<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
_____
Quarterly Report pursuant to Section 13 or 15(d) of the Securities
X Exchange Act of 1934 for the Quarterly period ended September 30,1999
- ----- -----------------
or
_____
Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the transition period from _______ to ______
_____
Commission file number 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.)
620 Airpark Road, Napa, California 94588
_______________________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone no. including area code: (707) 226-3900
NOT APPLICABLE
________________________________________________________________________________
(former name, former address and former fiscal year,
if changes since last report)
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 of 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
----- -----
Indicate number of shares outstanding of each of the issuer's classes of common
stock, as of the latest date practicable.
At November 12, 1999, there were 58,133,517
of the Registrants Ordinary shares outstanding
1
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SENETEK PLC AND SUBSIDIARIES
INDEX TO FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1999
PART I. FINANCIAL INFORMATION Page No.
Item 1 - Financial Statements
Unaudited Consolidated Statements of Operations
Three Months Ended September 30, 1999 and September 30, 1998
Nine Months Ended September 30, 1999 and September 30, 1998 3
Consolidated Balance Sheets
September 30, 1999 (unaudited) and December 31, 1998 4
Consolidated Statement of Stockholders' Equity and
Comprehensive Loss Nine Months Ended September 30, 1999 5
Unaudited Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1999, and September 30, 1998 6
Notes to the Unaudited Consolidated Financial Statements 8
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
PART II. OTHER INFORMATION 20
SIGNATURES 22
2
<PAGE>
SENETEK PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
------- ------- ------- ---------
<S> <C> <C> <C> <C>
Revenues:
Product Sales $3,405 $ 1,074 $ 6,098 $ 3,846
Cost of Sales 1340 534 2,553 2,204
------- ------- ------- ---------
Gross Profit 2,065 540 3,545 1,642
Operating Expenses:
Research & Development 720 2,287 2,400 5,536
General & Administration 947 2,736 4,625 6,472
Marketing & Promotion 5 536 224 983
Selling Expenses -- 147 -- 381
------- ------- ------- ---------
Total Operating Expenses 1,672 5,706 7,249 13,372
------- ------- ------- ---------
Operating Profit/<Loss> 393 <5,166> <3,704> <11,730>
Other Income <Expense>:
Settlement Expense (Note 3) -- -- <2,718> --
Interest Income 66 62 107 157
Interest Expense (Including
amortization of deferred financing
costs and discount) <433> <655> <1,083> <686>
Other 155 11 1 108
------- ------- ------- ---------
Income/<Loss> before extraordinary
Loss on extinguishment of debt 181 <5,748> <7,397> <12,151>
Extraordinary Loss on
extinguishment of debt(Note 3) -- -- <1,657> --
------- ------- ------- ---------
Net Income/<Loss> available to
common stockholders $ 181 $<5,748> $<9,054> $<12,151>
======= ======= ======= =========
Basic and Diluted Loss before
extraordinary item per
ordinary share outstanding $ 0.00 $<0.11> $ <0.13> $ <0.23>
Basic and Diluted Loss from
extinguishment of debt per
Ordinary share outstanding $ -- $ -- $ <0.03> $ --
Basic and Diluted Loss per
Ordinary share outstanding $ 0.00 $<0.11> $ <0.16> $ <0.23>
Weighted average Ordinary shares outstanding 57,561 54,742 57,416 53,803
------- ------- ------- ---------
</TABLE>
See accompanying notes to unaudited consolidated financial statements
3
<PAGE>
SENETEK PLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
(unaudited)
------------- ------------
<S> <C> <C>
Assets (Note 3)
Current Assets:
Cash and Cash Equivalents $ 1,595 $ 808
Trade Receivables 1,254 1,265
Inventory at cost (Note 4) 526 731
Non-Trade Receivables 1,196 129
Prepaids and Deposits 363 1,360
------------- ------------
Total Current Assets 4,934 4,293
Property and Equipment, net 5,040 3,366
Goodwill and Other Intangible Assets - net 1,664 1,766
Deferred Financing costs 2,881 1,241
Total Assets $ 14,519 $ 10,666
============= ============
Liabilities & Stockholders' Equity
Current Liabilities
Line of Credit (Note 3) -- 2,389
Accounts Payable 3,388 1,602
Accrued Liabilities 694 1,630
Accrued Compensation on Stock Options (Note 5)
- Employees 2,468 4,112
- Non-employees 2,128 1,708
------------- ------------
Total Current Liabilities 8,678 11,441
Long Term Liabilities
Capital Leases 46 46
Deferred licensing income 100 --
Notes Payable, net of unamoritized discount of $320 (Note 3) 7,069 --
Stockholders' Equity:
Ordinary shares $0.08 (5pence) par value:
Authorized shares: 100,000,000
Issued and outstanding shares:
September 30, 1999 - 58,133,517
December 31, 1998 - 57,215,856 4,696 4,625
Share Premium 74,892 66,472
Accumulated Deficit <81,022> <71,968>
Equity Adjustment from Foreign Currency Translation 60 50
------------- ------------
Total Stockholders' Equity $ <1,374> $ <821>
------------- ------------
Total Liabilities and Stockholders' Equity $ 14,519 $ 10,666
============= ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
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SENETEK PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE LOSS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(in thousands, except shares outstanding)
(unaudited)
<TABLE>
<CAPTION>
Ordinary Shares Share Accumulated Accumulated Net
Shares Amount Premium Deficit Other Equity
Comprehensive
Income
Currency
Translation
---------- --------- --------- -------------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balances, Dec. 31,1998 57,215,856 $ 4,625 $ 66,472 $<71,968> $50 $ <821>
Exercise of options 116,661 6 174 180
Warrants issued in connection
with $5 million note, $2.4
million refinance and April
1999 settlement agreement
(Note 3) 6,072 6,072
Ordinary shares issued 801,000 65 974 1,039
Cancellation of vested
Stock options (transfer
From accrued liabilities) 1,200 1,200
Comprehensive Loss
- Net loss <9,054>
- Translation loss, net of tax 10
Total Comprehensive Loss <9,054> 10 <9,044>
Balances, Sept. 30,1999 58,133,517 $ 4,696 $ 74,892 <81,022> $60 <1,374>
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
SENETEK PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1999 1998
-------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $<9,054> $<12,151>
Adjustments to reconcile net loss to net cash:
Depreciation and other amortization 438 1040
Loss/<Gain> on disposal of fixed assets 64 <9>
Stock option compensation <24> 2,026
Amortization of deferred finance costs 850 --
Settlement expenses 2,718 --
Extinguishment of debt 1,657 --
Shares issued in lieu of debt 107 --
Changes in assets and liabilities:
Trade receivables 11 <93>
Non-trade receivables <1,067> 368
