UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: March 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission file number: 0-25726
SEPRAGEN CORPORATION
(Exact name of small business issuer as specified in its charter)
California 68-0073366
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
30689 Huntwood Drive, Hayward, California 94544
(Address of principal executive offices)
(Issuer's telephone number (including area code): (510) 476-0650
(Former name, former address and former fiscal year if changed since last
report:
30689 Huntwood Drive, Hayward, California 94544
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the issuer was required to file such reports),and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
State the number of shares outstanding of each of the registrant's classes
of Common equity, as of the latest practicable date:
May 10, 1996
Class A Common Stock 2,070,000
Class B Common Stock 786,431
Class E Common Stock 1,209,894
THIS REPORT INCLUDES A TOTAL OF 20 PAGES. THE EXHIBIT INDEX IS ON PAGE 10.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SEPRAGEN CORPORATION
CONDENSED BALANCE SHEETS
ASSETS
March 31, 1996 December 31, 1995
(unaudited)
Current Assets:
Cash and cash equivalents. . . . . . . . . $ 119,674 $ 23,364
Marketable securities . . . . . . . . . . . 2,347,668 3,586,145
Accounts receivable, less allowance for
doubtful accounts of $30,459 as of
March 31, 1996 and December 31, 1995 . . . . 579,171 278,688
Inventories. . . . . . . . . . . . . . . . . . 645,550 777,620
Prepaid expenses and other . . . . . . . . . . .24,670 57,130
Total current assets. . . . . . . . . . . 3,716,733 4,722,947
Furniture and equipment, net . . . . . . . . . . 449,250 252,150
Intangible assets. . . . . . . . . . . . . . . . 111,709 111,709
$4,277,692 $5,086,806
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable . . . . . . . . . . . . . $ 273,499 $ 230,799
Accrued liabilities. . . . . . . . . . . . . . .95,260 174,395
Accrued payroll and benefits . . . . . . . . . .88,841 80,633
Interest payable . . . . . . . . . . . . . . . . . .-- 4,285
Total current liabilities. . . . . . . . . . 457,600 490,112
Class E common stock, no par value - 1,600,000
shares authorized; 1,209,894 shares issued
and outstanding at March 31, 1996 and December
31, 1995; redeemable at $.01 per share . . . . . . .-- --
Shareholders' equity:
Preferred stock, no par value - 5,000,000
shares authorized; none issued or outstanding
at March 31, 1996 and December 31, 1995. . . . . .-- --
Class A common stock, no par value-20,000,000
shares authorized; 2,070,000 shares issued
and outstanding at March 31 1996 and at
December 31, 1995. . . . . . . . . . . . . 8,353,737 8,353,737
Class B common stock, no par value -
2,600,000 shares authorized; 786,431
shares issued and outstanding at March
31, 1996 and at December 31, 1995. . . . . 4,559,956 4,559,956
Unrealized loss on available-for-sale
securities . . . . . . . . . . . . . . . . . (12,315) (14,462)
Accumulated deficit. . . . . . . . . . . . .(9,081,286) (8,302,537)
Total shareholders' equity . . . . . . . . . 3,820,092 4,596,694
$4,277,692 $5,086,806
The accompanying notes are an integral part of these condensed financial
statements
SEPRAGEN CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Twelve Months
Ended March 31, Ended March 31,
1996 1995 1996
Revenues:
Net Sales. . . . . . . . . . . . $ 632,662 $465,120 $1,213,798
Costs and expenses:
Cost of goods sold . . . . . . . . . 451,638 223,421 913,508
Selling, general and
administrative . . . . . . . . . . 637,851 331,281 2,586,700
Research and development . . . . . . 362,838 154,121 1,286,059
Total costs and expenses . . . 1,452,327 708,823 4,786,267
Loss from operations. . . . . .(819,665) (243,703) (3,572,469)
Interest income (expense), net . . . . .40,916 (141,821) (266,387)
Net loss . . . . . . . . . . . . .$ (778,749) $(385,524) $(3,838,856)
Net loss per common and common
equivalent share . . . . . . . . . . . $(.27) $(.43) $(1.36)
Weighted average shares
outstanding. . . . . . . . . . . . 2,856,431 904,461 2,824,270
The accompanying notes are an integral part of these condensed financial
statements
SEPRAGEN CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
1996 1995
Cash flows from operating activities:
Net Loss . . . . . . . . . . . . . . . . . . . $ (778,749) $ (385,524)
Adjustments to reconcile net loss to net cash and
cash equivalents used in operating activities:
Depreciation . . . . . . . . . . . . . . . . . . .23,271 5,476
Changes in assets and liabilities:
Accounts receivable . . . . . . . . . . . .(300,483) (99,962)
Inventories . . . . . . . . . . . . . . . . 132,070 (128,868)
