-----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, EJWLMoBJA8Arbcw+h0oAGYOLroB7ikd0PMgtMLfricPWzUiCSy4IqoOHN/o3gpMk wn95WqiNJp3CrYK7Hztf2Q== 0000927016-02-004216.txt : 20020819 0000927016-02-004216.hdr.sgml : 20020819 20020819171747 ACCESSION NUMBER: 0000927016-02-004216 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020819 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GLYCOGENESYS INC CENTRAL INDEX KEY: 0000946661 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 330231238 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-26476 FILM NUMBER: 02743031 BUSINESS ADDRESS: STREET 1: 31 ST. JAMES AVENUE STREET 2: 8TH FLOOR CITY: BOSTON STATE: MA ZIP: 02116 BUSINESS PHONE: 6174220674 MAIL ADDRESS: STREET 1: 31 ST JAMES AVE STREET 2: 8TH FL CITY: BOSTON STATE: MA ZIP: 02116 FORMER COMPANY: FORMER CONFORMED NAME: SAFESCIENCE INC DATE OF NAME CHANGE: 19980401 FORMER COMPANY: FORMER CONFORMED NAME: IGG INTERNATIONAL INC DATE OF NAME CHANGE: 19950721 FORMER COMPANY: FORMER CONFORMED NAME: GLYCOGENESY INC DATE OF NAME CHANGE: 20011107 10-Q 1 d10q.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 ------------------------------------------ FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2002. [_] 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 ------------------------------------------ GLYCOGENESYS, INC. (Exact name of Registrant as specified in its charter.) NEVADA 33-0231238 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification no.) Park Square Building 31 St. James Avenue, 8th Floor Boston, Massachusetts 02116 (Address of principal executive offices, including zip code.) (617) 422-0674 Registrant's telephone number, including area code. Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by the Section 13 or 15(d) of the Securities Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [_] The number of shares outstanding of the Registrant's common stock, $.01 par value per share, at August 19, 2002 was 37,251,457 shares. 1 GLYCOGENESYS, INC. (formerly known as SafeScience, Inc.) INDEX Page ---- Part I - Financial Information Item 1. Financial Statements (Unaudited) Consolidated Balance Sheets as of June 30, 2002 and December 31, 2001 .................................. 3-4 Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2002 and 2001 ............................................... 5 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2002 and 2001 ............................................... 6 Notes to Unaudited Consolidated Financial Statements ..... 7-11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .......... 12-15 Item 3. Quantitative and Qualitative Disclosures About Market Risk ...................................... 15-24 Part II - Other Information Item 2. Changes in Securities and Use of Proceeds ................ 24-25 Item 4. Submission of Matters to a Vote of Securities Holders .... 25 Item 6. Exhibits and Reports on Form 8-K ......................... 25 Signatures ........................................................... 26 On May 20, 2002, the Company filed its quarterly report on Form 10-Q for the quarter ended March 31, 2002 which contained financial statements that had not been reviewed by an independent public accountant as required by Rule 10-01(d) of Regulation S-X because the Company elected not to have Arthur Andersen LLP review such financial statements in reliance on Securities and Exchange Release No. 34-45589. Deloitte & Touche LLP has since reviewed those financial statements and did not recommend any material changes to such financial statements. 2 GLYCOGENESYS, INC. (formerly known as SafeScience, Inc.) CONSOLIDATED BALANCE SHEETS ASSETS ------ (Unaudited) June 30, December 31, 2002 2001 ----------- ----------- CURRENT ASSETS: Cash and cash equivalents $ 8,097,715 $ 7,977,910 Due from SafeScience Newco, Ltd. 360,715 177,646 Prepaid expenses and other current assets 192,301 271,899 ----------- ----------- Total current assets 8,650,731 8,427,455 ----------- ----------- PROPERTY AND EQUIPMENT, AT COST: Computer, office and laboratory equipment 489,128 469,253 Furniture and fixtures 289,958 284,748 Motor vehicles 25,026 25,026 ----------- ----------- 804,112 779,027 Less-accumulated depreciation (499,563) (437,844) ----------- ----------- 304,549 341,183 ----------- ----------- OTHER ASSETS: Restricted cash 108,128 108,128 Other 81,704 79,831 ----------- ----------- Total other assets 189,832 187,959 ----------- ----------- Total assets $ 9,145,112 $ 8,956,597 =========== =========== The accompanying notes are an integral part of these consolidated financial statements. GLYCOGENESYS, INC. (formerly known as SafeScience, Inc.) CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) ---------------------------------------------- (Unaudited)
June 30, December 31, 2002 2001 ------------ ------------ CURRENT LIABILITIES: Accounts payable $ 823,760 $ 1,094,872 Accrued liabilities 443,688 1,370,364 Net liabilities of discontinued operations 282,323 326,780 ------------ ------------ Total current liabilities 1,549,771 2,792,016 ------------ ------------ Preferred Stock: -- 15,091,827 ------------ ------------ Commitments and contingencies STOCKHOLDERS' EQUITY (DEFICIT): Preferred stock, $.01 par value; Authorized -5,000,000 shares Series A convertible, exchangeable preferred stock, 7,500 authorized; 4,944.44 shares issued and outstanding as of June 30, 2002 and December 31, 2001 (liquidation value $12,854,115 and $12,419,273, respectively) (Note 5c) 49 -- Series B convertible preferred stock, 10,000 authorized; 1,462.55 and 862.71 shares issued and outstanding as of June 30, 2002 and December 31, 2001 (liquidation value $2,548,057 and $1,466,601, respectively) 15 -- Series C convertible preferred stock, 1,117 authorized; 1,116.79 shares issued and outstanding as of June 30, 2002 and December 31, 2001 11 -- Common stock, $.01 par value; Authorized -200,000,000 shares Issued and outstanding - 37,220,449 and 33,568,952 shares at June 30, 2002 and December 31, 2001, respectively 372,204 335,690 Additional paid-in capital 81,802,037 60,100,645 Note receivable from former officer - issuance of common stock (2,675,000) (2,675,000) Accumulated deficit (71,903,975) (66,688,581) ------------ ------------ Total stockholders' equity (deficit) 7,595,341 (8,927,246) ------------ ------------ Total liabilities and stockholders' equity (deficit) $ 9,145,112 $ 8,956,597 ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 4 GLYCOGENESYS, INC. (formerly known as SafeScience, Inc.) CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended June 30, Six Months Ended June 30, --------------------------- -------------------------- 2002 2001 2002 2001 ----------- ------------ ----------- ----------- OPERATING EXPENSES: Research and development $ 247,326 $ 984,537 $ 1,375,981 $ 2,726,632 General and administrative 1,048,382 1,052,282 1,666,378 2,383,043 Restructuring charge (credit) -- -- -- (182,625) ----------- ----------- ----------- ----------- Operating loss (1,295,708) (2,036,819) (3,042,359) (4,927,050) ----------- ----------- ----------- ----------- OTHER (EXPENSE) INCOME: Equity in Loss of SafeScience Newco, Ltd. (Note 3) (1,301,104) -- (2,232,114) -- Other income (expense) 2,082 (19,036) 1,209 (24,780) Interest income 30,048 2,434 57,871 29,936 ----------- ----------- ----------- ----------- Total other (expense) income (1,268,975) (16,602) (2,173,034) 5,156 ----------- ----------- ----------- ----------- Loss from continuing operations (2,564,683) (2,053,421) (5,215,394) (4,921,894) Loss from discontinued operations -- (57,600) -- (244,129) ----------- ----------- ----------- ----------- Net loss (2,564,683) (2,111,021) (5,215,394) (5,166,023) Accretion of preferred stock dividend (256,885) -- (496,559) -- ----------- ----------- ----------- ----------- Net loss applicable to common stock $(2,821,568) $(2,111,021) $(5,711,952) $(5,166,023) =========== =========== =========== =========== Basic and diluted loss per common stock from continuing operations $ (0.08) $ (0.08) $ (0.15) $ (0.19) Basic and diluted loss per common stock from discontinued operations -- -- -- (0.01) ----------- ----------- ----------- ----------- Basic and diluted net loss per common stock $ (0.08) $ (0.08) $ (0.15) $ (0.20) =========== =========== =========== =========== Weighted average number of common shares outstanding 37,168,314 25,817,699 37,118,171 25,462,315 =========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. 5 GLYCOGENESYS, INC. (formerly known as SafeScience, Inc.) CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 30, ---------------------------- 2002 2001 -------------- ------------- Cash flows from operating activities: Net loss $ (5,215,394) $ (5,166,123) Adjustments to reconcile net loss to net cash used in operating and discontinued activities: Operating expenses paid in common stock, options and warrants 42,833 521,120 Amortization of value of warrants issued for license 433,734 456,024 Equity adjustment in SafeScience Newco, Ltd. 2,232,114 -- Depreciation and amortization 61,719 69,119 Changes in assets and liabilities: Due from SafeScience Newco, Ltd. (1,395,443) -- Prepaid expenses and other current assets 79,598 70,568 Accounts payable (271,112) 23,497 Accrued liabilities (926,676) (144,627) Net liabilities of discontinued operations (44,457) (804,595) ------------ ------------ Net cash operating and discontinued activities (5,003,084) (4,975,017) ------------ ------------ Cash flows from investing activities: Purchase of property and equipment (25,085) (11,173) Deposits (1,873) 188,280 ------------ ------------ Net cash (used in) provided by investing activities (26,958) 177,107 ------------ ------------ Cash flows from financing activities: Proceeds from sale of common stock, net of issuance costs 5,148,275 2,839,988 Proceeds from exercise of warrants 1,572 -- ------------ ------------ Net cash provided by financing activities 5,149,847 2,839,988 ------------ ------------ Net increase (decrease) in cash and cash equivalents 119,805 (1,957,922) Cash and cash equivalents, beginning balance 7,977,910 2,547,353 ------------ ------------ Cash and cash equivalents, ending balance $ 8,097,715 $ 589,431 ============ ============ Supplemental disclosure of non-cash financing activities: Series B preferred stock issued to fund SafeScience Newco $ 1,019,740 $ - Dividends accreted on Series A and Series B preferred stock $ 496,559 $ - Reclassification of Series A, B and C preferred stock from temporary equity to permanent equity $ 15,091,827 $ - ============ ============ Supplemental disclosure of cash flow information: Cash paid for interest $ -- $ 20,099 ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 6 GLYCOGENESYS, INC. (formerly known as SafeScience, Inc.) NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2002 (1) Basis of Presentation The accompanying unaudited consolidated financial statements of GlycoGenesys, Inc. (formerly SafeScience, Inc.) and its subsidiaries (the "Company") have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America applicable to interim periods, and with the rules and regulations of the Securities and Exchange Commission. In the opinion of management, such financial statements reflect all adjustments, consisting of only normal recurring adjustments, which are necessary for a fair presentation of the results of the interim periods presented. The results of operations for the interim periods shown in this report are not necessarily indicative of results expected for the full year. These financial statements do not include disclosures associated with the annual financial statements and, accordingly, should be read in conjunction with the Management's Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and footnotes for the year ended December 31, 2001, included in the Company's Annual Report on Form 10-K/A. 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 operating expenses during the period. Actual results could differ from those estimates. (2) Organization and Operations GlycoGenesys, Inc. 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. International Gene Group, Inc. focuses on the development of carbohydrate-based pharmaceutical products and related technologies in connection with oncology and other life threatening and/or debilitating diseases. SafeScience Products, Inc. develops agricultural products, some of which are also based upon carbohydrate chemistries. The therapeutic products will be either licensed from or jointly developed with third parties. In July 2001, the Company and Elan International Services, Ltd. ("EIS") formed a joint venture in Bermuda, SafeScience Newco, Ltd. ("SafeScience Newco"), for the purpose of furthering the development of the Company's drug candidate, GCS-100, in the field of oncology (see Note 3). 7 GLYCOGENESYS, INC. (formerly known as SafeScience, Inc.) NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2002 As of June 30, 2002, the Company has an accumulated deficit of $71,903,975. Despite this accumulated deficit, the Company had a net working capital position (current assets less current liabilities) of approximately $7.1 million at June 30, 2002. The Company believes that its existing funds will be sufficient to fund its operating expenses and capital requirements into the first quarter of 2003. The Company intends to raise additional capital through equity financings to support its continued operations. Since inception, the Company has funded its operations primarily through the proceeds from the sale of equity securities. Through June 30, 2002, the Company had been successful in raising approximately $58,551,000 from the sales of equity securities. Pursuant to an agreement with EIS, as of June 30, 2002, EIS may acquire up to $7.1 million of additional Series B preferred stock from the Company and may directly contribute up to approximately $1.8 million of additional funds directly to SafeScience Newco, in both cases to fund additional expenses which may be incurred by SafeScience Newco in the development of GCS-100. However, the Company will not receive additional reimbursement of R&D expenses from SafeScience Newco, and EIS will not contribute additional capital to SafeScience Newco nor acquire additional shares of Series B preferred stock, unless the Company agrees with EIS on a quarterly basis on the business plan for SafeScience Newco. On June 10, 2002, Elan Corporation, plc ("Elan") issued a press release announcing a plan to streamline its operations into three core areas: neurology, pain management and autoimmune disease. The release stated that its joint ventures that focus on products outside of these three core therapeutic areas will be evaluated on an ongoing basis for further investment and eventual outlicensing to marketing partners. As a result, we believe EIS will provide a portion but not all of the funds available to SafeScience Newco under the agreement. Any reduction in funding will not affect the amount of funding committed through June 30, 2002 (19.9% of the joint venture's losses) for payment of amounts due from SafeScience Newco. On August 15, 2002, EIS acquired 832.1245 additional shares, or $1.4 million, of Series B preferred stock and contributed approximately $0.35 million directly to SafeScience Newco from which the Company was reimbursed $1.7 million for R&D and other expenses incurred on behalf of SafeScience Newco. The Company's future is dependent upon its ability to obtain financing to fund its operations. As of August 19, 2002, the Company has not obtained commitments from any existing or potential investors to provide additional financing. The Company expects to incur substantial additional operating costs, including costs related to ongoing research and development activities, preclinical studies and clinical trials. To the extent that the Company is unable to raise additional capital on a timely basis, management may prioritize research activities to conserve cash. In the event additional financing is not obtained, the Company may be required to significantly reduce or curtail operations. In its Annual Report on Form 10-K/A for the year ended December 31, 2001, the Company reported that there is substantial doubt that the Company will have the ability to continue as a going concern and, therefore, may be unable to realize its assets and discharge its liabilities in the normal course of business. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or to amounts and classification of liabilities that may be necessary should the Company be unable to continue as a going concern. Principal risks to the Company include the need to obtain adequate financing to fund future operations, the successful development and marketing of pharmaceutical products, dependence on collaborative partners, United States Food and Drug Administration approval, dependence on key individuals and competition from substitute products and larger companies. 8 GLYCOGENESYS, INC. (formerly known as SafeScience, Inc.) NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2002 (3) Joint Venture with Elan International Services, Ltd. ("EIS") SafeScience Newco was formed by issuing voting common shares of SafeScience Newco ("Newco common shares") and non-voting non-redeemable convertible preferred shares of SafeScience Newco ("Newco preferred shares") valued at $15,000,000 to the Company and EIS. The Company owns 100% of the outstanding Newco common shares, which represents 100% of the outstanding voting shares of SafeScience Newco. The Newco preferred shares are non-voting and are convertible, at the option of the holder thereof, into voting Newco common shares at any time after July 10, 2003. While EIS currently does not own any Newco common shares and is unable to convert any of its Newco preferred shares into Newco common shares until July 10, 2003, it has retained significant minority investor rights that the Company considers to be "participating rights" as defined in EITF Issue 96-16 "Investors' Accounting for an Investee When the Investor Has a Majority of the Voting Interest but the Minority Shareholder or Shareholders Have Certain Approval or Veto Rights". EIS's participating rights prevent the Company from exercising sole control over SafeScience Newco. Accordingly, the Company has not consolidated the financial statements of SafeScience Newco but instead accounts for its investment in SafeScience Newco using the equity method. Subject to the approval by the Company and EIS on a quarterly basis to the business plan of SafeScience Newco, the Company has agreed to provide additional funding to SafeScience Newco as needed in relation to its 80.1% ownership interest in SafeScience Newco and EIS has agreed to provide the remaining 19.9%. To the extent such funding is provided, EIS has agreed to acquire up to $9,612,000 of the Company's Series B preferred stock, at the option of the Company, to provide the Company with funds for its pro rata share of development funding for SafeScience Newco, of which approximately $2.5 million has been funded through June 30, 2002. Elan's current business direction is likely to significantly limit its future funding of SafeScience Newco. The Company performed research for SafeScience Newco and incurred research expenses of approximately $2,537,000 on behalf of SafeScience Newco during the period January 1, 2002 through June 30, 2002. In addition, management fees and other direct expenses billed to SafeScience Newco totaled approximately $120,000 during this period. The Company's 80.1% share of SafeScience Newco's ongoing operating expenses for the three and six months ended June 30, 2002 was approximately $1,301,104 and $2,232,114, respectively, and is included in Equity in Loss of SafeScience Newco, Ltd. in the Company's consolidated statements of operations. As of June 30, 2002, the Company has a receivable from SafeScience Newco of $360,715. This receivable represents EIS' share of research and development expenses paid for by the Company on behalf of SafeScience Newco. Elan has committed to fund this amount through June 30, 2002. As part of a normal review of the Company's recently filed registration statement on Form S-3, the Securities and Exchange Commission has questioned the Company's recording of 80.1% of the expenses incurred by SafeScience Newco Ltd., when, in fact, the Company holds 100% of the outstanding common stock of SafeScience Newco Ltd. The Company and EIS have agreed to fund SafeScience Newco's on-going research and development costs as approved expenses are incurred on an 80.1%/19.9% basis, and, as such, the Company will not be responsible for more than 80.1% of SafeScience Newco's losses as long as both parties continue to agree to fund SafeScience Newco's expenditures. If EIS did not agree to fund such expenditures, and SafeScience Newco were to incur losses, the Company would recognize 100% of its losses. If the Company were required as a result of this review to record the additional 19.9% of SafeScience Newco's total loss, "Equity in loss of SafeScience Newco" would increase from $1,301,104 and $2,232,114 to $1,624,350 and $2,786,660 for the three and six months ended June 30, 2002, respectively. 9 GLYCOGENESYS, INC. (formerly known as SafeScience, Inc.) NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2002 SafeScience Newco incurred a net loss of $1,624,350 and $2,786,660 for the three and six-month period ended June 30, 2002, respectively. (4) Net Loss Per Common Stock The Company applies 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. The dilutive effect of the potential common shares consisting of outstanding stock options and warrants is determined using the treasury stock method in accordance with SFAS No. 128. Diluted weighted average shares outstanding for the three and six month periods ended June 30, 2002 and 2001 excluded the potential common shares from convertible preferred stock, warrants and stock options because to do so would be anti-dilutive. At June 30, 2002 and 2001, there are 11,165,328 and 4,851,360 warrants outstanding, respectively, with a weighted average exercise price of $2.27 and $2.90, respectively, and 1,400,427 and 986,251 stock options outstanding, respectively, with a weighted average exercise price of $2.90 and $6.34, respectively, which were omitted from the net loss per common stock calculations, and 7,523,780 and no shares, respectively, issuable upon conversion of outstanding shares of preferred stock. (5) EQUITY (a) Private Placement Offerings During the first quarter of 2002, the Company raised $5,650,666 in a private placement offering of common stock in which 3,008,608 shares of common stock were sold at a weighted average price of $1.88 per share, and warrants to purchase 2,256,457 shares of common stock each at a weighted average price of $2.25 per share, and warrants to purchase 903,243 shares of common stock at a price of $0.01 per share each exercisable for five years. Net proceeds of this offering were $5,237,039. Included in this private placement and pursuant to their pre-emptive rights, EIS purchased 597,205 shares of common stock at $1.79, and warrants to purchase 447,904 shares of common stock at a price of $2.15 and 149,301 shares of common stock at a price of $0.01, each exercisable for five years. (b) Stock, Stock Option, and Warrants The Company has entered into agreements with various employees and consultants for the grant of stock options and shares of common stock at prices determined by the Compensation Committee of the Company's Board of Directors. During the six months ended June 30, 2002 and 2001, the Company issued 122,038 and 427,162 shares of common stock, respectively, to various employees, a former employee and consultants as compensation for services rendered or for licensing fees and recorded charges to operations of $42,833 and $521,120 relating to those issuances of common stock. 10 GLYCOGENESYS, INC. (formerly known as SafeScience, Inc.) NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2002 During the six months ended June 30, 2002, the Company granted options to purchase 551,700 shares of common stock at a weighted average exercise price of $1.98 per share to employees. Options to purchase 16,100 shares were exercised generating proceeds of $2,497. Including the warrants referred to in Note 5(a), during the six months ended June 30, 2002, the Company issued warrants to purchase 3,352,869 shares of common stock to investors and advisors at a weighted average price of $1.65. Total non-cash compensation expense related to stock, stock option and warrant grants recorded in the accompanying consolidated statements of operations for the six months ended June 30, 2002 and 2001 amounted to $476,567 and $977,144, respectively. (c) Classification of Preferred Stock Prior to April 16, 2002, the Company's Series A, B and C preferred stock contained provisions for redemption in cash in the event that a change in control of the Company were to occur without prior approval by the Board of Directors. In July 2001, the Securities and Exchange Commission issued an SEC Staff announcement which was codified as EITF Topic No. D-98, "Classification and Measurement of Redeemable Securities", which required that certain equity instruments that have liquidation features similar to redemption features be reclassified to temporary equity. This announcement was applied retroactively in the Company's fourth quarter of 2001, by reclassifying the outstanding shares of preferred stock to temporary equity. On April 16, 2002, the Company and EIS, the holder of the outstanding shares of Series A, B and C preferred stock, amended the original terms of the preferred stock. As a result of this amendment, the Company has reclassified the Series A, B and C preferred stock to permanent equity as of April 16, 2002. As part of a normal review of the Company's recently filed registration statement on Form S-3, the Securities and Exchange Commission has questioned the Company's classification of the Series A preferred stock as stockholders' equity due to the existence of an exchange feature whereby EIS may exchange the Series A preferred stock for the preferred shares of SafeScience Newco held by the Company. Although the Company believes that the Series A preferred stock is appropriately reported as permanent equity, it is possible that preferred stock in the amount of approximately $12.9 million at June 30, 2002 will be reclassified back to temporary equity upon the completion of the SEC's review. (6) SUBSEQUENT EVENTS On August 15, 2002, the Company issued 832.1245 additional shares of Series B preferred stock to EIS for net proceeds of approximately $1.3 million. 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the consolidated financial statements and the notes thereto. The following contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. All forward-looking statements involve risks and uncertainty. Although the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore, there can be no assurance that the forward-looking statements included in this report will prove to be accurate. The Company's actual results may differ materially from the results anticipated in the forward-looking statements. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Certain Factors that May Affect Future Results" included herein for a discussion of factors that could contribute to such material differences. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved. The Company disclaims any obligation to update or revise the information provided in this report to reflect future events. Overview GlycoGenesys, Inc. is a biotechnology company that develops novel pharmaceutical products based on carbohydrate compounds and related technologies. Our lead drug candidate GCS-100 (formerly known as GBC-590), a potential treatment for multiple forms of cancer, completed Phase II(a) clinical trials for pancreatic cancer in April 2002 and completed Phase II(a) clinical trials for colorectal cancer in March 2001. We began a Phase I dose escalation trial to include colorectal and other types of cancer patients in February 2002. In July 2001, we formed a joint venture, SafeScience Newco, Ltd., with Elan International Services, Ltd. ("EIS") to advance GCS-100 in the field of oncology. While we are also developing two agricultural products (Elexa, a registered trademark of ours and Bb447), we continue to seek strategic alternatives, including the sale, of our agricultural products business area. Our near term objective is to continue to proceed through the various phases of United States Food and Drug Administration ("FDA") clinical trials for GCS-100. Our business was founded in 1992 as IGG International, Inc. to pursue carbohydrate based pharmaceutical research for cancer therapeutics. In 1995, we merged with Alvarada Inc., a publicly-traded corporation having no active operations. In 1998 we changed our name to SafeScience, Inc. and more recently in October 2001 we changed our name to GlycoGenesys, Inc. We conduct our business through two wholly-owned subsidiaries, International Gene Group, Inc. and SafeScience Products, Inc. International Gene Group, Inc. ("IGGI") develops human therapeutics. IGGI has been focused on developing GCS-100, a complex carbohydrate intended to fight cancerous tumors and metastasis, which it exclusively licenses from Dr. David Platt and Wayne State University and the Barbara Ann Karmanos Cancer Institute. Historically, SafeScience Products, Inc. developed agriculture products and developed, marketed, and distributed chemically safe consumer and commercial products. Critical Accounting Policies Our significant accounting policies are described in the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K/A for the year ended December 31, 2001. The accounting policies used in preparing our interim consolidated financial statements for 12 the six months ended June 30, 2002 are the same as those described in our Annual Report on Form 10-K/A. Our critical accounting policies are those having the most impact to the reporting of our financial condition and results and those requiring significant judgments and estimates. Our critical accounting policies include those related to (1) accounting for our investment in SafeScience Newco, Ltd., (2) accounting for our Series A, B, and C Preferred Stock and (3) research and development. Our critical accounting policies for our investment in SafeScience Newco Ltd. and for our Series A, B, and C Preferred Stock are discussed in Notes 3 and 5, respectively, in the notes to the accompanying financial statements in this report. Our critical accounting policy for research and development is as follows: research and development costs, which consist primarily of expenses for clinical trials, preclinical research, drug manufacturing for clinical trials, sponsored research, consultants, supplies and testing, are charged to operations as incurred. With respect to these critical accounting policies, management believes that the application of judgments and assessments is consistently applied and produces financial information, which fairly depicts the results of operations for all periods presented. Results of Operations: Three months ended June 30, 2002 versus June 30, 2001 We had a net loss of approximately $2.6 million for the three months ended June 30, 2002 versus a net loss of approximately $2.1 million for the three months ended June 30, 2001. The net loss for the three months ended June 30, 2002 included a charge in the amount of approximately $1.3 million to recognize our 80.1% equity share in the loss of SafeScience Newco, Ltd. ("SafeScience Newco"), our joint venture with Elan. In July 2001, we transferred our rights to GCS-100 in the field of oncology to SafeScience Newco. Accordingly, our total research and development expenses for the three months ended June 30, 2002 are included in two lines in the Consolidated Statements of Operations: (1) Research and Development ("R&D"), and (2) Equity in Loss of SafeScience Newco, Ltd. On this basis, total research and development expenses increased to approximately $1,423,000 for the three months ended June 30, 2002 from approximately $985,000 for the three months ended June 30, 2001, an increase of approximately $494,000, or 50%. Our expenses related specifically to the development of GCS-100 during the three months ended June 30, 2002 were approximately $1,337,000, a portion of which is included in our equity in loss of SafeScience Newco of approximately $1,301,000, as compared to approximately $894,000 during the three months ended June 30, 2001, resulting in an increase of approximately $443,000 or 50%. This increase is attributable to increases in the cost of managing our clinical trials of approximately $135,000, clinical, professional and consulting services of $261,000, sponsored research expenses of $65,000, drug production costs of $30,000, payroll related expenses of $90,000 and other net miscellaneous expenses of $21,000, partially offset by reductions in non-cash compensation of $159,000 related to warrants granted to Wayne State University as compensation for a license. Research and development expenses for Elexa-4 and Bb-447, our agricultural compounds, decreased to approximately $86,000 for the three months ended June 30, 2002 from approximately $91,000 for the three months ended June 30, 2001 reflecting our decreased emphasis of agricultural products. We expect future expenditures related to our agricultural compounds to be commensurate with current levels. We are actively seeking to expand our product pipeline under development. These new product candidates will either be developed jointly or licensed by us. The cost related to the development of new product candidates is projected to be in the range of $250,000-$500,000 during the next twelve months, but could vary significantly based on the actual product candidates. General and administrative expenses decreased to approximately $1,048,000 for the three months ended June 30, 2002 from approximately $1,052,000 for the three months ended June 30, 2001, a 13 decrease of only $4,000. This decrease is primarily attributable to reductions in non-cash compensation related to stock options granted to employees of $83,000 and expenses of $121,000 billed to SafeScience Newco, 80.1% of which is included in the Equity in Loss of SafeScience Newco, Ltd. offset by increased legal and other professional fees of approximately $115,000, office expenses of $57,000, and annual report costs of $28,000. Interest income increased to approximately $30,000 for the three months ended June 30, 2002 from approximately $2,400 for the three months ended June 30, 2001, an increase of approximately $28,000. This increase is attributable to an increase in cash available for temporary investment. Equity in the loss of SafeScience Newco, Ltd. is attributable to the recognition of 80.1% of the losses of SafeScience Newco, Ltd. for the quarter ended June 30, 2002. Substantially all of SafeScience Newco's expenses related to research and development. Results of Operations: Six months ended June 30, 2002 versus June 30, 2001 We had a net loss of approximately $5.2 million for the six months ended June 30, 2002 versus a net loss of approximately $5.2 million as well for the six months ended June 30, 2001. The net loss for the six months ended June 30, 2002 included a charge in the amount of approximately $2.2 million to recognize our 80.1% equity share in the loss of SafeScience Newco. Total research and development expenses, including our 80.1% equity share in the loss of SafeScience Newco, increased to approximately $3,408,000 for the six months ended June 30, 2002 from $2,727,000 for the six months ended June 30, 2001, an increase of $681,000, or 25%. Expenses associated with the development of GCS-100 increased approximately $720,000, partially offset by the reduction of approximately $39,000 in agriculture related expenses. Our expenses related specifically to the development of GCS-100 during the six months ended June 30, 2002 were approximately $3,260,000, a portion of which is included in our equity in loss of SafeScience Newco of approximately $2,232,000, as compared to $2,540,000 during the six months ended June 30, 2001, resulting in an increase of approximately $720,000, or 28%. This increase is attributable to increases in license fees paid to Wayne State University of approximately $452,000, clinical, professional and consulting services of $291,000, sponsored research of $92,000, payroll expenses of $174,000 and other net miscellaneous expenses of $54,000; partially offset by reductions in clinical trial management of $185,000, production costs of GCS-100 of $93,000 and non-cash compensation of $22,000 related to warrants granted to Wayne State University as compensation for a license and options granted to employees of $43,000. Research and development expenses for Elexa-4 and Bb-447, our agricultural compounds, decreased to approximately $147,000 for the six months ended June 30, 2002 from approximately $186,000 for the six months ended June 30, 2001 reflecting our decreased emphasis of agricultural products. We expect future expenditures to be commensurate with current levels. General and administrative expenses decreased to approximately $1,666,000 for the six months ended June 30, 2002 from approximately $2,383,000 for the six months ended June 30, 2001, a decrease of approximately $717,000, or 30%. This decrease is primarily attributable to reductions of non-cash compensation costs of approximately $208,000 related to issuance of stock options to employees, expenses billed to SafeScience Newco, Ltd. in the amount of $306,000 under the terms of the joint venture agreement, 80.1% of which is included in the "Equity in Loss of SafeScience Newco Ltd.", employee related costs of $126,000 and travel costs of $43,000, partially offset by increases in annual report costs of $27,000 and other office expenses of $25,000. Interest income increased to approximately $58,000 for the six months ended June 30, 2002 from approximately $30,000 for the six months ended June 30, 2001, an increase of approximately $28,000, or 93.3%. This increase is attributable to an increase in cash available for temporary investment. 14 The Equity in Loss of SafeScience Newco, Ltd. is attributable to the recognition of 80.1% of the losses of SafeScience Newco, Ltd. for the six months ended June 30, 2002. Substantially all of SafeScience Newco's expenses related to research and development. Liquidity and Capital Resources For the six months ended June 30, 2002, our operations utilized cash of approximately $5,003,000 primarily to fund our operating loss and the reduction of accounts payable and accrued liabilities. We also invested approximately $25,000 in purchases of property and equipment. The uses of cash were offset by equity financings, which resulted in net proceeds of approximately $5,150,000 to us during the six months ended June 30, 2002. We intend to pursue additional funds through sales of our securities and possibly through partnering arrangements with pharmaceutical or mature biotechnology companies. As of June 30, 2002, our accumulated deficit was approximately $71,904,000 and as of August 19, 2002, our cash balances were approximately $8.1 million. In July 2001, we and EIS formed a joint venture in Bermuda (SafeScience Newco, Ltd.) for the purpose of furthering development of our drug candidate, GCS-100, in the field of oncology. As of August 19, 2002, we could be reimbursed by SafeScience Newco, Ltd. of up to approximately $7.1 million of additional funds of which approximately $5.7 million could be funded by our issuance to EIS of Series B preferred stock and approximately $1.4 million of which could be funded directly by EIS to SafeScience Newco, Ltd. for expenses incurred in the development of GCS-100 pursuant to our agreement with EIS. Based on Elan's June 10, 2002 press release stating its intention to focus on neurology, pain management and auto-immune disease, and our discussions with Elan, we believe EIS will fund a portion but not all of the $7.1 million of additional funds. In any event, we will not receive additional capital from EIS unless we agree with Elan on a quarterly basis on the business plan for SafeScience Newco. We believe that our existing funds will be sufficient to fund our operating expenses and capital requirements into the first quarter of 2003 consistent with prioritizing R&D expenditures. Since inception, we have funded our operations primarily through the proceeds from the sale of equity securities; however, there can be no assurance that additional equity financing will be available. Our future is dependent upon our ability to obtain financing to fund our operations. As of August 19, 2002, we have not obtained commitments from any existing or potential investors to provide additional financing. We expect to incur substantial additional operating costs, including costs related to ongoing research and development activities, preclinical studies and clinical trials. To the extent that we are unable to raise additional capital on a timely basis, management plans to prioritize research activity to conserve cash. In the event additional financing is not obtained, we may be required to significantly reduce or curtail operations. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market Risk We are not exposed to significant market risk related to changes in currency exchange rates as measured against the U.S. dollar. As of June 30, 2002, we have evaluated our risk and determined that any exposure to currency exchange is not significant to our overall consolidated financial results. There can be no assurance that our exposure will remain at these levels, especially in the event of significant and sudden fluctuations in the value of local currencies. We do not use derivative financial instruments for speculative or trading purposes. Interest Rate Sensitivity 15 We are exposed to market risk related to changes in interest rates which could positively or negatively affect results of operations. We maintain 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 June 30, 2002, the fair value of the portfolio would decline by an immaterial amount. Certain Factors That May Affect Future Results You should carefully consider the risks described below before making an investment decision. If any of the following risks actually occur, our business, financial condition or results of operations could be materially and adversely affected. In such case, the trading price of our common stock could decline, and you may lose all or part of your investment. WE HAVE EXPERIENCED SIGNIFICANT LOSSES THROUGHOUT OUR HISTORY, WE EXPECT THESE LOSSES TO CONTINUE AND WE MAY NOT ACHIEVE PROFITABILITY IN THE FUTURE. We began operations more than nine years ago and began to generate revenue only in the second quarter of 1999. Through December 31, 2000, we generated only $2,723,000 from product sales. On February 23, 2001, we announced the discontinuation of our consumer and commercial product business from which all of our revenues to date have been generated. We do not expect to generate product revenue for several years, if at all. We will not generate funds unless we are able to sell our consumer and commercial and/or agricultural business areas, or generate revenues through the receipt of payments in connection with any potential licensing, marketing or other partnering arrangement with other pharmaceutical or biotechnology companies, or bringing to market pharmaceutical or agricultural products. Excluding dividends accreted to preferred stock, we have incurred approximately $71.9 million of losses since our inception, including $22.7 million in the year ended December 31, 2001 and approximately $5.2 million for