Inventory 205 <109>
Prepaids and deposits 997 <653>
Accounts payable and accrued
liabilities 980 <1,815>
Deferred Income 100 --
-------------- ---------------
Net Cash Used by Operating Activities <2,018> <11,396>
-------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of Property and Equipment $<2,074> $ <1,655>
-------------- ---------------
Net Cash Used by Investing Activities $<2,074> $ <1,655>
-------------- ---------------
</TABLE>
6
<PAGE>
SENETEK PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1999 1998
-------------- ---------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of issuance of ordinary shares from
private placements $ -- $ 4,628
Proceeds from exercise of options 118 --
Proceeds from notes payable issued net of $249,000
cash finance costs 4,751 --
Net increase in borrowings under Line of Credit -- 5,200
-------------- ---------------
Net Cash Provided By Financing Activities $4,869 $ 9,828
-------------- ---------------
Effect of exchange rate changes on cash 10 <62>
NET INCREASE <DECREASE> IN CASH AND CASH EQUIVALENTS $ 787 $<3,285>
Cash and cash equivalents at the beginning
of period 808 6,216
Cash and Cash Equivalents at the end
of the period $1,595 $ 2,931
============== ===============
</TABLE>
Supplemental disclosures of cash flow information are as follows:
<TABLE>
<CAPTION>
Amounts Paid
(in thousands)
1999 1998
-------------- ---------------
<S> <C> <C>
Interest $404 $59
</TABLE>
Non cash investing and financing activities consist of the following:
As discussed in the Notes to the unaudited Financial Statements the Company
refinanced the outstanding balance of $2,389,000 on its line of credit with
interest-bearing notes in April 1999. Warrants were issued to lenders with
an aggregate fair value of $6.1 million during the nine months ended September
30, 1999.
See accompanying notes to the unaudited consolidated financial statements.
7
<PAGE>
SENETEK PLC AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The interim consolidated financial statements incorporate the accounts of
Senetek PLC ("Senetek") or ("the Company") and its wholly owned
subsidiaries, Senetek Drug Delivery Technologies Inc. ("SDDT") (formerly
MEIS Corporation) and Carme Cosmeceutical Sciences, Inc. ("CCSI") (formerly
Carme International Inc.) (both Delaware corporations) for the nine months
ended September 30, 1999. CCSI was incorporated on June 21, 1995 and
commenced its operations on September 26, 1995 when it acquired certain
assets of Carme Inc. (a Nevada corporation) in an arms-length transaction.
All significant intercompany balances and transactions have been eliminated
in consolidation.
The interim consolidated financial statements have been prepared in
accordance with U.S. generally accepted accounting principles ( U.S. GAAP)
and reflect all adjustments (which include only normal, recurring
adjustments) which, in the opinion of management, are necessary for the
fair presentation of the results of the Company at the dates of the balance
sheets. The interim consolidated financial statements have been prepared
by the Company without audit. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to the rules and regulations of the Securities and Exchange
Commission.
These interim statements should be read in conjunction with the financial
statements and notes thereto included in the Company's 1998 Annual Report
on Form 10-K.
Results of operations for the nine months ended September 30, 1999 are not
necessarily indicative of results to be achieved for the full fiscal year.
2. Liquidity
The Company has been able to fund the loss of $9.0 million for the nine
months ended September 30, 1999 from existing resources and through the
sale of equity securities and issuance of debt. Management has taken steps
to reduce the amount of cash used by operations, including reducing
staffing levels and closing its London office. However the Company's
operations may not provide sufficient internally generated cash flows to
meet its projected short term requirements and to meet the cost of
developing the Company's pharmaceutical products. For the three months
ended September 30,1999, the Company reported a net income available to
Ordinary shareholders of $181,000.
In April 1999 we received $4.8 million (net of expenses) in cash and
refinanced $2,389,000 of our previously outstanding debt, that would have
been due in April 2000, for two new notes bearing interest at 8% per annum
and maturing in April 2002.
Research and development spending is decreasing as our products reach the
final stages of development and our Reliaject drug delivery device is
nearly ready for commercial deployment with almost all development and
supply chain set up costs recognized by September 30,1999.
Our patented kinetin product was made commercially available during the
first quarter of 1999 by way of distribution agreements entered into with
ICN Pharmaceuticals Inc. and Osmotics Corporation. These arrangements are
expected to generate additional operating cash flows in 1999.
Management is engaged in continuing efforts to obtain sufficient financing
to fund its operations for the foreseeable future, however there can be no
assurance given that we will be able to obtain the necessary financing.
3. Financing Activities
In April 1999, the Company received $4,751,000 (net of $249,000 in
expenses) in cash and refinanced the balance owed of
8
<PAGE>
$2,389,000 under a 1998 Credit Agreement, in exchange for two new notes
bearing interest at 8% per annum and maturing in April 2002. The notes
require semi annual payment of interest only until maturity and are secured
by all of the Company's assets.
The Company issued Series A warrants to purchase an aggregate of 738,857
ordinary shares at $1.50 per share (subject to downward adjustment under
certain circumstances), expiring in five years in connection with this
agreement. Series B and C warrants to purchase approximately 3.3 million
and 1.2 million Ordinary shares at $1.50 and $2 per share were issued in
connection with the Agreement but are only exercisable to the extent the
outstanding principal balance of $7,389,000 is not repaid in cash. The
Series B and C warrants expire in ten years.
The fair value of 500,000 of the Series A warrants and all of the Series B
warrants was determined to be $3.1 million using the Black Scholes model.
The fair value of these warrants will be amortized over the life of the new
notes because such warrants, under the terms of the financing agreement,
were issued in connection with the $5.0 million new financing. On the other
hand, the $1.0 million fair value of the remaining 238,857 Series A
warrants and all of the 3,333,333 Series C warrants was included in the
loss on extinguishment of debt discussed below because these warrants were
issued to refinance existing debt under the terms of the April 1999
financing agreement.