Prepaid expenses and other. . . . . . . . . 32,460 87,112
Accounts payable. . . . . . . . . . . . . . .42,700 182,738
Accrued liabilities . . . . . . . . . . . . (79,135) (110,586)
Accrued payroll and benefits. . . . . . . . . 8,208 32,185
Interest payable. . . . . . . . . . . . . . .(4,285) (17,113)
Net cash used in operating activities. . . . . . . .(923,943) (434,542)
Cash flows from investing activities:
Acquisition of furniture and equipment . . . . . .(220,371) (14,308)
Acquisitions of marketable securities. . . . . . .(259,514) --
Proceeds from sale of marketable securities. . . 1,500,138 --
Net cash provided by (used in) investing
activities . . . . . . . . . . . . . . . . . . . 1,020,253 (14,308)
Cash flows from financing activities:
Proceeds from issuance of common stock . . . . . . . . .-- 7,720,845
Repayment of bridge notes payable. . . . . . . . . . . .-- (1,550,000)
Net cash provided by financing activities. . . . . . . . .-- 6,170,845
Net increase in cash . . . . . . . . . . . . . . . . .96,310 5,721,995
Cash and cash equivalents at the beginning
of the period. . . . . . . . . . . . . . . . . . . .23,364 240,472
Cash and cash equivalents at the end
of the period. . . . . . . . . . . . . . . . . . .$119,674 $5,962,467
Supplemental disclosure of non-cash financing activities:
Conversion of note payable to shareholder
and related interest to common stock . . . . . . . . .-- $794,909
Deferred costs of securities registration offset
against proceeds from issuance of common stock . . . .-- $478,494
Net unrealized gain on available-for-
sale securities. . . . . . . . . . . . . . . . . .$2,147 --
The accompanying notes are an integral part of these condensed financial
statements
SEPRAGEN CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE MONTH PERIOD ENDED MARCH 31, 1996
(Unaudited)
Note 1 - Interim Financial Reporting.
The accompanying unaudited interim financial statements have been prepared
pursuant to the rules and regulations for reporting on Form 10-QSB.
Accordingly, certain information and footnotes required by generally
accepted accounting principles have been condensed or omitted. These
interim statements should be read in conjunction with the financial
statements and the notes thereto, included in the Sepragen Corporation's
(the "Company's") Annual Report on Form 10-KSB for the year ended December
31, 1995.
The December 31, 1995 balance sheet was derived from audited financial
statements, but does not include all disclosures required by generally
accepted accounting principles. The unaudited interim condensed financial
statements have been prepared on the same basis as the audited annual
financial statements, and in the opinion of management, contain all
adjustments (consisting of only normal recurring adjustments) necessary to
present fairly the financial information set forth therein, in accordance
with generally accepted accounting principles. The Company's quarterly
results may be subject to fluctuations. As a result, the Company believes
its results of operations for the interim period are not necessarily
indicative of the results expected for any future period.
The Company will be required to conduct significant research, development
and testing activities which, together with expenses to be incurred for
manufacturing, the establishment of a large marketing and distribution
presence and other general and administrative expenses, are expected to
result in operating losses for the next few years. Accordingly, there can
be no assurance that the Company will ever achieve profitable operations.
The Company expects to have sufficient working capital to support its
operating needs for up to a sixteen month period from December 31, 1995.
There is no assurance, however, that sufficient revenues will be generated
in this and future periods to fund the Company's operations, which would
result in the Company needing to raise additional financing at a
later date.
Note 2 - Initial Public Offering.
The Company's initial public offering was declared effective by the
Securities and Exchange Commission on March 23, 1995. The offering of
1,800,000 Units, each consisting of one share of Class A common stock, one
redeemable five year Class A warrant and one redeemable five year Class B
warrant, provided net proceeds of $7,242,351 to the Company. On the
effective date of the offering, the Company issued 57,224 shares of Class
B common stock and 88,039 shares of Class E common stock in exchange for
the cancellation of a note payable to a shareholder of $727,000 and
related accrued interest of $67,909. In May, 1995, the underwriter
exercised its overallotment option for 270,000 Units, generating an
additional $1,181,386 of net proceeds to the Company.
