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EX-31.1 - ORAGENICS INC | v182524_ex31-1.htm |
EX-31.2 - ORAGENICS INC | v182524_ex31-2.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K/A
Amendment
No. 1
x
|
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the fiscal year ended December 31, 2009
¨
|
TRANSITION REPORT PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the transition period from
to
Commission
file number 001-32188
ORAGENICS,
INC.
(Exact
name of registrant as specified in its charter)
Florida
|
59-3410522
|
|
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
(IRS
Employer
Identification
No.)
|
13700
Progress Blvd., Alachua, Florida
|
32615
|
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
(386)
418-4018
(Issuer’s
Telephone Number, Including Area Code)
SECURITIES
REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title
of each class
|
Name
of each exchange on which registered
|
|
None
|
SECURITIES
REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common
stock, par value $.001 per share
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes ¨ No
¨
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange
Act. Yes ¨ No ¨
Indicate
by check mark whether the Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ¨ No ¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such
files). Yes ¨ No ¨
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of Registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large
accelerated filer ¨ Accelerated
filer ¨ Non-accelerated
filer ¨ (Do
not check if a smaller reporting company) Smaller reporting
company x
Indicate
by check mark whether the registrant is a shell company (as defined in Exchange
Act Rule 12b-2). Yes ¨ No ¨
The
aggregate market value of the voting stock held by non-affiliates of the
registrant, as of June 30, 2009 was approximately $8,303,178 based upon a last
sales price of $0.25 as reported by the OTCBB.
As of
March 17, 2010 there were 108,203,148 shares of the registrant's Common Stock
outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
None
EXPLANATORY
NOTE
The
sole purpose of this Amendment No. 1 on Form 10-K/A is to amend our
Annual Report on Form 10-K for the fiscal year ended December 31,
2009, which was filed with the Securities and Exchange Commission on March 31,
2010 to timely provide the information required by Part III, Items 10
through 14.
This
report also contains certifications as required by Rule 12b-15 under the
Securities Exchange Act of 1934 for amendments. Except as otherwise expressly
stated herein, this Amendment No. 1 on Form 10-K/A does not reflect
events occurring after the filing of the original 10-K, or modify or update in
any way disclosures contained in the original Form 10-K.
1
PART
III
ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE.
Directors
and Executive Officers
The following table sets forth the
names, ages and titles of the Company’s Directors, executive officers, key
employees and the position they each hold with the Company.
Name
|
Age
as of
May,
2010
|
Position
|
||
Christine
L. Koski
|
52
|
Chairperson
and Director
|
||
David
B. Hirsch
|
|
41
|
|
Chief
Executive Officer, President and Director
|
Dr.
Jeffrey D. Hillman
|
61
|
Chief
Scientific Officer and Director
|
||
Robert
C. Koski
|
|
51
|
|
Director
|
Brian
Bohunicky
|
|
56
|
|
Chief
Financial Officer, Secretary and Treasurer
|
Gerard
“Gerry” David
|
|
57
|
|
Executive
Vice-President of Sales and Marketing
|
Martin
Handfield
|
|
39
|
|
Director,
Research and Development
|
Directors
of the Company
Christine L.
Koski. Ms. Koski has been a director and Chairperson of our
Board of Directors since June 2009. Ms. Koski joined the
executive team of nMetric, LLC as head of marketing in July
2006. Prior to joining nMetric, Ms. Koski founded Koski
Consulting Group, Inc. in June 2001 to work with start-up companies in the area
of business strategy and marketing. In May 2001, Ms. Koski
completed an Executive MBA degree from Southern Methodist
University. From 1980 through 2000, Ms. Koski held various
positions in sales, product management, purchasing, sales management, and
international marketing management with Celanese A.G. or its former affiliates,
including Celanese Ltd., Hoechst AG and Hoechst Celanese Chemical Group
Ltd. In addition to her positions at nMetric and Oragenics, Koski
serves on the Board of Directors at Sun Hydraulics Corporation, (NASDAQ: SNHY),
manufacturer of high performance hydraulic valves and solutions, and Cheltec, a
specialty chemical company. Ms. Koski is a partner in the Koski
Family Limited Partnership (“KFLP”), which beneficially owns a controlling
interest in us. Ms. Koski is a member of the nonprofit National
Association of Corporate Directors (NACD), and she is a graduate of St. Lawrence
University and Southern Methodist University’s Cox School of
Business. Ms. Koski is the sister of our director Robert
Koski.
Ms. Koski
brings to the Board over a decade of experience as an executive officer and
member of other boards of directors involving technology based
companies, including another public company. Through her extensive
executive management and board service experience, Ms. Koski has developed the
leadership, business judgment and consensus-building skills necessary to
effectively lead our Board as a Non-executive Chairperson. Her strong
expertise and background in management and marketing and track record as an
accomplished executive have provided her with the business acumen and skills
necessary to serve as our Chairperson.
David B.
Hirsch. Mr. Hirsch has been a Director and our President and
Chief Executive Officer since June 2009. Mr. Hirsch became a Director,
President and Chief Executive Officer following the change of control
transaction with the Koski Family Limited Partnership, discussed below.
Mr. Hirsch began working for the Company as a consultant in April 2008 and
joined the Company as a full-time employee in May 2008. Mr. Hirsch
became our Chief Operating Officer effective June 27, 2008 and assumed the
role of Chief Financial Officer on July 15, 2008. Mr. Hirsch assumed the
additional role of Acting President and Chief Executive Officer on March 18,
2009 upon the resignation of the Company’s former chief executive officer and
president and Mr. Hirsch relinquished his position as Chief Operating Officer at
that time. Mr. Hirsch further relinquished his position as our Chief
Financial Officer in June 2009 upon the appointment of Mr. Bohunicky to that
position. Prior to joining the Company, Mr. Hirsch operated a
boutique legal and consulting practice since January 2002 with a focus on
financing and advising emerging technology companies. Prior to starting his own
firm, Mr. Hirsch worked at Deloitte and Touche, LLP in San Francisco, California
as a Manager in its restructuring group; at Mutual Ascent, a registered
investment advisor; and at The Cottonwood Group, a venture capital firm in San
Mateo, California as an associate. He holds a MSIA (MBA) from the Tepper
School of Business at Carnegie Mellon University, a JD from Drake University Law
School and a B.A. in Economics from Indiana University. Mr. Hirsch is also
a licensed attorney in the States of Florida and Indiana.
2
As our
President, Chief executive Officer and a member of our Board, Mr. Hirsch draws
upon over a decade of experience in venture capital, restructuring and corporate
finance. In addition to his industry experience, Mr. Hirsch brings to the
Board the critical expertise gained over his career in corporate and business
strategy and in law.
Dr. Jeffrey D. Hillman.
Dr. Hillman has been our Chief Scientific Officer since November 1996, a
Director since November 1996 and served as Chairman of the Board of Directors
from November 1996 to December 2004. Since November 1991, Dr. Hillman has been a
Professor in the College of Dentistry at the University of Florida in
Gainesville, Florida. However, Dr. Hillman retired from the
University of Florida, as of July 2008. Dr. Hillman received
undergraduate training at the University of Chicago (Phi Beta Kappa), and his
D.M.D. degree (cum Laude) from the Harvard School of Dental Medicine and his
Ph.D. from Harvard University Medical School. He has authored or
co-authored more than 100 publications and textbook chapters on subjects related
to infectious diseases, including their etiology
and prevention. He has also worked extensively in the area of novel
antibiotics. He is the inventor or co-inventor of Oragenics’ technologies,
including the platform technologies to identify targets for the development
of new vaccines and diagnostic tests for a wide variety of infectious diseases
and cancer.
