|
As
filed with the Securities and Exchange Commission on June 9,
2005.
Registration No. 333 |
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
SB-2
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF 1933
(Name of
small business issuer in its charter)
|
Florida |
|
2836 |
|
59-3410522 |
|
(State
or Other Jurisdiction of Organization |
|
(Primary
Standard Industrial Classification Code) |
|
(IRS
Employer Identification #) |
|
ORAGENICS,
INC.
13700
Progress Boulevard
Alachua,
Florida 32615
Tel:
(386) 418-4018 |
|
Mento
A. Soponis
4730
SW 103 Way
Gainesville,
Florida 32608
Tel:
(386) 418-4018 |
|
(Address
and telephone of registrant’s executive office) |
|
(Name,
address and telephone number of agent for
service) |
Copies of
all communications and notices to:
|
Darrell
C. Smith, Esq.
Shumaker,
Loop & Kendrick, LLP
101
E. Kennedy Boulevard
Suite
2800
Tampa,
Florida 33602
Tel:
(813) 229-7600
Fax:
(813) 229-1660 |
| |
|
|
APPROXIMATE
DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this registration statement.
If any of
the securities being registered on this form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities
Act of 1933, as
amended (the "Securities Act") check the following box. [
X ]
If this
Form is filed to register additional securities for an offering under Rule
462(b) of the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [
]
If this
Form is a post-effective amendment filed under Rule 462(c) under the Securities
Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
[
]
If this
Form is a post-effective amendment filed under Rule 462(d) under the Securities
Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
[
]
If
delivery of the prospectus is expected to be made under Rule 434, please check
the following box. [
]
|
CALCULATION
OF REGISTRATION FEE |
|
|
Securities
to be Registered |
|
Amount
to be Registered(2) |
|
Proposed
Maximun
Offering
Price Per Share(1) |
|
Proposed
Maximum
Aggregate
Offering Price(1) |
|
Amount
of
Registration
Fee(1) |
|
Shares
of common stock, par value $0.001 |
|
|
4,727,921 |
|
$ |
2.45 |
|
$ |
11,583
406 |
|
$ |
1,346 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Estimated
solely for the purpose of computing the registration fee required by
Section 6(b) of the Securities Act and computed pursuant to Rule 457(c)
under the Securities Act based upon the average $2.45 of the high ($2.49)
and low ($2.40) prices of the common stock on June 6, 2005, as quoted on
the American Stock Exchange. It is not known how many shares will be
purchased under this registration statement or at what price shares will
be purchased. |
|
(2) |
|
The
shares being registered consist of (i) 565,421 shares of our common stock
issued and outstanding, (ii) 4,000,000 shares issuable to Fusion Capital
Fund II, LLC, and (iii) 162,500 shares issuable upon exercise of common
stock purchase warrants outstanding as of the date hereof issued in
connection with a private placement to accredited investors and placement
agents, and such indeterminate number of additional shares of common stock
issuable for no additional consideration pursuant to the anti-dilution
provisions of such warrants and by reason of any stock dividend, stock
split, recapitalization or other similar transaction effected without the
receipt of consideration, which results in an increase in the number of
outstanding shares of our common stock. In the event of a stock split,
stock dividend or similar transaction involving our common stock, in order
to prevent dilution, the number of shares registered shall be
automatically increased to cover the additional shares in accordance with
Rule 416(a) under the Securities Act of
1933. |
REGISTRANT
HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE
NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER
AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL
THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES
ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH
DATE AS THE COMMISSION, ACTING UNDER SAID SECTION 8(A), MAY DETERMINE.
SUBJECT
TO COMPLETION, DATED June 9, 2005
The
information in this prospectus is not complete and may be changed. We may not
sell these securities until the registration statement filed with the securities
and exchange commission is effective. This prospectus is not an offer to sell
these securities and we are not soliciting offers to buy these securities in any
state where the offer or sale is not permitted.
PROSPECTUS
ORAGENICS,
INC.
4,727,921
Shares of Common Stock
This
prospectus relates to the sale of up to 4,315,421 shares of our common stock by
Fusion Capital Fund II, LLC and up to 412,500 shares of our common stock by
certain other selling stockholders. The prices at which the selling stockholders
may sell the shares will be determined by the prevailing market price for the
shares or in negotiated transactions. We will not receive proceeds from the sale
of our shares by the selling stockholders.
Our
common stock is quoted on the American Stock Exchange under the symbol "ONI." On
June 6, 2005, the last reported sale price for our common stock as reported on
the American Stock Exchange was $2.40 per share. We have applied to have the
shares of common stock offered pursuant to this prospectus approved for trading
on the American Stock Exchange.
____________________
Investing
in the common stock involves certain risks. See "Risk Factors" beginning on page
4 for a discussion of these risks.
____________________
Fusion
Capital is an "underwriter" within the meaning of the Securities Act of 1933, as
amended.
____________________
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal
offense.
____________________
The date
of this Prospectus is
TABLE
OF CONTENTS
Page
| |
|
|
PROSPECTUS
SUMMARY |
1 |
|
RISK
FACTORS |
3 |
|
FORWARD-LOOKING
STATEMENTS |
13 |
|
USE
OF PROCEEDS |
14 |
|
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS |
14 |
|
THE
FUSION TRANSACTION |
16 |
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION |
20 |
|
BUSINESS |
26 |
|
LEGAL
PROCEEDINGS |
39 |
|
MANAGEMENT |
40 |
|
EXECUTIVE
COMPENSATION |
42 |
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
44 |
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS |
45 |
|
DESCRIPTION
OF SECURITIES |
46 |
|
SHARES
ELIGIBLE FOR FUTURE SALE |
49 |
|
SELLING
STOCKHOLDERS |
50 |
|
PLAN
OF DISTRIBUTION |
51 |
|
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES |
52 |
|
LEGAL
MATTERS |
52 |
|
EXPERTS |
52 |
|
WHERE
YOU CAN FIND ADDITIONAL INFORMATION |
52 |
|
FINANCIAL
STATEMENTS |
F-1 |
__________________________________
You
should rely only on the information contained in this prospectus. We have not,
and the selling stockholders have not, authorized anyone to provide you with
different information. If anyone provides you with different information you
should not rely on it. We are not, and the selling stockholders are not, making
an offer to sell the common stock in any jurisdiction where the offer is not
permitted. You should not assume that the information contained in this
prospectus is accurate as of any date other than the date on the front cover of
this prospectus. Our business, financial condition, results of operations and
prospects may have changed since that date.
Unless
the context otherwise requires, the terms “we,”“our,”“us,”“the company” and
“Oragenics” refer to Oragenics, Inc., a Florida corporation, and not to the
selling stockholders.
PROSPECTUS
SUMMARY
This
summary is not complete and does not contain all of the information that you
should consider before investing in our common stock. You should read the entire
prospectus carefully, including the more detailed information regarding our
company, the risks of purchasing our common stock discussed under "Risk Factors"
on page [4] and our financial statements and the accompanying
notes.
Business
We are an
emerging, early-stage biotechnology company aimed at developing novel
technologies and products licensed from innovative research at the University of
Florida and other academic centers. Our strategy is to in-license and to develop
products through human proof-of-concept studies (Phase I and II clinical trials
of the U.S. Food and Drug Administration’s regulatory process) prior to
partnering with major pharmaceutical, biotechnology or healthcare product firms
for advanced clinical development and commercialization. Since inception, we
have funded a significant portion of our operations from the public and private
sales of our securities. We have generated no significant revenues from
operations during the last two years. All of our revenues have been from a
sponsored research agreement and Small Business Innovation Research (SBIR)
grants which have expired. We have not generated revenues from sales of
products.
We are
currently seeking to develop several products, each of which address potentially
large market opportunities:
Replacement
therapy is a
single, painless one-time topical treatment that has the potential to offer
lifelong protection against dental caries (tooth decay). The therapy is based on
genetically altering the bacterium, Streptococcus
mutans (“S. mutans”), which is
the primary etiologic agent in tooth decay. Present in the normal flora of the
mouth, S.
Mutans converts
dietary sugar to lactic acid; the lactic acid, in turn, causes the erosion of
tooth enamel that results in the destruction of the tooth surface and eventually
the entire tooth. Replacement therapy permanently replaces resident
acid-producing S.
mutans with a
patented, genetically engineered strain of S.
mutans that does
not produce lactic acid. Applied topically to tooth surfaces with a swab, the
therapy requires only one application. We have begun Phase I clinical trials and
expect to partner with a major healthcare products or pharmaceutical company
prior to initiating later stages of clinical testing.
Probiotics are live
microorganisms that may confer health benefits to the host when administered in
adequate amounts; the use of yogurt containing live Lactobacillus cultures
is an example of a probiotic application. We have identified three natural
strains of bacteria that provide significant protection against the causative
organisms of periodontal disease and dental caries. Because probiotic treatments
may be marketed in certain markets as "health supplements" without the need for
extensive regulatory oversight, we believe that we may achieve commercialization
of our probiotic product in certain markets in 2006. If successfully developed,
our oral rinse product will be one of the first probiotics to be marketed for
the maintenance of oral health.
Mutacin
1140 is a
highly potent bactericidal peptide that is produced by our strain of
S.
mutans. Our
proprietary mutacin bacteria was discovered by our researchers during the course
of developing replacement therapy and is a novel antibiotic that has
broad-spectrum antimicrobial activity against essentially all Gram-positive
bacteria including vancomycin-resistant Staphylococcus
aureus. The
antibiotic currently is in preclinical stages of development. We currently plan
to wait to begin animal studies until we obtain sufficient financial resources.
IVIAT
and CMAT are
technologies we licensed from iviGene Corporation, a company related to us by
common ownership. These technologies enable the simple, fast identification of
novel and potentially important gene targets associated with the natural onset
and progression of infections, cancers and other diseases in humans and other
living organisms, including plants. This licensed technology offers us the
potential to generate and develop a number of product candidates for future
out-licensing to corporate partners, particularly in the area of cancer and
tuberculosis, as well as agricultural and other non-human uses. We currently
plan to apply for a Phase II SBIR grant in order to continue any significant
research using these licensed technologies.
We were
incorporated in Florida in 1996. We amended our articles of incorporation on May
8, 2002, in order to change our name from Oragen, Inc. to Oragenics, Inc. and to
increase our authorized capital from 100,000 shares of common stock to
100,000,000 shares of common stock and 20,000,000 shares of preferred stock. Our
executive office is located at 13700 Progress Boulevard, Alachua, FL 32615. This
is also our mailing address. Our registered office is 4730 S.W. 103 Way,
Gainesville, Florida 32608. Our telephone number is (386) 418-4018. Our
corporate website is at www.oragenics.com. We do
not intend the reference to our web address to incorporate by reference in this
prospectus the information on our website. The information on our website is not
intended to be part of this prospectus and you should not rely on it when making
a decision to invest in our securities.
The Offering
On May
23, 2005, we entered into a common stock purchase agreement with Fusion Capital
Fund II, LLC (Fusion Capital), pursuant to which Fusion Capital has agreed,
under certain conditions, to purchase on each trading day $15,000 of our common
stock up to an aggregate of $9.0 million over a 30 month period. In our
discretion, we may elect to sell more of our common stock to Fusion Capital than
the minimum daily amount. The purchase price of the shares of common stock will
be equal to a price based upon the future market price of the common stock
without any fixed discount to the market price. Fusion Capital does not have the
right or the obligation to purchase shares of our common stock in the event that
the price of our common stock is less than $0.75.
Fusion
Capital, is offering for sale up to 4,315,421 shares of our common stock. In
connection with entering into the agreement, we authorized the sale to Fusion
Capital of up to 4,000,000 shares of our common stock for a maximum proceeds of
$9.0 million, provided however, that in the event that we decide to issue more
than 2,900,000, i.e. greater than 19.99% of our outstanding shares of common
stock as of the date of the agreement, we would first seek shareholder approval
in order to be in compliance with American Stock Exchange rules. Assuming Fusion
Capital purchases all $9.0 million of common stock, we estimate that the maximum
number of shares we will sell to Fusion Capital under the common stock purchase
agreement will be 4,000,000 shares (exclusive of the 315,421 shares issued to
Fusion Capital as the commitment fee). Subject to approval by our board of
directors, we have the right but not the obligation to issue more than 4,000,000
shares to Fusion Capital. In the event we elect to issue more than 4,000,000
shares offered hereby, we will be required to file a new registration statement
and have it declared effective by the U.S. Securities & Exchange Commission.
The number of shares ultimately offered for sale by Fusion Capital is dependent
upon the number of shares purchased by Fusion Capital under the common stock
purchase agreement. The other selling stockholders are offering for sale up to
412,500 shares of our common stock, which includes up to 162,500 shares issuable
upon exercise of warrants.