As the outstanding borrowings under the 1998 Credit Agreement were
refinanced by notes with substantially different terms as defined by EITF
96-19, Debtors Accounting for a Modification or Extinguishment of Debt
Instruments, (EITF 96-19) , the Company is required to recognize the
difference between the fair value of the new notes issued to refinance the
old debt and the carrying value of the old debt net of unamortized issuance
costs as a loss on the extinguishment of debt. During the three months
ended June 30,1999, the Company recognized a $1.7 million loss on the
extinguishment of debt.
Also, in April 1999 the Company entered into a settlement agreement to
resolve the terms of various transactions that had been entered into by the
previous management of the Company. The settlement terms involve the issue
of 2,300,000 Series A warrants and 625,000 new Ordinary shares .
Accordingly the Company has recorded $2.7 million of expense in the second
quarter of 1999 related to the settlement terms. Included in the $2.7
million settlement expense is the fair value of the 625,000 ordinary shares
issued in 1999.
4. Inventory at cost comprises:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
(in thousands)
------------- ------------
<S> <C> <C>
Finished Goods $ 97 $465
Raw Materials 429 265
Work in Progress -- 1
------------- ------------
$526 $731
------------- ------------
</TABLE>
5. Options and Warrants during the nine months ended September 30, 1999:
The Company issued new Ordinary shares through the exercise of options
under the Company's approved plans at an average price of $1.50 per share.
Options were granted under the Company's No. 1 plan for employees amounting
to 864,000. 514,000 options were granted at an exercise price of $1.6875
and 350,000 were granted at an exercise price of $1.50.
Options were granted under the Company's No.2 plan for non employees and
consultants amounting to 400,000, all of which were at an exercise price of
$1.6875. The fair value of these non employee options was calculated at
$420,000 and this has been recorded as compensation expense in the second
quarter.
Series A, B and C warrants were issued, in connection with the both the
refinance of the $2,389,000 note and the new investment note, in the
amounts of 738,857, 3,333,333 and 1,194,285 respectively. Refer to note 3
for further
9
<PAGE>
discussion of the accounting treatment for these issuances.
Series A warrants amounting to 2.3 million were issued in the settlement of
disputes arising from commitments entered into by previous management . The
fair value of these warrants of approximately $2 million was calculated
using the Black Scholes option pricing model and included in the settlement
expense discussed in note 3.
6. Earnings per Share
Earnings per share were computed under the provisions of Statement of
Financial Accounting Standards No.128, Earnings Per Share. The following is
a reconciliation of the numerators and denominators of basic and diluted
earnings per share computations.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
(in thousands) (in thousands)
1999 1998 1999 1998
--------- -------- -------- ---------
<S> <C> <C> <C> <C>
Numerator:
Basic and Diluted Net Profit/<Loss>
per ordinary share outstanding $ 181 $<5,748> $<9,054> $<12,151>
Denominator:
Basic and diluted weighted average
shares outstanding 57,561 54,742 57,416 53,803
</TABLE>
Options and warrants to purchase 14,112,231 and 5,584,885 shares of stock
were outstanding at September 30,1999 and 1998, respectively, but were not
included in the computation of diluted loss per Ordinary share outstanding
because the effect would have been antidilutive.
7. Segment Reporting
<TABLE>
<CAPTION>
Three months ended September 30, 1999
(in thousands)
Pharmaceutical Skincare and
Health and Beauty Total
$ $ $
<S> <C> <C> <C>
Net sales to external customers 297 3,108 3,405
Operating profit/<loss> <1,169> 1,562 393
Income/<loss> before taxation <1,271> 1,452 181
<CAPTION>
Three months ended September 30, 1998
(in thousands)
Pharmaceutical Skincare and
Health and Beauty Total
$ $ $
<S> <C> <C> <C>
Net sales to external customers 334 740 1,074
Operating loss <4,856> <310> <5,166>
Loss before taxation <5,365> <383> <5,748>
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Nine months ended September 30,1999
(in thousands)
Pharmaceutical Skincare and
Health and Beauty Total
$ $ $
<S> <C> <C> <C>
Net sales to external customers 949 5,149 6,098
Operating profit/<loss> <5,618> 1,914 <3,704>
Income/(Loss) before extraordinary item
and taxation <9,060> 1,663 <7,397>
<CAPTION>
Nine months ended September 30,1998
(in thousands)
Pharmaceutical Skincare and
Health and Beauty Total
$ $ $
<S> <C> <C> <C>
Net sales to external customers 1,132 2,714 3,846
Operating loss <11,059> <671> <11,730>
Loss before taxation <11,366> <785> <12,151>
</TABLE>
8. Contingencies
The Company has disputed a third quarter 1999 invoice from a supplier, in
the amount of $350,000 for the supply of vasoactive intestinal polypeptide
under a supply agreement dated April 2, 1998. Management is of the opinion
that an accrual for this invoice is not necessary because loss is
reasonably possible but not probable. The invoice was outside the scope of
contractual obligations between the Company and the supplier and the
products were neither ordered nor received by Senetek.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the preceding
consolidated financial statements and notes thereto and with the Company's
audited financial statements, notes to the consolidated financial statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations relating thereto included or incorporated by reference in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
Except for the historical information contained herein, the statements contained
in this 10-Q may be deemed forward looking statements that involve risks and
uncertainties. There are certain important factors and risks, including,
without limitation, the Company's need for additional financing, its history of
losses and its dependence on key personnel and the other risks detailed from
time to time in the Company's Securities and Exchange Commission filings on Form
10-K and 10-Q, including those discussed under "Factors Affecting the Company"
below, that could cause results or prospects to differ materially from those
anticipated by the statements made herein.
RESULTS OF OPERATIONS
Revenues
- --------
Our product sales revenues of $3,405,000 for the third quarter of 1999 were
comprised of $61,000 from the sale of pharmaceutical products, $236,000 from the
sale of monoclonal antibodies and $3,108,000 from the sale of kinetin products,
skincare and health and beauty products.
Our product sales revenues of $1,074,000 for the third quarter of 1998 comprised
$110,000 from the sale of pharmaceutical products, $224,000 from the sale of
monoclonal antibodies and $740,000 from the sale of skincare and health and
beauty products.