Note 3 - Net Loss Per Share.
Net loss per common and common equivalent share is computed using the
weighted average number of common shares and common equivalent shares
outstanding during each period. Restricted shares issued as Class E
common shares and contingent options are considered contingently issuable
and, accordingly, are excluded from the weighted average number of common
and common equivalent shares outstanding. For the periods ended March 31,
1996 and 1995 common equivalent shares relating to options have been
excluded as they are anti-dilutive.
Note 4 - Inventory.
Inventories consist of the following:
3/31/96 12/31/95
Raw Materials. . . . . . . . . . . $393,383 $459,474
Finished Goods . . . . . . . . . . 252,167 318,146
$645,550 $777,620
Item 2. Management's Discussion and Analysis.
First quarter 1996 compared to first quarter 1995
Net sales increased by $168,000 or 36% from the first quarter of 1995. The
increase in sales is due primarily to the shipment of two large
QuantaSeps, a computer controlled liquid chromatography system.
Gross Margin decreased by $61,000 or 25% from the first quarter of the
prior year, and as a percent of sales, decreased from 52% to 29%. This
decrease was attributable to higher material cost and development
of software for the large QuantaSeps.
Selling, general and administrative expenses increased by $307,000 from
$331,000 in the first quarter of 1995 to $638,000 in the first quarter of
1996. The increase was primarily due to: the hiring of additional
personnel in sales and marketing, corporate development and
administration; additional expenses related to training, advertising and
promotion, public relations, product evaluation and demonstration;
and additional legal, accounting, insurance and other costs incurred
in complying with the requirements of being a publicly held company and
that were not require as a privately held company.
Research and development expenses increased by $209,000 from $154,000
in the first quarter of 1995 to $363,000 in the first quarter of 1996.
The increase was attributable to expenditures related to the development
of a process for dairy whey fractionation, expenditures related to the
development of a special absorbent media and further development of
QuantaSep products.
Interest income, net for the first quarter of 1996 reflects interest
income earned on the proceeds of the initial public offering.
Inflation
The Company believes that the impact of inflation on its operations
since its inception has not been material.
Volatility of Sales
In the last several years, the Company has experienced a relative
increase in customer equipment orders in the third and fourth quarters
and a relative decrease in orders in the first and second quarters.
The Company believes this fluctuation relates to capital appropriations
and spending cycles in the biopharmaceutical business.
Liquidity and Capital Resources.
The Company had working capital of $3,259,000 on March 31, 1996 and
$4,233,000 on December 31, 1995. The decrease in the working capital of
$974,000 reflects the use of net cash in operating activities and
leasehold improvements.
Since the IPO, the Company has funded its working capital
requirements substantially from the net cash proceeds from the IPO. Prior
to the IPO, the Company had funded its activities primarily through sales
of its Superflo(R) columns and QuantaSep(R) systems, loans from its
principal shareholders, and private placements of securities. The IPO
generated net proceeds of $7,242,000 and the exercise by the underwriter
of its over allotment option generated additional net proceeds of
$1,111,000.
From its inception in 1985 until the IPO, the Company's
expenditures have exceeded its revenues. Prior to the IPO, the Company
financed its operations primarily through private equity placements in an
aggregate amount of approximately $3,971,000, a substantial portion of
which was purchased by H. Michael Schneider, the secretary and a director
of the Company until October 1, 1995, and his affiliates, including Romic
Environmental Technologies Corporation ("Romic"), an entity controlled by
Mr. Schneider. In addition, the Company has historically relied on
customers to provide purchase price advances for development and scale-up
of its radial flow chromatography columns. As of March 31, 1996, the
Company had shareholders' equity of approximately $3,820,000.
As of March 31, 1996, the Company had a working capital balance of
approximately $3,259,000. For the quarter ended March 31, 1996, net cash
used in operating activities was $924,000. This negative cash out flow of
working capital from operations must be reversed and working capital
increased significantly in order for the Company to fund the level of
manufacturing and marketing required to meet the anticipated growth in
demand for its products from the pharmaceutical and biotechnology
industries during the next two years. Moreover, the Company requires
additional funds to extend the use of its technology to new applications
within the pharmaceutical and biotechnology industries as well as to
applications within the food and dairy and environmental industries and to
attract the interest of strategic partners in one or more of these
markets.
