ProMetic Life Sciences Inc.
Management’s Report
The accompanying consolidated financial statements for ProMetic Life Sciences Inc. are management’s responsibility and have
been approved by the ProMetic Life Sciences Inc. Board of Directors. These financial statements were prepared by
management in accordance with generally accepted Canadian accounting principles. They include some amounts that are
based on estimates and judgments. The financial information contained elsewhere in the Annual Report is consistent with
that contained in the financial statements.
To ensure the accuracy and objectivity of the information contained in the financial statements, ProMetic Life Sciences Inc.
management maintains a system of internal accounting controls. Management believes that this system gives a reasonable
degree of assurance that the financial documents are reliable and provide an adequate basis for the financial statements, and
that the Company’s assets are properly accounted for and safeguarded.
The Board of Directors upholds its responsibility for the financial statements in this annual report primarily through its audit
committee. The audit committee is made up of outside directors who review the Company’s consolidated annual financial
statements as well as management’s analysis and the operating results, and recommend their approval by the Board. KPMG
LLP, Chartered Accountants, the external auditors designated by the shareholders, periodically meet with the audit committee
to discuss auditing, the reporting of financial information and other related subjects.
Pierre Laurin
Chairman, President
and Chief Executive Officer
Montreal, Canada, April 10, 2001
André Bédard
Vice-President Finance
and Chief Financial Officer
Auditors’ Report to the Shareholders
We have audited the consolidated balance sheets of ProMetic Life Sciences Inc. at December 31, 2000 and 1999 and the
consolidated statements of operations and deficit and cash flows for the years then ended. 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 Canadian generally accepted auditing standards. Those standards require that
we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the
Company as at December 31, 2000 and 1999 and the results of its operations and its cash flows for the years then ended
in accordance with Canadian generally accepted accounting principles.
KPMG LLP
Chartered Accountants
Montreal, Canada, April 10, 2001
22
ProMetic » Annual Report 2000
ProMetic Life Sciences Inc.
Consolidated Balance Sheets
December 31, 2000 and 1999
Assets
Current assets:
Cash and cash equivalents
Short-term investments
Accounts receivable (note 3)
Inventories (note 4)
Prepaid expenses
Investment (note 5)
Capital assets (note 6)
Deferred development costs (note 7)
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities
Current portion of long-term debt (note 8)
Long-term debt (note 8)
Shareholders' equity:
Share capital (note 9)
Deficit
Commitments (notes 5, 6 and 10)
Contingencies (notes 11 and 13)
See accompanying notes to consolidated financial statements.
On behalf of the Board:
2000
$
1999
$
2,270,316
2,000,000
524,133
300,594
172,659
5,267,702
2,281,245
781,662
–
235,888
519,597
155,335
1,692,482
741,900
3,620,386
3,367,994
3,018,104
1,665,433
14,187,437
7,467,809
1,741,756
110,758
1,852,514
2,247,229
196,308
2,443,537
–
1,150,114
64,432,379
49,659,979
(52,097,456) (45,785,821)
3,874,158
12,334,923
14,187,437
7,467,809
Pierre Laurin, Director
Claude Lemire, Director
ProMetic » Annual Report 2000
23
ProMetic Life Sciences Inc.
Consolidated Statements of Operations and Deficit
Years ended December 31, 2000 and 1999
Revenues (1)
Expenses before the undernoted items:
Research and development expenses (note 7)
Depreciation of capital assets
Financial expenses
2000
$
1999
$
2,219,029
2,955,640
2,815,166
3,769,555
561,172
240,776
3,945,565
3,184,155
433,832
74,624
Loss from continuing operations
5,167,640
4,682,536
Loss from the discontinuation of the generic pharmaceutical
segment (note 13)
Net loss
Deficit, beginning of year
Share issue expenses
Deficit, end of year
Loss per share from continuing operations
Net loss per share
Weighted average number of outstanding shares
(in thousands)
(1) Revenues include interest income of $139,690 (1999: $69,450).
See accompanying notes to consolidated financial statements.
–
23,591,290
5,167,640
28,273,826
45,785,821
16,300,223
1,143,995
1,211,772
52,097,456
45,785,821
0.10
0.10
0.11
0.66
53,068
42,889
24
ProMetic » Annual Report 2000
ProMetic Life Sciences Inc.