The 44.5% sales decrease in pharmaceutical products was due to a temporary
suspension of named patient sales in the United Kingdom, following possible
toxicological findings on phentolamine mesylate submitted to the US Federal
Food and Drug Administration ("FDA") by a competitor who is also developing an
erectile dysfunction product. The United Kingdom's Medicines Control Agency
("MCA") supported the resumption of named patient sales after reviewing the FDA
findings and our initial response.
The 5.4% sales increase in monoclonal antibodies was due to increased volume of
sales. Sales of monoclonal antibodies, some of which are used for the early
diagnosis of Alzheimers disease, follow sales patterns determined by project
driven research organizations, and are subject to fluctuation.
The 320% sales increase in skincare and health and beauty products was due
primarily to the supply of kinetin products to ICN Pharmaceuticals under a
licensing and supply agreement, following the launch of their Kinerase product
in March 1999. Through September 30, 1999 we have accrued royalties of $375,000
under an arrangement with Osmotics Corporation for exclusive distribution rights
in the prestige market. In May 1999, exclusive rights for the world wide
distribution of Mill Creek and Silver Fox products were granted to the United
States International Trading Corporation (the "USITC"). At this time CCSI also
sold its inventories of Mill Creek and Silver Fox products to USITC for
$348,000. For the grant of the distribution rights CCSI received an initial
$100,000 license fee which we have recorded as deferred income and will receive
royalties on net sales of the products from September 1999 onwards.
Our product sales revenues of $6,098,000 for the first nine months of 1999
comprised $193,000 from the sale of pharmaceutical products, $756,000 from the
sale of monoclonal antibodies and $5,149,000 from the sale of kinetin products
and skincare and health and beauty products.
Our product revenues of $3,846,000 for the first nine months of 1998 comprised
$292,000 from the sale of pharmaceutical products, $840,000 from the sale of
monoclonal antibodies and $2,714,000 from the sale of skincare and health and
beauty products.
12
<PAGE>
The 33.9% sales decrease in pharmaceutical products was due to a temporary
suspension of named patient sales in the United Kingdom, following a possible
batch sterility problem with our contract manufacturer and possible
toxicological findings with respect to phentolamine mesylate.
The 10.0% sales decrease in monoclonal antibodies was mainly due to low volume
of sales in the first quarter of 1999. Sales of monoclonal antibodies, some of
which are used for the early diagnosis of Alzheimers disease, follow sales
patterns determined by project driven research organizations, and are subject to
fluctuation.
The 89.7% sales increase in skincare and health and beauty products was due
mainly to sales of kinetin products to ICN, following the Kinerase launch in
March 1999.
Cost of Goods Sold
- ------------------
Cost of goods sold for the third quarter of 1999, which includes contract
manufacturing and material costs, was $1,340,000, up 151% from $534,000 in the
third quarter of 1998. Cost of goods sold as a percentage of sales was 39% for
the third quarter of 1999 compared to 50% for the third quarter of 1998. The
cost of goods sold as a percentage of sales decrease is due to increased sales
of higher margin products-especially kinetin products. This follows the launch
of Kinerase products by ICN Pharmaceuticals in the dermatological sector of the
skincare market.
In the Pharmaceutical Sector, cost of goods sold for the third quarter of 1999
was $70,000, down 36.3% from $110,000 in the third quarter of 1998. This is due
to a decrease in sales volume following the temporary suspension of Invicorp
named patient sales in the United Kingdom.
In the Skincare and Health and Beauty Sector, cost of goods sold for the third
quarter of 1999 was $1,270,000, an increase of 200% from $424,000 in the third
quarter of 1998. This is mainly due to increased volumes of sales resulting in
a favourable change to sales mix, following the launch of the Kinerase product
in March 1999.
Cost of goods sold for the first nine months of 1999, which includes contract
manufacturing and material costs, was $2,553,000, up 15.8% from $2,204,000 in
the first nine months of 1998. Cost of goods sold as a percentage of sales was
42% for the first nine months of 1999 compared to 57% for the first nine months
of 1998. The cost of goods sold as a percentage of sales decrease is due to
increased sales of higher margin products-especially kinetin products. This
follows the launch of Kinerase products by ICN Pharmaceuticals in the
dermatological sector of the skincare market towards the end of the first
quarter of 1999.
In the Pharmaceutical Sector, cost of goods sold for the first nine months of
1999 was $345,000, down 23.7% from $452,000 in the first nine months of 1998.
This is due mainly to a decrease in sales volume following the temporary
suspension of Invicorp named patient sales in the United Kingdom.
In the Skincare and Health and Beauty Sector, cost of goods sold for the first
nine months of 1999 was $2,208,000, an increase of 26.0% from $1,752,000 in the
first nine months of 1998. This is mainly due to increased sales volumes
resulting in a favourable change to product mix, following the launch of the
Kinerase product in March 1999.
OPERATING EXPENSES
Research & Development
- ----------------------
Research and Development expenditure for the third quarter of 1999 was $720,000,
a substantial decrease of 68.5% from $2,287,000 in the third quarter of 1998.
Research spending on Invicorp development has declined as clinical trials for EU
countries reached completion and Invicorp has received approvals from Medical
Evaluation Agencies in Europe and New Zealand.
The Pharmaceutical Sector research and development accounted for 98.6% of our
total research and development spending for the third quarter of 1999, compared
to 99.5% for the third quarter of 1998. The decrease in expenditures is due
mainly to development spending for Invicorp and Reliaject, other than Invicorp
trials in the US, reaching final stages.
In August 1999 Senetek announced that it had received word from the Medicine
Control Agency in the United Kingdom and the FDA of the US that a competitor's
safety trial on phentolamine mesylate revealed pre-clinical tumours
(proliferation of brown fat cells). These findings are preliminary . The FDA
definition of tumour is very broad and encompasses any growth, inflammatory or
13
<PAGE>
non inflammatory, benign or malignant and includes proliferation of brown fat
cells. It is noteworthy to mention that in Spain, Holland and some other
European Union ("EU") countries, a product containing phentolamine mesylate has
been recently approved for use in erectile dysfunction.
