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Table of Contents

Exhibit 99.1

Contents

 

     Page  

Independent Auditor’s Report

     1   

Profit and Loss Account

     2   

Balance Sheet

     3   

Notes to the Financial Statements

     4 - 13   


Table of Contents

Independent Auditor’s Report

To the Members of Molecular Profiles Limited

We have audited the accompanying financial statements of Molecular Profiles Limited, which comprise the balance sheets as of July 31, 2013 and 2012, and the related profit and loss account, and related notes for the years then ended.

Management’s responsibility for the financial statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law); this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Molecular Profiles Limited as of July 31, 2013 and 2012, and the results of its operations for the years then ended in accordance with United Kingdom Generally Accepted Accounting Practice applicable to Smaller Entities.

Emphasis of Matter – accounting framework

The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United Kingdom applicable for smaller entities. These standards differ in certain respects from accounting principles generally accepted in the United States of America. Further information is presented in Notes 20 – 24 to the financial statements. Our opinion is not modified with respect to this matter.

Grant Thornton UK LLP

Chartered Accountants

Birmingham, United Kingdom

21 November 2013

 

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Profit and Loss Account

For the Year Ended 31 July 2013

 

          2013     2012  
     Note    £     £  

Turnover

   2      5,920,206        3,708,177   

Cost of sales

        (3,730,076     (2,230,737
     

 

 

   

 

 

 

Gross profit

        2,190,130        1,477,440   

Distribution costs

        (1,031,631     (642,685

Administrative expenses

        (938,938     (925,772

Other operating income

   3      614,210        372,688   
     

 

 

   

 

 

 

Operating profit

   4      833,771        281,671   

Interest receivable and similar income

        7,091        28,647   

Interest payable and similar charges

        (73,589     (17,258
     

 

 

   

 

 

 

Profit on ordinary activities before taxation

        767,273        293,060   

Tax on profit on ordinary activities

   6      88,144        128,496   
     

 

 

   

 

 

 

Profit for the financial year

   13      855,417        421,556   
     

 

 

   

 

 

 

The notes on pages 4 to 13 form part of these financial statements.

 

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Balance Sheet

As at 31 July 2013

 

          2013     2012  
     Note    £     £     £     £  

Fixed assets

           

Tangible assets

   7        7,457,713          4,957,674   

Current assets

           

Debtors

   8      2,740,018          2,034,843     

Cash at bank and in hand

        1,668,637          3,283,237     
     

 

 

     

 

 

   
        4,408,655          5,318,080     

Creditors: amounts falling due within one year

   9      (2,610,290       (1,679,366  
     

 

 

     

 

 

   

Net current assets

          1,798,365          3,638,714   
       

 

 

     

 

 

 

Total assets less current liabilities

          9,256,078          8,596,388   

Creditors: amounts falling due after more than one year

   10        (2,330,358       (2,437,941

Provisions for liabilities

           

Deferred tax

   11        (163,671       (251,815
       

 

 

     

 

 

 

Net assets

          6,762,049          5,906,632   
       

 

 

     

 

 

 

Capital and reserves

           

Called up share capital

   12        8,000          8,000   

Capital redemption reserve

   13        2,000          2,000   

Profit and loss account

   13        6,752,049          5,896,632   
       

 

 

     

 

 

 

Shareholders’ funds

   14        6,762,049          5,906,632   
       

 

 

     

 

 

 

The financial statements have been prepared in accordance with the special provisions relating to companies subject to the small companies regime within Part 15 of the Companies Act 2006 and in accordance with the Financial Reporting Standard for Smaller Entities (effective April 2008).

The financial statements were approved and authorized for issue by the board and were signed on its behalf by

/s/ Nikin Patel

Nikin Patel

Director

The notes on pages 4 to 13 form part of these financial statements.

 

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1. Accounting Policies

 

  1.1 Basis of preparation of financial statements

The financial statements have been prepared in accordance with the special provisions relating to companies subject to the small companies regime within Part 15 of the Companies Act 2006, ‘The Small Companies and Groups (Accounts and Directors’ Report) Regulations 2008’ and with the Financial Reporting Standard for Smaller Entities (effective April 2008).

The financial statements have been prepared under the historical cost convention. The following principal accounting policies have remained unchanged from the prior year.

