
TRINITY BIOTECH PLC
/s/ Jonathan O'Connell
Dated: March 22nd, 2000 By: --------------------------------
MR. JONATHAN O'CONNELL
DIRECTOR/
CHIEF FINANCIAL OFFICER
57