the six months ended June 30, 2002. Extensive losses can be expected to continue for the foreseeable future. OUR PRODUCTS ARE STILL IN DEVELOPMENT, THERE ARE UNCERTAINTIES ASSOCIATED WITH RESEARCH AND DEVELOPMENT ACTIVITIES AND WE MAY BE UNABLE TO BRING THESE PRODUCTS TO MARKET. Our proposed products require further research, development, laboratory testing, regulatory approval and/or demonstration of commercial scale manufacturing before they can be proven to be commercially viable. The products are in the development stage and are subject to the risks inherent in the development of new products. Potential products that appear to be promising at early stages of development may not reach the market for a number of reasons. Such reasons include the possibilities that potential products are found during testing to be ineffective, or unsafe, that they fail to receive necessary regulatory approvals, are difficult or uneconomical to manufacture on a large scale, fail to achieve market acceptance or are precluded from commercialization by proprietary rights of third parties. We cannot predict with any degree of certainty when, or if, the research development, testing and/or regulatory approval process for our proposed products will be completed. Our product development efforts may be unsuccessful, required regulatory approvals from U.S. or foreign authorities may not be obtained, and products, if introduced, may not be capable of being produced in commercial quantities at reasonable costs or be successfully marketed. The failure of our research and development activities to result in any commercially viable products or technologies would materially adversely affect our future prospects. WE MAY NOT BE ABLE TO OBTAIN ADDITIONAL FUNDING, WHICH COULD REDUCE OUR ABILITY TO FUND, EXPAND OR CONTINUE OPERATIONS. We believe that our existing funds will be sufficient to fund our operating expenses and capital requirements into the first quarter of 2003 consistent with prioritizing R&D expenditures. We intend to raise additional capital through the sale of equity securities. SafeScience Newco may receive, and in turn we could be reimbursed for work done on GCS-100, a portion of up to approximately $7.1 million of additional funds of which up to $5.7 million could be funded by us through the issuance to EIS of Series B preferred stock and up to 16 approximately $1.4 million of which would be funded directly by EIS for the development of GCS-100 pursuant to our agreement with EIS. We and Elan must agree on a quarterly basis on the business plan for SafeScience Newco in order to receive additional capital from EIS. Elan has stated that it intends to focus on three core therapeutic areas: neurology, pain management and auto-immune disease and that it will evaluate joint ventures outside those areas for further investment on an ongoing basis. Based on our conversations with Elan, we expect that SafeScience Newco will receive a portion but not all of the approximately $7.1 million of additional funds. Our future is dependent on our ability to obtain additional financing to fund our operations. We expect to incur substantial additional operating costs, including costs related to ongoing research and development activities, preclinical studies and clinical trials. We may also seek funds in conjunction with the in-licensing of additional bio-pharmaceutical products where we acquire in-licenses and development funds for our securities. Additional equity financing may result in dilution to our shareholders. If the market price of our common stock declines, some potential investors may either refuse to offer us any financing or will offer financing at unacceptable rates or unfavorable terms. If we are unable to obtain financing necessary to fund our operations, we may have to sell or liquidate GlycoGenesys or significantly reduce or curtail our operations. There is substantial doubt that we have the ability to continue as a going concern. OUR FAILURE TO PROTECT OUR INTELLECTUAL PROPERTY OR OUR INFRINGEMENT ON THE PROPERTY RIGHTS OF OTHERS MAY IMPEDE OUR ABILITY TO OPERATE FREELY. We rely significantly upon proprietary technology and protect our intellectual property through patents, copyrights, trademarks and contractual agreements as appropriate. We own, or exclusively license ten issued U.S. patents having expiration dates ranging from 2013 to 2018. Four of these ten issued patents relate directly to GCS-100. We own or exclusively license five foreign patents having expiration dates ranging from 2016 to 2017. Four of these five foreign patents relate directly to GCS-100. We own or exclusively license eight pending U.S. patent applications of which four directly relate to GCS-100 and 26 pending foreign patent applications, of which 16 relate to GCS-100. We continually evaluate our technology to determine whether to make further patent filings. To the extent aspects of our technology may be unpatentable or we determine to maintain such technology as trade secrets, we protect such unpatented technology by contractual agreements. Our unpatented technology or similar technology could be independently developed by others. In addition, the contractual agreements by which we protect our unpatented technology and trade secrets may be breached. If our technology is independently developed or our contractual agreements are breached, our technology will be less valuable and our business will be harmed. There is always a risk that issued patents may be subsequently invalidated, either in whole or in part, and this could diminish or extinguish our patent protection for key elements of our technology. We are not involved in any such litigation or proceedings, nor are we aware of any basis for such litigation or proceedings. We cannot be certain as to the scope of patent protection, if any, which may be granted on our patent applications. Our potential products or business activities could be determined to infringe intellectual rights of third parties despite our issued patents. Any claims against us or any purchaser or user of our potential products, including GCS-100, asserting that such product or process infringes intellectual property rights of third parties, if determined adversely to us could have a material effect on our business, financial condition or future operations. Any asserted claims of infringement, with or without merit, could be time consuming, result in costly litigation, divert the efforts of our technical and management personnel, or require us to enter into royalty or licensing agreements, any of which could materially adversely affect our operating results. Such royalty or licensing agreements, if required, may not be available on terms acceptable to us, if at all. In the event a claim is successful against us and we cannot obtain a license to the relevant technology on acceptable terms, license a substitute 17 technology or redesign our products to avoid infringement, our business, financial condition and operating results would be materially adversely affected. WE DEPEND ON TECHNOLOGY LICENSED TO US BY THIRD PARTIES AND IF WE ARE UNABLE TO CONTINUE LICENSING THIS TECHNOLOGY OUR FUTURE PROSPECTS MAY BE MATERIALLY ADVERSELY AFFECTED. We license our technology, including GCS-100, from third parties. We anticipate that we will continue to license technology from third parties in the future. To maintain our license with Wayne State University and the Karmanos Cancer Institute we must, among other things, pay Wayne State University and the Karmanos Cancer Institute 2% royalties on product sales and up to $3 million in milestone payments and receive FDA or equivalent agency approval to sell GCS-100 by January 1, 2006. To maintain our license with Dr. Platt we must pay an annual license fee equal to the greater of $50,000 or 2% of product sales starting this year. To maintain our joint venture's license with Elan for its oral drug delivery technology we do not have material obligations other than royalty payments, if any, which shall be determined by SafeScience Newco, Ltd. prior to commercialization of GCS-100. The technology we license from third parties would be difficult to replace. The loss of any of these technology licenses would result in delays in the availability of our products until equivalent technology, if available, is identified, licensed and integrated and could materially adversely affect our future prospects. The use of replacement technology from other third parties would require us to enter into license agreements with these third parties, which could result in higher royalty payments and a loss of product differentiation. WE EXPECT TO REMAIN DEPENDENT ON THIRD PARTIES FOR RESEARCH AND DEVELOPMENT ACTIVITIES NECESSARY TO COMMERCIALIZE OUR PRODUCTS. We do not maintain our own laboratories and employ five scientific personnel. We contract out research and development operations, utilizing third party contract manufacturers, such as Elan Drug Delivery, Ltd., Formatech, Inc. and Sigma-Aldrich, to supply clinical grade material, Chromaceutical Advanced Technologies, Inc. for assay development and contract research organizations, such as ITR Laboratories Canada, Inc. and Beardsworth Consulting Group, Inc. to perform pre-clinical and/or clinical studies in accordance with our designed protocols, as well as sponsoring research at medical and academic centers, such as MIT. In addition, we employ several consultants to oversee various aspects of our protocol design, clinical trial oversight, manufacturing and other research and development functions. Because we rely on third parties for much of our research and development work, we have less direct control over our research and development. We face risks that these third parties may not be appropriately responsive to our timeframes and development needs. OUR FUTURE PROSPECTS ARE HEAVILY DEPENDENT ON THE RESULTS OF GCS-100. While we seek to increase our portfolio of potential products, currently we are not developing a wide array of products. Most of our attention and resources are directed to the development of GCS-100. If GCS-100 is ultimately ineffective in treating cancer, does not receive the necessary regulatory approvals or does not obtain commercial acceptance, GlycoGenesys will be materially adversely affected. THE DEVELOPMENT OF GCS-100 IS NOT IN OUR EXCLUSIVE CONTROL AND IS JOINTLY DETERMINED WITH ELAN AND EIS. We are developing GCS-100 through collaboration with Elan and EIS. SafeScience Newco is a company that we formed and jointly own with EIS to develop GCS-100 in the field of oncology. We own 80.1% and EIS owns 19.9% of SafeScience Newco. Despite our majority ownership of SafeScience Newco, we do not fully control the development activities regarding GCS-100, because we need consent of EIS for material development decisions regarding GCS-100. As a result, development of GCS-100 will depend on our ability to negotiate development issues with EIS. 18 OUR ECONOMIC INTEREST IN GCS-100 WILL BE REDUCED IF EIS EXERCISES ITS RIGHTS TO ACQUIRE A 50% INTEREST IN SAFESCIENCE NEWCO, LTD. EIS has the right to exchange our Series A convertible exchangeable preferred stock it owns for all of the convertible preferred securities we own of SafeScience Newco at any time until July 10, 2007, which would give EIS a 50% ownership interest in SafeScience Newco, Ltd. If EIS exercises this right, our ownership in SafeScience Newco will be reduced to 50% from its current 80.1%, which would reduce our economic interest in GCS-100. IF ELAN DECIDES TO STOP FURTHER INVESTMENT IN SAFESCIENCE NEWCO, LTD. WE INTEND TO SEEK A NEW JOINT VENTURE PARTNER. On June 10, 2002, Elan issued a press release announcing a plan to streamline its operations into three core therapeutic areas: neurology, pain management and autoimmune disease. Elan stated that its joint ventures that focus on products outside of Elan's three core therapeutic areas (such as oncology) will be evaluated on an ongoing basis for further investment and eventual outlicensing to marketing partners. As a result of our subsequent conversations with Elan, we expect that SafeScience Newco will receive a portion, but not all of the approximately $7.1 million of additional research funds currently contemplated under the agreements with EIS. If EIS stops funding SafeScience Newco, we intend to replace EIS with a new development partner. If we are unable to find a partner to replace EIS, our ability to develop and commercialize GCS-100, and the Company as a whole, would be materially harmed. IF OUR AGRICULTURE PRODUCTS ARE NOT ACCEPTED BY THE AGRICULTURAL COMMUNITY OUR BUSINESS WILL SUFFER. Our focus is primarily pharmaceuticals and to a lesser extent agricultural products. Although we currently do not market any products, commercial sales of our proposed agricultural products will substantially depend upon the products' efficacy and on their acceptance by the agricultural community. For example, Elexa works by a different mode of action than current fungicides because it increases a plant's natural resistance to disease instead of killing the fungus directly. Widespread acceptance of Elexa in the agricultural field will require educating the agricultural community as to the benefits and reliability of Elexa. Our proposed products may not be accepted, and even if accepted, we are unable to estimate the length of time it would take to gain such acceptance. IF THE THIRD PARTIES WE RELY ON FOR MANUFACTURING OUR PRODUCTS ARE UNABLE TO PRODUCE THE NECESSARY AMOUNTS OF OUR PRODUCTS, DO NOT MEET OUR QUALITY NEEDS OR TERMINATE THEIR RELATIONSHIPS WITH US, OUR BUSINESS WILL SUFFER. We do not presently have our own manufacturing operations, nor do we intend to establish any unless and until in the opinion of our management, the size and scope of our business so warrants. While we have established manufacturing relationships with Formatech, Inc., Sigma-Aldrich and Elan Drug Delivery, Ltd. to provide us with GCS-100 and AgFormulators to provide us with Elexa that we believe will provide the capability to meet our anticipated requirements for the foreseeable future, we have not entered into any long-term arrangements for manufacturing and such arrangements may not be obtained on desirable terms. Therefore, for the foreseeable future, we will be dependent upon third parties to manufacture our products. Our reliance on independent manufacturers involves a number of risks, including the absence of adequate capacity, the unavailability of, or interruptions in, access to necessary manufacturing processes and reduced control over delivery schedules. If our manufacturers are unable or unwilling to continue manufacturing our products in required volumes, we will have to identify acceptable alternative manufacturers. The use of a new manufacturer may cause significant interruptions in supply if the new manufacturer has difficulty manufacturing products to our specifications. Further, the introduction of a new manufacturer may increase the variation in the quality of our products. 