EX-1 3 a2062670zex-1.txt EXHIBIT 1 EXHIBIT 1 VISIBLE GENETICS INC. CONSOLIDATED BALANCE SHEETS ( UNITED STATES DOLLARS)
SEPTEMBER 30 DECEMBER 31 2001 2000 (UNAUDITED) ------------- ------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 14,889,971 $ 18,476,303 Short-term investments 25,818,332 61,922,687 Trade receivables, net of allowance for doubtful accounts 3,413,179 3,214,934 Other receivables 949,030 884,995 Prepaid and deposits 632,207 452,124 Inventory 2,805,733 2,268,877 ------------- ------------- TOTAL CURRENT ASSETS 48,508,452 87,219,920 ------------- ------------- FIXED ASSETS 19,117,220 10,292,282 PATENTS AND LICENSES 15,087,035 12,182,112 OTHER LONG TERM ASSETS 288,329 290,633 ------------- ------------- $ 83,001,036 $ 109,984,947 ============= ============= LIABILITIES CURRENT LIABILITIES Accounts payable $ 2,952,007 $ 3,847,364 Accrued liabilities 7,120,451 5,265,864 ------------- ------------- TOTAL CURRENT LIABILITIES 10,072,458 9,113,228 ------------- ------------- MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED SHARES 25,998,099 24,397,398 ------------- ------------- SHAREHOLDERS' EQUITY Share capital 172,128,921 169,717,379 Other equity (3,443,872) (1,017,321) Cumulative translation adjustment (908,499) (1,013,459) Deficit (120,846,071) (91,212,278) ------------- ------------- 46,930,479 76,474,321 ------------- ------------- $ 83,001,036 $ 109,984,947 ============= =============
VISIBLE GENETICS INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNITED STATES DOLLARS) (UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30 NINE MONTHS ENDED SEPTEMBER 30 2001 2000 2001 2000 ---- ---- ---- ---- SALES Products $ 2,834,364 $ 2,934,278 $ 10,186,865 $ 9,675,155 Services 52,462 74,188 202,282 384,854 ------------ ------------ ------------ ------------ 2,886,826 3,008,466 10,389,147 10,060,009 ------------ ------------ ------------ ------------ COST OF SALES Products 2,347,306 2,804,305 7,252,073 7,264,251 Services 35,265 92,915 172,092 299,706 ------------ ------------ ------------ ------------ 2,382,571 2,897,220 7,424,165 7,563,957 ------------ ------------ ------------ ------------ GROSS MARGIN 504,255 111,246 2,964,982 2,496,052 EXPENSES Sales, general and administrative 8,618,175 7,423,619 25,006,016 20,141,522 Research and development 2,589,273 2,835,718 7,955,097 7,859,436 Exit and termination costs 1,380,000 -- 1,920,000 -- ------------ ------------ ------------ ------------ 12,587,448 10,259,337 34,881,113 28,000,958 ------------ ------------ ------------ ------------ LOSS FROM OPERATIONS BEFORE INTEREST (12,083,193) (10,148,091) (31,916,131) (25,504,906) Interest income 402,102 1,305,460 2,290,041 3,304,269 Interest and financing expense (5,204) (1,530) (7,703) (9,123) ------------ ------------ ------------ ------------ NET LOSS FOR THE PERIOD (11,686,295) (8,844,161) (29,633,793) (22,209,760) Cumulative preferred dividends and accretion of discount attributable to preferred stock (876,960) (868,985) (2,538,922) (2,806,134) ------------ ------------ ------------ ------------ NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS $(12,563,255) $ (9,713,146) $(32,172,715) $(25,015,894) ------------ ------------ ------------ ------------ Weighted average number of common shares outstanding 16,469,097 15,512,249 16,385,987 14,125,983 ------------ ------------ ------------ ------------ BASIC AND FULLY DILUTED LOSS PER SHARE $ (0.76) $ (0.63) $ (1.96) $ (1.77) ------------ ------------ ------------ ------------
VISIBLE GENETICS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNITED STATES DOLLARS) (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30 2001 2000 ------------- ------------- CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES Net loss for the period $ (29,633,793) $ (22,209,760) Add: Items not involving cash - Depreciation 3,315,106 1,837,871 Amortization 2,308,165 1,464,708 Foreign exchange 19,736 (113,844) Increase ( decrease ) from changes in - Trade receivables (216,966) 2,161,046 Other receivables (81,623) 372,816 Prepaid and deposits (182,613) (267,554) Inventory (523,033) (620,367) Other long term assets 2,304 1,887 Accounts payable (867,126) 761,890 Accured liabilities 1,919,737 318,051 ------------- ------------- (23,940,106) (16,293,256) ============= ============= INVESTING ACTIVITIES Purchase of fixed assets (12,248,544) (5,970,824) Licenses and patents acquired (5,213,088) (12,326,574) Purchase of short-term investments (101,256,639) (86,722,840) Redemption of short-term investments 137,360,994 39,894,978 ------------- ------------- 18,642,723 (65,125,260) ============= ============= FINANCING ACTIVITIES Common shares issued, net of expenses 1,690,652 80,584,446 ------------- ------------- 1,690,652 80,584,446 ============= ============= EFFECT OF EXCHANGE RATE FLUCTUATIONS ON CASH BALANCES 20,399 25,895 ------------- ------------- INCREASE ( DECREASE ) IN CASH DURING THE YEAR (3,586,332) (808,175) CASH, BEGINNING OF PERIOD 18,476,303 2,792,985 ------------- ------------- CASH, END OF PERIOD $ 14,889,971 $ 1,984,810 ============= ============= SUPPLEMENTAL INFORMATION Interest paid $ 7,703 $ 5,152 Income taxes paid $ -- $ --
