-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OlYVUM/EWnmd7f0qj1dpNcJrw2O19ExX0B/Fitj3y0zZuztxSJYI0WOX3/ux3upE LH5sMqdOghISZ1uwRqwF/Q== 0000794154-96-000001.txt : 19960517 0000794154-96-000001.hdr.sgml : 19960517 ACCESSION NUMBER: 0000794154-96-000001 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NASD SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEPRAGEN CORP CENTRAL INDEX KEY: 0000794154 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 680073366 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 001-14068 FILM NUMBER: 96566039 BUSINESS ADDRESS: STREET 1: 30689 HUNTWOOD DRIVE CITY: HAYWARD STATE: CA ZIP: 94544 BUSINESS PHONE: 5106360707 10QSB 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: March 31, 1996 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 0-25726 SEPRAGEN CORPORATION (Exact name of small business issuer as specified in its charter) California 68-0073366 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 30689 Huntwood Drive, Hayward, California 94544 (Address of principal executive offices) (Issuer's telephone number (including area code): (510) 476-0650 (Former name, former address and former fiscal year if changed since last report: 30689 Huntwood Drive, Hayward, California 94544 Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the issuer was required to file such reports),and (2) has been subject to such filing requirements for the past 90 days. Yes X No State the number of shares outstanding of each of the registrant's classes of Common equity, as of the latest practicable date: May 10, 1996 Class A Common Stock 2,070,000 Class B Common Stock 786,431 Class E Common Stock 1,209,894 THIS REPORT INCLUDES A TOTAL OF 20 PAGES. THE EXHIBIT INDEX IS ON PAGE 10. PART I - FINANCIAL INFORMATION Item 1. Financial Statements SEPRAGEN CORPORATION CONDENSED BALANCE SHEETS ASSETS March 31, 1996 December 31, 1995 (unaudited) Current Assets: Cash and cash equivalents. . . . . . . . . $ 119,674 $ 23,364 Marketable securities . . . . . . . . . . . 2,347,668 3,586,145 Accounts receivable, less allowance for doubtful accounts of $30,459 as of March 31, 1996 and December 31, 1995 . . . . 579,171 278,688 Inventories. . . . . . . . . . . . . . . . . . 645,550 777,620 Prepaid expenses and other . . . . . . . . . . .24,670 57,130 Total current assets. . . . . . . . . . . 3,716,733 4,722,947 Furniture and equipment, net . . . . . . . . . . 449,250 252,150 Intangible assets. . . . . . . . . . . . . . . . 111,709 111,709 $4,277,692 $5,086,806 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable . . . . . . . . . . . . . $ 273,499 $ 230,799 Accrued liabilities. . . . . . . . . . . . . . .95,260 174,395 Accrued payroll and benefits . . . . . . . . . .88,841 80,633 Interest payable . . . . . . . . . . . . . . . . . .-- 4,285 Total current liabilities. . . . . . . . . . 457,600 490,112 Class E common stock, no par value - 1,600,000 shares authorized; 1,209,894 shares issued and outstanding at March 31, 1996 and December 31, 1995; redeemable at $.01 per share . . . . . . .-- -- Shareholders' equity: Preferred stock, no par value - 5,000,000 shares authorized; none issued or outstanding at March 31, 1996 and December 31, 1995. . . . . .-- -- Class A common stock, no par value-20,000,000 shares authorized; 2,070,000 shares issued and outstanding at March 31 1996 and at December 31, 1995. . . . . . . . . . . . . 8,353,737 8,353,737 Class B common stock, no par value - 2,600,000 shares authorized; 786,431 shares issued and outstanding at March 31, 1996 and at December 31, 1995. . . . . 4,559,956 4,559,956 Unrealized loss on available-for-sale securities . . . . . . . . . . . . . . . . . (12,315) (14,462) Accumulated deficit. . . . . . . . . . . . .(9,081,286) (8,302,537) Total shareholders' equity . . . . . . . . . 3,820,092 4,596,694 $4,277,692 $5,086,806 The accompanying notes are an integral part of these condensed financial statements SEPRAGEN CORPORATION CONDENSED STATEMENTS OF OPERATIONS (Unaudited) Three Months Twelve Months Ended March 31, Ended March 31, 1996 1995 1996 Revenues: Net Sales. . . . . . . . . . . . $ 632,662 $465,120 $1,213,798 Costs and expenses: Cost of goods sold . . . . . . . . . 451,638 223,421 913,508 Selling, general and administrative . . . . . . . . . . 637,851 331,281 2,586,700 Research and development . . . . . . 362,838 154,121 1,286,059 Total costs and expenses . . . 1,452,327 708,823 4,786,267 Loss from operations. . . . . .(819,665) (243,703) (3,572,469) Interest income (expense), net . . . . .40,916 (141,821) (266,387) Net loss . . . . . . . . . . . . .$ (778,749) $(385,524) $(3,838,856) Net loss per common and common equivalent share . . . . . . . . . . . $(.27) $(.43) $(1.36) Weighted average shares outstanding. . . . . . . . . . . . 2,856,431 904,461 2,824,270 The accompanying notes are an integral part of these condensed financial statements SEPRAGEN CORPORATION CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended March 31, 1996 1995 Cash flows from operating activities: Net Loss . . . . . . . . . . . . . . . . . . . $ (778,749) $ (385,524) Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities: Depreciation . . . . . . . . . . . . . . . . . . .23,271 5,476 Changes in assets and liabilities: Accounts receivable . . . . . . . . . . . .