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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[ x ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended - December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to ________.
Commission file number 0-26476
SAFESCIENCE, INC.
(Exact name of Company as specified in its charter)
Nevada 33-0231238
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
Park Square Building
31 St. James Avenue, 8th Floor
Boston, Massachusetts 02116
(Address of principal executive offices, including postal code.)
(617) 422-0674
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class Common Stock
Securities registered pursuant to Section 15(d) of the Act:
Title of each class None
Indicate by check mark whether the Company (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Company was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES [ x ] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the Registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
The number of shares outstanding each of the Registrant's classes of
common stock, as of February 29, 2000 was 16,913,748.
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ITEM 1. BUSINESS
General
SafeScience is a "responsible science" company. We have chosen a
business model which spans multiple products, markets, industries and
technologies, all united through a common goal exemplified in our mission
"making chemical safety a lifestyle choice." We are focused on three
distinct business segments: biotechnology, agricultural products, and
consumer products tied together with a branding and marketing strategy.
We have unified these seemingly disparate businesses by seeking to fill
an important need which exists in many areas of modern life: to provide
safe alternatives to products which include hazardous chemicals. This
concept is embodied in the word "SafeScience," which is an idea and a
lifestyle as well as a brand. Our mission is to build a comprehensive
world brand that introduces chemical safety and product performance to
human therapeutics and to many aspects of consumer, institutional and
agricultural life.
We began as a carbohydrate chemical company, and continue to build
on carbohydrate technology. Yet SafeScience has expanded its efforts to
research, develop and market products beyond carbohydrate chemistry and
into many other safe and innovative technologies, and is seeking to build
a world brand based on our own products as well as technology we have
licensed from or developed with strategic partners. All our products
seek to achieve competitive standards of performance, as well as a strong
environmental, health and safety profile. The SafeScience brand
currently encompasses agricultural products, as well as, products for the
consumer and institutional markets.
We believe that the SafeScience trademark is an important asset.
The mark has been registered in the United States and is in the process
of registration in major markets throughout the world. It communicates
our mission and identity, creating the foundation for a world brand which
identifies not only products but the core principle behind them. The
message of the SafeScience brand has attracted retailers, distributors,
consumers, scientists and development partners to the Company, allowing
it to grow through activities such as licensing, partnering and joint
ventures in research and development. It has also allowed us to pursue
a strategy which is novel in "corporate" or store branding: a "better-
than brand" positioning. Historically, corporate or store brands have
been marketed based purely on price since they are cheaper than leading
brands. Co-branding with SafeScience allows a corporate brand to offer
a qualitative difference, where "SafeScience" is used descriptively, not
just as an identifier of origin.
SafeScience Products, Inc.
SafeScience conducts its business through two wholly-owned
subsidiaries. One subsidiary, SafeScience Products, Inc. ("SafeScience
Products"), operates our consumer and institutional, agricultural, and
horticultural products business. This subsidiary is also responsible for
the marketing and brand management of all SafeScience products.
SafeScience Products' consumer and institutional products currently for
sale include an innovative line of safe, industrial-strength cleaning
products, chemically safe consumer household cleaning products, a home
and garden care line, and automotive care products.
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We recognized our first revenues in the second quarter of 1999
through sales of consumer cleaning and home and garden products through
various retail channels. Additional products and product lines are in
various stages of development. In the agricultural sector, SafeScience
Products has developed and/or licensed an array of products that include
a Federal EPA-approved safe fungicide and a line of nutrient fertilizers.
Additional fungicide, herbicide and insecticide products are in various
stages of testing and development.
International Gene Group, Inc.
Our second subsidiary, International Gene Group, Inc. ("IGG"),
develops human therapeutics. IGG has been focused on developing GBC-590,
a complex carbohydrate designed to combat cancer tumors and metastasis.
Phase IIA United States Food and Drug Administration ("FDA") clinical
trials for GBC-590 efficacy for prostrate, pancreatic, colorectal, and
liver cancer are expected to begin in 2000. IGG has also developed CAN-
296, a complex carbohydrate antifungal agent, which is being tested in
animals to inhibit Candida infections.
As part of SafeScience, IGG has the opportunity to be part of a
revenue-generating group in which we believe the costs of research and
development (which are frequently financed by investment) may partially
be offset by revenues from the non-biopharmaceutical side of the
business. At the same time, we believe that SafeScience Products'
consumer products business can benefit from its affiliation with a
company that is engaged in important scientific research validating it as
a health/science oriented company, not simply a marketing organization.
Business Strategy
We have developed our products through internal research and
development, as well as, through licensing arrangements. This approach
has allowed us to gain access to a significantly wider array of products
than we would have been able to develop internally.
Our current strategy is focused on gaining a strong foothold in
markets for our cleaning products and to commence marketing efforts of
our agricultural and additional home and garden products for the 2000
season.
In connection with this strategy, we have retained Daymon
Associates, a leading corporate branding and retail sales company, to
represent our consumer cleaning products to its retailing clients
internationally. Daymon Associates has a large customer base of
supermarkets, drug stores and mass merchandisers and works with numerous
chains internationally. Our alliance with Daymon Associates provides our
products access to major supermarkets, mass merchandisers, drug chains,
wholesale clubs and food services stores, on both a national and
international level, thus allowing the SafeScience brand a broader range
of exposure than would have been possible had we attempted to approach
retailers on our own.
We have begun efforts to penetrate specific sectors of the
institutional market that seemed particularly appropriate for SafeScience
cleaning products, targeting large wholesalers that distribute to
restaurants, prisons, hospitals, schools, hotels and office buildings.
We use our Web Site not just as a channel to sell our products, but
also as a marketplace of ideas and information about chemical safety in
which we can share our mission with more people.
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While SafeScience Products is bringing products to market in the
consumer and institutional arenas, IGG, our subsidiary for human
therapeutics, has completed Phase I of human trials in the FDA approval
process for GBC-590. We plan to commence various human Phase II trials in
2000 for testing on prostate, pancreatic, colorectal and liver cancers.
Our near-term objectives as follows: to begin to build sales and revenues
for our consumer products; to continue to expand our product lines by
internal research and development, partnering and licensing; and to
proceed through the various phases of FDA trials for our therapeutic
products.
Products
SafeScience Products
The business of SafeScience Products may be divided into three broad
categories: consumer products, commercial products and agricultural
products. All three categories of products are sold under the
SafeScience(R) brand name. The agricultural products expected, subject
to various regulatory approvals, to begin sales in 2000 include a
fungicide known as Elexa Plant Defense Booster (PDB), and a line of
primary and secondary plant nutrients. Products in development include
an organically-based fungicide and outdoor and indoor bioinsecticides.
The Company's consumer products include a line of chemically safe
consumer household cleaning products and a home and garden care line.
The commercial product line presently consists of chemically-safe,
cleaning products.
Consumer Cleaning Products. We believe that the issue of chemical
safety cannot be addressed in a meaningful way with a single product or
even a single technology. From the consumer's perspective, chemical
safety must be a lifestyle choice if it is to have a material impact on
health. As the success of natural-food supermarkets has demonstrated, a
key to consumers' adopting a new lifestyle is a "one-stop shopping"
approach.
We envision the SafeScience brand as one for which consumers can
identify a wide range of products that fit the core value of chemical
safety. Our goal is to build a product line to be offered to all
consumers through multiple retail channels that ultimately can supply
chemically safe products for many consumer needs, which perform as well
as leading brands and are competitively priced. This inclusive business
model is designed to bring together the resources of numerous
technologies and products, so as to build the SafeScience brand into a
true lifestyle choice.
We have addressed the problems concerning indoor environments with
a line of chemically safe cleaning products which have been shown to
work as well as the leading brands in independent laboratory testing.
SafeScience Healthy Cleaners are household cleaning products that offer
leading-brand performance without the associated chemical hazards to
human health or the environment. They are the result of many years of
research, formulation, testing and use in industrial, institutional and
municipal settings. SafeScience cleaners are based on advanced
surfactant technologies rather than harsh chemical solvents such as
chlorine, ammonia and petroleum distillates. Surfactants are molecules
that encapsulate dirt, reducing its adherence to surfaces so that it can
be removed easily. Alternative solvents chemically dissolve substances
and are harsh. Our cleaners contain a balanced blend of surfactants to
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address both safety and performance. Products include an All-Purpose
Cleaner, Bathroom Cleaner, Window Cleaner, Floor Cleaner, Dish Liquid,
Laundry Liquid, Shower Mist, Kitchen Cleaner and Exterior Cleaner. These
products, which we have licensed, are presently available for sale.
Commercial Cleaning Products. The commercial cleaning market
represents a significant opportunity for SafeScience. From hospitals to
schools to office buildings, administrators have become sensitive to
demands for clean indoor air. A growing body of evidence links a wide
range of previously unidentified ailments, now referred to as Multiple
Chemical Sensitivity ("MCS") and Sick Building Syndrome ("SBS"), to poor
air quality in buildings. We are addressing the critical issue of indoor
environments with a line of chemically-safe institutional cleaning
products.
The causes of sick buildings are numerous, ranging from poor
ventilation and the presence of mites or fungal spores in older
buildings, to chemicals off-gassed by office furniture, carpets and
equipment which can be particularly concentrated inside new, airtight
buildings. Cleaning products are now recognized as major contributors of
indoor air pollutants. The EPA reports that "cleaning agents may emit
volatile organic compounds ( VOC's). Research shows that some VOCs can
cause chronic and acute health effects at high concentrations, and some
are known carcinogens." Our commercial cleaning products are industrial-
strength cleaning concentrates that offer the performance of the leading
brands, without the harsh chemicals, thus providing a non-hazardous
alternative to petroleum-distillate based, chlorinated, caustic or high-
VOC content products.
We are focusing our marketing efforts on wholesalers who sell to
specific industries including restaurants, prisons, hospitals, schools,
hotels and office buildings. We particularly focused on the hospital
industry, which has recently been targeted by the EPA as a major source
of pollution. Mercury, in particular, has been marked as a problem, with
the EPA citing the fact that three grams of mercury is enough to pollute
a 60 acre lake. Sources of mercury in hospitals extend beyond
thermometers and include many standard cleaning products that have been
recently found to be contaminated with significant amounts of mercury.
To address this concern, we have tested our commercial cleaning products
at a major hospital. Those test results showed our products to be
mercury free.
Under the banner of the "SafeScience Environment," we are also
reaching out to hotels, schools and office buildings such as the first
"SafeScience Building," a 500,000-square-foot office building in Houston,
Texas which is cleaning with SafeScience products on a trial basis. We
are in discussion with several other municipalities and institutions,
including a significant building management company. Some of these
organizations have already begun ordering SafeScience products.
Some of the major benefits of our products are their competitive
performance, their non-corrosive and non-abrasive qualities, and the fact
that they are not hazardous to human health and are biodegradable. These
products have been tested and used by a major U.S. airline, metropolitan
mass transit systems, schools, hospitals and the U.S. Armed Forces, among
others under a licensor's trade name. Sales under the SafeScience brand
name began in the second quarter of 1999.
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Agricultural Products. We are attempting to decrease reliance on
toxic agricultural chemicals. Our principal agricultural product, Elexa
PDB, is designed to improve a plant's natural ability to resist disease.
Unlike traditional fungicides (i.e., chemicals which are toxins that
function as agents to kill fungus directly) our lead fungicide product,
Elexa, contains carbohydrate compounds, or natural complex "sugars," that
are known to have low toxicity and little impact on the environment.
Our lead agricultural product, Elexa PDB, has been designed to
inhibit the penetration and development of fungal pathogens in a variety
of plants, including many important agricultural crops. In 1998 and
1999, Elexa PDB was tested in over 40 domestic and international field
trials at several leading agricultural universities, at independent
professional testing sites and through our overseas distributors. These
trials showed that Elexa PDB is effective in grapes, cucumbers and
strawberries in eliciting the plant's own defenses against a variety of
commercially significant diseases such as powdery mildew, downy mildew
and gray mold. In 1999, Elexa PDB testing expanded to include melons,
potatoes, lettuce, strawberries, grapes, cucumbers, apples, zucchini and
roses under both field and greenhouse conditions.