Dr.
Hillman, our founder and longest serving Board member, brings to our Board an
extensive background spanning nearly thirty years in biotechnology research and
development and a deep knowledge and understanding of Oragenics’ business,
operation and employees.
Robert C. Koski. Mr. Koski has been a
Director since June 2009. Mr. Koski is an attorney with the Koski
Firm, located in Atlanta, Georgia, where his practice includes litigation and
tax law. Mr. Koski received his B.A. from Colgate University and his
J.D. from Emory School of Law. He was admitted to the Bar in
1985. Mr. Koski is also a partner in the KFLP and is the brother of
our director and Chairperson, Ms. Christine Koski.
Mr. Koski
brings to our Board over two decades of experience in the legal field as a
practicing attorney. In addition to his legal experience Mr. Koski’s
educational background provides a foundation for leadership and
consensus-building.
Executive
Management
David B.
Hirsch. The biography of Mr. Hirsch is included above under
the section heading “Directors of the Company.”
Jeffrey D.
Hillman: The biography of Dr. Hillman is included above under
the section heading “Directors of the Company.”
Brian
Bohunicky. Mr. Bohunicky
has been our Chief Financial Officer since June 2009. Mr. Bohunicky
joined the Company in early January 2009 as the Company Controller and following
the change of control transaction with the Koski Family Limited Partnership,
discussed below, he became our Chief Financial Officer and subsequently our
Treasurer and Secretary. Prior to joining the Company, Mr. Bohunicky
was the Vice President and Controller of Idex Corporation’s Fire, Safety and
Diversified Segment from October 2002 to November 2009. In this role,
Mr. Bohunicky was responsible for managing the financial aspects of Idex’s
worldwide fire and rescue manufacturing businesses. Mr. Bohunicky’s
global responsibility included eight manufacturing facilities. Mr.
Bohunicky was the financial leader on acquisitions in the US, Germany and China
and led restructuring programs throughout his career at Idex. Prior
to joining Idex, Mr. Bohunicky had multiple general manager and controller
assignments with Flowserve Corporation and Ingersoll Rand
Company. Mr. Bohunicky holds a BA degree in Economics from Moravian
College.
Key
Employees
Gerard “Gerry” David. Mr.
David has served as our executive vice president of sales and marketing since
September 2008. Prior to that time he provided services to us
pursuant to a consulting agreement with his company, Certified Nutrition for
Less, LLC. Mr. David brings more than three decades of experience in
the natural products and direct sales industry. He served as president and COO
of Växa International in Tampa, Florida, from March 2007 to July 2008. From
August 2006 to February 2007 he served as COO of Cyberwize, located in Sarasota,
Florida. From March 2003 to July 2006, he served as president and COO
of Vitarich Labs in Naples, Florida. David also served as chief operating
officer for Life Science Technologies, where he extended the reach of
distribution to 50 states and successfully merged the company with a public
entity. Mr. David was the executive vice president international, at the Home
Shopping Network Direct from 1993 to 1997, managing the company's operations in
72 countries.
3
Martin
Handfield. Dr. Handfield has been our Director of Research and
Development since January of 2009. He previously spent 13 years of
service at the University of Florida, where he co-invented IVIAT and co-founded
iviGene Corp. and
Epicure Corp. to commercialize this and related technologies. The
intellectual property for IVIAT was acquired by Oragenics in 2006, and IVIAT was
further developed in-house at Oragenics to generate PIVIAT and PCMAT, the two
proprietary technologies that are at the core of Oragenics’ Biomarker Discovery
Division. Dr. Martin Handfield currently is on a leave of absence
from the University of Florida where he served as a Tenured Associate Professor
at the Center for Molecular Microbiology and the Department of Oral Biology in
the College of Dentistry. In the past decade, Dr. Handfield was the
recipient of 4 patents, and authored over 40 publications and book chapters with
a focus on infectious diseases, transcriptomics, proteomics and molecular
microbiology. His previous research generated over 10 million dollars
from diverse funding agencies including the National Institute of
Health. Dr. Handfield received his undergraduate degree in
biochemistry, and his MS and PhD in Microbiology and Immunology from the
Université Laval College of Medicine in Canada, and did his postdoctoral
training at the University of Florida under the mentorship of Dr.
Hillman.
Each of our directors hold office until
the next annual meeting of shareholders and until their successor is elected and
qualified, or as otherwise provided by the Company’s Bylaws or Florida
law. Our executive officers serve at the pleasure of our Board of
Directors until their successors are elected or qualified and subject, in
certain cases to employment agreements we have entered into with our
officers. Mr. Hirsch, our Chief Executive Officer and Dr. Hillman,
our Chief Technology Officer have employment agreements with us. See
“Executive Compensation—Employment Contracts and Change in Control
Arrangements.”
Corporate
Governance
The property, affairs and business of
the Company are under the general management of our Board of Directors as
provided by the laws of the State of Florida and the Bylaws of the Company. The
Board of Directors conducts its business through meetings of the full Board and
through committees of the Board, and the Board of Directors has appointed
standing Audit, Compensation and Nominating Committees. The Audit Committee
currently consist of all of our board members due to the lack of any directors
that meet the independence or financial expert criteria for service on our Audit
Committee. The Compensation and Nominating Committees, consist of Ms.
Koski and Mr. Koski and the Board has determined that each such
person meets the requirements of independence for service on such committees in
accordance with [NYSE Amex, LLC] NYSE Amex Equities (formerly known as the
American Stock Exchange). None of the Compensation or Nominating Committee
members has ever been an officer or employee of the Company. We recently formed a
nominating committee and adopted a revised nominating committee
charter. As a result of the formation of a standing Nominating
Committee and adoption of a revised nominating committee charter the Company
does not believe there has been any change in security holder
nominations. The nominating Committee would consider a nominee
submitted by a security holder in a similar manner as are submitted by a board
members.
Code
of Ethics
We have
adopted Company Operating Principles, which are applicable to all of
our directors and employees, including our principal executive officer and our
principal financial officer. These operating principles encompass and constitute
our code of ethics. A copy of the Company Operating Principles can be
found on our website at www.oragenics.com. Any
possible future amendments to or waivers from the Company Operating Principles
will be posted on our website.
Section 16(a)
Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934 requires the Company's officers and
Directors and any persons who beneficially own more than ten percent of the
Company's Common Stock to file reports of ownership and changes in ownership of
such securities with the Securities and Exchange Commission Officers, Directors
and beneficial owners of more than ten percent of the Common Stock are required
by applicable regulations to furnish the Company with copies of all Section
16(a) forms they file. Based solely on its
review of copies of forms furnished to the Company and written representations
from the executive officers, directors and holders of ten percent or more of the
Company's Common Stock, the Company believes, all persons subject to the
reporting requirements with regard to the Common Stock complied with the
applicable filing requirements during 2009, except that following
the June 29, 2009 transaction between the Koski Family Limited Partnership
(“KFLP”) and the Company, the following individuals and entities were late in
the filing of Form 4s: the KFLP (together with its partners, which included our
directors Ms. Christine Koski and Mr. Robert Koski) were each two days late in
filing their Form 4s; our Chief Scientific Officer, Dr. Hillman was two days
late in filing his Form 4; and our Chief Financial Officer, Brian Bohunicky, was
two days late in filing his Form 4.