(300,483) (99,962) Inventories . . . . . . . . . . . . . . . . 132,070 (128,868) Prepaid expenses and other. . . . . . . . . 32,460 87,112 Accounts payable. . . . . . . . . . . . . . .42,700 182,738 Accrued liabilities . . . . . . . . . . . . (79,135) (110,586) Accrued payroll and benefits. . . . . . . . . 8,208 32,185 Interest payable. . . . . . . . . . . . . . .(4,285) (17,113) Net cash used in operating activities. . . . . . . .(923,943) (434,542) Cash flows from investing activities: Acquisition of furniture and equipment . . . . . .(220,371) (14,308) Acquisitions of marketable securities. . . . . . .(259,514) -- Proceeds from sale of marketable securities. . . 1,500,138 -- Net cash provided by (used in) investing activities . . . . . . . . . . . . . . . . . . . 1,020,253 (14,308) Cash flows from financing activities: Proceeds from issuance of common stock . . . . . . . . .-- 7,720,845 Repayment of bridge notes payable. . . . . . . . . . . .-- (1,550,000) Net cash provided by financing activities. . . . . . . . .-- 6,170,845 Net increase in cash . . . . . . . . . . . . . . . . .96,310 5,721,995 Cash and cash equivalents at the beginning of the period. . . . . . . . . . . . . . . . . . . .23,364 240,472 Cash and cash equivalents at the end of the period. . . . . . . . . . . . . . . . . . .$119,674 $5,962,467 Supplemental disclosure of non-cash financing activities: Conversion of note payable to shareholder and related interest to common stock . . . . . . . . .-- $794,909 Deferred costs of securities registration offset against proceeds from issuance of common stock . . . .-- $478,494 Net unrealized gain on available-for- sale securities. . . . . . . . . . . . . . . . . .$2,147 -- The accompanying notes are an integral part of these condensed financial statements SEPRAGEN CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS THREE MONTH PERIOD ENDED MARCH 31, 1996 (Unaudited) Note 1 - Interim Financial Reporting. The accompanying unaudited interim financial statements have been prepared pursuant to the rules and regulations for reporting on Form 10-QSB. Accordingly, certain information and footnotes required by generally accepted accounting principles have been condensed or omitted. These interim statements should be read in conjunction with the financial statements and the notes thereto, included in the Sepragen Corporation's (the "Company's") Annual Report on Form 10-KSB for the year ended December 31, 1995. The December 31, 1995 balance sheet was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. The unaudited interim condensed financial statements have been prepared on the same basis as the audited annual financial statements, and in the opinion of management, contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial information set forth therein, in accordance with generally accepted accounting principles. The Company's quarterly results may be subject to fluctuations. As a result, the Company believes its results of operations for the interim period are not necessarily indicative of the results expected for any future period. The Company will be required to conduct significant research, development and testing activities which, together with expenses to be incurred for manufacturing, the establishment of a large marketing and distribution presence and other general and administrative expenses, are expected to result in operating losses for the next few years. Accordingly, there can be no assurance that the Company will ever achieve profitable operations. The Company expects to have sufficient working capital to support its operating needs for up to a sixteen month period from December 31, 1995. There is no assurance, however, that sufficient revenues will be generated in this and future periods to fund the Company's operations, which would result in the Company needing to raise additional financing at a later date. Note 2 - Initial Public Offering. The Company's initial public offering was declared effective by the Securities and Exchange Commission on March 23, 1995. The offering of 1,800,000 Units, each consisting of one share of Class A common stock, one redeemable five year Class A warrant and one redeemable five year Class B warrant, provided net proceeds of $7,242,351 to the Company. On the effective date of the offering, the Company issued 57,224 shares of Class B common stock and 88,039 shares of Class E common stock in exchange for the cancellation of a note payable to a shareholder of $727,000 and related accrued interest of $67,909. In May, 1995, the underwriter exercised its overallotment option for 270,000 Units, generating an additional $1,181,386 of net proceeds to the Company. Note 3 - Net Loss Per Share. Net loss per common and common equivalent share is computed using the weighted average number of common shares and common equivalent shares outstanding during each period. Restricted shares issued as Class E common shares and contingent options are considered contingently issuable and, accordingly, are excluded from the weighted average number of common and common equivalent shares outstanding. For the periods ended March 31, 1996 and 1995 common equivalent shares relating to options have been excluded as they are anti-dilutive. Note 4 - Inventory. Inventories consist of the following: 3/31/96 12/31/95 Raw Materials. . . . . . . . . . . $393,383 $459,474 Finished Goods . . . . . . . . . . 