<PAGE>
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U. S. 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, 1999
[_] Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
Commission File No. 0-21721
--------------------
CLINICOR, INC.
(Name of Small Business Issuer as Specified in Its Charter)
Nevada 88-0309093
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1717 West Sixth Street, Suite 400, Austin, Texas 78703
(Address of Principal Executive Offices) (Zip Code)
(512) 344-3300
(Issuer's Telephone Number, Including Area Code)
--------------------
Check whether the issuer (1) 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 registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
As of May 5, 1999, 4,169,734 shares of the Issuer's Common Stock, $.001 par
value, were outstanding.
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
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TABLE OF CONTENTS
Page
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PART I
FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Balance Sheets - March 31, 1999 and December
31, 1998 3
Condensed Statements of Operations - three months ended
March 31, 1999 and 1998 4
Condensed Statements of Cash Flows - three months ended
March 31, 1999 and 1998 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition 7
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
2
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PART I
FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
CLINICOR, INC.
BALANCE SHEET
================================================================================
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31,
1999 1998
(UNAUDITED) (NOTE A)
-------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,174,545 $ 1,665,672
Accounts receivable, net 2,240,382 2,272,376
Prepaid and other current assets 431,397 352,337
-------------- -------------
Total current assets 3,846,324 4,290,385
Property and equipment, net 1,193,905 1,097,441
Other assets, net 2,870 1,717
-------------- -------------
TOTAL ASSETS $ 5,043,099 $ 5,389,543
============== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of obligations under capital leases $ 405,479 $ 307,796
Accounts payable and accrued liabilities 1,627,359 1,414,636
Line of credit 794,123 416,624
Deferred revenue 628,947 989,540
-------------- -------------
Total current liabilities 3,455,908 3,128,596
Obligations under capital leases, less current portion 332,260 324,376
-------------- -------------
Total liabilities 3,788,168 3,452,972
Shareholders' equity:
Class A convertible preferred stock, no par value,
5,181 shares authorized 4,253 and 4,253 shares issued
and outstanding, respectively , at liquidation value 4,253,000 4,253,000
Class B convertible preferred stock, no par value,
50,000 shares authorized, issued
and outstanding, at liquidation value 5,000,000 5,000,000
Common stock, $0.001 par value, 75,000,000 shares
authorized, 4,169,734 and 4,169,734 shares issued
and outstanding, respectively 4,170 4,170
Additional paid-in capital 483,608 718,683
Deferred compensation (16,647) (22,196)
Accumulated deficit (8,469,200) (8,017,086)
-------------- -------------
Total shareholders' equity 1,254,931 1,936,571
-------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 5,043,099 $ 5,389,543
============== =============
</TABLE>
Note A:The balance sheet at December 31, 1998 has been derived from the
audited financial statements at that date, but does not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
The accompanying notes are an integral part of these financial statements.
3
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CLINICOR, INC.
STATEMENT OF OPERATIONS
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<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Service revenue:
Gross revenue $ 3,190,315 $ 2,867,196
Reimbursable costs 1,577,134 668,280
----------- -----------
Net service revenue 1,613,181 2,198,916
Operating costs and expenses:
Direct costs 1,081,566 1,851,327
Selling, general and administrative 871,928 826,053
Depreciation and amortization 101,063 105,356
----------- -----------
Total operating costs and expenses 2,054,557 2,782,736
----------- -----------
Loss from operations (441,376) (583,820)
Other income and expenses:
Interest income 29,509 37,609
Interest expense (40,247) (15,011)
----------- -----------
Other income and expenses (10,738) 22,598
----------- -----------
NET LOSS $ (452,114) $ (561,222)
=========== ===========
Net loss $ (452,114) $ (561,222)
Preferred stock dividends (235,074) (228,606)
----------- -----------
Net loss applicable to common stock $ (687,188) $ (789,828)
=========== ===========
BASIC/DILUTED EARNINGS (LOSS) PER SHARE $ (0.16) $ (0.19)
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 4,169,734 4,124,654
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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CLINICOR, INC.
STATEMENT OF CASH FLOWS
================================================================================
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------------
1999 1998
(UNAUDITED) (UNAUDITED)
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (452,114) $ (561,222)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization 101,063 105,356
Noncash stock option compensation expense 5,550 (246,951)
Net changes in assets and liabilities:
Accounts receivable 31,996 72,299
Prepaid expenses and other assets (80,213) (56,477)
Accounts payable and accrued liabilities 127,648 (69,709)
Deferred revenue (360,594) 142,756
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Net cash used in operating activities (626,665) (613,948)
INVESTING ACTIVITIES:
Purchases of property and equipment (37,308) (10,874)
FINANCING ACTIVITIES:
Payments on capital leases (54,655) (10,643)
Net proceeds from issuing common stock 0 5,000
Net borrowings under line of credit 377,500 572,669
Preferred stock dividends (150,000) (111,667)
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Net cash provided by financing activities 172,845 455,359
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Net decrease in unrestricted cash and cash equivalents (491,128) (169,463)
Unrestricted cash and cash equivalents at beginning of year 1,665,672 3,255,182
------------- -------------
Unrestricted cash and cash equivalents at end of period $ 1,174,545 $ 3,085,719
============= =============
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $ 40,247 $ 15,011
============= =============
Non-cash financing activities:
Capital lease obligations $ 160,223 $ -
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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Clinicor, Inc.