As of May
31, 2005, there were 14,912,645 shares outstanding, including the 315,421 shares
that we have issued to Fusion Capital as compensation for its purchase
commitment and 250,000 shares offered by the other selling stockholder, but
excluding the 4,000,000 shares offered by Fusion Capital pursuant to this
prospectus which it has not yet purchased from us and up to 162,500 shares
issuable upon exercise of warrants by the other selling
stockholders. If all of
shares offered by this prospectus were issued and outstanding as of the date
hereof, the number of shares offered by this prospectus would represent 24.79%
of the total common stock outstanding as of May 31, 2005.
RISK
FACTORS
You
should carefully consider the risks described below together with the other
information presented in this prospectus, including the financial statements and
notes thereto, before making an investment decision in our common stock. These
risk factors are effective as of the date of this prospectus. All of these risks
may impair our business operations. The forward-looking statements in this
prospectus involve risks and uncertainties and actual results may differ
materially from the results we discuss in the forward-looking statements. If any
of the following risks actually occur, our business, financial condition or
results of operations could be materially adversely affected. In that case, the
trading price of our stock could decline, and you may lose all or part of your
investment.
Risks
Associated with Our Company
We
Have A Limited Operating History With Significant Losses And Expect Losses To
Continue For The Foreseeable Future
We have
yet to establish any history of profitable operations. We have incurred annual
operating losses of $3,077,888, $1,672,954 and $699,603, respectively, during
the past three fiscal years of operation. As a result, at March 31, 2005 we had
an accumulated deficit of $6,338,114. Our revenues have not been sufficient to
sustain our operations. We expect that our revenues will not be sufficient to
sustain our operations for the foreseeable future. Our profitability will
require the successful commercialization of our replacement therapy, probiotic
and Mutacin 1140 technologies. No assurances can be given when this will occur
or that we will ever be profitable.
Our
independent registered
public accounting firm has added an explanatory paragraph to their audit opinion
issued in connection with the financial statements for the year ended December
31, 2004 relative to our ability to continue as a going concern. Our ability to
obtain additional funding will determine our ability to continue as a going
concern. Our financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
We
Will Require Additional Financing To Sustain Our Operations And Without It We
Will Not Be Able To Continue Operations
At March
31, 2005, we had working capital of $2,119,999. The independent registered
public accounting firm’s report for the year ended December 31, 2004, includes
an explanatory paragraph to their audit opinion stating that our recurring
losses from operations and limited working capital raise substantial doubt about
our ability to continue as a going concern. We have an operating cash flow
deficit of $1,282,635 for the three months ended March 31, 2005, and have
sustained operating cash flow deficits of $2,745,243 in 2004, $1,218,910 in 2003
and $677,442 in 2002. We do not currently have sufficient financial resources to
fund our operations. Therefore, we need additional funds to continue these
operations.
We only
have the right to receive $15,000 per trading day under the agreement with
Fusion Capital unless our stock price equals or exceeds $2.20 in which case the
daily amount may be increased under certain conditions as the price of our
common stock increases. Fusion Capital shall not have the right nor the
obligation to purchase any shares of our common stock on any trading days that
the market price of our common stock is less than $0.75. Since we are initially
registering 4,000,000 shares for sale by Fusion Capital pursuant to this
Prospectus, the selling price of our common stock to Fusion Capital will have to
average at least $2.25 per share for us to receive the maximum proceeds of
$9,000,000 without registering additional shares of common stock.
We have
authorized the sale and issuance of 4,000,000 shares of our common stock to
Fusion Capital under the common stock purchase agreement of which we are
registering 4,000,000 shares. We estimate that the maximum number of shares we
will sell to Fusion Capital under the common stock purchase agreement will be
4,000,000 shares (exclusive of the 315,421 shares issued to Fusion Capital as
the commitment fee) assuming Fusion Capital purchases all $9.0 million of common
stock. Subject to approval by our board of directors, we have the right, but not
the obligation, to issue more than 4,000,000 shares to Fusion Capital. In the
event we elect to issue more than 4,000,000 shares offered hereby, we will be
required to file a new registration statement and have it declared effective by
the U.S. Securities & Exchange Commission.
In the
event that we decide to issue more than 2,917,985 (19.99% of our outstanding
shares of common stock as of the date of our agreement), we would first be
required to seek stockholder approval in order to be in compliance with American
Stock Exchange rules. We have issued 315,421 shares to Fusion Capital as a
commitment fee and accordingly may issue up to 2,602,564 shares to Fusion
Capital before we would be required to seek stockholder approval in order to be
in compliance with American Stock Exchange rules. Assuming a purchase price of
$2.40 per share (the closing sale price of the common stock on June 6, 2005) and
the purchase by Fusion Capital of 2,602,564 shares under the common stock
purchase agreement, proceeds to us would only be $6,246,154, unless we elect to
sell more than 2,602,564 shares to Fusion Capital, which we have the right, but
not the obligation, to do.
The
extent we rely on Fusion Capital as a source of funding will depend on a number
of factors including, the prevailing market price of our common stock and the
extent to which we are able to secure working capital from other sources, such
as through the sale of products developed from our technologies. Specifically,
Fusion Capital shall not have the right nor the obligation to purchase any
shares of our common stock on any trading days that the market price of our
common stock is less than $0.75. If obtaining sufficient financing from Fusion
Capital were to prove unavailable or prohibitively dilutive and if we are unable
to commercialize and sell products resulting from the development of our
technologies, we will need to secure another source of funding in order to
satisfy our working capital needs. Even if we are able to access the full $9.0
million under the common stock purchase agreement with Fusion Capital, we may
still need additional capital to fully implement our business, operating and
development plans. Should the financing we require to sustain our working
capital needs be unavailable or prohibitively expensive when we require it, the
consequences would be a material adverse effect on our business, operating
results, financial condition and prospects.
We
must spend at least $1 million annually on development of our replacement
therapy and Mutacin
1140 technologies under our license agreements with the University of Florida
Research Foundation, Inc. We must also comply with certain other conditions of
our licenses. If we do not, our licenses to these technologies may be
terminated, and we may have to cease operations.
We hold
our replacement therapy and Mutacin 1140
technologies under licenses from the University of Florida Research Foundation,
Inc. Under the terms of the licenses, we must spend at least $1 million per year
on development of those technologies before the first commercial sale of
products derived from those technologies. If we do not, our licenses could be
terminated. Until commercial sales of such products take place, we will not be
earning revenues from the sale of products and will, therefore, have to raise
the money we must spend on development of our technologies by other means, such
as the sale of our common stock. There is no assurance we will be able to raise
the financing necessary to meet our obligations under our licenses. If we
cannot, we may lose our licenses to these technologies and have to cease
operations.
The
University of Florida Research Foundation, Inc. may terminate our licenses in
respect of our replacement therapy technology and our Mutacin 1140
technology if we breach our obligations to timely pay monies to it, submit
development reports to it or commit any other breach of the covenants contained
in the license agreement. There is no assurance that we will be able to comply
with these conditions. If our license is terminated, our investment in
development of our replacement therapy and Mutacin 1140 technologies will become
valueless and we may have to cease operations.
If
we are unable to maintain regulatory clearance or obtain approval for our
technologies, we will be unable to generate revenues and may have to cease
operations.
Only our
replacement therapy technology has been granted clearance to begin Phase 1 human
clinical trials by the Food and Drug Administration (FDA). Clinical trials on
our replacement therapy are expected to take 4-5 years to fully complete. Our
other technologies have not been cleared for testing in humans. Our technologies
have not been cleared for marketing by the FDA or foreign regulatory authorities
and they will not be able to be commercially distributed in the United States or
any international markets until such clearances are obtained. Before regulatory
approvals can be obtained, our technologies will be subject to extensive
preclinical and clinical testing. These processes are lengthy and expensive. We
cannot assure that such trials will demonstrate the safety or effectiveness of
our technologies. There is a possibility that our technologies may be found to
be unsafe or ineffective or otherwise fail to satisfy regulatory requirements.
If we are unable to resolve the FDA's concerns, we will not be able to proceed
further to obtain regulatory approval for that technology. If we fail to
maintain regulatory clearance for our replacement therapy or fail to obtain FDA
clearance for our other technologies, we may have to cease
operations.
Our
product candidates are in the preliminary development stage, and may not be
effective at a level sufficient to support a profitable business venture. If
they are not, we will be unable to create marketable products, and we may have
to cease operations.
All of
our product candidates are in the preliminary development state. Although we
have current data which indicates the promise of the concept of our replacement
therapy and Mutacin 1140 technologies, we can offer you no assurance that
the technologies will be effective at a level sufficient to support a profitable
business venture. If they are not, we will be unable to create marketable
products, we will not generate revenues from our operations, and we may have to
cease operations. The science on which our replacement therapy and
Mutacin 1140 technologies are based may also fail due to flaws or
inaccuracies on which the data are based, or because the data are totally or
partially incorrect, or not predictive of future results. If our science proves
to be flawed, incorrect or otherwise fails, we will not be able to create a
marketable product or generate revenues and we may have to cease
operations.
The
success of our research and development activities is uncertain. If they do not
succeed, we will be unable to generate revenues from our operations and we will
have to cease doing business.
We intend
to continue with research and development of our technologies for the purpose of
licensing these technologies to third parties or obtaining regulatory approval
to manufacture and market them. Research and development activities, by their
nature, preclude definitive statements as to the time required and costs
involved in reaching certain objectives. Actual costs may exceed the amounts we
have budgeted and
actual time may exceed our expectations. If research and development requires
more funding than we anticipate, then we may have to reduce technological
development efforts or seek additional financing. There can be no assurance that
we will be able to secure any necessary additional financing or that such
financing would be available on favorable terms. Additional financings could
result in substantial dilution to existing stockholders. We anticipate we will
remain engaged in research and development for a considerable
period of time, and there can be no assurance that we will be able to generate
adequate revenue from operations.
Each
of the technologies we are developing for eventual commercialization will face
various forms of competition from other products in the
marketplace.
The
pharmaceutical and biotechnology industries are characterized by intense
competition, rapid product development and technological change. Most of the
competition that the products developed from our technologies will face will
come from companies that are large, well established and have greater financial,
marketing, sales and technological resources than we have. Commercial success of
our technologies will depend on our ability and the ability of our sublicensees
to compete effectively in product development areas such as, but not limited to,
drug safety, efficacy, ease of use, patient or customer compliance, price,
marketing and distribution. There can be no assurance that competitors will not
succeed in developing products that are more effective than the products
developed from our technologies or that would render our products obsolete and
non-competitive.
We
rely on the significant experience and specialized expertise of our senior
management and must retain and attract qualified scientists and other highly
skilled personnel in a highly competitive job environment to maintain and grow
our business.
Our
performance is substantially dependent on the continued services and on the
performance of our senior management and our team of research scientists, who
have many years of experience and specialized expertise in our business. Our
performance also depends on our ability to retain and motivate our other
executive officers and key employees. The loss of the services of our Chief
Executive Officer, Mento A. Soponis and our Chief Scientific Officer, Dr.
Jeffrey D. Hillman, and any of our other executive officers or of our
researchers could harm our ability to develop and commercialize our
technologies. We have no “key man” life insurance policies. We have three year
employment agreements with Mr. Soponis and Dr. Hillman, which automatically
renew for one-year terms unless 90 days written notice is given by either
party.
Our
future success also depends on our ability to identify, attract, hire, train,
retain and motivate highly skilled technical, managerial and research personnel.
If we fail to attract, integrate and retain the necessary personnel, our ability
to maintain and build our business could suffer significantly.
It
is possible that our replacement therapy and oral probiotic technologies will be
less effective in humans than they have been shown to be in animals. It is
possible our Mutacin
1140 technology will be shown to be ineffective or harmful in humans. If any of
these technologies are shown to be ineffective or harmful in humans, we will be
unable to generate revenues from them, and we may have to cease
operations.
To date
the testing of our replacement therapy technology has been undertaken solely in
animals. Those studies have proven our genetically altered strain of
S. mutans to be
effective in preventing tooth decay in animals. It is possible that our strain
of S.
mutans will be
shown to be less effective in preventing tooth decay in humans in clinical
trials. If our replacement therapy technology is shown to be ineffective in
preventing tooth decay in humans, we will be unable to commercialize and
generate revenues from this technology. To date the testing of our oral
probiotic technology has been undertaken solely in animals. Those studies have
shown our technology to be effective at helping to reduce certain bacteria that
are believed to cause periodontal disease. It is possible that our probiotic
technology will not be effective in reducing those bacteria and will not improve
periodontal health. If our oral probiotic technology is shown to be ineffective
or harmful to humans, we will be unable to commercialize it and generate
revenues from sales. To date the testing of the antibiotic substance,
Mutacin 1140, has
been undertaken solely in the laboratory. We have not yet conducted animal or
human studies of Mutacin 1140. It
is possible that when these studies are conducted, they will show that
Mutacin 1140 is
ineffective or harmful. If Mutacin 1140 is
shown to be ineffective or harmful, we will be unable to commercialize it and
generate revenues from sales of Mutacin 1140. If
we are unable to generate revenues from our technologies, we may have to cease
operations.