Elexa PDB 1% formulation has been approved by the United States
Environment Protection Agency, ("EPA"). However, we are still awaiting
approval by both EPA and certain state pesticide regulatory agencies for
the Elexa PDB 4% formulation. Subject to obtaining such approvals, we
expect that sales of Elexa PDB may begin in the second quarter of 2000.
Other agricultural products are in various stages of testing.
Home and Garden Products. We intend to sell a unique fertilizer
delivery granule for lawn, garden and shrub care in both the consumer and
agricultural markets. These granular fertilizer products include All-
Purpose Garden, Acid Care, Fruit & Flower and Healthy Lawn. These
granular fertilizers use technology in which nutrients are embedded
within cellulose fiber granules that are biodegradable and facilitate the
controlled release of nutrients to the plant or grass. The timed-release
nitrogen formula promotes efficient plant uptake, minimizing the leaching
of nitrogen into groundwater. The essential micronutrients, bioavailable
potassium and specially processed humate also serve as an energy source
for beneficial soil microorganisms. Field trials have been conducted and
are continuing in the U.S. on grass. We expect to market several of
these products for the growing season 2000.
International Gene Group
Theoretical Background. Cells recognize one another through pairs
of complementary structures on their surface. A structure on one cell
carries encoded biological information that a structure on another cell
can decipher. While nucleic acids and proteins were previously
recognized as the major classes of biological materials involved in cell
recognition, it has recently been theorized (though not scientifically
established) that carbohydrates play a role as well. The majority of a
cell's surface components contain carbohydrate structures on the cell,
which change characteristics as the cell develops, differentiates and
sickens.
It is contended that cell adhesion plays a key role in non-
bacterial diseases, cancer and cancer metastasis. Metastasis is the
process by which cancer cells spread throughout the body, beginning at
the primary tumor. The spread of the cancer cells throughout the body is
the main cause of death for cancer patients. These cells, once
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circulating in the bloodstream after their detachment from the primary
tumor, must adhere to new cells in other parts of the body in order to
proliferate to form new tumor colonies. Malignant cells may thus recruit
the very adhesion molecules that are part of the body's natural defense
mechanism to promote their own metastasis. We thus believe that drugs,
which inhibit this process of adhesion, may therefore inhibit metastasis
although this theory has not been scientifically established.
Complex Carbohydrate Substance (GBC-590). GBC-590 may offer a novel
approach to controlling the progression of cancer, by disrupting the
cellular recognition process of roaming cancer cells and preventing them
from reattaching to each other and to normal tissue. The GBC-590
compound acts as a "molecular decoy" by recognizing specific substances
called "lectins" on cancer cells, attaching itself to the lectins and
preventing those cells from aggregating. GBC-590 may thus prevent or
even reverse metastasis, while the body's immune system destroys the
individual cancer cells marked with the carbohydrate molecule.
Phase I clinical trials of GBC-590, at the MD Anderson Cancer Center
in Houston, Texas and at Pennsylvania Oncology and Hematology Associates,
an affiliate of the University of Pennsylvania - School of Medicine in
Philadelphia, Pennsylvania, were completed in 1999. Phase I is intended
to assess toxicity; GBC-590 was well tolerated in patients.
There can be no assurances at present that injection with GBC-590
will prove effective in reducing or eliminating the spread of cancer in
humans. Phase II studies of GBC-590 are scheduled to commence at the MD
Anderson Cancer Center in Houston, Texas, Beth Israel/Deaconess Hospital
and Dana Farber Cancer Institute in Boston, Massachusetts, the University
of Chicago Pritzker School of Medicine in Chicago, Illinois and
Christiana Healthcare, in Wilmington, Delaware subject to IRB approval,
in 2000.
CAN-296. CAN-296 is an anti-fungal agent derived from a naturally
occurring complex carbohydrate, designed for treatment of Candida and
Apsergillus infections. Candida, a common fungal disease, can take on
two forms: deep-seated infections which can be fatal and superficial
infections such as athlete's foot, skin infections and vaginitis. The
former systemic Candida, as well as, Apsergillus infections are prevalent
in immuno-suppressed patients including individuals undergoing cancer
chemotherapy, and AIDS, leukemia and severe/progressed diabetes patients,
as well as patients undergoing transplant surgery.
Current therapies for Candida have been in the marketplace for more
than 20 years and, when administered systemically, can have serious side
effects. Despite substantial advances in patient care, there remains a
30-40% mortality rate from Candida in immuno-suppressed patients, and
many strains of Candida have developed resistance to current anti-fungal
agents.
CAN-296 has been tested in vitro against many Candida pathogenic
isolates including resistant strains and demonstrated superior efficacy.
It killed or inhibited many fungal strains at concentrations lower than
one microgram per milliliter. We may file an Investigational New Drug
application ("IND") with the FDA during 2000. There are no assurances
that application of CAN-296 will prove effective in reducing or
eliminating Candida infection in humans, and there have been no clinical
studies or tests conducted to prove such an effect.
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Manufacturing
We have established manufacturing and distribution relationships
with several firms, that we believe will provide the capability to meet
our anticipated requirements for the foreseeable future. Certain
products under license from third parties are manufactured by the
licensors, helping to ensure that the proper attributes are conveyed
directly to the end products. We audit our contract-manufacturing firms
for process capability, management control and for the capacity to scale-
up production in the event that larger volumes of product are needed.
Materials and components are selectively sourced from suppliers
nationally. We have good working relationships with all our
manufacturing associates and suppliers.
Government Regulation
Certain of our activities are subject to extensive federal and local
laws and regulations controlling the development, testing, manufacture
and distribution of pesticide and pharmaceutical products. The
pharmaceutical products of our IGG subsidiary are subject to regulation
as therapeutics by FDA, while many of our agricultural and home and
garden products are regulated as fungicides, insecticides or herbicides
by the EPA and other Federal and state regulatory agencies. In addition,
our products may also be subject to varying degrees of regulation by a
number of foreign governmental agencies. Compliance with FDA and EPA
regulations often results in substantial costs relating to laboratory and
clinical testing of new products, for the preparation and filing of
documents in required formats and for other testing. Moreover, there are
no assurances that we will receive the approvals necessary to
commercially market our products.
Food and Drug Administration Regulation
The FDA approval process consists of four steps that all new drugs,
antibiotics and biologicals must follow. These steps are:
1. investigational new drug application
2. clinical trials
3. new drug application (review and approval)
4. post-marketing surveys
In 1993 the FDA approved new procedures to accelerate the approval
of certain new drugs and biological products directed at serious or life-
threatening illnesses. These new procedures are intended to expedite the
approval process for patients suffering from terminal illness, if the
drugs subject to approval provide a therapeutic advantage over existing
treatment. We believe that GBC-590 may fall under the FDA guidelines for
accelerated approval, since they are targeted as potential treatments for
cancer metastasis and primary tumors, although there can be no assurance
that they will be subject to such accelerated approval standards.
Human clinical trials are conducted in three phases, normally
involving progressively larger numbers of patients. Phase I clinical
trials are concerned primarily with learning more about the safety of a
drug, by determining the drug's toxicity. Typically oncology related
Phase 1 trials involve 20-40 patients, taking one to two years to
complete. Phase I has been completed for GBC-590.
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Assuming the results of Phase I testing present no toxicity or
unacceptable safety problems, Phase II trials may begin. The primary
objective of this stage of clinical testing is to determine whether the
drug is effective in treating the disease or condition for which it is
intended. Phase II studies may take a year or longer and could involve
200 or more patients for each type of disease or illness tested. These
studies are randomized controlled trials that also attempt to disclose
short-term side effects and risks in people whose health is impaired. A
number of patients with the disease or illness will receive the treatment
while a control group will receive a placebo. We intend to begin Phase II
trials for GBC-590 in prostate, pancreatic, colorectal and liver cancer
in 2000.
The objective of Phase III is to develop information that will allow
the drug to be marketed and used safely. Phase III trials involve
hundreds of people with the objective of expanding on the research
carried out in Phase II. Among the objectives of Phase III trial are to
determine optimum dosage rates and schedules, to discover less common or
even rare side effects and adverse reactions, and to generate information
that will be incorporated into the drug's labeling and the FDA-approved
guidelines to physicians and others about how properly to use the drug.
The third step that is necessary prior to marketing a new drug is the New
Drug Application (NDA) submission and approval. In this step, all the
information generated by the clinical trials will be submitted for review
and, if successful, the drug will be approved for marketing.
The final step of the FDA approval process is the random
surveillance or surveys of patients being treated with the drug to
determine its long-term effects. This step has no effect on the
marketing of the drug unless toxic conditions arise. The time required
to complete all four of these steps averages seven years, but can take
significantly longer. There is no assurance that the Company will ever
receive FDA approval of any of its products.
Environmental Protection Agency Approval
Our subsidiary, SafeScience Products, is required to obtain the
approval of the EPA before beginning to sell products which constitute
fungicides, insecticides or herbicides.
The EPA approval process begins with the design and initiation of
tests to determine the chemistry of the compound being submitted and its
toxicity in animals. In addition, the manufacturing procedures must be
clearly defined and submitted with the registration. Once the EPA
approval process begins, it typically takes 12 to 14 months for approval
of safer biological products. The EPA regulatory process for the first
generation (1%) Elexa PDB has been completed. The Federal EPA and state
regulatory approvals for a new 4% formulation of Elexa PDB are pending.
The Company applied for California environmental protection agency
registration for both the original and new formulation during the second
half of 1999 and we are still awaiting California State approval. The
Company will also seek to register its products with other state
regulatory agencies.
The process of obtaining EPA approval for certain other products now
in development has already commenced. An application is currently being
pursued for the microbial agent BB447 as an alternative to the
conventional use of toxic chemicals to kill ants and cockroaches. Our
nutrient and fertilizer products for the agricultural and home and garden
markets do not require EPA approval.
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The Company intends to pursue approvals to the extent required by
foreign environmental protection agencies.
Marketing and Distribution
The name "SafeScience" is an important asset. It is not only a
brand name but also a statement of our philosophy. It has also served as
the thesis of our marketing strategy, tying together a variety of
products in a cross-section of categories. Our products will be marketed
under the brand name "SafeScience," as well as various co-branded and
private labels, in the United States. Our packaging communicates the
products' performance and nontoxic profile. We have either registered or
are in the process of registering the trademark SafeScience in all our
targeted U.S. and foreign markets.
Our Marketing Efforts are Focused in Several Areas
Consumer Products. An important relationship is with Daymon
Associates, a leading corporate branding and retail sales company.
Daymon Associates is introducing our consumer cleaning product line to
its client base of supermarkets, mass merchandisers and drugstores as a
"better brand" that offers leading-brand performance and chemical safety
at a competitive, corporate brand price. We intend to use Daymon
Associates for our other consumer product categories as they may be
introduced.
A significant milestone of our marketing efforts has been our
program with Shaw's Supermarkets of New England. On September 13, 1999,
we announced a program with Shaw's to co-brand eight household cleaning
products under Shaw's Own Label program. They lead the supermarket
industry in sales of private label products, at 40% of total sales. The
"Shaw's SafeScience" cleaners represent the first time Shaw's has ever
offered co-branded products.
Our relationships with Daymon Associates and Shaw's are two examples
of the acceptance of "SafeScience" as a retail branding concept. We hope
to expand our market penetration through additional alliances and
judicious use of our brand.
Institutional Products. We are marketing our institutional cleaning
products through distributors as well as directly to building maintenance
businesses, state departments, municipalities, schools, prisons and
merchants.