252,167 318,146 $645,550 $777,620 Item 2. Management's Discussion and Analysis. First quarter 1996 compared to first quarter 1995 Net sales increased by $168,000 or 36% from the first quarter of 1995. The increase in sales is due primarily to the shipment of two large QuantaSeps, a computer controlled liquid chromatography system. Gross Margin decreased by $61,000 or 25% from the first quarter of the prior year, and as a percent of sales, decreased from 52% to 29%. This decrease was attributable to higher material cost and development of software for the large QuantaSeps. Selling, general and administrative expenses increased by $307,000 from $331,000 in the first quarter of 1995 to $638,000 in the first quarter of 1996. The increase was primarily due to: the hiring of additional personnel in sales and marketing, corporate development and administration; additional expenses related to training, advertising and promotion, public relations, product evaluation and demonstration; and additional legal, accounting, insurance and other costs incurred in complying with the requirements of being a publicly held company and that were not require as a privately held company. Research and development expenses increased by $209,000 from $154,000 in the first quarter of 1995 to $363,000 in the first quarter of 1996. The increase was attributable to expenditures related to the development of a process for dairy whey fractionation, expenditures related to the development of a special absorbent media and further development of QuantaSep products. Interest income, net for the first quarter of 1996 reflects interest income earned on the proceeds of the initial public offering. Inflation The Company believes that the impact of inflation on its operations since its inception has not been material. Volatility of Sales In the last several years, the Company has experienced a relative increase in customer equipment orders in the third and fourth quarters and a relative decrease in orders in the first and second quarters. The Company believes this fluctuation relates to capital appropriations and spending cycles in the biopharmaceutical business. Liquidity and Capital Resources. The Company had working capital of $3,259,000 on March 31, 1996 and $4,233,000 on December 31, 1995. The decrease in the working capital of $974,000 reflects the use of net cash in operating activities and leasehold improvements. Since the IPO, the Company has funded its working capital requirements substantially from the net cash proceeds from the IPO. Prior to the IPO, the Company had funded its activities primarily through sales of its Superflo(R) columns and QuantaSep(R) systems, loans from its principal shareholders, and private placements of securities. The IPO generated net proceeds of $7,242,000 and the exercise by the underwriter of its over allotment option generated additional net proceeds of $1,111,000. From its inception in 1985 until the IPO, the Company's expenditures have exceeded its revenues. Prior to the IPO, the Company financed its operations primarily through private equity placements in an aggregate amount of approximately $3,971,000, a substantial portion of which was purchased by H. Michael Schneider, the secretary and a director of the Company until October 1, 1995, and his affiliates, including Romic Environmental Technologies Corporation ("Romic"), an entity controlled by Mr. Schneider. In addition, the Company has historically relied on customers to provide purchase price advances for development and scale-up of its radial flow chromatography columns. As of March 31, 1996, the Company had shareholders' equity of approximately $3,820,000. As of March 31, 1996, the Company had a working capital balance of approximately $3,259,000. For the quarter ended March 31, 1996, net cash used in operating activities was $924,000. This negative cash out flow of working capital from operations must be reversed and working capital increased significantly in order for the Company to fund the level of manufacturing and marketing required to meet the anticipated growth in demand for its products from the pharmaceutical and biotechnology industries during the next two years. Moreover, the Company requires additional funds to extend the use of its technology to new applications within the pharmaceutical and biotechnology industries as well as to applications within the food and dairy and environmental industries and to attract the interest of