Annual Report 2012.pdf - Karo Bio

Administration Report
MSEK 1.1 of transaction costs affected the cash balance. The
remainder of the issue amount of MSEK 7.7 and transaction
costs of MSEK 3.2 has been settled in January 2013. All new
shares were registered with the Companies Registration Office
in January 2013 and therefore the number of shares at year end
has not been affected. After completion of the rights issue the total
number of shares is 495,947,36, with a par value of SEK 0.02.
The shares carry one vote each and are entitled to equal part of
the company’s distributable earnings. There are no limitations to
the transferability of the Karo Bio shares due to legal constraints
or by regulations in the company by-laws. To the best of Karo
Bio’s knowledge, no agreements have been made between any
shareholders, which could limit the transferability of the shares.
There is no shareholder that alone controls 10 per cent or more
of the total number of shares of Karo Bio. 12.2 per cent of the
shares were owner-registered by JP Morgan Bank. In the event
of a substantial change in the ownership structure of Karo Bio (a
”change of control”) Pfizer may terminate the research collaboration
agreement entered into in December 2011.
The general meeting ’s authorization of the Board of
Directors to issue new shares
Shareholders at the AGM of Karo Bio in 2012, resolved to
authorize the Board of Directors until the 2013 AGM to decide
on issuing new shares within the framework of the ECF agreement
that gives the company the right, but not an obligation, to
issue shares to Azimunth Opportunity Ltd. The agreement was
renegotiated this year. The Board is thereby authorized for the
period until the next annual general meeting, to issue new shares
to Azimuth without any other limitations than as is prescribed at
any given time in the articles of association as regards share capital
and limits on the number of shares. The subscription price
shall be determined in accordance with the agreement between
the Company and Azimuth. The company’s share-based credit
facility may be exercised when the share price reaches or exceeds
SEK 0.75, a condition which was not fulfilled at the time of the
report. The mandate to exercise the credit facility will be annually
submitted to the Annual General Meeting. The agreement
expires in October 2013.
Continued operations
The company believes that there is potential for continued operations
for 12 months from the closing date. Without additional
funding or revenues, existing cash and financial investments
are estimated to be sufficient to finance the current scope of
operations to just before or just after year-end. Under the same
conditions, equity may be less than 50 percent of the registered
share capital at the end of the fourth quarter. The company believes
that there are opportunities for additional revenue during
the year and should these not occur or be delayed, the company
is planning for required cost adjustments. It is also expected
that prerequisites for such revenues, primarily a milestone from
and an extension of the existing agreement with Pfizer, and
cost adjustments can finance operations during a further three
months, ie to about the end of the first quarter of 2014. There
is no guarantee that the company will succeed in obtaining
additional revenue, and the company may during the next twelve
months also require additional funds for future operations. It
cannot be excluded that a capital injection may be sought during
the current fiscal year.
CORPORATE GOVERNANCE REPORT
Karo Bio’s corporate governance report is available at the
company website www.karobio.com and is also included in the
printed annual report for 2012.
Systems for internal control and risk management
The Group’s systems for internal control and risk management
regarding the consolidated financial reports are described in the
section internal control and risk management regarding financial
reporting in Karo Bio’s corporate governance report.
FUTURE DEVELOPMENT
The Board and management will strive to eventually reach a
point where the Group’s revenues significantly better match its
costs. Revenues in such a situation could be in the form of payments
from partnerships, public and private grants and compensation
for certain activities. The operations are considered to be
attractive enough for this to be achievable, although it may take
years to get there. Before Karo Bio reaches this point, additional
capital needs may arise.
Karo Bio is focusing its operations on the projects and activities
that are expected to generate the best business opportunities
and create the greatest value in the short term, thereby creating
the best conditions for its development in the long run. In the
long term, the intention is that its activities should generate
significant revenues from sales of pharmaceutical products in the
market, where Karo Bio receives royalties on partners’ product
sales.
RISK FACTORS
There is no guarantee that Karo Bio’s research and development
will result in commercial success. There can be no guarantee
that Karo Bio will develop products that can be patented, that
granted patents can be retained, that future inventions will lead
to patents, or that granted patents will be sufficient to protect
Karo Bio’s rights.
There is no guarantee that Karo Bio obtains approvals on its
clinical trials applications or that the clinical trials conducted by
Karo Bio, whether independently or in collaboration with its
partners, can demonstrate sufficient safety and efficacy to obtain
the necessary approvals from regulatory authorities, or that they
will result in marketable products. It cannot be excluded that the
approval process at regulatory level will involve requirements for
increased documentation and thereby increased costs and delays
in the projects, or even discontinuation of projects. Increased
total development costs and development time of a project could
result in an increased project risk and reduce the product’s potential
to successfully reach the commercial stage or reduce the
time from product launch to patent expiry.
There may be a need to turn to the capital market for additional
funding in the future. Both the size and the timing of the
company’s potential future capital requirements are dependent
on a number of factors, including opportunities to enter into
collaboration or licensing agreements and the progress made in
research and development projects undertaken. There is a risk
that the required funding of the operations will not be available
when needed or at a reasonable cost.
PROPOSED APPROPRIATION OF LOSS
The Board of Directors proposes that the available non-restricted
equity of SEK 36,012,880 is carried forward.
The company’s results for the financial year and the financial
position per December 31, 2012 are presented in the attached
financial statements and accompanying notes which are an integral
part of this Annual Report.
KARO BIO Annual Report 2012 17