Agriculture. We are marketing our commercial agricultural products
both domestically and in foreign markets. We have established a network
of independent distributors in over 25 countries throughout the world.
These distributors recognize the combined business and social value of
SafeScience and are committed to advancing economic, environmental and
health benefits in their nations and worldwide. We anticipate that
commercial sales may begin in 2000 for several of our agricultural
products.
Home & Garden. We are marketing our consumer home and garden
products through retailers such as home and garden centers, hardware
stores and mass merchandisers, as well as over the Internet. We hope to
continue to generate awareness of these products, the first of which we
commenced advertisements for on television, radio, print media and trade
journals in early 1999.
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The Internet. The Internet provides us with an international online
audience that is self-selected for its interest in ideas concerning
chemical and environmental safety. It allows potential partners
throughout the world with ideas, information and products to contact us.
We can be found at http://www.safescience.com.
Competition
Our products will encounter significant competition from firms
currently engaged in the pharmaceutical, biotechnology, agrochemical and
consumer products industries. The majority of these companies will be
substantially larger than the Company, and have substantially greater
resources and longer operating histories.
Product Liability
Because the Company's products are used in a wide variety of
applications including human therapeutic, household or industrial
cleaning and agricultural commodities including food products, the
Company may be exposed to significant product liability claims. The
Company has purchased product liability insurance for all its products,
which it believes is adequate; however, there can be no assurance that
available amounts of coverage will be sufficient adequately to protect
the Company in the event of a successful product liability claim.
Patent Status and Protection of Proprietary Technology
We own or license proprietary rights with respect to many of our
products. Some of the products we have either developed in house or
licensed from others have been issued patents, and many other product
patents are pending. We are continuing to pursue these patents; however,
there can be no assurance that our products or our technology will be
granted patent protection, or will not infringe on patents owned by
others. A patent has been granted on a compound which is similar to GBC-
590, the claims of which conflict with certain claims in the GBC-590
patent application. The GBC-590 patent application is pending at the U.
S. Patent and Trademark Office and based upon the claims of this
application the Company expects to receive a patent.
Dr. David Platt, our Chairman and CEO as well as a Director, has
granted our IGG subsidiary an exclusive, world-wide license, including
the right to sublicense, for all products covered by patents, (if and
when granted) or patent applications that he has developed (including
GBC-590). IGG is responsible for payment of all costs connected with
obtaining and maintaining the patents. In the case of GBC-590, Dr. Platt
is entitled to a royalty of 2% of all net sales. See "Certain
Relationships and Related Transactions" below.
To the extent that the Company currently relies upon unpatented,
proprietary technology, processes and know-how and the protection of such
intellectual property by confidentiality agreements, there can be no
assurance that others may not independently develop similar technology
and know-how or that confidentiality will not be breached. We believe
our intellectual property rights are significant and that the loss of all
or a substantial portion of such rights could have a material adverse
effect on our business, financial condition and results of operation.
There is no assurance that any patents will ever be granted on our
unpatented intellectual property.
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Uncertainties Associated with Research and Development Activities
The Company intends to continue its research and development
activities on its human therapeutic products and those of its other
products which are not presently ready for market and are in various
stages of development. Research and development activities, by their
nature, preclude definitive statements as to the time required and costs
involved in reaching certain objectives although the costs of these
activities will be significant. If research and development requires
more funding than anticipated, the Company will have to achieve the
necessary levels of sales to continue to support research and development
expenses, will have to reduce product development efforts or seek
additional financing. There can be no assurance that the Company would
be able to secure any necessary additional financing or that such
financing would be available on favorable terms.
Dependence Upon Key Personnel
The Company relies greatly in its efforts on the services and
expertise of its current senior officers: David Platt, Ph.D., CEO,
Secretary and Chairman of the Board of the Company; Bradley J. Carver,
President, Treasurer and a member of the Board of Directors; Richard A.
Salter, Senior Vice President of the Company and a member of the Board of
Directors. The operation and future success of the Company would be
adversely affected in the event that Dr. Platt, Mr. Carver or Mr. Salter
was incapacitated or the Company was otherwise to lose their services.
Certain Factors That May Affect Future Results
Forward-looking statements are made throughout this document.
Typically, the use of the words "believe", "anticipate", "plan",
"expect", "seek", "estimate" and similar expressions identify
forward-looking statements. Unless a passage describes a historical
event, the statement should be considered a forward-looking statement.
In keeping with the "Safe Harbor" provision of the Private Securities
Litigation Reform Act of 1995, it should be noted that forward-looking
statements regarding the Company's future expectations and projections
are not guarantees of future performance. They involve risks,
uncertainties and assumptions, and many of the factors that will
determine the Company's future results are beyond the Company's ability
to control or predict. Therefore, actual results may differ
significantly from those suggested by forward-looking statements. These
risks include those detailed under the heading "Certain Factors That May
Affect Future Results" immediately following the "Management's Discussion
and Analysis of Results of Operations and Financial Condition."
Employees
At December 31, 1999 we had approximately 53 employees on a full-
time basis and also employed several part-time workers. Our full-time
employment roster grew by 37 employees since January 1, 1999 and we may
hire additional full-time and/or part-time employees, as well as
consultants and other professionals, as necessary to support the growth
of our business.
13
ITEM 2. PROPERTIES.
Our offices are located at the Park Square Building, 8th Floor, 31
St. James Avenue, Boston, Massachusetts 02116. We lease a total of
11,300 square feet of office space, which we anticipate will be adequate
for our space requirements for the foreseeable future. In addition to
our leased space in Boston, we are conducting research at various
facilities on a contract or license basis.
ITEM 3. LEGAL PROCEEDINGS.
There is no outstanding material litigation against the Company.
The Company is aware of potential litigation threatened by Agrogene Ltd.
but does not believe this threatened litigation represents a material
threat to the Company's operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On June 29, 1999 the Company held its Annual Meeting of
Stockholders. Three items were voted upon: the election of directors; the
ratification of the appointment of auditors and Amendment of the Articles
of Incorporation.
The nominees for director were Bradley J. Carver, David Platt, David
Dube, Richard A. Salter Theodore J. Host, and Brian G. R. Hughes. The
following table indicates the number of votes cast with respect to each
candidate, the number of votes in favor, the number of votes against, and
the number of abstentions:
Total Votes Votes
Nominee Votes Cast In Favor Against
Bradley J. Carver 11,889,197 11,684,672 204,525
David Platt 11,889,197 11,683,883 205,314
David Dube 11,889,197 11,721,156 168,041
Richard A. Salter 11,889,197 11,685,758 203,439
Theodore J. Host 11,889,197 11,721,166 168,031
Brian G. R. Hughes 11,889,197 11,721,166 168,031
The appointment of Arthur Andersen LLP as auditors for the Company
for the fiscal year ended December 31, 1999 was approved by a vote of
11,881,902 in favor and 7,295 against out of a total of 11,889,197 votes
cast.
The amendment of the Articles of Incorporation to increase the
authorized common shares from 25,000,000 to 100,000,000 was approved by
a vote of 11,750,500 in favor and 132,537 against out of a total of
11,883,037 votes cast.
14
OFFICERS OF THE REGISTRANT
The officers of the Company are as follows:
Name Age Position
David Platt, Ph.D 46 Chief Executive Officer, Secretary and
Chairman
Bradley J. Carver 38 President, Treasurer and Director
John W. Burns 54 Chief Financial Officer
Richard A. Salter 57 Senior Vice President and Director
Louis J. Riceberg, Ph.D. 53 Senior Vice President, Strategic
Development
Kenneth J. Smaha 52 Chief Operating Officer
The Company's officers are elected by the Board of Directors at the
annual meeting of the Company's shareholders and hold office until their
death, or until they resign or have been removed from office.
Dr. Platt, the Chief Executive Officer, Secretary and Chairman of
the Board of Directors, co-founded the business of the Company. Prior to
his involvement with the Company, from January 1991 to November 1992, Dr.
Platt was a research scientist with the Department of Internal Medicine
at the University of Michigan, Ann Arbor, Michigan and from October 1989
to November 1991, Dr. Platt was a research fellow with Dr. A. Raz at the
Michigan Cancer Foundation, Detroit, Michigan. From January 1989 to
August 1989, Dr. Platt was a research fellow under Dr. M. Wilcheck,
Weizmann Institute of Science, Rehovot, Israel. Dr. Platt received a
Doctor of Philosophy degree, Masters of Science degree, and Bachelor of
Science degree from the Hebrew University of Jerusalem, Israel and a
Bachelor of Engineering degree from Technion, Haifa, Israel.
Mr. Carver, the President, Treasurer and a member of the Board of
Directors of the Company, co-founded the business of the Company. From
June 1992 to October 1994, Mr. Carver was a consultant with Cyrowski and
Associates, which is engaged in the business of commercial real estate.
From March 1991 to October 1994, Mr. Carver was a consultant with Circuit
Master, Inc., an electronics design and engineering firm engaged in the
production of audio power amplifiers. From January 1991 to September
1993, Mr. Carver was a consultant with EPI Medical Products, a company
engaged in the production and licensing of a patented device for disposal
of hazardous medical waste and surgical products, and a consultant with
Capital Networks, Inc., a consulting firm for small business. From
January 1989 to March 1991, Mr. Carver was a consultant with American/SCI
and Lincoln Technical Services, Inc., a company engaged in the selection
and management of engineers for automotive clients. From December 1988
to December 1990, Mr. Carver was the founder of Carver Nutritional
Products, which was engaged in production and sale of sports nutrition
products sold to professional and college sports teams. Mr. Carver
received a Bachelor of Arts degree in Management from Michigan State
University.
15
Mr. Burns has been the Company's Chief Financial Officer since
January 2000. Prior thereto, Mr. Burns was the CFO/Senior Vice
President, Finance & Business Operations for South Shore Hospital, a
regional healthcare services provider based in South Weymouth, MA, from
1993 to 1999. From 1989 to 1992, Mr. Burns was the Vice
President/Treasurer and a subsidiary CFO/Vice President, Finance for
Eastern Enterprises, a NYSE company engaged in energy and marine
transportation. Mr. Burns has also held corporate finance and treasury
positions with Allied-Signal, Citicorp Investment Bank, and International
Paper. Mr. Burns holds an MBA in Finance from New York University and a
Ph.D. in Mathematics from Stevens Institute of Technology.
Mr. Salter has been the Company's Executive Vice President since
January 1998. Prior thereto, Mr. Salter was the Company's Vice President
- - Corporate Development from June 1997 through January 1998 and served
the Company as a consultant from June 1996 through July 1997. From 1989
through 1996 Mr. Salter rendered consulting services in the areas of
sales and marketing to a variety of small businesses and companies. From
1971 to 1989, Mr. Salter was co-founder and Senior Vice President of
International Weekends, a travel and leisure company, which was sold to
The Interface Group. Mr. Salter received a Bachelor of Arts from the
University of Michigan and is a graduate of the Boston University School
of Law.
Dr. Riceberg has been the Company's Senior Vice President for
Strategic Development since November 1999. Prior thereto, Dr. Riceberg
was employed with Corning Medical, Ciba Corning Diagnostics, Chiron
Diagnostics from 1979 through 1999. From 1998-1999, Dr. Riceberg served
as Vice President, Research and R&D Portfolio Management of Chiron
Diagnostics. From 1996-1998 Dr. Riceberg served as Vice President,
Business Integration and from 1994-1996 he served as Vice President,
Strategic Planning of Chiron Diagnostics. Dr. Riceberg has a B.A. in
Biology and a Ph.D. in biochemistry from Brandeis University.
Mr. Smaha has been the Company's Chief Operating Officer since
November 1999. Prior thereto, Mr. Smaha was Executive Vice President of
Webster Industries, a private label manufacturer of consumer and
institutional plastic products, and a division of Chelsea Industries,
Inc., from 1995 through 1999. From 1989 through 1995, Mr. Smaha was
Senior Vice President and CFO of Webster Industries. Mr. Smaha has a
B.S. in Finance and Accounting from the University of Maine, Orono, and
an MBA from Babson College.