Research and Development expenditures for the first nine months of 1999 were
$2,400,000, a substantial decrease of 56.6% from $5,536,000 compared to the
first nine months of 1998. Research spending on Invicorp development has
declined as clinical trials for EU countries have reached completion and
Invicorp has received approval from Medical Evaluation Agencies in Europe and
New Zealand.
The Pharmaceutical Sector research and development accounted for 98.5% of our
total research and development spending for the first nine months of 1999,
compared to 99.6% for the first nine months of 1998.
General and Administration
- --------------------------
General and Administration ("G&A") expenses for the third quarter of 1999
totaled $947,000, a decrease of 65.4% from $2,736,000 in the third quarter of
1998.
Pharmaceutical Sector general and administrative expenses for the third quarter
of 1999 totaled $683,000, a decrease of 71.0% from $2,356,000 in the third
quarter of 1998. This decrease is mainly due to the net savings arising from the
corporate restructuring and cost reduction programs combined with stricter
management controls. The main results of the program were the substantial
reduction of our headcount and the consolidation of our US and UK offices.
During the third quarter of 1999, we cancelled 350,000 non vested stock options
granted to certain executives under the No.1 stock option scheme, who have left
the Company and signed Release and Settlement agreements. As of June 30, 1999
we had accrued $840,000 of stock compensation expense in accordance with
Accounting Principles Board Opinion No. 25 for these non vested stock options.
We reversed the accrual in the third quarter of 1999 and recognized a credit
to G&A of $840,000. We recognized $15,000 of stock compensation expense on the
remaining non vested stock options granted under the No.1 scheme in the third
quarter of 1999. During the third quarter of 1998 we recognized $1,102,000 of
stock compensation expense. The stock compensation expense credit was
partially offset by approximately $400,000 of legal expenses booked in the
third quarter of 1999.
Skincare and Health and Beauty Sector general and administration expenses for
the third quarter of 1999 totaled $264,000, a decrease of 30.5% from $380,000
in the third quarter of 1998. This is due mainly to a decrease in administrative
activities following the set up of licensing arrangements for the Mill Creek
product line. The majority of the Carme business now involves the supply of
kinetin products to ICN Pharmaceuticals.
General and Administration expenses for the first nine months of 1999 totaled
$4,625,000, a decrease of 28.5% from $6,472,000 in the first nine months of
1998.
Pharmaceutical Sector general & administration expenses for the first nine
months of 1999 totaled $3,693,000, a decrease of 32.2% from $5,447,000 in the
first nine months of 1998. This decrease is mainly due to the net savings
arising from the corporate restructuring and cost reduction program. The main
results of the program were the substantial reduction of our headcount and the
consolidation of offices mentioned below. We recognized during the first nine
months of 1999, an overall credit to stock compensation expense of $24,000. This
number is reconciled as follows: (1) stock compensation expense for employee
based stock option plans in accordance with Accounting Principle Board Opinion
No. 25 of $396,000 and $420,000 for non employee based stock option plans in
accordance with Financial Accounting Standard No 123 and (2) reversal of
previously recorded stock compensation expense on the cancellation of non vested
options of $840,000. The stock compensation benefit has been partially offset by
one time costs incurred in our Corporate restructuring program which was
launched at the end of 1998. In May 1999 we closed our UK, London operations and
combined those functions in our UK Kettering office. We also pared down our UK
clinical monitoring and development staff and have substantially moved these
functions to our Napa office. The reduction in headcount was 6 people and the
severance packages of $125,000 which included full settlement with a former
Director, were expensed in the second quarter of 1999. Also, during the third
quarter of 1999 we closed our St Louis research facility and transferred their
functions to Napa. The financial impact of the St Louis closure are annualized
savings of approximately $300,000 in salaries and office overheads. Furthermore,
we settled our legal disputes with a former director and consultant and
recognized the settlement costs of $77,000 in the second quarter of 1999. Also,
in the third quarter we executed Release and Separation agreements with our
former Chairman and CEO and our former President and COO both of whom left our
employment towards the end of the fourth quarter 1998. In the case of the
Chairman and CEO there were no settlement costs and 1.5 million stock options
were cancelled. In the case of the President and COO we settled outstanding
expenses of $23,000 and cancelled 500,000 stock options. We also incurred in the
second quarter of 1999 expenses of $140,000 relating to the write off of expense
advances for former employees. Legal costs of approximately $1,510,000 relating
primarily to the settlements of disputes
14
<PAGE>
arising from commitments made by former management to lenders, together with
disputes with former employees and consultants and, to a lesser extent, the
April financings, were incurred in the second and third quarters of 1999.
Skincare and Health and Beauty Sector general and administration expenses for
the first nine months of 1999 totaled $932,000, a decrease of 9.1% from
$1,025,000 in the first nine months of 1998. This is due mainly to the
restructuring of the skincare and health and beauty sector during the first
quarter of 1999, the licensing of kinetin products and the establishment of
licensing arrangements for the Mill Creek and Allercreme product lines.
Marketing and Promotion
- -----------------------
Marketing and promotion expenses in the third quarter of 1999 totalled $5,000, a
decrease of 99.1% from $536,000 in the third quarter of 1998. The decrease is
mainly due to the elimination of non-essential public relations, advertising and
marketing consulting spending.
Pharmaceutical Sector marketing and promotion expenses for the third quarter of
1999 were $5,000, a decrease of 98.9% from $448,000 in the third quarter of
1998. The decrease is mainly due to the elimination of consulting arrangements
and non-essential pubic relations spending.
Skincare and Health and Beauty Sector marketing and promotion expenses for the
third quarter of 1999 were zero, a decrease of 100% from $88,000 in the third
quarter of 1998. All our skincare products are now licensed to third parties who
incur the marketing and promotion expenditures.
Marketing and promotion expenses in the first nine months of 1999 totalled
$224,000, a decrease of 77.2% from $983,000 in the first nine months of 1998.
The decrease is mainly due to the elimination of non-essential public relations,
advertising and marketing consulting spending.
Pharmaceutical Sector marketing and promotion expenses for the first nine months
of 1999 were $165,000, a decrease of 78.7% from $776,000 in the first nine
months of 1998. The decrease is mainly due to decreased levels of external
consulting as these activities were brought in house.
