SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED) For The Fiscal Year Ended December
31, 1996.
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED) FOR THE TRANSITION PERIOD FROM
_______________ TO ___________________.
Commission File No. 0-14691
SENETEK PLC
(Exact name of registrant as specified in its charter)
England 77-0039728
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
23 Palace Street, SW1E 5HW
London, United Kingdom (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (011) 44-171-828-4800
Securities registered pursuant to Section 12(b) of the Act:
None.
Securities registered pursuant to Section 12(g) of the Act:
None.
AMERICAN DEPOSITARY SHARES
(each American Depositary Share represents
1 Ordinary share, (pound)0.05 par value)
----------------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
(see page 20)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [X].
As of February 28, 1997, Registrant had 45,962,959 Ordinary shares outstanding,
including 43,623,554 represented by American Depositary Shares. The aggregate
market value of voting stock held by nonaffiliates of the Registrant as of
February 28, 1997 was $125,057,717 based on the average bid and asked prices as
quoted on the Nasdaq Stock Market. This sum excludes shares held by directors,
officers, and stockholders whose ownership exceeded 5% of the outstanding shares
at February 28, 1997, in that such persons may be deemed affiliates of the
Registrant. This calculation does not reflect a determination that certain
persons are affiliates of the Registrant for any other purposes.
Documents Incorporated by Reference
-----------------------------------
Part III of this Report on Form 10-K incorporates information by reference from
the Registrant's definitive Proxy Statement for the Annual Meeting of
Shareholders, to be held on May 16, 1997.
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INDEX
Page
PART I
Item 1 - Business.........................................................3
Item 2 - Properties.......................................................9
Item 3 - Legal Proceedings................................................10
Item 4 - Submission of Matters to a Vote of Security Holders..............10
PART II
Item 5 - Market for Registrant's Common Equity and Related Stockholders
Matters..........................................................10
Item 6 - Selected Financial Data..........................................18
Item 7 - Management's Discussion and Analysis of Financial Condition an
Results of Operations............................................19
Item 8 - Financial Statements and Supplementary Data......................26
Item 9 - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.............................................26
PART III
Item 10 - Directors and Executive Officers of Registrant..................27
Item 11 - Executive Compensation..........................................28
Item 12 - Security Ownership of Certain Beneficial Owners and Management..28
Item 13 - Certain Relationships and Related Transactions..................28
PART IV
Item 14 - Exhibits, Financial Statement Schedules and Reports
on Form 8-K.....................................................29
Signatures................................................................38
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PART I
ITEM 1 - BUSINESS
Senetek PLC ("Senetek" or "the Company") is a public limited company registered
in England in October, 1983 with the number 1759068 with the objective of
sponsoring research in the life sciences and biotechnology fields, with
particular emphasis on research relating to the diagnosis and treatment of
diseases related to senescence or aging, and the subsequent exploitation of the
results of such research.
The main areas in which the Company is involved are the treatment of male sexual
dysfunction ("MSD"), which includes the development, manufacture and sale of a
patented self-administered automatic injector syringe as a delivery system. In
December, 1993, the Company formed a wholly owned subsidiary, MEIS Corporation
(a Delaware Corporation) based in St. Louis, Missouri, for the purposes of
designing, manufacturing and exploiting the syringe, initially as a delivery
system for its MSD product. Subsequently, possible other applications for the
syringe have been investigated, notably in the case of Epinephrine, an antidote
against anaphylactic shock.
In September, 1995, the Company extended its interests by forming another wholly
owned subsidiary, Carme International Inc ("CII"), a Delaware Corporation based
in Novato, California, for the acquisition, through CII, of the majority of the
assets of Carme Inc., an organisation based in Novato, that had concentrated on
the manufacture and distribution of a wide range of health and beauty products.
This acquisition was designed to promote the Company's interest in the area of
skin care, with particular reference to potential anti-aging aspects, and
specifically to provide a vehicle for the manufacture and distribution of a
product featuring the Kinetin compound (formerly referred to as Factor X or
Vivakin) in a cosmetic format. CII has extended the manufacturing capacity at
the existing premises, has revised marketing strategy and procedures, and has
commenced the commercialization of additional products.
In addition, the sales of monoclonal antibodies, derived from Company sponsored
research into diagnostic procedures for Alzheimer's disease and other cell lines
are effected on a continuing basis to the scientific community for research
purposes.
Aspects of the business are discussed under "Product Research & Development",
"Manufacturing and Marketing", and "Management's Discussion and Analysis of
Financial Condition and Results of Operations", below.
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PRODUCT RESEARCH AND DEVELOPMENT
General
- -------
A significant proportion of the Company's historic and current operating
expenses have related to the discovery and development of biomedical products,
for which purpose the Company has established clinical research agreements with
consultants and research scientists. Under these agreements, the Company funds
agreed programs of the consultants', clinicians' or research scientists' work
and retains exclusive rights to manufacture and market worldwide any products
arising from such research. Currently no products, except for CII's sales of its
Mill Creek range of products incorporating the Company's Kinetin compound, and
the sale of monoclonal antibodies, have reached the marketing stage but if
products arise from such research, certain of the researchers will become
entitled to a royalty under the terms of their individual agreements.
Typically, the research agreements referred to above oblige the Company to fund
research in amounts to be determined between the parties. The researchers are
responsible for filing progress reports with the Company. Currently, Senetek's
research and development efforts consist of the work being done under these
agreements, and through liaison with the research teams involved, and with
specialised consultants on matters such as formulation, stability and regulatory
matters covering the products involved in such research.
Male Sexual Dysfunction
- -----------------------
The Company has continued to liaise with research groups associated with the
University of Copenhagen and in various hospitals in Denmark, and at other
research centers, and with clinicians and consultants in the United Kingdom,
Europe and in the US for assessment of the role of neurotransmitters in sexual
response and their potential use in the treatment of sexual dysfunction. Test
data is being accumulated for regulatory approval purposes under the Company's
current Phase III clinical trials in the United Kingdom and the Company plans to
file a Product Licence Application ("PLA") with the UK authorities in April
1997. Pending the grant of a Product Licence for the Company's MSD product,
sales are being restricted to clinicians who are requesting the product in
increasing numbers for use on a named-patient basis only. The Company has
submitted for Investigational New Drug Application ("IND") status with the US
Food and Drug Administration ("FDA") and awaits the outcome of the FDA review.
Self-Administered Auto-Injector Syringe
- ---------------------------------------
The Company's patented self-administered auto-injector syringe ("the Syringe")
has now been fully developed by MEIS, and is currently being used with
considerable success as the delivery system for the MSD product by clinicians.
The possible delivery of drugs, in addition to the Company's MSD compound and
Epinephrine, referred to below, being utilised through the Syringe is also under
review, and investigations into such other potential applications are currently
being undertaken.
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Epinephrine
- -----------
The Company has filed an Abbreviated New Drug Application ("ANDA") with the FDA
for the proposed application of Epinephrine by subcutaneous injection delivered
through its Syringe and is also planning to file for U.K. approval during 1997.
Epinephrine is designed as an antidote against anaphylactic shock, triggered by
allergic reaction against food poisoning and insect stings. It is hoped that
approval for marketing may be obtained during the last quarter of 1997, in which
event it may be possible to commence commercial sales of one of the dose ranges
during the current fiscal year. In addition, the Company plans to file an ANDA
with the FDA for a pediatric application for this product.
Skin Aging
- ----------
Research activity relating to the Company's anti-aging compound continues to be
carried out through research groups in the US.
With regard to the commercial exploitation of products incorporating Kinetin,
the Company has, through its subsidiary CII, commenced the successful marketing
of its Mill Creek line of products as an "Age defiant" "over the counter"
consumer product, and is planning an advertising campaign in the current year.
Evidence to date, suggests that the Kinetin product could represent a major
breakthrough in the prevention or delay of aging characteristics in human
fibroblasts.
Any pharmaceutical application of Kinetin would require a separate approach,
entailing detailed testing and regulatory considerations and will inevitably
entail considerable expenditure and will have to cover an extended period before
being made available as a pharmaceutical product.
MANUFACTURING AND MARKETING
The Company's subsidiary, MEIS, has installed plant and machinery for the
manufacture and assembly of the components for the Syringe on a limited
production basis and has now entered into the necessary capital commitments to
provide high volume manufacturing facilities. MEIS has also arranged for the
filling of the delivery system for the MSD and Epinephrine compounds with a
specialist sub-contractor and is planning a management structure for subsequent
marketing and back-up facilities.
3
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In connection with the proposed MSD commercialization, discussions and
preliminary negotiations have been entered into regarding possible territorial
distribution rights for the Company's product in a number of European countries
and although considerable interest has been expressed by the potential
distributors, it is not possible to state at this stage, whether formal
agreements will result. In the meantime, the Company is considering whether to
effect its own distribution agreements, initially at least, for the United
Kingdom.
In the case of CII, the manufacture, filling, labeling and storage of its
products are carried out using CII's processing plant and warehousing facilities
located in Novato, California, the only exception being in the case of South
Africa and the United Kingdom where a license to manufacture has been granted
for the Mill Creek line of products. CII's products are distributed
internationally, with the majority of the products being sold within the North
American Free Trade Area through its marketing organization covering three main
sectors, natural products, specialty mass markets and private label customers.
Distribution agreements have been signed with important distributors in the US
and abroad. There is no significant reliance on main or specialised suppliers,
and it is not anticipated that problems will arise over the question of access
to raw materials that are generally available and that will be required for
CII's manufacturing processes.
In accordance with an agreement entered into with the Research Foundation for
Mental Hygiene Inc. ("the Foundation"), the Company, which has been granted the
exclusive rights to certain of the Foundation's cell lines capable of producing
certain monoclonal antibodies, including those applicable to Alzheimer's
disease, continues to effect sales of such antibodies to the scientific
community for research purposes in consideration for a royalty entitlement in
favor of the Foundation.
In the case of any emerging products, the Company anticipates that any
manufacturing and marketing activities may be arranged through co-development
and marketing agreements with companies which have already established a
majority presence in specialised fields. In this event, any revenues to be
generated will arise primarily through third party distribution or licensing
arrangements or co-ventures whereby the Company will seek to receive a
percentage of sales, licence fees and/or front-end and interim stage payments
for specified marketing rights to its products, or by a profit participation
through a third party equity investment, or joint venture. Currently, save for
an agreement covering the cosmetic form of the Kinetin product for certain Far
East territories, the Company is not a party to any co-development or marketing
agreements.
4
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COMPETITION
The biomedical industry is highly competitive and the Company's business and
research efforts compete with drug discovery programs at biotechnology companies
as well as with internal drug discovery efforts of pharmaceutical companies,
acting independently or in collaboration with other pharmaceutical or
biotechnology companies. Furthermore, academic institutions, government
agencies, and other public and private organizations conducting research may
seek patent protection, discover competing products, or establish collaborative
arrangements in the Company's area of research. The vast majority of the
Company's existing or potential competitors have substantially greater
financial, technical, and human resources and name recognition than the Company
and are better equipped to develop, manufacture, and market products. In
addition, many of these companies have extensive experience in preclinical
testing and human clinical trials. These companies may develop and introduce
products competitive with or superior to those of the Company. The timing of the
market introduction of competitors' products will be important competitive
factors. Accordingly, the relative speed with which the Company can develop
products, complete preclinical testing and clinical trials and the necessary
regulatory approval processes, and supply commercial quantities of the products
to the market will be critical to the Company's success. Once products have been
approved for sale, the Company believes that competition will be based, among
other things, on product efficacy, safety, reliability, price and patent
position. The Company's competitive position also depends upon its ability to
attract and retain qualified personnel to develop proprietary products or
processes and the degree of patent protection obtainable. The Company expects
competition to intensify in all fields in which it is involved as new products
in these areas are developed and become more widely known. Moreover, the patent
situation in this field is complex, and the protection afforded by patents in
any particular jurisdiction can be limited.
The Company cannot predict the extent to which any of the products in the course
of development may become commercially viable. However, Senetek expects that
Epinephrine by syringe delivery will be the first to reach the market and, on
the assumption that the Product License Approval is granted for the MSD product
within a reasonable time, it is hoped that subsequently this product may be
available for marketing in the UK early in 1998. In the case of MSD, certain
competing products have been or are being developed for the particular
application being undertaken by the Company, and in particular, two other US
companies - Pharmacia Upjohn and Vivus Inc. - have developed, and are marketing
internationally, products that compete directly with MSD. There are indications
that there should be a substantial potential demand for a product in this field
but there can be no assurance that the Company will be successful in penetrating
this potential market. With regard to the Syringe, there are already a number of
syringes on the market and there
5
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are two direct competitors whose products are being used extensively, mainly in
the US, but also in other areas. For regulatory approval purposes, syringes have
to be identified with the medical compound which they are designed to deliver.
In the opinion of the Company, based upon extensive UK clinical trials, its
Syringe (which utilizes a dental cartridge and a 29 gauge needle) for MSD
delivery is of an extremely high standard, is capable of competing successfully
with products currently on the market and is one which can, after instruction,
be utilized by the patient without medical supervision.
In the case of CII, bearing in mind that the vast health and beauty care market
is dominated by large multi-national organizations, who have far greater
resources and market exposure than the Company and CII, CII's non-animal tested
products are designed to address specific sectors selected from that market.
CII's products include the Mill Creek line, where the Kinetin compound is
featured, Sleepy Hollow Botanicals and Biotene H-24. The specialty mass market
lines are Silver Fox - a product for gray hair, the Allercreme range for
sensitive skins, often recommended by dermatologists, and DuBarry, which is a
long established cosmetic line. The Mill Creek range, including Kinetin, has
been launched as a next generation of skin care products, and is designed to
replace alpha hydroxy acid lines, marketed by other organizations, as a product
of choice. However, major companies may introduce competitive lines of similar
or superior quality and may be able to effect a greater marketing impact than
the Company can achieve.
GOVERNMENT REGULATION
The Company's research and development activities and future product
manufacturing and marketing activities are subject to extensive regulation for
safety and efficacy by numerous governmental authorities in the United States
and other countries. In the United States, drugs are subject to rigorous Food
and Drug Administration ("FDA") regulation. The Federal Food, Drug and Cosmetic
Act and the Public Health Service Act govern the testing, manufacture, safety,
efficacy, labeling, storage, record keeping, approval, advertising, and
promotion of the Company's products. Product development and approval within
this regulatory framework take a number of years and involve the expenditure of
substantial resources. Many products ultimately do not reach the market because
of toxicity or lack of effectiveness as demonstrated by required testing. In
addition, there can be no assurance that this regulatory framework will not
change or that additional regulation will not arise at any stage of the
Company's product development that may affect approval, delay an application, or
require additional expenditures by the Company. After approval is obtained,
failure to comply with present or future regulatory requirements, or new
information regarding the safety or effectiveness of an approved drug, can lead
to FDA withdrawal of approval to market the product.
6
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The steps required before a pharmaceutical product may be marketed in the United
States include (i) preclinical laboratory testing, (ii) submission to the FDA of
an Investigational New Drug ("IND") application, which must become effective
before human clinical trials may be commenced in the US, (iii) adequate and
well-controlled human clinical trials to establish the safety and efficacy of
the drug, (iv) submission of a New Drug Application ("NDA") to the FDA and (v)
FDA approval of the NDA prior to any commercial sale or shipment of the drug. To
date, the Company has submitted for IND status for its MSD product and an
Abbreviated New Drug Application ("ANDA") for Epinephrine.
Clinical testing of new compounds in humans is designed to establish both safety
and efficacy in treating a particular disease or condition. These studies are
usually conducted in three phases of testing. In Phase I, a small number of
volunteers are given the new compound in order to identify toxicities and
characterize the compound's behavior in humans. In Phase II, small numbers of
patients with the targeted disease are given the compound to test its efficacy
in treating the targeted disease and to establish effective dose levels. Phase
III studies are large-scale studies designed to confirm a compound's efficacy
for the targeted disease and identify toxicities that might not have been seen
in smaller studies. Once adequate data has been obtained in clinical testing to
demonstrate that the compound is both safe and effective for the intended use,
all available data will need to be submitted to the FDA as part of the NDA.
Review of this application by the FDA can cover an extended period.
Marketing of products outside of the United States requires regulatory approval
similar to that required in the United States. No action can be taken to market
any product in a country until an appropriate application has been approved by
the regulatory authorities in that country. The current approval process varies
from country to country, and the time spent in gaining approval varies from that
required for FDA approval. The Company believes that review of clinical studies
by regulatory agencies in other jurisdictions may not prove to be as lengthy a
process as in the United States and, accordingly, will first be seeking
regulatory approval within the UK, followed by an application for approval for
countries within the European Community.
In certain European countries, the sales price of a product must also be
approved. The pricing review period often begins after market approval is
granted. No assurance can be given that, even if a product is approved by a
regulatory authority, satisfactory prices will be approved for such product.
7
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Under current regulations, the market introduction of the majority of
non-medicated cosmetics and skin care products do not require prior formal
registration or approval by the FDA, although this could change in the future.
The Cosmetics Division of the FDA monitors matters of safety and adulteration.
Kinetin is a plant hormone and CII's initial product covers a skin care system
consisting of a cleanser, night cream and lotion. Management believes that the
ingredients are not harmful and on that basis the US government's only
requirement would be that no medical claims be made.
Import Restrictions and Duties
- ------------------------------
Because the Company may be importing certain of its initial products or product
ingredients into the United States, the Company could be subject to any quantity
limitations, duties and tariffs imposed by a country within which the products
are to be sold. The United States does not have quantity restrictions for goods
such as the Company's proposed products but does impose tariffs based on the
value of the products imported. Other countries may have different restrictions
and duties.
PATENTS
The Company believes that patents and other proprietary rights are an essential
element of its business and as part of its grant agreements with various
researchers, has received exclusive license rights to any commercially valuable
products developed by the contracted researchers within the scope of the
respective agreements in exchange for royalty entitlements. The Company's policy
is to file patent applications to protect inventions and improvements that are
considered important to the development of its business. Typically, patents
expire 19 years after the grant date. The Company also relies upon trade
secrets, know-how, continuing technological innovations and licensing
opportunities to develop and maintain its competitive position. The Company has
filed patent applications for its products in most major countries including
those that are signatories to the Patent Conference Treaty ("PCT"). Thus far,
the Syringe is patented in most PCT countries and in major areas in Asia and
South America, and additionally the Company has received patent approvals
covering its technology for the treatment of the effects of aging on skin in the
US, and for the treatment of psoriasis and other hyper-proliferative skin
diseases in the US, Canada and Australia, female sexual dysfunction in Australia
and Taiwan, and male sexual dysfunction in the US, Taiwan, Australia and certain
European territories.
