Independent Auditors’ Report

Financial Statements

Balance sheets

Statements of income

Statements of shareholder’s equity

Statements of cash flows

Notes to financial statements

BDO Audit & Assurance B.V.

on its behalf,

December 31,

Assets

Current

Cash and cash equivalents

Accounts receivable:

Trade, net of allowance for doubtful accounts of $136,144 and $104,496 (Note 8)

Related parties (Note 7)

Inventories (Note 2)

Prepaid expenses and other

Total current assets

Property and equipment, net (Note 3)

Other assets (Note 9)

Total assets

Liabilities and Shareholder’s Equity

Current

Accounts payable

Due to related parties (Note 7)

Other accrued expenses (Note 4)

Total current liabilities

Related party loan payable (Note 6)

Deferred income taxes (Note 5)

Total liabilities

Commitments and contingencies (Notes 3, 9 and 10)

Shareholder’s equity

Common stock

Additional paid-in capital

Accumulated deficit

Accumulated other comprehensive income (loss) (Note 12)

Total shareholder’s equity

Total liabilities and shareholder’s equity

Year ended December 31,

Net sales (Notes 7 and 8)

Cost of sales (Note 7)

Gross profit

Operating expenses:

Selling, general and administrative (Note 7)

Research and development

Total operating expenses

Income from operations

Other income (expense):

Interest, net

Gains (losses) arising from foreign currency translation

Miscellaneous, net

Total other income (expense), net

Income before income taxes

Income tax expense (Note 5)

Net income

Balance, December 31, 2009

Net income

Translation adjustment

Minimum pension liability adjustment (net of tax of $528,794)

Comprehensive income

Balance, December 31, 2010

Net income

Translation adjustment

Minimum pension liability adjustment (net of tax of $158,000)

Comprehensive income

Balance, December 31, 2011

Year ended December 31,

Cash flows from operating activities:

Net income

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

Realized and unrealized foreign exchange loss on related party loan

Deferred income taxes

Provision for pension

Payment of pension

Provision for losses on accounts receivable

Decrease (increase) in assets:

Accounts receivable

Inventories

Prepaid expenses and other

Due from related parties

Increase (decrease) in liabilities:

Accounts payable

Other accrued expenses

Due to related parties

Net cash provided by operating activities

Cash flows from investing activities:

Additions to property and equipment

Net cash used in investing activities

Effect of exchange rates on cash and cash equivalents

Net change in cash and cash equivalents

Cash and cash equivalents, beginning of year

Cash and cash equivalents, end of year

Business – Banner Pharmacaps Europe B.V. (the “Company”), is an indirect wholly owned subsidiary of VION Holding N.V. (“VION”).

The Company manufactures soft elastic gelatin capsules, primarily containing prescription and non-prescription pharmaceuticals, vitamins and dietary supplements.

Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. Actual results could differ from those estimates.

Foreign Currency Translation – The Company’s assets and liabilities are primarily denominated in Euros and are translated to United States dollars at year-end exchange rates. Revenues and expenses are translated at average exchange rates prevailing during the year. The effects of translation are recorded in the accumulated other comprehensive income (loss) component of shareholder’s equity.

Transactions denominated in foreign currency are translated using the exchange rate in effect at the transaction date. Gains and losses arising from subsequent fluctuations in exchange rates are included in other income.

Revenue Recognition – Revenue is recognized when products are shipped or delivered to the customer (based on shipping terms) and ownership has been transferred to the customer. Customers are primarily located within Europe.

Distributor and Royalty Agreements – The Company has agreements with various distributors that allow the Company to share in product profits. The Company recognizes these profits once the distributor ships the product and title passes to their customer.

Shipping and Handling Charges – Amounts billed to customers for shipping and handling costs are included in net sales. Related freight expenses are included in selling, general and administrative expenses and were approximately $160,000 and $137,000 in 2011 and 2010.

Trade Accounts Receivable and Credit Risk – Accounts receivable are customer obligations due under normal trade terms. Substantially all of the Company’s trade receivables are from pharmaceutical, biotech and retail companies.

The Company performs continuing credit evaluations of its customers’ financial condition and generally does not require collateral. Management reviews accounts receivable on a monthly basis to determine if any receivables will potentially be uncollectible. The allowance for doubtful accounts includes any accounts receivable balances that are determined to be uncollectible, along with a general reserve based on management’s assessment of their customers’ overall financial position. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. The Company has a limited number of customers with individually large amounts due at any given balance sheet date. See Note 8 for major customers. Any unanticipated change in one of those customers’ credit worthiness, or other matters affecting the collectability of amounts due from such customers, could have a material effect on the results of operations in the period in which such changes or events occur. Based on all available information, management believes the allowance for doubtful accounts is adequate. However, actual write-offs could exceed the recorded allowance.

Cash and Cash Equivalents – The Company considers investments with an original maturity of three months or less when purchased to be cash equivalents.

Inventories – Inventories are valued at the lower of cost or market. Cost is determined by the first-in, first-out (FIFO) method.