4
ITEM
11. EXECUTIVE COMPENSATION.
Compensation
of Directors
Directors
who are executive officers of the Company do not receive any cash compensation
for services on our Board.
Due
primarily to our limited operating capital, our director compensation program
during the year consisted of a onetime option grant in lieu of future meeting
fees. The one-time option grant was initially set at 65,000 shares,
which was amended to increase the option grant to 100,000 shares on May 9, 2008
and our then existing non-employee directors were granted an additional grant of
35,000 shares for the difference. Outside directors are reimbursed
for their expenses associated with travel to and from Board meetings and
meetings with management. Certain fees previously
earned by former non-employee directors for attending Board and Committee
meetings in the amount of $34,000 have been
deferred instead of being paid.
Provided
sufficient capital is determined to be available and in order to attract and
maintain participation of qualified directors, our board may revise the director
compensation program in the future to provide for payments for attendance of
meetings and of services on committees, and as chair of such
committees.
The following table sets forth the
compensation of our non-employee directors in 2009.
Director
Compensation
Name
|
Fees
Earned
or
Paid in
Cash
(1)
|
Option
Awards
($)
(2)
|
All
Other
Compensation
($)
(3)
|
Total
($)
|
||||||||||||
Christine
L. Koski
|
— | $ | 10,000 |
__
|
$ | 10,000 | ||||||||||
Robert
C. Koski
|
— | $ | 10,000 |
__
|
$ | 10,000 | ||||||||||
Richard
T. Welch
|
$ | 30,000 | — | — | $ | 30,000 | ||||||||||
Derek
G. Hennecke
|
$ | 6,000 | — | — | $ | 6,000 | ||||||||||
Kevin
H. Sills
|
$ | 6,000 | — | — | $ | 6,000 | ||||||||||
Marc
K. Siegel
|
$ | 3,000 | — | — | $ | 3,000 |
(1)
|
Amounts
represent cash compensation paid to these former directors during 2009 in
connection with their service on a special committee tasked
with exploring strategic alternatives on behalf of the
Company. This cash compensation was paid following the
successful completion of the investment of capital by the Koski Family
Limited Partnership in June 2009. Commensurate with such
transaction, Messrs. Welch, Hennecke and Sills resigned from our board of
directors and Ms. Christine Koski and Mr. Robert Koski were appointed to
our board. Mr. Siegel resigned as a director on May 9, 2009.
|
(2)
|
The
compensation amount reflected with respect to these awards represents the
2009 compensation expense associated with outstanding option grants to our
non-employee directors. Upon joining our board of directors in June 2009,
Ms. Christine Koski and Mr. Robert Koski as non-employee directors were
each granted options to acquire 100,000 shares of our common stock at
$0.10 per share in accordance with our director compensation
plan. On December 30, 2009 Ms. Koski and Mr. Koski each
exercised these options in full. The amounts reflected in the
table with respect to these awards represent the 2009 compensation expense
associated with such grants. The Company uses a Black-Scholes
option-pricing model to estimate the fair value of the stock option
grant. The use of a valuation model requires the Company to
make certain assumptions with respect to selected model
inputs. The average expected life is based on the contractual
term of the option and on the simplified approach provided by SAB
107. The risk-free interest rate is based on the U.S. Treasury
zero-coupon issues equal to the expected life assumed at the date of the
grant. As non-employee directors, the options previously awarded to
Messrs. Welch, Hennecke, Sills and Siegel in connection with their board
service were not exercised following their departure from our board of
directors and as such the shares covered by such options reverted back to
the pool of available shares covered by our stock option and incentive
plan.
|
(3)
|
No
other compensation was paid to the non-employee Directors except for
reimbursement for travel expenses to Board meetings, which did not exceed
$10,000 individually or in the aggregate for our non-employee
directors.
|
5
Compensation
of Executive Officers
The
following table sets forth the aggregate compensation in 2008 and 2009 for
services in all capacities paid or accrued by the Company to our Principal
Executive Officer and our next most highly compensated officers who earned more
than $100,000 in total salary and bonus during the fiscal year ended December
31, 2009 (the “Named Executive Officers”).
Summary
Compensation Table
Name and
Principal Position
|
Year
|
Salary ($)
|
Bonus $
|
Option
Awards ($)
(5)
|
All Other
Compensation ($)
(6)
|
Total ($)
|
||||||||||||||||
David
Hirsch, Chief
|
2009
|
$ | 214,583 | $ | 100,000 | $ | 413,211 | $ | 9,417 | $ | 737,211 | |||||||||||
Executive
Officer
(CEO),
President and
Principal
Executive
Officer
(“PEO”) (1)
|
2008
|
$ | 94,903 | $ | 50,000 | $ | 16,348 | $ | 23,744 | $ | 184,995 | |||||||||||
Jeffrey
D. Hillman
|
2009
|
$ | 182,278 |
__
|
$ | 318,205 | $ | 86,650 | $ | 587,133 | ||||||||||||
Chief
Scientific Officer (2)
|
2008
|
$ | 180,000 | — | $ | 34,069 | $ | 5,400 | $ | 219,469 | ||||||||||||
Brian
Bohunicky
|
2009
|
$ | 156,832 |
__
|
$ | 195,750 | $ | 3,840 | $ | 356,422 | ||||||||||||
Chief
Financial Officer
And
Principal Financial
Officer
(PEO) (3)
|
2008
|
— | — | — | — | — | ||||||||||||||||
Former Officer
|
||||||||||||||||||||||
Stanley
Stein
|
2009
|
$ | 39,824 |
__
|
__
|
$ | 120,000 | $ | 159,824 | |||||||||||||
Former
President, CEO
and
PEO (4)
|
2008
|
$ | 145,833 | $ | 75,000 | $ | 54,050 | $ | 40,000 | $ | 314,833 |
(1)
|
Mr.
Hirsch joined the Company as an executive on May 14, 2008 and was
subsequently appointed to Chief Operating Officer and entered into an
employment agreement with the Company. On July 1, 2008, Mr.
Hirsch also assumed the role of our Chief Financial Officer and Principal
Financial Officer. On March 18, 2009, Mr. Hirsch relinquished
his position as Chief Operating Officer and assumed the positions of
acting President, Chief Executive Officer and Principal Executive
Officer. In connection with his employment, Mr. Hirsch was
awarded a bonus of $50,000 during 2008 of which $33,333 was deferred and
subsequently paid during 2009. In June 2009 Mr. Hirsch was
awarded a bonus of $100,000 payable in 1,000,000 shares of our common
stock at a price per share of $0.10. This bonus was paid to Mr.