Notes to Financial Statements
March 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Note l - Basis of Presentation
- ------------------------------
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Item 310(b) of Regulation SB.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three months ended March 31, 1999 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1999. For further information, refer to the financial statements and footnotes
thereto included in the Company's annual report on Form 10-KSB filed on March
30, 1999 for the fiscal year ended December 31, 1998 (Commission File No. 0-
21721).
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Certain amounts related to the prior year have been reclassified to conform to
the current year presentation.
Note 2 - Net Income (Loss) per Share
- ------------------------------------
Net loss applicable to common stock per share has been calculated by dividing
the Company's net loss applicable to common stock by the weighted average number
of shares of the Company's outstanding common stock. Common stock equivalent
shares are not included in the per share calculations where the effect of their
inclusion would be anti-dilutive.
At March 31, 1999 and March 31, 1998, stock options and warrants to purchase
2,223,331 and 1,930,274 shares of common stock, respectively; Class A
Convertible Preferred Stock convertible into 2,835,333 and 2,620,000 shares of
common stock, respectively; and Class B Convertible Preferred Stock
convertible into 1,818,182 and 1,666,667 shares of common stock, respectively,
were not included in the calculation of basic/diluted earnings per share because
the effect of including these options, warrants and convertibles would have been
anti-dilutive.
6
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The information set forth and discussed below for the three months ended
March 31, 1999 and 1998, are derived from the Condensed Financial Statements
included elsewhere herein. The financial information set forth and discussed
below is unaudited but, in the opinion of management, reflects all adjustments
(consisting of normal recurring accruals) necessary for a fair presentation of
such information. The Company's results of operations for a particular quarter
may not be indicative of results expected during other quarters or for the
entire year.
OVERVIEW
The Company is a fully integrated contract research organization ("CRO")
serving the pharmaceutical, biotechnology and medical device industries
("sponsors"). The Company designs, manages and monitors clinical trials in
North America and Europe and provides integrated clinical and product
development services, including patient recruitment, data management,
biostatistical analysis, regulatory affairs, quality assurance and other
consultation services for its sponsors. The Company generates substantially all
of its revenue from services related to the clinical testing of new
pharmaceutical, medical device and biotechnology products. The Company
commenced operations in September 1992 and has achieved its growth through
internal development.
The Company's contracts for services generally vary from a few months to
several years in duration. A portion of the contract fee is typically required
to be paid when the contract is initiated, with the balance payable in
installments over the contract's duration. The installment payments are based
on performance or the achievement of milestones, relating payment to previously
negotiated events such as patient enrollment, patient completion or delivery of
databases, or periodic, based on personnel fees and actual expenses, typically
billed on a monthly basis.
In accordance with the terms of the Company's contracts, sponsors may
terminate or delay the performance of a contract, potentially causing the
Company to experience periods of excess capacity and reductions in service
revenue and net income. Trials may be terminated or delayed for a variety of
reasons, including unexpected or undesired results, production problems
resulting in shortages of the product or delays in supplying the product,
adverse patient reaction to the product, or the sponsor's decision to de-
emphasize a particular trial. If a trial is terminated, the contract generally
provides for a short continuation or wind-down period, as the Company manages
required investigator obligations through the termination date. Therefore, the
Company is typically entitled to all amounts owed for work performed through the
notice of termination and all costs associated with termination of the study.
In addition, contracts may require the payment of a separate early termination
fee, the amount of which usually declines as the trial progresses.
7
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Revenue from contracts is recognized as work is performed. Some contracts
contain a fixed price per patient plus either fixed or variable fees for
additional service components such as monitoring, project management,
advertising, travel, data management, consulting and report writing. Other
contracts are time and materials based. Payments received on contracts in
excess of amounts earned are recorded as deferred revenue.
The Company's net service revenue backlog consists of anticipated service
revenue from clinical trials and other services that have not been completed and
that generally specify completion dates within 24 months. To qualify as
"backlog" anticipated projects must be represented by contracts or letter
agreements or must be projects for which the Company has commenced a significant
level of effort based upon sponsor commitment and approval of a written budget.
Once work commences, service revenue is recognized over the life of the
contract. The Company's net service revenue backlog was approximately $5.1
million at March 31, 1999 as compared to $4.4 million at December 31, 1998. The
Company believes that its backlog at any given date is not necessarily a
meaningful predictor of future results, and no assurances can be given that the
Company will fully realize all of its backlog as service revenue.
Reimbursable costs can include patient and investigator stipends,
Institutional Review Board fees, laboratory fees, medical supplies, patient
recruitment advertising, travel and consulting fees. Reimbursable costs that
are paid to the Company directly by the client, and for which the Company does
not bear the risk of economic loss, are deducted from gross service revenue in
accordance with CRO industry practice.
Direct costs include project personnel costs and related allocated overhead
costs such as rent, supplies, postage, express delivery and telecommunications,
as well as study-related costs not reimbursed by clients. Selling, general and
administrative expenses consist primarily of compensation and benefits for
marketing and administrative personnel, professional services, facility costs,
and other allocated overhead items.
QUARTERLY RESULTS
Quarterly operating results are subject to variation, and are expected to
continue to be subject to variation, as a result of factors such as delays in
initiating or completing significant drug development trials and any termination
of drug development trials. Delays and terminations are the result of actions
by sponsors or regulatory authorities and are not controllable by the Company.
Since a large part of the Company's operating costs are relatively fixed while
revenue is subject to fluctuation, minor variations in the commencement,
progress or completion of drug development trials may cause significant
variations in quarterly operating results.