It
is possible we will be unable to find a method to produce Mutacin 1140 in
large-scale commercial quantities. If we cannot, we will be unable to undertake
the clinical trials that are required in order to obtain FDA permission to sell
it, we will be unable to generate revenues from product sales, and we may have
to cease operations.
Our
antibiotic technology, Mutacin 1140, is
a substance produced by our genetically altered strain of S. mutans. To
date, it has been produced only in laboratory cultures. In March 2005 we
successfully developed a methodology for manufacturing Mutacin 1140 in
quantities sufficient to undertake the preclinical studies necessary to prepare
an Investigational New Drug (IND) application to the FDA. We believe we will be
able to optimize this methodology to allow large-scale commercial production of
the antibiotic. However, this methodology may not be feasible for large-scale
manufacture of the Mutacin 1140 antibiotic. If we are not able to optimize this
methodology, we will be unable to generate revenues from this technology and we
may have to cease operations.
If
clinical trials for our product candidates are unsuccessful or delayed, we will
be unable to meet our anticipated development and commercialization timelines,
which could cause our stock price to decline and we may have to cease
operations.
Before
obtaining regulatory approvals for the commercial sale of any products, we must
demonstrate through preclinical testing and clinical trials that our products
are safe and effective for use in humans. Conducting clinical trials is a
lengthy, time-consuming and expensive process.
Completion
of clinical trials may take several years. Commencement and rate of completion
of clinical trials may be delayed by many factors, including:
|
• |
lack
of efficacy during the clinical trials; |
|
• |
unforeseen
safety issues; |
|
• |
slower
than expected patient recruitment; and |
|
• |
government
or regulatory delays. |
Results
from preclinical testing and early clinical trials are often not predictive of
results obtained in later clinical trials. A number of new products have shown
promising results in clinical trials, but subsequently failed to establish
sufficient safety and efficacy data to obtain necessary regulatory approvals.
Data obtained from preclinical and clinical activities are susceptible to
varying interpretations, which may delay, limit or prevent regulatory approval.
In addition, regulatory delays or rejections may be encountered as a result of
many factors, including perceived defects in the design of the clinical trials
and changes in regulatory policy during the period of product development. Any
delays in, or termination of, our clinical trials will materially and adversely
affect our development and commercialization timelines, which would adversely
affect our business and cause our stock price to decline and may cause us to
cease operations.
We
intend to consider relying on third parties to pay the majority of costs
relating to regulatory approvals necessary to manufacture and sell products
using our technologies. If we are unable to obtain agreements with third parties
to fund such costs, we will have to fund the costs ourselves. We may be unable
to do so, and if we are not, we may have to cease operations.
We intend
to consider sublicensing our technologies to strategic partners prior to
commercialization. If we do so, our sublicensees will pay the costs of any
remaining clinical trials, and manufacturing and marketing of our technologies.
If we are unable to sublicense our technologies, we will have to pay for the
costs of Phase II and III trials and new drug applications to the FDA ourselves.
We would also have to set up our own manufacturing facilities and find our own
distribution channels. This would greatly increase our future capital
requirements and we cannot be assured we would be able to obtain the necessary
financing. If we cannot obtain financing, we may have to cease
operations.
If
our expected collaborative partnerships do not materialize or fail to perform as
expected, we will be unable to develop our products as
anticipated.
We expect
to enter into collaborative arrangements with third parties to develop certain
products by sublicensing our technologies to strategic partners. We cannot
assure you that we will be able to enter into these collaborations or that, if
entered, they will produce successful products. If we fail to maintain our
existing collaborative arrangements or fail to enter into additional
collaborative arrangements, the number of products from which we could receive
future revenues would decline.
Our
dependence on collaborative arrangements with third parties subjects us to a
number of risks. These collaborative arrangements may not be on terms favorable
to us. Agreements with collaborative partners typically allow partners
significant discretion in electing whether or not to pursue any of the planned
activities. We cannot control the amount and timing of resources our
collaborative partners may devote to products based on the collaboration, and
our partners may choose to pursue alternative products. Our partners may not
perform their obligations as expected. Business combinations or significant
changes in a collaborative partner's business strategy may adversely affect a
partner's willingness or ability to complete its obligations under the
arrangement. Moreover, we could become involved in disputes with our partners,
which could lead to delays or termination of the collaborations and
time-consuming and expensive litigation or arbitration. Even if we fulfill our
obligations under a collaborative agreement, our partner can terminate the
agreement under certain circumstances. If any collaborative partner were to
terminate or breach our agreement with it, or otherwise fail to complete its
obligations in a timely manner, our chances of successfully commercializing
products would be materially and adversely affected.
If
our intellectual property rights do not adequately protect our products or
technologies, or if third parties claim we are infringing their intellectual
property rights, others could compete against us more directly or we could
suffer significant litigation. Such results could prevent us from marketing our
products and hurt our profitability
Our
success depends in part on our ability to obtain patents or rights to patents,
protect trade secrets, operate without infringing upon the proprietary rights of
others, and prevent others from infringing on our patents, trademarks and other
intellectual property rights. We will be able to protect our intellectual
property from unauthorized use by third parties only to the extent that it is
covered by valid and enforceable patents, trademarks and licenses. Patent
protection generally involves complex legal and factual questions and,
therefore, enforceability of patent rights cannot be predicted with certainty.
Patents, if issued, may be challenged, invalidated or circumvented. Thus, any
patents that we own or license from others may not provide adequate protection
against competitors. In addition, any future patent applications may fail to
result in patents being issued. Also, those patents that are issued may not
provide us with adequate proprietary protection or competitive advantages
against competitors with similar technologies. Moreover, the laws of certain
foreign countries do not protect intellectual property rights to the same extent
as do the laws of the United States.
In
addition to patents and trademarks, we rely on trade secrets and proprietary
know-how. We seek protection of these rights, in part, through confidentiality
and proprietary information agreements. These agreements may not provide
meaningful protection or adequate remedies for violation of our rights in the
event of unauthorized use or disclosure of confidential and proprietary
information. Failure to protect our proprietary rights could seriously impair
our competitive position.
In the
event of an infringement or violation, we may face litigation and may be
prevented from pursuing product development or commercialization. We may receive
in the future, notice of claims of infringement of other parties’ proprietary
rights. Infringement or other claims could be asserted or prosecuted against us
in the future and it is possible that past or future assertions or prosecutions
could harm our business. We received notification from B.C. International
Corporation on July 29, 2002 that a gene utilized in our licensed, patented
strain of S.
mutans
infringes a patent which it holds under a license. Their notification did not
state that they intended to pursue legal remedies. Our management does not
believe the gene in question infringes that patent. We have sent them
correspondence setting out our position and we have not heard anything further
from them. If necessary, we are prepared to assert our rights vigorously with
respect to such matter. If litigation should ensue and we are unsuccessful in
that litigation, we could be enjoined for a period of time from marketing
products which infringe any valid patent rights held or licensed by B.C.
International Corporation and/or we could owe substantial damages.
We
are subject to substantial government regulation, which could materially
adversely affect our business.
The
production and marketing of products which may be developed from our
technologies and our ongoing research and development, preclinical testing and
clinical trial activities are subject to extensive regulation and review by
numerous governmental authorities. Most of the technologies we are developing
must undergo rigorous preclinical and clinical testing and an extensive
regulatory approval process before they can be marketed. This process makes it
longer, harder and more costly to bring products which may be developed from our
technologies to market, and we cannot guarantee that any of such products will
be approved. The pre-marketing approval process can be particularly expensive,
uncertain and lengthy, and a number of products for which FDA approval has been
sought by other companies have never been approved for marketing. In addition to
testing and approval procedures, extensive regulations also govern marketing,
manufacturing, distribution, labeling, and record-keeping procedures. If we do
not comply with applicable regulatory requirements, such violations could result
in warning letters, non-approval, suspensions of regulatory approvals, civil
penalties and criminal fines, product seizures and recalls, operating
restrictions, injunctions, and criminal prosecution.
Delays in
or rejection of FDA or other government entity approval of our technologies may
also adversely affect our business. Such delays or rejection may be encountered
due to, among other reasons, government or regulatory delays, lack of efficacy
during clinical trials, unforeseen safety issues, slower than expected rate of
patient recruitment for clinical trials, inability to follow patients after
treatment in clinical trials, inconsistencies between early clinical trial
results and results obtained in later clinical trials, varying interpretations
of data generated by clinical trials, or changes in regulatory policy during the
period of product development in the United States. In the United States more
stringent FDA oversight in product clearance and enforcement activities could
result in our experiencing longer approval cycles, more uncertainty, greater
risk, and higher expenses. Even if regulatory approval of a product is granted,
this approval may entail limitations on uses for which the product may be
labeled and promoted. It is possible, for example, that we may not receive FDA
approval to market products based on our licensed, patented technologies for
broader or different applications or to market updated products that represent
extensions of our basic technologies. In addition, we may not receive FDA
approval to export our products based on our licensed, patented technologies in
the future, and countries to which products are to be exported may not approve
them for import.
Any
manufacturing facilities would also be subject to continual review and
inspection. The FDA has stated publicly that compliance with manufacturing
regulations will be scrutinized more strictly. A governmental authority may
challenge our compliance with applicable federal, state and foreign regulations.
In addition, any discovery of previously unknown problems with one of our
products or facilities may result in restrictions on the product or the
facility, including withdrawal of the product from the market or other
enforcement actions.
From time
to time, legislative or regulatory proposals are introduced that could alter the
review and approval process relating to our technologies. It is possible that
the FDA will issue additional regulations further restricting the sale of our
proposed products. Any change in legislation or regulations that govern the
review and approval process relating to our future technologies could make it
more difficult and costly to obtain approval for new products based on our
technologies, or to produce, market, and distribute such products if
approved.
We
can offer you no assurance the government and the public will accept our
licensed patented technologies. If they do not, we will be unable to generate
sufficient revenues from our technologies, which may cause us to cease
operations.
The
commercial success of our replacement therapy, oral probiotics and
Mutacin 1140 technologies will depend in part on government and public
acceptance of their production, distribution and use. Biotechnology has enjoyed
and continues to enjoy substantial support from the scientific community,
regulatory agencies and many governmental officials in the United States and
around the world. Future scientific developments, media coverage and political
events may diminish such support. Public attitudes may be influenced by claims
that health products based on biotechnology are unsafe for consumption or pose
unknown risks to the environment or to traditional social or economic practices.
Securing governmental approvals for, and consumer confidence in, such products
poses numerous challenges, particularly outside the United States. The market
success of technologies developed through biotechnology such as ours could be
delayed or impaired in certain geographical areas because of such factors.
Products based on our technologies may compete with a number of traditional
dental therapies and drugs manufactured and marketed by major pharmaceutical
companies and other biotechnology companies. Market acceptance of products based
on our technologies will depend on a number of factors including potential
advantage over alternative treatment methods. We can offer you no assurance that
dentists, physicians, patients or the medical and dental communities in general
will accept and utilize products developed from our technologies. If they do
not, we may be unable to generate sufficient revenues from our technologies,
which may cause us to have to cease operations.
We
may be exposed to product liability claims if products based on our technologies
are marketed and sold. Because our liability insurance coverage will have
limitations, if a judgment is rendered against us in excess of the amount of our
coverage, we may have to cease operations.
Because
we are testing new technologies, and will be involved either directly or
indirectly in the manufacturing and distribution of the technologies, we are
exposed to the financial risk of liability claims in the event that the use of
the technologies results in personal injury or death. There can be no assurance
that we will not experience losses due to product liability claims in the
future, or that adequate insurance will be available in sufficient amounts, at
an acceptable cost, or at all. A product liability claim, product recall or
other claim, or claims for uninsured liabilities or in excess of insured
liabilities, may have a material adverse effect on our business, financial
condition and results of operations. Although we currently carry $2,000,000 in
general liability insurance, such insurance may not be sufficient to cover any
potential liability. We could be sued for a large sum of money and held liable
in excess of our liability coverage. If we cannot pay the judgment, we may have
to cease operations.
There
is uncertainty relating to favorable third-party reimbursement in the United
States. If we can't obtain third party reimbursement for products based on our
technologies, it could limit our revenue.
In the
United States, success in obtaining payment for a new product from third parties
such as insurers depends greatly on the ability to present data which
demonstrates positive outcomes and reduced utilization of other products or
services as well as cost data which shows that treatment costs using the new
product are equal to or less than what is currently covered for other products.
If we are unable to obtain favorable third party reimbursement and patients are
unwilling or unable to pay for our products out-of-pocket, it could limit our
revenue and harm our business.