The decrease of $132,070 in inventory from December 31, 1995 to
March 31, 1996 was due primarily to the shipment of two large QuantaSep
Systems.
As of March 31, 1996, the Company had no borrowings. During fiscal
year 1996, the Company is committed to pay approximately $245,000 as
compensation for its current executive officers. The Company expects to
hire additional executive officers as the need arises.
The Company's financing requirements may vary materially from
those now planned because of results and changes in the focus and
direction of research and development programs, relationships with
strategic partners, competitive advances, technological change, changes in
the Company's marketing strategy and other factors, many of which will be
beyond the Company's control. Based on the Company's current operating
plan, the Company believes that the net proceeds of the 1995 IPO, together
with trade credit arrangements and cash flow generated from operations,
will be sufficient to fund the Company's operations for the sixteen month
period following December 31, 1995. The Company's cash requirements may
vary materially from those planned because of factors such as the timing
of significant product orders, commercial acceptance of new products,
patent developments and the introduction of competitive products. The
Company currently has no credit facility with a bank or other
financial institution. Historically, the Company and certain of its
customers have jointly borne a substantial portion of developmental
expenses on projects with such customers. There can be no assurance that
such sharing of expenses will continue. The Company continues its efforts
to increase sales of its existing products and to complete development and
initiate marketing of its products and processes now under development.
The Company is seeking to enter into strategic alliances
with corporate partners in the industries comprising its primary target
markets (biopharmaceutical, food, dairy and environmental management).
The Company hopes to enter into alliances that will provide funding to the
Company for the development of new applications of its radial flow
chromatography technology in return for royalty bearing licenses to the
developed applications. No assurance can be given, however, that the
terms of any such alliance will be successfully negotiated or that any
such alliance will be successful.
The Company's Class A Common Stock, Class A Warrants, Class B
Warrants and Units are quoted on the NASDAQ SmallCap Market and the
Company has listed its securities on the Pacific Stock Exchange.
The Company entered into a lease for new facilities in Hayward,
California with annual rent of $76,900 and relocated its facilities in
February 1996.
PART II - OTHER INFORMATION
Item 1 Legal Proceedings Not Applicable.
Item 2. Changes in Securities Not Applicable.
Item 3. Defaults Upon Senior Securities Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Not Applicable.
Item 5. Other Information. Not Applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
The following exhibits are filed as part of this Report:
3.1(1) Restated Articles of Incorporation of the
Company, as amended to date
3.2(2) Restated Bylaws, as amended to date
4.1(1) Form of Warrant Agreement among the
Company, the Underwriter and American Stock
Transfer Company, including Forms of Class A
Warrant Certificates and Class B Warrant
Certificates
4.2(1) Form of Unit Option Agreement between the
Company and the Underwriter
4.3(1) Form of Specimen Class A Common Stock
Certificate
4.4(1) Form of Specimen Class B Common Stock
Certificate
4.5(1) Form of Specimen Class E Common Stock
Certificate
4.6(1) Bridge Warrant Agreement, including forms of
Bridge Warrant Certificate
10.1(2) Lease dated July 3, 1995 between Hayward
Business Park, Inc. and the Company
10.2(1) Employment Agreement between the Company and
Vinit Saxena effective September 1, 1994
10.3(1) Employment Agreement between the Company and
Q. R. Miranda effective September 1, 1994
10.4(1) Form of Indemnification Agreement between the
Company and each director and officer of the
Company
10.5(1) Convertible Promissory Notes and Warrants
10.6(1) 1994 Stock Option Plan
10.7 Master Purchasing Agreement with
Thermax Limited dated April 23, 1996
(1) These exhibits which are incorporated herein by
reference were previously filed by the Company as
exhibits to its Registration Statement on Form SB-
2 and Amendments Nos. 1, 2, 3, 4 and 5 and Post
Effective No. 1 (File No. 33-86888).
(2) These exhibits which are incorporated herein by
reference were previously filed by the Company as
exhibits to its Quarterly Report on Form 10-QSB
for the quarter ended September 30, 1995.
