-----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, NHmYcEUHCtRQEfoGpHtv8NemW2k4OhLZyHAsi1zQgxfmu7CzdzIPiZ8AgDf6wVMD Ti4svWrtYblegBNwLDbYTw== 0000351532-00-000006.txt : 20000428 0000351532-00-000006.hdr.sgml : 20000428 ACCESSION NUMBER: 0000351532-00-000006 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000427 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERFERON SCIENCES INC CENTRAL INDEX KEY: 0000351532 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 222313648 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 000-10379 FILM NUMBER: 610379 BUSINESS ADDRESS: STREET 1: 783 JERSEY AVE CITY: NEW BRUNSWICK STATE: NJ ZIP: 08901 BUSINESS PHONE: 9082493250 MAIL ADDRESS: STREET 1: 783 JERSEY AVENUE STREET 2: 783 JERSEY AVENUE CITY: NEW BRUNSWICK STATE: NJ ZIP: 08901 10-K/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A /X/ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Fiscal Year Ended December 31, 1999 / / 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 0-10379 INTERFERON SCIENCES, INC. (Exact name of registrant as specified in its charter) Delaware 22-2313648 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 783 Jersey Avenue, New Brunswick, New Jersey 08901 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (732) 249-3250 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, Par Value $0.01 Per Share (Title of Class) 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 X 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. / / As of April 1, 2000, the aggregate market value of the outstanding shares of the registrant's Common Stock, par value $.01 per share, held by non-affiliates (assuming for this calculation only that all officers and directors are affiliates) was approximately $14,500,000 based on the last reported sale price of such stock on the OTC Bulletin Board on April 1, 2000. Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Class Outstanding at April 1, 2000 ----- ------------------------------ Common Stock, par value $.01 per share 5,387,473 shares DOCUMENTS INCORPORATED BY REFERENCE None. The Company's 10K for the year ended December 31, 1999 is hereby amended by including Part III as follows: PART III Item 10. Directors and Executive Officers of the Registrant Set forth below are the officers and directors of the Company as of April 1, 1999. Samuel H. Ronel, Ph.D. has been Chairman of the Board since February 1997 and was Vice Chairman of the Board from January 1996 to February 1997 and President, Chief Executive Officer, and a director of the Company from 1981 to January 1996. He was responsible for the interferon research and development program since its inception in 1979. Dr. Ronel joined GP Strategies Corporation ("GP Strategies") in 1970 and served as the Vice President of Research and Development of GP Strategies and as the President of Hydro Med Sciences, a division of GP Strategies, from 1976 to September 1996. Dr. Ronel served as President of the Association of Biotechnology Companies, an international organization representing United States and foreign biotechnology firms, from 1986-88 and has served as a member of its Board of Directors until 1993. Dr. Ronel was elected to the Board of Directors of the Biotechnology Industry Organization from 1993 to 1995 and to the Governing Body of the Emerging Companies Section from 1993 to 1997. Since 1999 he has been a member of the Technology Advisory Board of the New Jersey Economic Development Authority. Age 63. Lawrence M. Gordon has been Chief Executive Officer and a director of the Company since January 1996, Vice President of the Company from June 1991 to January 1996, General Counsel of the Company from 1984 to January 1996. Age 46. Stanley G. Schutzbank, Ph.D. has been President of the Company since January 1996, Executive Vice President of the Company from 1981 to January 1996, and a director of the Company since 1981 and has been associated with the interferon research and development program since its inception in 1979. He is involved with all facets of administration and planning of the Company and has coordinated compliance with FDA regulations governing manufacturing and clinical testing of interferon, leading to the approval of ALFERON N Injection in 1989. Dr. Schutzbank joined GP Strategies in 1972 and served as the Corporate Director of Regulatory and Clinical Affairs of GP Strategies from 1976 to September 1996 and as Executive Vice President of Hydro Med Sciences from 1982 to September 1996. Dr. Schutzbank is a member of the Regulatory Affairs Professionals Society and has served as Chairman of the Regulatory Affairs Certification Board from its inception until 1994. Dr. Schutzbank received the 1991 Richard E. Greco Regulatory Affairs Professional of the Year Award for his leadership in developing the United States Regulatory Affairs Certification Program. In September 1995, Dr. Schutzbank was elected to serve as President-elect in 1996, President in 1997, and Chairman of the Board in 1998 of the Regulatory Affairs Professionals Society. Age 56. Sheldon L. Glashow, Ph.D. has been a director of the Company since 1991. He has been a director of GP Strategies since 1987, a director of GSE Systems, Inc. since 1995, and a director of CalCol, Inc. since 1994. Dr. Glashow is the Higgins Professor of Physics and the Mellon Professor of the Sciences at Harvard University. He was a Distinguished Professor and visiting Professor of Physics at Boston University. In 1971, he received the Nobel Prize in Physics. Age 67. Item 11. Executive Compensation The following table presents the compensation paid by the Company to its Chief Executive Officer and the Company's four most highly compensated executive officers for 1999.
