Notes to the Consolidated Financial Statements
December 31, 1997

All sales represented diagnostic and pregnancy tests sold by Group Companies.

Due to adverse movements in the exchange rate between the IR£ and the US$ at December 31, 1996, the Company incurred a significant unrealised exchange loss on the translation of US$ into IR£ for reporting purposes. In accordance with FRS 3 the exchange loss was disclosed as an exceptional item. In the current year there was a favourable movement in the exchange rate between the IR£ and the US$ and to be consistent this exchange gain has been disclosed as an exceptional item.

At December 31, 1996, the Company made a provision to cover pending litigation at that time. In accordance with FRS 3 the charge for litigation and related costs was disclosed as an exceptional item.

5. EMPLOYEES AND REMUNERATION

The average number of persons employed by the Group in the financial year was one hundred and seventy three (1996: fifty two) and is analysed into the following categories:

6. TAXATION

There was no taxation charge due to losses available for carry forward.

7. PROFIT AND LOSS ACCOUNT

The consolidated profit and loss account reflects the combined results of Group Companies for the year.

As permitted by Section 3(2) of the Companies (Amendment) Act, 1986 the Company has not presented its own profit and loss account. The profit for the financial year dealt with in the profit and loss account of the Company amounted to IR£769,076 (US$1,093,626) - December 31, 1996 loss IR£172,720 (US$245,608).

8. NET PROFIT (LOSS) PER ORDINARY SHARE

(a) Earnings per share

Net profit (loss) per ordinary share is computed by dividing the profit (loss) on ordinary activities after taxation of IR£849,697 (US$1,208,269) - December 31, 1996 loss of IR£468,204 (US$665,786) for the financial year by the weighted average number of ordinary shares in issue of 19,108,363 - December 31, 1996 16,119,559.

(a) Fully diluted earnings per share

Fully diluted earnings per share is computed by dividing the adjusted profit on ordinary activities after taxation of IR£1,088,664 (US$1,548,080) for the financial year by the fully diluted weighted average number of ordinary shares in issue of 24,405,603.

The fully diluted earnings per share has not been presented for prior years as the effect of the inclusion of outstanding options and warrants was anti-dilutive.

Mortgages amounting to IR£1,452,848 (US$2,065,950) are secured by a charge over the Company's new plant in Bray, Ireland and a charge over the Company's existing plant in Jamestown, New York.

The market value of the Selfcare listed investment on the basis of overseas stock exchange quotation was IR£4,367,001 (US$6,209,875). Title to these shares is being disputed by Selfcare Inc. and is the subject of an ongoing legal case. The Company has obtained counsels' advice relating to this investment and the Directors of the Company are satisfied that the group has valid legal title.

Under the terms of a distributor agreement certain amounts have been put in escrow to cover any potential patent infringement claims. As the vesting period for such claims expired during 1996, amounts due to be released in 1997 of IR£500,000 (US$711,000) have been recognised as revenue in 1997 and set up as a receivable at 31 December, 1997.

The replacement cost of inventory is not materially different from the figures shown above.

At December 31, 1996, the Company adopted SFAS No. 115 'Accounting for Certain Investments in Debt and Equity Securities'. As a result current investments have been classified as trading securities and reported at fair value. As discussed in the accounting policy for investments on page 22, SFAS 115 requires trading investments to be marked to market with the resulting gain/loss taken through the profit and loss account. This treatment is a departure from Irish accounting rules which stipulate that the unrealised profit be credited to a revaluation reserve. In the opinion of the board the adoption of SFAS 115 is necessary to present a true and fair view. The impact of adopting SFAS 115 in the current year is an increase of IR£541,423 (US$769,904) to the current year 'other operating income'.

In connection with the acquisition of Centocor UK Holdings Ltd. on June 25, 1997, the Company completed a private placement of US$3,000,000 principal amount of 4% Convertible Debentures. The Debentures bear interest at the rate of 4% per annum, payable quarterly, and mature on December 24, 1999. The Debentures are 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.

17. 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 October 1994, the Company completed the acquisition of DDI which involved an exchange of shares in which holders of DDI Common Stock received American Depository Receipts representing one Class 'A' Ordinary Share for each share of DDI Common Stock. Holders of DDI Series 'B' Preferred Stock received American Depository Receipts representing 2.78 Class 'A' Ordinary Shares of Trinity for each share of DDI Series 'B' Preferred Stock. Holders of DDI 10% Exchangeable Convertible Preferred Stock received American Depository Receipts representing 2.33 Class 'A' Ordinary Shares of Trinity for each share of DDI 10% Preferred Stock. A total of 2,596,888 Trinity shares have been issued to the DDI shareholders as at December 31, 1997, December 31, 1996 - 2,593,169. A further 72,892 will be issued upon the presentation of DDI share certificates for exchange into Trinity shares.

(c) In July 1995 the Company completed the first part of a private placement, issuing 2,038,000 'A' Ordinary Shares for cash. In October and December, 1995, the Company completed subsequent parts of the private placement, issuing 1,669,284 and 577,429 'A' Ordinary Shares for cash respectively. The proceeds from these issuances provided working capital for the Group.

(d) In February 1997, the Company completed the acquisition of Clark Laboratories Inc. ("Clark") which involved an exchange of shares in which holders of Clark Common Stock received 'A'' Ordinary Shares representing 334 Class 'A' Ordinary Shares for each share of Clark Common Stock. A total of 1,427,142 Trinity Shares were issued as a result of the acquisition. In addition as part of the acquisition, 153,202 Class 'A' Ordinary Shares were issued to purchase 85 shares in CLI Oncology.

18. SHARE OPTIONS AND WARRANTS

Under the terms of Trinity's Founder and Employee Share Option Plans, options to purchase 3,127,208 Class 'A' Ordinary Shares were outstanding at December 31, 1997. Under the plans, options over a further 8,372,792 Class 'A' Ordinary Shares are available for grant. Under the plans 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 to purchase 481,704 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 issue in 1997. A further warrant to purchase 100,000 Class 'A' Ordinary Shares was granted to a consultant of the Company. At December 31, 1997 234,549 warrants were still outstanding.

On October 21, 1997 the Company's Class 'A' Warrants expired. This resulted in the cancellation of 805,849 unexercised Warrants. On December 31, 1996 - 1,201,914 Class 'A' Warrants were outstanding. At December 31, 1997 Share Warrants are outstanding on 1,279,151 Class 'B' Warrants, December 31, 1996 - 883,086, that the company issued in connection with its initial public offering in October 1992.

During the year 396,065 Class 'A' Warrants were exercised resulting in the issue of 396,065 Class ''A' Ordinary Shares and 396,065 Class 'B' Warrants.

In 1995 the terms of the warrants were amended as follows: Each Class 'A' Warrant entitled the holder, until the date which is five years after the Effective Date (October 21, 1992), to purchase from the Depository, for a price of $3.00, one ADS representing one Class 'A' Ordinary Share and one Class 'B' Warrant. These Warrants expired on October 21, 1997. Each Class 'B' Warrant entitles the holder beginning on the Effective Date until the date which is six years after the Effective Date to purchase one ADS representing one Class 'A' Ordinary Share of the Company at an exercise price of $4.00. The Warrants are redeemable during the exercise period upon notice from the Company, at a price of $.10 per Warrant during the exercise period, upon 30 days written notice, provided that the average closing bid price of the ADSs equals or exceeded $6.50 in the case of the Class 'A' Warrants or exceeds $9.00 in the case of the Class 'B' Warrants for 30 consecutive trading days.

The share options outstanding at December 31, 1997 were as follows:

NEXT    BACK TO ANNUAL REPORT