Hirsch in recognition of his efforts in guiding the Company through a
significant adverse liquidity crisis. On August 13, 2009, the Compensation
Committee also approved an increase in David Hirsch’s annual base salary
from $150,000 to $225,000.
|
(2)
|
Effective
December 1, 2009 Dr. Hillman’s annual salary was increased from $180,000
to $200,000. In addition, an amount of $81,250 in the other column
reflects payments to Dr. Hillman in December 2009, for compensation and
consulting fees that had previously been deferred. This amount
net of applicable fees was paid through the issuance of restricted common
stock to Dr. Hillman as part of our December 2009 Private placement
. See “Certain Relationships and Related Transactions and
Director Independence.”
|
(3)
|
Mr.
Bohunicky joined the Company in January 2009 and became our Chief
Financial Officer and Principal Financial Officer on June 29, 2009
following the Company’s financing transaction with the Koski Family
Limited Partnership and Mr. Bohunicky’s annual compensation was increased
by the Compensation Committee to $200,000. Included in Mr.
Bohunicky’s salary for 2009 is $25,000 in compensation that had been
deferred during a portion of the year which was paid to Mr. Bohunicky
immediately following the KFLP transaction in June 2009 in 250,000 shares
of our common stock at a price per share of
$0.10.
|
(4)
|
On
March 18, 2009, Mr. Stein resigned as our President, Chief Executive
Officer and Principal Executive Officer and was succeeded by Mr. Hirsch as
our acting President, Chief Executive Officer and Principle Executive
Officer. Pursuant to our separation agreement with Mr. Stein he
was to be paid a severance and provided consulting services to
us. Following a period in which no payments were made to Mr.
Stein under his separation agreement and the investment by the KFLP in
June 2009, we entered into a settlement and release agreement with Mr.
Stein August 31, 2009 pursuant to which we paid him $120,000
terminated the consulting agreement and Mr. Stein’s outstanding
options. Amounts paid to Mr. Stein as severance or in
connection with a settlement agreement are included
under “other
compensation.”
|
6
(5)
|
On
August 13, 2009, a portion of the shares covered by the
original option awards, (433,333 shares for Mr. Hirsch and 500,000
shares for Dr. Hillman) vested upon our stock price reaching
certain levels in the future. Following the acceleration of
vesting by the compensation committee, Mr. Hirsch's grant of options to
acquire 500,000 shares of our common stock at $0.49 per share
are now fully vested and exercisable (including the 433,333 shares
impacted by the acceleration of vesting) and Dr. Hillman's grant of
options to acquire 700,000 shares of our common stock at $0.85 per
share are now fully vested and exercisable (including the 500,000 shares
impacted by the acceleration of vesting). The impact of the
acceleration of vesting was $52,086 for Mr. Hirsch and $41,455
for Mr. Hillman which are included in options award
column. All other terms of the prior option awards, including
the share amounts covered by the options and exercise
price remained the same. In addition, the Compensation
Committee believes that the Company’s future success depends, in large
part, upon its ability to maintain a competitive position in attracting,
retaining and motivating key personnel. Accordingly, on December 1, 2009,
options to purchase a total of 5,631,800 shares of Company common stock
which are subject to time vesting and performance vesting were awarded to
Company executive officers and employees. The Company’s
President and Chief Executive Officer, Mr. David Hirsch, was awarded
options to acquire an aggregate of 1,337,500 shares of Company common
stock; Dr. Hillman was awarded options to acquire and aggregate of
1,025,000 shares of Company common stock, and Chief Financial Officer, Mr.
Brian Bohunicky was awarded options to acquire and aggregate of 725,000
shares of Company common stock. These option awards each have
exercise prices of $0.27 per share, which was the closing price on the
date the Compensation Committee granted the options. These
option awards were made pursuant to individual award agreements
substantially similar to the form of stock option agreement attached as an
exhibit to the Company’s Plan which has been previously filed with the
SEC. The amounts included in this column do not reflect compensation
actually received by the named executive officers. Instead the
amounts in this column represent the aggregate grant date fair value
computed in accordance with SFAS 123R. Under SEC rules relating to
executive compensation disclosure, the amounts shown exclude the impact of
estimated forfeitures related to service based vesting conditions. Fair
values relating to share grants have been determined under SFAS 123R and
were calculated using the common stock closing price on the date of grant
and multiplying that price by the number of shares subject to the share
grant. The equity-based compensation expense relating to the stock grants
is recognized over the requisite service period of the grant. For option
awards, we utilize the Black-Scholes option-pricing model to determine the
fair value on the date of the grant multiplied by the number of options
subject to the option grants in accordance with SFAS 123R. The
equity-based compensation expense relating to the stock option grants is
recognized over the requisite service period of the grant. For information
on the assumptions used to calculate the fair value of stock option
grants, refer to Footnote 1, “Organization and Significant Accounting
Policies,” to our financial statements in our Annual Report on Form 10-K
for the year ended December 31, 2009. These amounts
reflect our accounting expense for these awards, and do not necessarily
correspond to the actual value that will be recognized by the executive
officers. Other than our former executive officer, Mr. Stanley Stein, no
stock option awards received by our named executives above were forfeited
or cancelled during 2009.
|
(6)
|
Company’s
Simple IRA retirement plan requires the Company to match employee
contributions up to the first 3% of compensation earned and amounts
presented also include the Company’s matching contribution and the amounts
in this column represent such contributions. This column
excludes certain payments for personal benefits for Mr. Hirsch and Mr.
Hillman that do not exceed $10,000 individually or in the
aggregate.
|
Outstanding Equity Awards
The
following table provides information concerning unexercised options, stock that
has not vested, and equity incentive plan awards outstanding as of December 31,
2009:
7
OUTSTANDING
EQUITY AWARDS AT FISCAL 2009 YEAR-END TABLE
|
Option Awards
|
|||||||||||
Name
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
(1)
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
(1)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
|||||||
David
Hirsch
|
500,000(
|
(2)
|
—
|
0.49
|
5/30/2018
|
|||||||
1,000,000
|
|
0.27
|
12/01/2019
|
|||||||||
112,500
|
0.27
|
12/01/2019
|
||||||||||
125,000
|
0.27
|
12/01/2019
|
||||||||||
100,000
|
0.27
|
12/01/2019
|
||||||||||
|
|
|
||||||||||
Jeffrey
Hillman
|
75,000
|
—
|
0.74
|
09/08/2011
|
||||||||
700,000
|
(2) |
—
|
0.85
|
5/21/2018
|
||||||||
700,000
|
0.27
|
12/01/2019
|
||||||||||
100,000
|
0.27
|
12/01/2019
|
||||||||||
125,000
|
0.27
|
12/01/2019
|
||||||||||
100,000
|
0.27
|
12/01/2019
|
||||||||||
Brian
Bohunicky
|
500,000
|
0.27
|
12/01/2019
|
|||||||||
100,000
|
0.27
|
12/01/2019
|
||||||||||
100,000
|
0.27
|
12/01/2019
|
||||||||||
Former
Officer:
|
||||||||||||
Stanley
Stein (3)
|
—
|
—
|
—
|
—
|
—
|
|||||||
—
|
—
|
—
|
—
|
—
|
(1)
|
Of
the above total option share amounts awarded to Mr. Hirsch, Dr. Hillman
and Mr. Bohunicky, (i) 1,000,000, 700,000 and 500,000 shares,
respectively, are time vested and vest evenly on an annual basis over
three years, subject to earlier vesting upon a change in control of the
Company as defined in the award agreements; (ii) 112,500 , 100,000 and
100,000 shares respectively, vest upon the first calendar quarter in which
the Company reports a net profit in a Form 10-Q Report or Form 10-K Report
and expire on the earlier of (a) December 1, 2019 or (b) such date the
Company ceases to be required to file quarterly or annual reports with the
Securities and Exchange Commission (“SEC”), and (iii) 125,000, 125,000 and
125,000 shares, respectively, vest upon the Company achieving certain
performance goals tied to the shipment and invoicing of its consumer
products with a third of these options expiring if the Company has not
achieved the vesting performance targets by September 1, 2010, and another
third expiring if the Company has not achieved the vesting performance
targets by December 1, 2010, and another third expiring if the Company has
not achieved the vesting performance targets by March 1, 2011. To the
extent any of these option become vested and exercisable, they shall
expire December 1, 2019. In addition, included in the option
shares awarded to Mr. Hirsch and Mr. Hillman, are 100,000 shares each that
are subject to vesting based on certain scientific performance milestones
being achieved. These options expire and are void unless they
become vested and exercisable on or before December 31,
2011. To the extent these options become vested and
exercisable, they shall expire December 1,
2019.