Consolidated Statements of Cash Flows
Years ended December 31, 2000 and 1999
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to cash flows used by
operating activities:
Loss (gain) on disposal of capital assets
Depreciation of capital assets
Amortization and write-off of deferred development
costs (note 7)
Loss from the discontinuation of the generic
pharmaceutical segment
Cash flows used in operating activities
Net change in non-cash operating working capital items (note 16)
Cash flows from financing activities:
Proceeds from share issues and subscription
Share issue expenses
Increase in long-term debt
Repayment of long-term debt
Decrease in bank overdraft
Cash flows from investing activities:
Acquisition of short-term investments
Acquisition of an investment (note 5)
Additions to capital assets
Proceeds from disposal of capital assets
Deferred development costs (note 7)
2000
$
1999
$
(5,167,640)
(28,273,826)
3,739
561,172
21,613
–
(4,581,116)
(592,039)
(5,173,155)
14,272,400
(1,143,995)
–
(735,664)
–
12,392,741
(2,000,000)
(1,539,345)
(844,909)
27,606
(1,374,284)
(5,730,932)
(20,511)
433,832
735,760
23,591,290
(3,533,455)
1,114,859
(2,418,596)
13,448,750
(1,211,772)
139,911
(115,017)
(168,878)
12,092,994
–
(741,900)
(572,497)
121,635
(1,551,206)
(2,743,968)
Cash used by the discontinued generic pharmaceutical segment
–
(10,684,145)
Increase (decrease) in cash and cash equivalents
1,488,654
(3,753,715)
Cash and cash equivalents, beginning of year
781,662
4,535,377
Cash and cash equivalents, end of year
2,270,316
781,662
Other information related to cash flows:
Interests paid during the year
Interests received during the year
Non-cash transaction:
Conversion of long-term debt into shares
See accompanying notes to consolidated financial statements.
229,612
74,947
500,000
55,279
69,540
–
ProMetic » Annual Report 2000
25
ProMetic Life Sciences Inc.
Notes to Consolidated Financial Statements
Years ended December 31, 2000 and 1999
ProMetic is a leading biopharmaceutical company engaged in the research, development, manufacturing and commercialization
of a variety of commercial applications from its platform technology. ProMetic owns proprietary enabling technology
essential for use in large-scale drug purification proteomics, medical applications and therapeutics.
1. Significant accounting policies:
(a) Basis of presentation:
These consolidated financial statements have been prepared using accounting principles applicable to a going
concern, which assume that the Company will continue its operations in the foreseeable future and be able to
realize assets and satisfy liabilities in the normal course of business.
However, an emerging company assumes that it can expect future profitability and the support of its shareholders
and other external funding sources, if applicable. Management is of the opinion that adequate resources will be
available to complete the projects under development as at December 31, 2000.
(b) Consolidation basis:
The consolidated financial statements include the accounts of ProMetic Life Sciences Inc. and its subsidiaries.
(c) Cash and cash equivalents and short-term investments:
Cash equivalents are highly liquid investments purchased with an original maturity of less than three months. Short-
term investments are investment grade short-term debt instruments with original maturities greater than three
months. Short-term investments are valued at the lower of cost and market value. The carrying value of these
investments approximates their fair value due to their short maturity.
(d)
Inventories:
Work in process and finished goods are valued at the lower of cost and net realizable value and raw materials are
valued at the lower of cost and replacement cost. Cost is established using the first in, first out method.
26
ProMetic » Annual Report 2000
ProMetic Life Sciences Inc.
Notes to Consolidated Financial Statements, page 2
Years ended December 31, 2000 and 1999
1. Significant accounting policies (continued):
(e)
Investment:
The investment is recorded at cost.
(f) Capital assets:
Capital assets are recorded at cost. Depreciation is provided over the estimated useful lives of capital assets using
the following methods and rates:
Asset
Leasehold improvements
Equipment and tools
Office equipment and furniture
Computer equipment
Intellectual property
Method
Rate/period
Straight-line
Declining balance
Declining balance
Declining balance
Straight-line
Lease period
10% to 30%
20%
30%
5 to 15 years
Intellectual property includes vested rights as well as fees and expenditures incurred to obtain licenses for
product manufacturing and marketing.
(g) Deferred development costs:
Development costs of new products and processes, which are considered technically and financially feasible, are
stated at cost less related research and development tax credits and grants. These costs are amortized from the
start-up date of commercial production, based on sales. Should the Company determine that the unamortized
balance is in excess of recoverable amounts, the excess will be charged to operations for the year.