VISIBLE GENETICS INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNITED STATES DOLLARS) (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30 2001 2000 ------------- ------------- Net loss for the period $(29,633,793) $(22,209,760) Other comprehensive income: Foreign currency translation adjustments 104,960 (585,175) ------------- ------------- Comprehensive loss for the period $(29,528,833) $(22,794,935) ------------- -------------
VISIBLE GENETICS INC. CONSOLIDATED STATEMENTS OF DEFICIT (UNITED STATES DOLLARS) (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30 2001 2000 ------------- ------------- Deficit, beginning of year $ (91,212,278) $ (59,438,142) Net loss for the period (29,633,793) (22,209,760) ------------- ------------- Deficit, end of the period $(120,846,071) $ (81,647,902) ------------- -------------
VISIBLE GENETICS INC, NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2001 Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying financial statements have been prepared in United States dollars, in accordance with accounting principles generally accepted in the United States. The principal accounting policies of the Company have been applied on a consistent basis. See the Company's 2000 Annual Report for a description of the Company's significant accounting policies. These interim financial statements do not include all of the information and note disclosure required by generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of results for the reported periods have been included. Note 2 - REGULATORY APPROVAL In September 2000, the Company filed an application with the United States Food and Drug Administration ("FDA") to market our TRUGENE(TM) HIV-I genotyping kit and OpenGene(TM) system in the clinical diagnostic market in the United States. In September 2001, the FDA approved such application. Prior to marketing additional products in the clinical diagnostic market, the Company may require appropriate regulatory approval. Note 3 -INVENTORY
SEPTEMBER 30, ------------- 2001 2000 ---- ---- Raw materials $ 984,757 $1,909,695 Work in process 392,186 215,008 Finished goods 1,428,790 928,072 ----------- ---------- $ 2,805,733 $3,052,775 =========== ==========
Note 4 - CONVERSION OF SERIES A MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED SHARES On March 15, 2001 a holder of 3,948 shares of the Company's Series A Mandatorily Redeemable Convertible Preferred Shares (the Series A Shares) converted a total of 1,000 of the Series A Shares, plus a total of $139,050 of dividends that accrued on those shares, into 103,550 of the Company's common shares. Upon conversion of the 1,000 Series A Shares, approximately $938,221 attributable to such shares and carried in Mandatorily Redeemable Convertible Preferred Shares on the Balance Sheet was transferred to Share Capital. As of September 30, 2001, a total of 25,153 Series A Shares remain outstanding, and such shares, including dividends accrued on such shares through September 30, 2001, are convertible into 2,767,692 shares of the Company's common stock. Note 5 - WARRANT EXERCISE On July 10, 2001, warrants to purchase 12,576 common shares were exercised at a price of $12.81 per common share. Under terms of the warrant agreement, the warrant holder elected to pay the exercise price for the warrants through a non-cash exercise. As a result the warrant holder received 5,135 common shares rather than 12,576 common shares they would otherwise have received upon exercise in cash of all of their warrants. Note 6 - ACQUISITION OF RESEARCH LABORATORY On September 12, 2001, the Company acquired the Cambridge, England research laboratory of Virco UK Ltd., together with substantially all the research staff of approximately 25 scientists. The Company paid approximately $830,000 for the laboratory assets and assumed the lease of a 20,000 square foot building, which houses the laboratory. The Cambridge facility will become the Company's principal