Exhibits not listed above have been omitted because they
are inapplicable or because the required information is
given in the financial statements or notes thereto.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for
which this report is filed.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SEPRAGEN CORPORATION
Date: May 14, 1996 By: /s/ Vinit Saxena
Vinit Saxena
Chief Executive Officer, President
and Principal Financial and Chief
Accounting Officer
EXHIBIT LIST
Description Page
10.7 Master Purchasing Agreement with Thermax 11
Limited dated April 23, 1996
MASTER PURCHASING AGREEMENT
THIS AGREEMENT made as of the 4/23/96 day of 1996, by and between
Sepragen Corporation, a California corporation ("Buyer") at 30689 Huntwood
Drive, Hayward, California 94544, and Thermax Limited, a corporation
organized and existing under the laws of India ("Seller") having an office
and place of business at 40440 Grand River Avenue, Novi, Michigan 48375.
Recitals
WHEREAS, Buyer owns or has the right to utilize certain patents,
patent applications, rights to inventions, designs, technical, and other
proprietary information relating to the manufacture of products hereinafter
described; and
WHEREAS, Seller is desirous of manufacturing and selling to Buyer, and
Buyer is willing to purchase from Seller, on the terms and conditions
hereinafter described, certain chromatography media (hereafter
"Chromatography Media") to be manufactured by Seller in accordance with
designs, drawings, specifications, and proprietary information owned by
Buyer and communicated to Seller for that sole purpose; and
WHEREAS, Seller is the manufacturer of ion exchange resins and other
copolymer beads (hereinafter referred to as "Resins") which do not fall
under the definition of Chromatography Media.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. Purchases and Terms
a. Separate Orders
All purchases to be made pursuant to this Agreement will take the form
of separate orders to be communicated in writing, from time to time, from
Buyer to Seller. All orders shall incorporate the reference paragraph
attached hereto as Exhibit A.
b. Exclusive Dealing
Prior to termination of this Agreement and except as set forth in
Section 6, Buyer shall not solicit orders from other manufacturers for
production of the Chromatography Media "developed" by Seller under Section
1(d) and Seller agrees to develop and manufacture the Chromatography Media
requested by Buyer (for which orders are accepted) during the term of this
Agreement. Seller agrees that Buyer may purchase resins and Chromatography
Media, for which Seller has not been asked to perform "development"
activities, from any source without restriction.
c. Price, Delivery, and Payment
The prices, dates and places of delivery, and terms of payment to be
made pursuant to subparagraph 1.a, above, are to be specified, and agreed
upon between Buyer and Seller, in each and every such order.
d. Development
Prior to the initiation of each order, Buyer will provide Seller with
the guidelines for the particular Chromatography Media it wishes to
manufacture; thereafter, Seller shall develop the Chromatography Media and
manufacturing specifications. Buyer will assist Seller, to the extent
Buyer deems necessary, in such development activities.
e. Place of Orders
All orders to be made pursuant to this Agreement are to be placed by
Buyer from its principal place of business in the United States and
accepted by Seller within five (5) days following receipt thereof, by
written notice addressed to Buyer.
2. Technical Information to Be Furnished
a. Buyer agrees to furnish to Seller, prior to acceptance of each
order, without cost, information for the sole purpose of enabling
Seller to manufacture the Chromatography Media which are the
subject of such orders. Buyer shall furnish one set of each of
the following:
i. If and when available, the recipe for the Chromatography
Media in detail
ii. General guidelines
iii. Performance guidelines
iv. Quality control guidelines
v. An indication of the price that Buyer is willing to pay
Seller
Prior to submission of a final purchase order to Seller, Seller
shall prepare and submit sample batches to Buyer for testing.
Buyer's purchase order will not become effective until Buyer has
approved the test results from the relevant sample batch.
b. All technical information furnished from Buyer to Seller shall be
in the English language. Any dimensions, weights, or other
technical measurements furnished by Buyer shall be expressed
according to the standards in use in the United States of
America, or such other country as Buyer may elect.
3. Quality Control of Products to Be Manufactured
a. Seller agrees that the Chromatography Media which it manufactures
hereunder shall be acceptable to Buyer as to design,
specifications, standards of quality, and performance and must
pass Buyer's applications testing. No significant deviation from
designs, guidelines, specifications, or standards of quality
established or approved by Buyer, which have been communicated to
Seller, shall be made without the written consent of Buyer.