(h) Revenue recognition:
The Company recognizes revenues from various research and technology agreements when the contracted
services are provided and the various conditions, if any, are met.
(i)
Scientific research and experimental development expenses:
Research and development expenditures are charged to operations in the year in which they are incurred, net of
related tax credits.
ProMetic » Annual Report 2000
27
ProMetic Life Sciences Inc.
Notes to Consolidated Financial Statements, page 3
Years ended December 31, 2000 and 1999
1. Significant accounting policies (continued):
(j)
Foreign currency translation:
Foreign currency transactions are translated into Canadian dollars using the temporal method. Under this method,
monetary assets and liabilities are translated at year-end exchange rates while non-monetary items are translated
at historical exchange rates. Expense items are translated at the exchange rate on the transaction date or at
average exchange rates prevailing during the period. Exchange gains or losses are included in the statement
of operations.
(k)
Income taxes:
The Company uses the asset and liability method of accounting for income taxes. Future income tax assets and
income tax liabilities are recognized in the balance sheet to account for the future tax consequences of timing
differences between the respective accounting and taxable value of balance sheet assets and liabilities. As appropriate,
a valuation allowance is recognized to decrease the value of tax assets to an amount that is more likely than not to
be realized. Future income tax assets and income tax liabilities are measured using the income tax rates that are
expected to apply when the asset is realized or the liability is settled. The effect of changes in income tax rates is
recognized in the year during which these rates change.
(l)
Stock option plan:
The Company has established a stock option plan, as described in note 9 (b). No charge is recognized for this
plan when stock options are granted. Any consideration paid on the exercise of stock options is credited to
share capital.
(m) Use of estimates:
The preparation of financial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Significant items for which management must make estimates
related to the valuation and assessment of recoverability of intellectual property and deferred development costs.
Reported amounts and note disclosure reflect the overall economic conditions that are most likely to occur and
anticipated measures to be taken by management. Actual results could differ from those estimates.
28
ProMetic » Annual Report 2000
ProMetic Life Sciences Inc.
Notes to Consolidated Financial Statements, page 4
Years ended December 31, 2000 and 1999
2. Change in accounting policy:
Effective January 1, 2000, the Company adopted Section 3465 of the CICA Handbook, Income taxes. Section 3465
requires a change from the deferred method of accounting for income taxes to the asset and liability method of
accounting for income taxes.
The cumulative effect of this change in accounting for income taxes is nil as of January 1, 2000 as the Company
recorded a valuation allowance equal to the future income tax asset that could have been recorded if it would have
been more likely than not that a portion or all of this future income tax asset would realize.
3. Accounts receivable:
Trade
Sales taxes receivable
Interest receivable
Other
4.
Inventories:
Raw materials
Work in progress and finished goods
5.
Investment:
2000
$
344,496
60,244
64,742
54,651
524,133
2000
$
148,552
152,042
300,594
1999
$
64,668
158,721
–
12,499
235,888
1999
$
321,710
197,887
519,597
As of April 13, 2000, through AlphaOne-ProMetic Inc. (“AlphaOne-ProMetic”), the Company entered into a 50-50
joint venture with Arriva Pharmaceuticals, Inc. (“Arriva”; formerly known as AlphaOne Pharmaceuticals, Inc.) of
Alameda, California for the development of applications relating to commercializing serine protease inhibitors as a
platform for various pharmaceutical products for dermatological (ex.: eczema, psoriasis, genital herpes),
gastrointestinal (ex.: Crohn’s disease,
irritable bowel syndrome) and urinary tract indications. The first serine
protease pursued is rAAT, a lead compound produced in genetically-engineered yeast cells.
ProMetic » Annual Report 2000
29
ProMetic Life Sciences Inc.
Notes to Consolidated Financial Statements, page 5
Years ended December 31, 2000 and 1999
5.
Investment (continued):
Arriva has granted to AlphaOne-ProMetic an exclusive, perpetual license to develop, manufacture and
commercialize these serine protease inhibitors and the Company has granted AlphaOne-ProMetic an exclusive,
perpetual license for the use of its Mimetic LigandTM purification technology for the indications within the scope
of the joint venture. The Company has undertaken to fund the joint venture for $4 million US beginning April 1st, 2001,
on the basis of monthly instalments of $100,000 US each beginning April 1st, 2001, and up to the approval of next year
joint venture budget in December 2001. The Company had also undertaken to purchase preferred voting shares in
Arriva for a total amount of $1.5 million US representing a total equity position of 5.6%.This transaction was completed
in November 2000.