16
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS'
MATTERS.
(a) Market Information
In May 1998, the Company's securities became traded on the NASDAQ
(Small Cap) market under the symbol SAFS. Prior thereto, the Company's
securities were traded over-the-counter by the National Association of
Securities Dealers, Inc. under the symbol IGGI. The table shows the high
and low bid of Company's common stock during 1998 and 1999:
QUARTER ENDED BID
High Low
1998
March 31 5 3 1/2
June 30 7 3/8 4
September 30 6 7/32 2 7/8
December 31 7 13/16 4 1/4
1999
March 31 9 5/8 4 5/8
June 30 23 1/2 9 1/2
September 30 28 15/16 14 1/8
December 31 20 5/8 11 9/16
(b) Holders
As of December 31, 1999, the Company had 496 holders of record of
its common stock. This number does not include those beneficial owners
whose securities are held in street name. The total number of
stockholders is estimated to be approximately 7,000.
(c) Dividends
The Company has never paid a cash dividend on its common stock and
has no present intention to declare or pay cash dividends on the common
stock in the foreseeable future. The Company intends to retain any
earnings which it may realize in the foreseeable future to finance its
operations. Future dividends, if any, will depend on earnings, financing
requirements and other factors.
(d) Sales of Unregistered Securities
Set forth in chronological order below is information regarding the
number of shares of capital stock issued by the Company during the year
ended December 31, 1999. Further included is the consideration, if any,
received by the Company for such shares, and information relating to the
section of the Securities Act or rule of the Securities and Exchange
Commission under which exemption from registration was claimed.
1. From January 1999 to June 1999, the Company issued an aggregate of
1,399,101 shares of Common Stock to 38 accredited investors fro
$4.50 per share or an aggregate purchase price of $6,280,959.
17
2. From June 1999 to September 1999, the Company issued an aggregate of
216,605 shares of Common Stock to 34 accredited investors for $15.24
per share or an aggregate purchase price of $3,300,401.
3. On June 15, 1999, the Company issued an aggregate of 250,000 shares
of Common Stock to Richard A. Salter, its Senior Vice President, for
$13.375 per share or an aggregate purchase price of $3,343,750.
These shares were issued in connection with an employment agreement.
4. On June 24, 1999, the Company issued an aggregate of 307,500 shares
of Common Stock to 22 accredited investors for $3.50 per share or an
aggregate purchase price of $1,076,250. These shares represent an
exercise of warrants.
5. From June 1999 to December 31, 1999, the Company issued an aggregate
of 237,896 shares of Common Stock to 45 accredited investors for an
aggregate purchase price of $741,580. These shares represent an
exercise of warrants.
6. From January 1999 to July 1999, the Company issued 17,500 shares of
Common Stock to Richard A. Salter, its Senior Vice President, for
$0.01 per share, or an aggregate purchase price of $175.
7. In 1999, the Company issued 2, 273 shares of Common Stock to its
employees, for $0.01 per share, or an aggregate purchase price of
$228.
8. In 1999,the Company issued 56,603 shares of Common Stock to six
consultants, for $0.01 per share, or an aggregate purchase price of
$566.
No underwriters were used in connection with these sales and
issuance. The sales and issuance of these securities were exempt from
registration under the Securities Act pursuant to Section 4(2) of the
Securities Act and the rules and regulations thereunder on the basis that
the transaction did not involve a public offering. All of the foregoing
securities are deemed restricted securities for the purposes of the
Securities Act.
ITEM 6. SELECTED FINANCIAL DATA
Selected Consolidated Financial Data
The selected financial data presented below has been derived from
the financial statements of the Company. The following table summarizes
certain financial information and should be read in conjunction with
"Management's Discussion and Analysis of Results of Operations and
Financial Condition" and the Financial Statements and related notes
included elsewhere in this Report. The information shown below may not
be indicative of the Company's future results of operations.
18
As of December 31,
1999 1998 1997 1996 1995
Balance Sheet Data:
Cash and Cash
Equivalents $ 3,377,067 $ 3,439,408 $ 2,594,312 $ 444,661 $ 250,490
Working Capital 3,218,195 3,095,242 2,180,775 272,315 289,948
Total Assets 5,670,245 3,968,588 2,906,737 488,839 308,337
Stockholders' Equity
(Deficit) 4,521,117 3,500,449 2,443,120 298,091 (270,941)
Statement of Operations Data:
Revenue $ 1,368,513 $ - $ - $ - $ -
Cost of Goods Sold 1,410,731 - - - -
------------ ----------- ----------- ---------- ---------
Gross Margin (Loss) (42,218) - - - -
General and Administrative
Expenses 6,500,041 4,339,093 2,428,072 1,118,125 492,326
Marketing Expenses 3,194,589 81,793 - - -
Research and
Development
Expenses 2,910,299 2,174,400 2,390,021 1,095,027 154,495
------------ ----------- ----------- ----------- ---------
Operating Loss (12,648,147) (6,595,286) (4,818,093) (2,213,152) (646,821)
------------ ----------- ----------- ----------- ---------
Other Income (Expense)
Interest expense (8,063) (392) - (103,517) (35,970)
Interest income 353,492 122,173 83,618 18,289 6,958
Loss on disposal
of assets - - - (1,767) -
------------ ----------- ----------- ----------- ---------
Total other income
(expense) 345,429 121,781 83,618 (86,995) (29,012)
------------ ----------- ----------- ----------- ---------
Net Loss $(12,301,718) $(6,473,505) $(4,734,475) $(2,300,147)$(675,833)
============ =========== =========== =========== =========
Basic and
Diluted Net
Loss per Share $ (0.77) $ (0.50) $ (0.43) $ (0.26) $ (0.09)
============ =========== ============ =========== =========
Number of Weighted Average
Shares 16,060,783 13,000,259 11,022,577 8,700,146 7,290,615
============= =========== =========== =========== =========
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto appearing elsewhere
in this report.
Results of Operations: December 31, 1999 versus December 31, 1998
Revenues increased from $0 for the year ended December 31, 1998 to
$1,368,513 for the year ended December 31, 1999 and consisted of sales of
the Company's household products. During 1999 the Company commenced a new
program utilizing co-branding of its household products with the second
largest regional supermarket chain in New England. In addition, the
Company introduced a private label line of products with a major pharmacy
chain in the U.S. The Company also sold products through its
participation in a barter for advertising media program.
19
Cost of goods sold for the year ended December 31, 1999 was
$1,410,731, compared to $0 in 1998. Cost exceeded revenues for the
period by $42,218. The increase was primarily due to freight and
warehousing costs of $126,177 associated with operations of a warehouse
to service local accounts, delivery of sample product to potential
customers and representatives, and additional freight expense incurred in
shipping less than truckload quantities to distant warehouse locations.
Start-up costs for new products were significantly affected by expedited
production to meet delivery schedules.
General and administrative expenses increased to $6,500,041 for the
year ended December 31, 1999 from $4,339,093 for the year ended December
31, 1998, an increase of $2,160,948 or 49.8%. This increase was
principally attributable to a combination of additional administrative
compensation costs and related employee benefits expenses resulting from
the Company's new product lines, including an increase in the number of
employees and increased travel expenses due to the Company's efforts to
expand its distribution network. Non-cash compensation to various
consultants and advisors of $2,618,257 in 1999 and $1,713,918 in 1998
resulted from the issuance of stock grants; stock options and warrants to
purchase common stock.
Sales and marketing expenses increased $3,112,796 from $81,793 for
the year ended December 31, 1998 to $3,194,589 for the year ended
December 31, 1999. Advertising and promotion expenses totaled $ 1,255,795
for the year ended December 31, 1999. This includes amounts expended on
a multi-media advertising campaign that introduced the Company's entire
line of products as well as assisted the promotional activities of two
major customers. In addition, during 1999 the Company built a marketing
staff of experienced managers in consumer, industrial and agricultural
products. Sales and marketing employees increased from 4 in 1998 to 22
employees who were directly involved in marketing, promotion and customer
support.
Research and development expenses increased to $2,910,299 for the
year ended December 31, 1999 from $2,174,400 for the year ended December
31, 1998, an increase of $735,899 or 33.8%. This increase was principally
attributable to the Company's ongoing research activities on GBC-590, its
lead pharmaceutical compound. Included in research and development costs
are $197,143 in 1999 and $285,294 in 1998 of non-cash compensation
resulting from the issuance of stock grants, and stock options and
warrants to purchase common stock.
Interest income increased to $353,492 for the year ended December
31, 1999 from $122,173 for the year ended December 31, 1998, an increase
of $231,319 or 189.3%. This increase was attributable to an increase in
cash available for investment due to cash proceeds received from six
private placements of the Company's securities during 1999 and 1998 and
interest charged on notes receivable from related parties.
If non-cash compensation expenses were excluded from the results of
operations, net loss for the years ended December 31, 1999 and 1998 would
decrease from $(12,301,718) and $(6,473,505) to $(9,846,318) and
$(4,474,293) respectively. Loss per share for the periods would decrease
from $(0.77) and $(0.50) to $(0.61) and $(0.34) respectively.
20
Results of Operations: December 31, 1998 versus December 31, 1997
General and administrative expenses increased to $4,339,093 for the
year ended December 31, 1998 from $2,428,072 for the year ended December
31, 1997, a revenues sales and marketing increase of $1,992,894 or 82%.
This increase was principally attributable to a combination of additional
administrative compensation costs and related employee benefits expenses
resulting from the Company's increased research and development
activities, and marketing and product promotion, an increase in the
number of employees, increased travel expenses due to the Company's
efforts to build worldwide distribution, and additional costs associated
with shareholder and public relations. Compensation payments to various
consultants and advisors of $1,141,750 in 1997 and $1,713,918 in 1998
resulted from the issuance of stock grants; stock options and warrants to
purchase common stock.
Research and development expenses decreased to $2,174,400 for the
year ended December 31, 1998 from $2,390,021 for the year ended December
31, 1997, a decrease of $215,621 or 9.0%. This decrease was principally
attributable to the Company's discontinuance of certain subcontracted
research activities in 1998. Included in research and development costs
is $240,710 resulting from the issuance of stock grants, and stock
options and warrants to purchase common stock.
Interest income increased to $122,173 for the year ended December
31, 1998 from $83,618 for the year ended December 31, 1997, an increase
of $38,555 or 46.1%. This increase was attributable to an increase in
average cash available for investment due to cash proceeds received from
two private placements of the Company's securities during 1998.
Liquidity and Capital Resources
Since inception, the Company has funded its operations primarily
with the proceeds from debt and equity securities totaling approximately
$24,000,000. For the year ended December 31, 1999, the Company's
operations utilized cash of $10,148,000 primarily to fund the operating
loss. This use of cash was offset by equity financings that resulted in
net proceeds of $11,113,000 to the Company. In 1998 the Company's
operations utilized cash of $4,493,000, which was offset by equity
financings that resulted in net proceeds of $5,531,000.
Capital expenditures for the year end December 31, 1999 were as
follows:
Computer Software $ 58,517
Office Equipment 11,883
Motor Vehicle 25,026
Furniture and Fixtures 95,601
Computer Equipment 165,068
Machinery and Equipment 68,955
---------
$ 425,050
=========
21
The Company has no significant commitments for the purchase of
equipment, product manufacturing or marketing efforts at present. The
Company leases office facilities under an operating lease that ends in
May 2004. Rent expense for this space will be approximately $296,000 in
2000. The Company may also have the ability to expand its space in its
current location and to meet its continuing needs; in such event, the
Company's annual rent expense would be subject to increase.
The Company made loans to related parties totaling $ 574,177
during the year ended December 31, 1999.
The Company has entered into various licensing agreements that
require future cash payments. Aggregate future payments under licensing
agreements are approximately $200,000 of which approximately $50,000 is
payable in 2000.