 

  1.2 Going concern

The financial statements have been prepared on a going concern basis. The directors are pleased to report that the company has sufficient cash resources along with bank facilities to meet its working capital requirements for the foreseeable future.

 

  1.3 Turnover

The turnover shown in the profit and loss account represents the invoiced value of work carried out during the year, exclusive of Value Added Tax. Where turnover relates to the provision of a service such as testing, revenue is recognized as contract activity progresses.

 

  1.4 Tangible fixed assets and depreciation

Tangible fixed assets are stated at cost less depreciation. Depreciation is provided at rates calculated to write off the cost of fixed assets, less their estimated residual value, over their expected useful lives on the following bases:

 

Freehold property

  -    50 years straight line

Fit-out of freehold property

  -    10-15 years straight line

Equipment

  -    20-25% reducing balance

 

  1.5 Foreign currencies

Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into sterling at the rate ruling on the date of the transaction. Exchange differences are taken into account in arriving at the operating profit.

 

  1.6 Taxation

The tax benefit recognized in the Profit and Loss account comprises the sum of deferred tax and current tax.

Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting periods, that are unpaid at the reporting date. Current tax is payable on taxable profit, which differs from profit or loss in the financial statements. Calculation of current tax is based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is recognized in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events have occurred at that date that will result in an obligation to pay more, or a right to pay less or to receive more tax. Deferred tax assets are recognized when it is more likely than not that they will be recovered. Deferred tax is measured on a non-discounted basis using rates of tax that have been enacted or substantively enacted by the balance sheet date.

 

  1.7 Research and development

Research and development expenditure is charged to the Profit and Loss account in the period in which it is incurred.

 

  1.8 Grants

Grant income of a capital nature is accounted for as either a deduction against the amount of the grant from

 

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the purchase price of the related asset, with a consequent reduction in the annual charge for depreciation, or by treating the amount of the grant as deferred income which is credited to the profit and loss account by installments over the expected useful economic life of the related asset on a basis consistent with the depreciation policy.

Grant income of a revenue nature is credited to the profit and loss account so as to match it with the expenditure to which it is intended to contribute.

 

  1.9 Contributions to pension funds

The company provides access to a group personal pension plan which is administered by Standard Life. Total contributions payable at the year-end are £10,092 (2012: £9,823).

 

2. Turnover

The percentage of turnover that is attributable to markets outside the United Kingdom is 82.0% (2012 - 85.0%).

 

3. Other operating income

 

     2013      2012  
     £      £  

Recognition of grant income

     614,210         372,688   
  

 

 

    

 

 

 

 

4. Operating profit

The operating profit is stated after charging/(crediting):

 

     2013     2012  
     £     £  

Depreciation of tangible fixed assets:

    

- owned by the company

     415,918        318,586   

Auditor’s remuneration

     28,000        10,800   

Auditor’s remuneration - non-audit

     7,500        32,900   

Pension costs

     60,328        55,989   

(Profit)/loss on foreign exchange

     (13,911     2,524   

Grant income recognized

     (614,210     (372,688
  

 

 

   

 

 

 

 

5. Directors’ emoluments

Remuneration in respect of directors was as follows:

 

     2013      2012  
     £      £  

Aggregate remuneration

     311,817         280,340   
  

 

 

    

 

 

 

During the year retirement benefits were accruing to 2 directors (2012 - 2) in respect of defined contribution pension schemes.

 

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6. Taxation

 

     2013     2012  
     £     £  

Analysis of tax charge/(credit) in the year

    

Current tax

    

Adjustments in respect of the prior year

     —          (77,326
  

 

 

   

 

 

 

Deferred tax

    

Origination and reversal of timing differences

     (18,846     19,789   

Effect of increased tax rate on opening liability

     —          (69,607

Adjustments in respect of prior periods

     (69,298     (1,352
  

 

 

   

 

 

 

Total deferred tax (see note 11)

     (88,144     (51,170
  

 

 

   

 

 

 

Tax on profit on ordinary activities

     (88,144     (128,496
  

 

 

   

 

 

 

Factors affecting tax charge for the year

The tax assessed for the year is lower than (2012 - lower than) the standard rate of corporation tax in the UK of 23.67% (2012 - 20.00%). The differences are explained below:

 

     2013     2012  
     £     £  

Profit on ordinary activities before tax

     767,273        293,060   
  

 

 

   

 

 

 

Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 23.67% (2012 - 20.00%)