8
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RESULTS OF OPERATIONS
Three months ended March 31, 1999 compared with three months ended March 31,
- ----------------------------------------------------------------------------
1998
- -----
The following table sets forth, for the periods indicated, certain items
included in the Company's unaudited statements of operations for the three
months ended March 31, 1999 and 1998, and the percentage of net service revenue
for each item. Any results or trends illustrated in the following table may not
be indicative of future results or trends.
<TABLE>
<CAPTION>
For the quarter ended March 31,
----------------------------------------
1999 1998
----------------------------------------
<S> <C> <C> <C> <C>
Service revenues $ 3,190,315 $ 2,867,196
Reimbursable costs 1,577,134 668,280
--------- ---------
Net service revenue 1,613,181 100.0% 2,198,916 100.0%
Operating costs and expenses:
Direct costs 1,081,566 67.0% 1,851,327 84.2%
Selling, general and administrative 871,928 54.1% 826,053 37.6%
Depreciation and amortization 101,063 6.3% 105,356 4.8%
--------- ---------
Total operating costs and expenses 2,054,557 127.4% 2,782,736 126.6%
--------- ---------
Loss from operations (441,376) -27.4% (583,820) -26.6%
Net interest income (expense) (10,738) -0.6% 22,598 1.0%
--------- ---------
Net loss $ (452,114) -28.0% $ (561,222) -25.6%
========= =========
</TABLE>
Net service revenues decreased approximately $ 586,000 or 27%. The decrease
is primarily attributable to a decrease in the number of active trials and to
the increase in reimbursed costs.
Reimbursable costs increased to approximately 49% of gross revenue for the
three months ended March 31, 1999 as compared to 23% of gross revenue for the
same period in 1998. This increase is a direct result of the contract mix for
which revenue was recognized during the respective periods.
Direct costs decreased approximately $770,000, or 42%. The decrease in
direct costs is due to a reduced level of clinics that were directly managed by
the Company in the first quarter of 1999, as well as reductions of full-time
study, patient and data management staff and related overhead that occurred
during 1998 as a result of contract cancellations. As a percentage of net
service revenues, direct costs were approximately 67% for the three months ended
March 31, 1999 as compared to approximately 84% for the same period in 1998.
Selling, general and administrative expenses increased by approximately
$46,000 during the first quarter of 1999 as compared to the comparable period in
1998. Selling, general and administrative expenses were approximately 54% of net
service revenue for the three months ended March 31, 1999, as compared to 38%
for the corresponding period in 1998. The increase
9
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in the percentage of selling, general and administrative expenses to net service
revenues is primarily a result of the decline in net service revenues.
Depreciation and amortization expenses decreased approximately $4,000
during the three months ended March 31, 1999 as compared to the comparable
period in 1998. Depreciation expense as a percentage of net service revenue was
approximately 6% for the three months ended March 31, 1999 as compared to 4% for
the corresponding period in 1998. The increase in the percentage of depreciation
expense to net service revenues is primarily a result of the decline in net
service revenues.
Interest income decreased by approximately $8,000 during the three months
ended March 31, 1999 as compared to the comparable period in 1998. This is
primarily the result of the decrease in the funds available for investment.
Interest expense increased by approximately $25,000 during the three months
ended March 31, 1999 as compared to the comparable period in 1998.
The Company recorded no income tax benefit as a result of the net operating
losses for the three months ended March 31, 1999 and 1998, due to the
uncertainty that the loss carryforwards will be utilized.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations and internal
growth with proceeds from private placements of equity securities, advances from
shareholders and borrowing arrangements under capital lease obligations and
lines of credit. Investing activities have consisted of capital expenditures,
primarily for leasehold improvements, information systems, furniture and office
equipment.
Typically, cash flows from contracts include a payment at the time a
contract commences and the balance in installments over the contract's duration,
in some cases on a milestone completion basis. Consequently, cash receipts do
not necessarily correspond to costs incurred and revenue recognized on
contracts. The Company's cash flow is influenced by changes in levels of
accounts receivable and deferred revenue. Accounts receivable decreased to
approximately $2,240,000 at March 31, 1999 from approximately $2,270,000 at
December 31, 1998. Deferred revenues decreased to approximately $630,000 at
March 31, 1999 from approximately $990,000 at December 31, 1998. Cash
collections from clinical study contracts for the three months ended March 31,
1999, totaled approximately $2,900,000 as compared with approximately $3,000,000
for the corresponding period in 1998.
Net cash flow used in operating activities was approximately $626,000 for
the three months ended March 31, 1999, as compared to approximately $614,000 in
the corresponding period in 1998. The continuation of the negative trend in net
cash used in operations in 1999 is primarily attributable to the net loss and
the decline in deferred revenue, which occurred in the three months ended March
31, 1999. Net cash decreased by approximately $490,000 for the three months
ended March 31, 1999. The net cash operating loss for the first quarter of 1998
was primarily financed with the proceeds from a working capital line of credit
and short-term investments.
10
<PAGE>
Investing activities are attributable to purchases of property and
equipment and they increased to approximately $37,000 in the three months ended
March 31, 1999 as compared to approximately $11,000 in the comparable period of
1998.