Seller agrees that it will establish and maintain appropriate
test and inspection procedures to insure compliance by Seller
with the covenants hereinbefore set forth.
b. Seller agrees to manufacture the Chromatography Media according
to all relevant U.S. and California laws, rules and regulations,
of which it has received notice.
c. Upon request by Buyer, Seller shall obtain U.S. Federal Drug
Administration certification at Seller's sole cost and expense;
provided, however, that Seller will not be obligated to obtain
such certification if Seller elects not to produce the
Chromatography Media for which the guidelines were submitted.
d. Seller shall provide Buyer the limited warranty as set forth in
Section 13. Buyer may transfer and assign such warranty to its
customers.
4. Right of Inspection by Buyer
Seller agrees that Buyer shall have the right of sending inspectors to
the plant or plants of Seller during the course of manufacturing, and
Seller shall furnish to such inspectors the fullest opportunity of
observing any and all work being carried on with respect to the
Chromatography Media, and of testing a reasonable quantity of such
Chromatography Media or any portion thereof. All costs of such inspection
by the Buyer will be borne by the Buyer.
All Chromatography Media, or any compounds or components thereof, used
for inspection and testing pursuant to this paragraph 4 shall be placed at
the disposal of Buyer by Seller, at Seller's expense; and may be removed
from Seller's premises by Buyer for: (a) further inspection or testing; (b)
demonstrations for customers; or (c) for other purposes with Sellers
written consent, which consent shall not be unreasonably withheld.
5. Compliance With Quality Standards
Seller agrees to proceed promptly to make good or to replace all
defects in the Chromatography Media, or any compounds or components
thereof, that may be revealed by such factory inspection or are otherwise
defective under the terms of this Agreement, without, however, thereby
prejudicing the rights of Buyer under paragraph 12 or any other provision
of this Agreement.
6. Obligation Not to Subcontract
Seller agrees that it will perform all manufacturing and assembly
operations in connection with the production of the Chromatography Media,
and that it will not, directly or indirectly, subcontract the complete or
substantially complete manufacture or assembly of the Chromatography Media
or any parts thereof, unless prior written approval to do so is obtained
from Buyer. Seller agrees that Buyer may, without Seller's approval,
contract for manufacture of the Chromatography Media from other sources if
Seller refuses to either (i) accept any order proposed under this
Agreement; (ii) this Agreement is terminated pursuant to its terms; or
(iii) any Chromatography Media produced by Seller do not meet the
guidelines or specifications of the order.
7. Approved Sources
Buyer reserves the right to indicate, in any and all recipes for order
to be placed pursuant to this Agreement, approved sources from which
components to be incorporated into the Chromatography Media may be
purchased. Seller agrees that acceptance of any order in which approved
sources are indicated includes an obligation to purchase the components so
indicated from such sources.
8. Confidential Information
All technical and other proprietary information, including guidelines,
furnished by Buyer hereunder, or which results from the joint efforts of
Buyer's and Seller's personnel, is the sole property of Buyer and shall be
deemed to have been furnished to Seller in confidence for the sole purposes
herein set forth and Seller undertakes not to use any of this information
for its operations not connected with the orders accepted under this
Agreement. Seller shall also take all reasonable precautions to prevent
communication, without the written consent of Buyer, of any such technical
or other proprietary information to any third party, except as may be
necessary to carry out the purposes of this Agreement.
9. Exclusive Operations
a. During the term of this Agreement and for a period of thirty
years following the receipt by Seller of the last order from
Buyer, Seller agrees that it will not, either directly or
indirectly, or through one of its affiliates (herein defined as
any organization in which Seller holds a material financial
interest, whether directly or indirectly held), manufacture,
assemble, or sell, or cause to be manufactured, assembled, or
sold, to a third party, any of the Chromatography Media or
similar products which compete with the Chromatography Media
without the prior written approval of Buyer.
b. During the terms of this Agreement and for two years thereafter
neither Seller nor Buyer shall employ nor solicit employment of
the other's employees.
10. Obtaining Protective Rights
a. Any patent, copyright, or similar protective rights of whatever
nature which may accrue regarding or related to the
Chromatography Media, whether or not they result from the
operation of this Agreement or the development of the
Chromatography Media, shall be the exclusive property of Buyer.