     181,588        58,612   

Effects of:

    

Expenses not deductible for tax purposes

     21,128        13,558   

Capital allowances in excess of depreciation

     (455,915     (447,388

Adjustments to tax charge in respect of prior periods

     —          (77,326

Additional deduction for R&D expenditure

     (225,017     (128,682

Unrelieved tax losses and other deductions arising in the period

     477,284        433,405   

Losses carried back

     —          70,495   

Other short term timing differences

     932        —     
  

 

 

   

 

 

 

Current tax charge/(credit) for the year (see note above)

     —          (77,326
  

 

 

   

 

 

 

 

 

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7. Tangible fixed assets

 

     Freehold
property
     Equipment      Total  
     £      £      £  

Cost

        

At 1 August 2012

     4,360,571         2,665,819         7,026,390   

Additions

     2,318,760         597,197         2,915,957   
  

 

 

    

 

 

    

 

 

 

At 31 July 2013

     6,679,331         3,263,016         9,942,347   
  

 

 

    

 

 

    

 

 

 

Depreciation

        

At 1 August 2012

     363,027         1,705,689         2,068,716   

Provided in the year

     110,968         304,950         415,918   
  

 

 

    

 

 

    

 

 

 

At 31 July 2013

     473,995         2,010,639         2,484,634   
  

 

 

    

 

 

    

 

 

 

Net book value

        

At 31 July 2013

     6,205,336         1,252,377         7,457,713   
  

 

 

    

 

 

    

 

 

 

At 31 July 2012

     3,997,544         960,130         4,957,674   
  

 

 

    

 

 

    

 

 

 

 

8. Debtors

 

     2013      2012  
     £      £  

Trade debtors

     2,111,097         1,146,130   

Other debtors

     550,620         811,387   

Corporation tax

     78,301         77,326   
  

 

 

    

 

 

 
     2,740,018         2,034,843   
  

 

 

    

 

 

 

All amounts shown under debtors fall due for payment within one year.

 

9. Creditors: amounts falling due within one year

 

     2013      2012  
     £      £  

Bank loans (note 10)

     141,607         62,059   

Trade creditors

     1,137,472         319,011   

Other taxation and social security

     67,295         51,492   

Deferred income

     655,873         129,221   

Pensions payable

     10,092         9,823   

Accruals and other creditors

     597,951         1,107,760   
  

 

 

    

 

 

 
     2,610,290         1,679,366   
  

 

 

    

 

 

 

 

 

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10. Creditors: amounts falling due after more than one year

 

     2013      2012  
     £      £  

Bank loans

     2,330,358         2,437,941   
  

 

 

    

 

 

 

The bank loans totaling £2,500,000 at inception represent three facilities which are repayable by monthly instalments, with one starting to be repaid from January 2013, and the other 2 due to commence in October 2013. All facilities are due for repayment 15 years from the date of drawdown. Two of the facilities bear interest at 1.95% and 2.55% above base rate per annum respectively. The third facility is a fixed rate agreement bearing interest at 3.52% per annum. The loans are secured on mortgaged properties or an unlimited debenture over other assets of the company.

 

11. Deferred taxation

 

     2013     2012  
     £     £  

Provision brought forward

     251,815        302,985   

Released during year

     (88,144     (51,170
  

 

 

   

 

 

 

At end of year

     163,671        251,815   
  

 

 

   

 

 

 

The provision for deferred taxation is made up as follows:

 

     2013     2012  
     £     £  

Accelerated capital allowances and short term timing differences

     1,045,075        679,414   

Tax losses carried forward

     (881,404     (427,599
  

 

 

   

 

 

 
     163,671        251,815   
  

 

 

   

 

 

 

 

12. Called up share capital

 

     2013      2012  
     £      £  

Authorised

     

100,000- Ordinary shares of £1 each

     100,000         100,000   
  

 

 

    

 

 

 

Allotted, called up and fully paid

     

8,000- Ordinary shares of £1 each

     8,000         8,000   
  

 

 

    

 

 

 

 

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Share options

At 31 July 2013 and at 31 July 2012, four employees held 1,004 options over ordinary shares exercisable at £95.30 per share and 342 options exercisable at £70.00 per share. The share options are only exercisable in the event of a sale or listing. These options were granted on 13 April 2006.