Management believes that its existing capital resources, together with cash
flows from operations and borrowing capacity under its working capital line of
credit, will be sufficient to fund its operations in 1999. Should anticipated
growth in contract backlog levels and net service revenue not occur as expected
during the remainder of 1999 or should pending projects be delayed or cancelled,
the Company will be required to seek additional external financing in early
2000. Such external financing might be in the form of public or private
issuances of equity or debt securities or bank financing. There can be no
assurance that such financing can be obtained or obtained on terms acceptable to
the Company. Regardless of the availability of external financing, the Company
intends to continue to investigate strategies to preserve working capital. Such
strategies may include deferring payment of future quarterly dividends on its
Class B Preferred Stock or negotiating to pay such dividends in securities of
the Company, rather than cash. In addition, the Company may acquire in the
future businesses to expand its contract backlog and to enhance its therapeutic
expertise. Any such acquisition would also require additional external
financing. There can be no assurance that such financing will be available on
terms acceptable to the Company.
YEAR 2000
Information systems are an integral part of the services the Company
provides. Since many computer and software systems were designed to handle dates
with just two digits to represent the year applicable to a transaction, these
systems may not operate properly when the last two digits of the year become
"00". For example, on January 1, 2000, these systems may interpret "00" as the
year 1900 not 2000. If the computer equipment and software used in the operation
of the Company do not correctly recognize date information when the year changes
to 2000, there could be an adverse impact on the Company's operations.
The Company began its assessment of the Year 2000 issue from an internal
perspective in late 1997. The Company decided to change its information
technology ("IT") systems including those relating to clinical operations, data
management operations and financial operations, to Year 2000 compliant software
applications on an Oracle database platform in the first quarter of 1998. These
new systems were implemented to improve management's control of the organization
and increase operating efficiency. The installation of these software systems
was substantially completed by December 31, 1998, and they are currently in
production. One of the software applications will require a minor upgrade to a
new version release in order to be certified by Oracle to be Year 2000
compliant. This upgrade is expected to be completed by June 30, 1999. The
Company estimates that it has spent approximately $750,000 on its hardware and
software systems to accommodate the Oracle database and related software
applications. These expenditures were financed through operating and capital
leases.
The Company has also reviewed and tested its non-IT systems such as fax
machines and telephone systems without experiencing any material failures. The
Company intends to perform
11
<PAGE>
an integrated systems test in the third quarter to assure itself that all IT and
non-IT systems will be fully capable of handling the Year 2000 issue.
The Company is in the process of contacting its principal clients
concerning the state of their Year 2000 readiness. Until that effort is
completed, the Company cannot be assured that those other systems will be Year
2000 compliant on time and is unable to estimate the impact of such a failure.
The Company believes that its most likely worst case Year 2000 scenarios
would relate to problems with the systems of unrelated third parties rather than
the Company's internal systems or those of its clients. It is clear that the
Company has the least ability to assess and remediate the Year 2000 problems of
third parties. The Company believes the risks are greatest with infrastructure
(e.g. electricity supply and water service), telecommunications and
transportation systems.
The Company is not in a position to identify or to avoid all possible
scenarios; however, the Company is currently assessing scenarios. This
contingency planning will continue through 1999 as the Company learns more about
the preparations and vulnerabilities of third parties regarding Year 2000
issues. Due to the large number of variables involved, the Company cannot
provide an estimate of the damage it might suffer if any of these scenarios were
to occur.
As we get closer to December 31, 1999, certain of the Company's customers
may decide to delay starting or awarding new clinical trials as a part of a
general restriction of awarding new clinical trials. Should any of the
Company's customers adopt such a strategy, this would have a material adverse
impact of the Company's future operating results.
Based on currently available information, management does not believe that
the Year 2000 issues discussed above related to internal systems will have a
material adverse impact on the Company's financial condition or overall trends
in results of operations. However, it is uncertain to what extent the Company
may be affected by such matters. In addition, there can be no assurance that
the failure to ensure Year 2000 capability by a customer or other third party
would not have a material adverse effect on the Company's financial condition or
overall trends in results of operations.
INFORMATION ABOUT FORWARD-LOOKING STATEMENTS
Certain statements made in this Form 10-QSB, in other SEC filings or
written materials, or orally by the Company or it representatives may constitute
"forward-looking" statements within the meaning of the federal securities laws.
The Company notes that a variety of factors could cause the Company's actual
results and experience to differ materially from the anticipated results
expressed in the Company's forward-looking statements. The risks and
uncertainties that may affect the operations, performance, development and
results of the Company's business include the factors discussed in "Risk
Factors" under Item 1 of the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1998.
12
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PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
10(r) Employment Agreement effective February 16, 1999 between the
registrant and Rosina Maar, M.D.
27 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the fiscal quarter covered by this
report.
13
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CLINICOR, INC.
Date: May 14, 1999 By: /s/ Robert S. Sammis
-------------------------------------
Robert S. Sammis
President
(Principal Executive Officer)
Date: May 14, 1999 By: /s/ James W. Clark, Jr.
-------------------------------------
James W. Clark, Jr.
Vice President and Chief Financial Officer
(Principal Financial Officer)
14
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EXHIBIT 10(R)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is executed to be effective February 16, 1999 (the
"Effective Date") between Clinicor, Inc., a Nevada corporation (the
"Corporation"), and Rosina Maar, M.D. (the "Employee").
W I T N E S S E T H:
-------------------
1. Employment. The Corporation hereby employs the Employee and the
----------
Employee hereby accepts such employment and agrees to perform the services
specified herein upon the terms and conditions hereinafter set forth.
2. Term. Subject only to the provisions for termination as hereinafter
----
set forth, the term of this Agreement shall begin on the Effective Date and
shall terminate two (2) years and one (1) day thereafter. Unless either party
gives the other thirty (30) days written notice prior to the expiration of the
initial or any renewal term hereof, this Agreement shall automatically renew for
three (3) additional periods of one (1) year each.