No expenses relating to the project activities had been allocated to the joint venture as of December 31, 2000.
6. Capital assets:
Leasehold improvements
Equipment and tools
Office equipment and furniture
Computer equipment
Intellectual property ((a) and (b))
Leasehold improvements
Equipment and tools
Office equipment and furniture
Computer equipment
Intellectual property ((a) and (b))
30
ProMetic » Annual Report 2000
Cost
$
390,856
2,412,439
157,716
176,654
2,471,003
Accumulated
depreciation
$
136,824
1,472,353
34,540
57,231
287,334
2000
Net book
value
$
254,032
940,086
123,176
119,423
2,183,669
5,608,668
1,988,282
3,620,386
Cost
$
127,241
1,091,468
56,396
94,486
2,414,972
3,784,563
Accumulated
depreciation
$
15,306
215,926
14,876
35,053
135,408
416,569
1999
Net book
value
$
111,935
875,542
41,520
59,433
2,279,564
3,367,994
ProMetic Life Sciences Inc.
Notes to Consolidated Financial Statements, page 6
Years ended December 31, 2000 and 1999
6. Capital assets (continued):
(a) The Company owns the rights, title and interest in and to the know-how, the information, the technology and the
patents relating to its Mimetic Ligand Technology. Part of these rights, title and interest were assigned to the
Company by the Cambridge University’s Institute of Biotechnology in consideration of the payment of continuing
royalties; the others have been developed by the Company.
(b) Pursuant to a license agreement dated November 9, 1995, and amended as of December 20, 2000 with DCV, Inc.,
the Company owns the exclusive right to use under the patent rights, a technology permitting the link of
its Mimetic Ligands™ to a matrix with a Teflon-like surface such as the Teflon beads (registered mark of Dupont
Chemical & Energy Operations,
Inc.) and the Company’s Perfluorocarbon beads (Perfluorosorb™). This
technology is useful in chromatographic applications and for medical devices. This license is subject to the
payment of a royalty to DCV, Inc. on net sales with respect to any products covered by the patent rights.
7. Deferred development costs:
Research and development
Incurred during the year
Less: Amount deferred
Amortization of deferred development costs
Write-off of deferred development costs
2000
$
1999
$
5,122,226
3,999,601
1,374,284
3,747,942
6,000
15,613
1,551,206
2,448,395
66,039
669,721
Expense for the year
3,769,555
3,184,155
Deferred development costs
Deferred development costs, beginning of year
1,665,433
2,430,271
Deferred development costs for the year
Amortization of deferred development costs
Write-off for the year
Portion related to the discontinued
generic pharmaceutical segment
1,374,284
(6,000)
(15,613)
1,551,206
(66,039)
(669,721)
–
(1,580,284)
Deferred development costs, end of year
3,018,104
1,665,433
ProMetic » Annual Report 2000
31
ProMetic Life Sciences Inc.
Notes to Consolidated Financial Statements, page 7
Years ended December 31, 2000 and 1999
8. Long-term debt:
Bank loan, bearing interest at prime rate plus 2.5%, payable
by monthly capital and interest installments of $9,328,
maturing in December 2001
Due to shareholders, bearing interest at prime rate plus 3.5%
from January 2000, of which $500,000 were converted into
subordinate voting shares and $535,000 were repaid in 2000
Due to a shareholder, unsecured, bearing interest at prime
rate plus 2.25%, payable on demand
Current portion of long-term debt
9. Share capital:
Authorized and without par value:
2000
$
1999
$
110,758
206,511
–
–
110,758
110,758
1,035,000
104,911
1,346,422
196,308
–
1,150,114
Unlimited number of Subordinate voting shares, participating, carrying one vote per share
20,000,000 Multiple voting shares, participating, carrying ten votes per share, convertible at the option of the
holder or automatically converted upon their sale to a third party by the holder into an equal number
of Subordinate voting shares
An unlimited number of Preferred shares, no par value, issuable in one or several series:
1,050,000 Preferred shares, series A, non-participating, non-voting, convertible at the option of the holder
into subordinate voting shares at $0.50 per share except for unpaid dividends, convertible at a rate equal
to the trading average of the subordinate voting shares during the 20 days preceding the conversion,
preferential cumulative dividend of 12% per year, payable quarterly
32
ProMetic » Annual Report 2000
ProMetic Life Sciences Inc.