strategic partners in one or more of these markets. The decrease of $132,070 in inventory from December 31, 1995 to March 31, 1996 was due primarily to the shipment of two large QuantaSep Systems. As of March 31, 1996, the Company had no borrowings. During fiscal year 1996, the Company is committed to pay approximately $245,000 as compensation for its current executive officers. The Company expects to hire additional executive officers as the need arises. The Company's financing requirements may vary materially from those now planned because of results and changes in the focus and direction of research and development programs, relationships with strategic partners, competitive advances, technological change, changes in the Company's marketing strategy and other factors, many of which will be beyond the Company's control. Based on the Company's current operating plan, the Company believes that the net proceeds of the 1995 IPO, together with trade credit arrangements and cash flow generated from operations, will be sufficient to fund the Company's operations for the sixteen month period following December 31, 1995. The Company's cash requirements may vary materially from those planned because of factors such as the timing of significant product orders, commercial acceptance of new products, patent developments and the introduction of competitive products. The Company currently has no credit facility with a bank or other financial institution. Historically, the Company and certain of its customers have jointly borne a substantial portion of developmental expenses on projects with such customers. There can be no assurance that such sharing of expenses will continue. The Company continues its efforts to increase sales of its existing products and to complete development and initiate marketing of its products and processes now under development. The Company is seeking to enter into strategic alliances with corporate partners in the industries comprising its primary target markets (biopharmaceutical, food, dairy and environmental management). The Company hopes to enter into alliances that will provide funding to the Company for the development of new applications of its radial flow chromatography technology in return for royalty bearing licenses to the developed applications. No assurance can be given, however, that the terms of any such alliance will be successfully negotiated or that any such alliance will be successful. The Company's Class A Common Stock, Class A Warrants, Class B Warrants and Units are quoted on the NASDAQ SmallCap Market and the Company has listed its securities on the Pacific Stock Exchange. The Company entered into a lease for new facilities in Hayward, California with annual rent of $76,900 and relocated its facilities in February 1996. PART II - OTHER INFORMATION Item 1 Legal Proceedings Not Applicable. Item 2. Changes in Securities Not Applicable. Item 3. Defaults Upon Senior Securities Not Applicable. Item 4. Submission of Matters to a Vote of Security Holders. Not Applicable. Item 5. Other Information. Not Applicable. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. The following exhibits are filed as part of this Report: 3.1(1) Restated Articles of Incorporation of the Company, as amended to date 3.2(2) Restated Bylaws, as amended to date 4.1(1) Form of Warrant Agreement among the Company, the Underwriter and American Stock Transfer Company, including Forms of Class A Warrant Certificates and Class B Warrant Certificates 4.2(1) Form of Unit Option Agreement between the Company and the Underwriter 4.3(1) Form of Specimen Class A Common Stock Certificate 4.4(1) Form of Specimen Class B Common Stock Certificate 4.5(1) Form of Specimen Class E Common Stock Certificate 4.6(1) Bridge Warrant Agreement, including forms of Bridge Warrant Certificate 10.1(2) Lease dated July 3, 1995 between Hayward Business Park, Inc. and the Company 10.2(1) Employment Agreement between the Company and Vinit Saxena effective September 1, 1994 10.3(1) Employment Agreement between the Company and Q. R. Miranda effective September 1, 1994 10.4(1) Form of Indemnification Agreement between the Company and each director and officer of the Company 10.5(1) Convertible Promissory Notes and Warrants 10.6(1) 1994 Stock Option Plan 10.7 Master Purchasing Agreement with Thermax Limited dated April 23, 1996 (1) These exhibits which are incorporated herein by reference were previously filed by the Company as exhibits to its Registration Statement on Form SB- 2 and Amendments Nos. 1, 2, 3, 4 and 5 and Post Effective No. 1 (File No. 33-86888). (2) These exhibits which are incorporated herein by reference were previously filed by the Company as exhibits to its Quarterly Report on Form 10-QSB for the quarter ended September 30, 1995. Exhibits not listed above have been omitted because they are inapplicable or because the required information is given in the financial statements or notes thereto. (b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter for which this report is