19 MANY OF OUR COMPETITORS HAVE SUBSTANTIALLY GREATER RESOURCES THAN WE DO AND MAY BE ABLE TO DEVELOP AND COMMERCIALIZE PRODUCTS THAT MAKE OUR POTENTIAL PRODUCTS AND TECHNOLOGIES OBSOLETE OR NON-COMPETITIVE. A biotechnology company such as ours must keep pace with rapid technological change and faces intense competition. We compete with biotechnology and pharmaceutical companies for funding, access to new technology, research personnel and in product research and development. Many of these companies have greater financial resources and more experience than we do in developing drugs, obtaining regulatory approvals, manufacturing and marketing. We also face competition from academic and research institutions and government agencies pursuing alternatives to our products and technologies. We expect that our products under development, including GCS-100, will face intense competition from existing or future drugs. In addition, our product candidates may face increasing competition from generic formulations or existing drugs whose active components are no longer covered by patents. According to industry surveys there are approximately 402 new drug candidates in development to treat various types of cancer. This research is being conducted by 170 pharmaceutical and biotechnology companies and the National Cancer Institute. We have conducted two Phase I clinical trials, the first enrolled late stage patients with differing types of cancer and the second enrolled patients with late stage prostate cancer. We also conducted two Phase II(a) clinical trials, one in patients with refractory or relapsing pancreatic cancer and the other in refractory or relapsing colorectal cancer. Published surveys indicate that, including GCS-100, approximately twenty-six drugs are in various stages of clinical trial development for pancreatic cancer and fifty-five drugs in various stages of clinical trial development for colorectal cancer. Our current clinical trial plan is to pursue pancreatic cancer as a lead indication and we are planning to conduct a Phase II/III pivotal trial in 2003/2004. There are approximately ten drugs currently having completed or in Phase III clinical trial development, ten drugs in Phase II and six drugs in Phase I for pancreatic cancer. Competitors may receive approval before us for competing pancreatic cancer drugs, including without limitation the following drugs which have completed Phase III trials: Imclone and Bristol Meyer's Erbitux; Pharmacia's Camptosar; Snaofi-Synthelabo's tirapazamine; Aphton and Aventis Pasteur's anti-gastrin therapeutic vaccine; Genentech's Herceptin (already approved for breast cancer); MGI Pharma's Irofulven; Supergens' Mitoextra and rubitecan; Janssen Pharmaceuticals' R115777 and Lorus Therapeutics' Virulizin. In addition, GCS-100, if it receives FDA approval, will face competition from existing cancer drugs approved for pancreatic cancer. These drugs are fluorouracil (5-FU) and Eli Lilly's gemcitabine (Gemzar). Combination studies utilizing new drug candidates and Gemzar are ongoing and combination therapies of new drug candidates and Gemzar may present future competition. Our competitors may: .. successfully identify drug candidates or develop products earlier than we do; .. obtain approvals from the FDA or foreign regulatory bodies more rapidly than we do; .. develop products that are more effective, have fewer side effects or cost less than our products; or .. successfully market products that may compete with our product candidates. The success of our competitors in any of these efforts would adversely affect our ability to develop, commercialize and market our product candidates. OUR BUSINESSES ARE SUBJECT TO SIGNIFICANT GOVERNMENT REGULATION AND FAILURE TO ACHIEVE REGULATORY APPROVAL OF OUR PRODUCTS WOULD SEVERELY HARM OUR BUSINESS. The FDA regulates the manufacture, distribution and promotion of pharmaceutical products in the United States pursuant to the Federal Food, Drug, and Cosmetic Act and related regulations. We must receive premarket approval by the FDA for any commercial sale of our pharmaceutical products. Before receiving such approval we must provide proof in human clinical trials of the nontoxicity, safety and efficacy of our pharmaceutical products, which 20 trials can take several years. Premarket approval is a lengthy and expensive process. We may not be able to obtain FDA approval for any commercial sale of our product. By regulation, the FDA has 180 days to review an application for approval to market a pharmaceutical product; however, the FDA frequently exceeds the 180-day time period. In addition, based on its review, the FDA may determine that additional clinical trials are required. Except for any potential licensing or marketing arrangements with other pharmaceutical or biotechnology companies, we will not generate any revenues in connection with our pharmaceutical products unless and until we obtain FDA approval to sell our products in commercial quantities for human application. The investigation, manufacture and sale of agricultural products are subject to regulation by the EPA, including the need for approval before marketing, and by comparable foreign and state agencies. Our agricultural products will be able to be commercially marketed for use either in the United States or other countries only by first obtaining the necessary approvals. While we hope to obtain regulatory approvals for our proposed products, we may not obtain these approvals on a timely basis, if at all. We have received approval from the EPA, California and other states for Elexa 4%. REIMBURSEMENT PROCEDURES AND FUTURE HEALTHCARE REFORM MEASURES ARE UNCERTAIN AND MAY ADVERSELY IMPACT OUR ABILITY TO SUCCESSFULLY SELL ANY PHARMACEUTICAL PRODUCT. Our ability to successfully sell any pharmaceutical product will depend in part on the extent to which government health administration authorities, private health insurers and other organizations will reimburse patients for the costs of our future pharmaceutical products and related treatments. In the United States, government and other third-party payers have sought to contain healthcare costs by limiting both coverage and the level of reimbursement for new pharmaceutical products approved for marketing by the FDA. In some cases, these payers may refuse to provide any coverage for uses of approved products to treat medical conditions even though the FDA has granted marketing approval. Healthcare reform may increase these cost containment efforts. We believe that managed care organizations may seek to restrict the use of new products, delay authorization to use new products or limit coverage and the level of reimbursement for new products. Internationally, where national healthcare systems are prevalent, little if any funding may be available for new products, and cost containment and cost reduction efforts can be more pronounced than in the United States. OUR GROWTH MAY BE LIMITED IF WE ARE UNABLE TO RETAIN AND HIRE ADDITIONAL QUALIFIED PERSONNEL AS NECESSARY. Our success will depend on our ability to retain key employees and our continuing ability to attract and retain highly qualified scientific, technical and managerial personnel. We may hire additional clinical operations personnel in the future. Competition for such personnel is intense and we may not be able to retain existing personnel or attract qualified employees in the future. Our limited drug pipeline and small size make it more difficult to compete for such personnel against larger, more diversified companies. At present, we employ approximately 14 full-time employees and one part-time worker. We depend upon the personal efforts and abilities of our officers and directors, including Bradley J. Carver, our President, CEO and a director, John W. Burns, our Senior Vice President and Chief Financial Officer and a director, and Brian G.R. Hughes, Chairman of the Board and would be materially adversely affected if their services ceased to be available for any reason and comparable replacement personnel were not employed. THE BUSINESSES IN WHICH WE ENGAGE HAVE A RISK OF PRODUCT LIABILITY, AND IN THE EVENT OF A SUIT AGAINST US, OUR BUSINESS COULD BE SEVERELY HARMED. The testing, marketing and sale of pharmaceutical and agricultural products entails a risk of product liability claims by patients and customers. While we currently maintain product liability insurance, such insurance may not be available at reasonable cost and in the event of a significant adverse event with a patient or customer, such insurance would likely be insufficient to cover the full amount of the liability incurred. In the event of a successful suit against us, payments and damage to our reputation could have a material adverse effect on our business and financial condition. Even if such suit is unsuccessful, our 21 reputation could be damaged and litigation costs and expenditure of management time on such matters could adversely affect our business and financial condition. WE ARE CONTRACTUALLY OBLIGATED TO ISSUE SHARES IN THE FUTURE, INCLUDING SHARES TO BE ISSUED UPON THE CONVERSION OF OUTSTANDING PREFERRED STOCK AND WARRANTS HELD BY EIS, WHICH WILL CAUSE DILUTION OF YOUR INTEREST IN US. As of June 30, 2002, there are outstanding options to purchase 1,400,427 shares of common stock, at a weighted average exercise price of $2.90 per share and warrants to purchase 11,165,328 shares of common stock at a weighted average exercise price of $2.27 per share. Moreover, we may in the future issue additional shares to raise capital, acquire other companies or technologies, to pay for services, or for other corporate purposes. Any such issuances will have the effect of further diluting the interest of the purchasers of the current shareholders. In July 2001, in connection with a business venture and financing transaction, we issued to EIS 1,116.79 shares of our Series C convertible non-voting preferred stock, 4,944.44 shares of our Series A convertible exchangeable non-voting preferred stock and a warrant to purchase 381,679 shares of our common stock. In December 2001, May 2002 and August 2002, we sold 862.70647, 599.84706 and 832.1245 shares, respectively, of our Series B convertible non-voting preferred stock to EIS. Each share of our Series A preferred stock and Series C preferred stock is presently convertible after July 10, 2003 into 1,000 shares of our common stock. Each share of our Series B preferred stock is presently convertible after December 31, 2003 into 1,000 shares of our common stock. The Series A preferred stock and the Series B preferred stock each bear a 7% dividend payable in Series A preferred stock and Series B preferred stock, respectively, which compounds annually. In January 2002, we sold to EIS warrants to purchase a total of 597,205 shares of common stock in connection with a private placement. Accordingly, a total of 9,334,793 shares of our common stock could be issued to EIS, assuming the exercise of the warrants and the conversion into common stock of all shares of Series A, Series B and Series C preferred stock currently outstanding, but not including any dividends to be issued on the Series A and Series B preferred stock. This amount of shares represents 25.0% of our currently outstanding common stock. Pursuant to provisions in our agreement with EIS, if the exercise or conversion of any of our securities held by EIS would result in EIS owning more than 9.9% of our common stock at any time EIS may opt to receive non-voting securities instead of common stock. In addition, we may elect to sell to EIS, subject to its agreement, up to an additional 3,359.440 shares of our Series B convertible non-voting preferred stock in the future at a price per share of $1,700. Upon conversion, a total of an additional 3,359,440 shares of common stock would be issued to EIS assuming the purchase of all the remaining Series B preferred stock, but not including any dividends to be issued on the Series B preferred stock. Thus, we could potentially issue a total of 12,694,233 shares of our common stock to EIS, assuming the exercise of all warrants and conversion of all Series A, Series B and Series C preferred stock outstanding or that may be sold to EIS in the future, but excluding any dividends to be issued on the Series A and Series B preferred stock. This amount of shares represents 34.1% of our currently outstanding common stock. WE MUST COMPLY WITH THE LISTING REQUIREMENTS OF THE NASDAQ SMALLCAP MARKET OR OUR COMMON STOCK MAY DECLINE AND THE LIQUIDITY OF AN INVESTMENT IN OUR SECURITIES WOULD DECREASE. Our common stock could be delisted from The Nasdaq Stock Market for the following reasons: . if the bid price of our common stock falls below $1.00 per share for thirty (30) consecutive business days; or . if our market capitalization falls below $35 million and we have less than (A) $2,000,000 in net tangible assets (total assets less total liabilities and goodwill) or (B) $2,500,000 in equity; or . if the value of our common stock held by our stockholders (other than our directors, executive officers and 10% stockholders) is less than $1,000,000. 