Risks
Associated With and Investment in Our Common Stock
The
sale of shares by the selling stockholders as contemplated by this prospectus
may encourage our other shareholders to sell their stock and have an adverse
impact on the market price of our common stock, and the sale to Fusion Capital
Fund II, LLC of shares under the common stock purchase agreement will result in
dilution to our existing shareholders.
The sale
by the selling stockholders of our common stock as contemplated by this
prospectus will increase the number of our publicly traded shares, which could
depress the market price of our common stock. Moreover, the mere prospect of
resales by the selling stockholders as contemplated by this prospectus could
depress the market price for our common stock. The issuance of shares to Fusion
Capital under the common stock purchase agreement will dilute the equity
interest of existing shareholders and could have an adverse effect on the market
price of our common stock.
The
perceived risk of dilution may cause our shareholders to sell their shares,
which would contribute to a decline in the price of our common stock. Moreover,
the perceived risk of dilution and the resulting downward pressure on our stock
price could encourage investors to engage in short sales of our common stock. By
increasing the number of shares offered for sale, material amounts of
short-selling could further contribute to progressive price declines in our
common stock.
The
sale of our common stock to Fusion Capital may cause dilution and the sale of
the shares of common stock acquired by Fusion Capital could cause the price of
our common stock to decline.
The
purchase price for the common stock to be sold to Fusion Capital pursuant to the
common stock purchase agreement will fluctuate based on the price of our common
stock. All shares in this offering are freely tradable. Fusion Capital may sell
none, some or all of the shares of common stock purchased from us at any time.
We expect that the shares offered by this prospectus will be sold over a period
of up to 30 months from the date of this prospectus. Depending upon market
liquidity at the time, a sale of shares under this offering at any given time
could cause the trading price of our common stock to decline. The sale of a
substantial number of shares of our common stock under this offering, or
anticipation of such sales, could make it more difficult for us to sell equity
or equity-related securities in the future at a time and at a price that we
might otherwise wish to effect sales.
Our
stock price historically has been volatile and our stock’s trading volume has
been low.
The
market price of our common stock has been and is expected to continue to be
highly volatile. Factors, including announcements of technological innovations
by us or other companies, regulatory matters, new or existing products or
procedures, concerns about our financial position, operating results,
litigation, government regulation, developments or disputes relating to
agreements, patents or proprietary rights, may have a significant impact on the
market price of our stock. In addition, potential dilutive effects of future
sales of shares of common stock by stockholders and by the Company, including
Fusion Capital pursuant to this prospectus and subsequent sale of common stock
by the holders of warrants and options could have an adverse effect on the
market price of our shares.
Although
our common stock began trading on the American Stock Exchange under the symbol
“ONI” on May 20, 2004, the trading price of our common stock has been, and may
be, subject to wide fluctuations in response to a number of factors, many of
which are beyond our control. These factors include:
| · |
quarter-to-quarter
variations in our operating results; |
| · |
the
results of testing, technological innovations, or new commercial products
by us or our competitors; |
| · |
governmental
regulations, rules, and orders; |
| · |
general
conditions in the healthcare, dentistry, or biotechnology industries;
|
| · |
comments
and/or earnings estimates by securities analysts;
|
| · |
developments
concerning patents or other intellectual property rights;
|
| · |
litigation
or public concern about the safety of our
products; |
| · |
announcements
by us or our competitors of significant acquisitions, strategic
partnerships, joint ventures or capital
commitments; |
| · |
additions
or departures of key personnel; |
| · |
release
of escrow or other transfer restrictions on our outstanding shares of
common stock or sales of additional shares of common
stock; |
| · |
adverse
announcements by our competitors; and |
| · |
the
additional sale of common stock by us in a capital raising
transaction. |
Historically,
the daily trading volume of our common stock has been relatively low. We cannot
guarantee that an active public market for our common stock will be sustained or
that the average trading volume will remain at present levels or increase. In
addition, the stock market in general, has experienced significant price and
volume fluctuations. Volatility in the market price for particular companies has
often been unrelated or disproportionate to the operating performance of those
companies. Broad market factors may seriously harm the market price of our
common stock, regardless of our operating performance. In addition, securities
class action litigation has often been initiated following periods of volatility
in the market price of a company's securities. A securities class action suit
against us could result in substantial costs, potential liabilities, and the
diversion of management's attention and resources. Since our initial public
offering and through March 31, 2005 our stock price has fluctuated from $4.45 to
$1.59 per share. To the extent our stock price fluctuates and/or remains low, it
could impair our ability to raise capital through the offering of additional
equity securities.
Future
sales of our common stock may depress our stock
price.
The
market price of our common stock could decline as a result of sales of
substantial amounts of our common stock in the public market, or the perception
that these sales could occur. In addition, these factors could make it more
difficult for us to raise funds through future offerings of common stock. As of
May 31, 2005, there were 14,912,645 shares of our common stock outstanding,
with another 436,380 shares of common stock issuable upon exercise of warrants
to investors and underwriters, 970,000 shares issuable upon exercise of options
issued and an additional 530,000 shares available for issuance under our stock
option plans. The issuance of our stock underlying these options is covered by
an S-8 registration statement we filed with the SEC and may be resold into the
market. As of May 31, 2005, we had approximately 3,960,317 shares of common
stock held in escrow pursuant to Canadian law and underwriter requirements in
connection with our initial public offering pursuant to escrow agreements. These
shares are released from escrow periodically in three- and six -month increments
and are subject to the limitations of the respective escrow agreements. Of these
shares 3,690,344 are held by principals of the Company and 269,973 are held by
the University of Florida Research Foundation, Inc. Through May 31, 2005,
approximately 4,510,447 shares held by principals (including a former director)
and 329,967 shares held by the University of Florida Research Foundation, Inc.
were released from escrow. The released shares held by the principals (excluding
the former director) may now be resold into the market under Rule 144. This
could cause the market price of our common stock to drop significantly. The
shares held by the University of Florida Research Foundation, Inc. are eligible
for resale without restriction.
We
may be unable to maintain the listing of our common stock on the American Stock
Exchange and that would make it more difficult for stockholders to dispose of
their common stock.
Our
common stock is listed on the American Stock Exchange. We cannot guarantee that
it will always be listed. The American Stock Exchange rules for continual
listing include minimum market capitalization and other requirements, which we
may not meet in the future, particularly if the price of our common stock
declines.
If our
common stock is de-listed from the American Stock Exchange, trading in our
common stock would be conducted, if at all, on the NASD’s OTC Bulletin Board in
the United States. This would make it more difficult for stockholders to dispose
of their common stock and more difficult to obtain accurate quotations on our
common stock. This could have an adverse effect on the price of our common
stock.
We
must maintain a current prospectus and registration statement in connection with
shares and warrants issued in connection with our private
placement.
We may
need to meet state registration requirements for sales of securities in states
where an exemption from registration is not otherwise available. There are
currently 273,880 shares of common stock issuable upon exercise of the
underwriter warrants at $1.25 per share that were issued in connection with our
initial public offering and expire on June 24, 2005. In addition, there are
162,500 shares of common stock issuable upon exercise of warrants issued in
connection with our private placement, 25,000 at an exercise price of $2.75 and
137,500 at an exercise price of $3.50 expiring November 30, 2008. We are
obligated to maintain an effective registration statement in connection with the
resale of shares issued and acquired upon exercise of warrants issued in
connection with our private placement. It is possible that we may be unable to
cause a registration statement covering the common stock underlying these shares
and shares issuable upon exercise of the warrants to be effective or to maintain
the effectiveness of such registration. There can be no assurance that we will
be able to maintain an effective registration statement relating to the resale
of our common stock. If we are unable to maintain an effective registration for
the resale of common stock issued in connection with our private placement and
upon exercise of the warrants, we may be subject to claims by the holders of
such shares and warrants.
We
have limited resources which exposes us to potential risks resulting from new
internal control requirements under Section 404
of the Sarbanes-Oxley Act of 2002.
We are
evaluating our internal controls in order to allow management to report on, and
our independent registered public accounting firm to attest to, our internal
controls, as required by Section 404 of the
Sarbanes-Oxley Act of 2002. We may encounter unexpected delays in implementing
the requirements relating to internal controls, therefore, we cannot be certain
about the timing of completion of our evaluation, testing and remediation
actions or the impact that these activities will have on our operations. We also
expect to incur additional expenses and diversion of management’s time as a
result of performing the system and process evaluation, testing and remediation
required in order to comply with the management certification and auditor
attestation requirements. We are a small company with limited resources that
will make it difficult for us to timely comply with the requirements of Section
404. If we are not able to timely comply with the requirements set forth in
Section 404, we
might be subject to sanctions or investigation by regulatory authorities. Any
such action could adversely affect our business and financial results. The
requirement to comply with Section 404 of
the Sarbanes-Oxley Act of 2002 will become effective for our fiscal year ending
December 31, 2006.
In
addition, in our system of internal controls we may rely on the internal
controls of third parties such as payroll service providers. In our evaluation
of our internal controls, we will consider the implication of our reliance on
the internal controls of third parties. Until we have completed our evaluation,
we are unable to determine the extent of our reliance on those controls, the
extent and nature of the testing of those controls, and remediation actions
necessary where that reliance cannot be adequately evaluated and
tested.
FORWARD-LOOKING
STATEMENTS
This
prospectus contains forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended and Section 21E of the Securities
Exchange Act of 1934, as amended. Such forward-looking statements include
statements regarding, among other things, (a) our projected sales and
profitability, (b) our growth strategies, (c) anticipated trends in our
industry, (d) our future financing plans, and (e) our anticipated needs for
working capital. Forward-looking statements, which involve assumptions and
describe our future plans, strategies, and expectations, are generally
identifiable by use of the words
“may,”“will,”“should,”“expect,”“anticipate,”“estimate,”“believe,”“intend,” or
“project” or the negative of these words or other variations on these words or
comparable terminology. This information may involve known and unknown risks,
uncertainties, and other factors that may cause our actual results, performance,
or achievements to be materially different from the future results, performance,
or achievements expressed or implied by any forward-looking statements. These
statements may be found under “Management’s Discussion and Analysis or Plan of
Operation” and “Business,” as well as in this prospectus generally. Actual
events or results may differ materially from those discussed in forward-looking
statements as a result of various factors, including, without limitation, the
risks outlined under “Risk Factors” and matters described in this prospectus
generally. In light of these risks and uncertainties, there can be no assurance
that the forward-looking statements contained in this filing will in fact occur.
In addition to the information expressly required to be included in this filing,
we will provide such further material information, if any, as may be necessary
to make the required statements, in light of the circumstances under which they
are made, not misleading.
USE
OF PROCEEDS
This
prospectus relates to shares of our common stock that may be offered and sold
from time to time by the selling stockholders. We will receive no proceeds from
the sale of shares of common stock in this offering. However, we may receive up
to $9.0 million in proceeds from the sale of our common stock to Fusion Capital
under the common stock purchase agreement and we will receive proceeds from the
exercise of the warrants to acquire common stock in the amount of $434,375,
assuming all of the warrants are exercised. Any proceeds from Fusion Capital we
receive under the common stock purchase agreement will be used for working
capital and general corporate purposes.
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Our
common stock began trading on the American Stock Exchange under the symbol ONI
on May 20, 2004. Previously our common stock was traded on the TSX Venture
Exchange under the symbol ORA.U. We voluntarily de-listed from the TSX Venture
Exchange on October 12, 2004. The following sets forth the high and low closing
bid prices for the common stock on the TSX Venture Exchange from the beginning
of 2004 through May 19, 2004 and on the American Stock Exchange from May 20,
2004 through June 6, 2005. Such prices represent prices between dealers without
adjustment for retail mark ups, mark downs, or commissions and may not
necessarily represent actual transactions.
| |
|
2005 |
|
2004 |
|
2003 |
|
| |
|
High |
|
Low |
|
High |
|
Low |
|
High |
|
Low |
|
|
COMMON
STOCK |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
quarter |
|
$ |
4.00 |
|
$ |
1.59 |
|
$ |
4.35 |
|
$ |
3.20 |
|
|
N/A |
|
|
N/A |
|
|
Second
quarter |
|
|
--- |
|
|
--- |
|
$ |
4.40 |
|
$ |
2.80 |
|
$ |
2.30 |
|
$ |
1.80 |
|
|
Third
quarter |
|
|
--- |
|
|
--- |
|
$ |
3.75 |
|
$ |
2.00 |
|
$ |
4.45 |
|
$ |
2.62 |
|
|
Fourth
quarter |
|
|
--- |
|
|
--- |
|
$ |
4.45 |
|
$ |
2.65 |
|
$ |
4.40 |
|
$ |
3.50 |
|
On June
6, 2005, the closing bid price of the common stock, as reported by the American
Stock Exchange, was $2.40. As of June 6, 2005, there were approximately
20 record
holders of our common stock according to our transfer agent. The number of
record holders does not reflect the number of beneficial owners of the common
stock for whom shares are held by banks, brokerage firms and others.
