Attached files
| file | filename |
|---|---|
| EX-10.4 - REGISTRATION RIGHTS AGREEMENT - BioNeutral Group, Inc | f8k020310ex10iv_bioneutral.htm |
| EX-10.1 - FIRST AMENDMENT TO THE ADVISORY AGREEMENT - BioNeutral Group, Inc | f8k020310ex10i_bioneutral.htm |
| EX-10.3 - RESTRICTED STOCK UNIT AGREEMENT - BioNeutral Group, Inc | f8k020310ex10iii_bioneutral.htm |
| EX-10.2 - STOCK APPRECIATION RIGHT AGREEMENT - BioNeutral Group, Inc | f8k020310ex10ii_bioneutral.htm |
| EX-4.1 - 8% EXCHANGEABLE PROMISSORY NOTE - MICHAEL D. FRANCIS - BioNeutral Group, Inc | f8k020310ex4i_bioneutral.htm |
| EX-4.2 - 8% EXCHANGEABLE PROMISSORY NOTE - CAPARA INVESTMENTS LLC - BioNeutral Group, Inc | f8k020310ex4ii_bioneutral.htm |
| EX-4.3 - 8% EXCHANGEABLE PROMISSORY NOTE - MICHAEL D. FRANCIS - BioNeutral Group, Inc | f8k020310ex4iii_bioneutral.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date of
report (Date of earliest event reported): February 3, 2010
BIONEUTRAL
GROUP, INC.
(Exact
Name of Registrant as Specified in its Charter)
|
Nevada
|
333-149235
|
26-0745273
|
||
|
(State
or Other Jurisdiction
|
(Commission
File Number)
|
(IRS
Employer
|
||
|
of
Incorporation)
|
Identification
No.)
|
|
211
Warren Street
|
||
|
Newark,
New Jersey
|
07103
|
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant’s
telephone number, including area code: (973) 286-2899
Check
the appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
o Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item
1.01 Entry into a Material Definitive Agreement.
Item
3.02 Unregistered Sales of Equity Securities.
On
February 3, 2010, BioNeutral Group, Inc. (the “Company”) and Chertoff Group,
L.L.C. (the “Advisor”) entered into a First Amendment to the Advisory Agreement
(the “Amendment”), which amends the Advisory Agreement by and between the
Company and the Advisor dated August 26, 2009 (the “Original
Agreement”). The Amendment modifies, among other things, the scope of
services to be provided under the Original Agreement by Advisor and the
personnel to provide such services and reduces the monthly fee for such services
to $28,000 per month during the term of the Original Agreement.
In
connection with the execution and delivery of the Amendment, the Company and
Advisor, on February 3, 2010 also entered into a Stock Appreciation Rights
Agreement (the “SAR Agreement”), a Restricted Stock Unit Agreement (the “RSU
Agreement”) and a Registration Rights Agreement (the “Registration Rights
Agreement” and together with the SAR Agreement and the RSU Agreement, the
“Equity Award Agreements”). The Equity Award Agreements evidence the
terms of the equity award required to be made to Advisor pursuant to the
Original Agreement. The Company relied on the exemption from
registration provided by Section 4(2) of the Securities Act of 1933, as amended,
in issuing the securities covered by the Equity Award Agreements.
Pursuant
to the SAR Agreement, the Company granted 7,442,725 stock appreciation rights to
Advisor evidencing Advisor’s right to receive, for each SAR exercised, up to the
number of shares of the Company’s common stock (the “SAR Shares”) equal in value
to the excess of the Fair Market Value of one share of common stock on the date
of exercise (as defined in the SAR Agreement) over $0.186. The SARs
vest on a cumulative basis according the following vesting
schedule: 25% on September 1, 2010, 50% on September 1, 2011 and 100%
on September 1, 2012. In addition, vesting accelerates and the SARs
fully vest upon the occurrence of certain events specified in the SAR Agreement,
including a Change in Control of the Company (as defined in the SAR
Agreement).