|
8
(2)
|
On
August 13, 2009, a portion of the shares covered by the
original option awards, (433,333 shares for Mr. Hirsch and 500,000
shares for Dr. Hillman) vested upon our stock price reaching
certain levels in the future. Following the acceleration of
vesting by the compensation committee, Mr. Hirsch's grant of options to
acquire 500,000 shares of our common stock at $0.49 per share
are now fully vested and exercisable (including the 433,333 shares
impacted by the acceleration of vesting) and Dr. Hillman's grant of
options to acquire 700,000 shares of our common stock at $0.85 per
share are now fully vested and exercisable (including the 500,000 shares
impacted by the acceleration of vesting). All other terms of
the prior option awards, including the share amounts covered by the
options and exercise price remained the
same.
|
(3)
|
Mr.
Stein was originally granted 65,000 upon becoming a Director which vested
immediately. These shares expired on June 18, 2009 following
Mr. Stein’s resignation as a Director on March 18, 2009. Mr.
Stein’s other option grant of 750,000 shares consisted of 100,000 of the
option shares that became exercisable on April 9, 2008 and the remaining
650,000 option shares become exercisable, upon the Company's stock
reaching certain share prices as follows: 150,000 option shares if reaches
$1.00 per share, 150,000 option shares if reaches $2.00 per share, 150,000
option shares if reaches $3.00 per share and 200,000 option shares if
reaches $5.00 per share. This option award was amended to continue in
connection with Mr. Stein’s consultant agreement with the
Company. Pursuant to a subsequent agreement with Mr. Stein on
August 31, 2009 his consulting arrangement with us and his options were
terminated.
|
There
were no stock options exercised by the named executive officers during the year
ending December 31, 2009. No stock awards were made during
2009. We do not have any long-term incentive plans that provide
compensation intended to serve as incentives for performance other than options
granted pursuant to our Amended and Restated 2002 Stock Option and Incentive
Plan.
Employment Contracts and Change in
Control Arrangements
Our
Chief Executive Officer and President, Mr. David Hirsch began working for us as
a consultant in April 2008 and became a full time employee in May
2008. In connection with Mr. Hirsch’s appointment, effective June 27,
2008, as our Chief Operating Officer, Mr. Hirsch entered into an employment
agreement with us which was amended on July 15, 2008 when he also became our
Chief Financial Officer upon the retirement of our former chief financial
officer. The initial term of Mr. Hirsch’s Employment Agreement was
for one year, and was automatically extended for successive one year renewal
terms. Pursuant to his employment agreement, Mr. Hirsch initially
received an annual salary of not less than $150,000 and was eligible to receive
bonuses at the discretion of the Compensation Committee of the Board of
Directors. Mr. Hirsch was granted stock options to acquire 500,000
shares of common stock under the Stock Option Plan. These options
were scheduled to vest as follows: 66,667 shares vest immediately, 100,000
shares on the dates which the Company’s stock price equals or exceeds $1.00 per
share, $2.00 per share and $3.00 per share respectively, and 133,333 shares on
the date which the Company’s stock price equals or exceeds $5.00 per
share.
If
Mr. Hirsch is involuntarily terminated he shall receive his base salary accrued
through the date of termination, and any nonforfeitable benefits earned and
payable to him under the terms of the deferred compensation, incentive or other
benefit plan, payable in accordance with the terms of the applicable
plan. In addition, if Mr. Hirsch’s separation from employment is not
voluntary, for cause or due to death or disability, the Company would be
obligated to pay Mr. Hirsch a series of nine (9) equal monthly payments equal to
one-twelfth (1/12th) of his
annual base salary in effect on the date of such termination as severance and
any unvested options shall vest. If he is terminated for cause, he
shall be entitled to receive his base salary accrued through the date of
termination and any nonforfeitable benefits already earned and payable to Mr.
Hirsch under the terms of the deferred compensation or incentive plans
maintained by the Company. If Mr. Hirsch voluntarily resigns, he shall be
entitled to this base salary accrued through termination and any nonforfeitable
benefits already earned and payable to Mr. Hirsch under the terms of the
deferred compensation or incentive plans maintained by the
Company. In the event of a Change in Corporate Control the vesting of
any stock options or other awards under the terms of the Stock Option Plan shall
become immediately vested in full and in the case of stock options exercisable
in full. If Mr. Hirsch is terminated within six months of a change in
control (as such term is defined in his employment agreement), Mr. Hirsch would
be entitled to receive, in lieu of the foregoing severance payment described
above, a series of twenty-four (24) equal monthly payments equal to one twelfth
(1/12) of Mr. Hirsch’s annual base salary in effect at the time of a change in
control. The employment agreement also includes non-disclosure and
non-compete provisions as well as a lump sum payment equal to the sum of the
executive’s accrued base salary, unpaid amounts of any bonuses earned with
respect to the fiscal year of the Company most recently ended and the death
benefits payable under any retirement, deferred compensation or other employee
benefit plan maintained by the Company in the event of an executive’s death
during the term of the agreement.
9
Mr.
Hirsch became our Acting President and Chief Executive Officer effective March
18, 2009. He also continued in his role as our Chief Financial
Officer. Mr. Hirsch did not receive any adjustment in his
compensation upon assuming the role of our acting President and Chief Executive
Officer. On June 29, 2009, immediately following the KFLP
Transaction, Mr. Hirsch became our President and Chief Executive Officer and
relinquished his position as Chief Financial Officer to Mr.
Bohunicky. On August 13, 2009, the Compensation Committee approved
acceleration of the vesting of the unvested, unexerciseable options awarded to
Mr. Hirsch and approved an increase in his annual base salary to
$225,000.
We
have an employment agreement with Jeffrey D. Hillman, our Chief Scientific
Officer. His three-year agreement commenced on January 1, 2004 and provides for
automatic one-year extensions after December 31, 2007. Under the terms of
our employment agreement with Dr. Hillman, we are obligated to pay Dr.