Patent positions generally, including those for pharmaceutical and health
service organizations such as the Company, are uncertain and involve complex
legal and factual questions for which important legal principles are largely
unresolved. In addition, the coverage claimed in a patent application can be
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significantly reduced before a patent is issued. Consequently, the Company
cannot be sure that any patents that are or may be issued to it will provide
significant proprietary protection or will not be circumvented or invalidated.
Because patent applications in the United States are maintained in secrecy until
patents issue, and publication of discoveries in the scientific or patent
literature often lags behind actual discoveries, the Company cannot be certain
that it or any licensor was the first creator of inventions covered by pending
patent applications or that it or such licensor was the first to file patent
applications for such inventions. Moreover, the Company might have to
participate in interference proceedings declared by the U.S. Patent and
Trademark Office to determine priority of inventions, which could result in
substantial cost to the Company, whether or not the eventual outcome were
favorable to the Company. There can be no assurance that the Company's patents,
if issued, would be held valid by a court or that a competitor's technology or
product would be found to infringe such patents.
A number of pharmaceutical and health services companies and research and
academic institutions have developed technologies, filed patent applications, or
received patents in areas that may be related to the Company's business. Some of
these technologies, applications, or patents may conflict with the Company's
development efforts or patent applications.
CII has acquired the numerous trademarks formerly owned by Carme Inc. To the
best of CII's knowledge, there has been no indication to date that such
trademarks are invalid or are subject to challenge.
Typically, the Company requires its employees, consultants and sponsored
researchers to execute confidentiality agreements as part of their employment,
consulting or research arrangements with the Company. There can be no
assurances, however, that these agreements will produce meaningful or adequate
protection for the Company's trade secrets.
EMPLOYEES
As of December 31, 1996 Senetek, together with its two subsidiaries MEIS and
CII, employed 65 full-time employees; including 5 persons in the United Kingdom
of whom 4 are employed at the Company's scientific center at Kettering, and 4 in
the U.S., 1 of whom is the Chief Scientific Advisor. MEIS Corporation employed 4
persons in the U.S., of whom 3 concentrated on the scientific, engineering and
production aspects of the Company's syringe. CII has 52 employees covering the
production , marketing, advertising and distribution of CII's products, together
with a team covering the management and financial aspects of CII's business.
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ITEM 2 - PROPERTIES
- -------------------
The Company occupies office space at its registered office in London for the
Finance Director and Corporate Secretary and his financial and administrative
staff. These premises are held under a 3 year lease terminating in March 1999
and comprise 1,144 square feet at an annual rental of (pound)15,444 ($25,000).
In 1996, the Company also acquired additional UK premises at a Science Park at
Kettering, Northamptonshire, for its scientific activities, concentrating
initially on the development and approval procedures for the Company's MSD
product. These premises were acquired under a 15 year lease, terminable by the
Company after 5 years and subject to a rent free period of 6 months, in order to
provide accommodation for the Company's scientific staff and for the storage of
syringes and ampoules containing its MSD compound prior to delivery to
clinicians. The premises cover 2,595 square feet at an annual rental of
(pound)28,800 ($46,000). The acquisition of additional premises at the Science
Park is currently in the course of negotiation.
Through its subsidiary MEIS, the Company occupies 12,412 square feet of
manufacturing, warehousing, design and office space in Maryland Heights,
Missouri, for use by MEIS for the development and production of the Company's
syringe, pursuant to a lease terminating on May 31, 2000, at a rental of $81,545
per annum.
Through its subsidiary CII, the Company occupies 8,825 square feet of office
space, 10,800 square feet of production space and 25,950 square feet of
warehouse space in Novato, California, for the manufacture and marketing of
CII's cosmetic products, pursuant to two three-year leases at an annual rental
of $397,629 terminating in October and November 1998.
ITEM 3 - LEGAL PROCEEDINGS
- --------------------------
A former employee, Dr. Nicholas Coppard, filed suit for summary judgment in the
UK High Court alleging wrongful dismissal and a claim for royalty entitlements
relating to the Company's MSD product and the retention of his former option
entitlement. Judgment in favor of the Plaintiff was given in January 1997 on the
wrongful dismissal claim, but no figure representing alleged damages has yet
been quantified. The judgment is not expected to have a material adverse effect
on the Company's financial position, results of operations or liquidity. The
last two issues of the claim were deferred for a full High Court hearing at some
unspecified and probably extended period in the future. The Company strongly
contests these claims and has prepared a vigorous defense in the event that the
matters come to trial.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
Not applicable.
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PART II
ITEM 5 -MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
- ------------------------------------------------------------------------------
a) GENERAL DISCUSSION
Since November 1983, shares of the Company had been traded on the
over-the-counter market in the United Kingdom at an extremely
restricted level of activity. The Company was subsequently unable to
retain the services of a market maker and currently there is no
established public trading market for the Company's shares in the
United Kingdom. American Depositary Shares of the Company (representing
Ordinary Shares and evidenced by American Depositary Receipts) were
traded on the over-the-counter market in the United States from
November 1984 and have been traded through the Nasdaq Stock Market
system since the Company's public offering in the US in May 1986.
The following table sets out the range of high and low closing bid
prices for the Company's American Depositary Shares during each quarter
of the Company's two most recent fiscal years based upon the reports of
the Nasdaq Stock Market.
Fiscal Year Ended December 31, 1995
Quarter Ended: High Low
---- ---
March 31 $ 2.38 $ 1.53
June 30 2.22 1.88
September 30 2.28 1.31
December 31 1.78 1.06
Fiscal Year Ended December 31, 1996
Quarter Ended: High Low
---- ---
March 31 $ 2.41 1.72
June 30 2.16 1.56
September 30 1.81 1.19
December 31 1.91 1.19
As of February 28, 1997, there were approximately 1,618 holders of
record of the Company's Shares, including approximately 1,398 holders
of record of the American Depositary Shares.
The Company has not paid, nor does it presently contemplate the payment
of, any cash dividends on its Ordinary shares.
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The decision whether to pay, and the amount of such dividends, will be
based upon, among other things, the earnings, capital requirements and
financial condition of the Company. Any dividend by the Company, either
cash or stock, must be recommended by the Board of Directors and
approved by the Company's shareholders. The Board of Directors is,
however, empowered to declare interim dividends. Under the English
Companies Act of 1985, a limited company may not declare or pay cash
dividends while it has an accumulated deficit. The Company had an
accumulate deficit of $30,217,000 at December 31, 1996. Accordingly,
the Company will not be in a position to consider the question of
dividends until the accumulated deficit has been absorbed by profits or
by the application against the deficit with the approval of
stockholders and the UK Companies' Court, which forms part of the
Chancery Division of the High Court, of an equivalent figure forming
part of the Share Premium on the Company's Balance Sheet.
b) SALES OF UNREGISTERED SECURITIES
During the last quarter of 1996, the Company raised funds through the
following offerings under the terms and conditions of Regulation S of
the Securities Act of 1933:--
1. Date of Transaction
October 11, 1996
Securities Sold
$2,500,000 3 year Unsecured Debentures, convertible
into shares at the lower of (a) the average closing
bid price of the Company's ADR's for 5 days preceding
the closing date or (b) 70% of the average closing
bid price for the 5 days prior to conversion.
Names of subscribers
Lionhart Global Appreciation Fund
Nelson Fernandes
Rajan Bhasin
Names of warrantholders
GEM Ltd
Investment Perspectives Ltd
Cavendish Ltd
Settendown Capital Investments Ltd
2 Year Warrants to the total value of $2,700,000
entitling the holder to convert into shares of the
Company at a price of $1.70 per share.
2. Date of Transaction
December 5, 1996
Securities sold
1,185,185 5p Ordinary shares
Consideration received
$1,000,000
Name of subscriber and warrantholder
Brentwood Financial Limited
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$1,000,000 2 year Unsecured Debentures convertible
into shares at $0.84375 per share. 2 Year Warrants to
the value of $1,733,333 entitling the warrantholder
to convert into shares of the Company at a price of
$1.4625 per share.
Name of warrantholder
HIG Securities Investments Ltd
2 Year Warrants to the value of $1 00,000 entitling
the warrantholder to convert into shares of the
Company at a price of $1.125 per share.
(c) TAXATION
General
-------
The following is a summary of the principal U.S. federal and U.K. tax
consequences applicable to the ownership of Ordinary shares and
American Depositary Shares, by a beneficial holder that is a citizen or
resident of the United States, a corporation or partnership created or
organized under the laws of the United States or any state thereof or
that otherwise is subject to U.S. Federal income tax on a net income
basis in respect of the Ordinary shares or American Depositary Shares
(a "U.S. Holder"). This summary is not exhaustive of all possible tax
considerations, and U.S. Holders are advised to consult their own tax
advisers as to the overall tax consequences, including specifically the
consequences under state and local laws, of the purchase, ownership and
disposition of Ordinary shares or American Depositary Shares.
This summary does not address the U.K. tax consequences to a U.S.
Holder who is resident or (in the case of an individual) ordinarily
resident in the United Kingdom or who carries on business there through
a branch or agency. A disposition of Ordinary shares or American
Depositary Shares, by such a person may be subject to U.K. tax.
This summary also does not address the U.S. tax consequences to a U.S.
Holder (i) controlling, directly or indirectly, together with
associates, 10% or more of the voting shares of the Company, (ii) who
does not hold the Ordinary shares or American Depositary Shares as
capital assets, (iii) who does not use the U.S. dollar as the U.S.
Holder's functional currency or (iv) who holds the Ordinary shares or
American Depositary Shares as part of a larger integrated financial
transaction or straddle.
The statements regarding U.S. Federal and U.K. tax laws set out below
are based on those laws as in force on the date of this Form 10-K.
13
<PAGE>
For the purposes of the current U.S.U.K. double taxation conventions
(the "Income Tax Convention") and for the purposes of the U.S. Internal
Revenue Code of 1986, as amended (the "Code"), U.S. Holders of American
Depositary Shares will be treated as owners of the underlying Ordinary
shares.
Taxation of Dividends.
----------------------
No tax will be withheld from dividend payments by the Company, but the
Company is generally required, when paying a dividend in respect of its
Ordinary shares or American Depositary Shares, to account to the U.K.
Inland Revenue for advance corporation tax ("ACT") at the rate of one
quarter of the dividend (which is equivalent to 20% of the sum of the
cash dividend and the ACT). This rate is subject to change. An
individual shareholder resident in the United Kingdom is treated for
U.K. tax purposes as having taxable income equal to the sum of the
dividend plus a tax credit equal to 20% of the sum of the dividend plus
the tax credit (such aggregate sum being hereinafter referred to as the
"Gross Dividend"). The tax credit is available as a tax credit against
the individual's tax liability on the relevant dividend and may, in
appropriate cases, be refunded to such individual.
The Income Tax Convention provides that, in general, a U.S. resident
shareholder will normally be entitled to a repayment (the "ACT
Repayment") by the U.K. Inland Revenue of an amount equal to the tax
credit to which a U.K. resident shareholder is entitled, subject to the
deduction of an amount equal to 15% of the Gross Dividend. Thus, a
payment of a dividend of (pound)8.00 to a U.S. resident shareholder
would result in the shareholder becoming entitled to a net repayment of
50 pence, i.e., (pound)2.00 (25% of (pound)8.00) less a deduction of
(pound)1.50 (15% of (pound)10, being the sum of (pound)8.00 and
(pound)2.00).
In the event that the Company expects to make a dividend payment, it
intends to enter into arrangements with the U.K. Inland Revenue so
that, subject to certain exceptions, any ACT Repayment due in respect
of Shares in American Depositary Share form may be paid to a U.S.
resident holder of an American Depositary Share provided that the
holder completes the declaration of U.S. residency on the reverse of
the dividend check and presents the check for payment within three
months from the date of issue of the check. These arrangements are not
available, among other cases, where the beneficial owners of American
Depositary Shares are certain investment or holding companies or where
the American Depositary Shares comprise property subject to certain
estates or trusts. These arrangements can be terminated without notice
by the U.K. Inland Revenue.
14
<PAGE>
Shareholders not holding American Depositary Shares or not eligible for
the special arrangements described in the preceding paragraph wishing
to make a claim for ACT Repayment should obtain claim forms from the
Internal Revenue Service, Assistant Commissioner (International), 950
L'Enfant Plaza South, S.W., Washington, D.C., 29924, Attention:
Taxpayers' Services. The first claim by a shareholder should be sent
with the dividend counterfoils to the Director of the Internal Revenue
Service Center to which the shareholder's last U.S. Federal income tax
return was filed. The Service Center will then transmit the claim
directly to the U.K. Inland Revenue Financial Intermediaries and Claims
Office. Subsequent claims by the same shareholder should be filed
directly with the U.K. Inland Revenue Financial Intermediaries and
Claims Office, Fitz Roy House, P.O. Box 46, Nottingham NG2 1 BD,
England. Claims for an ACT Repayment must be made within six years of
the U.K. year of assessment (12 months ending on April 5 in each year)
in which the dividend is paid.
Because a claim is not considered made until the U.K. tax authorities
receive the appropriate form from the Internal Revenue Service, the
claim forms should be sent to the Internal Revenue Service well before
the end of the applicable limitations period.
The amount of any Gross Dividend paid to a holder who is a U.S. Holder
(i.e., (pound)10 in the above example) will be treated as dividend
income to such U.S. Holder for U.S. Federal income tax purposes to the
extent paid out of current or accumulated earnings and profits of the
Company, as determined under U.S. Federal income tax principles. Such
amount will not be eligible for the dividends received deduction
otherwise allowed to U.S. corporations. The amount included in income
with respect to a dividend on an Ordinary share or American Depositary
Shares will be the U.S. dollar value of the payment (determined at the
spot rate on the date of such payment) regardless of whether the
payment is in fact converted into U.S. dollars. Generally, any gain or
loss resulting from currency exchange fluctuation between the date of a
dividend payment and the date such payment is converted into U.S.
dollars will be U.S. source ordinary income or loss. Subject to certain
limitations, the 15% U.K. deduction from the Gross Dividend as
described above will be treated, for U.S. Federal income tax purpose,
as a foreign income tax eligible for credit against such holder's U.S.
Federal income tax.
The U.K. Treasury has power to deny the payment of ACT Repayments to
certain corporations if they or an associated company have a qualifying
presence in a state which operates a unitary system of corporate
taxation. Such provisions will only come into force if appropriate U.K.
statutory instruments are introduced. None have so far been
15
<PAGE>
introduced. However, it has been indicated that such provisions could
be introduced retrospectively, thus applying to dividends paid on or
before the date of implementation.
UK legislation provides that when paying a dividend a Company may elect
for it to be classified as a foreign income dividend ("FID") and in
such a case may obtain a repayment of ACT to the extent that the
dividend can be shown to have been paid out of foreign source profits.
It should be noted that the tax consequences of the payment of a FID
are different to those set out in this section, in particular that the
recipients of a FID are unable to claim a tax credit.
Taxation of Capital Gains
-------------------------
In general, holders of Ordinary shares or American Depositary Shares
who are U.S. Holders and who are not residents or ordinarily residents
in the United Kingdom will not normally be liable for U.K. taxation of
capital gains realized or accrued on the disposal of their Ordinary
shares or American Depositary Shares. However, for U.S. Federal income
tax purposes, gain or loss, if any, on the sale or other disposition of
Ordinary shares or American Depositary Shares by a U.S. Holder will
generally result in capital gain or loss to such U.S. Holder.
Generally, a U.S. Holder's capital gain or loss will be a long-term
capital gain or loss if the Ordinary shares or American Depositary
Shares have been held for more than one year. Capital gains realized or
accrued on the disposition of shares will be U.S. source gains for
purposes of the U.S. foreign tax credit limitation, while there is a
substantial risk that capital losses will be foreign source by
reference to the dividends received in respect of the Ordinary shares
and American Depositary Shares.
Estate and Gift Taxation
------------------------
The current Estate and Gift Tax Convention between the United States
and the United Kingdom generally relieves from U.K. inheritance tax
(generally the equivalent of U.S. Federal estate and gift tax) the
transfer of Ordinary shares or ADRs provided the shareholder making the
transfer is, for the purposes of the Convention, domiciled in the
United States and is not a national of the United Kingdom, and the
applicable U.S. tax is paid. A holder who is a U.S. citizen or is
domiciled in the United States will be subject to U.S. Federal estate
and gift tax on such a transfer.
16
<PAGE>
Inheritance Tax
---------------
An ADR held by an individual U.S. Holder who is domiciled in the United
States for the purposes of the Convention relating to estate and gift
taxes (the "Estate and Gift Tax Convention") and is not a national of
the United Kingdom for such purposes is not subject to U.K. Inheritance
Tax on the individual's death or on a gift made by the individual
during his lifetime except where the ADR is part of the business
property of a U.K. "permanent establishment" of the individual or
pertains to a U.K. "fixed base" of an individual used for the
performance of independent personal services. The Estate and Gift Tax
Convention generally provides for tax paid in the United Kingdom to be
credited against tax payable in the United States and for tax paid in
the United States to be credited against any tax payable in the United
Kingdom, based on priority rules set forth in that Convention in cases
where an ADR is subject both to U.K. Inheritance Tax and to U.S.
Federal gift or estate tax. There are special individual rules applying
to trusts. ADRs held in trust created by a U.S. holder will normally
fall outside the scope of U.K. Inheritance Tax.
U.K. Stamp Duty and Stamp Duty Reserve Tax
------------------------------------------
The statements below relate to what is understood to be the current
practice of the U.K. Inland Revenue under existing law.
Provided that the instrument of transfer of American Depositary Shares
is not executed in the United Kingdom and remains at all times outside
of the United Kingdom, no U.K. stamp duty is payable on the acquisition
or transfer of ADRs. Neither will an arrangement to transfer American
Depositary Shares in the form of ADRs give rise to a liability for
stamp duty reserve tax.