filed. SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SEPRAGEN CORPORATION Date: May 14, 1996 By: /s/ Vinit Saxena Vinit Saxena Chief Executive Officer, President and Principal Financial and Chief Accounting Officer EXHIBIT LIST Description Page 10.7 Master Purchasing Agreement with Thermax 11 Limited dated April 23, 1996 EX-10 2 MASTER PURCHASING AGREEMENT THIS AGREEMENT made as of the 4/23/96 day of 1996, by and between Sepragen Corporation, a California corporation ("Buyer") at 30689 Huntwood Drive, Hayward, California 94544, and Thermax Limited, a corporation organized and existing under the laws of India ("Seller") having an office and place of business at 40440 Grand River Avenue, Novi, Michigan 48375. Recitals WHEREAS, Buyer owns or has the right to utilize certain patents, patent applications, rights to inventions, designs, technical, and other proprietary information relating to the manufacture of products hereinafter described; and WHEREAS, Seller is desirous of manufacturing and selling to Buyer, and Buyer is willing to purchase from Seller, on the terms and conditions hereinafter described, certain chromatography media (hereafter "Chromatography Media") to be manufactured by Seller in accordance with designs, drawings, specifications, and proprietary information owned by Buyer and communicated to Seller for that sole purpose; and WHEREAS, Seller is the manufacturer of ion exchange resins and other copolymer beads (hereinafter referred to as "Resins") which do not fall under the definition of Chromatography Media. NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows: 1. Purchases and Terms a. Separate Orders All purchases to be made pursuant to this Agreement will take the form of separate orders to be communicated in writing, from time to time, from Buyer to Seller. All orders shall incorporate the reference paragraph attached hereto as Exhibit A. b. Exclusive Dealing Prior to termination of this Agreement and except as set forth in Section 6, Buyer shall not solicit orders from other manufacturers for production of the Chromatography Media "developed" by Seller under Section 1(d) and Seller agrees to develop and manufacture the Chromatography Media requested by Buyer (for which orders are accepted) during the term of this Agreement. Seller agrees that Buyer may purchase resins and Chromatography Media, for which Seller has not been asked to perform "development" activities, from any source without restriction. c. Price, Delivery, and Payment The prices, dates and places of delivery, and terms of payment to be made pursuant to subparagraph 1.a, above, are to be specified, and agreed upon between Buyer and Seller, in each and every such order. d. Development Prior to the initiation of each order, Buyer will provide Seller with the guidelines for the particular Chromatography Media it wishes to manufacture; thereafter, Seller shall develop the Chromatography Media and manufacturing specifications. Buyer will assist Seller, to the extent Buyer deems necessary, in such development activities. e. Place of Orders All orders to be made pursuant to this Agreement are to be placed by Buyer from its principal place of business in the United States and accepted by Seller within five (5) days following receipt thereof, by written notice addressed to Buyer. 2. Technical Information to Be Furnished a. Buyer agrees to furnish to Seller, prior to acceptance of each order, without cost, information for the sole purpose of enabling Seller to manufacture the Chromatography Media which are the subject of such orders. Buyer shall furnish one set of each of the following: i. If and when available, the recipe for the Chromatography Media in detail ii. General guidelines iii. Performance guidelines iv. Quality control guidelines v. An indication of the price that Buyer is willing to pay Seller Prior to submission of a final purchase order to Seller, Seller shall prepare and submit sample batches to Buyer for testing. Buyer's purchase order will not become effective until Buyer has approved the test results from the relevant sample batch. b. All technical information furnished from Buyer to Seller shall be in the English language. Any dimensions, weights, or other technical measurements furnished by Buyer shall be expressed according to the standards in use in the United States of America, or such other country as Buyer may elect. 3. Quality Control of Products to Be Manufactured a. Seller agrees that the Chromatography Media which it manufactures hereunder shall be acceptable to Buyer as to design, specifications, standards of quality, and performance and must pass Buyer's applications testing. No significant deviation from designs, guidelines, specifications, or standards of quality established or approved by Buyer, which have been communicated to Seller, shall be made without the written consent of Buyer. Seller agrees that it will establish and maintain appropriate test and inspection procedures to insure compliance by Seller with the covenants hereinbefore set forth. b. Seller agrees to manufacture the Chromatography Media according to all relevant U.S. and California laws, rules and regulations, of which it has received notice. c. Upon request by Buyer, Seller shall obtain U.S. Federal Drug Administration certification at Seller's sole cost and expense; provided, however, that Seller will not be obligated to obtain such certification if Seller elects not to produce the Chromatography Media for which the guidelines were submitted. d. Seller shall provide Buyer the limited warranty as set forth in Section 13. Buyer may transfer and assign such warranty to its customers. 