22 On November 1, 2002, the $2,000,000 net tangible assets test will no longer be a listing requirement and will be replaced by the requirement to have no less than $2,500,000 in equity. There are other quantitative and qualitative criteria of the Nasdaq SmallCap Market which if violated could lead to delisting of our common stock. We may not be able to maintain our compliance with Nasdaq continued listing requirements in the future. The closing bid price of our common stock has been below $1.00 for a thirty day period. On July 23, 2002, we received a letter from Nasdaq that the bid price of our common stock had been below $1.00 for 30 consecutive business days and that we have until January 21, 2003 to achieve a bid price of at least $1.00 for a period of 10 consecutive business days or face delisting. Further, in light of the recent declines in our stock price, our market capitalization has been below $35 million since July 1, 2002. Our net tangible assets and equity are approximately $7.6 million as of June 30, 2002. As part of a normal review of our recently filed registration statement on Form S-3, the Securities and Exchange Commission has questioned our classification of the Series A preferred stock as stockholders' equity due to the existence of an exchange feature whereby EIS may exchange the Series A preferred stock for the preferred shares of SafeScience Newco held by us. Although we believe that the Series A preferred stock is appropriately reported as permanent equity, it is possible that preferred stock in the amount of approximately $12.9 million at June 30, 2002 will be reclassified back to temporary equity upon the completion of the SEC's review. This would reduce our net tangible assets and change shareholders equity to a deficit of approximately negative $5.3 million as of June 30, 2002. If Nasdaq delisted our common stock, we would likely seek to list our common stock for quotation on a regional stock exchange. However, if we were unable to obtain listing or quotation on such market or exchange, trading of our common stock would occur in the over-the-counter market on an electronic bulletin board for unlisted securities or in what are commonly known as the "pink sheets." In addition, delisting from Nasdaq and failure to obtain listing or quotation on such market or exchange would subject our common stock to so-called "penny stock" rules. These rules impose additional sales practice and market making requirements on broker-dealers who sell and/or make a market in such securities, such as disclosing offer and bid prices and compensation received from a trade to a purchaser and sending monthly account statements to purchasers. Consequently, broker-dealers may be less willing or able to sell and/or make a market in our common stock. These rules also require that purchasers be accredited investors which would reduce the number of investors that could purchase our shares. Additionally, an investor would find it more difficult to dispose of, or to obtain accurate quotations for the price of, our common stock. As a result of delisting, it may become more difficult for us to raise funds through the sale of our securities. OUR STOCK PRICE COULD DECLINE IF A SIGNIFICANT NUMBER OF SHARES BECOME AVAILABLE FOR SALE. Approximately 24,280,160 shares of common stock presently issued and outstanding are "Restricted Securities" as that term is defined in Rule 144 promulgated under the Act. In general, a person (or persons whose shares are aggregated) who has satisfied a one year holding period may sell, within any three month period, an amount of restricted securities which does not exceed the greater of 1% of the then outstanding shares of common stock or the average weekly trading volume during the four calendar weeks prior to such sale. Restricted securities can be sold, under certain circumstances, without any quantity limitation, by persons who are not affiliates of GlycoGenesys and who have beneficially owned the shares for a minimum period of two years. The Company has filed a registration statement on Form S-3, which is not yet effective, with respect to 7,233,266 outstanding shares of the approximately 24,280,160 restricted securities, as well as with respect to shares issuable upon the exercise of warrants. In addition, the Company has seven S-3 Registration Statements which are currently effective. The sale of these restricted shares as well as our additional seven effective registration statements, will increase the number of free-trading shares and may reduce the price of our common stock. Moreover, such sales, if substantial, might also adversely affect our ability to raise additional capital through the sale of equity securities. 23 BECAUSE OUR MANAGEMENT COULD CONTROL A SIGNIFICANT PERCENTAGE OF OUR COMMON STOCK, THEY COULD EXERCISE SUBSTANTIAL CONTROL OVER US. The holders of the common stock do not have cumulative voting rights. Our directors, two of whom are executive officers of GlycoGenesys, own approximately 9.7% collectively of the currently outstanding shares of common stock. One of the conditions of the transactions between us, Elan and EIS required that we expand our board of directors to six members at our 2002 annual stockholders' meeting at which time EIS could appoint one director. EIS decided not to appoint a director at our 2002 annual stockholders' meeting, but may choose to do so in the future. If EIS appoints a director, members of the board of directors and their affiliates will own approximately 18.6% of the currently outstanding common stock, assuming EIS has not converted or exercised any of our securities held by it, and the same number of shares are outstanding at such time as are currently outstanding. If EIS and our directors were to have converted or exercised all of our securities held by them, the members of our board of directors and their affiliates would own approximately 39.7% of the currently outstanding common stock, assuming the number of shares outstanding at such time equals the number of shares currently outstanding plus the number of shares issued on exercise or conversion of securities held by EIS and our directors. This percentage would increase if we were to sell additional shares of our Series B preferred stock to EIS. This concentration of ownership would allow these stockholders to substantially influence all matters requiring stockholder approval and could have the effect of delaying or preventing a change in control or otherwise discouraging a potential acquirer from attempting to obtain control of us, which in turn could materially adversely affect our stock price. THE PRICE OF OUR COMMON STOCK HAS BEEN VOLATILE, WHICH COULD RESULT IN SUBSTANTIAL LOSSES BY YOU. The market price of our common stock, which is traded on the National Association of Securities Dealers Automated Quotation (NASDAQ--Small Cap) has been, and may continue to be, highly volatile. During the twelve months ending June 30, 2002, our common stock has traded at prices ranging from $0.63 to $2.43 per share. Factors such as announcements of clinical trial results, financings, technological innovations or new products, either by us or by our competitors or third parties, as well as market conditions within the biotech and pharmaceutical industries, may have a significant impact on the market price of our common stock. In addition, the stock market has from time to time and especially in the last few years, experienced extreme price and volume fluctuations, particularly in the biotechnology sector, which have often been unrelated to the operating performance of particular companies. Current market conditions are particularly unstable and there is a large degree of uncertainty at this time. In general, biotechnology stocks tend to be volatile even during periods of relative market stability because of the high rates of failure and substantial funding requirements associated with biotechnology companies. Market conditions and conditions of the biotechnology sector could negatively impact the price of our common stock. Part II - Other Information Item 2. Changes in Securities and Use of Proceeds (c) Set forth below is information regarding the sale of unregistered shares of equity securities sold by the Company during the three months ended June 30, 2002. On May 7, 2002, the Company issued 599.84706 shares of Series B preferred stock to EIS for $1,019,740. Net proceeds of the sale were $930,976. The Series B preferred stock is convertible into common stock after December 31, 2003 at a conversion price of $1.70, subject to anti-dilution adjustment. These securities were sold in reliance upon the exemption from registration pursuant to Section 4(2) under the Securities Act of 1933, as amended. 24 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On June 13, 2002, the Company held its Annual Meeting of Stockholders. Three items were voted upon: (1) an amendment of the Articles of Incorporation; (2) the election of directors; and (3) the ratification of the appointment of auditors. The proposed amendment to the Articles of Incorporation providing for the increase in the number of shares of common stock authorized from 100,000,000 to 200,000,000 was approved by a vote of 26,150,898 in favor, 4,010,170 against with 82,241 abstentions out of a total of 30,243,309 votes cast. The nominees for director approved by the shareholders were Theodore J. Host and John W. Burns. The following table indicates the term expiration dates and the number of votes cast with respect to each candidate, the number of votes in favor and the number of votes withheld: Term Total Total Votes Total Votes Nominee Expiration Votes Cast in Favor Withheld ------- ---------- ---------- -------- -------- Theodore J. Host 2005 30,243,309 27,022,316 3,220,993 John W. Burns 2005 30,243,309 26,778,392 3,464,917 The appointment of Deloitte & Touche LLP as auditors for the Company for the year ended December 31, 2002 was approved by a vote of 27,164,449 in favor, 3,009,618 against with 69,242 abstentions out of a total of 30,243,309 votes cast. Item 6. Exhibits and Report on Form 8-K. (a) Exhibits 3.1 Certificate of Amendment to the Articles of Incorporation of the Company filed on June 18, 2002. 4.1 Certificate of Amendment to the Certificate of Designations, Preferences and Rights of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock of the Company filed on April 19, 2002. 10.1 Consulting Agreement between the Company and Beardsworth Consulting Group, Inc. dated as of April 16, 2002 (portions of this Exhibit are omitted and are being filed separately with the Securities and Exchange Commission pursuant to the Company's application requesting confidential treatment in accordance with Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended). (b) Reports on Form 8-K. On April 19, 2002, the Company filed a Current Report on Form 8-K to report the dismissal of its independent public accountant, Arthur Andersen LLP and the engagement of Deloitte & Touche LLP to serve as the Company's independent public accountants. On June 6, 2002, the Company filed a Current Report on Form 8-K to report developments concerning GCS-100 discussed in the Company's conference call regarding the first quarter results. 25 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, thereunto duly authorized. Dated this 19th day of August 2002. GLYCOGENESYS, INC. (the "Registrant") BY: /s/ Bradley J. Carver ----------------------------------------------------- Bradley J. Carver, CEO, President, Treasurer, and a member of the Board of Directors BY: /s/ John W. Burns ----------------------------------------------------- John W. Burns, Senior Vice President, CFO & Secretary and a member of the Board of Directors BY: /s/ Patrick J. Joyce ----------------------------------------------------- Patrick J. Joyce, Controller, Principal Accounting Officer 26 EX-3.1 3 dex31.txt AMENDMENT TO ARTICLES OF INCORPORATION Exhibit 3.1 CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION [STAMP] OF GLYCOGENESYS, INC. ------------------------------------ Pursuant to Section 78.390 of the Nevada Revised Statutes ------------------------------------ The undersigned, being the Senior Vice President and Secretary of GlycoGenesys, Inc., a corporation organized and existing under the laws of the State of Nevada, (the "Corporation") does hereby certify: 1. The name of the Corporation is GlycoGenesys, Inc. 2. That the Board of Directors of said corporation at a meeting duly convened, held on April 9, 2002, adopted a resolution to amend the articles as follows: That Section 4 be removed in its entirety and the following be inserted in lieu thereof: "The maximum number of shares of all classes which the corporation is authorized to have outstanding is two hundred five million (205,000,000) shares, consisting of two hundred million (200,000,000) shares of Common Stock, par value $.01 per share, and five million (5,000,000) shares of Preferred Stock, par value $.01 per share. The holders of preferred stock shall have such rights, preferences and privileges as may be determined, prior to issuance of such shares, by the Board of Directors." 3. The total number of outstanding shares of Common Stock of the Corporation having voting power as of April 15, 2002 was 37,064,044. As of April 15, 2002, there were 6923.93647 shares of Preferred Stock of the Corporation issued and outstanding. 4. The amendment set forth above was adopted, pursuant to Section 78.390 of the Nevada Revised Statutes, by the affirmative vote of stockholders owning at least a majority of the outstanding shares entitled to vote therein given at the annual meeting of the stockholders. 5. Signature: /s/ John W. Burns - ------------------------- John W. Burns, Senior Vice President and Secretary EX-4.1 4 dex41.txt CERTIFICATE OF AMENMENT TO DESIGNATIONS Exhibit 4.1 [STAMP] AMENDMENT TO THE CERTIFICATE OF DESIGNATIONS, PREFERENCES, AND RIGHTS of SERIES A PREFERRED STOCK, SERIES B PREFERRED STOCK, AND SERIES C PREFERRED STOCK of GLYCOGENESYS, INC. We, Bradley J. Carver and John W. Burns, the President and the Secretary, respectively, of GlycoGenesys, Inc., a corporation organized and existing under the laws of the State of Nevada (the "Corporation"), in accordance with the provisions of Section 78.1955 of the Nevada Revised Statutes, DO HEREBY CERTIFY: WHEREAS, on June 22, 2001, the Board of Directors of the Corporation (the "Board of Directors") adopted a resolution creating three series of shares of preferred stock designated as the "Series A Preferred Stock," the "Series B Preferred Stock," and the "Series C Preferred Stock"; and WHEREAS, the Board of Directors and the holders of the Corporation's Series A preferred stock, par value U.S. $0.01 per share ("Series A Preferred Stock"), Series B preferred stock, par value U.S. $0.01 per share ("Series B Preferred Stock") and Series C preferred stock, par value U.S. $0.01 per share ("Series C Preferred Stock") desire to amend certain powers, preferences and other special rights of the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock. NOW, THEREFORE, pursuant to the authority conferred upon the Board of Directors by the Articles of Incorporation of the Corporation and by Section 78.1955 of the Nevada Revised Statutes, on April 15, 2002, the Board of Directors adopted, and holders of a majority of the Corporation's Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock approved, the following resolution, amending and restating the Certificate of Designations, Preferences, and Rights of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock of the Corporation: "RESOLVED, that pursuant to the authority vested in the Board of Directors (the "Board of Directors") of GlycoGenesys, Inc., a corporation organized and existing under the laws of the State of Nevada (the "Corporation"), by the Certificate of Incorporation of the Corporation (the "Certificate of Incorporation"), the Board of Directors does hereby amend and restate, effective as of July 9, 2001, the designations, powers, preferences, and relative participating, optional, or other special rights, and the qualifications, limitations, and restrictions of the Corporation's Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, as follows (respectively, the "Series A Designation", the "Series B Designation", and the "Series C Designation"): 1. Section 3(a) of Article I of the Certificate of Designations shall be amended and restated in its entirety to read as follows: "(a) Liquidation Events. The occurrence of any of the following events shall be deemed a "Liquidation": (i) any liquidation, dissolution, or winding-up of the affairs of the Corporation; (ii) any consolidation or merger of the Corporation with or into any other corporation or other entity or person, or any other corporate organization in which the stockholders of the Corporation immediately prior to such consolidation, merger or reorganization, own less than 50% of the outstanding voting securities of the surviving or resulting entity immediately after such consolidation, merger or reorganization (a "Merger Event"); (iii) any transaction or series of related transactions approved by the Board of Directors of the Corporation in which securities of the Corporation representing 50% or more of the combined voting power of the Corporation's then outstanding voting securities are acquired by a person, entity or group of related persons or entities, excluding any consolidation or merger effected exclusively to change the domicile of the Corporation; or (iv) any sale, lease, exclusive license or other disposition of all or substantially all of the assets of the Corporation." 