Property and Equipment – Property and equipment are carried at cost. Depreciation is computed over the estimated useful lives of the assets by the straight-line method for financial reporting purposes and by accelerated methods for income tax purposes. Assets are depreciated for financial reporting purposes based on estimated useful lives as follows: Buildings and improvements (25-40 years); Machinery, equipment and other assets (5-12 years).

Long-Lived Assets – Long-lived assets, such as property and equipment, are evaluated for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through the estimated undiscounted future cash flows from the use of these assets. When any such impairment exists, the related assets will be written down to fair value. No impairment charges were incurred in 2011 and 2010.

Fair Value of Financial Instruments – The carrying amount of cash and cash equivalents, accounts receivable and accounts payable approximates fair value because of the short maturity of those instruments. The recorded value of the Company’s related party loans approximate their fair values based on the variable interest rates and the current rates available to the Company for debt of similar remaining maturities.

Income Taxes – Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets, including tax loss and credit carryforwards, and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred income tax expense represents the change during the period in deferred tax assets and liabilities. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on their characteristics. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

1.

Tax benefits are recorded only for tax positions that would be more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon ultimate settlement. Unrecognized tax benefits are tax benefits claimed in the Company’s tax return that do not meet these recognition and measurement standards. The Company’s policy is to classify any interest or penalties as income tax expense, if applicable.

Research and Development Expenses – Research and development (R&D) costs are expensed as incurred. These expenses consist of the Company’s proprietary R&D efforts.

Other Comprehensive Income (Loss) – Other comprehensive income (loss) includes translation adjustments arising from the translation of the assets and liabilities of the Company into US Dollars as well as changes in the value of plan assets and liabilities of the deferred benefit pension plan not included in net periodic benefit cost.

Comparative Financial Statements – Certain 2010 amounts have been classified to conform to the 2011 presentation. These reclassifications have no effect on previously recorded net income.

Subsequent Events – Management has evaluated events occurring subsequent to the balance sheet date through April 4 2012, the date that the financial statements were available to be issued, determining no events require adjustment to or additional disclosure in the financial statements.

Depreciation expense amounted to $1,737,280 and $1,499,520 for 2011 and 2010.

The Company estimates that costs to complete projects in progress at December 31, 2011 will be approximately $25,000.

The Company is part of a group that files consolidated tax returns. Taxes are allocated to the Company as if that entity filed its own income tax returns.

Income tax expense consists of foreign deferred taxes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Significant components of the Company’s deferred tax assets (liabilities) are as follows:

The Company purchased materials from parties related through common ownership totaling $2,485,000 and $1,908,000 during 2011 and 2010.

An administration charge of $672,000 and $633,000 from an entity related through common ownership was recorded in 2011 and 2010. This charge is included in the selling, general and administrative expenses in the statements of income.

The Company has a defined benefit pension plan. The pension obligation has been calculated using the defined unit credit method. Consistent with the instructions of this method, future benefits earned by employees in their current and past periods of services are being estimated. Subsequently, the present value of this obligation is calculated.

The funded status of this plan is as follows:

The Company expects to contribute $816,000 to its pension plan in 2012.

The pension benefit payments, which reflect expected future service, are expected to be in the next years:

Litigation – The Company is involved in various claims and lawsuits incidental to its business and where appropriate has or will establish reserves where it is probable that a liability has occurred. In the opinion of management, other claims and lawsuits in the aggregate will not have a material effect on the Company’s financial statements.

Guarantees – The Company unconditionally guarantees VION’s bank debt. The maximum amount of the guarantee may vary, but is limited to the sum of the total outstanding principal, related interest and fees, or approximately $1.1 billion at December 31, 2011. VION’s bank debt is denominated in Euros, and therefore, will vary based on fluctuations in foreign exchange rates. The guarantee is scheduled to expire in November 2015. There is currently no recorded liability for potential losses under this guarantee, nor is there any liability for the Company’s obligation to “stand ready” to fund such guarantee. Management believes there is only a remote possibility that VION will not remain current with its debt payments and that the Company will be required to perform under the guarantee.

In May 2011, the Financial Accounting Standards Board (“FASB”) issued an accounting update (Update No. 2011-04 – Fair Value Measurement (Topic 820)) that amends existing guidance regarding fair value measurements and disclosure requirements. For nonpublic entities, the amendments are effective for annual periods beginning after December 15, 2011 and are to be applied prospectively. The accounting update will be applicable to the Company beginning in fiscal year 2012. The adoption of this update is not expected to materially impact the Company’s financial statements.

In June 2011, the FASB issued an accounting update (Update No. 2011-05 – Comprehensive Income (Topic 220) – Presentation of Comprehensive Income) that amends the presentation of other comprehensive income in the financial statements including requiring an entity to report comprehensive income either in a single continuous financial statement or in two separate but continuous financial statements. For nonpublic entities, the new guidance is generally effective for fiscal years ending after December 15, 2012, with early adoption permitted. In December 2011, the FASB issued an accounting update (Update No. 2011-12 – Comprehensive Income (Topic 220)) effectively deferring those changes in Update No. 2011-05 that relate to the presentation of reclassification adjustments out of accumulated other comprehensive income. The Company will adopt this update in fiscal year 2012.