4. Right of Inspection by Buyer Seller agrees that Buyer shall have the right of sending inspectors to the plant or plants of Seller during the course of manufacturing, and Seller shall furnish to such inspectors the fullest opportunity of observing any and all work being carried on with respect to the Chromatography Media, and of testing a reasonable quantity of such Chromatography Media or any portion thereof. All costs of such inspection by the Buyer will be borne by the Buyer. All Chromatography Media, or any compounds or components thereof, used for inspection and testing pursuant to this paragraph 4 shall be placed at the disposal of Buyer by Seller, at Seller's expense; and may be removed from Seller's premises by Buyer for: (a) further inspection or testing; (b) demonstrations for customers; or (c) for other purposes with Sellers written consent, which consent shall not be unreasonably withheld. 5. Compliance With Quality Standards Seller agrees to proceed promptly to make good or to replace all defects in the Chromatography Media, or any compounds or components thereof, that may be revealed by such factory inspection or are otherwise defective under the terms of this Agreement, without, however, thereby prejudicing the rights of Buyer under paragraph 12 or any other provision of this Agreement. 6. Obligation Not to Subcontract Seller agrees that it will perform all manufacturing and assembly operations in connection with the production of the Chromatography Media, and that it will not, directly or indirectly, subcontract the complete or substantially complete manufacture or assembly of the Chromatography Media or any parts thereof, unless prior written approval to do so is obtained from Buyer. Seller agrees that Buyer may, without Seller's approval, contract for manufacture of the Chromatography Media from other sources if Seller refuses to either (i) accept any order proposed under this Agreement; (ii) this Agreement is terminated pursuant to its terms; or (iii) any Chromatography Media produced by Seller do not meet the guidelines or specifications of the order. 7. Approved Sources Buyer reserves the right to indicate, in any and all recipes for order to be placed pursuant to this Agreement, approved sources from which components to be incorporated into the Chromatography Media may be purchased. Seller agrees that acceptance of any order in which approved sources are indicated includes an obligation to purchase the components so indicated from such sources. 8. Confidential Information All technical and other proprietary information, including guidelines, furnished by Buyer hereunder, or which results from the joint efforts of Buyer's and Seller's personnel, is the sole property of Buyer and shall be deemed to have been furnished to Seller in confidence for the sole purposes herein set forth and Seller undertakes not to use any of this information for its operations not connected with the orders accepted under this Agreement. Seller shall also take all reasonable precautions to prevent communication, without the written consent of Buyer, of any such technical or other proprietary information to any third party, except as may be necessary to carry out the purposes of this Agreement. 9. Exclusive Operations a. During the term of this Agreement and for a period of thirty years following the receipt by Seller of the last order from Buyer, Seller agrees that it will not, either directly or indirectly, or through one of its affiliates (herein defined as any organization in which Seller holds a material financial interest, whether directly or indirectly held), manufacture, assemble, or sell, or cause to be manufactured, assembled, or sold, to a third party, any of the Chromatography Media or similar products which compete with the Chromatography Media without the prior written approval of Buyer. b. During the terms of this Agreement and for two years thereafter neither Seller nor Buyer shall employ nor solicit employment of the other's employees. 