Under the
RSU Agreement, the Company granted to Advisor the right to receive on the
Delivery Date (as defined in the RSU Agreement) a number of shares of common
stock (the “RSU Shares,” and together with the SAR Shares, the “Advisor Shares”)
equal to “A” divided by “B,” where “A” equals 1,384,346.85, and “B” equals the
greater of (i) the Fair Market Value of a share of common stock on the Delivery
Date and (ii) $0.186. The RSU Agreement defines “Delivery Date” as
the earlier to occur of January 2, 2013 and the date that is immediately prior
to a Change in Control of the Company (as defined in the RSU
Agreement). The RSUs vest on a cumulative basis and vesting thereof
accelerates on the same dates and in the same circumstances as are applicable to
the vesting of the SARs, all as described in the preceding
paragraph.
-2-
The
Company is obligated, under the Registration Rights Agreement, to file a
registration statement with the Securities and Exchange Commission (the “SEC”)
registering the resale of the Advisor Shares under the Securities Act of 1933,
as amended (the “Securities Act”) and have such registration statement declared
effective by not later than the Outside Date (as defined in the Registration
Rights Agreement), which date is subject to acceleration, including upon the
occurrence of certain events constituting a Change in Control of the Company (as
defined in the Registration Rights Agreement). In the event that the
Company fails to comply with certain registration obligations under the
Registration Rights Agreement, it is obligated to pay liquidated damages to
Advisor in the amount of four percent per annum of the Registration Default
Value (as defined in the Registration Rights Agreement) of the securities for
which there is a registration obligation and two percent per annum of the
registration default value of such securities for each thirty day period
following the initial thirty day period following a default. The
Registration Rights Agreement defines Registration Default Value as the average
of the Fair Market Value (as defined in the SAR Agreement) of one share of
common stock on the grant date under the SAR Agreement and the Fair Market Value
of one share of common stock on the date of the registration default under the
Registration Rights Agreement. Such liquidated damages are to be paid
in stock appreciation rights on substantially the same terms as those contained
in the SAR Agreement. The Company also granted to Advisor certain
“piggy-back” registration rights in connection with any Company registration of
the sale of securities on behalf of itself or on behalf of others under the
Securities Act. In addition, in connection with any future issuance
of the Company’s equity securities or securities convertible or exchangeable
into the Company’s equity securities, Advisor has the right to purchase its pro
rata share of such issuance, which is calculated based the ratio of common stock
held by Advisor to the total number of shares of common stock then outstanding
(on a fully diluted basis). As part of the Registration Rights
Agreement, the Chief Executive Officer of the Company and a director of the
Company agreed to certain limits on their respective abilities to engage in a
sale or other disposition or other transactions constituting a Sale Transaction
(as defined in the Registration Rights Agreement) in respect of the common
stock.
The
foregoing descriptions of the Amendment, the SAR Agreement, the RSU Agreement
and the Registration Rights Agreement do not purport to be complete and are
qualified in their entirety by reference to the text of the Amendment, the SAR
Agreement, the RSU Agreement and the Registration Rights Agreement, which are
attached hereto as Exhibits 10.1, 10.2, 10.3 and 10.4, respectively, and are
incorporated herein by reference.
Item 4.02. Non-Reliance on
Previously Issued Financial Statements or a Related Audit Report or Completed
Interim Review.
(a)
(1) On February 17, 2010,
the Company’s Board of Directors concluded that there were errors in the
following financial statements of the Company (the “Subject Financial
Statements”) and that the Subject Financial Statements should no longer be
relied upon:
(i) for
the year ended December 31, 2007, the year ended December 31, 2006, the nine
month period ended September 30, 2008 and the nine month period ended September
30, 2007, each included in the Company’s Current Report on Form 8-K filed on
February 5, 2009;
(ii) for
the ten months ended October 31, 2008 and included in the Company’s Transition
Annual Report on Form 10-KT filed on June 24, 2009;
(iii) for
the three months ended January 31, 2009 and included in the Company’s Quarterly
Report on Form 10-Q filed on March 23, 2009;
-3-
(iv) for
the three months ended April 30, 2009 and included in the Company’s Quarterly
Report on Form 10-Q filed on June 24, 2009; and
(v) for
the three months ended July 31, 2009 and included in the Company’s Quarterly
Report on Form 10-Q filed on September 21, 2009.