3. Compensation. The Corporation shall pay to the Employee a minimum base
------------
salary of Two Hundred Twenty-Five Thousand and No/100 Dollars ($225,000.00) per
year, payable in equal bi-monthly installments, net of applicable withholdings.
The Corporation shall also pay to the Employee an initial signing bonus of
Thirty-Five Thousand and No/100 Dollars ($35,000.00), payable within forty-five
(45) days after the Effective Date. The Employee shall be entitled to receive
such further compensation in the form of bonuses and salary increases as shall
be authorized by the Board of Directors of the Corporation (the "Board") from
time to time.
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4. Benefits.
--------
(a) In addition to the direct remuneration provided for in the
preceding Section 3, the Employee shall be entitled to participate in and to
receive benefits consistent with those of other executive officers of the
Corporation. Set forth on Exhibit A hereto is a summary of company benefits
---------
currently made available to executive officers of the Corporation. The Employee
understands and acknowledges that these benefits may change from time to time in
the ordinary course of the Corporation's business. With respect to the
Corporation's vacation policy only, the Employee shall be credited with three
(3) years of service, in addition to actual years of service, so that she shall
initially be entitled to three (3) weeks of vacation per year.
(b) The Corporation shall, simultaneously with the commencement of the
Employee's employment hereunder (or as soon thereafter as a meeting of the Board
may conveniently be convened, but in no event more than two (2) month following
the Effective Date), grant to the Employee options to purchase a total of three
hundred thousand (300,000) shares of the Corporation's common stock. The
exercise price applicable to such options shall be the closing price of such
stock on the Over-the-Counter Bulletin Board (or, if such stock is not traded on
the Over-the-Counter Bulletin Board, on such other market as the stock is
publicly traded) on the business day immediately preceding the date of grant.
Twenty percent (20%) of the options shall vest on the date of grant, and the
balance of the options shall vest in four (4) equal annual increments on the
anniversary of the Effective Date, commencing on the first anniversary of the
Effective Date, in the year 2000, provided the Employee is still employed by the
Corporation on such dates. The options,
2
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if unexercised, shall terminate and expire ninety (90) days after the
termination of the Employee's employment by the Corporation, and in any event no
later than the seventh anniversary of the Effective Date, in the year 2006. The
Employee understands and acknowledges that the grant of options as set forth
above does not constitute a promise by the Corporation to continue the term of
the Employee's employment hereunder beyond the term provided for in Section 2
hereof. The description of the terms and conditions of the options contained in
this Section 4(b) is in all respects subject to and qualified by the terms and
conditions of the Corporation's Amended and Restated 1995 Director, Employee and
Consultant Stock Option Plan and the standard form of Option Agreement
thereunder, each of which has been supplied to the Employee.
(c) The Corporation acknowledges that Employee will maintain a
residence, in Cary, North Carolina during the term of this Agreement. The
Corporation agrees to provide living accommodations and a means of travel
(subject to the expense limitations and other terms set forth on Exhibit B
---------
hereto) when the Employee is present in Austin, Texas.
(d) The Corporation shall reimburse to the Employee all business
expenditures reasonably incurred by the Employee, subject to the Corporation's
expense reimbursement policy in effect from time to time and to the expense
limitations set forth on Exhibit B hereto.
---------
5. Duties. The Employee has been selected to serve as Chief Operating
------
Officer of the Corporation, and she agrees to perform the duties normally
incidental to this office for as long as she holds the office. The Employee
acknowledges that she occupies this office at the discretion of the Board and
that her title may be changed at any time and that such change will not
constitute a breach
3
<PAGE>
of this Agreement. The Employee agrees to perform for the Corporation such
duties and responsibilities as may reasonably be prescribed from time to time by
the Board.
6. Extent of Service. The Employee shall devote her full time, attention
-----------------
and energy to the business of the Corporation and shall faithfully,
industriously, and to the best of her ability perform all of the duties that may
be required of her as an employee and as an officer of the Corporation. The
Employee shall not directly or indirectly render any services to any other
person or organization, whether for compensation or otherwise, without the prior
consent of the Board. The Employee will not engage in activities, businesses,
or investments that would in any way conflict with the best interests of the
Corporation. The parties agree that the passive ownership by the Employee of up
to one percent (1%) of the outstanding shares of capital stock of a publicly
held entity shall not be deemed to violate the provisions of this Section 6,
even if such entity competes with the Corporation.
7. Confidentiality and Non-Solicitation.
------------------------------------
(a) The Employee recognizes and acknowledges that she will have access
to certain Confidential Information of the Corporation (as hereinafter defined)
and that such information constitutes valuable, special and unique property of
the Corporation. The Employee will not, during the term of her employment or
for a period of one (1) year thereafter, directly or indirectly divulge,
disclose or otherwise communicate or make available any of such Confidential
Information to any person, firm, corporation, association, or other entity for
any reason or purpose whatsoever without the prior written consent of the
Corporation. Confidential Information includes
4
<PAGE>
without limitation each of the following with respect to the Corporation: (i)
financial information; (ii) information concerning marketing plans or
strategies; (iii) information concerning sponsors, investigators and other third
parties with whom the Corporation has contacts; (iv) information concerning the
Corporation's markets and potential markets; (v) information concerning business
methods and practices; (vi) client proprietary information, contracts,
proposals, work in process and research; (vii) information concerning
development or marketing programs or plans or client lists; and (viii) any other
information that the Corporation reasonably treats and identifies as
confidential. Confidential Information shall also include without limitation any
information or materials received by the Corporation from third parties in
confidence (or subject to nondisclosure or similar agreements). Notwithstanding
the foregoing, Confidential Information does not include information the
Employee had prior to her employment with the Corporation or information that is
generally available to the public or in the pharmaceutical industry. The
Employee should consider all information coming into her possession by virtue of
her employment relationship with the Corporation to be Confidential Information
unless it is freely available to the public.