Purchase of Ordinary shares, as opposed to American Depositary Shares,
will normally give rise to a charge to U.K. stamp duty at the rate of
50 pence per (pound)100 (or part) of the price. An agreement to
transfer Ordinary shares gives rise to a charge to U.K. stamp duty
reserve tax at the rate of 0.5% of the price unless an instrument of
transfer is duly stamped under the stamp duty legislation. Stamp duty
reserve tax is generally the liability of the purchaser and stamp duty
is also usually paid by the purchaser. Where such Ordinary shares are
later transferred to the Depositary's nominee, further stamp duty will
normally be payable at the rate of (pound)1.50 per (pound)l00 (or part)
of the price paid for or the value of the Ordinary shares at the time
of the transfer. In accordance with the terms of the Deposit Agreement,
any tax or duty payable by the Depositary or the Custodian on deposits
of Ordinary shares will be charged by the Depositary to the party to
whom American Depositary Shares are delivered against such deposits. A
transfer of
17
<PAGE>
the underlying Ordinary shares to an American Depositary Share holder
upon cancellation of the American Depositary Shares without transfer of
beneficial ownership will give rise to U.K. stamp duty at the rate of
50 pence per transfer.
ITEM 6 - Selected Financial Data
- --------------------------------
The selected consolidated statement of operations data presented below for each
of the years in the 3 year period ended December 31, 1996 and the selected
consolidated balance sheet data as of December 31, 1995 and 1996, has been
derived from and should be read in conjunction with the financial statements of
the Company included in Part IV of this Report on Form 10K.
The selected consolidated statements of operations data for the years ended
December 31, 1992 and 1993 and the selected consolidated balance sheet data as
of December 31, 1992, 1993 and 1994 has been derived from the audited financial
statements contained in the Company's annual report to shareholders.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
($ in thousands, except per share data)
(unaudited)
1992 1993 1994 1995 1996
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
Revenues $ 10 508 212 1,956 6,486
Loss from Operations (2,362) (2,584) (3,476) (3,879) (4,066)
Net Loss (2,347) (2,338) (2,982) (3,721) (4,020)
======= ======= ======= ======= =======
Net Loss per Ordinary share
outstanding $ (0.12) (0.07) (0.08) (0.09) (0.10)
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
($ in thousands)
(unaudited)
1992 1993 1994 1995 1996
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Assets:
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 2,080 6,313 5,088 2,237 2,975
Government Bonds at Fair Value -- 4,220 3,128 -- --
Inventory at Cost -- -- 42 1,231 1,657
Trade Receivables and Other
Current Assets 53 157 401 959 997
---------- ---------- ---------- ---------- ----------
Total Current Assets 2,133 10,690 8,659 4,427 5,629
Property & Equipment net 39 393 749 1,087 1,182
Deferred Financing costs -- -- -- -- 902
Goodwill and Other Intangible
Assets net 603 476 349 2,391 2,128
Other Assets 4 4 4 -- --
---------- ---------- ---------- ---------- ----------
Total Assets 2,779 11,563 9,761 7,905 9,841
---------- ---------- ---------- ---------- ----------
Accumulated Deficit (20,876) (23,214) (26,196) (29,917) (33,897)
Stockholders' Equity $ 1,816 10,991 9,203 6,745 6,263
========== ========== ========== ========== ==========
</TABLE>
18
<PAGE>
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company received its initial funding from a public issuance of Ordinary
shares in the United Kingdom in November 1983. In May 1986, a public financing
was completed in the United States resulting in the issuance of 1,322,500 Units,
each consisting of one Ordinary share, one 'A' and one 'B' warrant for the
purchase of Ordinary shares. The expiry date of the "A" and "B" warrants has
been extended on a number of occasions and it is now proposed that the latest
date for conversion shall be not later than May 15, 1997. The Ordinary shares
were issued as American Depositary Shares, evidenced by American Depositary
Receipts, and together, with the 'A' and 'B' 'warrants are traded under the
Nasdaq Automated Quotations system. Since May 1986, the Company has relied on
private placements of Ordinary shares to add to its capital base.
The accounts of the Company set forth in Part IV of this Report have been
prepared in accordance with United States generally accepted accounting
principles (US GAAP). The Company's financial information included in this Form
10-K is presented in U.S. dollars.
MATERIAL CHANGES IN FINANCIAL CONDITION
During the year ended December 31, 1996, the Company's liquid position,
represented by cash and deposits at banks and liquid investments, increased by
$738,000 to $2,975,000. This increase is attributable to the excess of the net
proceeds of private placements amounting to $4,450,000, as discussed in
"Liquidity and Capital Resources" below, over the cost of the Company's
operational losses and the net movements in working capital.
RESULTS OF OPERATIONS
The Company's operations are carried out through research and development in the
life science and biotechnology fields ("pharmaceuticals") and, through its
wholly-owned subsidiary, CII, the manufacture and distribution of health and
beauty aids ("cosmetics"). CII commenced operations on September 26, 1995.
19
<PAGE>
1994 1995 1996
---- ---- ----
(in thousands of dollars)
Loss From Operations:
Pharmaceuticals:
Revenues 212 160 499
Gross Profit 201 35 317
Operating Expenses (3,677) (3,931) (4,427)
-------- ------- -------
Loss from Operations (3,476) (3,896) (4,110)
-------- ------- -------
Cosmetics:
Revenues -- 1,771 5,987
------- ------ ------
Gross Profit -- 704 2,530
Operating Expenses -- (712) (2,486)
------- ------- -------
Profit/(Loss) from Operations -- (8) 44
------- ------- ------
Total Loss from Operations (3,476) (3,904) (4,066)
-------- ------- -------
20
<PAGE>
1994 1995 1996
---- ---- ----
(in thousands of dollars)
Overall Loss Before Taxation:
Pharmaceuticals:
Loss from Operations (3,476) (3,896) (4,110)
Interest Income/(Expense) 534 419 (21)
Loss on Sale of Investments (40) (273) --
Other Income/(Expense) -- 25 (4)
(2,982) (3,725) (4,135)
------- ------- -------
Cosmetics:
Profit/(Loss) from Operations -- (8) 44
Other Income -- 12 74
Interest Expense -- (3)
------- ------- -------
Profit -- 4 115
------- ------- -------
Total Overall Loss Before Taxation (2,982) (3,721) (4,020)
------- ------- -------
The increase of $410,000 in the overall loss of the Company's pharmaceutical
division for 1996 compared with 1995 represents a net increase in operating
expenses of $495,000 as discussed in the following sub-sections and a reduction
of $440,000 in net interest income. These increases are offset by an increase in
net revenues of $282,000 and the non-recurrence of the loss on sale of
investments of $273,000.
21
<PAGE>
The increase of $743,000 in the overall loss of the Company's pharmaceutical
division for 1995 compared with 1994 represents a net increase in operating
expenses of $254,000 as discussed in the following sub-sections, a reduction in
net revenues of $166,000, a reduction of $115,000 in interest income and an
increase of $233,000 in the loss on the sale of investments. These increases are
partially offset by other income received of $25,000.
The profit of $115,000 in the cosmetics division in the twelve months to
December 31, 1996 is an increase of $111,000 over the results of the
newly-formed, wholly-owned subsidiary CII or the trading period September
26,1995 to December 31, 1995. The full year produced revenues of $5,987,000 and
an operating profit of $44,000, a $52,000 increase over the 3 month period in
1995. Other income increased by $62,000, mainly as a result of one-off royalties
and fees.
Revenues
- --------
The Company's product sales revenues of $6,486,000 for the year to December 31,
1996 comprised $84,000 from the sale of its pharmaceutical products, $415,000
representing the sale of monoclonal antibodies, and $5,987,000 from the sale of
health and cosmetic beauty aids by CII.
The Company's product sales revenues of $1,931,000 to December 31, 1995
comprised $160,000 from the sale of its pharmaceutical products, and sales for
three months from September 26, 1995 to December 31, 1995, of $1,771,000 from
the sale of health and cosmetic beauty aids following the Company's acquisition
of a majority of the assets of Carme Inc.
Research and Development
- ------------------------
Pharmaceutical Division
-----------------------
Research and development expenses in the year ended December 31, 1996 were
$2,040,000 compared with $1,900,000 and $1,626,000 in 1995 and 1994,
respectively.
The increase of $140,000 in 1996 compared with 1995 was primarily due to (i)
increases in the payments to research institutes carrying out clinical trials
and stability tests, and (ii) additional research costs relating to the
availability to the Company of the monoclonal antibodies referred to in
"Manufacturing and Marketing" above. The increase of $274,000 in 1995 compared
with 1994 was due to (i) increases in the payments to research institutes
carrying out clinical trials and stability tests, and the purchase of the
requisite materials relating to the MSD compound, and (ii) additional research
costs on the cellular aging project.
22
<PAGE>
Cosmetics Division
------------------
Research and development expenditure in the year ended December 31, 1996 was
$147,000 compared with $25,000 in 1995.
The increase is mainly represented by the expenditure covering the full 12
months in 1996 as opposed to a 3 months charge in 1995.
General and Administrative
- --------------------------
Pharmaceutical Division
-----------------------
General and administrative expenses totaled $1,627,000 for 1996, compared with
$1,275,000 and $1,383,000 for 1995 and 1994, respectively.
The increase of $352,000 in these costs for 1996 compared with 1995 is mainly
due to (i) an increase in legal and professional charges, (ii) an increase in
liability insurance charges and (iii) an increase in salaries, rent, travel,
utilities, and general overheads under this heading associated with an increase
in the numbers of the management team. These costs were partially offset by a
decrease in consultancy fees.
The decrease of $108,000 in these costs for 1995 compared with 1994 is mainly
due to (i) a reduction in legal and professional charges and (ii) savings in
patent charges relating to additional protection for the Company's auto-injector
syringe. These decreases were partially offset by an increase in the cost of
producing the Company's re-designed Annual Report and Accounts.
Cosmetics Division
------------------
General and administrative costs for the year ended December 31, 1996 were
$962,000 compared with $320,000 in 1995.
The increase is accounted for by the effect of a full 12 months charge for 1996
compared with 3 months in 1995, partially offset by a decrease in professional
fees.
Marketing and Promotion
- -----------------------
Pharmaceutical Division
-----------------------
Marketing and promotion expenses totaled $760,000 for 1996, compared with
$756,000 and $668,000 for 1995 and 1994, respectively.
23
<PAGE>
The net increase of $4,000 in these costs for 1996 compared with 1995 is mainly
due to a re-allocation of Directors and Officers costs, offset by a reduction in
consultancy fees in the area of investor relations, and in a non-recurring cost
for producing the Company's corporate brochure in 1995.
The increase of $88,000 in these costs for 1995 compared with 1994 is mainly due
to (i) the cost of producing the Company's Corporate Capabilities brochures,
(ii) additional consultancy services in the area of investor relations, and
(iii) a proportion of the salary costs and associated expenses allocated to this
heading of an Executive Vice President appointed in June 1994. These increases
are partially offset by (i) a reduction in the additional compensation to the
Company's then President and (ii) savings made upon the expiration of a
consultancy agreement in March 1995.
Cosmetics Division
------------------
The marketing and promotion expenses incurred by CII for the year ended December
31, 1996 were $459,000 compared with $91,000 in 1995. In 1995, the expenditure
covered the period from the commencement of trading on September 26, 1995 to
December 31,1995, compared with 1996 where the charges covered the full 12
months.
Selling Expenses
- ----------------
Cosmetics Division
------------------
Selling expenses incurred by CII during fiscal 1996 totaled $918,000 and
includes the allocation to this heading of CII's sales personnel, selling
commission paid to brokers together with the cost of overheads allocated to this
heading. The increase reflects a full charge for the 12 months to December 31,
1996 compared with $276,000 for the 3 month period to December 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased by $738,000 during 1996, from $2,237,000 to
$2,975,000. This increase is due to the excess of the proceeds of private
placements of shares and 8% convertible debentures, providing net receipts of
$4,450,000 over the costs attributable to the Company's operational losses for
the period, to capital expenditure and to net movements in working capital. To
date, the Company has realized only modest revenues from its operations and has,
in the past, had to depend upon raising equity funds from private placements.
The objective of the Company's major investment in CII was to facilitate the
development, manufacture and marketing of cosmetic compounds containing the
Company's Kinetin product together with the prospect, through the installation
of a new management team, of utilizing the assets and certain members of the
personnel of Carme Inc. for the purpose of making a positive contribution to the
Company's consolidated results. However, in the event of the
24
<PAGE>
use of Kinetin as a pharmaceutical product, considerable expenditure would have
to be committed to this project and the speed at which this work can be
undertaken will depend upon the Company's financial resources.
The Company's most significant revenue commitments are its research grant
agreements, consulting agreements, employment agreements and its property
leases. In addition, capital expenditure of approximately $2 million is
envisaged during 1997 in connection with the purchase of additional plant and
machinery in order to achieve capacity at a substantial level for the production
of the Company's syringe components.
The Company anticipates spending approximately $5 million through 1997 on the
development of its pharmaceutical products, including syringe applications, on
its administrative and marketing structure generally, and expenditure of up to
$1 million on an advertising campaign on behalf of CII. Although management
believes that revenues from CII's trading activities, the sale of monoclonal
antibodies, from Epinephrine, and from the sale of the Company's MSD product to
named patients will be generated, these will not be sufficient to address the
Company's projected financial requirements. The Company therefore is currently
planning to procure additional funds through financing arrangements that will
include the further issuance of new equity securities pending the generation of
a positive cash flow from revenues. In this connection, negotiations have
reached an advanced stage , and management believes that agreements may be
finalized in the near future. Additionally, certain of the holders of a
substantial number of warrants of the Company have notified their intention to
exercise their right to convert their warrants into shares upon payment to the
Company of the conversion price. Moreover, the Company is considering the grant
of licensing rights for certain of its products, and, if negotiated, any
resulting agreements could represent an additional source of funding - although
no assurance can be given that any such agreements will be concluded in fiscal
year 1997. In the meantime, the renewal of an unsecured bank loan facility of $1
million is in the course of negotiation and, if granted, may be utilized, but
only if this proves to be necessary. Although management believes that the
Company can adequately address its financial needs through 1997, no assurances
can be given that the Company will be successful in obtaining the necessary
revenues or capital funding.
Upon the acquisition of the assets of Carme Inc., the Company incurred the
obligation of including 3 prior years audited financial statements for that
Organisation when filing Form 8-K with the Securities and Exchange Commission
("SEC"). Carme Inc. was the subject of a Chapter 11 bankruptcy suit and as a
result of this, together with other administration problems, the parent company
of Carme Inc., International Research and Development Corporation, had been
unable to procure audited financial
25
<PAGE>
statements for the 3 years in question. Senetek having received a "no action"
letter from the SEC in connection with this omission, was subsequently able to
reach an agreement with the former auditors of Carme Inc. to undertake a special
project for the provision of audited financial statements, for the period from
January 1, 1995 to September 25, 1995. The effect of the non-availability of the
3 years' audited financial statements has been to preclude Senetek from
effecting registration statements under the Securities Act of 1933 covering a
public issuance of securities until the Company has filed audited financial
statements, incorporating CII, for a period of 3 years. A recent SEC release
indicated that some relaxation of the 3 year restricted period may be possible.
FUTURE PROSPECTS
The Company proposes to expedite the development and subsequent
commercialization of the MSD treatment either through its own resources or in
co-operation with one or more licensees. The Company is continuing to seek
agreements with parties who have expressed interest in acquiring licensing
rights for certain major territories and although negotiations regarding license
rights for certain geographical segments are in progress, there can be no
assurance that agreements on acceptable terms will ultimately be effected with
the parties concerned and at present, the Company is not party to any such
agreement.
The pre-marketing costs of these activities are likely to be of a substantial
nature. The Company's immediate objective is to achieve the successful
completion of Phase III clinical trials in the UK, leading to a Product License
Application in April 1997 and the subsequent granting of a Product License for
its MSD treatment product. Pending these developments, it is anticipated that
sales, which at present are restricted to clinicians for use on a
"named-patient" basis, will continue to increase although such income is
unlikely to make a material contribution to the Company's revenues in the
current fiscal year.
The Syringe has been fully developed and is available for commercialization and
for testing purposes as a delivery system for the MSD product. It is anticipated
that it may be possible to commence effecting sales of Epinephrine in
conjunction with the Syringe, dependent upon FDA approval, in the final quarter
of 1997.
With regard to the development and marketing of CII's Mill Creek line and its
potential associated products featuring Kinetin, the acquisition of CII has
provided the necessary production and marketing facilities for its incorporation
into cosmetic products which, it is anticipated, in conjunction with the
projected advertising campaign should commence to make a positive contribution
to the Company's revenue during the latter part of
26
<PAGE>
1997, although no assurance can be given as to the successful consummation of
this objective. Management believes that existing inventory levels will suffice
for the support of the expected increase in sales as a result of the advertising
campaign.
In the case of monoclonal antibodies derived from the Company's sponsored
research into Alzheimer's disease, and from other sources, sales to scientific
institutions are being achieved at an encouraging volume in 1997, and whilst the
amounts involved are unlikely to be substantial, it is anticipated that it
should be possible to achieve a flow of revenue at a reasonable level.
It is not practicable at the present time to indicate the probable future
operating results and equity capital requirements, but it is anticipated that
growing revenues may be generated by the Company during fiscal year 1997, and
subsequently, from the trading results of CII including sales of cosmetic
products which utilize the Kinetin compound, from monoclonal antibodies, from
sales of Epinephrine, and from sales or possible licensing of the Syringe.
However, no assurances can be given that this course of events will transpire.
GOVERNMENT POLICY
It is the opinion of the Board of Directors that there are no aspects of
Government policy which, as far as can be foreseen, are likely to have a
material effect on the conduct of the Company's business except as generally
described in Part 1, Item 1, of this Form 10-K under the heading "Government
Regulation".
IMPACT OF INFLATION
The Company believes that inflation has not made any material effect on the
results of its operations to date, and, as far as can be ascertained, will not
do so in the foreseeable future.
ITEM 8 - Financial Statements and Supplementary Data
- ----------------------------------------------------
See Item 14(a)(1) and 14(a)(2) of Part IV of this Report on Form 10-K.
ITEM 9 - Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
----------------------------------------------
None.
27
<PAGE>
PART III
Item 10 - Directors and Executive Officers of Registrant
- --------------------------------------------------------
The Company incorporates by reference the information regarding Directors and
Executive Officers set forth under the caption "Election of Directors" in the
Company's Proxy Statement ("the Proxy Statement") for its Annual Meeting of
Shareholders to be held on May 16, 1997 (to be filed with the Securities and
Exchange Commission ("the Commission").