Equity
Compensation Plan Information
We have
reserved an aggregate of 1,500,000 shares of
our common stock for issuance pursuant to our 2002 Stock Option and Incentive
Plan. The per share exercise price of each stock option or similar award granted
under these plans must be at least equal to the closing fair market value of the
stock on the date of grant. The following table represents the number of shares
issuable upon exercise and reserved for future issuance under these plans as of
May 31, 2005.
|
Plan
Category |
|
Number
of Securities to be issued upon exercise of outstanding options, warrants
and rights |
|
Weighted-average
exercise price of outstanding options, warrants
and rights |
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected
in column (a)) |
|
| |
|
(a) |
|
(b) |
|
(c) |
|
|
Equity
compensation plans
approved by security
holders |
|
|
970,000 |
|
$ |
2.58 |
|
|
530,000 |
|
|
Equity
compensation plans
not approved by security
holders |
|
|
273,880(1
37,500(2 |
)
) |
$
$ |
1.25
2.42 |
|
|
---
--- |
|
|
Total |
|
|
1,281,380 |
|
$ |
2.29 |
|
|
530,000 |
|
|
(1) |
Represents
outstanding underwriter warrants issued in connection with the Company’s
initial public offering to acquire shares of common stock at an exercise
price of $1.25. |
|
(2) |
Represents
warrants issued to the placement agent in connection with the initial
closing of the Company’s private placement to acquire 25,000 shares of
common stock at an exercise price of $2.25, subject to adjustment and
12,500 shares of common stock at an exercise price of
$2.75. |
Dividends
To date,
we have neither declared nor paid any dividends on our common stock nor do we
anticipate that such dividends will be paid in the foreseeable future. Rather,
we intend to retain any earnings to finance the growth and development of our
business. Any payment of cash dividends on our common stock in the future will
be dependent, among other things, upon our earnings, financial condition,
capital requirements and other factors which the board of directors deems
relevant. In addition, restrictive covenants contained in our business loan
agreement preclude the payment of dividends without our lenders
consent.
THE
FUSION TRANSACTION
General
On May
23, 2005 we entered into a common stock purchase agreement with Fusion Capital
Fund II, LLC, pursuant to which Fusion Capital has agreed, under certain
conditions, to purchase on each trading day $15,000 of our common stock up to an
aggregate of $9.0 million over a 30 month period. In our discretion, we may
elect to sell more of our common stock to Fusion Capital than the minimum daily
amount. The purchase price of the shares of common stock will be equal to a
price based upon the future market price of the common stock without any fixed
discount to the market price. Fusion Capital does not have the right or the
obligation to purchase shares of our common stock in the event that the price of
our common stock is less than $0.75.
Fusion
Capital is offering for sale up to 4,315,421 shares of our common stock. In
connection with entering into the agreement, we authorized the sale to Fusion
Capital of up to 4,000,000 shares of our common stock for maximum proceeds of
$9.0 million. Assuming Fusion Capital purchases all $9.0 million of our common
stock, we estimate that the maximum number of shares we will sell to Fusion
Capital under the common stock purchase agreement will be 4,000,000 shares
(exclusive of the 315,421 shares issued to Fusion Capital as the commitment
fee). Subject to approval by our board of directors, we have the right but not
the obligation to issue more than 4,000,000 shares to Fusion Capital. In the
event we elect to issue more than 4,000,000 shares offered hereby, we will be
required to file a new registration statement and have it declared effective by
the U.S. Securities & Exchange Commission. In the event that we decide to
issue more than 2,900,000, i.e. greater than 19.99% of our outstanding shares of
common stock as of the date of the agreement, we would first be required to seek
stockholder approval in order to be in compliance with American Stock Exchange
rules. The number of shares ultimately offered for sale by Fusion Capital is
dependent upon the number of shares purchased by Fusion Capital under the common
stock purchase agreement.
Purchase
Of Shares Under The Common Stock Purchase Agreement
Under the
common stock purchase agreement, on each trading day Fusion Capital is obligated
to purchase a specified dollar amount of our common stock subject to our right
to suspend such purchases at any time, and our right to terminate the agreement
with Fusion Capital at any time, each as described below, Fusion Capital shall
purchase on each trading day during the term of the agreement $15,000 of our
common stock. This daily purchase amount may be decreased by us at any time. We
also have the right to increase the daily purchase amount at any time, provided
however, we may not increase the daily purchase amount above $15,000 unless our
stock price is above $2.20 per share for five consecutive trading days. The
purchase price per share is equal to the lesser of:
| |
• |
the
lowest sale price of our common stock on the purchase date;
or |
|
• |
the
average of the three (3) lowest closing sale prices of our common stock
during the twelve (12) consecutive trading days prior to the date of a
purchase by Fusion Capital. |
The
purchase price will be adjusted for any reorganization, recapitalization,
non-cash dividend, stock split, or other similar transaction occurring during
the trading days in which the closing bid price is used to compute the purchase
price. Fusion Capital may not purchase shares of our common stock under the
common stock purchase agreement if Fusion Capital, together with its affiliates,
would beneficially own more than 9.9% of our common stock outstanding at the
time of the purchase by Fusion Capital. Fusion Capital has the right at any time
to sell any shares purchased under the common stock purchase agreement which
would allow it to avoid the 9.9% limitation. Therefore, we do not believe that
Fusion Capital will ever reach the 9.9% limitation.
The
following table sets forth the amount of proceeds we would receive from Fusion
Capital from the sale of shares of our common stock offered by this prospectus
at varying purchase prices:
|
Assumed
Average
Purchase
Price |
|
Number
of Shares to be
Issued
if Full Purchase |
|
Percentage
of Outstanding After Giving Effect to the Issuance to
Fusion
Capital(1) |
|
Proceeds
from the Sale of Shares to Fusion Capital Under the Common Stock Purchase
Agreement |
|
|
$0.75 |
|
|
4,000,000 |
|
|
21.15
|
% |
$ |
3,000,000 |
|
|
$1.00 |
|
|
4,000,000 |
|
|
21.15
|
% |
$ |
4,000,000 |
|
|
$2.40(2)
|
|
|
3,750,000 |
|
|
20.09
|
% |
$ |
9,000,000 |
|
|
$3.00 |
|
|
3,000,000 |
|
|
16.75
|
% |
$ |
9,000,000 |
|
|
$4.00 |
|
|
2,250,000 |
|
|
13.11
|
% |
$ |
9,000,000 |
|
|
$5.00 |
|
|
1,800,000 |
|
|
10.77
|
% |
$ |
9,000,000 |
|
| (1) |
Based
on 14,912,645 shares outstanding as of May 31, 2005. Includes the issuance
of 315,421 shares of common stock issuable to Fusion Capital as a
commitment fee and the number of shares issuable at the corresponding
assumed purchase price set forth in the adjacent
column. |
| (2) |
Closing
sale price of our common stock on June 6, 2005. |
In
connection with entering into the agreement, we authorized the sale to Fusion
Capital of up to 4,000,000 shares of our common stock. We estimate that we will
issue no more than 4,000,000 shares to Fusion Capital under the common stock
purchase agreement (exclusive of the 315,421 shares issued to Fusion Capital as
the commitment fee), all of which are included in this offering. We have the
right to terminate the agreement without any payment or liability to Fusion
Capital at any time, including in the event that more than 4,000,000 shares are
issuable to Fusion Capital under the common stock purchase agreement. Subject to
approval by our board of directors, we have the right but not the obligation to
issue more than 4,000,000 shares to Fusion Capital. In the event we elect to
issue more than the 4,000,000 shares offered hereby, we will be required to file
a new registration statement and have it declared effective by the U.S.
Securities & Exchange Commission.
Minimum
Purchase Price
Under the
common stock purchase agreement, we have set a minimum purchase price (“floor
price”) of $0.75. Fusion Capital shall not have the right nor the obligation to
purchase any shares of our common stock in the event that the purchase price
would be less than the floor price. Specifically, Fusion Capital shall not have
the right or the obligation to purchase shares of our common stock on any
trading day that the market price of our common stock is below
$0.75.
Our
Right To Suspend Purchases
We have
the unconditional right to suspend purchases at any time for any reason
effective upon one trading day’s notice. Any suspension would remain in effect
until our revocation of the suspension. To the extent we need to use the cash
proceeds of the sales of common stock under the common stock purchase agreement
for working capital or other business purposes, we do not intend to restrict
purchases under the common stock purchase agreement.
Our
Right To Increase and Decrease the Amount to be Purchased
Under the
common stock purchase agreement, Fusion Capital has agreed to purchase on each
trading day during the 30 month term of the agreement, $15,000 of our common
stock or an aggregate of $9.0 million. We have the unconditional right to
decrease the daily amount to be purchased by Fusion Capital at any time for any
reason effective upon one trading day’s notice.
In our
discretion, we may elect to sell more of our common stock to Fusion Capital than
the minimum daily amount. First, in respect of the daily purchase amount, we
have the right to increase the daily purchase amount as the market price of our
common stock increases. Specifically, for every $0.20 increase in Threshold
Price (as defined below) above $2.00, the Company shall have the right to
increase the daily purchase amount by up to an additional $4,500. For example,
if the Threshold Price is $2.20 we would have the right to increase the daily
purchase amount to up to an aggregate of $19,500. The "Threshold Price" is the
lowest sale price of our common stock during the five trading days immediately
preceding our notice to Fusion Capital to increase the daily purchase amount. If
at any time during any trading day the sale price of our common stock is below
the Threshold Price, the applicable increase in the daily purchase amount will
be void.
In
addition to the daily purchase amount, we may elect to require Fusion Capital to
purchase on any single trading day our shares in an amount up to $300,000,
provided that our share price is above $3.00 during the ten (10) trading days
prior thereto. The price at which such shares would be purchased will be the
lowest Purchase Price (as defined above) during the previous fifteen (15)
trading days prior to the date that such purchase notice was received by Fusion
Capital. We may increase this amount to $500,000 if our share price is above
$4.00 during the ten (10) trading days prior to our delivery of the purchase
notice to Fusion Capital. We may deliver multiple purchase notices; however at
least ten (10) trading days must have passed since the most recent non-daily
purchase was completed.
Events
of Default
Generally,
Fusion Capital may terminate the common stock purchase agreement without any
liability or payment to the Company upon the occurrence of any of the following
events of default:
| |
• |
the
effectiveness of the registration statement of which this prospectus is a
part of lapses for any reason (including, without limitation, the issuance
of a stop order) or is unavailable to Fusion Capital for sale of our
common stock offered hereby and such lapse or unavailability continues for
a period of five (5) consecutive trading days or for more than an
aggregate of thirty (30) trading days in any 365-day
period; |
| |
• |
suspension
by our principal market of our common stock from trading for a period of
three consecutive trading days; |
| |
• |
the
de-listing of our common stock from the American Stock Exchange, our
principal market, provided our common stock is not immediately thereafter
trading on the Nasdaq National Market,
the
Nasdaq SmallCap Market, the New York Stock Exchange or the OTC Bulleting
Board; |
| |
• |
the
transfer agent’s failure for five trading days to issue to Fusion Capital
shares of our common stock which Fusion Capital is entitled to under the
common stock purchase agreement; |
| |
• |
any
material breach of the representations or warranties or covenants
contained in the common stock purchase agreement or any related agreements
which has or which could have a material adverse affect on us subject to a
cure period of ten trading days; |
| |
• |
any
participation or threatened participation in insolvency or bankruptcy
proceedings by or against us; |
|
• |
a
material adverse change in our business;
or
|
| |
• |
the
issuance of an aggregate of 2,917,985 shares to Fusion Capital under our
agreement if we fail to obtain the requisite stockholder
approval. |
Our
Termination Rights
We have
the unconditional right at any time for any reason to give notice to Fusion
Capital terminating the common stock purchase agreement. Such notice shall be
effective one trading day after Fusion Capital receives such notice.
Effect
of Performance of the Common Stock Purchase Agreement on our
Stockholders
All
shares registered in this offering will be freely tradable. It is anticipated
that shares registered in this offering will be sold over a period of up to 30
months from the date of this prospectus. The sale of a significant amount of
shares registered in this offering at any given time could cause the trading
price of our common stock to decline and to be highly volatile. Fusion Capital
may ultimately purchase up to 4,000,000 shares of common stock registered in
this offering, and it may sell some, none or all of the shares of common stock
it acquires upon purchase. Therefore, the purchases under the common stock
purchase agreement may result in substantial dilution to the interests of other
holders of our common stock. However, we have the right at any time for any
reason to: (1) reduce the daily purchase amount, (2) suspend purchases of the
common stock by Fusion Capital and (3) terminate the common stock purchase
agreement.
