8-K 1 d8k.htm DATE OF REPORT DECEMBER 31, 2002 Date of Report December 31, 2002
 
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported):  December 31, 2002
 
 
SENETEK PLC
(Exact Name of Registrant as Specified in Charter)
 
ENGLAND
  
0-14691
  
77-0039728
(State or Other Jurisdiction of Incorporation)
  
(Commission
File Number)
  
(I.R.S. Employer
Identification No.)
 
620 Airpark Road
Napa, CA 94458
(Address of Principal Executive Offices)
 
(707) 226-3900
(Registrant’s telephone number, including area code)
 

 
ITEM 2.        Disposition of Assets.
 
On December 31, 2002, we closed a transaction in which U.S. International Trading Corporation (USITC) purchased our rights to the Mill Creek personal care line, the Silver Fox hair care line and other brands acquired by us in our 1995 acquisition of Carme Inc. We had licensed these product lines to USITC since 1999, and USITC made the purchase under a purchase option provided for in the license agreement.
 
The purchase price was $2.8 million, payable $400,000 in cash at closing followed by 23 consecutive quarterly payments of $100,000 each commencing September 30, 2003, plus interest on the outstanding balance, and the application of a deposit of $100,000 made by USITC in 1999 towards the agreed-upon purchase price. The transaction closed upon the recording of title transfers by the Patent and Trademark Office.
 
ITEM 7.        Pro Forma Financial Information and Exhibits
 
(b) Pro Forma Financial Information
 
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS OF SENETEK PLC
 
On December 31, 2002, we closed a transaction in which U.S. International Trading Corporation (USITC) purchased our rights to the Mill Creek personal care line, the Silver Fox hair care line and other brands acquired by us in our 1995 acquisition of Carme Inc. (which are referred to hereafter as the “intellectual property”) for $400,000 cash, a promissory note of $2.3 million payable in 23 quarterly installments commencing September 30, 2003 and the application of a deposit of $100,000 made by USITC in 1999 towards the agreed-upon purchase price of $2.8 million. Delivery of the intellectual property, which had no carrying value, was made on December 31, 2002, concurrent with the receipt of $400,000 cash from USITC and the recording of title transfers by the Patent and Trademark Office.
 
We had licensed the intellectual property to USITC since 1999, and USITC made the purchase under a purchase option provided for in the license agreement. The purchase and sale agreement, among other things, terminated the 1999 license agreement. Other than the 1999 license agreement and the Du Barry product line license agreement, there are no material existing relationships between USITC and us.
 
We will account for this transaction as a sale of assets. The gain on the transaction will be recognized when collection is probable, which is deemed to be when cash is received. Accordingly, the balance of the unpaid promissory note of $2.3 million will be net with the deferred gain on our balance sheet and any gain on the transaction in excess of the initial payment of $400,000 and the previously unamortized portion of the $100,000 deposit made by USITC will be deferred until collection is deemed to be probable. All gains arising from this transaction will be classified as a component of discontinued operations.
 
The accompanying unaudited pro forma condensed consolidated financial statements are based upon our historical financial statements after giving effect to the sale of the intellectual property. These unaudited pro forma condensed consolidated financial statements are not

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necessarily indicative of the financial position and results of operations that would have been attained had the transactions actually taken place at the date indicated and do not purport to be indicative of the effects that may be expected to occur in the future.
 
The unaudited pro forma condensed consolidated balance sheet as of September 30, 2002 is based on our historical consolidated balance sheet and assumes that the sale of the intellectual property took place on that date. The unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2001 and the nine months ended September 30, 2002 are based on our historical statements of operations and assume the sale of the intellectual property took place on January 1, 2001. The expected gain on the sale of the intellectual property is not reported in the accompanying unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2001 and the nine months ended September 30, 2002 because the gain is a component of discontinued operations.