In September 1996, Dr. Gerlof Homan, the Company's former Chairman, Chief
Executive Officer and Chief Scientific Officer, decided that it was no longer
practicable to undertake the responsibility for combining these three roles with
particular reference to allocating sufficient time for the requirements of the
investment community, and invited Mr. Anthony Cataldo to undertake the two first
mentioned positions. Mr. Cataldo was thereupon appointed as the Company's
Chairman and Chief Executive Officer and subsequently appointed his former
colleague Mr. Cliff Brune as the Company's Chief Financial Officer. In February,
1997, Mr. Steven Georgiev, a Director and Chief Executive Officer of Palomar
Medical Technologies Inc. of Beverly, Massachusetts, and a Director of other
publicly quoted companies, was appointed as a non-Executive Director of the
Company.
The following provides information with respect to employees who are not
Directors or Executive Officers of the Company but may be expected to make
significant contributions to the business of the Company:
Edward Curley, age 58, holds a Bachelor of Science degree in Mechanical
Engineering from the State University of New York. Before joining the Company in
December 1993, Mr. Curley had been Director of the Pharmaceutical Division of
Survival Technology Inc. ("STI") an organization concentrating on the
manufacture and world-wide sales of automatic injectors. In 1990, he became
Director of National Sales covering the marketing of STI's automatic injectors
for self-administration, and pre-filled syringes for clinical use. Mr. Curley
heads MEIS Corporation, which is Senetek's auto-injector division and also
undertakes responsibility for the marketing of monoclonal antibodies made
available to the Company from the Institute of Basic Research and Mental
Retardation and Developmental Disabilities.
Alan Hofstein, age 57, joined the Company in June 1994. He obtained a Bachelor
of Science degree in Mechanical Engineering at the New York University College
of Engineering, and an MBA at the City University of New York. Mr. Hofstein has
considerable experience in senior positions in manufacturing and marketing,
28
<PAGE>
including holding a number at President and Chief Executive Officer level. From
1991 until he joined the Company, Mr. Hofstein was President, Chief Executive
Officer and a Director of Rotoflex Inc., a rotary seal manufacturer for the
paper and chemical industries. Mr. Hofstein heads CII and will also be
concentrating on establishing distributor outlets for the Company's Mill Creek
range of cosmetic products featuring Kinetin.
Item 11 - Executive Compensation
- --------------------------------
The Company incorporates by reference the information set forth under the
caption "Executive Compensation" of the Proxy Statement.
Item 12 - Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
The Company incorporates by reference information set forth under the caption
"Securities Ownership of Certain Beneficial Owners and Management" of the Proxy
Statement.
Item 13 - Certain Relationships and Related Transactions
- --------------------------------------------------------
The Company incorporates by reference the information set forth under the
caption "Certain Transactions" of the Proxy Statement.
29
<PAGE>
PART IV
Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K
- -------------------------------------------------------------------------
(a)(1) The following consolidated financial statements are included in Item 8:
Page
Report of ndependent Accountants....................................F-1
Consolidated Balance Sheet as of December 31, 1995 and 1996............F-2
Consolidated Statement of Operations for the Years Ended:
December 31, 1994, 1995 and 1996.......................................F-3
Consolidated Statement of Stockholders' Equity (Deficit) for the
Years Ended: December 31, 1994, 1995 and 1996..........................F-4
Consolidated Statement of Cash Flows for the Years Ended:
December 31, 1994, 1995, and 1996......................................F-5
Notes to Consolidated Financial Statements.............................F-6
(a)(2) The following financial statement schedules are submitted herewith:
All Schedules are omitted because they are not required or the
information required is not applicable or not present in amounts
sufficient to require submission of the schedule or the required
information is shown in the financial statements or notes thereto.
(a)(3) The following Exhibits are filed or incorporated by reference as part of
this Report on Form 10-K;
3.1 Certificate of Incorporation of the Company dated October 5, 1983.
Filed as an Exhibit with corresponding Exhibit Number to Registrant's
Registration Statement on Form F-1, Registration No: 33-3535 and
incorporated herein by reference.
30
<PAGE>
3.2 Memorandum and Articles of Association of the Company (defining the
rights of security holders, subject to the provisions of the UK Companies
Act 1985).
Filed as an Exhibit with corresponding Exhibit Number to Registrant's
Registration Statement on Form F-1, Registration No: 33-3535 and
incorporated herein by reference.
10.3 Senetek No. 1 Share Option Scheme for Employees.
Filed as an Exhibit with corresponding Exhibit Number to Registrant's
Report on Form S-8 on October 8, 1993, Registration No. 33-70136 and
incorporated herein by reference.
10.4 Asset Purchase Agreement dated as of July 31, 1995, between Carme
International, Inc. a wholly-owned subsidiary of the Company and Carme
Inc.
Filed as an Exhibit on Form 8-K, dated October 10, 1995 (as amended) and
incorporated herein by reference.
10.18 Senetek No. 2 Executive Share Option Scheme for non-Executive Directors
and Consultants.
Filed as an Exhibit with corresponding Exhibit Number to Registrant's
Report on Form S-8 on October 8, 1993, Registration No. 33-70136 and
incorporated herein by reference.
10.29. Amended and restated Deposit Agreement dated November 6, 1992 between the
Company and The Bank of New York.
Form of such Agreement was filed as an Exhibit on Form F-6 with the
Securities and Exchange Commission on March 19, 1992, Registration No.
33-46638 and incorporated herein by reference.
10.32 Consulting Agreement dated May 1, 1994 between the Company and Dr. G.D.
Frentz.
Filed as an exhibit with corresponding Exhibit Number to Registrant's
annual Report on Form 10-K for the year ended December 31, 1994 and
incorporated herein by reference.
10.33 Service Agreement dated August 11, 1995 between the Company and Dr. G.
Homan.
Filed as an exhibit with corresponding Exhibit Number to Registrant's
annual Report on Form 10-K for the year ended December 31, 1995 and
incorporated herein by reference.
31
<PAGE>
An Agreement dated July 3, 1996 between the Company and Dr. G. Homan
supplemental to the Service Agreement dated August 11, 1995.
10.34 Service Agreement dated August 11, 1995 between the Company and Mr. P.A.
Logan.
Filed as an exhibit with corresponding Exhibit Number to Registrant's
annual Report on Form 10-K for the year ended December 31, 1995 and
incorporated herein by reference.
An Agreement dated July 3, 1996 between the Company and Mr. P.A. Logan
supplemental to the Service Agreement dated August 11, 1995.
10.35 Service Agreement dated September 1, 1996 between the Company and Mr.
A.J. Cataldo
10.36 Service Agreement dated October 1, 1996 between the Company and Mr. C. D.
Brune
21 Subsidiaries of the Company.
Filed as an exhibit with corresponding Exhibit Number to Registrant's
annual report on Form 10-K for the year ended December 31, 1995 and
incorporated herein by reference.
24 Power of Attorney
Reference is made to page 29 hereof.
(b) Reports on Form 8-K.
Since October 1, 1995 the Company has filed the following reports on Form
8-K, each of which relates to the acquisition of the assets of Carme,
Inc. by Carme International, Inc., a wholly owned subsidiary of the
Company:
Form 8-K filed on October 10,1995.
Form 8-K/A - Amendment No. 1 filed on November 22, 1995.
Form 8-K/A - Amendment No. 2 filed on March 1, 1996.
(c) Exhibits
The Company has filed as part of this Report on Form 10-K the exhibits in
Item 14(a)(3) as set forth above.
(d) Financial Statement Schedules
See Item 14(a)(2) of this Report on Form 10-K.
32
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
- ----------- -------
10.33 An Agreement dated July 3, 1996 between the Company and Dr. G.
Homan supplemental to the Service Agreement dated August 11, 1995
10.34 An Agreement dated July 3, 1996 between the Company and Mr. P.A.
Logan supplemental to the Service Agreement dated August 11, 1995
10.35 Service Agreement dated September 1, 1996 between the Company and
Mr. A.J. Cataldo
10.36 Service Agreement dated October 1, 1996 between the Company and
Mr. C. D. Brune
33
<PAGE>
S I G N A T U R E S
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SENETEK PLC
By: /S/ A.J. Cataldo
Anthony J. Cataldo
Chairman of the Board,
and Chief Executive Officer
Date: March 27, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/S/A.J. Cataldo Chairman of the Board, and Chief March 27, 1997
Anthony J. Cataldo Executive Officer
/S/P.A. Logan Company Secretary and Director March 27, 1997
P.A. Logan
/S/C.D. Brune Chief Financial Officer March 27, 1997
C. D. Brune
</TABLE>
34
<PAGE>
POWER OF ATTORNEY TO SIGN AMENDMENTS
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
does hereby constitute and appoint Anthony J. Cataldo and Paul A. Logan, and
each of them, with full power of substitute and full power to act without the
other, his true and lawful attorney-in-fact and agent to act for him in his name
place and stead, in any and all capacities to sign any or all amendments to this
Annual Report on Form 10-K and to file the same, with all exhibits hereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to all intents and purposes, as they or he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/S/A.J. Cataldo Chairman of the Board, and Chief March 27, 1997
(Anthony J. Cataldo) Executive Officer
/S/P.A. Logan Company Secretary, and Director March 27, 1997
(P.A. Logan)
/S/G.D. Frentz Director March 27, 1997
(G.D. Frentz)
/S/R.A. Oakes Director March 27, 1997
(R.A. Oakes)
/S/S. Georgiev Director March 27, 1997
(S. Georgiev)
</TABLE>
35
<PAGE>
Southwark Towers Telephone: 0171-939 3000
32 London Bridge Street Telex: 884657 PRIWAT G
London SEI 9SY Facsimile: 0171-378 0647
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Senetek Plc
We have audited the accompanying consolidated balance sheets of Senetek PLC and
its subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of operations and stockholders equity and of cash flows for each of
the three years in the period ended December 31, 1996. 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 auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about 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. We believe that our audits provide a reasonable basis for our
opinion.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has suffered recurring
losses from its pharmaceutical operations and, as described in Note 18, its
ability to continue research activities to a stage where it has a product able
to be commercialised is dependent upon securing additional sources of financing,
which raises substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to this matter are also described in
Note 18. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
In our opinion, the consolidated financial statements audited by us present
fairly, in all material respects, the financial position of Senetek PLC and its
subsidiaries at December 31, 1996 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1996, in conformity with accounting principles generally accepted in the
United States.
PRICE WATERHOUSE
32 London Bridge Street
LONDON SE1 9SY
England 27 March 1997
F-1
<PAGE>
<TABLE>
<CAPTION>
SENETEK PLC
CONSOLIDATED BALANCE SHEET
December 31,
------------
1995 1996
---- ----
(in $ thousands,
except share amounts)
<S> <C> <C>
Assets
Current Assets:
Cash and Cash Equivalents $ 2,237 $ 2,975
Inventory 1,231 1,657
Trade Receivables 800 771
(net of provisions of $78,000 in 1995 & $31,000 in 1996)
Non-trade Receivables 41 88
Prepaids and Deposits 118 138
------------- -------------
Total Current Assets 4,427 5,629
Property and Equipment, net 1,087 1,182
Goodwill and Other Intangible Assets - net 2,391 2,128
Deferred Financing Costs -- 902
------------- -------------
Total Assets 7,905 9,841
============= =============
Liabilities & Stockholders' Equity
Current Liabilities
Bank Overdraft -- 230
Accounts Payable 955 1,236
Accrued Liabilities 205 412
8% Convertible Debentures 1999 -- 1,700
------------- -------------
1,160 3,578
============= =============
Commitments and Contingencies (Note 17) -- --
Stockholders' Equity
Ordinary Shares
Authorized Shares: 58,000,000,
$0.08 (5 pence) par value:
Issued and Outstanding Shares: 43,899,205
(1995: 40,606,123) 3,266 3,533
Share Premium 33,310 36,607
Accumulated Deficit (29,917) (33,937)
Equity Adjustment from Foreign Currency Translation 86 60
Total Stockholders' Equity 6,745 6,263
============= =============
Total Liabilities and Stockholders' Equity $ 7,905 $ 9,841
------------ -------------
See accompanying notes to consolidated financial statements.
</TABLE>
F-2
<PAGE>
<TABLE>
<CAPTION>
SENETEK PLC
CONSOLIDATED STATEMENT OF OPERATIONS
Years Ended December 31,
------------------------
1994 1995 1996
---- ---- ----
(in $ thousands,
except for per share data)
<S> <C> <C> <C>
Revenues:
Product Sales $ 192 1,931 6,486
Development Stage Payments 20 -- --
---- ------ ------
Total Revenues 212 1,931 6,486
Cost of Sales:
Product (11) (1,192) (3,640)
Gross Profit 201 739 2,846
Operating Expenses:
Research & Development (1,626) (1,925) (2,187)
General & Administrative (1,383) (1,595) (2,588)
Marketing & Promotion (668) (847) (1,219)
Selling Expenses -- (276) (918)
------ ------ ------
Total Operating Expenses (3,677) (4,643) (6,912)
Loss From Operations (3,476) (3,904) (4,066)
Interest Income 534 419 34
Other Income -- 37 69
Loss on Sale of Investments (40) (273) --
Interest Expense --- -- (57)
---- ---- --
Loss Before Taxation (2,982) (3,721) (4,020)
Taxation -- -- --
------ ------ ------
Net Loss $ (2,982) (3,721) (4,020)
====== ====== ======
Net Loss per Ordinary Share Outstanding $ (0.08) (0.09) (0.10)
------ ------- -------
Weighted Average Ordinary Shares Outstanding 39,062 40,490 41,235
------ ------ ------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
SENETEK PLC
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
For The Years Ended December 31, 1994, 1995, and 1996
Accumulated
Shares Amount Share Premium Deficit
<S> <C> <C> <C> <C>
Balances, December 31, 1993: 38,677,198 3,124 31,344 (23,214)
Shares subscribed for but awaiting (10) (10)
issue
Issuance of Ordinary shares in 300,000 24 345
Private Placement
Warrant conversions 328,925 24 448
Options exercised 600,000 48 402
Net Loss (2,982)
Translation adjustment:
Unrealized holding (loss) on
investments available for sale
---------- ---------- ---------- -----------
Balances, December 31, 1994: 39,906,123 3,210 32,539 (26,196)
Issuance of Ordinary Shares in 700,000 56 771 --
Private Placements
Net Loss -- -- -- (3,721)
Translation Adjustment: -- -- -- --
Transfer of unrealized holding loss
on sale of short-term investments
---------- ---------- ---------- -----------
Balances, December 31, 1995: 40,606,123 3,266 33,310 (29,917)
Issuance of Ordinary Shares in 1,000,000 78 972
Private Placements
Conversion of Debentures 2,093,000 172 604
Options Exercised 200,000 17 133
Warrants Issued in Connection With
Convertible Debentures -- -- 1,588
Net Loss (4,020)
Translation Adjustment
---------- ---------- ---------- -----------
Balances, December 31, 1996 43,899,205 3,533 36,607 (33,937)
---------- ---------- ---------- -----------
<CAPTION>
Equity
Adjustment From Net
Unrealized Gains Foreign Currency Stockholders'
(Losses) Translation Equity
<S> <C> <C> <C>
Balances, December 31, 1993: (263) 10,991
Shares subscribed for but awaiting
issue
Issuance of Ordinary shares in 369
Private Placement
Warrant conversions 472
Options exercised 450
Net Loss (2,982)
Translation adjustment: 382 382
Unrealized holding (loss) on
investments available for sale (469) (469)
---------- ---------- ----------
Balances, December 31, 1994: (469) 119 9,203
Issuance of Ordinary Shares in -- -- 827
Private Placements
Net Loss -- -- (3,721)
Translation Adjustment: -- (33) (33)
Transfer of unrealized holding loss
on sale of short-term investments 469 469
---------- ---------- ----------
Balances, December 31, 1995: -- 86 6,745
Issuance of Ordinary Shares in 1,050
Private Placements
Conversion of Debentures 776
Options Exercised 150
Warrants Issued in Connection With
Convertible Debentures 1,588
Net Loss (4,020)
Translation Adjustment (26) (26)
---------- ---------- ----------
Balances, December 31, 1996 -- 60 6,263
---------- ---------- ----------
See accompanying notes to consolidated financial statements.
</TABLE>
F-4
<PAGE>
<TABLE>
SENETEK PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
Years Ended December 31,
1994 1995 1996
---- ---- ----
(in $ thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net Loss (2,982) (3,721 ) (4,020)
Adjustments to reconcile net
Loss to net cash:
Depreciation and amortization 175 260 450
Write-off of assets -- -- 31
Gain/Loss on Sale of Equipment -- (5) --
Loss on sale of investments 40 273 --
Changes in Assets and Liabilities:
Trade Receivables (increase)/ decrease (153) (114) 25
Non-trade Receivables
(increase)/decrease (57) 88 (47)
Inventory increase (42) (97) (432)
Prepaids and deposits increase (31) (46) (21)
Accounts payable and accrued liabilities
increase/(decrease) (18) 597 420
Other Assets decrease -- 4 --
Net Cash Used By Operating Activities (3,068) (2,761) (3,594)
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of Property and Equipment (400) (218) ( 318)
Purchase of Certain Assets of Carme Inc. -- (4,002) --
Purchase of Short-term Investments (92) (54) --
Proceeds from sale of short-term investments
800 3,378 -
Proceeds from disposals of Property & Equipment
-- 5 4
------- ------- -------
Net Cash Used By Investing Activities 308 (891) (314)
------- ------- -------
</TABLE>
F-5
<PAGE>
SENETEK PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
Years Ended December 31,
1994 1995 1996
---- ---- ----
(in $ thousands)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds of Issuance of Ordinary
Shares and Class A Warrants 1,282 827 1,200
Issue of 8% Convertible Debentures -- -- 3,500
Costs of Financing -- -- (250)
Short term loans and overdrafts -- -- 230
----- ----- -----
Net Cash Provided By Financing Activities 1,282 827 4,680
----- ----- -----
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (1,478) (2,825) 772
Cash and Cash Equivalents at
the Beginning of Period 6,313 5,088 2,237
----- ----- -----
Effect of Exchange Rate Changes on Cash 253 (26) (34)
Cash and Cash Equivalents at the
End of Period $5,088 2,237 2,975
====== ===== =====
Supplemental disclosures of cash flow information are as follows:
Amounts
Paid
(in $
thousands)
1994 1995 1996
---- ---- ----
Interest $ -- -- 57
Income Taxes $ -- -- --
See accompanying notes to consolidated financial statements.