No
Short-Selling or Hedging by Fusion Capital
Fusion
Capital has agreed that neither it nor any of its affiliates shall engage in any
direct or indirect short-selling or hedging of our common stock during any time
prior to the termination of the common stock purchase agreement.
Commitment
Shares Issued to Fusion Capital
Under the
terms of the common stock purchase agreement Fusion Capital has received 315,421
shares of our common stock as a commitment fee. Unless an
event of default occurs, these shares must be held by Fusion Capital until 30
months from the date of the common stock purchase agreement or the date the
common stock purchase agreement is terminated.
No
Variable Priced Financings
Until the
termination of the common stock purchase agreement, we have agreed not to issue,
or enter into any agreement with respect to the issuance of, any variable priced
equity or variable priced equity-like securities unless we have obtained Fusion
Capital’s prior written consent.
Participations
Rights
For a
period of 30 months from May 23, 2005, the date of the common stock purchase
agreement, we have granted to Fusion Capital the right to participate in the
purchase of any New Securities (as defined below) that we may, from time to
time, propose to issue and sell in connection with any financing transaction to
a third party. In particular, Fusion Capital can purchase up to 25% of such New
Securities at the same price and on the same terms as such other investor. “New
Securities” means any shares of our common stock, our preferred stock or any
other of our equity securities or our securities convertible or exchangeable for
our equity securities. New Securities shall not include, (i) shares of our
common stock issuable upon conversion or exercise of any securities outstanding
as of the date of our agreement, (ii) shares, options or warrants for our common
stock granted to officers, directors and employees of the company pursuant to
stock option plans approved by our board of directors, (iii) shares of our
common stock or securities convertible or exchangeable for our common stock
issued pursuant to the acquisition of another company by consolidation, merger,
or purchase of all or substantially all of the assets of such company or (iv)
shares of our common stock or securities convertible or exchangeable into shares
of our common stock issued in connection with a strategic transaction involving
us and issued to an entity or an affiliate of such entity that is engaged in the
same or substantially related business as we are. Fusion Capital’s participation
rights shall not prohibit or limit us from selling any securities so long as we
make the same offer to Fusion Capital.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The
following discussion and analysis should be read in conjunction with the
Financial Statements and Notes thereto included elsewhere in this prospectus.
This discussion contains certain forward-looking statements that involve risks
and uncertainties. Our actual results and the timing of certain events could
differ materially from those discussed in these forward-looking statements as a
result of certain factors, including, but not limited to, those set forth
herein.
Overview
We are an
emerging, early-stage biotechnology company developing novel technologies and
products sourced from innovative research at the University of Florida and other
academic centers. Our strategy is to in-license and to develop products through
human proof-of-concept studies (Phase I and II clinical trials of the U.S. Food
and Drug Administration’s regulatory process) prior to partnering with major
pharmaceutical, biotechnology or healthcare product firms for advanced clinical
development and commercialization. Since inception, we have funded a significant
portion of our operations from the public and private sales of our securities.
We have generated no significant revenues from operations during the last two
years. All of our revenues have been from a sponsored research agreement and
SBIR grants which have expired. We have not generated revenues from sales of
products.
We are
currently seeking to develop several products, each of which address potentially
large market opportunities:
Replacement
therapy is a
single, painless one-time topical treatment that has the potential to offer
lifelong protection against dental caries (tooth decay). The therapy is based on
genetically altering the bacterium, S.
mutans, which is
the primary etiologic agent in tooth decay. Present in the normal flora of the
mouth, S.
mutans converts
dietary sugar to lactic acid; the lactic acid, in turn, causes the erosion of
tooth enamel that results in the destruction of the tooth surface and eventually
the entire tooth. Replacement therapy permanently replaces resident
acid-producing S.
mutans with a
patented, genetically engineered strain of S.
mutans that does
not produce lactic acid. Applied topically to tooth surfaces with a swab, the
therapy requires only one application. We have begun Phase I clinical trials of
our replacement therapy technology and expect to partner with a major healthcare
products or pharmaceutical company prior to initiating later stages of clinical
testing.
Probiotics are live
microorganisms that may confer health benefits to the host when administered in
adequate amounts; the use of yogurt containing live Lactobacillus cultures
is an example of a probiotic application. We have identified three natural
strains of bacteria that provide significant protection against the causative
organisms of periodontal disease and dental caries. Because probiotic treatments
may be marketed as "health supplements" without the need for extensive
regulatory oversight in certain countries, we believe that we may achieve
commercialization of our probiotic product in certain markets in 2006. If
successfully developed, our oral rinse product will be one of the first
probiotics to be marketed for the maintenance of oral health.
Mutacin
1140 is a
highly potent bactericidal peptide that is produced by our strain of
S.
mutans. Our
proprietary mutacin bacteria was discovered by our researchers during the course
of developing replacement therapy and is a novel antibiotic that has
broad-spectrum antimicrobial activity against essentially all Gram-positive
bacteria including vancomycin-resistant Staphylococcus
aureus. The
antibiotic currently is in preclinical stages of development. We currently plan
to wait to begin animal studies of Mutacin 1140 until we obtain sufficient
financial resources. See Liquidity and Capital Resources discussion below.
IVIAT
and CMAT are
technologies we licensed from iviGene Corporation, a company related to us by
common ownership. These technologies enable the simple, fast identification of
novel and potentially important gene targets associated with the natural onset
and progression of infections, cancers and other diseases in humans and other
living organisms, including plants. This licensed technology offers us the
potential to generate and develop a number of product candidates for future
out-licensing to corporate partners, particularly in the area of cancer and
tuberculosis, as well as agricultural and other non-human uses.
Business
Objectives and Milestones
The
specific goal of our business is to successfully develop, clinically test and
obtain FDA approval for sales of products based on our licensed, patented
technologies. Our strategy is to develop novel technologies through human
proof-of-concept studies (Phase I or II clinical trials) prior to partnering
with major pharmaceutical, biotechnology or health care product firms for
advanced clinical development and commercialization. Upon successful completion
of proof-of-concept studies, we intend to consider sublicensing our licensed,
patented technologies to one or more strategic partners that would be
responsible for advanced clinical development, completing the U.S. Food and Drug
Administration’s approval process, and manufacturing and marketing our products.
In order to accomplish these objectives, we must take the following
actions:
Replacement
Therapy
|
1. |
Successfully
complete Phase I clinical trials. |
|
2. |
Obtain
FDA approval for a pivotal trial. |
Probiotic
Technology
|
1. |
Develop
appropriate manufacturing and packaging systems. |
|
2. |
Complete
one human study. |
Mutacin 1140
|
1. |
Complete
preclinical studies, including animal toxicity and efficacy, required for
an investigational new drug application submission. |
|
2. |
Submit
an investigational new drug application to the
FDA. |
The above
actions, individually and in the aggregate, are expected to be costly and will
require additional capital to undertake and complete. To the extent our current
capital limits our ability to pursue our technologies being developed, we expect
our progress to be limited in the near-term to focus on Replacement Therapy. See
Liquidity and Capital Resources below. We currently believe, provided we obtain
adequate funding, that we will be able to begin to generate ongoing revenue from
our development efforts with our oral probiotics technology sometime in the next
eighteen to twenty-four months. This time period could change depending on the
progress of our development efforts and our ability to negotiate a partnering
arrangement.
Critical
Accounting Policies
Our
discussion and analysis of our financial condition and results of operations are
based upon our financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States. The
preparation of financial statements in accordance with accounting principles
generally accepted in the United States requires us to make estimates and
assumptions that affect reported amounts and related disclosures. We consider an
accounting estimate to be critical if it requires assumptions to be made that
were uncertain at the time the estimate was made; and changes in the estimate or
different estimates that could have been made could have a material impact on
our results of operations or financial condition. Our financial statements do
not include any significant estimates that would have a material impact on our
results of operations or financial condition.
New
Accounting Pronouncements
In
December 2004, the Financial Accounting Standards Board (FASB) issued FASB
Statement No. 123 (revised 2004), Share-Based
Payment (“Statement
123(R)”),
a
revision of FASB Statement No. 123, Accounting
for Stock-Based Compensation.
Statement 123(R) supersedes APB Opinion No. 25, Accounting
for Stock Issued to Employees, and
amends FASB Statement No. 95, Statement
of Cash Flows.
Statement 123(R), which we expect to adopt in the first quarter of 2006, is
generally similar to Statement 123, however, it will require all share-based
payments to employees, including grants of employee stock options, to be
recognized in the financial statements based on their fair values. Thus, pro
forma disclosure will no longer be an alternative to financial statement
recognition. We do not believe the adoption of Statement 123(R) will have a
material impact on our results of operations or financial position.
Results
of Operations
| |
|
Three
Months Ended March 31 |
|
| |
|
2005 |
|
2004 |
|
| |
|
|
|
|
|
| |
|
|
|
|
|
|
Revenue |
|
$ |
-- |
|
$ |
-- |
|
| |
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
Research
and development |
|
|
647,186 |
|
|
262,295 |
|
|
General
and administration |
|
|
231,919 |
|
|
282,166 |
|
|
Total
operating expenses |
|
|
879,105 |
|
|
544,461 |
|
| |
|
|
|
|
|
|
|
|
Loss
from operations |
|
|
(879,105 |
) |
|
(544,461 |
) |
| |
|
|
|
|
|
|
|
|
Other
income (expense): |
|
|
|
|
|
|
|
|
Interest
income |
|
|
14,620 |
|
|
7,021 |
|
|
Interest
expense |
|
|
(1,645 |
) |
|
--- |
|
|
Total
other income, net |
|
|
12,975 |
|
|
7,021 |
|
| |
|
|
|
|
|
|
|
|
Loss
before income taxes |
|
|
(866,130 |
) |
|
(537,440 |
) |
|
Income
tax benefit |
|
|
-- |
|
|
-- |
|
|
Net
loss |
|
$ |
(866,130 |
) |
$ |
(537,440 |
) |
| |
|
|
|
|
|
|
|
| |
|
Years
ended December 31 |
|
| |
|
2004 |
|
2003 |
|
| |
|
|
|
|
|
| |
|
|
|
|
|
|
Revenue |
|
$ |
196,210 |
|
$ |
-- |
|
| |
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
Research
and development |
|
|
1,990,979 |
|
|
929,355 |
|
|
General
and administration |
|
|
1,329,983 |
|
|
738,596 |
|
|
Total
operating expenses |
|
|
3,320,962 |
|
|
1,667,951 |
|
| |
|
|
|
|
|
|
|
|
Loss
from operations |
|
|
(3,124,752 |
) |
|
(1,667,951 |
) |
| |
|
|
|
|
|
|
|
|
Other
income (expense): |
|
|
|
|
|
|
|
|
Interest
income |
|
|
47,306 |
|
|
7,874 |
|
|
Interest
expense |
|
|
(442 |
) |
|
(12,877 |
) |
|
Total
other income (expense), net |
|
|
46,864 |
|
|
(5,003 |
) |
| |
|
|
|
|
|
|
|
|
Loss
before income taxes |
|
|
(3,077,888 |
) |
|
(1,672,954 |
) |
|
Income
tax benefit |
|
|
-- |
|
|
-- |
|
|
Net
loss |
|
$ |
(3,077,888 |
) |
$ |
(1,672,954 |
) |
| |
|
|
|
|
|
|
|
For
the Three Months Ended March 31, 2005 and 2004
We had no
revenues in the three months ended March 31, 2005 and 2004. Our operating
expenses increased 61% to $879,105 in the three months ended March 31, 2005 from
$544,461 in the same period in 2004. Research and development expenses increased
147% to $647,186 in the three months ended March 31, 2005 from $262,295 in the
same period in 2004, reflecting the hiring of additional research staff
amounting to approximately $93,000, contract manufacturing and conduct of the
replacement therapy clinical trials totaling approximately $212,000, use of
consultants costing approximately $40,000 on our Mutacin 1140 and probiotic
technologies, increased depreciation for new equipment purchased amounting to
approximately $39,000, increased costs for supplies of approximately $30,000 as
a result of the increase in our research staff and increased costs to operate
our new facilities amounting to approximately $22,000, minimum royalty payments
for our technologies of $25,000, less a reduction in expenses in connection with
compensation expense for options approximating $76,000 caused by a significantly
lower stock price in 2005. General and administration expenses decreased 18% to
$231,919 in the three months ended March 31, 2005 from $282,166 in the same
period in 2004, reflecting the reduction in expenses in connection with
compensation expense for options approximating $127,000 caused by a
significantly lower stock price in 2005, offset by increased costs for
additional personnel amounting to approximately $35,000, for financial audit
services approximating $28,000, and for directors’ and officers’ liability
insurance coverage approximating $14,000.