 

13. Reserves

 

     Capital
redemption
reserve
     Profit and
loss
account
 
     £      £  

At 1 August 2012

     2,000         5,896,632   

Profit for the financial year

     —           855,417   
  

 

 

    

 

 

 

At 31 July 2013

     2,000         6,752,049   
  

 

 

    

 

 

 

The capital redemption reserve is a non-distributable class of reserve.

 

14. Reconciliation of movement in shareholders’ funds

 

     2013      2012  
     £      £  

Opening shareholders’ funds

     5,906,632         5,485,076   

Profit for the financial year

     855,417         421,556   
  

 

 

    

 

 

 

Closing shareholders’ funds

     6,762,049         5,906,632   
  

 

 

    

 

 

 

 

15. Related party transactions

Amounts payable to companies controlled by the following directors and shareholders for their services provided to the business in the year were:

 

     2013      2012  
     £      £  

M C Davies

     702,446         403,583   

P M Williams

     22,875         56,500   
  

 

 

    

 

 

 
     725,321         460,083   
  

 

 

    

 

 

 

At 31 July 2013, the company owed a company controlled by M C Davies £292,668 (2012: £63,528) and P M Williams £nil (2012: £nil) in respect of these services.

In September 2013, the company was acquired by Columbia Laboratories Inc. (see note 19). At 31 July 2013, there was a balance payable by Columbia Laboratories Inc. to Molecular Profiles Limited of £17,498.

 

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16. Capital commitments

There were no capital commitments at 31 July 2013 or 31 July 2012.

 

17. Contingent liabilities

There were no contingent liabilities at 31 July 2013 or 31 July 2012.

 

18. Ultimate controlling parties

By virtue of the spread of shareholdings there is no one controlling party.

 

19. Post balance sheet events

On 12 September 2013, the entire issued share capital of the company was acquired by Columbia Laboratories Inc., a company incorporated in the United States of America.

 

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20. Summary of Differences Between Accounting Principles Generally Accepted in the United Kingdom and the United States of America

The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United Kingdom (“UK GAAP”); specifically, the financial reporting framework that has been applied in their preparation is applicable law and the Financial Reporting Standard for Smaller Entities (“FRSSE”). For the purpose of the financial statements of Molecular Profiles Limited, there are no significant differences between the actual results reported for the years ended July 31, 2013 and July 31, 2012 and the results which would have been reported for those periods had the FRSSE not been applied.

These standards differ in certain respects from accounting principles generally accepted in the United States of America (“US GAAP”). Differences which have an effect on the consolidated net income, shareholders’ equity and financial position of the Company are set out below

Effect of differences between UK GAAP and US GAAP on net income after tax:

 

     Notes    2013
£
    2012
£
 

Gain for the year in accordance with UK GAAP

        855,417        421,556   

US GAAP adjustments:

       

Adjustment to other income acquired with the GBI grant

   (a)      (18,130     72,490  

Adjustment to other income acquired with the RGF grant

   (b)      (438,186     (295,439 )

Income tax benefit

   (c)      16,609        54,039   
     

 

 

   

 

 

 

Net income in accordance with US GAAP

           415,710           252,646   
     

 

 

   

 

 

 

Effect of differences between UK GAAP and US GAAP on net equity:

 

     Notes    2013
£
    2012
£
 

Net assets in accordance with UK GAAP

        6,762,049        5,906,632   

US GAAP adjustments:

       

Decrease in deferred revenue acquired with the GBI grant

   (a)      42,280       60,410   

Increase in deferred revenue/tangible assets acquired with the RGF grant

   (b)      (733,625 )     (295,439 )

Income tax benefit

   (c)      141,450        124,841   
     

 

 

   

 

 

 

Net assets in accordance with US GAAP

        6,212,154        5,796,444   
     

 

 

   

 

 

 

 

(a) Adjustment to other income/deferred revenue (GBI)

Under UK GAAP, the Company matches income to the related expenses associated with the Grant for Business Investment (GBI) grant. Under US GAAP, revenue is recognized under the proportional performance method over the expected life of the contractual agreement.

 

(b) Adjustment to other income/deferred revenue/increase in tangible assets (RGF)

Under UK GAAP, the Company matches income to the related expenses associated with the Regional Growth Fund (RGF) grant. Under US GAAP, revenue is recognized under the proportional performance method over the expected life of the contractual agreement. The Company is recognizing revenue over the performance period based on the overall risks associated with the grant.