During the first quarter of 2000, the Company agreed to retain
Covance Inc. for the purpose of conducting studies to evaluate the effect
of GBC-590 in clinical trials. The duration of the pancreatic cancer
study may cover approximately 25 months and may cost approximately
$900,000. The colorectal cancer study may require 25 months and may cost
approximately $1,650,000. A separate services agreement in support of the
Company's CAN-296 product in an amount up to $360,000 was executed on
January 31, 2000.
As of December 31, 1999, the Company's cash balances were
approximately $3,377,000, as compared to $3,439,000 as of December 31,
1998. The Company has no bank lines of credit or other commercial
financing sources at present but may seek such sources in the future. It
is not known whether additional funds could be borrowed from stockholders
or other sources.
During the first quarter of 2000, the Company has raised $5,00,000
in a private placement offering of common stock whereby 346,021 shares
were sold at $14.45 per share. These shares included a warrant to
purchase 108,996 additional shares at $15.98 per share exercisable for
five years, and a warrant to purchase shares at $0.01 per share, the
number of shares to be determined in the future according to a formula
based on the then price per share compared to the $14.45 common stock
offering price. The purchasers have certain rights, including but not
limited to, registration rights, rights-of-first-refusal, and adjustments
for certain events. Net proceeds from the offering were $4,625,000. The
purchasers have a commitment to purchase up to $2,000,000 additional
shares upon the date at which the registration statement for the initial
shares becomes effective, provided the date is no later than June 29,
2000. In addition, the purchasers have a commitment to purchase
$7,000,000 in additional shares at the price equal to the lessor of (i)
100% of the average of the closing bid prices of the Company's Common
Stock for the four trading days preceding the closing date of the tranche
and (ii) $16.00, with additional warrants within 190 - 210 days from the
closing of the initial transaction subject to conditions, including but
not limited to, market capitalization, trading volume, and share price
conditions.
22
During the first quarter of 2000, the Company raised $4,000,000 in
a private placement offering of common stock whereby 333,333 shares were
sold at $12.00 per share. These shares included warrants to purchase
75,758 additional shares at $15.98 per share exercisable for five years.
The purchasers have "piggyback" registration rights in any registered
public offering of common shares by the Company subject to standard
underwriter consent and cut-backs and lock-ups.
As of March 31, 2000, the Company's cash and cash equivalents was
approximately $ 9,250,000.
The Company's future is dependent upon its ability to obtain
financing to fund its operations. The Company expects to incur
substantial additional operating costs, including costs related to
ongoing research and development activities, sales and marketing
activities, preclinical studies and clinical trials. The Company
believes that its existing funds will be sufficient to fund its operating
expenses and capital requirements as currently planned through the end of
2000.
Year 2000
The Company relies upon a diverse assortment of computer hardware
and software, the integrated operation of which is essential to the
successful implementation of the Company's operations. In 1999, the
Company began a comprehensive review of its information technology
systems and other systems and equipment and developed a year 2000
implementation program. Full compliance and testing was completed before
the end of 1999.
Subsequent to the end of 1999, the Company's operations are fully
functioning and have not experienced any significant issues relating to
the Year 2000. While the Company is encouraged by the result of its Year
2000 efforts, monitoring for any potential problems will continue
throughout 2000.
Although the Company does not believe that any continued exposure
exists, the Company has a contingency plan for possible Year 2000 issues
and will continue to update that plan based on assessments of any
subsequent Year 2000 issues as additional information becomes available.
Market Risk
The Company is exposed to market risk related to changes in interest
rates as well as changes in currency exchange rates as measured against
the U.S. dollar and each other which could positively or negatively
affect results of operations and retained earnings. As of December 31,
1999, the Company has evaluated its risk and determined that any exposure
to currency exchange is not significant to the Company's overall
consolidated financial results. There can be no assurance that the
Company's exposure will remain at these levels, especially in the event
of significant and sudden fluctuations in the value of local currencies.
The Company does not use derivative financial instruments for speculative
or trading purposes.
23
Interest Rate Sensitivity
The Company maintains short-term investments in an overnight money
market account comprised of U.S. treasury bills. If market interest
rates were to increase immediately and uniformly by 10% from levels that
existed at December 31, 1999, the fair value of the portfolio would
decline by an immaterial amount.
24
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Public Accountants
To the Stockholders and Board of Directors of
SafeScience, Inc.:
We have audited the accompanying consolidated balance sheets of
SafeScience, Inc. and subsidiaries (the Company) (formerly IGG
International, Inc., a Nevada corporation) as of December 31, 1999 and
1998, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the
period ended December 31, 1999. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of the Company as of December 31, 1999 and 1998, and the results
of its operations and its cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.
/s/ Arthur Andersen
Boston, Massachusetts
February 23, 2000
(except for the matter
discussed in Note 11
for which the date is March 30, 2000)
F-1
25
SAFESCIENCE, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31,
1999 1998
CURRENT ASSETS:
Cash and cash equivalents $ 3,377,067 $ 3,439,408
Accounts receivable, net of allowance
for doubtful accounts of approximately
$43,000 at December 31, 1999 95,222 -
Inventory, net 356,211 -
Prepaid expenses, trade credits
and other current assets 538,823 112,673
------------ -----------
Total current assets 4,367,323 3,552,081
------------ -----------
PROPERTY AND EQUIPMENT, AT COST:
Computer, office and
laboratory equipment 470,614 187,255
Furniture, fixtures and
leasehold improvements 210,274 114,673
Motor vehicles 46,100 -
------------ -----------
726,988 301,928
Less-accumulated depreciation (207,267) (81,704)
------------ -----------
519,721 220,224
------------ -----------
OTHER ASSETS:
Note receivable- related parties 661,005 86,827
Restricted cash 108,128 108,128
Deposits 14,068 1,328
----------- -----------
Total other assets 783,201 196,283
----------- -----------
Total assets $ 5,670,245 $ 3,968,588
=========== ===========
The accompanying notes are an integral part of these consolidated
financial statements.
F-2a
26
SAFESCIENCE, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of capital
lease obligation $ - $ 4,608
Accounts payable 484,208 246,813
Accrued liabilities 644,945 185,443
Deferred revenue 19,975 19,975
------------- -------------
Total current liabilities 1,149,128 456,839
------------- -------------
CAPITAL LEASE OBLIGATION,
LESS CURRENT PORTION - 11,300
------------- -------------
Commitments and Contingencies (Note 8)
Stockholders' equity:
Preferred stock, $.01 par value
Authorized - 5,000,000 shares
Issued and outstanding - None - -
Common stock, $.01 par value
Authorized - 100,000,000 shares
Issued and outstanding -
16,835,923 and 14,107,216
shares at December 31, 1999
and 1998, respectively 168,359 141,072
Additional paid-in capital 34,388,615 17,749,766
Note receivable from officer -
Issuance of common stock (3,343,750) -
Accumulated deficit (26,692,107) (14,390,389)
------------- -------------
Total stockholders' equity 4,521,117 3,500,449
------------- -------------
Total liabilities and
stockholders' equity $ 5,670,245 $ 3,968,588
============= =============
The accompanying notes are an integral part of these consolidated
financial statements.
F-2b
27
SAFESCIENCE, INC.
Consolidated Statements of Operations
Years Ended December 31,
1999 1998 1997
SALES $ 1,368,513 $ - $ -
COST OF GOODS SOLD 1,410,731 - -
------------- ------------ ------------
GROSS LOSS (42,218) - -
GENERAL AND ADMINISTRATIVE
EXPENSES 6,500,041 $ 4,339,093 $ 2,428,072
MARKETING EXPENSES 3,194,589 81,793 -
RESEARCH AND DEVELOPMENT
EXPENSES 2,910,299 2,174,400 2,390,021
------------- ------------ ------------
Operating loss (12,647,147) (6,595,286) (4,818,093)
OTHER INCOME (EXPENSE):
Interest expense (8,063) (392) -
Interest income 353,492 122,173 83,618
------------- ------------ ------------
Total other income
(expense) 345,429 121,781 83,618
------------- ------------ ------------
Net loss $ (12,301,718) $ (6,473,505) $ (4,734,475)
============= ============ ============
BASIC AND DILUTED
NET LOSS PER COMMON
SHARE $ (0.77) $ (0.50) $ (0.43)
============= ============ ============
WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING 16,060,783 13,000,259 11,022,577
============= ============ ============
The accompanying notes are an integral part of these consolidated
financial statements.
F-3
28
SAFESCIENCE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
Common Stock Additional
Number of Paid-in
Shares Amount Capital
BALANCE, DECEMBER 31, 1996 9,462,641 94,626 3,385,874
Common stock issued for cash
at $2.00 to $3.00 per share
with warrants attached,
net of costs of $175,000 750,000 7,500 1,567,500
Common stock issued as part of
a private placement at $2.50
per share with warrants attached,
net of costs of $63,375 463,000 4,630 1,076,995
Common stock issued as part
of a private placement at
$3.00 per share with
warrants attached 533,867 5,339 1,596,478
Common stock issued for common
stock of International Gene Group
Inc. minority interests 205,469 2,055 717,087
Common stock issued for
consulting services and
wages valued at $2.00 to
$5.81 per share 195,800 1,958 822,300
Stock options for 141,426
shares of common stock issued
for consulting and professional
services valued at
$2.90 to $5.83 per option - - 557,662
Stock options exercised 187,799 1,878 (1,878)
Warrants exercised 300,000 3,000 517,000
Net loss - - -
BALANCE, DECEMBER 31, 1997 12,098,576 $ 120,986 $ 10,239,018
Common stock issued as part
of a private placement at
$2.75 per share with
warrants attached 181,818 1,818 498,182
Common stock issued as part
of a private placement at
$3.00 per share with
warrants attached 145,999 1,460 436,540
Common stock issued as part
of a private placement at
$4.25 per share, net of
$101,200 in issuance costs 406,206 4,062 1,621,114
The accompanying notes are an integral part of these consolidated
financial statements.