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Senetek PLC
Unaudited Pro Forma Condensed Consolidated Balance Sheet
September 30, 2002
(in thousands, except for per share data)
 
    
Historical Senetek
       
Pro forma Adjustments
            
As Adjusted
  
ASSETS
                                  
Current Assets:
                                  
Cash and Cash Equivalents
   
$
2,991
 
     
400
 
   
(a
)
   
$
3,391
 
Trade Receivables, net
   
 
2,001
 
     
(210
)
   
(d
)
   
 
1,791
 
Receivables related to disposed asset group
              
210
 
   
(d
)
   
 
210
 
Non-Trade Receivables, net
   
 
62
 
                   
 
62
 
Inventory, net
   
 
347
 
                   
 
347
 
Prepaids and Deposits
   
 
76
 
                   
 
76
 
    
    
         
Total Current Assets
   
 
5,477
 
     
400
 
          
 
5,877
 
    
    
         
Property & Equipment, net
   
 
3,268
 
                   
 
3,268
 
Goodwill, net
   
 
1,308
 
                   
 
1,308
 
    
    
         
TOTAL ASSETS
   
$
10,053
 
     
400
 
          
$
10,453
 
    
    
         
LIABILITIES AND STOCKHOLDERS’ EQUITY
                                  
Current Liabilities:
                                  
Accounts Payable
   
$
721
 
                   
$
721
 
Accrued Liabilities
   
 
934
 
     
40
 
   
(c
)
   
 
974
 
    
    
         
Total Current Liabilities
   
 
1,655
 
     
40
 
          
 
1,695
 
    
    
         
Long Term Liabilities
                                  
Notes Payable, net
   
 
6,055
 
                   
 
6,055
 
Deferred License Fees
   
 
1,664
 
     
(48
)
   
(b
)
   
 
1,616
 
Stockholders’ Equity
    Ordinary shares $0.07 (5 pence) par value
    Authorized shares: 100,000,000
    Issued and outstanding shares: 59,052,153
   
 
4,763
 
                   
 
4,763
 
Share Premium
   
 
82,125
 
                   
 
82,125
 
Accumulated Deficit
   
 
(86,218
)
     
400
48
(40
 
 
)
   
(a
(b
(c
)
)
)
   
 
(85,810
)
Equity Adjustment from Foreign Currency Translation
   
 
9
 
                   
 
9
 
    
    
         
Total Stockholders’ Equity
   
 
679
 
     
408
 
          
 
1,087
 
    
    
         
Total Liabilities and Stockholders’ Equity
   
$
10,053
 
     
400
 
          
$
10,453
 
    
    
         
 
Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet for the Year Ended September 30, 2002
(a)
 
Adjustment to record gain on sale of intellectual property to USITC. Senetek will account for this transaction as a sale of assets. The gain on the transaction will be recognized when collection is probable, which is deemed to be when cash is received. Accordingly, the balance of the unpaid promissory note of $2,300,000 will be net with the deferred gain on Senetek’s balance sheet and any gain on the transaction in excess of the initial payment of $400,000 and the previously unamortized portion of the $100,000 deposit made by USITC will be deferred until collection is deemed to be probable.
(b)
 
Adjustment to record recognition of the unamortized license fee of $48,000. A non-refundable license fee amounting to $100,000 was paid at the time of execution of the 1999 license agreement and is to be applied against the purchase price for the acquisition of the intellectual property.
(c)
 
Adjustment to record tax impact of transaction at tax rate of 9%. Due to the existence of federal net operating loss carryforwards, this rate only reflects state taxes.
(d)
 
To reclass receivables related to uncollected past revenues earned under the licensing agreement pertaining to the intellectual property sold.

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Senetek PLC
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the year ended December 31, 2001
(in thousands, except for per share data)
 
    
Historical Senetek
       
Pro forma Adjustments
          
As Adjusted
  
Revenues:
                                
Product Sales
   
$
3,896
 
                 
$
3,896
 
Royalties & Licensing
   
 
4,961
 
     
(404
)
  
(a
)
  
 
4,557
 
    
    
       
Total Revenue
   
 
8,857
 
     
(404
)
        
 
8,453
 
    
    
       
Cost of Sales—Products
   
 
1,093
 
                 
 
1,093
 
Cost of Sales—Royalty
   
 
377
 
                 
 
377
 
    
    
       
Total Cost of Sales
   
 
1,470
 
     
—  
 
        
 
1,470
 
    
    
       
Gross Profit
   
 
7,387
 
     
(404
)
        
 
6,983
 
    
    
       
Operating Expenses:
                                
Research & Development
   
 
344
 
                 
 
344
 
General & Administration
   
 
5,006
 
                 
 
5,006
 
    
    
       
Total Operating Expenses
   
 
5,350
 
     
—  
 
        
 
5,350
 
    
    
       
Income from Operations
   
 
2,037
 
     
(404
)
        