Skincare and Health and Beauty Sector marketing and promotion expenses for the
first nine months of 1999 were $59,000, a decrease of 71.5% from $207,000 in the
first nine months of 1998. The decrease is the result of a focused marketing
plan which has resulted in all the Skincare product lines coming under third
party licensing arrangements.
Selling
- -------
No field selling expenses have been recorded in the third quarter of 1999, a
decrease of $147,000 from the third quarter of 1998. This is due to the
establishment of licensing and distribution arrangements in Skincare and Health
and Beauty sector coupled with the elimination of direct selling activities.
No field selling expenses have been recorded for the first nine months of 1999,
a decrease of $381,000 from the first nine months of 1998. This is due to the
streamlining of the Skincare and Health and Beauty sector as discussed above.
OPERATING PROFIT/<LOSS>
Operating profit for the third quarter of 1999 totaled $393,000, an increase of
108% from an operating loss of $5,166,000 in the third quarter of 1998.
The operating loss in the pharmaceuticals sector for the third quarter of 1999
totaled $1,169,000, a decrease of 76.0% from $4,856,000 in the third quarter of
1998. This is mainly due to decreased research and development spending as
product development reaches its final stages, and reduced G&A costs, relating to
the reversal of stock compensation expense which was substantially offset by
high one time legal costs incurred in the implementation of our corporate and
debt restructuring program.
Operating profit in the skincare and health and beauty sector for the third
quarter of 1999 totaled $1,562,000, an increase of 604% from an operating loss
of $310,000 in the third quarter of 1998. This was due mainly to increased sales
of the Company's kinetin products, a higher margin product line, and decreased
operating spending.
The operating loss for the first nine months of 1999 totaled $3,704,000, a
decrease of 68.4% from $11,730,000 in the first nine months
15
<PAGE>
of 1998.
The operating loss in the pharmaceuticals sector for the first nine months of
1999 totaled $5,618,000 a decrease of 49.2% from $11,059,000 in the first nine
months of 1998. This is mainly due to decreased research and development and
administrative spending during the period. This is partly offset by the higher
levels of non-recurring general and administrative expense in the period as
discussed above.
Operating profit in the skincare and health and beauty sector for the first nine
months of 1999 totaled $1,914,000, an increase of 385% from an operating loss of
$671,000 in the first nine months of 1998. This was due mainly to sales of the
Company's Kinetin products, a higher margin product line and decreased operating
spending.
Since the beginning of 1999, the new management team at Senetek has focused its
efforts on increasing revenues, reducing cost and obtaining sufficient cash
resources to fund the Company's growth. The table below shows the progress in
operating results that has been achieved over the first three quarters of 1999.
<TABLE>
<CAPTION>
Three months ended Three months ended Three months ended
September 30,1999 June 30, 1999 March 31,1999
------------------ ------------------ ------------------
<S> <C> <C> <C>
Revenues
Product sales 3,405 100% 1,759 100% 934 100%
Cost of sales 1,340 39% 620 35% 593 63%
------------------ ------------------ ------------------
Gross Profit 2,065 61% 1,139 65% 341 37%
Operating expenses
Research and Development 720 21% 811 46% 869 93%
General and Administration 947 28% 2,093 119% 1,585 170%
Marketing and Promotion 5 --% 128 7% 91 10%
------------------ ------------------ ------------------
Total Operating expenses 1,672 49% 3,032 172% 2,545 272%
Operating Profit/<Loss> 393 12% <1,893> <108>% <2,204> <236>%
</TABLE>
Aggressive marketing of our Kinetin based products has led to significant
revenue growth. Even though we are still early in the product introduction
cycle, we are very pleased with the market response and we continue to expand
our licensing activities.
Through effective consolidation and company restructuring we have reduced our
operating costs and gained efficiency in our overall operations. Our general
and administrative expenditures during the three months ended September 30, 1999
were significantly reduced from the expenditure levels during the three month
periods ended March 31, 1999 and June 30, 1999.
Management continues to focus its efforts on improving operating results.
OTHER INCOME AND EXPENSE AND EXTRAORDINARY ITEM
Included in other expense for the first nine months of 1999 is $2.7 million
relating to the fair value of Series A warrants and Ordinary shares issued to
Windsor Capital and others for the settlement of disputes arising from
commitments made by the previous management of the Company.
As discussed in Note 3 to the unaudited financial statements, the Company
refinanced $2.4 million in debt during the first none months of 1999. The terms
of the refinance represented a substantial modification of the original terms,
resulting in a $1.7 million loss.
In April 1999 we received $4.8 million (net of expenses) in cash and refinanced
$2,389,000 of our previously outstanding debt, that would have been due in April
2000, for two new notes bearing interest at 8% per annum and maturing in April
2002. For the period April 14, 1999 through September 30, 1999 $271,000 of
interest expense was incurred.
The fair value of the Series A and B warrants issued in connection with the
financing of $5 million was calculated using the Black Scholes option pricing
model. The fair value of these warrants was recorded as a deferred financing
cost and will be amortized on a straight line basis over the period April 1999
to April 2002. For the first nine months of 1999 these amortization costs
amounted to $850,000.
There were no similar charges in the corresponding periods of 1998.
16
<PAGE>
TAXATION
- --------
Gross deferred tax assets, which approximate $19.0 million, and relate
periodically to substantial cumulative net operating losses incurred are 100%
reserved as realization is not considered more probable than not.
LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of 1999, the Company's liquidity represented by
cash and deposits at banks increased by $787,000 to $1,595,000. Although the
Company experienced negative cash flow during the first six months of 1999, its
activities resulted in positive cash flow during the three months ended
September 30, 1999.
Net cash used by operating activities from continuing operations totaled
$2,018,000 in the first nine months of 1999, a decrease of $9,378,000 from the
first nine months of 1998. The overall decrease was partially attributed to the
$5,850,000 decrease in operating losses adjusted for non cash expenses and
$3,528,000 for changes in working capital. The marketing of our kinetin based
products through ICN Pharmaceuticals and Osmotics Corporation has lead to
significant revenue growth. However, the increased kinetin revenues may not have
an immediate positive effect on liquidity due to our investment in accounts
receivable and inventory net of financing through accounts payable. Also our
consolidation and corporate restructuring programs have greatly reduced our
operating costs. The financing completed in April 1999 and discussed below has
so far proved sufficient to fund our growth and current monthly cash revenues
are in excess of current monthly cash operating expenses.