(2)
The Company anticipates that, at a minimum, it will:
(i)
make adjustments to the beginning balance of shareholders’ equity for each
fiscal quarter or year end contained in the Subject Financial
Statements.
(ii)
reduce the Company’s capital and deficit calculations contained in the Subject
Financial Statements based on a revaluing from the stated value of $5 per share
to the fair value of $1 per share of 7,832,800 shares of common stock issued in
2005 for non-cash consideration. 7,000,000 of such shares were issued
in connection with the Company’s acquisition of patent rights; the balance was
issued as compensation. The asset value of the patent was previously
written down to its fair value in fiscal year 2006. This adjustment
would address all corresponding amounts included in the Company’s capital and
deficit accounts related to the original $5 a share valuation and patent
write-down.
(iii) reverse
a previously reported liability of approximately $1.1 million related to the
issuance of warrants in 2005. The Company historically treated such
warrants as having a feature for issuing a variable amount of shares, thereby
creating an obligation under U.S. generally accepted accounting principles
(“GAAP”). The Company anticipates recording such warrants as standard
equity instruments with no obligation to redeem the warrants or to issue a
variable amount of shares pursuant to the warrants.
(iv) expand
the related party transaction disclosures in the Notes to certain of the Subject
Financial Statements.
In
addition, the Subject Financial Statements for the interim periods of Fiscal
Year 2009 reflect a minority interest of 19% interest in BioNeutral Laboratories
Corporation USA, a subsidiary of the Company (“BioLabs”). The Company
believes that this figure will be adjusted to reflect a 14% minority interest in
BioLabs. The Company does not have records of certain common
shareholders of BioLabs as participating in the exchange of their shares of
BioLabs common stock for shares of common stock of the Company pursuant to that
certain share exchange agreement, dated as of January 30, 2009, between the
Company and BioNeutral Laboratories (the “Share Exchange
Agreement”). Accordingly, until such time as the Company locates such
records or such shareholders of BioLabs are able to confirm such participation
in accordance with the terms of the Share Exchange Agreement, the Company has
determined it will treat such persons as part of a 14% minority interest in
BioLabs.
-4-
(3)
The Company’s management, Board of Directors and independent registered
public accounting firm have discussed the matters disclosed in this
filing.
Item
8.01 Other Events.
Late
Filing of 10-K; Possible FINRA Actions.
On
February 16, 2010, the Company failed to
file timely its Annual Report on Form 10-K (“Form 10-K”) for the year ended
October 31, 2009 (“Fiscal 2009”) because the Company has not completed
preparation of financial statements for the year ended October 31, 2009 for
inclusion in the Form 10-K, management has not completed its preparation of such
financial statements and the Company’s independent auditor has not completed its
Fiscal 2009 year end audit of the Company’s financial statements. The
Company intends to use it best efforts to file such Form 10-K as soon as
possible.
The
Financial Industry Regulatory Authority (“FINRA”) has published a statement
indicating that in connection with its Annual Report on Form 10-K for the fiscal
year ended October 31, 2008 and its Quarterly Report on Form 10-Q for the fiscal
quarter ended April 30, 2009, the Company, on two previous occasions, failed to
file on a timely basis or made an incomplete filing of a periodic report
required to be filed under the Securities Exchange Act of 1934, as
amended. If FINRA’s statement is correct, the late filing of the Form
10-K for Fiscal 2009 would constitute a third late filing and, under FINRA
Rules, would cause the Company’s securities to no longer be eligible for
quotation on the Over the Counter Bulletin Board market (“OTCBB”). On
February 18, 2010, the Company received a notice from FINRA dated February 17,
2010 stating that, as of the commencement of trading on February 26, 2010, its
securities will not be eligible for quotation on the OTCBB. The
Company intends to request a hearing to appeal such determination if, after
review, it concludes that the determination by the Staff of FINRA as to late or
incomplete filings was in error. A hearing request will stay the
removal of the Company's securities from OTCBB pending the Hearing Officer's
Decision.