(b) The Employee shall not, during her employment with the Corporation
or for a period of six (6) months thereafter, directly or indirectly, willfully
solicit, or willfully interfere with the Corporation's relationships with, or
willfully entice away from the Corporation, any sponsor, any investigator with
whom the Employee has had a relationship during her employment at the
Corporation or any other person, firm or corporation who has at any time during
the term of the Employee's employment hereunder done business with the
Corporation; provided, however, nothing
5
<PAGE>
herein shall prevent the Employee from doing business with any person, firm or
entity with whom she has had a business relationship prior to the Employee's
employment with the Corporation. The Employee shall not, during the term of her
employment with the Corporation or for a period of six (6) months thereafter,
offer employment to or procure employment for any person who has at any time
during the term of the Employee's employment hereunder been employed by the
Corporation.
8. Materials. All data, protocols, listings, charts, drawings, records,
---------
documents, programs, software, documentation, memoranda, journals, notebooks,
records, files, drafts, specifications and similar items relating to the
business of the Corporation or its customers, whether compiled by the Employee,
furnished to the Employee by the Corporation, its customers or clients or
otherwise made accessible to the Employee or coming into her possession, while
the Employee is in the employ of the Corporation, and copies of any such items,
shall be and remain the sole and exclusive property of the Corporation or its
customers or clients, as the case may be, and none of such items shall be
removed from the Corporation's business premises by the Employee without the
prior consent of the Corporation, except as required in the course of her
employment. All of such items shall be returned to the Corporation by the
Employee upon the termination of her employment with the Corporation for
whatever reason. The provisions of this Section 8 shall not, however, prohibit
the Employee from using any materials published by the Corporation and made
available (without breach of this Section) to the general public.
6
<PAGE>
9. Termination.
-----------
(a) Death or Disability. Subject to any broader rights granted the
-------------------
Employee under applicable law, including under the Family Medical Leave Act or
under the Americans with Disabilities Act, in the event of the Employee's death
or in the event of her disability for a period in excess of one (1) month during
the term of this Agreement, the Corporation may terminate this Agreement, in
which event the Corporation shall pay to the Employee or to her heirs or
personal representatives the amount of compensation and benefits accrued under
Sections 3 and 4 hereof through the date of death or (in case of disability)
through the end of the one-month period commencing with the onset of disability.
The Corporation shall thereafter have no further liability under this Agreement
to the Employee or her heirs or personal representatives. "Disability" for
purposes hereof shall be deemed to have occurred if the Employee because of
injury or sickness is unable to perform each of the material duties of her
occupation.
(b) Termination with Cause by the Corporation. At any time during the
-----------------------------------------
term hereof, the Corporation shall have the right to terminate for cause the
Employee's employment under this Agreement upon the occurrence of any of the
following events by the Employee:
(i) willful or repeated violation of any of the material
provisions of this Agreement, or persistent neglect of her material duties
hereunder, provided that any termination pursuant to this subparagraph (i)
shall be conducted in accordance with any applicable procedures contained
at the time of such termination in the Corporation's Employee Handbook;
(ii) dishonesty, fraud, embezzlement, defalcation, conviction of
any felonious offense; or
7
<PAGE>
(iii) intentionally imparting Confidential Information, as
defined in Section 7, to competitors or to other third parties other than
in the course of carrying out her corporate duties.
Such termination shall be effective immediately upon the delivery to the
Employee by the Corporation of written notice of such termination. In the event
of a termination of the Employee's employment for cause in accordance with the
provisions of this Section 9(b), the Corporation shall pay to the Employee on
the date of termination all compensation and benefits accrued under Sections 3
and 4 of this Agreement to the date of such termination. Thereafter, the
Corporation shall have no further obligation to the Employee.
(c) Termination with Cause by the Employee. At any time during the
--------------------------------------
term hereof, the Employee shall have the right to terminate her employment
hereunder for cause upon the failure of the Corporation to comply with any of
the material terms of this Agreement. Such termination shall be effective
immediately upon the delivery to the Corporation by the Employee of written
notice of such termination. In the event of a termination of the Employee's
employment for cause in accordance with the provisions of this Section 9(c), the
Corporation shall pay to the Employee on the date of termination all
compensation and benefits accrued under Sections 3 and 4 of this Agreement to
the date of such termination. Thereafter, neither the Corporation nor the
Employee shall have any obligation to the other hereunder, except as accrued
prior to the date of termination or as set forth in Sections 7 and 8 hereof.
10. No Termination Without Cause by the Corporation. The Corporation
-----------------------------------------------
shall not be entitled to terminate the Employee's employment during either the
initial or any renewal term hereof
8
<PAGE>
without cause. The Corporation may, however, with or without cause, suspend the
performance of the Employee's duties hereunder, such suspension to be effective
immediately upon written notification by the Corporation to the Employee. In
such event, the Employee shall continue to be an employee of the Corporation
through the conclusion of the initial or renewal term during which suspension of
duties occurs, and the Employee shall be entitled during such initial or renewal
term to receive all compensation and benefits provided for herein, including any
benefits related to the vesting of options pursuant to any Stock Option
Agreement to which the Employee is a party.