2. Section 3(b)(iii) of Article I of the Certificate of Designations shall be amended and restated in its entirety to read as follows: "(iii) After the distributions described in clause (b)(i) above have been paid, subject to the rights of any other class or series of capital stock of the Corporation that may from time to time come into existence, in the event of a Liquidation described in clause (i) or clause (iv) of Section 3(a) of this Article I, the remaining assets of the Corporation available for distribution to stockholders shall be distributed among the holders of Common Stock, the holders of the Series A Preferred Stock, and the holders of any other class or series of capital stock of the Corporation entitled to share in such distribution pro rata based on the number of shares of Common Stock held by each, assuming conversion of any other class or series of capital stock of the Corporation convertible into shares of Common Stock." 3. Section 6(a) of Article I of the Certificate of Designations shall be amended and restated in its entirety to read as follows: "(a) On July 10, 2007, if any shares of the Series A Preferred Stock shall be outstanding, the Corporation shall redeem all outstanding shares of the Series A Preferred Stock, at a redemption price per share equal to the aggregate Series A Liquidation Preference, either (i) to the extent the Corporation shall have funds legally available for such payment, in cash, or (ii) by the issuance of shares of Common Stock with an 2 aggregate Fair Market Value (as defined below) equal to such redemption price, in each case, together with any accrued and unpaid dividends thereon to the date fixed for redemption. For the purposes of this Section 6, and Section 4(e)(i) of this Article I and Sections 4(e)(i) of Article II, the "Fair Market Value" of one share of Common Stock shall be determined by the Board of Directors in good faith and certified in a board resolution (taking into account the most recently of concurrently completed arm's length transaction between the Corporation and an unaffiliated third party the closing of which occurs within the six months preceding or on the date of such calculation, if any) and shall be reasonably agreed to by a majority of the holders of the Series A Preferred Stock or, as applicable, the Series B Preferred Stock; provided, that in the event the Corporation and a majority of holders of the Series A Preferred Stock or, as applicable, the Series B Preferred Stock do not agree on the Fair Market Value the parties shall jointly appoint an independent third party appraiser to determine the Fair Market Value pursuant to the procedure set forth in Section 3(d) of this Article I; provided further, that in the event the Common Stock is traded on a securities exchange, the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair Market Value shall be deemed to be the average of the closing sale prices for the Common Stock over the 30-day trading period (or such shorter period for which closing sale prices are available if the Common Stock commenced trading during such period) ending three (3) trading days prior to, in the case of this Section 6, the date of notice of exercise of redemption pursuant to this Section 6, in the case of Section 4(c)(i) of this Article I or, as applicable, Section 4(e)(i) of Article I, the date of the sale of Additional Shares that results in an adjustment to the Series A Conversion Price pursuant to Section 4(e)(i) of this Article I or, as applicable, the Series B Conversion Price (as defined in Article II) pursuant to Section 4(e)(i) of Article II; provided further, that for the purpose of this Section 6 the Fair Market Value shall be deemed to be at least $0.50 per share (the "Share Floor Price"). The Share Floor Price shall be proportionately adjusted for any stock split, stock combination or similar event affecting the Common Stock." 4. Section 3(a)(iii) of Article II of the Certificate of Designations shall be amended and restated in its entirety to read as follows: "(iii) After the distributions described in clause (a)(i) above have been paid, subject to the rights of any other class or series of capital stock of the Corporation that may from time to time come into existence, in the event of a Liquidation described in clause (i) or clause (iv) of Section 3(a) of Article I, the remaining assets of the Corporation available for distribution to stockholders shall be distributed among the holders of Common Stock, the holders of the Series B Preferred Stock, and the holders of any other class or series of capital stock of the Corporation entitled to share in such distribution pro rata based on the number of shares of Common Stock held by each, assuming conversion of any other class or series of capital stock of the Corporation convertible into shares of Common Stock." 3 5. Section 3 of Article III of the Certificate of Designations shall be amended and restated in its entirety to read as follows: "3. In the event of a Liquidation described in clause (i) or clause (iv) of Section 3(a) of Article I, whether voluntary or involuntary, the holders of Series C Preferred Stock shall have the right to receive, pari passu with the holders of the Common Stock and subject to the rights of the holders of any other senior class or series of capital stock of the Corporation, the assets of the Corporation in proportion to the number of shares of Common Stock held by each such holder (assuming, for such purposes, the holders of Series C Preferred Stock are deemed to hold that number of shares of Common Stock equal to the number of shares of Common Stock into which such shares of Series C Preferred Stock are then convertible)." (signature page follows) 4 IN WITNESS WHEREOF, said GlycoGenesys, Inc. has caused this Amendment to the Certificate of Designations, Preferences and Rights of Series. A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock to be signed by Bradley J. Carver, its President, and John W. Burns, its Secretary, this 16/th/ day of April, 2002. GLYCOGENESYS, INC. By: /s/ Bradley J. Carver ------------------------- Name: Bradley J. Carver Title: President By: /s/ John W. Burns ------------------------- Name: John W. Burns Title: Secretary State of Massachusetts ------------- County of Suffolk ------------ I. Richard Gallant a notary public, do hereby certify and attest that the attached document is a true and exact copy of the Amended and Restated Certificate of Designations. Preferences, and Rights of Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock of the Company and that on this 16/th/ day of April, 2002, personally appeared before me, Bradley J. Carver and John W. Burns, who being by me first duly sworn, declared that they are the President and Secretary of the Company, respectively, that they signed the foregoing document as President and Secretary of the Company, and that the statements therein contained are true. /s/ Richard A. Gallant ----------------------------- Notary Public RICHARD A. GALLANT Notary Public Commonwealth of Massachusetts My Commission Expires My commission expires November 21, 2002 [STAMP] ----------------- EX-10.1 5 dex101.txt CONSULTING AGREEMENT Exhibit 10.1 GlycoGenesys, Inc. April 15, 2002 Master Agreement for Consulting Services Page 1 ================================================================================ CONSULTING AGREEMENT by and between GlycoGenesys, Inc. and BEARDSWORTH CONSULTING GROUP, INC. =============================================================================== [LETTERHEAD OF BEARDSWORTH CONSULTING GROUP, INC.] GlycoGenesys, Inc. April 15, 2002 Master Agreement for Consulting Services Page 2 CONSULTING AGREEMENT This Agreement is by and between Beardsworth Consulting Group, Inc. a New Jersey corporation, having an address at 70 Church Street, Suite 200, Flemington, NJ 08822, (hereinafter called "BCGI(R)"); and GlycoGenesys, Inc. (hereinafter called "Client"); having an address at, 31 Saint James Avenue, Boston, MA 02116. W I T N E S S E T H WHEREAS, BCGI represents that it is under no obligation to any third party that would interfere with the rendering to Client professional services as hereinafter defined; and WHEREAS, Client is desirous of engaging BCGI's professional services; and WHEREAS, BCGI desires to render professional services to Client in the performance of agreed-upon tasks or services; NOW, THEREFORE, in consideration of the premises and of the mutual promises and covenants herein contained, the parties hereto agree as follows: 1. Prior to commencing any work hereunder, the definitions of any specific task or project to be performed shall be agreed upon by the parties, and attached to and made a part of this Agreement as an Attachment. 2. BCGI shall use its best efforts to provide consulting services in accordance with the terms of accepted offers, to keep Client advised of the progress of the work, to permit any representative duly authorized in writing by Client to inspect, from time to time, such results of said consulting services as are susceptible of inspection, to provide Client with such reports, specifications, drawings, models, and the like, as are appropriate to the nature of the services to be contemplated by any accepted offer and to keep records of hours worked and costs of materials used, as well as other reasonable out-of-pocket expenses, which such records Client's duly authorized representative may examine upon reasonable notice to BCGI. 3. Any confidential information acquired by BCGI, its employees, subcontractors and affiliates from Client concerning existing or contemplated machines, products, processes, techniques, or know-how, or any information or data developed pursuant to the performance of the consulting services contemplated by any accepted offer made by Client shall not be disclosed by BCGI to others or used for BCGI's own benefit without the prior written consent of Client. This obligation of confidentiality shall not apply to: a. information which, at the time of disclosure to BCGI by Client is published, known publicly, or is otherwise in the public domain; b. information which, after it is disclosed to BCGI by Client is published, becomes known publicly, or otherwise becomes part of the public domain, through no fault of BCGI; GlycoGenesys, Inc. April 15, 2002 Master Agreement for Consulting Services Page 3 c. information disclosed to BCGI by Client which prior to the time of disclosure is known to BCGI, as evidenced by written records; and d. information which has been or hereafter is disclosed to BCGI in good faith by a third party who was not, and is not, under any obligation of confidence or secrecy to Client at the time said third party discloses to BCGI. e. information, which is required by law, regulation, or legal process to be disclosed. It is understood that the obligations of confidentiality and nonuse set forth herein shall survive the termination of this Agreement. In addition to the confidentiality provisions set forth herein, BCGI and Client shall execute the Client's confidentiality agreement, subject to BCGI's approval. 4. Any copyrightable work created by BCGI in connection with or during the performance of services pursuant to this Agreement by BCGI shall be considered a work made for hire, whether published or unpublished, and all rights therein shall be the property of Client as employer, author and owner of the copyright in such work. BCGI, without charge to Client other than reasonable payment for time involved in the event the services contemplated by any accepted offer shall have terminated, but at Client's expense, shall duly execute, acknowledge, and deliver to Client all such further papers, including assignments and applications for copyright registration or renewal, as may be necessary to enable Client to publish or protect said works by copyright or otherwise in any and all countries and to vest title to said works in Client, or its nominees, their successors or assigns, and shall render all such assistance as Client may require in any proceeding or litigation involving the rights in said works. BCGI shall promptly notify Client of any copyrightable work contemplated herein. 