SUMMARY COMPENSATION TABLE Long-Term Annual Compensation Compensation Awards ------------------- ----------------------------- Stock All Other Year Salary Bonus Options Compensation Name and Principal Position ($) ($) (#) ($) (3) - --------------------------- ---- ------ ------ -------- ------------ Lawrence M. Gordon (1) 1999 135,800(1) - 0 - 400,000 9,059 Chief Executive Officer 1998 270,000 103,000 60,000 10,000 1997 135,000(2) - 0 - 42,525 4,718 Samuel H. Ronel, Ph.D. 1999 103,000(1) - 0 - 250,000 8,916 Chairman of the Board 1998 213,000 27,000 40,000 10,000 1997 205,154 - 0 - 51,200 5,083 Stanley G. Schutzbank, Ph.D. 1999 123,400(1) - 0 - 400,000 8,261 President 1998 251,000 77,000 60,000 10,000 1997 231,302 - 0 - 51,750 4,860 James Knill, M.D. 1999 120,800(1) - 0 - 50,375 12,692 Vice President 1998 170,000 16,800 10,000 10,000 Medical Affairs 1997 130,646 - 0 - 15,400 3,582 Mei-June Liao, Ph.D. 1999 113,200(1) - 0 - 81,075 6,952 Vice President, Research 1998 133,000 16,500 15,000 7,500 and Development 1997 122,380 - 0 - 7,325 3,744 - ------------ (1) In 1999, due to the financial condition of the Company, Messrs. Gordon, Ronel, Schutzbank, Knill and Ms. Liao, reduced the amount of time they spent on Company business. (2) In 1997, Mr. Gordon spent 60% of his time working on the Company's business. (3) Matching contribution by the Company to the 401(k) Savings Plan and payments by the Company for Group Term Life.
The following table sets forth information for the named executive officers regarding the unexercised options held at the end of 1999. No options were exercised by the named executive officers in 1999.
AGGREGATED DECEMBER 31, 1999 OPTION VALUES Number of Unexercised Value of Unexercised Options at In-the-Money Options at December 31, 1999(#) December 31, 1999($)(1) Exercisable/Unexercisable Exercisable/Unexercisable ------------------------- ------------------------- Lawrence M. Gordon 165,653 343,352 $8,282 $17,167 Samuel H. Ronel, Ph.D. 103,469 208,796 5,173 10,439 Stanley G. Schutzbank, Ph.D. 153,535 331,340 7,676 16,567 James Knill, M.D. 19,634 44,141 981 2,207 Mei-June Liao, Ph.D. 30,363 68,752 1,518 3,437 - ------------------- (1) Calculated based on the closing price of the Common Stock as reported on the OTC Bulletin Board on December 31, 1999.
Item 12. Security Ownership Of Directors And Named Executive Officers Principal Stockholders The following table sets forth the number of shares of Common Stock beneficially owned as of April 1, 2000, by each person who is known by the Company to own beneficially more than 5% of the Company's outstanding Common Stock.