Hillman compensation of $180,000. He is also eligible for participation in
incentive stock compensation plans. The employment agreement also provides for
other benefits including the right to participate in fringe benefit plans, life
and disability insurance plans, expense reimbursement and 20 days accumulating
vacation/sick leave annually. If Dr Hillman is terminated by the Company without
cause (as defined in the agreement) or within twelve months following a change
of control (as defined in the agreement), or if he leaves for good reason (as
defined in the agreement), he will be entitled to severance payments, at his
then annual base salary and all stock options granted to the executive and any
benefits under any benefit plans shall become immediately vested and to the
extent applicable, exercisable. If Dr. Hillman voluntarily resigns he
shall receive no further compensation after the effective date of such
resignation. The employment agreement also includes non-disclosure
and non-compete provisions, as well as salary payments for a three month period
in the event of an executive’s death or disability during the term of the
agreements. Dr. Hillman was awarded options to acquire 700,000 share
of common stock on May 21, 2008. These options vested as follows:
200,000 shares immediately and the remaining 500,000 shares were scheduled to
vest when the Company’s stock price reaches certain levels (150,000 shares vest
at $1.00 per share, 150,000 shares vest at $2.00 per share and 200,000 share
vest at $3.00 per share). On August 13, 2009 the Compensation
Committee approved the accelerated vesting of the unvested, unexerciseable
options.
On April
8, 2008, we entered into an employment agreement with our former Chief Executive
Officer and President, Mr. Stanley Stein. Mr. Stein’s initial
compensation arrangement was pursuant to an offer letter that provided for an
annual rate of compensation of $175,000 and relocation expenses of $10,000.
Mr. Stein also was compensated in the amount $30,000 in connection with his
initially commencing services and was expected to receive an award of stock
options under our Amended and Restated 2002 Stock Option and Incentive
Plan. The initial term of the Employment Agreement was for one year
and was subject to automatically being extended for successive one year renewal
terms. Pursuant to the employment agreement Mr. Stein received an
annual salary of not less than $175,000 and was eligible to receive bonuses at
the discretion of the Compensation Committee of the Board of
Directors. Mr. Stein was granted stock options to acquire 750,000
shares of common stock under our Amended and Restated 2002 Stock Option and
Incentive Plan (the “Stock Option Plan”). The options were subject to
vesting as follows: 100,000 shares on April 9, 2008; 150,000 shares
on the dates which the Company’s stock price equals or exceeds $1.00 per share,
$2.00 per share and $3.00 per share respectively, and 200,000 shares on the date
which the Company’s stock price equals or exceeds $5.00 per
share. Mr. Stein resigned as President, Chief Executive Officer and
Director effective March 18, 2009 and his employment agreement was
terminated. In connection with Mr. Stein’s separation from employment
he was to be paid his accrued compensation earned through the date of
termination, which included an accrued bonus payment of $50,000 upon the
occurrence of certain specified events. In addition, Mr. Stein was to
be paid $1,500 for nine months to cover post-separation
expenses. After separation from employment with us, Mr. Stein also
became a consultant to the Company with his previously granted options
continuing so long as Mr. Stein served as a consultant to the
Company. On August 31, 2009, pursuant to a subsequent agreement with
Mr. Stein, all continuing obligations and payments to Mr. Stein including his
consulting agreement and options were terminated in exchange for a onetime
payment of $120,000. As a result of Mr. Stein’s resignation in March
2009, Mr. Hirsch was appointed to serve as our acting President and Chief
Executive Officer.
10
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The
following table sets forth, as of April 21, 2010, certain information concerning
the beneficial ownership of each class of our voting securities by:
(i) each person known by us to own beneficially five percent (5%) or
more of the outstanding shares of our common stock, (ii) each of our
Directors and named executive officers, and (iii) all executive officers
and Directors as a group.
The
number of shares beneficially owned by each 5% stockholder, Director or named
executive officer is determined under rules of the SEC and the information is
not necessarily indicative of beneficial ownership for any other purpose. Under
those rules, beneficial ownership includes any shares to which the individual
has sole or shared voting power or investment power and also any shares that the
individual has the right to acquire within 60 days after April 21, 2010 through
the exercise of any stock option, warrant or other right, or conversion of any
security. Unless otherwise indicated, each person has sole investment and voting
power (or shares such power with his or her spouse) with respect to the shares
set forth in the following table. The inclusion in the table below of any shares
deemed beneficially owned does not constitute an admission of beneficial
ownership of those shares.
Name
and Address (1)
|
Number of Shares
Beneficially Owned
|
Percentage of
Ownership(2)
|
||||||
5%
Shareholder
|
||||||||
Koski
Family Limited Partnership (3)
|
59,140,000 | 54.7 | % | |||||
George
T. Hawes (4)
|
13,845,123 | 12.5 | % | |||||
Directors
and Officers
|
||||||||
David
B. Hirsch (5)
|
1,500,000 | 1.3 | % | |||||
Jeffrey
D. Hillman (6)
|
5,433,958 | 5.2 | % | |||||
Christine
Koski (7)
|
55,853,333 | 51.6 | % | |||||
Robert
Koski (8)
|
56,813,333 | 52.5 | % | |||||
Brian
Bohunicky (9)
|
250,000 | * | ||||||
All
Officers and Directors as a Group
(6 Persons)
|
63,490,624 | 58.7 | % |
* less
than one percent
(1)
|
Except
as indicated, the address of the person named in the table is c/o 13700
Progress Boulevard, Alachua, Florida
32615.
|
(2)
|
For
each person and group included in this table, percentage ownership is
calculated by dividing the number of shares beneficially owned by such
person or group by the sum of 108,083,148 shares of common stock
outstanding as of April 21, 2010, plus the number of shares of common
stock that such person has the right to acquire within 60 days after
September 16, 2009.
|
11
(3)
|
Based
upon information provided by the Koski Family Limited Partnership (“KFLP”)
in the amendment to its Schedule 13D filing with the SEC on February 15,
2010, includes (i) 54,960,000 shares held directly by the KFLP, and (ii)
893,333 shares held by KFLP partner Christine Koski, 453,333 held by KFLP
partner Robert Koski, 40,000 shares held by KFLP partner, Koski
Management, Inc. (solely owned by Beverly Koski), 1,393,334 shares held by
KFLP partner, Thomas Koski and 1,400,000 shares held in trusts which
Robert Koski serves as a trustee. (See note 8 below.) The address for the
KFLP is 3525 Turtle Creek Boulevard, Unit 19-B, Dallas, Texas
75219.
|
(4)
|
Based
upon information provided by Mr. Hawes in his filings with the SEC (Form 5
and Form 4’s). The amount of shares includes 11,287,345 owned
directly (as reflected on Form 4 dated April 15, 2010), and 2,557,778
shares issuable pursuant to currently exercisable warrants and excludes
100,000 shares of common stock and warrants to purchase 105,000 shares of
common stock owned by Mr. Hawes wife for which he disclaimed beneficial
ownership. Mr. Hawes address, as reflected in Schedule 13D/A (and Form 5
and Form 4), is 390 Plandome Road, Suite 222, Manhasset, New York
11030.
|
(5)
|
Includes
500,000 shares of common stock from currently exercisable options awarded
to Mr. Hirsch in connection with his employment with us and excludes an
aggregate of 1,337,500 shares able to be acquired pursuant to stock
options which have not vested.
|
(6)
|
Includes
4,056,914 shares held by the 2002 Jeffrey Hillman Trust, 785,664 shares
held directly by Jeffrey D. Hillman and 775,000 shares pursuant to
currently exercisable outstanding options and excludes an aggregate of
1,025,000 shares able to be acquired pursuant to stock options which have
not vested.
|
(7)
|
In
addition to the shares reflected as being directly owned by the KFLP in
note (3), the share amounts include 893,333 shares owned directly by Ms.