F-5(ii)
<PAGE>
SENETEK PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACTIVITIES
The Company was incorporated in England on October 5, 1983, as a public
company with limited liability under the Companies Acts of 1948 to 1985 to
exploit commercially the products which may arise as a result of Company
sponsored research in the fields of life science and biotechnology with
particular reference to the diagnoses and treatment of diseases relating to
senescence or aging.
Since incorporation, the Company has concentrated on its research and
development activities together with the concomitant requirement of
procuring the necessary supportive equity financing.
In September 1995, the Company extended its range of interests by
acquiring, through its newly formed subsidiary Carme International, Inc.
("CII"), a Delaware Corporation, the majority of the assets of Carme Inc.,
an organization based in Novato, California that had concentrated on the
manufacture and distribution of health and beauty products. This
acquisition was designed to extend the Company's interest in the area of
skin-care and to provide a vehicle for the development and distribution of
a product featuring the Kinetin compound (formerly referred to as Factor X
or Vivakin) in a cosmetic format. CII is currently extending the
manufacturing capacity at the existing premises and revising marketing
strategy and procedures. It plans to achieve the commercialization of
additional products incorporating Kinetin at the earliest practicable date.
2. PRINCIPAL ACCOUNTING POLICIES
(a) Basis of Consolidation
The consolidated financial statements incorporate the accounts of
Senetek PLC and its wholly owned subsidiaries, CII and MEIS
Corporation for the year ended December 31, 1996. All significant
intercompany balances and transactions have been eliminated in
consolidation. The accounts have been prepared in accordance with US
generally accepted accounting principles (US GAAP). Certain prior year
balances have been re-classified in order to conform to current year
presentation.
(b) Revenues
Product sales, recognized at the time of shipment (or time of
rendering in the case of services) are stated at the net invoiced
value of goods and services supplied to customers after deduction of
value added tax where applicable. Development stage payment revenues
recognized represent initial payments received under licensing
agreements. Future development stage revenues will be recognized upon
the receipt of initial payments and subsequently upon the achievement
of agreed significant development milestones.
(c) Inventories
Inventories, constituting finished goods, components, raw materials
and work-in-progress are stated at the lower of cost or market value.
Cost is determined using the first in first out method.
(d) Property and Equipment
Property and equipment are stated at cost. Depreciation is calculated
on a straight line basis using the following estimated useful lives:
Fixtures, fittings & equipment 5 years
Motor vehicles 4 years
F-6
<PAGE>
(e) Intangible Assets
Intangible Assets representing Patents and Proprietary Technology are
stated at cost. Amortization is calculated on a straight line basis
over an estimated useful life of 5 years.
Goodwill is being amortized on the straight line method over 15 years.
Goodwill included in the consolidated financial statements relates to
the Company's acquisition on September 26, 1995 of certain assets of
Carme Inc.
In accordance with Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long
Lived Assets to Be Disposed Of", the Company reviews the carrying
value of its investments for impairment value whenever events or
changes in circumstances indicate that the carrying amount of assets
may not be recoverable. The Company considers various valuation
factors including discounted cash flows, fair values, and replacement
costs to assess any impairment of goodwill and other long lived
assets.
(f) Research and Development
Expenditures on research and development are written off as incurred.
(g) Foreign Exchange
The Company follows currency translation principles established by
Statement of Financial Accounting Standards No. 52. All assets and
liabilities in the balance sheets of foreign branches and subsidiaries
whose functional currency is other than U.S. dollars are translated at
period-end exchange rates. Translation gains and losses arising from
the translation of the financial statements of foreign branches and
subsidiaries whose functional currency is other than the U.S. dollar
are not included in determining net income but are accumulated in a
separate component of stockholders' equity. The functional currency of
the Company's foreign operation is the applicable local currency.
Foreign currency transaction gains and losses are included in the
determination of net income in the period in which they occur.
(h) Calculation of the Number of Shares in Issue
The loss per share for all periods presented is calculated on the
basis of the weighted average of the number of shares in issue during
each period.
(i) Net Loss Per Share
The per share calculations include fully paid up Ordinary shares and
exclude Ordinary share equivalents because inclusion would be
anti-dilutive.
(j) Statement of Cash Flows
For the purposes of the statement of cash flows, the Company considers
all highly liquid debt instruments purchased with an original maturity
of three months or less to be cash equivalents.
(k) Financial Instruments
The carrying value of the Company's financial instruments, being
current assets and current liabilities approximate fair value due to
the short term value of these items. Fair value is the amount at which
the instrument could be exchanged in a current transaction between
willing parties, other than in a forced sale of liquidation.
F-7
<PAGE>
3. ACQUISITION OF THE ASSETS OF CARME INC.
On June 21, 1995 the Company incorporated a new, wholly owned subsidiary,
CII, a Delaware corporation. On September 26, 1995, CII acquired certain
assets of Carme Inc., a Nevada corporation ("Carme") in an arm's length
transaction pursuant to the terms and provisions of an Asset Purchase
Agreement dated as of July 31, 1995 ("the Agreement") by and between Carme
and CII. The purchase price for the assets including expenses was
$3,952,000 in cash and the assumption of certain liabilities including the
liabilities and obligations of Carme arising under the Contracts (as
defined in the Agreement) and all obligations whether arising by contract,
course of dealings or otherwise, to customers of the business with respect
to the return of Products (as defined in the Agreement) or credits for
unsold merchandise.
The funds used for the acquisition were obtained from the liquid resources
of the Company and no bank or other loans have been used for this
transaction. The principles involved in determining the valuation followed
an assessment of the fair value of the assets as a result of research and
inquiry by the Company.
The consummation of the proposed transaction pursuant to the terms of the
Agreement were subject to the approval of the US Bankruptcy Court for the
District of Delaware and such approval was obtained on August 25, 1995.
The business of Carme was the manufacturing and selling of health and
beauty aids. The assets acquired from Carme include all the assets of the
business of Carme (not expressly excluded under the terms of the
Agreement), including the inventory for a provisional figure of $1,042,000;
the accounts receivable for $488,000 and the plant, machinery and equipment
used for the business for $220,000. This allocation of the purchase price
has resulted in goodwill of $2,202,000 and tangible assets of a fixed
nature represented by property and equipment of $220,000. The goodwill is
being amortized over 15 years and the tangible assets in question over 5
years, both under a straight line basis.
CII intends to continue to utilize these assets to continue the manufacture
and distribution of health and beauty aids.
4. INVENTORY
Inventory at cost comprises the following:
December 31, 1995 December 31, 1996
----------------- -----------------
(in $ thousands)
Finished Goods 635 879
Raw Materials 552 776
Work in Progress 44 2
------ ------
$1,231 1,657
------ ------
F-8
<PAGE>
5. PROPERTY AND EQUIPMENT
Property and equipment is summarized as follows:
December 31, 1995 December 31, 1996
----------------- -----------------
(in $ thousands)
Cost:
Fixtures, fittings, plant and
laboratory equipment $ 877 1,309
Motor vehicles 77 106
Assets in the course of
construction 462 284
------ ------
1,416 1,699
------ ------
Less accumulated depreciation:
Fixtures, fittings, plant and
laboratory equipment (301) (469)
Motor vehicles (28) (48)
------ ------
(329) (517)
------ ------
$1,087 1,182
------ ------
Changes during 1995 and 1996 include the effects of foreign currency
translations.
NOTES:
1. Depreciation charged during the year amounted to $187,000 (1995:
$100,000)
2. The tangible fixed assets of the Group include plant and laboratory
equipment owned under Capital leases as follows:
Cost $ -- 26
Depreciation -- (1)
----------- -----------
Net book value $ -- 25
----------- -----------
F-9
<PAGE>
6. GOODWILL AND OTHER INTANGIBLE ASSETS
The amount in the Company's Balance Sheet represented by these intangible
assets is made up as follows:
December 31, 1995 December 31, 1996
----------------- -----------------
(in $ thousands)
Goodwill:
Cost 2,202 2,202
Amortization (33) (169)
------ ------
Net 2,169 2,033
------ ------
Other Intangible Assets:
Cost 635 635
Amortization (413) (540)
------ ------
Net $ 222 $ 95
------ ------
Totals $2,391 $2,128
------ ------
In October 1992, the Company acquired from the inventor, the patent rights
and related proprietary technology for a self-administered auto-injector
syringe. It is anticipated that initially this will be used as the delivery
system for the Company's IVISD compound. The total consideration for these
intangible assets was $635,000. Future royalties will become payable by the
Company to the inventor based on the number of syringes sold.
7. GOVERNMENT BONDS
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standard (FAS) No. 115 "Accounting for Certain Investments in
Debt and Equity Securities". Application of FAS 115 resulted in the
Company's investments in marketable debt securities being classified as
"available for sale".
During the year ended December 31, 1995 the Company disposed of its entire
holdings in securities available for sale. This generated proceeds of
$3,378,000 and created a loss of $273,000. This loss is reported as an
operating expense in accordance with FAS 115.
F-10
<PAGE>
8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities comprise the following:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1996
Accrued Accounts Accrued Accounts
Liabilities Payable Liabilities Payable
----------------- ---------------- ----------------- ----------------
(in $ thousands)
<S> <C> <C> <C> <C>
Trade Creditors -- 413 -- 495
Directors' Fees and Remuneration -- 3 -- --
Staff Salaries 50 4 60 8
Vacation Pay Accrual 29 -- 71 --
Taxes and Social Security -- 26 -- 28
Audit and Accountancy Fees 108 19 107 18
Research Grants and Costs -- 324 -- 368
Approved Travel and Accommodation
Expenses -- 10 -- 15
Legal and Professional Fees 18 1 20 52
Consultancy Fees -- 37 15 15
Other Liabilities and Accruals -- 118 39 237
Accrued Financing Costs on Issue of
Convertible Debentures -- -- 100 --
---- ---- ---- -----
$ 205 955 412 1,236
---- ---- ---- -----
Obligations under capital leases
1995 1996
$000 $000
---- ----
Amounts payable (within one year $9,000; within two to three years $9,000,
within three to four years $9,000; within four to five years $5,000) $ -- 32
Less Future Financing Charges -- (9)
------- ----
-- 23
Due within one year -- 5
Due after more than one year $ -- 18
------- ---
</TABLE>
9. 8% CONVERTIBLE DEBENTURES
These debentures have 2 and 3 year terms expiring in September 1998 and
October 1999 respectively and have been issued to private investors. During
the year debentures to the value of $3,500,000 were issued, of which
$1,800,000 were converted to Ordinary share capital, and $1,700,000 was
outstanding at year end. Another $1,100,000 was redeemed and converted into
Ordinary shares in January 1997. The Company promises to pay to the
debenture holder, or any subsequent registered holder the principal sum on
or prior to October 1999, the maturity date, and to pay interest on the
principal sum outstanding in arrears on the earlier of the Date of the
Conversion or the Maturity Date at the rate of 8% per annum. The principal
and interest on the Debenture are payable, if converted, at eight per cent
(8%) per annum in shares of ADR to the holder. Warrants with a fair value
of $1,588,000 were issued to various intermediaries in connection with this
issue. These have been treated as an addition to deferred financing costs
and are amortized to the income statement over the life of the debentures.
Upon the date of conversion the carrying value of the debentures is
released to share premium together with any related unamortized deferred
financing costs.
F-11
<PAGE>
10. STOCKHOLDERS' EQUITY
(a) During the year ended December 31, 1996, the outstanding share capital
of the Company increased by 3,293,082 to 43,899,205 Ordinary shares.
(b) Warrants outstanding at December 31, 1996 are as follows:
(1) 1,037,591 'A' Warrants at an exercise price of $2.50 per Ordinary
share, expiring May 15, 1990. The Board of Directors has approved
the extension of the expiry date of the 'A' Warrants to May 15,
1997. The Company has the right to call the warrants, at a price
of $0.01 per warrant, upon giving the holder 30 days notice of
its intention.
(2) 1,322,500 'B' warrants at an exercise price of $3.25 per Ordinary
share, expiring May 15, 1990. The Board of Directors has approved
the extension of the expiry date of the 'B' warrants to May 15,
1997. The Company has the right to call the warrants, at a price
of $0.01 per warrant, upon giving the holder 30 days notice of
its intention.
(3) The following warrants, mainly issued in association with private
placements, remain unexercised as follows:
<TABLE>
<CAPTION>
Warrants
Lapsed/ Unexercised at
Warrants Issued Exercise Price Expiry Date Canceled December 31, 1996
--------------- -------------- ----------- -------- -----------------
<S> <C> <C> <C> <C> <C>
175,000 0.75 December 1996 175,000 --
633,000 3.00 May 1997 40,000
1,215,920 3.00 June 1997 12,500 818,420
1,036,517 3.00 July 1997 946,342
25,000 1.15625 December 1999 25,000
1,285,000 1.4625 December 1998 1,285,185
--------- ------- ---------
4,370,437 187,500 3,114,947
--------- ------- ---------
</TABLE>
(4) The following Regulation S Convertible Warrants, issued in association
with the placement of Convertible Debentures, remain unexercised as
follows:
Warrants Exercise Warrants
Issued Price Expiry Date Unexercised
--------- --------- ----------- -----------
2,700,000 $1.70 10/10/99 2,700,000
The Warrants entitle the holder thereof to purchase American
Depositary Receipts ("ADR") of the Company at a purchase price per ADR
equal to 115% of the average closing bid price of the Company's ADR
for the five (5) days preceding the Closing Date, such Warrants to be
exercisable at any time on or after the 90th day from the Closing Date
until October 1999. The offer and the sale of the Warrants is being
made in compliance with and in reliance upon the provision of
Regulation S under the United States Securities Act of 1933, as
amended.
11. STOCK OPTIONS
(a) On October 8, 1993, 4,550,000 options, representing the total number
of options available for grant at that time were registered with the
Securities & Exchange Commission on Form S-8.
In December 1985, the Company adopted a share option plan (the "No. 1
Plan") for employees. Under the Plan, options to purchase Ordinary
shares are granted by the Board of Directors, subject to the exercise
price of the option being not less than the market value of an
Ordinary share twenty-one days prior to the grant date. After the
first twelve months following the date of the grant, options are
exercisable at the rate of 25 per cent, for each full year of
employment. In the event the optionee's employment is terminated, the
option may not be exercised unless the Board of Directors so permits.
The options expire seven years from the date of the grant.
F-12
<PAGE>
The following table summarizes option transactions under the No. 1
Plan for the three years ended December 31, 1996:
<TABLE>
<CAPTION>
Shares
Available Options Options Exercise Price
For Grant Outstanding Vested Per Share
---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C>
Balance at December 31, 1993 1,318,000 682,000 431,000 $0.75-3.19
Canceled 10,000 (10,000) $ 3.19
Exercised 250,000 (250,000) (250,000) $ 0.75
Granted (330,000) 330,000 $ 2.00
Options Vested -- -- 105,500 $ 0.75
---------- ---------- ---------- ---------------
Balance at December 31, 1994 1,248,000 752,000 286,500 $0.75-2.00
Canceled 120,000 (120,000) (12,500) $0.75-2.00
Granted (477,000) 477,000 $1.32-2.00
Options Vested -- -- 170,500 $0.75-2.00
---------- ---------- ---------- ---------------
Balance at December 31, 1995 891,000 1,109,000 444,500 $0.75-2.00
Exercised 200,000 (200,000) (200,000) $ 1.75
Granted (1,436,000) 1,436,000 -- $1.25-4.00
Options Vested -- -- 201,750 $0.75-2.00
---------- ---------- ---------- ---------------
Balance at December 31, 1996 * (345,000) 2,345,000 446,250 $0.75-4.00
---------- ---------- ---------- ---------------
</TABLE>
*The above figure represents options granted under the No. 1 Plan in
excess of the total of 2 million, being the number of options
available for grant under the Plan, as approved at the Annual Meeting
of Stockholders on December 16, 1992, and is provisional upon the
retrospective approval by stockholders of Resolution 11 at the Annual
Meeting to be held on May 16, 1997.
Not included in the above are 350,000 and 150,000 options granted to
Dr. G. Homan and P.A. Logan respectively, at an exercise price of
$0.75, under the general power granted to Directors for the allotment
of equity securities approved at an Extraordinary General Meeting of
the Company held on March 6, 1991.
(b) In May 1987 the Company adopted a share option plan ("the No. 2 Plan")
for non-executive directors and consultants. Under the No. 2 Plan,
options to purchase Ordinary shares are granted by the Board of
Directors, subject to the exercise price being not less than the
market value of an Ordinary share 21 days prior to the grant date.
Options granted under this plan are exercisable in their entirety one
year after the date of grant. In the event the optionee ceases to be a
non-executive Director or consultant, the option may not be exercised
unless the Board of Directors so permits. The options expire seven
years from the date of grant.
F-13
<PAGE>
The following table summarizes option transactions under the No. 2
Plan for the three years ended December 31, 1996:
<TABLE>
<CAPTION>
Shares
Available Options Options Price
For Grant Outstanding Vested Per Share
---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C>
Balance at December 31, 1993 1,424,000 576,000 510,000 $0.75-3.00
Granted (85,000) 85,000 -- $2.00
Cancelled 50,000 (50,000) (50,000) $2.00
Exercised 300,000 (300,000) (300,000) $0.75
Options Vested -- -- 66,000 $2.00
---------- ---------- ---------- ---------------
Balance at December 31, 1994 1,689,000 311,000 226,000 $0.75-3.00
Cancelled 110,000 (110,000) (110,000) $2.00-3.00
Granted (19,000) 19,000 -- $1.75
Options Vested -- -- 85,000 $2.00
---------- ---------- ---------- ---------------
Balance at December 31, 1995 1,780,000 220,000 201,000 $0.75-2.00
Granted (7,500) 7,500 $1.21
Options Vested -- -- 19,000 $1.75
---------- ---------- ---------- ---------------
Balance at December 31, 1996 1,772,500 227,500 220,000 $0.75-2.00
---------- ---------- ---------- ---------------
</TABLE>
12. CALCULATION OF THE NUMBER OF SHARES IN ISSUE
Weighted
Shares Average
Issued and Shares
Outstanding Outstanding
----------- -----------
Twelve Months January 1, 1994 through December 31, 1994
-------------------------------------------------------
Shares outstanding at the beginning
of the period 38,677,198 38,677,198
Conversion of warrants 328,925 219,509
Exercise of Options 600,000 126,713
Private Placements 300,000 38,630
---------- ----------
Shares outstanding at the end of the period 39,906,123 39,062,050
---------- ----------
Twelve Months January 1, 1995 through December 31, 1995
-------------------------------------------------------
Shares outstanding at the beginning
of the period 39,906,123 39,906,123
Private Placements 700,000 584,109
---------- ----------
Shares outstanding at the end of the period 40,606,123 40,490,232
---------- ----------
F-14
<PAGE>
Weighted
Shares Average
Issued and Shares
Outstanding Outstanding
----------- -----------
Twelve Months January 1, 1995 through December 31, 1996
-------------------------------------------------------
Shares outstanding at the beginning
of the period 40,606,123 40,606,123
Private Placements and Conversion of Debentures 3,093,082 604,115
Options Exercised 200,000 25,205
---------- ----------
Shares outstanding at the end of the period 43,899,205 41,235,443
---------- ----------
13. SHARE OPTION PLANS
Under U.S. GAAP, the Company applies Accounting Principle Board Opinion No.