Name and Address Number of Shares of Beneficial Owner Beneficially Owned - ------------------- ------------------ GP Strategies Corporation 969,000 (1) 9 West 57th Street Suite 4170 New York, NY 10019 (1) Includes 500,000 shares which may be acquired upon the exercise of a warrant, exercisable until March 2004, at a price of $1.00 per share.
The following table sets forth, as of April 1, 2000, beneficial ownership of shares of Common Stock of the Company by each director, each of the named executive officers and all directors and executive officers as a group.
Of Total Number of Shares Beneficially Total Number Percent of Owned of Shares Common Shares which Beneficially Stock May be Acquired Name Owned Owned(1) Within 60 Days - ---- ---------- ---------- ----------------- Samuel H. Ronel, Ph.D. 313,765 5.5% 176,617 Lawrence M. Gordon 509,905 8.6% 287,329 Stanley G. Schutzbank, Ph.D. 484,875 8.3% 269,205 Sheldon L. Glashow 22,250 * 19,350 Directors and Executive Officers 1,608,003 23% 906,539 as a Group (8 persons) ------------- * The number of shares owned is less than one percent of the outstanding shares of Common Stock. (1) The percentage of class calculation assumes for each beneficial owner that all of the options or warrants are exercised in full only by the named beneficial owner and that no other options or warrants are deemed to be exercised by any other stockholders.
Item 13. Certain Relationships and Related Transactions. Agreements with NPDC Transfer Agreement. As of January 1, 1981, NPDC entered into an agreement (the "Transfer Agreement") with the Company pursuant to which NPDC (i) licensed to the Company in perpetuity all of its right title, and interest in and to certain intellectual property and technology rights (the "Intangible Assets") relating to its programs in human leukocyte interferon and recombinant DNA and hybridoma technology, and (ii) transferred to the Company its rights under certain consulting, supply, and research agreements (the "Agreements"). In consideration of the license and transfer of the Intangible Assets and the Agreements, the Transfer Agreement provides that the Company will pay to NPDC a royalty of $1,000,000. Such amount is payable if and when the Company generates net income before income taxes, and is limited to 25% of such net income before taxes per year until the amount is paid in full. Other Transactions In an agreement dated March 25, 1999, GP Strategies agreed to lend the Company $500,000 at the rate of $250,000 a month (the "GP Strategies Debt"). In return, the Company agreed to grant GP Strategies (i) a first mortgage on the Company's real estate, (ii) a two-year option to purchase the Company's real estate, provided that the Company has terminated its operations and the Red Cross Debt has been repaid, and (iii) a two-year right of first refusal in the event the Company desires to sell its real estate. In addition, the Company agreed to issue GP Strategies 500,000 shares of Common Stock and five-year options to purchase 500,000 shares of Common Stock at a price of $1 per share. Pursuant to the agreement, the Company has issued a note to GP Strategies representing the GP Strategies Debt, which note matures on September 30, 1999 and bears interest, payable at maturity, at the rate of 6% per annum. In addition, the Company has negotiated a subordination agreement with the Red Cross pursuant to which the Red Cross has agreed that its lien on the Company's real estate is subordinate to GP Strategies' lien. On March 27, 2000, the Company and GP Strategies entered into an agreement pursuant to which (i) the GP Strategies Debt was extended until June 30, 2001, (ii) the Company agreed to file a registration statement prior to July 31, 2000 covering the shares issuable upon exercise of the GP Warrant and any of the GP Shares for which Rule 144 under the Securities Act of 1933 was not available, and (iii) the Management Agreement between the Company and GP Strategies was terminated and all intercompany accounts between the Company and GP Strategies (other than the GP Strategies Debt) in the amount of $130,000 were discharged and eliminated. The agreement also provides that (i) commencing on May 1, 2001 and ending on June 30, 2001, on any day ISI may require GP Strategies to exercise the GP Warrant and sell the underlying shares, if the market price of ISI Common Stock exceeds $1.00 per share on each of the 10 trading days prior to any such day, and (ii) any proceeds from the sale of the shares issuable upon exercise of the GP Warrant in excess of the aggregate amount paid by GP Strategies to purchase such shares, would be deemed to reduce the then outstanding amount of principal and interest of the GP Strategies Debt until such amount is reduced to zero. Employment Agreement As of October 1, 1997, Lawrence M. Gordon and the Company entered into an employment agreement pursuant to which Mr. Gordon is employed as the Chief Executive Officer of the Company until