Estimated
Results of Operations; Liquidity Issues; Expected Going Concern Qualification in
Auditor’s Opinion.
The
Company expects to incur a net loss for Fiscal 2009 of approximately $15
million, greater than fifty percent (50%) of which will consist of a non-cash
charge against the carrying value of its prepaid asset representing certain
consulting, distribution and other agreements for which the Company has
determined the underlying services will not be recovered. In
addition, the Company’s cash flow projections indicate that it will have an
extremely difficult time funding its operations over the next thirty days
without additional borrowings or capital infusions and thereafter without
raising substantial additional funds from external sources. Moreover,
the Company’s independent auditor has indicated that it will conclude that the
Company’s net losses, negative cash flow and accumulated deficit as of October
31, 2009, raise substantial doubt about the Company’s ability to continue as a
going concern.
-5-
SEC
Investigation.
On
October 1, 2009, the United States Securities and Exchange Commission (“SEC”)
issued a formal order of investigation regarding possible securities laws
violations by the Company and other persons. The investigation
appears to be focused on the process by which the Company became a publicly
traded entity, trading in the Company’s shares, and disclosure and promotion of
developments in the Company’s business. The SEC has requested, and
the Company has produced, certain documents relevant to the SEC’s
investigation. The Company has incurred, and expects to continue to
incur, significant costs in responding to such investigation. Any
adverse findings by the SEC in connection with such investigation could have a
material adverse impact on the Company’s business, including the Company’s
ability to continue to operate as a publicly traded company.
Uncertainty as to
Number of Common Shares Outstanding.
The
records of the Company’s Transfer Agent reflect as outstanding a number of
shares of common stock different than the number reflected in the Company’s
records. The Company is in the process of addressing this
discrepancy.
Update
on Regulatory Approvals and Product Testing.
The
Company’s Ygiene professional disinfectant product and multipurpose cleaner and
disinfectant product were registered with the German Bundesanstalt für
Arbeitsschutz und Arbeitsmedizin, a German government sanctioned institute for
safety and health, on January 5, 2010 and November 30, 2009,
respectively. As a result of such registrations, the Company is
permitted to sell such Ygiene-based products in Germany. The Company
has not sold any of its products in Germany and currently does not have adequate
resources to attempt to make any such sales or to have its products manufactured
for sale.
On
January 26, 2010 the Company was informed that the toxicity study on its Ygiene
Hospital Grade Disinfectant was completed with positive results that are
acceptable for submission to the U.S. Environmental Protection
Agency. These studies were conducted by Eurofins Product Safety
Laboratories located in Dayton, New Jersey, an independent laboratory for
conducting GLP studies to support product registrations with the
EPA.
Recent
Loans to Company by Substantial Shareholders and Director.