25, "Accounting for Stock Issues to Employees" and related interpretations
in accounting for its plans. Accordingly, no compensation expense has been
recognized for its stock-based compensation plans. Had compensation expense
for the Company's No. 1 and No. 2 Share Option Plans been determined based
upon the fair value at the grant date for awards under these Plans
consistent with the methodology prescribed under SFAS No. 123, "Accounting
for Stock-Based Compensation", the Company's U.S. GAAP net loss and loss
per share would have to be increased in 1996 by $278,129 and $0.01 per
share, and in 1995 by $102,643 and $0.00 per share, respectively.
The fair value of the options granted are estimated using the Black-Scholes
option pricing model with the following assumptions:
Dividend yield of nil, volatility of 93%, risk-free investment rate of 6.37
% (1995 - 6.47%), and an expected life of 6 years. The average fair values
of the options granted during 1996 and 1995 are estimated respectively as
being $1.06 and $1.41 for each Ordinary Share ADR.
14. TAXATION
The Company is incorporated in England with US subsidiaries and formerly
owned a subsidiary in Denmark. The Company is subject to United Kingdom
corporation tax on a worldwide basis with relief for foreign taxes in cases
where double taxation relief agreements have been established. The Company
will be liable for United States tax (including state taxes) through the
U.S. subsidiaries.
Income tax charges/(credits) have been reflected in the Consolidated
Statement of Operations:
Year ended December 31,
1994 1995 1996
---- ---- ----
Current:
UK -- -- --
____ ____ ____
Provisional tax losses available to the Company in the UK are estimated to
be approximately $24,200,000. The deferred tax asset value of these losses
is approximately $8,000,000 but no benefit has been recognized in the
financial statements as the benefit is offset by an equal valuation
allowance.
Provisional tax losses available to the Company in the USA are estimated to
be approximately $1,850,000 at the end of fiscal year 1996. The deferred
tax asset value of these losses is approximately $630,000 but no benefit
has been recognized in the financial statements as the benefit is offset by
an equal valuation allowance.
F-15
<PAGE>
15. INDUSTRY AND GEOGRAPHIC AREA SEGMENT
The Company's operations are in the areas of research, development and
sales of pharmaceutical products related to senescence or aging, and, from
September 1995, the manufacture and distribution of health and cosmetic
beauty aids. These products have been classified into pharmaceuticals and
cosmetics.
Industry Segments 1994 1995 1996
----------------- ------- ------- -------
(in thousands of dollars)
Net Sales
Pharmaceuticals $ 212 160 499
Cosmetics -- 1,771 5,987
------- ------- -------
Total 212 1,931 6,486
------- ------- -------
Operating Profit/(Loss)
Pharmaceuticals (3,476) (3,896) (4,110)
Cosmetics -- (8) 44
------- ------- -------
Operating Loss (3,476) (3,904) (4,066)
Interest Income/(expense) 534 419 (23)
Other Income -- 37 69
Loss on Sale of Investments (40) (273) --
------- ------- -------
Loss Before Taxation (2,982) (3,721) (4,020)
------- ------- -------
Identifiable Assets:
Pharmaceuticals 1,489 1,113 1,090
Cosmetics -- 4,778 5,318
General Corporate 8,272 2,014 3,433
------- ------- -------
Total 9,761 7,905 9,841
------- ------- -------
Capital Expenditure:
Pharmaceuticals 400 178 254
Cosmetics -- 40 64
------- ------- -------
Total 400 218 318
------- ------- -------
Depreciation and Amortization:
Pharmaceuticals 175 220 278
Cosmetics -- 40 172
------- ------- -------
Total $ 175 260 450
------- ------- -------
F-16
<PAGE>
Geographic Areas 1994 1995 1996
---------------- ------- ------- -------
(in thousands of dollars)
Net Sales
Pharmaceuticals -
United States -- 246 202
United Kingdom and Europe 212 (98) 260
Pacific, Far East & Canada -- 12 37
------- ------- -------
Total Pharmaceutical 212 160 499
Cosmetics -
United States - Domestic
& Export Customers -- 1,771 5,987
------- ------- -------
212 1,931 6,486
------- ------- -------
Operating Losses:
Pharmaceuticals:
United States (2,658) (2,520) (2,260)
United Kingdom & Europe (818) (1,376) (1,850)
------- ------- -------
(3,476) (3,896) (4,110)
Cosmetics:
United States -- (8) 44
------- ------- -------
Total (3,476) (3,904) (4,066)
------- ------- -------
Cosmetics:
United States -- (8) 44
------- ------- -------
Total (3,476) (3,904) (4,066)
------- ------- -------
Identifiable Assets, excluding
General Corporate Assets
Pharmaceuticals:
United States 1,289 1,026 948
United Kingdom & Europe 200 87 142
------- -------- --------
1,489 1,113 1,090
Cosmetics:
United States -- 4,778 5,318
------- ------- --------
Total $ 1,489 5,891 6,408
------- -------- --------
The Company's registered office is located in the United Kingdom from which
the financial controls, administration and scientific research and
development activities are operated. The Company's Chairman is based in the
United States from where liaison is effected with the US investing public
and from where the development of the activities of MEIS Corporation and
Carme International Inc. are directed.
16. SUBSIDIARY UNDERTAKINGS
MEIS Corporation was incorporated in the State of Delaware in December
1993. Its main activity is the development, production and distribution of
the auto-injector syringe for use with the Company's MSD compound. In
addition, it undertakes the sales activities for the monoclonal antibodies
derived from the Research Foundation for Mental Hygiene Inc. and made
available to the Senetek Organisation by virtue of an agreement entered
into in July 1994.
CarmeInternational Inc. was incorporated in the State of Delaware in June
1995. Its main activity is the manufacture and distribution of health and
beauty aids.
F-17
<PAGE>
17. COMMITMENTS AND CONTINGENCIES
(a) Research
1) Under existing agreements, the Company is committed to provide
funding for research programs and clinical trials of
approximately $1,350,000 during the year ending December 31,
1997.
2) Commitments of approximately $1.5 million have been given for the
automation of the auto-injector assembly line at MEIS Inc.
(b) Commitments Under Operating Leases
The Company leases certain office, laboratory and factory space and
equipment under operating leases in the United Kingdom and, through
its subsidiaries MEIS Corporation and Carme International Inc., in the
United States. The premises formerly occupied in Aarhus, Denmark have
been vacated and the lease lapsed in March 1995.
Minimum future lease payments under non-cancelable leases are as
follows:
Years Ending Future
December 31, Minimum Payment
------------ ---------------
$ 000
1997 $ 550
1998 517
1999 134
2000 --
2001 --
---------
$ 1,201
Rent expense was approximately $552,000 in 1996, and $200,000 and $98,000
in 1995 and 1994, respectively.
18. GOING CONCERN
The Company's continuing development of its pharmaceutical products in a
timely manner is dependent upon maintaining adequate sources of finance
during the period up to the marketing stage, and in this connection, it is
presently engaged in substantive discussions regarding additional sources
of finance. If the current proposals can be successfully concluded it is
anticipated that the Company should be able to continue its operations so
as to conclude the UK Phase III clinical trials for its MSD product during
1997 leading to a successful application for a Product License.
Any amounts which the Company may receive as part of any proposed licensing
distribution or joint-venture arrangements whereby a partner may effect
contributions in consideration for the transfer of certain rights to the
Company's research project, have not been taken into account in the
Company's financial projections. If present or future discussions for
additional funding do not proceed satisfactorily, Senetek may not otherwise
be able to support its operations at the desired augmented level. The
Company's ability to enter into such agreements depends in part on the
results of evaluation tests of the Company's products, as well as on a
number of economic and market factors over which the Company has little, if
any, influence.
F-18
<PAGE>
DATED 3RD JULY 1996
SENETEK PLC (1)
DR. GERLOF HOMAN (2)
----------------------------------------
SUPPLEMENTAL AGREEMENT
----------------------------------------
Trowers & Hamlins
6 New Square
Lincoln's Inn
London WC2A 3RP
<PAGE>
THIS AGREEMENT is made the 3rd day of JULY 1996
BETWEEN
(1) SENETEK PLC a company registered in England under Number 1759068 whose
registered office is situated at 23 Palace Street, London SW1E 5HW,
England (the "Company"); and
(2) DR. GERLOF HOMAN of [1819 Hermitage Place, Imperial, Missouri 63052,
United States of America] ("Dr. Homan").
WHEREAS
This Agreement is supplemental to a service agreement dated 11th August 1995
between the Company and Dr. Homan (the "Service Agreement"). The parties have
agreed to amend the Service Agreement in the manner hereinafter set out.
NOW IT IS HEREBY AGREED as follows:
1. With effect from the date hereof the Service Agreement shall be amended as
follows:
(a) In Clause 2 of the Service Agreement there shall be
inserted a new Clause 2(f) as follows:
"(f) The expression "Initial Period" shall mean
the period from 1st October 1995 to 30th
September 1997 and the expression
"Additional Period" shall mean the period
from 1st October 1997 to 30th September
1998".
(b) Clause 3 of the Service Agreement shall be deleted and
replaced with the following:
"The employment shall be for a fixed period
commencing on 1st October 1995 and expiring on 30th
September 1998 subject to prior termination
hereinafter provided. Dr. Homan shall be obliged to
retire on 30th September 1998 and the Company shall
not continue or extend this Agreement beyond that
date".
(c) There shall be inserted a new Clause 4(h) in the Service
Agreement as follows:
"At the commencement of the Additional Period Dr.
Homan shall be entitled to a salary pro rata to his
salary at the end of the Initial Period and such
salary shall be subject to review in accordance with
Clause 4(a) (and such salary shall be paid to him
irrespective of whether or not the Company requires
Dr. Homan to work for the entire
<PAGE>
46 day period referred to in Clause 7(a)). For the
avoidance of doubt, during the Additional Period Dr.
Homan shall continue to be entitled to all other
benefits and entitlements due to him under, pursuant
to or in connection with this Agreement (except for
the 4 weeks holiday entitlement)".
(d) In Clause 7(a) of the Service Agreement there shall be
inserted after the words "subject to a maximum commitment
of 2.5 days per working week, averaged over a period
of each calendar month" the following words:
"during the Initial Period, and subject to a
maximum commitment of a total of 46 days during
the Additional Period (on such days as the Company
and Dr. Homan may from time to time agree),"
(e) In Clause 7(b) of the Service Agreement there shall be
inserted after the words "more than the equivalent of
2.5 days per working week over any calendar month" the
following words:
"during the Initial Period, or more than 46 days
during the Additional Period".
2. The parties hereby agree that the Service Agreement as amended hereby
shall continue in full force and effect in accordance with its terms.
SIGNED BY [ P. A. LOGAN ] )
for and on behalf of SENETEK PLC ) /S/ P. A. Logan
in the presence of: )
/s/ Karen Goldsmith
Karen Goldsmith
5 Charlton Drive
Biggin Hill, Kent TN1G 3T2
SIGNED by the said )
DR. GERLOF HOMAN ) /s/ Gerlof Homan
in the presence of: )
Signature of Witness: /s/ Nancy K. Dennigmann
Full name of Witness: Nancy K. Dennigmann
Address: 1714 Sibley
St. Charles, MO 63301
Occupation: Off. Mgr.
2
<PAGE>
SENETEK PLC
SENESCENCE TECHNOLOGY
23 PALACE STREET, LONDON SW1E 5HW
(Registered Office)
Tel: 0171-828-4800 Fax: 0171-828-8081
SERVICE AGREEMENT
-----------------
AN AGREEMENT made the 11th day of August 1995 between:
A. SENETEK PLC whose registered office is situated at 23 Palace Street,
London SW1E 5HW, England ("the Company"), and
B. DR. GERLOF HOMAN of 1819 Hermitage Place, Imperial, Missouri 63052,
United States of America ("Dr. Homan").
NOW IT IS HEREBY AGREED as follows:
- -----------------------
1. The Company shall employ Dr. Homan and Dr. Homan shall serve the
Company with effect from the 1st day of October 1995 as the Executive
Chairman of the Board of Directors which appointment shall include
liaison with the Company's investors and parties acting on their
behalf, with additional special responsibilities that shall cover
advising on the development and marketing of the Company's products,
including in particular the auto-injector syringe and its various
applications, advising on additional projects and potential products
that may be of value to the Company and its subsidiary and associated
companies, and liaising with the Company Secretary, particularly on
matters affecting SEC compliance, UK statutory obligations and the
distribution of investor information, upon and subject to the
following terms and conditions:
2. In this Agreement:
(a) the expression the "Board" means the Board of Directors for
the time being of the Company, and the expression "subsidiary"
means a subsidiary (as defined by Section 736 of the Companies
Act 1985) for the time being of the Company;
(b) the expression "associated company" means, in relation to a
company, its holding company (as defined by Section 736 of the
Companies Act 1985) or any subsidiary of such holding company
and the expression "associates" shall be construed
accordingly;
(c) "the Act" means the Employment Protection (Consolidation) Act
1978;
<PAGE>
(d) any reference to a statutory provision shall be deemed to
include a reference to any statutory modification or
re-enactment of the same;
(e) references to the singular shall include the plural and vice
versa.
3. The employment shall be for a fixed period of two years subject to
prior termination as hereinafter provided.
4. (a) The basic remuneration of Dr. Homan shall be a salary (which shall
accrue from day to day) at a rate of US$125,000 per annum (subject to
annual or earlier review at the discretion of the Board). Such salary
shall be payable by equal monthly installments on the last day of
every month and the first of such payments shall be made on 31st
October 1995. In addition to the annual or earlier review referred to
above, Dr. Homan's salary shall be subject to an automatic increase on
the 1st day of January of each year by the percentage by which the
cost of living has increased, as determined by the US Labor
Department, over the immediately preceding twelve months. Such
adjusted salary will then become the "basic remuneration" of Dr. Homan
for the corresponding year.
(b) The Board shall, on an annual basis, determine any additional payment,
if any, that may be paid to Dr. Homan arising from the performance of
his duties. Without prejudice to any payment that may be paid to Dr.
Homan in respect of the fiscal year ending December 31, 1995, the
first determination shall be in respect of the fiscal year ending 31st
December 1996.
(c) Dr. Homan shall automatically be entitled to participate in any
Executive Share Option Scheme and Profit Sharing Scheme that may be
operated by the Company.
(d) Dr. Homan shall (in addition to the usual public and bank holidays) be
entitled to four weeks holiday with pay per annum, to be taken at
times agreed with the Board. The entitlement to holiday pay accrues
pro rata through each year of employment hereunder. At the end of each
year of employment hereunder, or upon termination of Dr. Homan's
employment hereunder for whatever reason, Dr. Homan shall at his
option, be entitled to either payment in lieu of any outstanding
holiday entitlement, payment being calculated pro rata to Dr. Homan's
remuneration under Clause 4(a) above or to accumulate such holiday
entitlement so that it may be taken at a later date. In addition, Dr.
Homan may at any time claim from the Company pay in lieu of his
holiday entitlement that has accrued in respect of
2
<PAGE>
employment with the Company prior to the date of commencement of this
Agreement but which, due to pressure of work, it has not been
practicable for him to take.
(e) In case of illness of Dr. Homan or other cause incapacitating him from
attending to his duties, Dr. Homan shall continue to be paid during
such absence provided that if such absence shall aggregate in all to
thirteen weeks in any twenty-six consecutive weeks, the Company may
terminate the employment of Dr. Homan hereunder forthwith by notice
given on a date not more than fourteen days after the end of the last
of such thirteen weeks, in which event the Company shall pay to Dr.
Homan a sum equal to six months salary from the date of such
termination.
(f) Dr. Homan and his spouse will be entitled to full medical and dental
insurance cover, the premiums being payable by the Company, during the
term of this Agreement.
(g) Dr. Homan shall participate in all benefit plans available to
executives of the Company; such plans may include for the benefit of
Dr. Homan term or other life insurance (in a form agreed upon by the
Board) providing death benefits of $500,000 and long term disability
insurance.
5. Dr. Homan's place of work shall be in or within reasonable daily
traveling distance of the city of St. Louis, Missouri, United States of
America, provided that Dr. Homan may be required to make business
visits elsewhere from time to time in connection with his duties
hereunder.
6. The Company shall reimburse Dr. Homan all reasonable hotel, travel and
other expenses exclusively incurred by him in or about the performance
of his duties hereunder, subject to the production of the appropriate
receipts or vouchers. In the event that aeroplane journeys have to be
undertaken on behalf of the Company, such travel shall be "business
class" category, or equivalent standard. Furthermore, if such travel on
behalf of the Company's business matters shall exceed a period of 4
days. Dr. Homan's spouse shall, upon Dr. Homan's request, be provided
with the same facilities at the cost of the Company.
7. (a) During the continuance of his employment hereunder, Dr.
Homan shall, unless prevented by ill health, devote such
time and attention to the business of the Company as the
Board may require, subject to a maximum commitment of 2.5
days per working week, averaged over a period of each
calendar month, and shall do all in his power to promote,
develop, and extend the business
3
<PAGE>
of the Company and shall at all times and in all respects
conform to and comply with the directions and regulations
made by the Board and also shall not, without the previous
consent of the Board, engage in any other business of a
similar nature to, or competitive with, that carried on by
the Company, its subsidiaries or associates. This shall not
be construed so as to preclude Dr. Homan from serving in the
capacity of an adviser or director to any company or
organisation whose interests are of a dissimilar nature to
those of the Company its subsidiaries or associates. There
are no fixed hours of work in relation to the employment
hereunder.