Seller acknowledges that its entire understanding of the
Chromatography Media, including the design and function thereof,
derives from the exposure thereto provided by Buyer, and
therefore freely affirms that as part of the consideration
extended in this Agreement, any inventive concepts occurring to
Seller during the existence of this Agreement are rightfully
assigned to Buyer.
b. All applications and other measures which may be required in
order to obtain the protective rights referred to in subparagraph
10.a are to be executed by Buyer. Buyer shall also have the
exclusive right to obtain such protective rights in all countries
including India. Seller agrees to furnish promptly to Buyer all
documents and other information which may be required to obtain
such protective rights, even though this Agreement may have
terminated at the time Seller is requested to do so by Buyer.
c. The parties acknowledge that the requirements of Sections 8 and
10 do not apply to the Resins and products derived from Resins,
nor any technology that falls under public domain.
11. Term and Termination
This Agreement has an indefinite term and may be terminated by either
party, at any time, by giving the other party written notice of intention
to terminate. Upon the expiration of a 30 day period, measured from the
date of the giving of such notice, this Agreement shall automatically
terminate, without the need of further action by the notifying party. In
the event of termination pursuant to the provisions of this paragraph, all
orders pending at the time of the receipt of such notice of termination are
to be completed and delivered in accordance with the terms of each such
order, unless otherwise provided herein. Paragraphs 8, 9, 10 and 15 shall
survive the termination of this Agreement.
12. Breach and Remedies
a. Either party may terminate this Agreement by giving written
notice of termination to the other party, at any time, upon or
after the filing by the said other party of a petition in
bankruptcy or insolvency, or upon any other proceeding or action
when by or against the other party under the relevant law on
insolvency or bankruptcy, or after the making by the said other
party of any assignment or attempted assignment for the benefit
of creditors, or upon or after the institution of any proceedings
for the liquidation or winding up of the said other party's
business, or for the termination of its corporate charter. In the
event of the giving of such notice, this Agreement shall
terminate immediately upon receipt of said notice by the notified
party.
Upon the occurrence of any of the events enumerated in this
subparagraph 12.a, any or all of the then pending orders may be
cancelled at the option of the notifying party, such cancellation
to be effective immediately upon receipt of written notice of
cancellation by the notified party.
b. In the event of any change in management or control or insolvency
of either party, the party subject to such change undertakes to
inform the other party immediately.
c. Termination of this Agreement for any reason, unless otherwise
provided, shall not affect (i) obligations accruing prior to the
effective date of termination, or (ii) any obligations which,
from the context hereof, are intended to survive termination of
this Agreement.
d. Any waiver by either party of a breach of any term or condition
of this Agreement shall not constitute a waiver of any subsequent
breach of the same or any other term or condition hereof.
13. Warranty
Seller warrants that the Chromatography Media will be manufactured in
accordance with the technical information and guidelines set forth in
Section 2. In addition, Seller warrants that any defective Chromatography
Media will be replaced with Chromatography Media meeting the guidelines and
specifications within thirty days after receipt of such defective media by
Seller, Seller agrees that this warranty may be assigned by Buyer to its
customers.
14. Assignability
This Agreement is not assignable by either party without the prior
written consent of the other party, except that Buyer may assign this
Agreement to any person, firm, or corporation that may purchase or take an
assignment of the business relating to the Chromatography Media covered
hereby, and provided further that such purchaser or assignee shall assume
the obligations of Buyer hereunder.
15. Force Majeure
Neither party shall be in default hereunder by reason of its delay in
the performance of or failure to perform any of its obligations hereunder,
if such delay is caused by strikes, acts of God or the public enemy, riots,
incendiaries, interference by civil or military authorities, compliance
with governmental laws, rules, and regulations, including those relating to
exchange restrictions or security, delays in transit or delivery, inability
to secure necessary governmental priorities for material, or any failure
beyond its control, or without its fault or negligence.
16. Proprietary Rights on Termination
All designs, drawings, specifications, and such other information made
available by Buyer to Seller hereunder, shall be and remain the legal
property of Buyer. Seller will cease to use such designs, drawings,
specifications, and other proprietary information upon termination of this
Agreement, and will promptly return to Buyer any and all such designs,
drawings, specifications, and all other information and data furnished to
Seller. Upon notice of termination, Seller shall deliver to Buyer complete
manufacturing specifications of any Resins produced by Seller.
