10-K/A 1 isi10ka2001.txt 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, 2000 / / 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 16, 2001, 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 $5,400,000 based on the last reported sale price of such stock on the OTC Bulletin Board on April 16, 2001. 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 16, 2001 ----- ------------------------------ Common Stock, par value $.01 per share 20,013,252 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 16, 2001. 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 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 64. 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 47. 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 (RAPS) 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 RAPS. In October 2000, Dr. Schutzbank received the Leonard J. Stauffer Award from RAPS. RAPS gives this award once each year to a Regulatory Affairs Certified (RAC) individual who exemplifies outstanding service to the RAC Program and/or mentoring in the regulatory affairs profession. Age 55. Donald W. Anderson has been the Controller of the Company since 1981 and Corporate Secretary of the Company since 1988. He was an officer of various subsidiaries of GP Strategies from 1976 to September 1996. Age 51. Mei-June Liao, Ph.D. has been Vice President, Research and Development of the Company since March 1995. She has served as a Director, Research & Development since 1987, and held senior positions in the Company's Research & Development Department since 1983. Dr. Liao received her Ph.D. from Yale University and completed a three-year postdoctoral appointment at the Massachusetts Institute of Technology under the direction of Nobel Laureate in Medicine, Professor H. Gobind Khorana. Dr. Liao has authored many scientific publications and invention disclosures. Age 50. James R. Knill, M.D. has been Vice President, Medical Affairs of the Company since September 1996 and a consultant to the Company from November 1995 to September 1996. Dr. Knill was employed as Vice President of Medical Affairs for Cytogen Corporation from 1994 to 1995 and as consultant for Cytogen Corporation from 1995 to July 1996. He was previously employed for more than 20 years as Vice President of Medical Affairs for Bristol-Myers Squibb Company. Age 68. Robert P. Hansen has been Vice President, Manufacturing of the Company since February 1997. He served as a Director of Manufacturing since 1995, and held senior positions in the Company's Manufacturing Department since 1987. 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 68. Item 11. Executive Compensation The following table presents the compensation paid by the Company to its five most highly compensated executive officers for the years ended December 31, 2000, 1999, and 1998.
SUMMARY COMPENSATION TABLE Long-Term Annual Compensation Compensation Awards ------------------- ----------------------------- Stock All Other Year Salary Bonus Options Compensation Name and Principal Position ($) ($) (#) ($) (2) --------------------------- ---- ------ ------ -------- ------------ Lawrence M. Gordon (1) 2000 328,790 - 0 - - 0 - 12,275 Chief Executive Officer 1999 135,500(1) - 0 - 400,000 9,368 1998 270,000 100,000 60,000 13,093 Samuel H. Ronel, Ph.D. 2000 190,250 - 0 - - 0 - 13,733 Chairman of the Board 1999 102,750(1) - 0 - 250,000 9,151 1998 213,000 25,000 40,000 12,300 Stanley G. Schutzbank, Ph.D. 2000 248,112 - 0 - - 0 - 13,375 President 1999 123,113(1) - 0 - 400,000 8,533 1998 251,000 75,000 60,000 12,716 James R. Knill, M.D. 2000 128,995 4,000 - 0 - 11,703 Vice President 1999 120,658(1) - 0 - 50,375 12,880 Medical Affairs 1998 170,000 15,000 10,000 11,800 Mei-June Liao, Ph.D. 2000 124,747 4,000 - 0 - 7,615 Vice President, Research 1999 113,075(1) - 0 - 81,075 7,102 and Development 1998 133,000 15,000 15,000 9,000 ------------ (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) Matching contribution by the Company to the 401(k) Savings Plan, payments by the Company for Group Term Life, and payments made by the Company under the Common Stock Compensation Plan. The Common Stock Compensation Plan ended on October 1, 2000.
The following table sets forth information for the named executive officers regarding the unexercised options held at December 31, 2000. No options were exercised by the named executive officers during the year ended December 31, 2000.
AGGREGATED DECEMBER 31, 2000 OPTION VALUES Number of Unexercised Value of Unexercised Options at In-the-Money Options at December 31, 2000(#) December 31, 2000($)(1) Exercisable/Unexercisable Exercisable/Unexercisable ------------------------- ------------------------- Lawrence M. Gordon 287,329 221,676 $35,916 $27,710 Samuel H. Ronel, Ph.D. 176,617 135,648 22,077 16,956 Stanley G. Schutzbank, Ph.D. 269,205 215,670 33,651 26,959 James R. Knill, M.D 35,408 28,367 4,426 3,546 Mei-June Liao, Ph.D. 54,605 44,510 6,826 5,564 ------------------- (1) Calculated based on the closing price of the Common Stock as reported on the OTC Bulletin Board on December 31, 2000.