Koski (which includes 100,000 shares of our common stock acquired during
the year upon exercise of director
options).
|
(8)
|
In
addition to the shares reflected as directly owned by the KFLP in note
(3), the share amounts include: (i) 453,333 shares owned directly by Mr.
Koski (which includes 100,000 shares of our common stock acquired during
the year upon exercise of director options) and (ii) 1,400,000
shares owned by trusts which Mr. Koski serves as sole trustee as follows:
the Robert Clayton Koski Trust for the benefit of Anthony James Hunter
(200,000 shares); The Robert Clayton Koski Trust for the benefit of Hunter
Buchanan Koski (500,000 shares); The Robert Clayton Koski Trust for the
benefit of Clayton Ward Bennett (500,000 shares); and The Robert Clayton
Koski Trust for the benefit of Robert Edward Koski (200,000
shares).
|
(9)
|
Excludes
an aggregate of 725,000 shares able to be acquired pursuant to stock
options which have not vested.
|
12
ITEM 13. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The Audit
Committee of the Board of Directors (or, to the extent applicable, our
disinterested directors) is responsible for reviewing all transactions between
the Company and any officer or Director of the Company or any entity in which an
officer of Director has a material interest. Any such transactions must be on
terms no less favorable than those that could be obtained on an arms-length
basis from independent third parties.
Consulting
Fees
In
December 2009, we paid Dr. Hillman, our director and Chief Scientific Officer,
$55,000 for consulting services he provided to us in 2001 and
2002. No interest was accrued on this outstanding
obligation. At the same time we paid Dr, Hillman $26,250 for salary
deferred prior to 2008. Together these amounts, net of applicable
taxes , totaled $54,063 were paid through the issuance of 216,250 shares of
restricted common stock at a price per share of $0.25 in accordance with Dr.
Hillman’s participation in the December 2009 Private Placement discussed
below.
Our former director, Dr. Marc Siegel
entered into a consulting agreement with us to provide certain media relations
services to us. In connection with Dr. Siegel’s services as a
consultant he was paid $9,600 in 2008. Mr. Siegel resigned as a
director on May 9, 2009.
Financing
Transactions
The
June 2009 Private Placement.
On June
29, 2009, we successfully entered into and consummated a private placement of
equity and debt financing pursuant to a securities purchase agreement (the
“Purchase Agreement”) with an accredited investor. Pursuant to the
terms of the Purchase Agreement the Company issued 50,000,000 shares of its
Common Stock to the Koski Family Limited Partnership (“KFLP”) and issued
warrants to the KFLP to acquire 1,000,000 shares of Company common stock at an
exercise price of $0.10 per share in exchange for $4,000,000, the payment of
which consisted of the following: $1,500,000 in cash at closing and $2,500,000
pursuant to a non-interest bearing promissory note providing for five
consecutive monthly installment payments of $500,000 commencing July 31, 2009
and the KFLP provided a secured loan of $1,000,000 to the
Company. The loan was secured by substantially all of our assets
(excluding receivables) and bore interest at the rate of Prime plus 4.0% payable
quarterly. The principal of the loan was due in five
years. The warrants expired in five years and were immediately
exercisable. We also agreed to provide the KFLP with certain
registration rights in connection with any underwritten or other offering by us
over the next five years. Specifically, we shall include 15% of the
total number of shares publicly offered from the shares to be sold by us to the
KFLP. Effective upon the closing of the transaction contemplated by
the Purchase Agreement, directors Welch, Hennecke and Sills resigned from our
Board of Directors and our President and CEO, Mr. David Hirsch as well as Ms.
Christine Koski and Mr. Robert Koski were appointed to fill the vacancies
created by such resignations, with Ms. Koski being elected as Chairperson of our
board. Ms. Koski and Mr. Koski are siblings and partners in the
KFLP. As a result of the transaction the board of directors believes
there was a change of control of the Company with the KFLP acquiring a
controlling interest of approximately 56.6 % of our then outstanding voting
common stock.
In
addition to the above, as a further condition to the consummation of the
transaction contemplated by the Purchase Agreement we were required to obtain
satisfactory arrangements with three main creditors for reductions in the
amounts payable by the Company to them. As of June 30, 2009, these reductions
amounted to $707,674 in aggregate and were conditioned upon prompt payment of
the remaining balances owed to such creditors after taking into account the
agreed upon reductions. As of December 31, 2009, the amount of reductions
arranged with our creditors totaled $832,959. These agreed upon reductions in
payables were reflected in our financial statements for the period and reported
under other income.
In
connection with, and as a closing condition to the Purchase Agreement, the
purchasers, (including George Hawes our largest shareholder prior to the June
2009 Private Placement), under that certain securities purchase agreement dated
June 12, 2008, (the “June 2008 Private Placement”) entered into waiver and
release agreements with us on June 25, 2009. In addition, such
individuals waived and relinquished any special rights they possessed pursuant
to agreements with the Company, including, but not limited to, (i) rights of
first refusal (ii) antidilution regarding future equity sales and (iii)
covenants regarding secured lending contained in the June 2008 Private
Placement. In connection with such waivers and releases, warrants to
acquire 3,220,000 shares of our common stock at an exercise price of $1.30 per
share that were previously issued under the June 2008 Private Placement were
subject to the right of exchange for new replacement warrants to acquire the
same number of shares under the same terms except for a change in the exercise
price from $1.30 to $0.75. In addition, to the extent of any future underwritten
registered offerings of our common stock, or the filing of any resale
registration statement, in each case occurring within five years from the date
of the waiver and release, the purchasers shall have the right to include an
aggregate of up to 5% of the shares being registered in such offering or
registration statement, subject to the discretion, in any underwritten primary
offerings, of the underwriter on the inclusion of shares in the offering to be
sold by selling shareholders.
13
The
December 2009 Private Placement.
On
December 30th, 2009,
we completed the initial closing of a private placement of equity pursuant to a
Common Stock Purchase Agreement (the “Securities Purchase Agreement”) with
accredited investors. The Company issued 10,016,250 shares of its Common Stock
at a price of $0.25 per share to the investors for $2,504,062, the payment of
which consisted of the following: $2,450,000 in cash at closing and $54,063
pursuant to the cancellation of the same dollar amount of outstanding deferred
compensation obligation owed by the Company to Dr. Jeffrey Hillman, our Chief
Scientific Officer and director. Approximately half of the total investment, or
$1,250,000, was made by the KFLP. In conjunction with, and as a condition to
closing of the financing, the KFLP was issued 4,000,000 shares of the Company's
Common Stock at $0.25 per share, which was the same price per share paid by the
investors, in exchange for the cancellation of its $1.0 million secured note.