17. Construction
This Agreement shall be construed in all respects according to the
laws of the state of California; provided, however, that if any provisions
of this Agreement shall be in contravention of the laws of India, such
provisions shall either be ineffective to the extent that they are in
contravention of such laws without invalidating the remaining provisions
hereof, or, at the option of Buyer, may be considered to have rendered this
entire Agreement unenforceable or its essential stipulations incapable of
performance; in the latter event, this Agreement shall automatically
terminate forthwith.
18. Resolution of Disputes
All disputes arising in connection with this Agreement shall be
finally settled under the Rules of Conciliation and Arbitration of the
International Chamber of Commerce by a single arbitrator appointed in
accordance with said Rules. The parties agree to London, England as the
forum city for the conduct of any arbitration proceedings.
19. Governmental Approval
In the event that this Agreement or any provision thereof shall
require the approval of any governmental authority, either in India or
elsewhere, the same shall not be operative and binding until such consent
shall have been obtained. If such approval is not given within six (6)
months from the execution of this Agreement by the parties, the Agreement
shall not be effective, nor shall it be binding on either party.
20. Obligation to Pay Taxes
Seller and Buyer agree that the purchase price reflected in Buyer's
purchase order is to include all taxes, duties and fees. In the event that
the government of India, or any subdivision thereof, requires the payment
of stamp taxes, registration taxes, turnover taxes, or other taxes or
duties levied on this Agreement by reason of the execution or the
performance thereof, it shall be the responsibility of Seller to pay all
such taxes when due. Seller further agrees to indemnify Buyer and to hold
it harmless from all liability of whatever nature which may be imposed on
Buyer arising out of Seller's failure, for whatever reason, to duly pay
such taxes.
21. Disclaimer of Agency
The parties hereto agree and stipulate that Seller is in no way to be
construed as acting as an agent or representative of Buyer in any dealings
which Seller may have with any other person, firm, or corporation, and that
Seller has no power to act for or to legally bind Buyer in any such
transaction or transactions.
22. Prevalence of Agreement
This Agreement contains all the understandings and representations
between the parties hereto pertaining to the matters referred to herein,
and supersedes all agreements, if any, previously entered into by them with
respect thereto. This Agreement may be modified only by a written
supplement, duly executed by the authorized officers of the parties.
23. Addresses for Notice Purposes
All notices and approvals herein provided for shall be addressed, if
to Seller to:
Thermax Limited
40440 Grand River Avenue
Novi, Michigan 48675
FAX (810) 474-5790
or if to Buyer to:
Sepragen Corporation
30689 Huntwood Drive
Hayward, California 94544
FAX (510)476-0655
All notices of termination, or notices which if not complied with may
be the basis for termination, shall be forwarded by registered air mail.
Any notices so given shall be deemed to have been given as of the date
when, in the ordinary course of registered air mail, the said notice should
have reached its destination.
24. Section and Paragraph Headings
The section and paragraph headings herein are for convenience only,
and shall not be interpreted to limit or affect in any way the meaning of
the language contained in such paragraphs.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Agreement to be executed in their corporate names
by their officers thereunto duly authorized as of the day and year first
above written.
Sepragen Corporation
By: /s/ Vinit Saxena
Title: President
Thermax Limited
By: /s/ J.A. Bhathena
Title: General Manager
<TABLE> <S> <C>
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 1996 ON FORM 10QSB
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-END> MAR-31-1996 DEC-31-1995
<CASH> 119,674 23,364
<SECURITIES> 2,347,668 3,586,145
<RECEIVABLES> 579,171 278,688
<ALLOWANCES> 30,459 30,459
<INVENTORY> 645,550 777,620
<CURRENT-ASSETS> 3,716,733 4,722,947
<PP&E> 449,250 252,150
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 4,277,692 5,086,806
<CURRENT-LIABILITIES> 457,600 490,112
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<COMMON> 12,913,693 12,913,693
0 0
0 0
<OTHER-SE> (12,315) (14,462)
<TOTAL-LIABILITY-AND-EQUITY> 4,277,692 5,086,806
<SALES> 632,662 1,213,798
<TOTAL-REVENUES> 632,662 1,213,798
<CGS> 451,638 913,508
<TOTAL-COSTS> 451,638 913,508
<OTHER-EXPENSES> 1,000,689 3,872,759
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (40,916) 266,387
<INCOME-PRETAX> (778,749) (3,838,856)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (778,749) (3,838,856)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (778,749) (3,838,856)
<EPS-PRIMARY> (.27) (1.36)
<EPS-DILUTED> (.27) (1.36)
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