11. Matters Involving Current Employer. The Employee represents and
----------------------------------
warrants to the Corporation that her execution, delivery and performance of this
Employment Agreement will not in any respect contravene any obligations owed by
her to any third party, including the Employee's former employer, Quintiles,
Inc.
12. Notices. Any notice required or permitted to be given under this
-------
Agreement shall be sufficient if in writing and if delivered (including delivery
by private courier or facsimile transmittal) or sent by registered or certified
mail, postage prepaid, return receipt requested to the Employee at 106 Preston
Ridge, Cary, North Carolina 27513, or to the Corporation at 1717 West Sixth
Street, Suite 400, Austin, Texas 78703, or to such other address as either party
shall designate by written notice to the other. Such notice shall be effective
as of the earlier of the date received or, if mailed as described above, three
days after the date of mailing.
13. Assignment. This Agreement may not be assigned by either party hereto
----------
without the consent of the other party. Subject to the foregoing, the rights
and obligations of the Corporation
9
<PAGE>
under this Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of the Corporation, and the rights of the Employee under
this Agreement shall inure to the benefit of the heirs and personal
representatives of the Employee.
14. Appointment to Board. The parties mutually acknowledge that the
--------------------
Employee will be considered for a position on the Corporation's Board of
Directors, commencing with the election of directors to be held at the
Corporation's 1999 annual meeting. The Employee understands and acknowledges
that her nomination for a Board position will be subject to the pro rata
representation rights of the Corporation's preferred shareholders and, in
particular, will be subject to the agreement of such preferred shareholders to
expand the present size of the Board. There can be no assurance that the
preferred shareholders will approve expansion of the Board.
15. Miscellaneous.
-------------
(a) This Agreement shall be subject to and governed by the laws of the
State of Texas and is performable in Travis County, Texas.
(b) Whenever the context requires, the gender of all words used herein
shall include the masculine, feminine and neuter, and the number of all words
shall include the singular and plural. Titles of sections are for convenience
only and neither limit nor amplify any of the provisions contained herein.
(c) Upon execution of this Agreement, the right, duties and
obligations of the parties hereto with respect to the matters set forth herein
shall be governed solely by the provisions of this Agreement, and all
representations, warranties, terms and conditions with respect to such
10
<PAGE>
matters which may be contained in any prior writing executed by any of the
parties shall be null and void and of no further force and effect.
(d) Whenever possible, each provision of this Agreement will be
interpreted in such a manner as to be effective and valid under applicable law,
but if any provision of this Agreement, or the application thereof to any party
hereto or under any circumstances, shall be invalid or unenforceable to any
extent under applicable law, such provision shall be deemed severed from this
Agreement with respect to such party or such circumstance, without invalidating
the remainder of this Agreement or the application of such provision to other
persons or circumstances, and a new provision shall be deemed to be substituted
in lieu of the provision so severed which new provision shall, to the extent
possible, accomplish the intent of the parties hereto as evidenced by the
provision so severed.
(e) In the event of a breach or threatened breach by the Employee of
any provision of this Agreement, then in addition to any other available remedy
to which the Corporation may be entitled, including the recovery of damages, the
Corporation shall be entitled to an injunction restraining the Employee from
breaching or attempting to breach, in whole or in part, any of the provisions of
this Agreement. In addition, in the event of a breach by either party of any
provision of this Agreement, the non-breaching or (in the event of litigation)
the prevailing party shall be entitled to recover from the other party (the
"Non-Prevailing Party") all reasonable costs and attorneys' fees incurred by the
non-breaching or prevailing party in seeking any of such remedies; provided,
however, the Non-Prevailing Party shall not be required to pay any amount of the
other
11
<PAGE>
party's costs and attorneys' fees that is in excess of one and one-half (1-1/2)
times such Non-Prevailing Party's own bona fide costs and attorneys' fees
incurred in connection with the matter.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date set forth above.
CLINICOR, INC.
By: /s/ James W Clarke CFO
--------------------------------------
JAMES W. CLARK, JR., Vice President of Finance,
Treasurer and CFO
"CORPORATION"
/s/ Rosina Maar MD
--------------------------------------
ROSINA MAAR, M.D.
"EMPLOYEE"
12
<PAGE>
EXHIBIT A
---------
Summary of Benefits
-------------------
WORKERS' COMPENSATION INSURANCE
Workers' compensation benefits are provided in accordance with the Texas
Workers' Compensation Act. Policy with Hartford Insurance allowing
coverage throughout the United States.
MEDICAL
Clinicor provides a PPO medical insurance plan with Fortis Benefits for all
full-time employees and their eligible dependents. A new employee is
eligible for group medical coverage on the first day of the month
immediately following 30 days of uninterrupted service. Clinicor pays the
medical and dental premiums for each full-time employee.
Preferred Provider One Hundred Plan 1000
- Deductible Amount: $1,000
- Family Deductible: $2,000
- Contracting Outpatient Physician Co-Pay: $20.00
- Emergency Room Co-Pay:
Contracting - $50 each visit
Non-Contracting - $100 each visit
- Non Contracting Hospital Admission Co-Pay: $200
DENTAL
- Preventive: $0
- Basic and Major: $50 (deductible)
- Yearly Maximum Benefit: $1,000
- One year waiting period for major dental
PRESCRIPTION DRUG CARD PLAN
- Generic Prescription Drugs: $5
- Brand Name Prescription Drugs: $10 plus 30%
13
<PAGE>
LIFE INSURANCE & SHORT AND LONG-TERM DISABILITY
Benefits include a group life insurance and AD&D policy with Fortis
Benefits for all full-time employees, with the premiums paid in full by
Clinicor. A new employee is eligible for this coverage on the first day of
the month immediately following 90 days of uninterrupted service.