Notes to Consolidated Financial Statements, page 8
Years ended December 31, 2000 and 1999
9. Share capital (continued):
Authorized and without par value (continued):
An unlimited number of Preferred shares, no par value, issuable in one or several series (continued):
950,000 Preferred shares, series B, non-participating, non-voting, convertible at the option of the holder into
subordinate voting shares at $0.60 per share except for unpaid dividends, convertible at a rate equal to the
trading average of the subordinate voting shares during the 20 days preceding the conversion, preferential
cumulative dividend of 12% per year, payable quarterly
Issued and fully paid:
46,254,045 Subordinate voting shares (1999 - 32,777,747)
13,703,197 Multiple voting shares (1999 - 14,303,057)
1,050,000 Preferred shares, series A (1999-nil)
950,000 Preferred shares, series B (1999-nil)
1,957,504 warrants (ii and iii) (1999 - nil)
Subscriptions
2000
$
60,787,994
1,644,385
1,050,000
950,000
–
–
1999
$
46,395,130
1,714,849
–
–
–
1,550,000
64,432,379
49,659,979
Cumulative dividends in arrears on preferred shares amount to $208,525 as at December 31, 2000 (1999 - nil).
(a) Share issuance:
(i) On February 18, 2000, the Company issued 2,000,000 preferred shares (1,050,000 Series A and 950,000
Series B) at a price of $1 per share, for gross proceeds of $2,000,000.
(ii) On March 16, 2000, the Company issued 3,629,295 units for a gross proceeds of $3,084,900. Each unit is
comprised of one Subordinate voting share and one-half of a warrant. Each whole warrant entitles the
holder thereof to purchase one Subordinate voting share at any time between the date of issuance and a
period of 12 months thereafter, at a price of $1.10 per share.
(iii) On May 15, 2000, the Company issued 357,143 units for a gross proceeds of $500,000. Each unit is comprised
of one Subordinate voting share and 0.4 of a warrant. Each whole warrant entitles the holder thereof to
purchase one Subordinate voting share at any time between the date of issuance and a period of 12 months
thereafter, at a price of $1.40 per share.
ProMetic » Annual Report 2000
33
ProMetic Life Sciences Inc.
Notes to Consolidated Financial Statements, page 9
Years ended December 31, 2000 and 1999
9. Share capital (continued):
(a) Share issuance (continued):
(iv) On September 6, 2000, the Company proceeded with a public issue of 6,600,000 Subordinate voting shares at
a price of $1.25 per share, for gross proceeds of $8,250,000.
(v) On November 3, 2000, the Company proceeded with a public issue of 990,000 Subordinate voting shares at
a price of $1.25 per share, for gross proceeds of $1,237,500 representing the exercise in whole of the 15%
option to cover allotments granted in the September 6, 2000 public issue.
(vi) During the year 2000, 1,300,000 Subordinate voting shares were issued following the conversion of
shareholders’ advances.
(vii) During the year 2000, 599,860 Multiple voting shares were converted into 599,860 Subordinate voting shares.
(viii) As set forth in a prospectus dated August 12, 1999, 6,799,286 Subordinate voting shares have been issued
following the exercise of the 6,799,286 special warrants by their holders. These special warrants were issued,
on June 25, 1999, for net proceeds of $11,125,332, net of agents’ fees and estimated issuance expenses.
(ix) During the year 1999, 1,145,806 Multiple voting shares were converted into 1,145,806 Subordinate
voting shares.
(b) Stock options:
The Company established a stock option plan for its directors, officers and employees or consultants. The plan
provides that the aggregate number of shares reserved for issuance at any time under the plan and any other
employee incentive plans may not exceed 3,500,000 Subordinate voting shares. The options could be exercised in
a period not exceeding 10 years from the date they were granted.
Year of grant
1997
1998
1999
2000
Subscription price
(in dollars)
Number of options outstanding
1999
2000
$1.49 to $1.75
$2.00 to $3.00
$1.00 to $2.00
$1.35
165,502
65,500
2,265,000
300,000
210,318
118,000
2,727,000
–
2,796,002
3,055,318
34
ProMetic » Annual Report 2000
ProMetic Life Sciences Inc.