 
1,633
 
Other Income (expense):
                                
Interest Income
   
 
30
 
                 
 
30
 
Interest Expense (Including amortization of debt discount)
   
 
(1,614
)
                 
 
(1,614
)
Other
   
 
(62
)
                 
 
(62
)
    
    
       
Net Income (loss) from continuing operations before taxation
   
 
391
 
     
(404
)
        
 
(13
)
Provision for Income Taxes
   
 
6
 
     
—  
 
        
 
6
 
    
    
       
Income (loss) from continuing operations
   
$
385
 
     
(404
)
        
$
(19
)
    
    
       
Basic and diluted net income from continuing operations per Ordinary share outstanding
   
$
0.01
 
                 
$
0.00
 
    
                
Weighted average basic Ordinary shares outstanding
   
 
58,755
 
                 
 
58,755
 
    
                
Weighted average diluted Ordinary shares outstanding
   
 
58,805
 
                 
 
58,805
 
    
                
 
Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Year Ended December 31, 2001
(a)
 
To reverse royalties earned from licensing agreement with USITC.

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Senetek PLC
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the nine months ended September 30, 2002
(in thousands, except for per share data)
 
    
Historical Senetek
       
Pro forma Adjustments
            
As Adjusted
  
Revenues:
                                  
Product Sales
   
$
1,834
 
                   
$
1,834
 
Royalties & Licensing
   
 
6,251
 
     
(283
)
   
(a
)
   
 
5,968
 
    
    
         
Total Revenue
   
 
8,085
 
     
(283
)
          
 
7,802
 
    
    
         
Cost of Sales—Products
   
 
420
 
                   
 
420
 
Cost of Sales—Royalty
   
 
294
 
                   
 
294
 
    
    
         
Total Cost of Sales
   
 
714
 
     
—  
 
          
 
714
 
    
    
         
Gross Profit
   
 
7,371
 
     
(283
)
          
 
7,088
 
    
    
         
Operating Expenses:
                                  
Research & Development
   
 
838
 
                   
 
838
 
General & Administration
   
 
3,506
 
                   
 
3,506
 
    
    
         
Total Operating Expenses
   
 
4,344
 
     
—  
 
          
 
4,344
 
    
    
         
Income from Operations
   
 
3,027
 
     
(283
)
          
 
2,744
 
Other Income (expense):
                                  
Interest Income
   
 
26
 
     
0
 
          
 
26
 
Interest Expense (Including amortization of debt discount)
   
 
(1,093
)
     
0
 
          
 
(1,093
)
Other
   
 
18
 
     
0
 
          
 
18
 
    
    
         
Net Income (loss) from continuing operations before taxation
   
 
1,978
 
     
(283
)
          
 
1,695
 
Provision for Income Taxes
   
 
97
 
     
(25
)
   
(b
)
   
 
72
 
    
    
         
Income (loss) from continuing operations
   
$
1,881
 
     
(258
)
          
$
1,623
 
    
    
         
Basic and diluted net income from continuing operations per Ordinary share outstanding
   
$
0.03
 
                   
$
0.03
 
    
                  
Weighted average basic Ordinary shares outstanding
   
 
59,052
 
                   
 
59,052
 
    
                  
Weighted average diluted Ordinary shares outstanding
   
 
59,106
 
                   
 
59,106
 
    
                  
 
Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Nine Months Ended September 30, 2002
(a)
 
To reverse royalties earned from licensing agreement with USITC.
(b)
 
To record tax effect of royalties reversed at a rate of 9%.

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(c)
 
Exhibits
 
2.1
   
Purchase and Sale Agreement dated September 27, 2002 by and between Carme Cosmeceutical Sciences, Inc. and U.S. International Trading Corporation (incorporated by reference to Exhibit 10.3 to our Form 10-Q for the quarterly period ended September 30, 2002 filed November 14, 2002).

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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
Date: January 14, 2003
      
SENETEK PLC
(registrant)
       
By:
  
/s/  Frank J. Massino        
       
Name:    Frank J. Massino
Its:         Chief Executive Officer

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EXHIBIT INDEX
 
2.1
   
Purchase and Sale Agreement dated September 27, 2002 by and between Carme Cosmeceutical Sciences, Inc. and U.S. International Trading Corporation (incorporated by reference to Exhibit 10.3 to our Form 10-Q for the quarterly period ended September 30, 2002 filed November 14, 2002).