Interest
income increased 108% to $14,620 in the three months ended March 31, 2005 from
$7,021 during the same period in 2004, reflecting the higher average cash
balances maintained during most of the quarterly period in 2005, as well as
higher interest rates in 2005. We incurred interest expense of $1,645 in the
three months ended March 31, 2005 as result of the initial draw on a note
payable to our bank of approximately $229,500 on February 24, 2005. There was no
interest expense in the same period in 2004 as we had no outstanding debt that
incurred interest charges.
We
incurred net losses of $866,130 and $537,440 during the three months ended March
31, 2005 and 2004, respectively. The increase in our net loss amounting to
$328,690 was principally caused by our hiring additional personnel and the
increase in costs associated with supporting those employees, the costs to
support our clinical trial for our replacement therapy technology and the
increase in consulting fees to support our other research efforts.
For
the Years Ended December 31, 2004 and 2003
We had
revenues of $196,210 in the year ended December 31, 2004 and no revenues in
2003. This is a result of having two Small Business Innovation Research Grants
for our Mutacin 1140 and IVIAT technologies in 2004. Our operating expenses
increased 99% to $3,320,962 in the year ended December 31, 2004 from
$1,667,951 in 2003. Research and development expenses increased 114% to
$1,990,979 in 2004 from $929,355 in 2003, reflecting the hiring of research
personnel, increased consumption of laboratory supplies and the costs associated
with preparing for human clinical trials. General and administration expenses
increased 80% to $1,329,983 in 2004 from $738,596 in 2003, reflecting the hiring
of personnel, the hiring of outside professionals for investor and public
relations, costs associated with public entity filings and increased coverage in
directors’ and officers’ liability insurance.
Interest
income increased 501% to $47,306 in the year ended December 31, 2004 from $7,874
in 2003, which was a result of the higher interest rates and higher average cash
balances maintained in 2004 due to the exercise of Series A and Series B common
stock warrants in December 2003 and March 2004, respectively. Interest expense
decreased 97% to $442 in the year ended December 31, 2004 from $12,877 in 2003
as a result of the pay-off of stockholder notes in December 2003.
Our net
loss increased 84% to $3,077,888 in the year ended December 31, 2004 from
$1,672,954 in 2003. The increase in our net loss was principally caused by the
hiring of additional personnel, increased fees paid to outside professionals for
clinical trial preparation and public entity filings, and the increased use of
supplies.
Liquidity
and Capital Resources
Our
operating activities used cash for the twelve months ended December 31,
2004, 2003 and the three months ended March 31, 2005 was $2,745,243, $1,218,910
and $1,282,635, respectively. Our working capital was $3,345,512 as of December
31, 2004 and $2,119,999 as of March 31, 2005. Cash used by operations in the
twelve months ended December 31, 2004 resulted primarily from operating
losses from operations of $3,077,888. Cash used by operations in the three
months ended March 31, 2005 resulted primarily from our net loss from
operations of $866,130, as well as an increase in prepaid expenses of
approximately $100,000, a decrease in accounts payable and accrued expenses of
approximately $152,000, and adjustments for non-cash expenses for depreciation
of approximately $49,000 and non-cash reversal of expenses for stock-based
compensation of approximately $213,000.
Our
investing activities used cash of $690,548 for the twelve months ended
December 31, 2004 for the acquisition of property and equipment. Our
investing activities used cash of $561,462 for the three months ended
March 31, 2005 for the acquisition of property and equipment. We anticipate
spending approximately $100,000 on additional property and equipment during the
remainder of 2005.
Our
financing activities provided $3,518,278 in cash for the twelve months ended
December 31, 2004, which consists primarily of $3,035,788 in proceeds from
exercised warrants. On November 30, 2004 we issued a total of 250,000 shares of
our common stock and warrants to purchase 125,000 shares of our common stock
pursuant to a subscription agreement between us and three investors. We received
gross proceeds of $687,500, and incurred offering costs of approximately
$142,500 resulting in net proceeds of approximately $545,000. Westminster
Securities Corp., a member of the National Association of Securities Dealers,
Inc. and a registered broker-dealer, acted as the placement agent in connection
with this private placement transaction. The private placement agreement and
offering was terminated by mutual assent of the Company and the placement agent
because a sufficient level of funding was not being achieved. Each warrant is
exercisable on or before November 30, 2008 to acquire one share of common stock
at a price of $3.50 per share. The issuance of the shares of common stock and
warrants was made pursuant to the exemption from registration provided by
Section 4(2) of the Securities Act. Each investor is accredited under the
Securities Act and the securities were sold without any general solicitation. As
the placement agent, Westminster received (i) $35,000 (ii) commission of 8% on
the gross proceeds to us, and (iii) a warrant to purchase 25,000 shares of
common stock at a purchase price of $2.75 per share and a warrant to purchase
12,500 shares of common stock at 3.50. In addition to Westminster's fee and
commission, we incurred further expenses in connection with the offering of
approximately $52,500.
We
anticipate that direct costs in 2005 associated with preparing for and
conducting clinical testing on our replacement therapy technology will be
approximately $1,700,000. Such costs are expected to consist of approximately
$875,000 for manufacturing clinical materials, $475,000 for conducting the
clinical trials and $350,000 for employee salaries, fringe benefits, supplies
and other related direct costs. We also anticipate spending approximately
$525,000 performing animal studies on our Mutacin 1140 technology. Such costs
are expected to consist of approximately $175,000 for contract research,
$200,000 for employee salaries and fringe benefits and $150,000 for laboratory
supplies and other related direct costs.
Our
financing activities provided $559,236 in cash for the three months ended
March 31, 2005, which consists primarily of $556,361 in proceeds from a
note payable to our bank. On February 24, 2005, we entered into a Business Loan
Agreement with our bank that will fund approximately $615,000 of laboratory
equipment purchases. The loan has a term of 37 months with the first month’s
payment of interest only and the remaining monthly payments of principal and
interest of approximately $18,900 per month. Interest will be calculated at the
prime rate as published in the Wall Street Journal (5.75% at March 31, 2005)
plus 1.00%. Interest can never be below 5.75% or above 17.5%. The loan is
collateralized by the equipment being purchased as well as all equipment
currently owned by the Company and the agreement requires the Company to
maintain working capital of $750,000. It is anticipated that the Company will
draw $59,000 in additional proceeds under the terms of this loan in the second
quarter of 2005.
We
anticipate that direct costs in 2005 associated with preparing for and
conducting clinical testing on our replacement therapy technology will be
approximately $1,700,000, of which $330,000 was spent in the three months ended
March 31, 2005. During the remainder of 2005, provided additional financing is
obtained, we expect to spend approximately $670,000 for manufacturing clinical
materials, $410,000 for conducting the clinical trials and $290,000 for employee
salaries, fringe benefits, supplies and other related direct costs. Provided
additional financing is obtained, we would also anticipate spending during the
remainder of 2005 approximately $434,000 for performing animal studies on our
Mutacin 1140 technology. Such costs are expected to consist of approximately
$165,000 for contract research, $135,000 for employee salaries and fringe
benefits and $134,000 for laboratory supplies and other related direct
costs.
Our
business is based on commercializing entirely new and unique technologies, and
our current business plan contains a variety of assumptions and expectations
that are subject to uncertainty, including assumptions and expectations about
manufacturing capabilities, clinical testing cost and pricing, continuing
technological improvements, strategic licensing relationships and other relevant
matters. These assumptions take into account recent financings, as well as
expected but currently unidentified additional financings. We have experienced
losses from continuing operations during the last two fiscal years and have an
accumulated deficit of $6,338,114 as of March 31, 2005. Cash used in
operating activities for 2004 was $2,745,243 and for the first three months of
2005 was $1,282,635. At March 31, 2005, our principal source of liquidity
was $2,381,383 of cash and cash equivalents. These operating results occurred
while developing and attempting to commercialize and manufacture products from
entirely new and unique technologies. Our business plan requires significant
spending related primarily to clinical testing expenditures. These factors place
a significant strain on our limited financial resources and adversely affect our
ability to continue as a going concern. Our ultimate success depends on our
ability to continue to raise capital for our operations.
Our
capital requirements during the remainder of 2005 will depend on numerous
factors, including the success of our research and development, the resources we
devote to develop and support our technologies, and the success of pursuing
strategic licensing and funded product development relationships with external
partners. We expect to incur substantial expenditures to further develop each of
our technologies including continued increases in personnel and costs related to
research, preclinical testing and clinical studies, as well as significant costs
associated with being a public company. We believe our working capital at March
31, 2005 is not sufficient to meet our business objectives as presently
structured. We will require substantial funds to conduct research and
development and preclinical and Phase I clinical testing of our licensed,
patented technologies and to develop sublicensing relationships for the Phase II
and III clinical testing and manufacture and marketing of any products that are
approved for commercial sale. We recognize that we must generate additional
capital resources to enable us to continue as a going concern. Our plans include
seeking financing, alliances or other partnership agreements with entities
interested in our technologies, or other business transactions that would
generate sufficient resources to assure continuation of our operations and
research and development programs.
Our
future success depends on our ability to raise capital and ultimately generate
revenue and attain profitability. We cannot be certain that additional capital,
whether through selling additional debt or equity securities or obtaining a line
of credit or other loan, will be available to us or, if available, will be on
terms acceptable to us. If we issue additional securities to raise funds, these
securities may have rights, preferences, or privileges senior to those of our
common stock, and our current stockholders may experience substantial dilution.
On May
23, 2005, we entered into a Common Stock Purchase Agreement (“Purchase
Agreement”) with Fusion Capital Fund II, LLC (“Fusion Capital”). Pursuant to the
terms of the Purchase Agreement, Fusion Capital has agreed to purchase from us
up to $9,000,000 of our common stock over a 30 month period. Pursuant to the
terms of a Registration Rights Agreement, dated May 23, 2005, we agreed to file
a registration statement on Form SB-2 (the “Registration Statement”) with the
Securities and Exchange Commission covering shares which may be purchased by
Fusion Capital under the Purchase Agreement. Once the Registration Statement has
been declared effective, on each trading day during the term of the Purchase
Agreement we have the right to sell to Fusion Capital $15,000 of our common
stock at a price based upon the market price of the common stock on the date of
each sale without any fixed discount to the market price. At our option, Fusion
Capital can be required to purchase fewer or greater amounts of common stock
each month. We have the right to control the timing and the number of shares
sold to Fusion Capital.
BUSINESS
This
description contains certain forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from the results
discussed in the forward-looking statements as a result of certain of the risks
set forth herein. We assume no obligation to update any forward-looking
statements contained herein.
Overview
We are an
early-stage biotechnology company focused on the acquisition and development of
novel technologies and products to address significant, unmet medical needs. Our
strategy is to in-license and to develop products through human proof-of-concept
studies (Phase I and II clinical trials of the U.S. Food and Drug
Administration’s regulatory process) prior to partnering with major
pharmaceutical, biotechnology or healthcare product firms for advanced clinical
development and commercialization. Our most advanced product, which we refer to
as replacement therapy, is a one-time topical treatment to prevent tooth decay.
The FDA has approved our Investigational New Drug application (“IND”) for
replacement therapy and we began the Phase I trials in 2005.
Since
inception, we have funded a significant portion of our operations from the
public and private sales of our securities. We have generated no significant
revenues from operations during the last two years. All of our revenues have
been from a sponsored research agreement and Small Business Innovation Research
(“SBIR”) grants which have expired. We have not generated revenues from sales of
products.
We are
currently developing several products, each of which addresses large market
opportunities:
| · |
Replacement
therapy is
a single, painless, one-time topical treatment that has the potential to
offer lifelong protection against dental caries (tooth decay). Replacement
therapy refers to a process which permanently replaces bacteria normally
present in the mouth which are strongly associated with tooth decay with a
genetically altered strain of bacteria that has been modified so that it
no longer contributes to the disease. Present in the normal flora of the
mouth, S.
mutans converts
dietary sugar to lactic acid; the lactic acid, in turn, causes the erosion
of tooth enamel that results in the destruction of the tooth surface and
eventually the entire tooth. Replacement therapy permanently replaces
resident acid-producing S.
mutans with
a patented, genetically engineered strain of S.
mutans that
does not produce lactic acid. Applied topically to tooth surfaces with a
swab, the therapy requires only one application. We began Phase I clinical
trials in 2005 and intend to partner with a major healthcare products or
pharmaceutical company prior to initiating later stages of clinical
testing. |
| · |
Probiotics
are live microorganisms that confer health benefits to the host when
administered in adequate amounts; the use of yogurt containing live
Lactobacillus
cultures is an example of a probiotic application. We have identified
three natural strains of bacteria that provide significant protection
against the causative organisms of periodontal disease and dental caries.
We are developing a formulation and method of delivery of these beneficial
bacteria that we plan to commercialize as a dental care probiotic. Because
probiotic treatments may be marketed as "health supplements" without the
need for extensive regulatory oversight in certain countries, we believe
that we may achieve commercialization of our probiotic product in certain
markets in 2006. If successfully developed, our oral probiotic product
will be one of the first probiotics to be marketed for the maintenance of
oral health. |
| · |
Mutacin
1140 is
a highly potent bactericidal peptide produced by S.
mutans.