5. Any inventions, improvements, or ideas made or conceived in connection with or during the performance of services by BCGI pursuant to this Agreement, and directly related to such services, shall be the property of Client. BCGI shall promptly notify Client of any such inventions, improvements or ideas. BCGI, without charge to Client other than reasonable payment for time involved in the event the services contemplated by any accepted offer shall have terminated, but at Client's expense shall execute, acknowledge, and deliver to Client all such further papers, including applications for patents, as may be necessary to enable Client to publish or protect said inventions, improvements, and ideas by parent or otherwise in any and all countries and to vest title to said patents, inventions, improvements, and ideas in Client or its nominees, their successors or assigns, and shall render all such assistance as Client may require in any Patent Office proceeding or litigation involving said inventions, improvements, or ideas. 6. Client hereby recognizes and understands that BCGI presently and may from time to time in the future contract with other consultants to perform certain services pursuant to this Agreement. Each subcontractor has executed a written agreement with BCGI which incorporates provisions of the character and scope of Paragraphs 3 through 5 of this Agreement which inure to the benefit of BCGI and its clients and customers. BCGI hereby covenants and agrees that all of its employees, consultants, and principals shall, previous to performing services pursuant to this Agreement, execute a written agreement with BCGI which incorporates provisions of the character and scope of Paragraphs 3 through 5 of this Agreement which inure to the benefit of BCGI and its clients and customers. Client may waive this requirement with GlycoGenesys, Inc. April 15, 2002 Master Agreement for Consulting Services Page 4 respect to nonprofessional personnel regularly employed at BCGI's place of business and whose work is performed strictly in accordance with BCGI's directions. 7. Client reserves the right forthwith to direct, by written notice, BCGI to discontinue with [***] written notice the work upon which BCGI shall have been engaged for Client, in which event Client shall be obligated to pay BCGI for work done by BCGI and for cost of materials for which BCGI has become obligated in connection with the contemplated services. BCGI shall commit to use its best efforts to minimize costs after which such notice is given. During the [***] period from written discontinuation notice to project transfer, BCGI will provide transitional support as required. 8. Client hereby offers to engage and BCGI accepts engagement by Client of BCGI's professional services as follows: to render consulting services to personnel of Client relating to clinical research, regulatory (FDA submissions), technical writing, and product development matters associated with Client products or potential products in accordance with the terms and provisions of this Agreement. 9. In consideration of BCGI's acceptance of this Consulting Agreement and of its performance of the professional services as specifically set forth in Paragraph 8 hereof, Client shall retain BCGI for the following rates unless alternate rates are otherwise specified in an Attachment to this master agreement:
- ------------------------------------------------------------------------------------------------------------ Category Hourly Category Hourly Rate Rate - ------------------------------------------------------------------------------------------------------------ Administrative Staff [***] Project Manager [***] - ------------------------------------------------------------------------------------------------------------ Data Entry Staff [***] Medical Writer [***] - ------------------------------------------------------------------------------------------------------------ Clinical Data Coordinator [***] Quality Control Document Reviewer [***] - ------------------------------------------------------------------------------------------------------------ CRF Designer [***] Quality Assurance Site Auditor [***] - ------------------------------------------------------------------------------------------------------------ Clinical Document Reviewer [***] Specialty Committee Members (DMC) [***] - ------------------------------------------------------------------------------------------------------------ Data Entry Manager [***] Regulatory Affairs Specialist [***] - ------------------------------------------------------------------------------------------------------------ SAS Programmer [***] Medical Director (M.D.) [***] - ------------------------------------------------------------------------------------------------------------ Director of Systems Development [***] Vice President, Business Development [***] - ------------------------------------------------------------------------------------------------------------ Biostatistician (Ph.D.) [***] Vice President, Clinical Services [***] - ------------------------------------------------------------------------------------------------------------ Clinical Research Associate [***] Donna E. Beardsworth [***] - ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------
10. Client agrees to reimburse BCGI for reasonable travel and out-of-pocket expenses incurred by BCGI while performing the consulting services for Client. Such expenses shall include but not be limited to airfare, accommodations, meals, rental cars, courier expenses, telephone and fax and other reasonable travel expenses. Specifics of the agreed upon travel policy are put forth in Exhibit 1. Travel and out-of-pocket expenses will be invoiced monthly by BCGI with copies of all receipts for individual expenses greater than five dollars ($5.00). Payments shall be due to BCGI upon receipt of invoice, net 30 days. *** Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission. GlycoGenesys, Inc. April 15, 2002 Master Agreement for Consulting Services Page 5 11. Client shall have no obligation whatsoever to compensate BCGI for services rendered hereunder beyond the sums referred to in Paragraphs 7, 9 and 10 herein. 12. The role of BCGI will be outlined in each project specific 'transfer of obligation' appendix to this agreement. Otherwise, BCGI is not acting as a "contract research organization" or a "sponsor" as defined in Title 21 of the Code of Federal Regulations of the Food and Drug Administration of the United States of America. Client retains full responsibility for the content of documents and regulatory submissions, for interpretation of data therein and for the timing, preparation and processing of required regulatory submissions. 13. BCGI represents that it is free to enter into this agreement and agrees not to knowingly disclose to Client any information with respect to which it is under any actual or implied duty to any third party to keep confidential. Client shall be free to use all information conveyed to it by BCGI, with the exception of the names, addresses, and compensation rates of BCGI subcontractors and employees which are to remain confidential, whether before or after the execution of this Agreement, without any further obligation to BCGI other than as outlined herein. 14. BCGI agrees not to originate any publicity, news release or other public announcement, written or oral, whether to the public, press or otherwise, relating to this Agreement, to any amendment hereto, or to the performance and any results or information obtained hereunder, without Client's prior written consent. BCGI may acknowledge that it is a consultant to Client. BCGI shall be free to make any disclosure which, in the opinion of legal counsel, it is required by law to make, but shall give Client an opportunity to review the form of such disclosure in advance of its release. 15. BCGI shall not act as an agent for Client and shall not have the authority to bind Client in any dealings with third parties. 16. Consulting services hereunder may be performed at BCGI's office, Client's offices or other locations as mutually agreed upon. Consulting at Client or locations other than BCGI's office shall require payment of travel costs to BCGI. 17. BCGI warrants and represents that the services provided under this Agreement will be carried out in accordance with the standard of care customarily observed with regard to such services in BCGI's profession. 18. Client understands that BCGI now has and may in the future enter into consulting relationships with other companies, and affiliates of Client. 19. This Agreement shall be interpreted in accordance with the laws of the state of the suing party. 20. This Agreement shall commence on the date of execution and shall continue until terminated as hereinafter provided by either party. GlycoGenesys, Inc. April 15, 2002 Master Agreement for Consulting Services Page 6 21. Client agrees that it shall defend, indemnify, and hold BCGI, its employees, and consultants, harmless from any loss, damage, or expense (including reasonable attorney's fees and costs) arising out of any and all claims, actions, suits, governmental or administrative proceedings relating to the development, manufacture, or sale of Client products for which BCGI has written or given advice. BCGI agrees to indemnify Client and hold Client harmless for all claims, demands, and liabilities, to which Client is subjected by reason of any breach by BCGI of the terms of this Agreement or by any action taken or not taken by BCGI unless such action or inaction was at the specific request of Client. 22. Client, during the term of this Agreement and for [***] thereafter, shall not, without the prior written consent of BCGI, directly or indirectly solicit for employment or contract, attempt to employ or contract with or assist any other entity in employing, contracting with or soliciting for employment or contract any employee, subcontractor or executive who is at that time employed/contracted by BCGI or who had been employed/contracted by BCGI within the prior [***] period. 23. This agreement shall supersede any and all prior agreements and understandings between the parties respecting the subject matter hereof. No verbal representations or statements made by any representative of BCGI or Client not stated herein shall be of any force or effect. The provisions of this Agreement for Consulting Services constitute the entire agreement between the parties and their respective principals. No modification or amendment to this agreement shall be binding unless agreed upon in writing and signed by the parties. Failure of either party to enforce rights under this agreement shall not constitute a waiver of such rights. 24. BCGI hereby certifies that neither BCGI or any person employed by BCGI is under or has been under investigation by the U.S. Food and Drug Administration ("FDA") or has been debarred under Section 306(a) or (b) of the Federal Food, Drug, and Cosmetic Act or pursuant to Generic Drug Enforcement Act of 1992 or has a disqualification hearing pending or has been disqualified by the FDA pursuant 21.C.F.R. Section 312.70, and no debarred person will in the future be employed by BCGI in connection with any work to be performed by or on behalf of Client which may later become part of any application for approval of a drug or biologic FDA. If at any time after execution of this Agreement, BCGI becomes aware (i) that it or any person employed by it is in the process of being debarred, BCGI hereby certifies that it will notify Client immediately upon its become aware of such debarment or process. 25. BCGI agrees that it will, to the best of its ability (i) ensure that investigators understand that written informed consent must be obtained from all participating subjects prior to enrollment in the studies in accordance with the requirements specified with the Code of Federal Regulations, the ICH guidelines and all other Applicable Laws, that they must give a signed copy of the informed consent to each subject and they must keep a copy in the subject's files, and report and attempt to correct deficiencies in such practices, (ii) ensure that investigators understand and comply with FDA guidelines for the conduct of research, (iii) ensure that there will be acceptable facilities for conduct of any study and immediately report and attempt to correct deficiencies, (iv) ensure that investigators understand their obligation to conduct all studies in compliance with the Protocol's requirements and to report and attempt to correct deficiencies, (v) work with investigators to ensure that the rights, welfare and safety of the GlycoGenesys, Inc. April 15, 2002 Master Agreement for Consulting Services Page 7 subjects are protected, and (vi) otherwise comply with any applicable law, rule regulation, order, decision or decree including, without limitation, the Food Drug & Cosmetic Act, as amended, and the rules and regulations thereunder and the Health Insurance Portability and Accountability Act, as may be amended, and the rules and regulations thereunder (HIPPA) (collectively, the "Applicable Laws"). 26. Each of the parties hereto hereby warrant and represent that they have power and authority to execute this Agreement and that this Agreement is being executed by its duly authorized signatories. BCGI further represents and warrants that it is under no obligation which conflicts with its duties contemplated hereunder and agrees not to undertake any project which conflicts with this Agreement and the duties contemplated hereunder. 27. All equipment, materials, documents, data, information and suggestions of every kind and description supplied to BCGI directly or indirectly by Client or prepared or developed by BCGI pursuant to this Agreement (except for BCGI's procedural manuals, personnel data, and computer software developed by BCGI), or resulting from the services provided hereunder shall be the sole and exclusive property of Client and shall be treated as Confidential Information; provided that BCGI may retain copies of such materials as required by Applicable Laws. Client shall have the right to make whatever use it deems desirable of any such materials, documents, data and information. 28. The protocols are incorporated by reference to this agreement, as amended from time to time by consent of both parties. 29. BCGI will use its best efforts to minimize the amount of turnover of key personnel on the project. Changes of key personnel or director level personnel will not be done without prior notification to Client. 30. See Rider 1 Regarding Insurance Coverage. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year signed below. GLYCOGENESYS, INC. BEARDSWORTH CONSULTING GROUP, INC. By: /s/ Chris Szuskiewicz By: /s/ Donna E. Beardsworth ------------------------------------ ---------------------------------- Chris Szuskiewicz, Donna E. Beardsworth, President & CEO Sr. VP of Operations & Development Date: 16 April 2002 Date: 16 April 2002 ---------------------------------- -------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----