F-4a
29
SAFESCIENCE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
Common Stock Additional
Number of Paid-in
Shares Amount Capital
Common stock issued as part
of a private placement at
$3.50 per share, net of
$97,220 in issuance costs 646,918 6,469 2,155,275
Common stock issued as part
of a private placement at
$4.50 per share 179,222 1,792 804,710
Common stock issued for
services and wages valued
at $2.88 to $6.94 per share 332,263 3,323 1,289,926
Common stock issued as
charitable contribution at
$3.55 to $4.30 per share 5,000 50 18,450
Stock options issued for
consulting and professional
services valued at $3.63
to $7.66 per option - - 687,463
Stock options exercised 111,214 1,112 (912)
Net loss - - -
---------- --------- ------------
BALANCE, DECEMBER 31, 1998 14,107,216 $ 141,072 $ 17,749,766
Options exercised 71,153 712 (127)
Options granted to nonemployees 528,233
Private placements, net of
finders fee of $445,259
(includes 1,112 shares for
payment) 1,615,706 16,157 9,119,944
Stock issued for services 218,276 2,183 1,413,727
Warrants exercised 545,396 5,454 1,812,374
Notes receivable from
issuance of common stock 250,000 2,500 3,341,250
Common stock issued as
legal settlement 20,453 204 306,590
Cashless option exercised 7,723 77 116,858
Net loss - - -
---------- --------- ------------
BALANCE, DECEMBER 31, 1999 16,835,923 $ 168,359 $ 34,388,615
========== ========= ============
F-4b
30
SAFESCIENCE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
Stockholder's
Equity (Deficit)
BALANCE, DECEMBER 31, 1996 298,091
Common stock issued for cash
at $2.00 to $3.00 per share
with warrants attached,
net of costs of $175,000 1,575,000
Common stock issued as part of
a private placement at $2.50
per share with warrants attached,
net of costs of $63,375 1,081,625
Common stock issued as part of a
private placement at $3.00 per
share with warrants attached 1,601,817
Common stock issued for common
stock of International Gene Group,
Inc. minority interests 719,142
Common stock issued for consulting
services and wages valued at
$2.00 to $5.81 per share 824,258
Stock options for 141,426 shares
of common stock issued for consulting
and professional services valued at
$2.90 to $5.83 per option 557,662
Stock options exercised -
Warrants exercised 520,000
Net loss (4,734,475)
BALANCE, DECEMBER 31, 1997 $ 2,443,120
Common stock issued as part of a
private placement at $2.75 per share
with warrants attached 500,000
The accompanying notes are an integral part of these consolidated
financial statements
F-5a
31
SAFESCIENCE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
Stockholder's
Equity (Deficit)
Common stock issued as part
of a private placement
at $3.00 per share with
warrants attached 438,000
Common stock issued as part
of a private placement at
$4.25 per share, net of
$101,200 in issuance costs 1,625,176
Common stock issued as part
of a private placement at
$3.50 per share, net of
$97,220 in issuance costs 2,161,744
Common stock issued as part
of a private placement at
$4.50 per share 806,502
Common stock issued for
services and wages valued
at $2.88 to $6.94 per share 1,293,249
Common stock issued as
charitable contribution at
$3.55 to $4.30 per share 18,500
Stock options issued for
consulting and professional
services valued at $3.63
to $7.66 per option 687,463
Stock options exercised 200
Net loss (6,473,505)
------------
BALANCE, DECEMBER 31, 1998 $ 3,500,449
Options exercised 585
Options granted to nonemployees 528,233
Private placements, net of
finders fee of $445,259 (includes
1,112 shares for payment) 9,136,101
Stock issued for services 1,415,910
Warrants exercised 1,817,828
Notes receivable from issuance
of common stock 3,343,750
Common stock issued as
legal settlement 306,794
Cashless option exercised 116,935
Net loss (12,301,718)
------------
BALANCE, DECEMBER 31, 1999 $ 4,521,117
============
The accompanying notes are an integral part of these consolidated
financial statements
32
SAFESCIENCE, INC.
Consolidated Statements of Cash Flows
Years Ended December 31
1999 1998 1997
Cash Flows from Operating Activities:
Net loss $ (12,301,718) $ (6,473,505) $ (4,734,475)
Adjustments to reconcile net loss to
net cash used in operating activities
Operating expenses paid in common
stock and options 2,367,871 1,999,212 1,382,460
Issuance of stock for minority interest - - 719,142
Depreciation and amortization 125,563 53,684 15,545
Changes in assets and liabilities
Accounts receivable (95,222) - -
Inventory (356,211) - -
Prepaid expenses, trade credits
and other current assets (426,150) (61,354) (31,678)
Accounts payable 237,395 97,959 86,206
Accrued liabilities 459,503 (119,320) 176,663
Deferred revenue - 9,975 10,000
------------ ------------ ------------
Net cash used in
operating activities (10,148,261) (4,493,349) (2,376,137)
------------ ------------ ------------
Cash Flows from Investing Activities:
Purchases of property and equipment (425,060) (205,188) (39,744)
Loans to related parties (574,177) - (90,000)
Repayment of stockholders' loans - 1,167 767
Decrease (increase) in
deposits, net (12,741) 5,000 (4,539)
Net cash paid in acquisition - - -
Decrease in restricted cash - 11,010 (119,138)
------------ ------------ ------------
Net cash used in investing
activities (1,011,978) (188,011) (252,654)
------------ ------------ ------------
Cash Flows from Financing Activities:
Short-term borrowing - - -
Payment on short-term borrowing - - -
Payments on notes payable (15,908) - -
Payments for obligations under
capital lease - (5,166)
Proceeds from issuance of
common stock 11,113,807 5,531,422 4,778,442
Proceeds from exercise of common
stock options - 200 -
Capital contributed stockholders - - -
------------ ------------ ------------
Net cash provided by
financing activities 11,097,889 5,526,456 4,778,442
------------ ------------ ------------
F-6a
33
SAFESCIENCE, INC.
Consolidated Statements of Cash Flows
Years Ended December 31
1999 1998 1997
Net (Decrease) Increase in Cash (62,341) 845,096 2,149,665
Cash and Cash Equivalents,
beginning of period 3,439,408 2,594,312 441,661
------------ ------------ ------------
Cash and Cash Equivalents,
end of period 3,377,067 3,439,408 2,594,312
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF NONCASH
FINANCING ACTIVITIES:
Equipment acquired under capital $ - $ 21,074 $ -
lease obligations ============ ============ ============
Note receivable from issuance of
common stock $ 3,343,750 $ - $ -
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for interest $ 319 $ 392 $ -
============ ============ ============
F-6b
34
SAFESCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
(1) Summary of OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
(a) Organization
SafeScience, Inc. (f/k/a IGG International, Inc.) (the Company) was
formed in 1992 for the research and development of pharmaceutical
products based on carbohydrate chemistry. Today, the Company has two
wholly owned subsidiaries: International Gene Group, Inc. and SafeScience
Products, Inc. The Company has expanded its focus to include other
pharmaceuticals, agricultural, consumer and home and garden products.
International Gene Group, Inc. focuses on the development of
carbohydrate-based pharmaceutical products related to two major areas of
disease: cancer and fungal infections. SafeScience Products, Inc.
focuses on developing agricultural, consumer and home and garden
applications for products some of which are also based upon carbohydrate
chemistries. These products will be either licensed from or jointly
developed with third parties (Note 9). SafeScience, Inc., International
Gene Group, Inc. and SafeScience Products, Inc. maintain an office in
Boston, Massachusetts.
The Company was a development stage enterprise from inception until 1998.
The Company is producing and marketing its consumer and industrial
products while continuing its efforts toward product research and
development and raising capital. Management anticipates that additional
revenues may be derived from products under development or those
developed in the future. Principal risks to the Company include the
successful development and marketing of products to obtain profitable
operations, dependence on collaborative partners, the need to obtain
adequate financing to fund future operations, United States Food and Drug
Administration approval and other regulatory agencies, clearance and
regulation, dependence on key individuals and competition from substitute
products and larger companies.
(b) Principles of Consolidation
The Company's consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries, International Gene Group,
Inc., and SafeScience Products, Inc. All material intercompany
transactions and accounts have been eliminated in the consolidated
financial statements.
F-7
35
SAFESCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
(Continued)
(c) Use of Estimates
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 operational expenses
during the reporting period. Actual results could differ from those
estimates.
(d) Revenue Recognition
The Company recognizes revenue related to product sales upon shipment
of the product. The Company provides for anticipated product returns
at the time of product shipment. Approximately $703,000 or 51.4% of
the Company's revenues for the year ended December 31, 1999 were
derived from a barter transaction.
(e) Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased with
an original maturity of three months or less to be cash equivalents.
Cash and cash equivalents at December 31, 1999 and 1998 include
approximately $1,042,000 and $254,000, and approximately $2,335,000 and
$3,122,000, respectively, held in an overnight investment account, which
is reinvested daily in government securities funds and money market
funds. Restricted cash represents funds held under an irrevocable
standby letter of credit. The letter of credit serves as a security for
the Company's facility lease. The funds are being held in an investment
account.
(f) INVENTORY
Inventories are stated at the lower of cost (first-in, first-out) or
market and consist of the following:
December 31, 1999
Raw Materials 266,702
Finished goods 89,509
---------
Total inventory $ 356,211
=========
F-8
36
SAFESCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
(Continued)
(g) Depreciation and Amortization
The Company provides for depreciation and amortization using
straight-line and accelerated declining balance methods to allocate the
cost of property and equipment over their estimated useful lives as
follows:
Asset Estimated
Classification Useful Life
Computer, office and laboratory equipment 3 - 5 years
Furniture and fixtures 7 years
Motor vehicles 4 years
(h) Research and Development
Research and development costs, which consist primarily of expenses for
consultants, supplies and testing, are charged to operations as incurred.
(i) Net Loss Per Share
In December 1997, the Company adopted Statement of Financial Accounting
Standards Statement (SFAS) No. 128, Earnings per Share. Basic loss per
share is computed using the weighted-average number of common shares
outstanding. Diluted net loss per share is the same as basic net loss
per share as the inclusion of common stock equivalents would be
antidilutive. Antidilutive securities that are not included in diluted
net loss per common share were 660,424, 840,532 and 601,763 for 1999,
1998 and 1997, respectively.
(j) Comprehensive Income
Effective January 1, 1998, the Company adopted SFAS No. 130, Reporting
Comprehensive Income. SFAS No. 130 establishes standards for reporting
and display of comprehensive income and its components in the financial
statements. Comprehensive income loss is defined as the change in equity
of a business enterprise during a period from transactions and other
events and circumstances from nonowner sources. The Company's
comprehensive net loss is the same as net loss for all periods presented.
(k) Disclosures About Segments of an Enterprise
The Company has adopted SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information, in the fiscal year ended December 31,
1998. SFAS No. 131 establishes standards for reporting information
regarding operating segments in annual financial statements and requires
selected information for those segments to be presented in interim
F-9
37
SAFESCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
(Continued)
financial reports issued to stockholders. SFAS No. 131 also establishes
standards for related disclosures about products and services and
geographic areas. Operating segments are identified as components of an
enterprise about which separate discrete financial information is
available for evaluation by the chief operating decision-maker, or
decision-making group, in making decisions how to allocate resources and
assess performance. The Company's chief decision-maker, as defined under
SFAS No. 131, is the chief executive officer. The Company's sales are
primarily confined to one geographic area. During the year ended December
31, 1999, 99.3% of all sales were in the United States. To date, the
Company has viewed its operations and manages its business as one
principal operating segment. In addition, the Company does not prepare
financial statement information for other than one segment. As a result,
the financial information disclosed herein represents all of the material
financial information related to the Company's principal operating
segment.
(l) Concentrations of Credit Risk
SFAS No. 105, Disclosure of Information About Financial Instruments with
Off-Balance-Sheet Risk and Financial Instruments with Concentrations of
Credit Risk, requires disclosure of any significant off-balance-sheet
risk and credit risk concentrations. The Company has no significant
off-balance-sheet risk or credit risk concentrations. The Company
maintains its cash and cash equivalents with multiple financial
institutions and invests in investment-grade securities.
(m) Financial Instruments
The estimated fair values of the Company's consolidated financial
instruments, which include cash equivalents, notes receivable and
accounts payable, approximate their carrying value due to the short
maturity of these instruments.
The estimated fair value of the Company's capital lease obligations
approximates its carrying value based upon the current rates offered to
the Company for similar type arrangements. As of January 31, 1999 there
were no capital lease obligations.
(n) Post retirement Benefits
The Company has no obligations for post retirement benefits.
(o) RECLASSIFICATION
Certain items in the prior years consolidated financial statements have
been reclassified to conform to their 1999 presentation.
F-10
38
SAFESCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
(Continued)
(p) Derivative Instruments and Hedging Accounting
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. The statement as amended by SFAS No.
137 is effective for the year ended December 31, 2001. SFAS No. 133
establishes accounting and reporting standards for derivative instruments
including certain derivavtive instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities.
The Company does not expect adoption of this statement to have a material
impact on its consolidated financial position or results of operations.
(2) NOTES RECEIVABLE - RELATED PARTIES
Notes receivable from related parties includes $ 85,514 of promissory
notes from two officers/stockholders of the Company. The loans are
payable in monthly installments of $375 and $160, including interest at
5.66% and 6.65%, respectively, with final payments of $60,601 due on
March 11, 2002 and $23,603 due on June 20, 2002. Each note is
collateralized by shares of the Company's common stock held by each
individual.
During the year, the Company advanced $ 150,000 to one of its suppliers.
