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.
<PAGE>
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.
<PAGE>
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.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation Awards
------------------- -----------------------------
<S> <C> <C> <C> <C> <C>
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.
</TABLE>
<PAGE>
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.
<TABLE>
<CAPTION>
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
------------------------- -------------------------
<S> <C> <C> <C> <C>
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.
</TABLE>
<PAGE>
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.
<TABLE>
<CAPTION>
Name and Address Number of Shares
of Beneficial Owner Beneficially Owned
- ------------------- ------------------
<S> <C>
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.
</TABLE>
<PAGE>
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.
<TABLE>
<CAPTION>
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
- ---- ---------- ---------- -----------------
<S> <C> <C> <C>
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.
</TABLE>
<PAGE>
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.
<PAGE>
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