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 16, 2001, 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 Percent of of Beneficial Owner Beneficially Owned Class ------------------- ------------------ ---------- Harbor Trust 3,219,698(1) 14.7%(1) 418 Avenue I Brooklyn, NY 11230 Balmore S.A. 1,515,152(2) 7.3%(2) 160 Central Park South Suite 2701 New York, NY 10019 Celeste Trust Reg. 1,515,152(2) 7.3%(2) 160 Central Park South Suite 2701 New York, NY 10019 Michael G. Jesselson 12/18/80 Trust 1,515,152(2) 7.3%(2) 450 Park Avenue Suite 2603 New York, NY 10022 RBB Bank Aktiengesellschaft 1,760,000(3) 8.4%(3) Burgring 16 8010 Graz, Austria Mark Nordlicht 1,212,122(4) 5.9%(4) 165 West End Avenue Apartment 11N New York, NY 10023 (1) Includes (i) 1,363,637 shares that may be acquired upon the exercise of warrants, exercisable until April 2005, at a price of $1.50 per share, and (ii) an option to purchase 246,212 Units (each Unit consisting of a share of Common Stock and a warrant to purchase a share of Common Stock for $1.50) exercisable commencing on April 17, 2001 at a price of $.66 per Unit. (2) Includes 757,576 shares that may be acquired upon the exercise of warrants, exercisable until April 2005, at a price of $1.50 per share. (3) Includes 880,000 shares that may be acquired upon the exercise of warrants, exercisable until April 2005, at a price of $1.50 per share. (4) Includes 606,061 shares that may be acquired upon the exercise of warrants, exercisable until April 2005, at a price of $1.50 per share. The following table sets forth, as of April 16, 2001, 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. 264,974 1.3% 249,765 Lawrence M. Gordon 429,139 2.1% 409,005 Stanley G. Schutzbank, Ph.D. 402,184 1.9% 384,875 Sheldon L. Glashow 12,250 * 12,250 Directors and Executive Officers 1,356,149 6.3% 1,277,374 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. Employment Agreements As of October 1, 1997, Lawrence M. Gordon entered into an employment agreement with the Company 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'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. As of July 1, 2000, Stanley G. Schutzbank and Samuel H. Ronel entered into employment agreements with the Company pursuant to which Dr. Schutzbank is employed as President of the Company and Dr. Ronel is employed as Chairman of the Board of the Company until December 31, 2003. On December 31, 2001 for Dr. Schutzbank and December 31, 2002 for Dr. Ronel, 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. Dr. Schutzbank's base annual salary is $250,000, subject to annual increases of 6%, and Dr. Ronel's base annual salary is $175,000, subject to such increases as may be granted by the Board. The Board may determine Dr. Schutzbank's and Dr. Ronel's bonus for each year, and whether to grant them stock 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 each of the employment agreements for Cause, which is defined as (i) the willful and continued failure by the employee to substantially perform his duties or obligations or (ii) the willful engaging by the employee in misconduct which is materially monetarily injurious to the Company. If an employment agreement is terminated for Cause, the Company is required to pay the employee his full salary through the termination date. Each of the employees can terminate his 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 an employment agreement or the employee terminates his employment agreement for Good Reason, then (i) the Company is required to pay the employee his full salary through the termination date; (ii) the Company is required to pay as severance pay to the employee an amount equal to (a) his average annual cash compensation received from the Company during the three full calendar years immediately preceding the termination date (or, if the termination date is prior to December 31, 2002, during the full calendar years commencing with calendar year 2000 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 (one and one-half in the case of Dr. Ronel), 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 the employee under the Company's option plan or otherwise immediately become fully vested and terminate on such date as they would have terminated if the employee's employment by the Company had not terminated and, if the employee's termination is based on a change of control of the Company and the employee elects to surrender any or all of such options to the Company, the Company is required to pay the employee 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 the employee 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 (one and one-half in the case of Dr. Ronel), all employee benefit plans and programs in which the employee 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 30, 2001