The outstanding principal balance accrues interest at 8.25% per annum,
with interest payable quarterly in arrears commencing three months after
the date of the first advance. All outstanding principal, together with
accrued interest on the unpaid principal balance of this note, will be
due and payable on May 14, 2001.
During the second quarter of 1999, the Company advanced $72,000 to a
senior executive and in the third quarter of 1999 advanced an additional
$200,000 under two non-recourse promissory notes. The outstanding
principal balance of the $72,000 promissory note accrues interest at
4.92% per annum, compounded semi annually and the outstanding principal
balance of the $200,000 promissory note accrues interest at 5.35% per
annum, compounded semi-annually. The executive has pledged 5,970 shares
of the Company's common stock as collateral for the $72,000 promissory
note and 9,553 shares of the Company's common stock as collateral for the
$200,000 promissory note. All outstanding principal, together with
accrued interest on the unpaid principal balance of the $72,000 and
$200,000 promissory notes, are due August 4, 2000 and May 5, 2000,
respectively. Pursuant to such promissory notes, the executive agreed
not sell any shares of the Company's common stock prior to April 1, 2000
with respect to the $72,000 promissory notes and January 1, 2000 with
respect to the $200,000 promissory note.
F-11
39
SAFESCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
(Continued)
On June 15, 1999, the Company entered into a transaction whereby a senior
executive relinquished an option to purchase 100,000 shares of common
stock for a price of $0.01 per share which would have vested on January
1, 2000 and, in exchange, the Company issued to the executive a stock
option for 250,000 shares of common stock at an exercise price of $10.70
per share, the estimated fair market value of the common stock on the
date of the transaction. The option was exercised immediately. The
Company loaned the executive an amount representing the entire exercise
price. The principal balance of this note receivable from the issuance
of common stock represents 80% of the value of the purchase price of
$3,343,750 for the shares issued or $2,675,000 and accrues interest at
4.92% per annum, compounded semi-annually. The difference of $ 668,750
was recorded as a non-cash compensation expense. The executive has
pledged the 250,000 shares of common stock as collateral. The note is
non-recourse and is secured only by the pledged shares. All outstanding
principal, together with accrued interest on the unpaid principal balance
of this note, will be due on June 15, 2004. The balance outstanding at
December 31, 1999 is $ 2,750,000 and is shown in the accompanying
statement of stockholders' equity.
(3) CAPITAL LEASE OBLIGATION
During the year ended December 31, 1999, the Company purchased a vehicle
that was previously leased. The capital lease obligations at December 31,
1998 consisted of the following:
1998
Capital lease, due in monthly installments
of $418, including interest at 2.96% through
April 2002, secured by a motor vehicle $ 15,908
Less-Current portion 4,608
--------
$ 11,300
========
Property and equipment under capital leases are capitalized using
interest rates appropriate at the inception of each lease. The net book
value of property and equipment under capital leases amounted to $16,859
at December 31, 1998. Property and equipment under capital leases were
net of accumulated amortization of $4,215 at December 31, 1998.
(4) Stockholders' Equity
(a) Authorized Shares
On June 29, 1999, at the 1999 Stockholders' meeting, the Company's
Articles of Incorporation were amended to increase the authorized common
shares from 25,000,000 to 100,000,000.
F-12
40
SAFESCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
(Continued)
(b) Sales of Common Stock
In November 1996, the Company began a private placement offering of
common stock. As of December 31, 1996, 190,000 shares had been sold at
$2.50 per share. In 1997, the Company sold an additional 463,000 shares
at $2.50 per share. These shares included a detachable warrant to
purchase one share of common stock for $3.50 for every four shares of
common stock purchased. As of December 31, 1999, all warrants had been
exercised.
In September 1997, the Company completed an additional sale of 250,000
shares of common stock for $675,000 under regulation S of the Securities
and Exchange Commission's regulations. These shares also include an
attached warrant to purchase one share of common stock for $4.75 for
every four shares of common stock purchased. As of December 31, 1999, no
warrants were outstanding.
In January 1997, the Company completed a sale of 500,000 shares of common
stock for $900,000 under regulation S of the Securities and Exchange
Commission's regulations. These shares also included an attached warrant
to purchase one share of common stock for $3.50 for every four shares of
common stock purchased. As of December 31, 1999, no warrants were
outstanding as all warrants had been exercised.
In March 1998, the Company completed a sale of 181,818 shares of common
stock at $2.75 per share. These shares also included a detachable
warrant to purchase one share of common stock for $4.75 for every four
shares of common stock purchased. As of December 31, 1999 all warrants
had been exercised.
In June 1998, the Company completed a private placement offering of
common stock. During the period January 1, 1998 through June 30, 1998,
the Company sold 146,000 shares of common stock at $3.00 per share. The
Company had sold 533,867 shares of common stock at $3.00 per share as of
December 31, 1997. These purchases included an attached warrant to
purchase one share of common stock for $4.75 for every four shares
purchased. As of December 31, 1999, all warrants had been exercised.
In September 1998, the Company completed a private placement offering of
common stock. During the year ended December 31, 1998, the Company sold
406,206 shares of common stock at $4.25 per share.
During the period from September 1998 through December 1998, the Company
completed a private placement of common stock. During the four months
ended December 31, 1998, the Company sold 561,133 shares of common stock
at $3.50 per share. The Company had sold 85,714 shares of common stock
at $3.50 per share as of September 30, 1998.
F-13
41
SAFESCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
(Continued)
(c) Stock Option Plan
In November 1998, the Company began a new private placement of common
stock. Through December 31, 1998, the Company sold 179,222 shares of
common stock at $4.50 per share. During the year ended December 31, 1999
the Company sold 1,398,480 shares of common stock at $ 4.50 per share.
In July 1999 the Company began a new private placement of common stock.
During the period from July 1, 1999 through December 31, 1999 the Company
sold 216,605 shares of common stock. The price per share has been
calculated for each investor based upon the average fair market value of
the stock for a specified period preceding the purchase date.
The Company has a Nonqualified Stock Option Plan (1996 Plan) and has
registered 500,000 shares of common stock with the Securities and
Exchange Commission for future issuance under option agreements. The
exercise price of each option will be determined by the Board of
Directors and must be exercised within ten years from May 1, 1996. The
Company may issue these options to its officers, directors, employees and
consultants. As of December 31, 1998, options to purchase 11,659 shares
were available for future grant.
Effective December 1, 1998, the Company adopted the 1998 Incentive Stock
Option Plan under which 600,000 shares of common stock were reserved for
issuance under option agreements. As with the 1996 Plan, the exercise
price of the each option will be determined by the Board of Directors and
may be issued to officers, directors, employees and consultants.
Additionally, the options must be exercised within ten years from
December 1, 1998. As of December 31, 1999, options to purchase 35,000
shares were available for future grant.
The Company has entered into agreements with various employees and
consultants for the grant of stock options and shares of common stock at
$0.01 per share. During 1999 and 1998, the Company granted options and
shares totaling 246,452 and 153,517 shares, respectively, and recorded
charges to operations of approximately $2,815,400 and $1,999,000
respectively, relating to these grants. The charge to operations
represented the fair market value of the underlying common stock or
option.
The following table summarizes all stock option activity to employees and
consultants for services and all warrant activity in connection with
equity financings as of December 31, 1999.
F-14
42
SAFESCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
(Continued)
Weighted
Average
Number Exercise Price
Of Shares Per Share
Balance, December 31, 1996 154,706 $ 0.01
Granted 141,426 0.01
Exercised (187,799) 0.01
-------- -------
Balance, December 31, 1997 108,333 0.01
Granted 193,028 1.72
Exercised (111,214) 0.01
-------- -------
Balance, December 31, 1998 190,147 $ 1.74
Granted 486,931 12.94
Exercised (78,877) 3.67
Forfeited (12,777) 13.38
-------- -------
Balance, December 31, 1999 585,424 $ 10.42
======== =======
Exercisable December 31, 1997 108,333 0.01
======== =======
Exercisable December 31, 1998 108,597 1.74
======== =======
Exercisable December 31, 1999 561,424 10.42
======== =======
The following table presents weighted-average price and life information
about significant option groups outstanding at December 31, 1999:
------Options Outstanding-------- ---Options Exercisable---
Weighted-
Average Weighted- Weighted-
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
$ 0.01 70,912 8.3 years $ 0.01 70,912 $ 0.01
3.00 30,000 8.0 years 3.00 30,000 3.00
5.50 60,000 9.0 years 36,000 5.50
11.00
to 14.56 5,112 9.5 years 13.94 5,112 13.94
13.38 419,400 2.5 years 13.38 419,400 13.38
------- ------- ------- -------
585,424 561,424
======= =======
F-15
43
SAFESCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
(Continued)
As of December 31, 1999, the Company had committed to grant 40,000 shares
of common stock upon the attainment of future milestones.
(e) Pro Forma Disclosures of Stock-Based Compensation
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, Accounting for Stock-Based Compensation. SFAS No. 123 requires the
measurement of the fair value of stock options or warrants granted to
employees to be included in the statement of operations or,
alternatively, disclosed in the notes to financial statements. The
Company has determined that it will continue to account for stock-based
compensation for employees under Accounting Principles Board (APB)
Opinion No. 25,
Accounting for Stock Issued to Employees, and elect the disclosure-only
alternative under SFAS No. 123. The Company records the fair market
value of stock options and warrants granted to nonemployees in the
consolidated statement of operations. The Company has computed the pro
forma disclosures required under SFAS No. 123 for stock options granted
in 1999, 1998 and 1997 using the Black-Scholes option pricing model. The
weighted average assumptions used for 1999, 1998 and 1997 are as follows:
1999 1998 1997
Risk-free interest rate 5.8% 4.2% - 5.6% 5.8% - 6.8%
Expected dividend yield - - -
Expected life 5 years 5 years 5 years
Expected volatility 60% 60% 60%
Weighted average fair value
of options granted $ 8.84 $ 2.52 $ 2.49
Had compensation cost for the Company's stock option plans been
determined consistent with SFAS No. 123, net loss would have been as
follows:
1999 1998 1997
As reported
Net loss $ (12,301,718) $ (6,473,505) $ (4,734,475)
============= ============ ============
Pro forma
Net loss $ (12,792,904) $ (6,516,065) $ (4,734,475)
============= ============ ============
Basic and diluted net
loss per common share $ (0.77) $ (0.50) $ (0.43)
============= ============ ============
Basic and diluted net
loss per common share $ (0.80) $ (0.50) $ (0.43)
============= ============ ============
F-16
44
SAFESCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
(Continued)
(f) Warrants
The following table summarizes all warrant activity in connection with
equity financing as of December 31, 1999:
Warrants
Weighted
Average
Number of Exercise Price
Shares Per Share
Balance, December 31, 1996 747,500 3.59
Granted 445,930 4.06
Exercised (300,000) 1.73
Canceled (400,000) 5.00
--------
Balance, December 31, 1997 493,430 4.00
Granted 156,955 7.45
-------- -------
Balance, December 31, 1998 650,385 $ 4.10
Granted 14,750 4.75
Exercised (551,678) 4.75
Cancelled (38,457)
-------- -------
Balance, December 31, 1999 75,000 $ 10.40
======== =======
Exercisable, December 31, 1997 493,430 4.00
1998 650,385 4.10
1999 75,000 10.40
(g) Acquisition of Minority Interest in Subsidiary
In 1997, the Company acquired the remaining minority interest in its
subsidiary, International Gene Group, Inc. by issuing 205,469 shares of
restricted stock in exchange for the outstanding shares in the
subsidiary. Research and development costs have been charged for
$719,142, which represented the fair market value of the shares issued.
F-1 7
45
SAFESCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
(Continued)(5) RELATED PARTY TRANSACTIONS
In January 1994, the Company agreed that its founder, Dr. David Platt,
would receive a royalty of 2% of net sales, in exchange for the licensed
patent rights on certain products being developed. The Company has
agreed to pay all of the costs to procure and maintain any patents
granted under this agreement. The agreement includes a requirement that
the royalties paid in the sixth year of this agreement and all subsequent
years meet a minimum requirement of $50,000. If this requirement is not
met, Dr. Platt may terminate the agreement and retain the patent rights.