10. Obtaining Protective Rights a. Any patent, copyright, or similar protective rights of whatever nature which may accrue regarding or related to the Chromatography Media, whether or not they result from the operation of this Agreement or the development of the Chromatography Media, shall be the exclusive property of Buyer. Seller acknowledges that its entire understanding of the Chromatography Media, including the design and function thereof, derives from the exposure thereto provided by Buyer, and therefore freely affirms that as part of the consideration extended in this Agreement, any inventive concepts occurring to Seller during the existence of this Agreement are rightfully assigned to Buyer. b. All applications and other measures which may be required in order to obtain the protective rights referred to in subparagraph 10.a are to be executed by Buyer. Buyer shall also have the exclusive right to obtain such protective rights in all countries including India. Seller agrees to furnish promptly to Buyer all documents and other information which may be required to obtain such protective rights, even though this Agreement may have terminated at the time Seller is requested to do so by Buyer. c. The parties acknowledge that the requirements of Sections 8 and 10 do not apply to the Resins and products derived from Resins, nor any technology that falls under public domain. 11. Term and Termination This Agreement has an indefinite term and may be terminated by either party, at any time, by giving the other party written notice of intention to terminate. Upon the expiration of a 30 day period, measured from the date of the giving of such notice, this Agreement shall automatically terminate, without the need of further action by the notifying party. In the event of termination pursuant to the provisions of this paragraph, all orders pending at the time of the receipt of such notice of termination are to be completed and delivered in accordance with the terms of each such order, unless otherwise provided herein. Paragraphs 8, 9, 10 and 15 shall survive the termination of this Agreement. 12. Breach and Remedies a. Either party may terminate this Agreement by giving written notice of termination to the other party, at any time, upon or after the filing by the said other party of a petition in bankruptcy or insolvency, or upon any other proceeding or action when by or against the other party under the relevant law on insolvency or bankruptcy, or after the making by the said other party of any assignment or attempted assignment for the benefit of creditors, or upon or after the institution of any proceedings for the liquidation or winding up of the said other party's business, or for the termination of its corporate charter. In the event of the giving of such notice, this Agreement shall terminate immediately upon receipt of said notice by the notified party. Upon the occurrence of any of the events enumerated in this subparagraph 12.a, any or all of the then pending orders may be cancelled at the option of the notifying party, such cancellation to be effective immediately upon receipt of written notice of cancellation by the notified party. b. In the event of any change in management or control or insolvency of either party, the party subject to such change undertakes to inform the other party immediately. c. Termination of this Agreement for any reason, unless otherwise provided, shall not affect (i) obligations accruing prior to the effective date of termination, or (ii) any obligations which, from the context hereof, are intended to survive termination of this Agreement. d. Any waiver by either party of a breach of any term or condition of this Agreement shall not constitute a waiver of any subsequent breach of the same or any other term or condition hereof. 13. Warranty Seller warrants that the Chromatography Media will be manufactured in accordance with the technical information and guidelines set forth in Section 2. In addition, Seller warrants that any defective Chromatography Media will be replaced with Chromatography Media meeting the guidelines and specifications within thirty days after receipt of such defective media by Seller, Seller agrees that this warranty may be assigned by Buyer to its customers. 14. Assignability This Agreement is not assignable by either party without the prior written consent of the other party, except that Buyer may assign this Agreement to any person, firm, or corporation that may purchase or take an assignment of the business relating to the Chromatography Media covered hereby, and provided further that such purchaser or assignee shall assume the obligations of Buyer hereunder. 15. Force Majeure Neither party shall be in default hereunder by reason of its delay in the performance of or failure to perform any of its obligations hereunder, if such delay is caused by strikes, acts of God or the public enemy, riots, incendiaries, interference by civil or military authorities, compliance with governmental laws, rules, and regulations, including those relating to exchange restrictions or security, delays in transit or delivery, inability to secure necessary governmental priorities for material, or any failure beyond its control, or without its fault or negligence. 