Notes to Consolidated Financial Statements, page 10
Years ended December 31, 2000 and 1999
9. Share capital (continued):
(b) Stock options (continued):
Changes in the number of options outstanding during the past two fiscal years were as follows:
Number of options as at December 31, 1998
Granted
Cancelled
Number of options as at December 31, 1999
Granted
Cancelled
Number of options as at December 31, 2000
The following table summarizes information about stock options outstanding at December 31, 2000:
Range of
exercise prices
Number
outstanding
$1.00 to $1.49
$1.50 to $1.75
$2.00 to $3.00
2,327,002
148,000
321,000
2,796,002
Weighted
average
remaining
contractual
life (in years)
9.03
6.67
7.98
Weighted
average
exercise
price
$
1.05
1.58
2.16
Number
exercisable
1,072,401
88,800
77,300
1,238,501
Options
756,911
2,925,750
(627,343)
3,055,318
300,000
(559,316)
2,796,002
Weighted
average
exercise
price
$
1.00
1.58
2.26
ProMetic » Annual Report 2000
35
ProMetic Life Sciences Inc.
Notes to Consolidated Financial Statements, page 11
Years ended December 31, 2000 and 1999
10. Commitments:
The Company has commitments under various operating leases for office space and laboratories. The minimum
annual payments are as follows:
2001
2002
2003
2004
2005
2006 and thereafter
11. Contingency:
$
678,602
669,728
592,292
558,178
632,438
2,835,511
The Company and a subsidiary, ProMetic BioSciences Inc., have an outstanding claim from a former employee for an
approximate amount of $320,000. This claim was rejected by the Superior Court (Quebec, Canada) on August 8, 2000
and the former employee appealed against this judgment. After obtaining representation from their legal counselors,
management is of the opinion that this claim is without substantial merit and no provision was recorded in these
consolidated financial statements in that respect. Settlements, if any, will be charged to operations in the period in which
the settlement occurs.
12. Financial instruments:
(a) Fair values:
The carrying amount of cash and cash equivalents, short-term investments, accounts receivable, accounts payable
and accrued liabilities approximates the fair value because of the near-term maturity of these instruments. The
carrying amount of the Company’s floating rate long-term debt approximates its fair value because it bears
interest at current market floating rates.
(b) Credit risk:
The Company reviews a new customer’s credit history before extending credit and conducts regular reviews of its
existing customers’ credit performance.
(c) Foreign currency rate risk:
The Company receives a substantial part of its revenues in US dollars and the majority of its expenses are incurred
in Sterling pounds. The Company does not possess nor issue financial instruments for hedging or trading purposes.
36
ProMetic » Annual Report 2000
ProMetic Life Sciences Inc.
Notes to Consolidated Financial Statements, page 12
Years ended December 31, 2000 and 1999
13. Discontinuation of the generic pharmaceutical segment:
On September 30, 1999, the Company discontinued its activities in the generic pharmaceuticals business when its
subsidiary ProMetic Pharma Inc. (“Pharma”) made an assignment in favour of its creditor generally under the Bankruptcy
and Insolvency Act. As a result, the following legal proceedings took place:
(a) A garanteed creditor of Pharma,
is claiming $2,021,619 from the Company pursuant to guarantees and
agreements related to certain credit contracts concluded between this creditor and Pharma. The action
was commenced on June 29, 2000.
(b) A legal action was filed by a creditor of Pharma for recovery of certain amounts. The claim is for $305,104.
The Company is contesting these claims and on the basis of the opinions provided by legal counsels, the Company is of
the view that it has valid grounds for defence in respect of each claim. While management is confident to avoid any
unfavorable outcome, it should however be noted that any settlement in favour of one of the above creditors could
have an adverse effect on the Company’s cash flows, its results of operations and its financial position. No provision
related to these claims was recorded in these consolidated financial statements.
Settlements, if any, will be charged to operations in the period in which the settlement occurs.
14. Related party transactions:
The Company entered into the following transaction with related parties:
Consulting fees paid to directors
2000
$
1999
$
194,175
288,350
ProMetic » Annual Report 2000
37
ProMetic Life Sciences Inc.