The Company may terminate the agreement on sixty days' notice. The
Company has not made any royalty payments under the agreement. The
parties executed an amendment to the agreement to delay the first year of
this minimum threshold from 1999 to 2002.
On December 6, 1996, Dr. Platt signed a Confidentiality and Invention
Agreement with the Company. The Agreement provides that Dr. Platt
assigns all his rights, title and interest in any invention, data or
idea, made or conceived or reduced to practice either alone or jointly
with others to the Company. Further, the agreement provides all rights
thereto shall remain the sole property of the Company and Dr. Platt
agreed not to disclose any information about the Company's confidential
information.
(6) TRADE CREDITS
The Company has entered into a trade agreement with a barter company for
the exchange of goods and services. This barter company purchased
approximately $718,000 of products from the Company and paid for these
products by issuing $718,000 of advertising credits. The barter company
acquires advertising media on behalf of the Company; 55% of the net cost
of all media utilized by the Company is payable in cash and the remaining
45% is charged against the trade credit. As of December 31, 1999
advertising credits in the amount of $ 387,776 are included in other
current assets.
The Company plans to utilize these credits during the year ended December
31, 2000.
(7) LEASE COMMITMENTS
(a) Clinical Trials
During the first quarter of 2000, the Company agreed to retain Covance
Inc. for the purpose of conducting two studies to evaluate the effect of
GBC-590 in clinical trials. The duration of the pancreatic cancer study
may cover approximately 25 months and may cost approximately $ 900,000.
The colorectal cancer study may also require 25 months and may cost
approximately $ $1,650,000. A separate services agreement in support of
the Company's CAN-296 product in an amount up to $360,000 was executed on
January 31, 2000.
46
SAFESCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
(Continued)
(b) Leases
The Company leases office space in Boston, Massachusetts, under an
operating lease expiring in May 2004. The Company also leases certain
equipment under operating leases.
Minimum future payments under the operating leases as of December 31,
1999 for each of the next five calendar years are approximately as
follows:
Years ending December 31,
2000 $ 308,000
2001 307,000
2002 316,000
337,000
142,000
-----------
$ 1,410,000
===========
Rent expense in the accompanying consolidated statements of operations
was approximately $223,000
$100,000 and $45,700 in 1999, 1998, and 1997 respectively.
(8) LICENSING AGREEMENTS
During the year ended December 31, 1999, the Company and Volcani
Institute agreed not to continue their research program, however, the
Company retained the exclusive right to sell licensed products Elexa PDB
under a royalty agreement. No products were sold in 1999 or 1998
therefore no royalty payments where due. The company paid $200,000,
$200,000 and $327,000 in 1999, 1998 and 1997, respectively, related to
this agreement.
During the year ended December 31, 1999 the Company terminated its
agreement with Agrogene Ltd. No payments were made during 1998 or 1999.
In October 1997, the Company entered into an agreement to license certain
patented technology from Leket-Bar Chemicals, Ltd. The Company is
required to pay license fees totaling $400,000 over the next four years
as well as royalties on future product sales. The Company paid $39,000
during 1999 and $175,000 in 1998.
During the Year ended December 31, 1999 the Company terminated its
agreement with Dominion BioSciences, Inc. ("DBI"). The Company made
payments to DBI of $ 0 and $ 100,000 in 1999 and 1998, respectively.
F-19
47
SAFESCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
(Continued)
(9) INCOME TAXES
The Company accounts for income taxes under SFAS No. 109, Accounting for
Income Taxes, the objective of which is to recognize the amount of
current and deferred income taxes payable or refundable at the date of
the consolidated financial statements as a result of all events that have
been recognized in the accompanying consolidated financial statements, as
measured by enacted tax laws.
At December 31, 1999, the Company has net operating loss carryforwards
for federal income tax purposes of approximately $25,168,000 which expire
through 2019. The Company also has certain tax credits available to
offset future federal and state income taxes, if any. Net operating loss
carryforwards and credits are subject to review and possible adjustments
by the Internal Revenue Service and may be limited in the event of
certain cumulative changes in excess of 50% in the ownership interests of
significant stockholder over a three-year period.
The components of the Company's deferred tax asset follow:
1999 1998
Net operating loss carryforwards $ 10,067,000 $ 5,405,000
Tax credit carryforwards 465,000 296,000
Temporary differences (42,000) 174,000
------------ -----------
Total deferred tax assets 10,490,000 5,875,000
Less Valuation allowance (10,490,000) (5,875,888)
------------ -----------
Deferred tax assets $ - $ -
============ ===========
In evaluating realizability of these deferred tax assets, management has
considered the Company's short operating history, the volatility of the
market in which it competes and the operating losses incurred to date,
and it believes that given the significance of this evidence, a full
valuation reserve against its deferred tax assets is required as of
December 31, 1999 and 1998. The increase in the valuation allowance
during these periods primarily relates to the increase in the Company's
net operating loss carryforwards.
F-20
48
SAFESCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
(Continued)
(10) Employee Benefit Plan
The Company instituted the SafeScience 401(k) Plan (the Plan) in 1998,
pursuant to which employees may defer compensation for income tax
purposes under Section 401(k) of the Internal Revenue Code.
Substantially all of the Company's employees are eligible to participate
in the Plan. Participants may contribute up to 20% of their annual
compensation to the Plan, subject to certain limitations. The Company
could match a discretionary amount as determined by the Board of
Directors. The Company did not make any contributions to the Plan during
1998 and 1999.
(11) Subsequent Event
During the first quarter of 2000, the Company has raised $5,00,000 in a
private placement offering of common stock whereby 346,021 shares were
sold at $14.45 per share. These shares included a warrant to purchase
108,996 additional shares at $15.98 per share exercisable for five years,
and a warrant to purchase shares at $0.01 per share, the number of shares
to be determined in the future according to a formula based on the then
price per share compared to the $14.45 common stock offering price. The
purchasers have certain rights, including but not limited to,
registration rights, rights-of-first-refusal, and adjustments for certain
events. Net proceeds from the offering were $4,625,000. The purchasers
have a commitment to purchase up to $2,000,000 additional shares also at
$14.45 per share upon the date at which the registration statement for
the initial shares becomes effective, provided the date is no later than
June 29, 2000. In addition, the purchasers have a commitment to purchase
$7,000,000 in additional shares at the price equal to the lessor of (i)
100% of the average of the closing bid prices of the Company's Common
Stock for the four trading days preceding the closing date of the tranche
and (ii) $16.00, with additional warrants within 190 -210 days from
closing of the initial transaction subject to conditions, including but
not limited to, market capitalization, trading volume, and share price
conditions.
During the first quarter of 2000, the Company raised $4,000,000 in a
private placement offering of common stock whereby 333,333 shares were
sold at $12.00 per share. These shares included warrants to purchase
75,758 additional shares at $15.98 per share exercisable for five years.
The purchasers have "piggyback" registration rights in any registered
public offering of common shares by the Company subject to standard
underwriter consent and cut-backs and lock-ups.
F-21
49
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company will furnish to the Securities and Exchange Commission
a definitive Proxy Statement (the "Proxy Statement") no later than 120
days after the close of the fiscal year ended December 31, 1999. The
information required by this item is incorporated herein by reference to
the Proxy Statement. Also see "Executive Officers of the Registrant" in
Part I of this form.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is incorporated by reference
to the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is incorporated herein by
reference to the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is incorporated herein by
reference to the Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K.
(a) Financial Statements are contained in Item 8 of this Form 10.
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the last quarter of the
year ended in regard to this report.
(c) Exhibits.
The following documents are incorporated herein by reference from the
Registrant's Form 10, as filed with the Securities and Exchange
Commission, SEC file No. 0-26476:
3.1 Articles of Incorporation of Alvarada, Inc.
3.2 Amendment to the Articles of Incorporation dated March 1, 1995.
3.3 Amendment to the Articles of Incorporation dated March 3, 1995.
3.4 Amendment to the Articles of Incorporation dated May 23, 1995
3.5 Bylaws of Alvarada, Inc.
3.6 Articles of Incorporation of International Gene Group.
3.7 Bylaws of the Company of International Gene Group.
50
3.8 Articles of Incorporation of Agricultural Glycosystems, Inc.
3.9 Bylaws of the Company of Agricultural Glycosystems, Inc.
4.1 Specimen Stock Certificate.
10.1 Agreement and Plan of Reorganization.
10.2 Licensing Agreement with Dr. Platt.
10.3 Office Lease.
10.4 Licensing Agreement with The Government of Israel.
The following documents are incorporated herein by reference from the
Registrant's Form S-8 Registration Statement filed with the Commission on
May 14, 1996, SEC file No. 333-04764:
10.5 Incentive Stock Option Plan.
The following documents are incorporation herein by reference from the
Registrant's Form 10-K for the period ending December 31, 1996:
10.6.1 Employee Confidentiality and Invention Agreement between Dr.
David Platt and the Company.
The following documents are incorporated herein by reference from the
Registrant's Registration Statement on Form SB-2, filed with the
Commission on November 20, 1996, SEC file no. 333-16087:
10.6.2 Warrant Agreement with Trinity American Corporation.
10.7 Consulting Agreement with Richard Salter and Amendment thereto.
10.8 Consulting Agreement with Keith Greenfield.
10.9 Consulting Agreement with James C. Czirr.
10.10 Warrant Agreement with James C. Czirr.
The following documents are incorporated herein by reference from the
Registrant's Form 10-K for the period ending December 31, 1997:
10.11 Amendment to Consulting Agreement with Keith Greenfield.
10.12 Licensing Agreement with Agrogene Ltd.
10.13 Trademark Sales and License Agreement with Elk Mound Feed and
Farm Supply, Inc.
10.14 Consulting Agreement with Michelangelo, LLC, dated May 1997.
10.15 Consulting Agreement with Michelangelo LCC, dated September
1997.
10.16 Agreement with Leket-Bar Chemicals, Ltd., dated October 1997
99.1 Office Lease
The following documents are an exhibit hereto:
23.1 Consent of Arthur Andersen LLP
27 Financial Data Schedule.
51
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this Form 10-K to be signed on
its behalf by the undersigned, thereunto duly authorized, in Boston,
Massachusetts, on this 30th day of March, 2000.
SAFESCIENCE, INC.
BY: /s/ Bradley J. Carver
Bradley J. Carver, President
/s/ John W. Burns
John W. Burns, Chief Financial
Officer
KNOW ALL MEN BY THESE PRESENT, that each person whose signature appears
below constitutes and appoints Bradley J. Carver, as true and lawful
attorney-in-fact and agent, with full power of substitution, for his and
in his name, place and stead, in any and all capacities, to sign any and
all amendments to this registration statement, and to file the same,
therewith, with the Securities and Exchange Commission, and to make any
and all state securities law or blue sky filings, granting unto said
attorney-in-fact and agent, full power and authority to do and perform
each and every act and thing requisite or necessary to be done in about
the premises, as fully to all intents and purposes as he might or could
do in person, hereby ratifying the confirming all that said
attorney-in-fact and agent, or any substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Form 10-K has been signed by the following persons in the
capacities and on the dates indicated:
Signatures Title Date
/s/ David Platt Chief Executive Officer, March 30, 2000
David Platt, Ph.D Secretary and Chairman of
the Board of Directors
/s/ Bradley J. Carver President, Treasurer and March 30, 2000
Bradley J. Carver a member of the Board
of Directors
/s/ Richard A. Salter
Richard A. Salter Senior Vice President and March 30, 2000
a member of the Board
of Directors
/s/ Thoedore J. Host
Theodore J. Host Director March 30, 2000
/s/ Brian G.R. Hughes
Brian G.R. Hughes Director March 30, 2000