Clinicor provides group short-term and long-term disability insurance to
all regular full-time employees. A new employee is eligible for this
coverage on the first day of the month immediately following 90 days of
uninterrupted service.
401(K) RETIREMENT PLAN
Principal Financial Group offers a mix of investment profiles. Principal
offers an internet site to find daily account values and information about
investment options. Clinicor provides eligible employees with retirement
benefits under a 401(k) Profit Sharing Plan. Clinicor matches 20% of the
first 5%. Regular full-time employees become eligible for this plan on a
quarterly basis.
Clinicor also offers rollover options into Clinicor's qualified 401(k) plan
for employees who wish to transfer their funds from other retirement plans
into Clinicor's 401(k) plan.
SECTION 125 FLEXIBLE BENEFIT PLAN
The Flexible Benefit Plan allows employees to pay for certain eligible
expenses with pre-tax dollars under Section 125 of the Internal Revenue
Code.
PERSONAL DAYS
Eligible full-time employees accrue paid personal days off at the rate of
5.3 hours per month worked; however, no employee shall take a paid-
personal day off until they have worked the 90 day introductory period with
Clinicor.
This policy takes the place of the more conventional "sick leave". We
believe our policy will give employees more flexibility in their personal
lives and will allow for better planning between employees and supervisors.
Every eligible employee is entitled to 8 paid personal days per year of
work. These personal days can be used for any combination of illness,
doctors' appointments, family business, childcare, or other personal needs.
They may include personal "mental health" days as needed, to avoid
suffering from excessive stress.
14
<PAGE>
VACATION DAYS
Vacation pay will be at the same rate as any other regularly scheduled work
week. The vacation pay is designed as an incentive and reward for length
of service with Clinicor. After the first three months of employment,
vacation is accrued at the following monthly rates, based on a forty-hour
week. Eligible employees working at least 32 but less than 40 hours per
week will receive vacation on a prorated basis.
- Up to 3 years of service: 6.67 hours per month
(80 hours per year)
- From 3 to 8 years of service: 10 hours per month (120 hours per year)
- More than 8 years of service: 13.3 hours per month (160 hours per year)
HOLIDAYS
The following are the national holidays, which are observed as paid
holidays by Clinicor:
New Year's Day
Memorial Day
Independence Day (July 4/th/)
Labor Day
Thanksgiving Day
Day after Thanksgiving
Christmas Day
Details concerning the foregoing benefits are as set forth in the Corporation's
Employee Handbook, which the Corporation reserves the right to modify from time
to time.
15
<PAGE>
EXHIBIT B
---------
Expenses to be Reimbursed in Connection with
--------------------------------------------
Employee's Presence in Austin, Texas
------------------------------------
As long as the Corporation requires the Employee to maintain her primary office
in Austin, Texas, the Corporation agrees to reimburse the Employee for certain
living expenses to be incurred when working at the Corporation's headquarters in
Austin, Texas, and to provide a leased automobile for use by the Employee in
Austin, as detailed below:
. Housing: The Corporation will reimburse the Employee $1,100.00 per
month for housing accommodations in Austin.
. Transportation: The Corporation will provide the Employee a leased
automobile for use in Austin.
. Travel: The Corporation agrees to reimburse the Employee for two round
trip airline tickets per month for travel by the Employee between
Austin and her residence in North Carolina.
The foregoing list includes all expenses to be reimbursed by the Corporation in
respect of Employee's presence in Austin. The Corporation will reimburse the
Employee ordinary business expenses, pursuant to travel and entertainment
policies in effect from time to time, for expenses incurred in connection with
entertaining clients and in connection with travel outside of Austin.
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CLINICOR,
INC. FINANCIAL STATEMENTS AS OF MARCH 31, 1999, AND FOR THE 3-MONTH PERIOD ENDED
MARCH 31, 1999, AND THE ACCOMPANYING NOTES AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,174,545
<SECURITIES> 0
<RECEIVABLES> 2,260,382
<ALLOWANCES> 20,000
<INVENTORY> 434,267
<CURRENT-ASSETS> 3,849,194
<PP&E> 2,100,916
<DEPRECIATION> 907,011
<TOTAL-ASSETS> 5,043,099
<CURRENT-LIABILITIES> 3,455,908
<BONDS> 332,260<F1>
0
9,253,000
<COMMON> 4,170
<OTHER-SE> (8,002,239)
<TOTAL-LIABILITY-AND-EQUITY> 5,043,099
<SALES> 1,613,181
<TOTAL-REVENUES> 1,613,181
<CGS> 1,081,566
<TOTAL-COSTS> 2,054,557
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (10,738)
<INCOME-PRETAX> (452,114)
<INCOME-TAX> 0
<INCOME-CONTINUING> (452,114)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (452,114)
<EPS-PRIMARY> (0.16)
<EPS-DILUTED> (0.16)
<FN>
<F1>CONSISTS OF CAPITALIZED LEASE OBLIGATIONS, EXCLUDING CURRENT PORTIONS.
</FN>
</TABLE>
