-----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, WMMv8mwrucDP10e+VINA9e9IQEVHGFjc+SeLwuWfpexn/JrdX4s+GN1ts0gUEX+2 uq+fQ+IBf51QePCGtP0uew== 0000351532-99-000012.txt : 19990503 0000351532-99-000012.hdr.sgml : 19990503 ACCESSION NUMBER: 0000351532-99-000012 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990430 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: 99606250 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, 1998 / / 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 March 31, 1999, 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 $2,300,000 based on the last reported sale price of such stock on the over-the-counter bulletin board on March 31, 1999. 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 March 31 , 1999 ----- ------------------------------ Common Stock, par value $.01 per share 4,667,284 shares DOCUMENTS INCORPORATED BY REFERENCE None. The Company's 10K for the year ended December 31, 1998 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 30, 1999. Samuel H. Ronel, Ph.D. has been a Director of the Company since 1981 and Chairman of the Board since February 1997. He was Vice Chairman from January 1996 until February 1997 and was President and Chief Executive Officer, 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, Inc. (formerly National Patent Development Corporation) ("NPDC"), which is primarily a holding company, in 1970 and served as the Vice President of Research and Development of NPDC from 1976 to September 1996 and as the President of Hydro Med Sciences, a division of NPDC, from 1976 to September 1996. Dr. Ronel served as President of Association of Biotechnology Companies, an international organization representing United States and foreign biotechnology firms, from 1986 to 1988 and has served as a member of the Board of Directors until 1993. Dr. Ronel was elected to the Board of Directors of the Biotechnology Industry Organization in 1993. Age 62. Lawrence M. Gordon has been Chief Executive Officer and a director of the Company since January 1996, Vice President of the Company from 1991 to January 1996, and General Counsel of the Company since 1984. Age 45. 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 NPDC in 1972 and served as the Corporate Director of Regulatory and Clinical Affairs of NPDC from 1976 until September 1996, and as Executive Vice President of Hydro Med Sciences from 1982 until 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 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 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 53. Sheldon L. Glashow, Ph.D. has been a director of the Company since 1991. He has been a director of GPC since 1987, a director of GSE since 1995, a director of CalCol, Inc. since 1994, and was a director of Duratek from 1985 to 1995. 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 66. 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 1998.
SUMMARY COMPENSATION TABLE Long-Term Annual Compensation Compensation Awards ------------------- ----------------------------- Stock All Other Year Salary Bonus Options Compensation Name and Principal Position ($) ($) ($) (#) ($) - --------------------------- ---- ------ ------ -------- ------------ Lawrence M. Gordon (1) 1998 270,000 103,000(6) 60,000 10,000(4) Chief Executive Officer 1997 135,000(1) - 0 - 42,525 4,718(4) 1996 135,000(1) 150,000 25,000 168,000(2) Samuel H. Ronel, Ph.D. 1998 213,000 27,000(6) 40,000 10,000(4) Chairman of the Board 1997 205,154 - 0 - 51,200 5,083(4) 1996 145,905(3) 52,000 41,375 5,298(4) Stanley G. Schutzbank, Ph.D. 1998 251,000 77,000(6) 60,000 10,000(4) President 1997 231,302 - 0 - 51,750 4,860(4) 1996 197,341(5) 97,500 41,375 5,298(4) James Knill, M.D. 1998 170,000 16,800(6) 10,000 10,000(4) Vice President, 1997 130,646 - 0 - 15,400 3,582(4) Medical Affairs 1996 119,452(6) 21,250 11,250 3,431(4) Mei-June Liao, Ph.D. 1998 133,000 16,500(6) 15,000 7,500(4) Vice President, Research 1997 122,380 - 0 - 7,325 3,744(4) and Development 1996 115,568 21,250 125 3,324(4)
- ------------ [FN] (1) In 1997 and 1996, Mr. Gordon spent 60% of his time working on the Company's business. (2) The Company forgave a $150,000 loan to Mr. Gordon and also forgave $18,000 of accrued interest on such loan. Such loan had been due July 9, 1997 and bore interest at a rate of 6% per annum. (3) Dr. Ronel has been Chairman of the Board of the Company since February 1997, was Vice Chairman from January 1996 to February 1997, and was President and Chief Executive Officer until January 1996. Excludes $59,595 for 1996, respectively, paid by the Company to Dr. Ronel for which the Company was reimbursed by NPDC in consideration of the Company's permitting Dr. Ronel to devote a portion of his working hours to NPDC. (4) Matching contribution by the Company to the 401(k) Savings Plan and payments by the Company for Group Term Life. (5) Dr. Schutzbank has been President of the Company since January 1996 and was Executive Vice President of the Company until January 1996. Excludes $21,927 for 1996 paid by the Company to Dr. Schutzbank for which the Company was reimbursed by NPDC in consideration of the Company's permitting Dr. Schutzbank to devote a portion of his working hours to NPDC. (6) Bonuses of $100,000, $25,000, $75,000, $15,000, and $15,000 paid to Messrs. Gordon, Ronel, Schutzbank, Knill and Ms. Liao, were paid in January 1998. The following table sets forth information for the named executive officers regarding the unexercised options held at the end of 1998. No options were exercised by the named executive officers in 1998.
AGGREGATED DECEMBER 31, 1998 OPTION VALUES Number of Unexercised Value of Unexercised Options at In-the-Money Options at December 31, 1998(#) December 31, 1998($)(1) Exercisable/Unexercisable Exercisable/Unexercisable ------------------------- ------------------------- Lawrence M. Gordon 30,877 48,128 $43,227 $67,379 Samuel H. Ronel, Ph.D. 29,571 32,694 $41,399 $45,771 Stanley G. Schutzbank, Ph.D. 36,615 48,260 $51,261 $67,564 James Knill, M.D. 4,200 9,040 $ 6,104 $12,656 Mei-June Liao, Ph.D. 5,871 12,169 $ 8,219 $17,036
- ------------------- [FN] (1) Calculated based on the closing price of the Common Stock as reported by NASDAQ on December 31, 1998. 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 March 31, 1999, 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, Inc. 301,800 9 West 57th Street Suite 4170 New York, NY 10019 The following table sets forth, as of April 30, 1999, 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. 31,471 * 29,571 Lawrence M. Gordon 31,777 * 30,877 Stanley G. Schutzbank, Ph.D. 38,140 * 36,615 Sheldon L. Glashow 5,250 * 5,250 Directors and Executive Officers as a Group (9 persons) 375,000 7.5% 335,200
- ------------- [FN] * 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. Management Agreement. As of January 1, 1981, NPDC entered into a management agreement (the "Management Agreement") with the Company pursuant to which certain legal, financial and administrative services have been provided by employees of NPDC. The fee for such services is $120,000 per annum. Lease Agreement. While the above-described agreements were negotiated with a principal stockholder of the Company which was then its parent, the Company nevertheless believes that such agreements are equivalent economically to arms-length transactions with a third party. 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 allow a designee of GP Strategies to attend any meeting with the FDA with respect to approval of ALFERON N Injection for the treatment hepatitis B and 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. The Company also agreed not to increase its payroll during the term of the GP Strategies Debt without the prior consent of GP Strategies. 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. 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 30, 1999 -----END PRIVACY-ENHANCED MESSAGE-----