History of Losses
- -----------------
Although we were formed almost 16 years ago in October 1983, our business is
subject to the risks inherent in the establishment of a relatively new business
enterprise in the field of biopharmaceuticals.
The likelihood of the success of our business must be considered in light of the
problems, expenses, difficulties and delays frequently encountered in connection
with the development of new products and the competitive and regulatory
environment in which we are operating. Since inception, the Company has only
produced $26,216,000 in gross revenues and has cumulative losses of $81,022,000
(including a net loss of $22,492,000 in fiscal 1998).
There can be no assurance that marketing of our biopharmaceutical products will
begin when we anticipate, if at all, or that revenues from our other products,
including Kinetin, will rise to a level that will allow us to operate profitably
during the fiscal year ending December 31, 2000.
With respect to our recurring operating cash losses, we have implemented major
cost reduction programs in 1999 to reduce operating expenses to include:
. In the UK, effective May 31, 1999 we combined two offices into one with
a 55% reduction in staff.
. In the US, effective August 31, 1999 we closed our St Louis research
facility with a reduction in headcount of 4.
. Effective January 1999 a substantial reduction of costs in the areas of
public relations, advertising and travel.
. In the US, the licensing of our Mill Creek product line in the second
quarter of 1999, enabled us to reduce substantially our Carme
Cosmeceutical Sciences operation, allowing us to start negotiations for
the sublease of up to 40% of our Napa facility. The Mill Creek
agreements provide for a non-refundable licensing fee, the purchase of
inventory and guaranteed quarterly royalty payments.
Need for Financing
- ------------------
Our monthly cash requirements have been substantially reduced in 1999 to less
than 50% of the average monthly 1998 rate. The company believes that its
current cash position and anticipated revenues from the sale of its products
will provide sufficient cash flow to
17
<PAGE>
finance its operations through fiscal year 1999. The company expects to require
additional sources of liquidity, either through an increase in revenue or
external funding sources, to fund its operations during fiscal year 2000. It
should be noted that additional revenue sources will not have an immediate
effect on liquidity due to our investment in net working capital. If the company
fails to obtain the necessary external financing or to generate sufficient
revenues from its continuing operation it will be required to curtail its
operations. There can be no assurance that we will generate sufficient revenues
in fiscal year 2000 or that we will be able to obtain necessary financing from
external sources. If our cash requirements cannot be successfully addressed,
there would be a material adverse effect on our business, financial condition
and results of operations. Further, our independent auditors report on our 1998
consolidated financial statements stated that "[Senetek] has suffered recurring
losses from its operations and . . . its ability to continue research activities
to a stage where it has a product able to be commercialised is dependent upon
[Senetek's] ability to continue as a going concern."
FACTORS AFFECTING THE COMPANY
Dependence on Key Personnel
- ---------------------------
We are dependent upon the services of Mr. Frank Massino, our Chairman and Chief
Executive Officer. If Mr. Massino was unable to provide his services to us for
whatever reason, our business could be adversely affected. Since Mr. Massino is
involved in most aspects of our business, there can be no assurance that a
suitable replacement could be found if he was unable to perform services for us.
In addition, our ability to market our products and fulfil our business plan
will depend, in large part, upon our ability to attract and retain qualified
personnel in our field. Competition for such personnel is intense and there can
be no assurance that we would be able to attract or retain such personnel.
At the present time we have a $1 million key man life insurance policy in effect
on Frank J. Massino our Chairman and Chief Executive Officer.
Product Research and Technological Obsolescence
- -----------------------------------------------
We are engaged in a field characterized by extensive research efforts. Despite
our current access to leading expertise in the field, there remains a risk that
the research financed by us in the future could prove unproductive.
Furthermore, there can be no assurance that research and discoveries by other
companies will not render our programs superfluous or obsolete. This is true for
all companies who operate in the same field.
Exposure to Liability for the Company's Products
- ------------------------------------------------
During recent years, lawsuits resulting in very substantial liability have been
filed against companies engaged in the manufacture of pharmaceutical and other
medical-related products or devices which have subsequently proved harmful to
human health. Many of these cases have exposed companies to liability long
after the products have been brought to market, even though, at the time of
their development, based on extensive research, there were no perceived risks of
injury. Thus, notwithstanding FDA or other foreign governmental approval, there
can be no assurance that we will not be subject to liability from the use of our
products. There is no assurance that product liability coverage will be
adequate to protect against future claims. Management intends to have third
parties manufacture and distribute certain of our products and believes that our
exposure to liability will thereby be lessened. However, there can be no
assurance that this result will be achieved.
Reliance on Suppliers
- ---------------------
We contract out manufacture of all of our products and purchase raw materials
from third-party suppliers. We recently established a dual supply chain for
Kinetin.
Although we believe that other suppliers are available who can produce similar
materials and products, there can be no assurance that such materials would be
available to us on an immediate basis if needed, or at prices similar to those
now paid by us.
18
<PAGE>
Product Liability Risks of Cosmetics
- ------------------------------------
We are subject to the risk of product liability claims related to the use of our
products which are designed for application to human hair and skin. We carry
product liability insurance which management believes will be adequate to cover
risks associated with such use; however, there can be no assurance that existing
or future insurance coverage will be sufficient to cover any possible product
liability risks or that such insurance will continue to be available to us on
economically feasible terms.
YEAR 2000 COMPUTER SOFTWARE CONVERSION
The Problem
- -----------
The term "Year 2000 issues" is used to describe the various problems that may
result from the improper processing of dates and date-sensitive calculations by
computers and other machinery as the year 2000 approaches. These problems
generally arise from the fact that most of the world's computer hardware and
software have used only two digits to identify the year in a date, often meaning
that the computer will fail to distinguish dates in the "2000's" from those in
the "1900's." This could result in system failure or miscalculations causing
disruptions of operations including, among other things, a temporary inability
to process transactions, send invoices or engage in similar normal business
activities.
Our State of Readiness
- ----------------------
We have instituted a year 2000 project. As a part of this project, we have
completed an initial evaluation of our computer systems and significant software
programs, including our network hardware and operating system and accounting and
business process software, as well as our non-information technology systems.