December 31, 2001. On December 31, 1999, and on each December 31 of each year thereafter, the employment period is automatically extended for one additional year unless, not later than June 30 immediately preceding any such December 31, either party delivers to the other written notice that the employment period is not further extended. Commencing January 1, 1997, Mr. Gordon's base annual salary is $250,000, subject to annual increases of 6%. The Company granted Mr. Gordon under the Company's option plan options to purchase 150,000 shares of the Company's common stock at an exercise price of $8.50. Such options vest 20% immediately and 20% on each January 1 commencing January 1, 1998 and terminate on December 31, 2001. The Company's Board of Directors may determine Mr. Gordon's bonus for each year, and whether to grant Mr. Gordon additional options, based upon the Company's revenues, profits or losses, financing activities, progress in clinical trials, and such other factors deemed relevant by the Board. The Company may terminate the employment agreement for Cause, which is defined as (i) the willful and continued failure by Mr. Gordon to substantially perform his duties or obligations or (ii) the willful engaging by Mr. Gordon in misconduct which is materially monetarily injurious to the Company. If employment agreement is terminated for Cause, the Company is required to pay Mr. Gordon his full salary through the termination date. Mr. Gordon can terminate the employment agreement for Good Reason, which is defined as (i) a change in control of the Company or (ii) a failure by the Company to comply with any material provision of the employment agreement which has not been cured within ten days after notice. A "change in control" of the Company is defined as (i) a change in control of a nature that would be required to be reported in response to Item 1(a) of Current Report on Form 8-K pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), (ii) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities, or (iii) at any time individuals who were either nominated for election or elected by the Board of Directors of the Company cease for any reason to constitute at least a majority of the Board. If the Company wrongfully terminates the employment agreement or Mr. Gordon terminates the employment agreement for Good Reason, then (i) the Company is required to pay Mr. Gordon his full salary through the termination date; (ii) the Company is required to pay as severance pay to Mr. Gordon an amount equal to (a) Mr. Gordon's average annual cash compensation received from the Company or GP Strategies Corporation during the three full calendar years immediately preceding the termination date, multiplied by (b) the greater of (I) the number of years (including partial years) that would have been remaining in the employment period if the employment agreement had not so terminated and (II) three, such payment to be made (c) if termination is based on a change of control of the Company, in a lump sum on or before the fifth day following the termination date or (d) if termination results from any other cause, in substantially equal semimonthly installments payable over the number of years (including partial years) that would have been remaining in the employment period if the employment agreement had not so terminated; (iii) all options to purchase the Company's common stock granted to Mr. Gordon under the Company's option plan or otherwise immediately become fully vested and terminate on such date as they would have terminated if Mr. Gordon's employment by the Company had not terminated and, if Mr. Gordon's termination is based on a change of control of the Company and Mr. Gordon elects to surrender any or all of such options to the Company, the Company is required to pay Mr. Gordon a lump sum cash payment equal to the excess of (a) the fair market value on the termination date of the securities issuable upon exercise of the options surrendered over (b) the aggregate exercise price of the options surrendered; and (iv) if termination of the employment agreement arises out of a breach by the Company, the Company is required to pay all other damages to which Mr. Gordon may be entitled as a result of such breach. If the employment agreement is terminated for any reason other than Cause, the Company is required to maintain in full force and effect, for a number of years equal to the greater of (i) the number of years (including partial years) that would have been remaining in the employment period if the employment agreement had not so terminated and (ii) three, all employee benefit plans and programs in which Mr. Gordon was entitled to participate immediately prior to the termination date. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. INTERFERON SCIENCES, INC. By: /s/ Lawrence M. Gordon ------------------------ Lawrence M. Gordon Chief Executive Officer Dated: April 26, 2000 -----END PRIVACY-ENHANCED MESSAGE-----