Notes to Consolidated Financial Statements, page 13
Years ended December 31, 2000 and 1999
15. Income taxes:
Significant components of the Company’s net future income taxes balances are as follows:
Future income tax assets:
Capital assets
Net losses
Financing costs
Undeducted research and development expenses
Less: valuation allowance
Net future income tax assets
Future income tax liabilities:
Capital assets
Net future income tax assets
$
11,125
5,256,343
1,143,648
265,020
6,676,136
(6,431,222)
244,914
244,914
–
The Company has unutilized tax loss carryforwards and unamortized share issue expenses for which no tax benefit has
been reflected in the financial statements. These items may be used to reduce taxable income and income taxes in
future years. As at December 31, 2000, expiry dates and amounts are as follows:
Tax loss carryforwards expiring in 2002
Tax loss carryforwards expiring in 2003
Tax loss carryforwards expiring in 2004
Tax loss carryforwards expiring in 2005
Tax loss carryforwards expiring in 2006
Tax loss carryforwards expiring in 2007
Tax loss carryforwards expiring in 2010
Tax loss carryforwards expiring in 2011
Tax loss carryforwards expiring in 2012
Tax loss carryforwards expiring in 2018
Tax loss carryforwards expiring in 2019
Tax loss carryforwards expiring in 2020
Tax loss carryforwards, no expiration date
Share issue expenses to be amortized over 1 year
Share issue expenses to be amortized over 2 years
Share issue expenses to be amortized over 3 years
Share issue expenses to be amortized over 4 years
38
ProMetic » Annual Report 2000
Federal
$
42,580
525,630
764,964
1,100,268
4,091,000
3,213,135
–
–
–
–
–
–
–
Provincial
$
42,580
364,589
–
1,149,113
4,091,000
3,213,135
–
–
–
–
–
–
–
151,499
1,185,481
747,950
915,196
151,499
1,185,481
747,950
915,196
Other
countries
$
–
–
–
–
–
–
162,699
467,255
1,170,475
1,447,184
540,082
77,050
62,329
–
–
–
–
12,737,703
11,860,543
3,927,074
ProMetic Life Sciences Inc.
Notes to Consolidated Financial Statements, page 14
Years ended December 31, 2000 and 1999
16. Net change in non-cash operating working capital items:
(Increase) decrease in accounts receivable
Decrease (increase) in inventories
Increase in prepaid expenses
(Decrease) increase in accounts payable and
accrued liabilities
17. Segmented information:
2000
$
(288,245)
219,003
(17,324)
(505,473)
1999
$
1,195,223
(105,656)
(89,149)
114,441
(592,039)
1,114,859
ProMetic is a leading biopharmaceutical company engaged in the research, development, manufacturing and
commercialisation of a variety of commercial applications from its platform technology. ProMetic owns proprietary
enabling technology essential for use in large-scale drug purification proteomics, medical applications and therapeutics.
Revenues by geographic segment are as follows:
United States
United Kingdom
Europe (excluding United Kingdom)
Other
Canada
Intersegment sales
Net losses from the continuing operations by geographic segment are as follows:
Canada
United States
United Kingdom
2000
$
1,256,989
797,025
139,652
37,598
160,672
(172,907)
1999
$
1,469,550
609,247
1,559,158
57,745
74,012
(814,072)
2,219,029
2,955,640
2000
$
3,890,293
777,740
499,607
1999
$
3,021,676
1,003,364
657,496
5,167,640
4,682,536
ProMetic » Annual Report 2000
39
ProMetic Life Sciences Inc.
Notes to Consolidated Financial Statements, page 15
Years ended December 31, 2000 and 1999
17. Segmented information (continued):
Assets by geographic segment are as follows:
Canada
United Kingdom
United States
Capital assets by geographic segment are as follows:
United Kingdom
Canada
United States
Capital expenditures by geographic segment are as follows:
United Kingdom
Canada
United States
Major customer information:
2000
$
8,010,094
5,543,422
633,921
1999
$
4,489,475
2,377,380
600,954
14,187,437
7,467,809
2000
$
2,599,566
973,143
47,677
1999
$
2,311,675
971,888
84,431
3,620,386
3,367,994
2000
$
660,163
181,059
3,687
844,909
1999
$
152,710
416,216
3,571
572,497
As the Company is in its development phase, a considerable percentage of its R&D revenues are derived from
a relatively small number of customers.
18. Comparative figures:
Comparative figures have been reclassified in order to conform with the current year’s presentation.
40
ProMetic » Annual Report 2000