In anticipation of potential year 2000 system problems, we have begun to replace
our management information systems with a platform designed to be year 2000
compliant. We expect to complete this process by the end of November 1999. We
have retained a consulting firm to co-ordinate successful system implementation,
including testing for year 2000-related problems. We will commence testing for
year 2000 compliance upon full implementation of our new system and will
continue this testing throughout 1999. We presently believe that upon
completion of successful system conversions, the year 2000 issue will not pose
significant operational problems for us. However, although our new systems are
designed to be year 2000 compliant, we cannot assure you that the systems
contain all necessary data code changes. If we do not complete our conversions
in a timely fashion, the year 2000 issue could have a material impact on our
operations.
As a part of our year 2000 project, we have assessed our products in connection
with year 2000 issues. Our products do not contain any software, date-sensitive
fields or embedded microprocessors; therefore, we do not believe that our
products will present year 2000 issues.
We are also in the process of contacting our vendors and other third parties on
which we rely to obtain information about their year 2000 compliance. We plan
to complete these contacts by the end of November 1999. Based on our review of
responses we have received to date, we do not expect this issue to have a
material adverse effect on our business.
The Costs to Address Our Year 2000 Issues
- -----------------------------------------
In 1998, we spent approximately $130,000 to address year 2000 issues, including
new hardware, software and networking capabilities. We expect that our
assessment, remediation and contingency planning activities for its internal
systems will be ongoing through 1999. We currently expect the total cost for
these activities to be approximately $20,000 in 1999. This cost estimate does
not include replacement of internal software and hardware in the normal course
of business. We do not believe that these costs will materially affect our
liquidity or financial condition. The costs of our year 2000 project and the
date established for completion of year 2000 modifications are based on our
management's best estimates, which were derived using numerous assumptions of
future events, including the continued availability of certain resources, third
party modification plans and other factors. We cannot guarantee that we will
achieve these estimates; actual results could differ materially from those we
currently anticipate.
The Risks Associated With Our Year 2000 Issues
- ----------------------------------------------
Our failure to resolve year 2000 issues by December 31, 1999 could result in
system failures or miscalculation, causing disruptions in our operations and
normal business activities. In addition, the failure of our vendors or other
third parties on whom we rely to remediate their year 2000 issues could result
in disruptions in our ability to obtain parts and materials or other problems
related to our daily operations. Since third party year 2000 compliance is not
within our control, and since we have not completed the process of obtaining
compliance information from vendors and others, we cannot assure that a vendor's
or other third party's failure to achieve year 2000 compliance would not have a
material adverse effect on our business.
19
<PAGE>
Part II OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
On June 11, 1998 we filed a lawsuit against Mad Dogs & Englishmen Inc. and Mad
Dog Enterprises d/b/a Mad Dogs & Englishmen (together " Mad Dogs") in the
Supreme Court of New York. On December 11, 1996 we entered into a written
agreement with Mad Dogs under which Mad Dogs agreed to promote our cosmetics
business and to hire a consultant familiar with the Cosmetics industry in
connection therewith. We are seeking damages of approximately $ 10 million for a
breach of that agreement. Mad Dogs served us with an answer to our complaint in
August 1998. There have been no substantive developments in the lawsuit since
the filing of the answer to our complaint.
Ronald Trahan Associates, Inc. ("RTA") and Ronald C. Trahan ("Trahan") have
filed a lawsuit against Senetek PLC claiming breach of an alleged contract
between Ronald Trahan Associates, Inc. and Senetek. The plaintiff alleges
damages approximating $ 170,000. The plaintiff also claims a right to treble
damages. This breach of contract claim was filed around January 25,1999 in
Middlesex Superior Court in Massachusetts. On March 8, 1999, we removed the
lawsuit to the U.S. District Court for the District of Massachusetts. We have
entered into a settlement agreement with the plaintiffs dated August 6, 1999
pursuant to which the parties agreed to release all claims against each other
and terminate the lawsuit in exchange for our payment of $13,500 to RTA and our
issuance to Trahan of options to purchase 60,000 Ordinary shares.
During the third quarter 1999, David Carey, former Vice President - Finance
filed a lawsuit against Senetek PLC claiming breach of his employment contract
on March 5, 1999. The plaintiff alleges damages of $45,000, which represents six
months salary and benefits. We intend to defend against the lawsuit vigorously.
At the beginning of the fourth quarter 1999, Gerlof Homan, former Chief
Scientific Adviser filed a lawsuit against Senetek PLC claiming breach of his
employment contract on August 1, 1999. Dr. Homan's employment agreement provides
for the payment of an annual salary of $200,000, health insurance, life
insurance and a car allowance of $750 per month. The agreement stipulates that
there are no fixed hours of work. The plaintiff alleges damages of $89,080,
which represents five months salary and benefits under the terms of his
Employment arrangement. We intend to defend against the lawsuit vigorously.
20
<PAGE>
Item 2. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the third quarter of 1999.
21
<PAGE>
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
SENETEK PLC
(Registrant)
Date: November 12, 1999 /S/FRANK J MASSINO
------------------ ---------------------
Frank J Massino
Chief Executive Officer
Date: November 12, 1999 /S/STEWART W SLADE
------------------ ---------------------
Stewart W Slade
Chief Financial Officer
22
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH (B) CONSOLIDATED FINANCIAL STATEMENTS AND NOTES.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,595
<SECURITIES> 0
<RECEIVABLES> 1,254
<ALLOWANCES> 0
<INVENTORY> 526
<CURRENT-ASSETS> 4,934
<PP&E> 5,040
<DEPRECIATION> 0
<TOTAL-ASSETS> 14,519
<CURRENT-LIABILITIES> 8,678
<BONDS> 0
0
0
<COMMON> 4,696
<OTHER-SE> (6,070)
<TOTAL-LIABILITY-AND-EQUITY> 14,519
<SALES> 6,098
<TOTAL-REVENUES> 6,098
<CGS> 2,553
<TOTAL-COSTS> 2,553
<OTHER-EXPENSES> 7,249
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,083
<INCOME-PRETAX> (7,397)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,397)
<DISCONTINUED> 0
<EXTRAORDINARY> (1,657)
<CHANGES> 0
<NET-INCOME> (9,054)
<EPS-BASIC> (0.16)
<EPS-DILUTED> (0.16)
</TABLE>