 

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In association with the grant under UK GAAP, the Company recorded land at historic cost less the grant income associated to the land. Under US GAAP, land is stated at cost and cannot be offset by the income attributable to the land.

 

(c) Adjustment to other income/deferred taxes

Under UK GAAP, deferred tax assets are recognized only to the extent that, on the basis of all available evidence, it is considered that there will be sufficient future profits from which the reversal of the timing losses can be deducted. There is a general acceptance that an entity would look out between 1-3 years when considering future profitability to evaluate the probability of realizing the assets. Under US GAAP, there is no accepted cap on the look-out period when the company had a history of profitability. Additionally positive and negative evidence is weighted in determining the recognition of deferred tax assets.

Under US GAAP, deferred taxes are presumptively recognized on unremitted earnings related to foreign countries unless there is sufficient evidence that the country will invest the undistributed earnings indefinitely.

 

21. Statements of Stockholder’s Equity and Comprehensive Income Under US GAAP

The accompanying statements of stockholder’s equity and comprehensive income set out below for illustrative purposes, is presented using the captions under US GAAP.

 

     Common
stock
     Capital
redemption
reserve
     Retained
earnings
     Total  

At 1 August 2011

   £ 8,000       £ 2,000       £   5,533,798       £   5,543,798   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

                     252,646         252,646   
  

 

 

    

 

 

    

 

 

    

 

 

 

At 31 July 2012

     8,000         2,000         5,786,444         5,796,444   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

                     415,710         415,710   
  

 

 

    

 

 

    

 

 

    

 

 

 

At July 31 2013

   £ 8,000       £ 2,000       £ 6,202,154       £ 6,212,154   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

22. Explanation of UK GAAP-US GAAP Differences Not Quantified

Under ASC 230, “Statement of Cash Flows,” it is required to present cash flows from operating, investing, and financing activities. Set out below, for illustrative purposes, is the consolidated statement of cash flows presented using the captions under US GAAP.

 

     July 31,  
     2013     2012  

Operating activities:

    

Net income

   £ 415,710      £ 252,646   

Reconciliation of net income to net cash provided by operating activities:

    

Depreciation and amortization

     415,918        318,586   

Deferred income taxes

     (104,753     (105,209

Changes in operating assets and liabilities:

    

Accounts receivable

     (964,967     500,820   

Inventories

     (1,392     2,648   

Prepaid expenses and other assets

     261,184        (629,190

Accounts payable

     (15,842     837,521   

Accrued expenses

     340,566        (518,198

Deferred revenue

     982,968        458,140   
  

 

 

   

 

 

 

Net cash provided by operating activities

     1,329,392        1,117,764   

Investing activities:

    

Purchase of property and equipment

     (2,915,957     (2,888,605
  

 

 

   

 

 

 

Net cash used in investing activities

     (2,915,957     (2,888,605

Financing activities:

    

Payments on short-term loan

     (28,035       

Proceeds from note payable

            2,500,000   
  

 

 

   

 

 

 

Net cash (used in) provided by financing activities

     (28,035     2,500,000   
  

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents

     (1,614,600     729,159   

Cash and cash equivalents, beginning of period

     3,283,237        2,554,078   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   £ 1,668,637      £ 3,283,237   
  

 

 

   

 

 

 

 

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23. Classification Differences Between UK and US GAAP

In addition to the differences between UK GAAP and US GAAP related to the recognition and measurement of transactions by the Company, there are also a number of differences in the manner in which items are classified in the consolidated profit and loss account and consolidated balance sheet. These classification differences have no impact on net income or shareholders’ equity.

Under UK GAAP, the balance sheets are presented in ascending order of liquidity, whereas under US GAAP assets are presented in descending order of liquidity. Also under UK GAAP, the balance sheet is ordinarily analyzed between net assets and shareholders’ funds. Under US GAAP, the analysis is between total assets and total liabilities plus shareholder’s equity.

 

24. Subsequent Events

Following the balance sheet date, on September 12, 2013, the entire issued share capital of the Company was acquired by Columbia Laboratories Inc., a company incorporated in the United States of America.

As a result of this transaction, the stock-based awards to employees and directors in 2006, 2012 and 2013 vested. This will result in a charge to the Statement of Operations in the year ended July 31, 2014 of $147,386, together with related tax effects thereof.

 

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