The loan originally had been secured by substantially all of the Company's
assets (excluding receivables) and required interest payments at the rate of
Prime plus 4.0% which were payable quarterly.
Contemporaneously
with the financing transaction contemplated by the Securities Purchase
Agreement, the KFLP also elected to exercise previously issued warrants (issued
on June 30, 2009 as part of the June 2009 Private Placement) to purchase
1,000,000 shares of Company Common Stock. The warrants were exercised through
the payment by the KFLP of the warrant exercise price of $0.10 per share.
Additionally, Christine L. Koski and Robert C. Koski, as Directors of the
Company, each exercised previously issued options to purchase 100,000 shares of
the Company's Common Stock at the option exercise price of $0.10 per share.
These options were automatically granted to both Christine and Robert Koski when
they became non-employee directors of the Company on June 30, 2009.
On
January 13, 2010, we completed the $3,004,062 private placement contemplated by
the Securities Purchase Agreement and December 2009 Private Placement and issued
another 2,000,000 shares of common stock at a price of $0.25 per share to the
accredited investors for $500,000. Of this amount the KFLP again participated in
one half of the remainder of the aggregate investment by acquiring 1,000,000
shares for $250,000.
The June 2008 Private
Placement.
On June
12, 2008, our Securities Purchase Agreement (“SPA”) with two accredited
investors became binding and we closed on $2,600,000 in equity based financing
with net proceeds of $2,515,000. We issued a total of 5,777,778 shares of
restricted common stock in the private placement. The shares were sold to two
accredited investors (including our largest shareholder and affiliate, Mr.
George T. Hawes) at $0.45 per share. Each participating investor also received
warrants to purchase shares of common stock at the price of $1.30 per share. One
warrant was issued for each share of common stock issued for a total of
5,777,778 shares that may be acquired upon exercise of the warrants. The
warrants are exercisable and expire June 12, 2013. In addition, Mr. George T.
Hawes, acquired certain rights pursuant to the SPA. However, these rights were
the subject of the waiver and release agreement noted above under the June 2009
Private Placement and were waived by Mr. Hawes as a condition precedent to such
financing and such rights are no longer in force or effect.
Warrant
Exercises.
On August
7, 2007, we closed on $1,171,591 in equity based financing. We issued a total of
4,600,000 shares of restricted common stock and warrants to acquire 4,600,000
shares of common stock in a private placement to accredited investors. The
shares were sold to accredited investors at $0.25 per share, except that per
stock exchange requirements, a former director, acquired his shares at $0.44 per
share, which was the closing share price on August 7, 2007. One of our largest
shareholders at the time, George Hawes participated in this offering and
acquired 1,100,000 shares and 1,100,000 warrants. Each warrant to purchase
shares of common stock is exercisable at the price of $0.58 per share. The
warrants expired on August 8, 2008 (the “August 2007 Warrants”). On January 31,
2008 we amended the August 2007 Warrants, to reduce the exercise price to $0.44,
which was the fair market value on the date of the amendment for a designated
period of time (from January 28, 2008 to February 29, 2008) following which the
exercise price reverted back to $0.58. Prior to the expiration of the August
2007 Warrants, 3,386,364 shares were issued upon exercise at the amended
exercise price. George Hawes acquired 500,000 shares at the reduced exercise
price.
14
Relationships
During 2008, Dr. Zahradnik’s wife
provided administrative services to the Company as an independent contractor on
an as-needed basis at an hourly rate and was paid an aggregate of $5,925 during
fiscal 2008. As of February 15, 2008, Ms. Zahradnik was no longer
providing these services to the Company.
During 2008 and 2009 we paid $201,665
and $150,406 to a law firm that employs our director, Dr. Hillman’s daughter and
for which we received intellectual property related legal services.
ITEM 14. PRINCIPAL
ACCOUNTANT FEES AND SERVICES.
Audit
and Other Fees
The
following table presents fees incurred for
professional audit services
rendered by our independent registered public accounting
firm, Kirkland, Russ, Murphy
and Tapp, PA for the audit of
our financial statements for the years ended December 31, 2009 and
December 31, 2008, and fees for other services
rendered by Kirkland, Russ, Murphy and Tapp
and other accounting firms whom assisted on special projects during those
periods.
Type of Fees
|
2009
|
2008
|
||||||
Audit
Fees (1)
|
$ | 124,625 | $ | 110,150 | ||||
Audit-Related
Fees (2)
|
37,037 | 8,075 | ||||||
Tax
Fees (3)
|
3,100 | 3,000 | ||||||
All
Other Fees (4)
|
14,821 | — | ||||||
Total
|
$ | 179,583 | $ | 121,225 |
(1) Audit Fees: These fees consist of aggregate fees billed or to
be billed by Kirkland, Russ, Murphy and Tapp, PA of $124,625 for professional
services rendered in connection with their audit of the Company’s 2009 and 2008
financial statements, respectively, including the review of the financial
statements included in the Company's Quarterly Reports on Form
10-Q.
(2) Audit-Related
Fees: There were fees billed by Edward Leiber, CPA and
Kirkland, Russ, Murphy and Tapp, PA for assurance and related services that are
reasonably related to the performance of the audit or review of the Company's
financial statements that are not reported above under the caption "Audit
Fees."
(3) Tax Fees: There
were fees billed by Kirkland, Russ, Murphy and Tapp, PA for professional
services for tax compliance and tax advice.
(4) All Other
Fees: There were fees billed by Taylor White Accounting firm
in 2009 of $14,821 in connection with the professional services associated with
the Company’s compliance with the Sarbanes-Oxley Act of 2002 filings for small
businesses. No other fees were billed for 2008.
The Audit
Committee approves in advance all audit and non-audit services to be performed
by the Company’s independent registered public accounting firm. The
Audit Committee considers whether the provision of any proposed non-audit
services is consistent with the SEC’s rules on auditor independence and has
pre-approved certain specified audit and non-audit services to be provided by
Kirkland, Russ, Murphy and Tapp, PA for up to twelve (12) months from the date
of the pre-approval. If there are any additional services to be
provided, a request for pre-approval must be submitted by management to the
Audit Committee for its consideration.
15
Pre-Approval
Policies and Procedures
The Audit
Committee approves in advance all audit and non-audit services to be performed
by the Company’s independent registered public accounting firm. The
Audit Committee considers whether the provision of any proposed non-audit
services is consistent with the SEC’s rules on auditor
independence. If there are any additional services to be provided, a
request for pre-approval must be submitted by management to the Audit Committee
for its consideration.
16
PART
IV
ITEM
15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
Incorporated by reference to the
Exhibit Index immediately following the signature page.
17
SIGNATURES
Pursuant
to the requirements of Section 13 and 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this amended report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: April
26, 2010
ORAGENICS, INC.
|
|
By:
|
/s/
David B. Hirsch
|
David
B. Hirsch, President and Chief
Executive Officer, and Principal Executive Officer. |
18
EXHIBIT
INDEX TO FORM 10-K/A
Exhibit
Number
|
Description
of Document
|
|
31.1*
|
Rule
13a-14(a)/15d-14(a) Certification
|
|
31.2*
|
Rule
13a-14(a)/15d-14(a) Certification
|
|
*Filed
herewith
|