(b) To the extent that it may reasonably be necessary for Dr
Homan to devote more than the equivalent of 2.5 days per
working week over any calendar month, Dr. Homan may provide
the Company details of the additional time expended and the
nature of the work undertaken and in such circumstances
shall be entitled in respect of such additional time worked
to additional payment at a rate pro rata to his basic
remuneration in clause 4(a) above.
8. This Agreement shall not be terminated by any:
(a) Merger or consolidation where the Company is not the
consolidating or surviving entity; or
(b) Transfer of all or substantially all of the assets of the
Company.
In the event of any such merger or consolidation or transfer of all or
a substantial majority of the assets of the Company, the surviving or
resulting entity or the transferee of the Company's assets shall be
bound by, and shall have the benefit of, the provisions of this
Agreement, and the Company shall endeavour to take all actions
necessary to ensure that such entity or transferee is bound by the
provisions of this Agreement; it being understood, however, that Dr.
Homan's job title, duties and responsibilities may be changed or
realigned to reflect the fact that the combination has resulted, but
not changed otherwise, to his detriment.
9. Subject to the provisions of the Patent Act 1977, if at any time during
the continuance of his employment hereunder, Dr. Homan makes or
discovers or participates in the discovery of any invention or
improvement upon or in addition to an invention which is applicable to
the business for the time being carried on by the Company or its
subsidiaries or associates, the same shall be forthwith communicated by
him to the Company and shall be the absolute property of the Company,
and at the request and expense of the Company, he
4
<PAGE>
shall give and supply all such information, data, and drawings as may be
requisite to enable the Company to exploit such invention, improvement,
or addition to the best advantage and shall execute and do all such
documents as may be necessary or desirable for obtaining patent or
similar protection for the same in such part or parts of the world as
may be specified by the Company and for vesting the same in the Company
or as it may direct.
10. Dr. Homan shall not (except in the proper course of his duties
hereunder) either during or after the period of his employment
hereunder, divulge to any person and shall use his best endeavours to
prevent the publication or disclosure of any trade secret or
manufacturing process or any confidential information covering the
business or finances of the Company or any of its dealings,
transactions, affairs, trade secrets or secret manufacturing processes
and any similar confidential information governing any of the
subsidiaries or associates, and all notes and memoranda of such trade
secrets or information made or received by Dr. Homan during the course
of his employment hereunder shall be the property of the Company and
shall be surrendered by Dr. Homan to someone duly authorized in that
behalf at the termination of his employment.
11. Dr. Homan hereby covenants with the Company that he will not within 2
years after ceasing to be employed hereunder, without the consent of the
Company in writing under the hand of a Director duly authorised by a
resolution of the Board, directly or indirectly seek to procure orders
from or do business with any person, firm, or company who, on the date
of Dr. Homan ceasing to be employed hereunder or at any time in the
twelve months prior to that date, was a client or customer of the
Company or its subsidiary or associated companies and with whom in the
course of his employment Dr. Homan shall have had dealings, provided
always that nothing in this clause contained shall be deemed to prohibit
the seeking or procuring of orders or the doing of business not in
direct or indirect competition with the business or businesses aforesaid
or any of them.
12. The Company shall provide Dr. Homan with a motor car appropriate to his
status for his business and personal use. The Company shall pay all
taxation, insurance premiums, maintenance and repair expenses and for
all petrol, oil and other running expenses thereof. Dr. Homan shall at
all times conform to all regulations which may from time to time be
imposed by the Company with respect to motor cars provided by the
Company for use by its personnel.
13. The employment of Dr. Homan hereunder may be determined by the Company
forthwith if Dr. Homan is guilty of any gross default or gross
misconduct in connection with or affecting the business of the Company,
or in the event of any material
5
<PAGE>
or substantial breach or non-observance by Dr. Homan of any of the
stipulations herein contained.
14. Notwithstanding the terms and conditions of this Agreement, Dr. Homan
shall be entitled to resign without incurring any penalty upon giving
the Company 24 hours notice if he has bona fide reasons for believing
that any party appointed to the Board of Directors or to an executive
position is or may be prejudicial to the interests of the Company or to
himself and, in addition under any circumstances where he believes that
the identification and development of any product or the purchase of any
organisation or its assets is likely to have similar prejudicial
effects.
15. In the event of any dispute or controversy arising from the Agreement,
the Company shall pay all reasonable legal fees incurred by Dr. Homan in
the settlement of such dispute or controversy, provided that they have
been properly and necessarily incurred by Dr. Homan.
16. This Agreement shall take effect from 1st October 1995 and shall from
that date supersede any and all other agreements, either oral or in
writing and, in particular, Dr. Homan's agreement with the Company dated
the 10th day of December 1993 and his agreement dated 10th December 1993
with the Company's wholly owned subsidiary MEIS Corporation (a Delaware
corporation) for which, in both cases, he undertakes to relinquish all
rights and entitlements without any claim against the Company or MEIS
Corporation for such relinquishments, and contains all of the covenants
and agreements between the parties with respect to such employment in
any manner whatsoever. Each party to this Agreement acknowledges that no
representations, inducements, promises, or agreements orally or
otherwise, have been made by any party, or anyone acting on behalf of
any party, which are not embodied herein, and that no other agreement
shall be binding or valid. Any modification of this Agreement will be
effective only if it is in writing and signed by both parties hereto.
17. This agreement shall be construed and governed by the laws of England
and Wales and the parties hereby submit to the jurisdiction of the
English Courts.
18. Dr. Homan's period of continuous employment with the Company commenced
on 1st September 1988.
19. There are no pension entitlements under this Agreement. There is no
contracting out certificate in force in respect of this employment.
6
<PAGE>
20. There are no disciplinary or grievance rules in place in respect of Dr.
Homan's employment. Dr. Homan may raise any grievance or concern about
any disciplinary matter with the Board.
SIGNED BY
for and on behalf of
SENETEK PLC
presence of }
/s/ /s/ P.A. Logan
- ----------------------------- -----------------------
Witness P.A. Logan
Director
23 Palace Street
- -----------------------------
London SW1
- -----------------------------
SIGNED by the said Dr. Gerlof }
Homan in the presence of }
/S/ Nancy Dennigmann /s/ Gerlof Homan
- ----------------------------- -----------------------
Witness Gerlof Homan
1714 Sibley
- -----------------------------
St. Charles, MO 63301
- -----------------------------
7
<PAGE>
DATED 3rd July 1996
SENETEK PLC (1)
PAUL ANTHONY LOGAN (2)
----------------------------------------
SUPPLEMENTAL AGREEMENT
----------------------------------------
Trowers & Hamlins
6 New Square
Lincoln's Inn
London WC2A 3RP
<PAGE>
THIS AGREEMENT is made the 3rd day of July 1996
BETWEEN
(1) SENETEK PLC a company registered in England under Number 1759068 whose
registered office is situateD at 23 Palace Street, London SW1E 5HW,
England (the "Company"); and
(2) PAUL ANTHONY LOGAN of 30 Riverside Drive, Esher, Surrey KT10 8PG
(the "Executive").
WHEREAS
This Agreement is supplemental to an executive officer's agreement dated 11th
August 1995 between the Company and the Executive (the "Executive Agreement"), a
consultancy agreement dated 2nd March 1992 between the Company and the Executive
(the "Consultancy Agreement") and a letter dated 11th August 1995 from the
Company to the Executive in relation to the Consultancy Agreement (the
"Letter").
NOW IT IS HEREBY AGREED as follows:
1. The Company and the Executive hereby agree that upon expiry of the term
of the Executive Agreement (that is to say, on 1st September 1997) the
Company shall continue to employ the Executive for a period until 30th
September 1998 subject to and in accordance with the terms and
conditions of the Executive Agreement except that:
(a) During the period from 1st September 1997 to 30th September
1998 (the "Additional Period") the Executive shall, unless
prevented by ill-health, devote such time and attention to the
business of the Company as the Board may require, subject to a
maximum commitment of a total of fifty days during the
Additional Period (on such days as the Company and the
Executive may from time to time agree).
(b) To the extent that it may reasonably be necessary for the
Executive to devote more than fifty days service during the
Additional Period, the Executive may provide to the Company
details of the additional time expended and the nature of the
work undertaken and in such circumstances shall be entitled in
respect of such additional time worked to additional payment
at a rate pro rata to his basic remuneration in respect of the
Additional Period.
(c) The Executive shall be obliged to retire on 30th September
1998 and the Company shall not continue or extend the
Executive Agreement beyond that date.
<PAGE>
(d) At the commencement of the Additional Period, the Executive
shall be entitled to a salary pro rata to the salary payable
to him immediately prior to 1st September 1997 and his salary
payable to him immediately prior to 1st September 1997 and his
salary during the Additional Period shall be subject to review
in accordance with Clause 3 of the Executive Agreement and
such salary shall be paid to the Executive irrespective of
whether or not the Company requires the Executive to work for
the entire 50 day period referred to above. For the avoidance
of doubt, during the Additional Period the Executive shall
continue to be entitled to all other benefits and entitlements
(except for the 4 weeks holiday entitlement) due to the
Executive under, pursuant to or in connection with the
Executive Agreement.
2. The Company and the Executive hereby agree that the references in the
Letter to the expiry of the term of the Executive Agreement shall be
construed as references to the expiry of the term of the Executive
Agreement as amended by this Agreement.
3. The Company and the Executive hereby agree that the Executive Agreement
shall be read and construed in accordance with the provisions of Clause
1 of this Agreement and in the event of any conflict between the
provisions of this Agreement and the Executive Agreement then this
Agreement shall prevail.
4. The parties hereby agree that the Executive Agreement as amended hereby
shall continue in full force and effect in accordance with its terms.
SIGNED by [G. HOMAN] for and )
and on behalf of SENETEK PLC ) /s/ Gerlof Homan
in the presence of: )
Nancy K. Dennigmann
1714 Sibley Street
St. Charles, MO 63301
SIGNED by the said )
PAUL ANTHONY LOGAN ) /s/ P. A. Logan
in the presence of: )
2
<PAGE>
Signature of Witness: /s/ Karen Goldsmith
Full name of Witness: Karen Goldsmith
Address: 5 Charlton Drive
Biggin Hill
Kent TN16 3TZ
Occupation: PA
3
<PAGE>
SENETEK PLC
SENESCENCE TECHNOLOGY
23 PALACE STREET, LONDON S1E5HW
(Registered Office)
Tel: 0171-828-4800 Fax: 0171-828-8081
August 11, 1995
Paul Logan, Esq.
30 Riverside Drive
Esher, Surrey KT10 8PG
England
Dear Mr. Logan:
We refer to the executive officer's agreement between Senetek PLC and yourself
dated September 1, 1989 (the "First Executive Officer's Agreement") and to the
consultancy agreement between us dated March 2, 1992 (the "Consultancy
Agreement").
As you are aware, the Consultancy Agreement was entered into between us in order
to take effect upon the expiry of the First Executive Officer's Agreement, with
effect from September 1, 1992. However, further to an earlier reconsideration of
these arrangements it has been agreed that the commencement date of the
Consultancy Agreement be deferred until the expiry of the term of the executive
officer's agreement dated 11th August 1995 made between Senetek PLC and yourself
(the "New Executive Officer's Agreement"), regardless of earlier termination
howsoever occasioned. Notwithstanding the foregoing, in the event that the New
Executive Officer's Agreement shall terminate prior to the end of its fixed term
by reason of your serving three months notice pursuant to Clause 2 of the New
Executive Officer's Agreement, the Consultancy Agreement shall commence on the
expiry of the said three month notice period. In the event that the New
Executive Officer's Agreement shall terminate prior to the end of its fixed term
by reason of termination pursuant to Clause 6 of the New Executive Officer's
Agreement, the Consultancy Agreement shall commence six months following the
date of termination.
Upon commencement, the Consultancy Agreement shall thereafter continue for a
period of three years from such date in accordance with its terms.
Please confirm your agreement to and acceptance of the above by signing and
returning the enclosed duplicate of this letter.
Yours sincerely, Accepted by:
/s/ Gerlof Homan /s/ P. A. Logan
____________________________ __________________________________
Chairman and Chief Executive P.A. Logan
Officer For and on behalf of
Senetek PLC
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made this 1st day of September, 1996
("Agreement"), by and between SENETEK, PLC, having a place of business at 62A
Weldon Parkway, Maryland Heights, Missouri 63048 (hereinafter referred to as
"EMPLOYER") and ANTHONY J. CATALDO, residing at 63 North East Village Road,
Concord, New Hampshire 03301 (hereinafter referred to as "EMPLOYEE").
W I T N E S S E T H :
WHEREAS, the EMPLOYER is engaged in the business of developing various
biomedical products in the areas of male sexual dysfunction and age-related skin
disorders, as well as the manufacture and distribution of a wide range of health
and cosmetic beauty products; and
WHEREAS, the EMPLOYER wishes to employ EMPLOYEE and EMPLOYEE wishes to
be employed by EMPLOYER in accordance with the terms and conditions set forth in
this Agreement;
--------------
NOW, THEREFORE, in consideration of the mutual covenants and promises
and other good and valuable consideration, the receipt of which is hereby
acknowledged, it is mutually agreed as follows:
FIRST: The EMPLOYER does hereby employ, engage and hire the EMPLOYEE
as Chairman of the Board of Directors and Chief Executive Officer of EMPLOYER
for a period of two years commencing September 1, 1996 and terminating August
30, 1998, subject to the provisions stated herein ("Term"). The duties of the
EMPLOYEE shall include, but not be limited to, assisting the EMPLOYER in
managing its relationship with current and potential investors, obtaining the
support of a well-established, well-known market-maker for the EMPLOYER's
securities and obtaining financing for EMPLOYER.
SECOND: The EMPLOYEE agrees that he will at all times faithfully,
industriously and to the best of his ability, experience and talent, perform all
of the duties that may be required of and from him pursuant to the express and
implicit term hereof.
THIRD: The EMPLOYER shall pay to the EMPLOYEE and the EMPLOYEE agrees
to accept from the EMPLOYER in full payment for the EMPLOYEE's services
hereunder, compensation at the rate of $250,000 per year of the Term. Such
payments shall be paid pursuant to the procedures regularly established, as they
may be
<PAGE>
amended, by the EMPLOYER during the course of the term of this Agreement.
FOURTH: Upon the due execution and delivery of this Agreement,
EMPLOYER shall grant to EMPLOYEE stock options to purchase: (a) 500,000 ordinary
shares of the EMPLOYER at an exercise price of $1.25 per share upon the EMPLOYEE
obtaining the support of a well-known, well-established market-maker for the
EMPLOYER's securities; (b) 150,000 ordinary shares at the exercise price of
$1.50 per share at the end of the first year of this Agreement; and (c) 150,000
options at an exercise price of $4.00 at the end of the second year of the
Agreement. Subject to all securities and other applicable laws, the Company will
use reasonable efforts to register under a Form S-8 Registration Statement all
stock options granted to EMPLOYEE, or EMPLOYEE will shall have cost-free demand
registration rights on two occasions for the underlying shares. EMPLOYEE will
also have reasonable piggy-back registration rights for the shares underlying
these options. All stock options are exercisable over a period of the greater of
three (3) years from the date of grant and one (1) year following the
termination of this Agreement.
FIFTH: EMPLOYEE may act as a consultant for other companies, provided,
such arrangement does not interfere with the business of EMPLOYER, does not
directly or indirectly compete with EMPLOYER, does not cause any loss of time in
EMPLOYEE's duties with EMPLOYER, and does not interfere with the EMPLOYEE's
ability to diligently and faithfully serve and endeavor to further the
EMPLOYER's interest. EMPLOYER recognizes that EMPLOYEE is currently a consultant
for the other companies listed on Schedule A hereto. In the event that EMPLOYEE,
during the term of the Agreement, wishes to act as a consultant to any other
company, EMPLOYEE will notify EMPLOYER in writing and EMPLOYEE must obtain
EMPLOYER's written consent, which will not be unreasonably withheld. EMPLOYER
represents and warrants that this Agreement has been ratified, adopted and
confirmed by the Board of Directors of EMPLOYER.
SIXTH: Subject to Paragraph FIFTH, the EMPLOYEE shall devote
all of his working time, attention, knowledge and skill solely and exclusively
to the business and interest of the EMPLOYER. The EMPLOYEE expressly agrees that
he will not, during the term hereof or for two (2) years from the termination of
this Agreement, be involved directly or indirectly, in any form, fashion or
manner, as a partner, officer, director, stockholder, advisor, consultant or
employee in any other business similar to or in any way competing with the
business of the EMPLOYER. Nothing herein contained shall, however, limit the
rights of the EMPLOYEE to own up to 35% of the capital stock or other securities
of any corporation whose stock or securities are publicly owned or traded
regularly on a public exchange or in the over-the-counter market, or to prevent
the EMPLOYEE from investing financially in, or limiting the EMPLOYEE's rights to
invest financially in, other businesses not allied with or
2
<PAGE>
competing with the business of the EMPLOYER, as long as EMPLOYEE continues to
devote all of his working time, attention, knowledge and skill solely and
exclusively to the business and interest of the EMPLOYER.
SEVENTH: During the course of EMPLOYEE's employment under this
Agreement, and for five (5) years thereafter, the EMPLOYEE specifically agrees
that he will not, at any time, in any fashion, form or manner, either directly
or indirectly, use, divulge, disclose or communicate to any person, firm or
corporation, in any manner whatsoever, any confidential or proprietary
information of any kind, nature or description concerning any matters affecting
or relating to the business of the EMPLOYER, including, without limiting the
generality of the foregoing, any of its customers, its manner of operations, its
plans, its ideas, processes, programs, its intellectual property or other data,
information or materials of any kind, nature or description without regard to
whether any or all of the foregoing matters shall be deemed confidential,
material or important. The parties hereto stipulate that as between them the
same are important, material, confidential and gravely affect the effective and
successful conduct of the business of the EMPLOYER and its good will, and that
any breach of the terms of this paragraph is a material breach thereof, except
where the EMPLOYEE shall be acting on behalf of the EMPLOYER. EMPLOYEE
understands and agrees that in the event that EMPLOYEE violates the terms and
conditions as stated in this paragraph, that he will be subject to an injunction
and damages, and understands and agrees that EMPLOYER's remedy to prevent
further or continued damages will include a petition for injunctive relief.