On
November 13, 2009, the Company issued (i) an unsecured promissory note to
Michael D. Francis, a shareholder of the Company, in the amount of $250,000 (the
“First Francis Note”), and (ii) an unsecured promissory note to Capara
Investments LLC (“Capara”), in the amount of $250,000 (the “Capara Note”), which
issuances resulted in gross proceeds to the Company of $500,000. The
sole member of Capara, Raj Pamani, is a member of the Board of Directors of the
Company. On February 12, 2010, the Company issued an unsecured
promissory note to Mr. Francis containing substantially the same terms as the
First Francis Note (the “Second Francis Note”, and together with the First
Francis Note and the Capara Note, the “Shareholder Notes”). Each of
the Shareholder Notes (i) bears an 8% annual interest rate, (ii) is due and
payable in cash on the fifth anniversary of the date of issuance, and (iii) upon
consummation of a “Qualified Financing” (as defined in the Shareholder Notes),
will automatically be exchanged for, at the Company’s election, either (i)
securities on the same terms and conditions as those received by investors in
such Qualified Financing based on an assume exchange rate reflecting the pricing
used in such financing or (ii) shares of the Company’s common stock equal to the
quotient obtained by dividing (x) the then outstanding principal amount of the
Shareholder Note by (y) the lower of (i) $0.69 and (ii) the Fair Market Value
(as defined in the Shareholder Notes) of one share of Company Common Stock as of
the date of such exchange. On each three (3) month anniversary of the
issuance of each Shareholder Note, all accrued and unpaid interest shall be
added to the unpaid principal amount of such note. The Company relied
on the exemption from registration provided by Section 4(2) of the Securities
Act of 1933, as amended, in issuing the Shareholder Notes. The
foregoing description of the Shareholder Notes does not purport to be complete
and is qualified in its entirety by reference to the text of the Shareholder
Notes, which are attached hereto as Exhibits 4.1, 4.2, and 4.3 and are
incorporated herein by reference.
-6-
Item
9.01 Financial Statements and Exhibits.
(d)
Exhibits.
|
Exhibit
Number
|
|
Description
|
| 4.1 |
8%
Exchangeable Promissory Note, dated November 13, 2009, issued in favor of
Michael D. Francis.
|
|
| 4.2 |
8%
Exchangeable Promissory Note, dated November 13, 2009, issued in favor of
Capara Investments LLC.
|
|
| 4.3 |
8%
Exchangeable Promissory Note, dated February 12, 2010, issued in favor of
Michael D. Francis.
|
|
| 10.1 |
First
Amendment to the Advisory Agreement, dated as of February 3, 2010, by and
between Chertoff Group, L.L.C. and BioNeutral Group,
Inc.
|
|
| 10.2 |
Stock
Appreciation Right Agreement, dated as of February 3, 2010, by and between
BioNeutral Group, Inc. and Chertoff Group, L.L.C.
|
|
| 10.3 |
Restricted
Stock Unit Agreement, dated as of February 3, 2010, by and between
BioNeutral Group, Inc. and Chertoff Group, L.L.C.
|
|
| 10.4 |
Registration
Rights Agreement, dated as of February 3, 2010, by and between BioNeutral
Group, Inc. and Chertoff Group, L.L.C.
|
-7-
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
|
BIONEUTRAL GROUP, INC.
|
||
|
By:
|
/s/
Stephen J. Browand
|
|
|
Name:
Stephen J. Browand
|
||
|
Title:
President and Chief Executive
Officer
|
||
Dated: February
18, 2010
-8-
EXHIBIT INDEX
|
Exhibit
Number
|
|
Description
|
| 4.1 |
8%
Exchangeable Promissory Note, dated November 13, 2009, issued in favor of
Michael D. Francis.
|
|
| 4.2 |
8%
Exchangeable Promissory Note, dated November 13, 2009, issued in favor of
Capara Investments LLC.
|
|
| 4.3 |
8%
Exchangeable Promissory Note, dated February 12, 2010, issued in favor of
Michael D. Francis.
|
|
| 10.1 |
First
Amendment to the Advisory Agreement, dated as of February 3, 2010, by and
between Chertoff Group, L.L.C. and BioNeutral Group,
Inc.
|
|
| 10.2 |
Stock
Appreciation Right Agreement, dated as of February 3, 2010, by and between
BioNeutral Group, Inc. and Chertoff Group, L.L.C.
|
|
| 10.3 |
Restricted
Stock Unit Agreement, dated as of February 3, 2010, by and between
BioNeutral Group, Inc. and Chertoff Group, L.L.C.
|
|
| 10.4 |
Registration
Rights Agreement, dated as of February 3, 2010, by and between BioNeutral
Group, Inc. and Chertoff Group, L.L.C.
|
-9-