international research facility. Note 7 - EXIT AND TERMINATION COSTS Concurrent with the acquisition of the research laboratory and related staff in Cambridge, England, the Company approved a plan to close, during the fourth quarter of 2001, it's Toronto, Canada research facility. Accordingly, during the third quarter of 2001 the Company recorded a charge of $1,180,000 in the statement of operations related to such closure. Such charge represents costs related to employee severance, relocation of certain employees, the remaining future lease commitments, net of estimated sub-lease income, of the Toronto research facility, the write-off of the unamortized balance of leasehold improvements, and other miscellaneous costs. During the first quarter of 2001 the Company approved a plan to close its Pittsburgh facility and move all of its kit manufacturing to productions lines that are currently undergoing testing and validation in the Company's facility in Atlanta. It is expected that the Pittsburgh facility will be closed in the fourth quarter of 2001. As a result of the decision to centralize kit manufacturing in Atlanta certain employees will be terminated and the Pittsburgh facility will be vacated. Accordingly, the Company recorded a charge of $540,000 in the statement of operations in the first quarter of 2001. This amount represents the expected severance payments to be made to terminated employees, the remaining future lease commitments, the unamortized balance of leasehold improvements and other costs related to closure of the facility. During 1999, the Company approved a plan to move the sales, marketing and various other functions from Canada to the Company's United States facility in Atlanta. In 2000 these functions were moved to the United States facility. As a result of the decision to centralize United States operations in Atlanta, certain premises leased by the Company were vacated. In December 1999, the Company commenced efforts to sublease the premises to be vacated. Accordingly, during 1999 the Company recorded a charge to reflect the estimated costs of sub-leasing these vacated facilities. All of the vacated facilities were sub-leased during 2000. During the third quarter of 2001 the sub-lessee on one of the facilities declared bankruptcy and as a result the Company took back the facility and sub-leased this facility to another organization. As a result of this during the third quarter of 2001 the Company recorded an additional charge in the statement of operations of $200,000 to reflect the costs to again sub-lease this facility. Note 8 - SEGMENT INFORMATION The Company's reportable segments are Sequencing Systems, Gene Kits and Other Consumables, and Testing, Sequencing and Other Services. Total assets shown below are as of September 30th, while all other numbers are for the nine-month period ended September 30th, of the respective year. September 30, 2001
Sequencing GeneKits Testing Reconciling Total Systems and Other Sequencing and Items(A) Consumables Other Services Revenues $ 2,107,326 $ 8,079,539 $ 202,282 -- $ 10,389,147 Depreciation & Amtz. 1,358,063 3,707,258 557,950 -- 5,623,271 (Loss) from operations before interest (6,679,363) (25,133,453) (103,315) -- (31,916,131) Additions to fixed assets 482,465 11,617,262 148,817 -- 12,248,544 Total assets 3,490,092 37,243,697 1,558,944 40,708,303 83,001,036
September 30, 2000
Sequencing GeneKits Testing Reconciling Total Systems and Other Sequencing and Items(A) Consumables Other Services Revenues $ 3,933,098 $ 5,742,057 $ 384,854 -- $ 10,060,009 Depreciation & Amtz. 1,217,877 1,868,164 216,538 -- 3,302,579 (Loss) from operations before interest (9,877,707) (15,513,384) (113,815) -- (25,504,906) Additions to fixed assets 1,088,241 3,339,852 1,542,731 -- 5,970,824 Total assets 4,740,001 22,006,213 2,435,079 88,707,650 117,888,943
(A) Reconciling items consist of cash, cash equivalents and short-term investments. Note 9 - CONTINGENCY In September 2001, a lawsuit was filed against the Company alleging unspecified damages resulting from the Company's alleged infringement of certain patents. The Company has previously studied these patents and has received legal advice that it is not liable for any claims of infringement. Management believes that these allegations are without merit and intends to vigorously defend against these allegations. No amount has been provided in these financial statements in respect of these allegations, as the amount of loss, if any, cannot be determined and the results of such allegations cannot be predicted with certainty.