EMPLOYEE expressly acknowledges that the restrictions contained in this
paragraph are reasonable and are properly required for the adequate protection
of the EMPLOYER's interests.
EMPLOYEE further understands and agrees that EMPLOYER, in entering
into this Agreement, is relying upon EMPLOYEE's representation and warranty that
all trade secrets and other proprietary information of EMPLOYER will be kept
strictly confidential by EMPLOYEE and not utilized by EMPLOYEE in any manner
whatsoever other than on EMPLOYER's behalf during the course of EMPLOYEE's
employment with EMPLOYER.
EIGHTH: Employee agrees that during the term of this Agreement, and
for two (2) years after termination hereof, he shall not, for himself or any
third party, directly or indirectly divert or attempt to divert from the
EMPLOYER or its subsidiaries or affiliates any business of any kind in which it
is engaged or employ, solicit for employment, or recommend for employment any
person employed by the EMPLOYER or by any of its subsidiaries or affiliates,
during the period of such person's employment and for a period of two (2) years
thereafter. EMPLOYEE expressly acknowledges that the restrictions contained in
this paragraph are reasonable and are properly required for the adequate
protection of the EMPLOYER's interests.
3
<PAGE>
NINTH: It is expressly understood and agreed that the terms of this
Agreement, except for Paragraphs SIXTH, SEVENTH and EIGHTH, may be terminated by
the EMPLOYER prior to August 30, 1998 upon the occurrence of any of the
following events:
(a) Automatically and without notice upon the death of the EMPLOYEE;
it is also understood that EMPLOYEE will be entitled to six months' salary which
will be payable to his estate;
(b) Persistent absenteeism on the part of the EMPLOYEE, which in the
reasonably judgment of the Board of Directors of the Company is having or will
have a material adverse effect on the performance of the EMPLOYEE's duties under
this Agreement;
(c) Deliberate and wilful failure to perform normal services and
duties required of EMPLOYEE pursuant to this Agreement, except if the
performance of such duties or services would result in a violation of EMPLOYEE's
fiduciary responsibility to the Company and its shareholders or is in a
violation of applicable laws;
(d) any wilful act or failure to act, which in the reasonable opinion
of the Board, is in bad faith and to the material detriment of the EMPLOYER;
(e) Conviction of a felony involving moral turpitude or dishonesty;
(f) Total or partial disability of the EMPLOYEE for a period of three
(3) consecutive months or ninety (90) days in the aggregate so that he is
prevented from satisfactorily performing a substantial part of his duties; it
being further understood and agreed that any proceeds received by EMPLOYER from
a policy of disability benefits insurance or any other proceeds received from
any Federal, State or Municipal agency of government will be credited to the
amount of compensation paid to EMPLOYEE by EMPLOYER; and
(g) Fraudulent misconduct of the EMPLOYEE.
In the event of a material change in the Board of Directors of
EMPLOYER (other than with the acknowledgment of EMPLOYEE) or the wilful failure
of the Company to fulfill its material obligations under this Agreement, upon
thirty (30) days written notice by EMPLOYEE to EMPLOYER, EMPLOYEE may also
terminate this Agreement, except that Paragraphs SIXTH, SEVENTH and EIGHTH shall
survive for the terms set forth in such paragraphs.
TENTH: EMPLOYER agrees that EMPLOYEE will be entitled during the Term
to all fringe benefits in effect for executive officers of the EMPLOYER, such as
Blue Cross/Blue Shield and
4
<PAGE>
Major Medical insurance benefits which are afforded to key employees of the
EMPLOYER.
ELEVENTH: This Agreement contains the total and entire agreement
between the parties and shall, as of the effective date hereof, supersede any
and all other agreements between the parties. The parties acknowledge and agree
that neither of them has made any representations that are not specifically set
forth herein and each of the parties hereto acknowledge that he or it has relied
upon his or its own judgment in entering into the same.
TWELFTH: The parties hereto do further agree that no waiver or
modification of this Agreement or of any covenant, condition or limitation
herein contained, shall be valid, unless in writing and duly executed by the
party to be charged therewith and that no evidence of any proceedings or
litigation between either of the parties arising out of or affecting this
Agreement or the rights and obligations of any party hereunder shall be valid
and binding unless such waiver or modification is in writing, duly executed, and
the parties further agree that the provisions of this paragraph may not be
waived except as herein set forth.
THIRTEENTH: The parties hereto agree that it is their intention and
covenant that this Agreement and the performance hereunder shall be construed in
accordance with and under the laws of the State of Missouri and that the terms
hereof may be enforced in any court of competent jurisdiction in an action for
specific performance which may be instituted under this Agreement.
FOURTEENTH: EMPLOYER indemnifies and holds harmless EMPLOYEE from any
claims of any type against EMPLOYER that arise prior to the date of the
commencement of this Agreement.
FIFTEENTH: EMPLOYEE warrants and represents to EMPLOYER that EMPLOYEE
has had sufficient and adequate opportunity to consult with Employee's counsel
concerning the within agreement and is aware that EMPLOYER is relying upon the
within representation concerning entering into the agreement herein.
SIXTEENTH: All notices required or permitted to be given by either
party hereunder shall be in writing and mailed by registered mail, return
receipt requested and by regular mail to the other party addressed as follows:
If to EMPLOYER at: SENETEK, PLC
62A Weldon Parkway
Maryland Heights, Missouri 63043
If to EMPLOYEE at: 63 North East Village Road
Concord, New Hampshire 03301
5
<PAGE>
Any notice mailed as provided above shall be deemed completed on the
date of receipt, or five (5) days from the postmark on said postal receipt.
IN WITNESS WHEREOF, the parties have hereunto set their hands
and seals the day, month and year first above written.
SENETEK, PLC
By: /s/ Gerlof Homan
/s/ Anthony J. Cataldo
ANTHONY J. CATALDO
6
<PAGE>
SCHEDULE A
The companies for which EMPLOYEE provides consulting services are:
None
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made this 1st day of October 1996 ("Agreement")
by and between SENETEK, PLC, having a place of business at 62A Weldon Parkway,
Maryland Heights, Missouri 63043 (hereinafter referred to as "EMPLOYER") and
CLIFF D. BRUNE, residing at 329 Glengary Drive, Aurora, Ohio 44202 (hereinafter
referred to as "EMPLOYEE").
W I T N E S S E T H:
WHEREAS, the EMPLOYER is engaged in the business of developing various
biomedical products in the areas of male sexual dysfunction and age-related skin
disorders, as well as the manufacture and distribution of a wide range of health
and cosmetic beauty products; and
WHEREAS, the EMPLOYER wishes to employ EMPLOYEE and EMPLOYEE wishes to
be employed by EMPLOYER in accordance with the terms and conditions set forth in
this Agreement;
_____________________
NOW, THEREFORE, in consideration of the mutual covenants and promises
and other good and valuable consideration, the receipt of which is hereby
acknowledged, it is mutually agreed as follows:
FIRST: The EMPLOYER does hereby employ, engage and hire the EMPLOYEE
as Executive Vice President and Chief Financial Officer of EMPLOYER for a period
of 23 months commencing October 1, 1996 and terminating August 31, 1998, subject
to the provisions stated herein ("Term").
SECOND: The EMPLOYEE agrees that he will at all times faithfully,
industriously and to the best of his ability, experience and talent, perform all
of the duties that may be required of and from him pursuant to the express and
implicit term hereof.
THIRD: The EMPLOYER shall pay to the EMPLOYEE and the EMPLOYEE agrees
to accept from the EMPLOYER in full payment of the EMPLOYEE's services
hereunder, compensation at the rate of $155,000 per year of the Term. Such
payments shall be paid pursuant to the procedures regularly established, as they
may be amended, by the EMPLOYER during the course of the Term of this Agreement.
Further, the Employer will provide the Employee a Lease car of the Employee's
choice or cash equivalent of $550 per month of the Term.
FOURTH: Upon the due execution and delivery of this Agreement,
EMPLOYER shall grant to EMPLOYEE stock options to
<PAGE>
purchase: (a) 200,000 ordinary shares of the EMPLOYER at an exercise price of
$1.25 per share; (b) 100,000 ordinary shares at the exercise price of $1.50 per
share at August 31, 1997; and (c) 100,000 options at an exercise price of $4.00
at August 31, 1998. Subject to all securities and other applicable laws, the
Company will use reasonable efforts to register under a Form S-8 Registration
Statement all stock options granted to EMPLOYEE, or EMPLOYEE will have cost-free
demand registration rights on two occasions for the underlying shares. EMPLOYEE
will also have reasonable piggy-back registration rights for the shares
underlying these options. All stock options are exercisable over a period of the
greater of three (3) years from the date of grant and one (1) year following the
termination of this Agreement.
FIFTH: EMPLOYEE may act as a consultant for other companies, provided,
such arrangement does not interfere with the business of EMPLOYER, does not
directly or indirectly compete with EMPLOYER, does not cause any loss of time in
EMPLOYEE's duties with EMPLOYER, and does not interfere with the EMPLOYEE's
ability to diligently and faithfully serve and endeavor to further the
EMPLOYER's interest. EMPLOYER recognizes that EMPLOYEE is currently a consultant
for the other companies listed on Schedule A hereto. In the event that EMPLOYEE,
during the term of the Agreement, wishes to act as a consultant to any other
company, EMPLOYEE will notify EMPLOYER in writing and EMPLOYEE must obtain
EMPLOYER's written consent, which will not be unreasonably withheld. EMPLOYER
represents and warrants that this Agreement has been ratified, adopted and
confirmed by the Board of Directors of EMPLOYER.
SIXTH: Subject to Paragraph FIFTH, the EMPLOYEE shall devote all of
his working time, attention, knowledge and skill solely and exclusively to the
business and interest of the EMPLOYER. The EMPLOYEE expressly agrees that he
will not, during the Term hereof or for two (2) years from the termination of
this Agreement, be involved directly or indirectly, in any form, fashion or
manner, as a partner, officer, director, stockholder, advisor, consultant or
employee in any other business similar to or in any way competing with the
business of the EMPLOYER. Nothing herein contained shall, however, limit the
rights of the EMPLOYEE to own up to 35% of the capital stock or other securities
of any corporation whose stock or securities are publicly owned or traded
regularly on a public exchange or in the over-the-counter market, or to prevent
the EMPLOYEE from investing financially in, or limiting the EMPLOYEE's rights to
invest financially in, other businesses not allied with or competing with the
business of the EMPLOYER, as long as EMPLOYEE continues to devote all of his
working time, attention, knowledge and skill solely and exclusively to the
business and interest of the EMPLOYER.
SEVENTH: During the course of EMPLOYEE's employment under this
Agreement, and for five (5) year thereafter, the EMPLOYEE specifically agrees
that he will not, at any time, in
2
<PAGE>
any fashion, form or manner, either directly or indirectly, use, divulge,
disclose or communicate to any person, firm or corporation, in any manner
whatsoever, any confidential or proprietary information of any kind, nature or
description concerning any matters affecting or relating to the business of the
EMPLOYER, including, without limitation the generality of the foregoing, any of
its customers, its manner of operations, its plans, its ideas, processes,
programs, its intellectual property or other data, information or materials of
any kind, nature or description without regard to whether any or all of the
foregoing matters shall be deemed confidential, material or important. The
parties hereto stipulate that as between them the same as important, material,
confidential and gravely affect the effective and successful conduct of the
business of the EMPLOYER and its good will, and that any breach of the terms of
this paragraph is a material breach thereof, except where the EMPLOYEE shall be
acting on behalf of the EMPLOYER. EMPLOYEE understands and agrees that in the
event that EMPLOYEE violates the terms and conditions as stated in this
paragraph, that he will be subject to an injunction and damages, and understands
and agrees that EMPLOYER's remedy to prevent further or continued damages will
include a petition for injunctive relief. EMPLOYEE expressly acknowledges that
the restrictions contained in this paragraph are reasonable and are properly
required for the adequate protection of the EMPLOYER's interests.
EMPLOYEE further understands and agrees that EMPLOYER, in entering
into this Agreement, is relying upon EMPLOYEE's representation and warranty that
all trade secrets and other proprietary information of EMPLOYER will be kept
strictly confidential by EMPLOYEE and not utilized by EMPLOYEE in any manner
whatsoever other than on EMPLOYER's behalf during the course of EMPLOYEE's
employment with EMPLOYER.
EIGHTH: EMPLOYEE agrees that during the term of this Agreement, and
for two (2) years after termination hereof, he shall not, for himself or any
third party, directly or indirectly divert or attempt to divert from the
EMPLOYER or its subsidiaries or affiliates any business of any kind in which it
is engaged or employ, solicit for employment, or recommend for employment any
person employed by the EMPLOYER or by any of its subsidiaries or affiliates,
during the period of such persons' employment and for a period of two (2) years
thereafter. EMPLOYEE expressly acknowledges that the restrictions contained in
this paragraph are reasonable and are properly required for the adequate
protection of the EMPLOYER's interests.
NINTH: It is expressly understood and agreed that the terms of this
Agreement, except for Paragraphs SIXTH, SEVENTH and EIGHTH, may be determined by
the EMPLOYER prior to August 31, 1998 upon the occurrence of any of the
following events:
(a) Automatically and without notice upon the death of the EMPLOYEE;
it is also understood that EMPLOYEE will be
3
<PAGE>
entitled to six months' salary which will be payable to his estate;
(b) Persistent absenteeism on the part of the EMPLOYEE, which in the
reasonable judgment of the Board of Directors of the Company is having or will
have a material adverse effect on the performance of the EMPLOYEE's duties under
this Agreement;
(c) Deliberate and wilful failure to perform normal services and
duties required of EMPLOYEE pursuant to this Agreement, except if the
performance of such duties or services would result in a violation of EMPLOYEE's
fiduciary responsibility to the Company and its shareholders or is in violation
of applicable laws;
(d) Any wilful act or failure to act, which in the reasonable opinion
of the Board, is in bad faith to the material detriment of the EMPLOYER;
(e) Conviction of a felony involving moral turpitude or dishonesty;
(f) Total or partial disability of the EMPLOYEE for a period of three
(3) consecutive months or ninety (90) days in the aggregate so that he is
prevented from satisfactorily performing a substantial part of his duties; it
being further understood and agreed that any proceeds received by EMPLOYER from
a policy of disability benefits insurance or any other proceeds received from
any Federal, State or Municipal agency of government will be credited to the
amount of compensation paid to EMPLOYEE by EMPLOYER; and
(g) Fraudulent misconduct of the EMPLOYEE.
In the event of a material change in the Board of Directors of
EMPLOYER (other than with the acknowledgment of EMPLOYEE) or the wilful failure
of the Company to fulfill its material obligations under this Agreement, upon
thirty (30) days written notice by EMPLOYEE to EMPLOYER, EMPLOYEE may also
terminate this Agreement, except that Paragraphs SIXTH, SEVENTH and EIGHTH shall
survive for the terms set forth in such paragraphs.
TENTH: EMPLOYER agrees that EMPLOYEE will be entitled during the Term
to all fringe benefits in effect for executive officers of the EMPLOYER, such as
Blue Cross/Blue Shield and Major Medical insurance benefits which are afforded
to key employees of the EMPLOYER including a life insurance policy of $500,000.
ELEVENTH: This Agreement contains the total and entire agreement
between the parties and shall, as of the effective date hereof, supersede any
and all other agreements between the
4
<PAGE>
parties. The parties acknowledge and agree that neither of them has made any
representations that are not specifically set forth herein and each of the
parties hereto acknowledge that he or it has relied upon his or its own judgment
in entering into the same.
TWELFTH: The parties hereto do further agree that no waiver or
modification of this Agreement or of any covenant, condition or limitation
herein contained, shall be valid, unless in writing and duly executed by the
party to be charged therewith and that no evidence of any proceedings or
litigation between either of the parties arising out of or affecting this
Agreement or the rights and obligations of any party hereunder shall be valid
and binding unless such waiver or modification is in writing, duly executed, and
the parties further agree that the provisions of this paragraph may not be
waived except as herein set forth.
THIRTEENTH: The parties hereto agree that it is their intention and
covenant that this Agreement and the performance hereunder shall be construed in
accordance with and under the laws of the State of Missouri and that the terms
hereof may be enforced in any court of competent jurisdiction in an action for
specific performance which may be instituted under this Agreement.
FOURTEENTH: EMPLOYEE indemnifies and holds harmless EMPLOYEE from any
claims of any type against EMPLOYER that arise prior to the date of the
commencement of this Agreement.
FIFTEENTH: EMPLOYEE warrants and represents to EMPLOYER that EMPLOYEE
has had sufficient and adequate opportunity to consult with EMPLOYEE's counsel
concerning the within agreement and is aware that EMPLOYER is relying upon the
within representation concerning entering into the agreement herein.
SIXTEENTH: All notices required or permitted to be given by either
party hereunder shall be in writing and mailed by registered mail, return
receipt requested, and by regular mail to the other party addressed as follows:
If to EMPLOYER at: SENETEK, PLC
62A Weldon Parkway
Maryland Heights, Missouri 63043
If to EMPLOYER at: CLIFF D. BRUNE
329 Glengary Drive
Aurora, Ohio 44202
5
<PAGE>
Any notice mailed as provided above shall be deemed completed on the date of
receipt, or five (5) days from the postmark on said postal receipt.
6
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
the day, month and year first above written.
SENETEK, PLC
By: /S/ Anthony J. Cataldo
CHAIRMAN & CEO
/S/ Cliff D. Brune
CLIFF D. BRUNE
7
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
</LEGEND>
<CIK> 0000789944
<NAME> SENETEK PLC
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,975
<SECURITIES> 0
<RECEIVABLES> 771
<ALLOWANCES> 0
<INVENTORY> 1,657
<CURRENT-ASSETS> 5,629
<PP&E> 1,182
<DEPRECIATION> 0
<TOTAL-ASSETS> 9,841
<CURRENT-LIABILITIES> 3,578
<BONDS> 0
<COMMON> 3,533
0
0
<OTHER-SE> 2,730
<TOTAL-LIABILITY-AND-EQUITY> 9,841
<SALES> 6,486
<TOTAL-REVENUES> 6,589
<CGS> 3,640
<TOTAL-COSTS> 10,552
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57
<INCOME-PRETAX> 4,020
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,020
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,020
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