16. Proprietary Rights on Termination All designs, drawings, specifications, and such other information made available by Buyer to Seller hereunder, shall be and remain the legal property of Buyer. Seller will cease to use such designs, drawings, specifications, and other proprietary information upon termination of this Agreement, and will promptly return to Buyer any and all such designs, drawings, specifications, and all other information and data furnished to Seller. Upon notice of termination, Seller shall deliver to Buyer complete manufacturing specifications of any Resins produced by Seller. 17. Construction This Agreement shall be construed in all respects according to the laws of the state of California; provided, however, that if any provisions of this Agreement shall be in contravention of the laws of India, such provisions shall either be ineffective to the extent that they are in contravention of such laws without invalidating the remaining provisions hereof, or, at the option of Buyer, may be considered to have rendered this entire Agreement unenforceable or its essential stipulations incapable of performance; in the latter event, this Agreement shall automatically terminate forthwith. 18. Resolution of Disputes All disputes arising in connection with this Agreement shall be finally settled under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by a single arbitrator appointed in accordance with said Rules. The parties agree to London, England as the forum city for the conduct of any arbitration proceedings. 19. Governmental Approval In the event that this Agreement or any provision thereof shall require the approval of any governmental authority, either in India or elsewhere, the same shall not be operative and binding until such consent shall have been obtained. If such approval is not given within six (6) months from the execution of this Agreement by the parties, the Agreement shall not be effective, nor shall it be binding on either party. 20. Obligation to Pay Taxes Seller and Buyer agree that the purchase price reflected in Buyer's purchase order is to include all taxes, duties and fees. In the event that the government of India, or any subdivision thereof, requires the payment of stamp taxes, registration taxes, turnover taxes, or other taxes or duties levied on this Agreement by reason of the execution or the performance thereof, it shall be the responsibility of Seller to pay all such taxes when due. Seller further agrees to indemnify Buyer and to hold it harmless from all liability of whatever nature which may be imposed on Buyer arising out of Seller's failure, for whatever reason, to duly pay such taxes. 21. Disclaimer of Agency The parties hereto agree and stipulate that Seller is in no way to be construed as acting as an agent or representative of Buyer in any dealings which Seller may have with any other person, firm, or corporation, and that Seller has no power to act for or to legally bind Buyer in any such transaction or transactions. 22. Prevalence of Agreement This Agreement contains all the understandings and representations between the parties hereto pertaining to the matters referred to herein, and supersedes all agreements, if any, previously entered into by them with respect thereto. This Agreement may be modified only by a written supplement, duly executed by the authorized officers of the parties. 23. Addresses for Notice Purposes All notices and approvals herein provided for shall be addressed, if to Seller to: Thermax Limited 40440 Grand River Avenue Novi, Michigan 48675 FAX (810) 474-5790 or if to Buyer to: Sepragen Corporation 30689 Huntwood Drive Hayward, California 94544 FAX (510)476-0655 All notices of termination, or notices which if not complied with may be the basis for termination, shall be forwarded by registered air mail. Any notices so given shall be deemed to have been given as of the date when, in the ordinary course of registered air mail, the said notice should have reached its destination. 24. Section and Paragraph Headings The section and paragraph headings herein are for convenience only, and shall not be interpreted to limit or affect in any way the meaning of the language contained in such paragraphs. IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby, have caused this Agreement to be executed in their corporate names by their officers thereunto duly authorized as of the day and year first above written. Sepragen Corporation By: /s/ Vinit Saxena Title: President Thermax Limited By: /s/ J.A. Bhathena Title: General Manager EX-27 3
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REGISTRANT'S QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 1996 ON FORM 10QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS YEAR DEC-31-1996 DEC-31-1995 MAR-31-1996 DEC-31-1995 119,674 23,364 2,347,668 3,586,145 579,171 278,688 30,459 30,459 645,550 777,620 3,716,733 4,722,947 449,250 252,150 0 0 4,277,692 5,086,806 457,600 490,112 0 0 12,913,693 12,913,693 0 0 0 0 (12,315) (14,462) 4,277,692 5,086,806 632,662 1,213,798 632,662 1,213,798 451,638 913,508 451,638 913,508 1,000,689 3,872,759 0 0 (40,916) 266,387 (778,749) (3,838,856) 0 0 (778,749) (3,838,856) 0 0 0 0 0 0 (778,749) (3,838,856) (.27) (1.36) (.27) (1.36)
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