This proprietary peptide was discovered by our researchers during the
course of developing replacement therapy and is a novel antibiotic that
has broad-spectrum antimicrobial activity against essentially all
Gram-positive bacteria including vancomycin-resistant Staphylococcus
aureus.
The antibiotic currently is in preclinical stages of development. We
currently plan to begin animal studies in 2005, provided sufficient
funding is available. |
| · |
IVIAT
and CMAT
are technologies we licensed from iviGene Corporation (a company related
to us by common ownership). These technologies enable the simple, fast
identification of novel and potentially important gene targets associated
with the natural onset and progression of infections, cancers and other
diseases in humans and other living organisms, including plants. This
licensed technology offers us the potential to generate and develop a
number of product candidates for future out-licensing to corporate
partners, particularly in the area of cancer and tuberculosis, as well as
agricultural and other non-human uses. We currently plan to apply for a
Phase II SBIR grant in order to continue any significant research using
these licensed technologies. |
Our
Business Strategy
Our
strategy is to develop novel technologies through human proof-of-concept studies
(Phase I or II clinical trials) prior to partnering with major pharmaceutical,
biotechnology or health care product firms for advanced clinical development and
commercialization. Upon successful completion of proof-of-concept studies, we
intend to consider sublicensing our licensed, patented technologies to one or
more strategic partners that would be responsible for advanced clinical
development, completing the U.S. Food and Drug Administration’s (“FDA”) approval
process, and manufacturing and marketing our products. We plan to structure our
agreements with strategic partners sublicensing our technology to include an
upfront licensing fee upon execution of the agreement, milestone payments upon
achievement of specific product development goals and royalties from product
sales.
In
pursuing this strategy, we expect to avoid the high cost of later stage clinical
trials and generate revenues in the form of license fees from our technologies
sooner than if we were to complete the lengthy FDA approval-process ourselves.
Once one or more of our technologies are successfully licensed, we plan to
license additional promising technologies within our field of expertise from
leading academic institutions and other biotechnology companies. There can be no
assurance that we will be able to enter into such sublicenses.
Our
Technologies
Replacement
Therapy
Dental
caries (tooth decay) is a worldwide epidemic that affects the majority of
populations in industrialized and developing countries. According to the World
Health Organization, tooth decay is the most prevalent infectious disease,
affecting approximately 5 billion people. Much of the tooth decay in low-income
countries remains untreated until the teeth are extracted.
Tooth
decay is characterized by the dissolution of enamel and dentin which eventually
results in the destruction of the entire tooth. The immediate cause of tooth
decay is organic acid produced by microorganisms on the tooth surface. Studies
suggest that of the 400 to 500 microbial species in the mouth, S.
mutans, a common
bacterium found in virtually all humans, is the principal causative agent in the
development of tooth decay. Residing within dental plaque, S.
mutans derives
its energy from carbohydrate metabolism as it converts dietary sugar to lactic
acid which, in turn, erodes the tooth enamel.
Our
replacement therapy technology employs a genetically modified strain of
S.
mutans that does
not produce lactic acid. When applied to the teeth, this non acid-producing
organism displaces and permanently replaces the indigenous acid-producing
strains of S.
mutans, thereby
potentially providing lifelong protection against most forms of tooth decay.
Replacement
therapy is suitable for use by the general population. The ideal application
would be to treat infants at the onset of tooth eruption when initial bacterial
colonization of the tooth surfaces is occurring. Replacement therapy requires
only a single 5-minute application. Applied topically to the teeth with a swab,
the therapy can be administered by dentists to patients during routine office
visits.
We
submitted an IND for replacement therapy to the FDA in 1998 seeking permission
to begin Phase I clinical trials. In March 2003, we submitted a new IND. In
November 2004, the FDA approved our clinical design and protocol for the Phase I
clinical trial. In March 2005, we initiated enrollment in the clinical trial and
began enrolling subjects in May 2005.
Technical
Background
Replacement
therapy represents a novel approach to preventing bacterial infections by
capitalizing on interactions between different species of bacteria inhabiting
the same ecosystem. This approach involves permanently implanting a harmless
strain of bacteria in the host’s microflora. Once established, the harmless
strain prevents the colonization and outgrowth of a potential pathogen. In the
case of dental caries, beneficial bacteria are implanted in the mouth of the
host to prevent colonization of the harmful bacteria that cause
tooth decay.
Our
replacement therapy involves replacing the naturally occurring, acid-producing
strains of S.
mutans with a
genetically engineered strain of S.
mutans that does
not produce lactic acid. Our researchers discovered a strain of S.
mutans that did
not produce the decay-causing lactic acid. This strain, however, could not
permanently replace the acid-producing strains of S.
mutans naturally
occurring in the normal flora of the mouth. Thus, it was first necessary to find
a strain of S.
mutans that
could permanently replace the naturally occurring decay-causing strains of
S.
mutans.
Through
extensive scientific research, we eventually found a rare strain of S.
mutans, present
in only 1% of the population, which secretes a natural antibiotic capable of
killing virtually all other strains of S.
mutans. We
believe this natural antibiotic, referred to as Mutacin 1140, enables the
bacteria to persistently and preemptively colonize the oral cavity, displace
pre-existing strains and gain dominance in its ecosystem, dental
plaque.
Using
this rare strain as the
starting strain, we eliminated the gene encoding for the enzyme responsible for
producing lactic acid. Our research revealed the gene deletion eliminated the
bacteria’s ability to produce lactic acid; however, it also prevented the strain
from growing. So as to correct the imbalance, an auxiliary gene was inserted
which restored the strain’s growth. Instead of lactic acid, the strain produced
ethanol and acetoin which are the normal end products of metabolism in many
other microorganisms colonizing the oral cavity. We named this strain BCS3-L1,
and filed for composition of matter intellectual property protection for the
strain.
Regulatory
Status
We
submitted an Investigational New Drug application for our replacement therapy to
the U.S. Food and Drug Administration in 1998 seeking permission to begin
clinical trials. Subsequent to review by the Office of Vaccines Research and
Review Division of Vaccines and Related Products Application at the Center for
Biologics Evaluation and Research (CBER), the FDA placed the application on
clinical hold pending the development of a recall mechanism to completely
eradicate the organism from human subjects, should it be necessary, until
complete safety could be experimentally established in the Phase I clinical
trials.
In
response to this requirement, we genetically engineered a second strain of
S.
mutans (A2JM)
identical in every aspect to the original strain (BCS3-L1) except that it
requires d-alanine
for survival. d-alanine
was selected because the nutrient is not normally found in human diets; humans
do not produce it; and it can be easily administered via a mouth rinse. With
d-alanine
nutrient supplementation, the organism lives; without nutrient supplementation,
the organism cannot survive. Therefore, we believe the organism can be
completely eradicated from human subjects by withdrawing d-alanine
nutrient supplementation.
In the
initial studies to assess product safety (Phase I clinical trials) that began in
March 2005, the genetically altered strain of S.
mutans requiring
d-alanine
supplementation is administered to study subjects in conjunction with a twice
daily dose of a d-alanine
mouth rinse. Once safety is experimentally established, the replacement therapy
to be commercialized will consist of the original strain which does not require
d-alanine
to survive.
The
initial study will be conducted in six couples and an additional nine unattached
males at Hill Top Research in West Palm Beach, Florida and will look at the
safety of Replacement Therapy and the potential for transmission of the
Replacement Therapy organism to the non-treated member of each couple (referred
to as horizontal transmission). All of
the participants in the trial must be without teeth, with full sets of dentures,
and under the age of 55. The study will involve four days of pretreatment with
an antibiotic (chlorhexidine) to kill resident S.
mutants in each
participant’s mouth.
Male study subjects will then receive Replacement Therapy. The non-treated
member of each couple will be tested repeatedly to see if there is any
horizontal transmission of the Replacement Therapy organism from one person to
another. The investigators will determine the genetic stability of the
Replacement Therapy organism over time. Seven days after treatment, the subjects
will undergo an eradication phase of the study for one month, using the same
antibiotic and the withholding of a D-alanine amino acid supplement that the
Replacement Therapy organism requires for its survival. The investigators will
subsequently follow each study participant for three months to ensure that the
eradication was effective.
Preclinical
Studies
From 1976
to 2002, our researchers and others have conducted several animal studies on
replacement therapy for dental caries. We believe these studies support our
belief in the ability of our novel technology to
prevent tooth decay. Additionally, we believe these studies demonstrate the
ability of our genetically engineered strain of S.
mutans to
persistently and preemptively colonize the oral cavity and aggressively displace
the indigenous wild-type strain, filling its bacterial niche in all respects
except for the production of lactic acid.
In the
most recent animal study, our patented effector strain (BCS3-L1) and the
wild-type strain were both grown in culture in the presence of sugar. The
wild-type strain produced mostly lactic acid from the metabolism of sugar; it
also produced small amounts of other acids as well as the non-acidic compounds,
ethanol and acetoin. By contrast, our genetically modified strain produced
mostly the non-acidic compounds, ethanol and acetoin, from the metabolism of
sugar. No lactic acid was detectable. Two identical groups of conventional rats
were then infected with either the wild-type strain or the genetically modified
strain. A third identical group was not infected and served as the control
group.
In both
preemptive colonization and aggressive displacement rat model studies, the
genetically engineered effector strain performed well and was able to occupy the
niche normally occupied by wild-type S.
mutans. The
Mutacin 1140 produced by the effector strain appeared to provide a selective
advantage in colonization suitable for use in replacement therapy for dental
caries.
A
six-month study was also conducted to evaluate possible toxic effects of
exposure to the genetically modified effector strain. No adverse gross or
histological side effects were observed in conventional rats. Sufficient amounts
of Mutacin 1140 have not yet been purified to be able to directly test its
toxicity but it belongs to the same class of antibiotics as nisin, which has
very low toxicity and is used as a food preservative worldwide.
In
summary, we believe the preclinical studies demonstrate that our genetically
modified strain of S.
mutans:
· Does not
cause significant tooth decay in rats;
· Persistently
and preemptively colonizes the tooth surfaces of rats;
· Displaces
other strains of S.
mutans;
· Is
genetically stable in the laboratory and in rats;
· Shows no
toxicity in acute and chronic tests; and
· Does not
disrupt the normal flora of the mouth.
Intellectual
Property
We have
exclusively licensed the intellectual property for our replacement therapy from
the University of Florida Research Foundation, Inc. The license is dated August
4, 1998 and was amended on September 15, 2000, July 10, 2002, September 25, 2002
and March 17, 2003. The agreement provides us with an exclusive worldwide
license to make, use and sell products and processes covered by Patent No.
5,607,672, which is dated March 4, 1997 and will expire on March 3, 2014. Our
license is for the period of the patent, subject to the performance of terms and
conditions contained therein. The patent covers the genetically altered strain
of S.
mutans which
does not produce lactic acid, a pharmaceutical composition for administering the
genetically altered strain and the method of preventing tooth decay by
administering the strain. The University of Florida Research Foundation, Inc.
has reserved for itself and the University of Florida the right to use and sell
such products and services for research purposes only. Our license also provides
the University of Florida Research Foundation, Inc. with a license, for research
purposes only, to any improvements that we make to the products and processes
covered by the patent.
Under the
terms of the license, we have entered into an Equity Agreement with the
University of Florida Research Foundation, Inc. under which we issued 599,940
shares of our common stock as partial consideration for the license. We are
obligated to pay 5% of the selling price of any products developed from the
licensed technology to the University of Florida Research Foundation, Inc. and,
if we sublicense the license, we are obligated to pay 20% of all amounts
received from the sublicensee. On December 31, 2005 and each year thereafter we
are obligated to make a minimum royalty payment of $50,000. We spent in excess
of $600,000 in 2003 and $1,000,000 in 2004 which were the minimum amounts
required under our license in order to maintain it. In each future calendar
year, we are obligated to spend, or cause to be spent, an aggregate of
$1,000,000 on the research, development and regulatory prosecution of our
replacement therapy and Mutacin 1140 technologies combined, until a product
which is covered wholly or partially by the claims of the patent, or is
manufactured using a process which is covered wholly or partially by the claims
of the patent, is sold commercially. If we fail to make these minimum
expenditures, the University of Florida Research Foundation, Inc. may terminate
our license.
We must
also pay all patent costs and expenses incurred by the University of Florida
Research Foundation, Inc. for the preparation, filing, prosecution, issuance and
maintenance of the patents beyond $105,000. We have paid $100,000 to the
University of Florida Research Foundation, Inc. for patent expenses already
incurred. We have agreed to indemnify and hold the University of Florida
Research Foundation, Inc. harmless from any damages caused as a result of the
production, manufacture, sale, use, lease, consumption or advertisement of the
product. Further, we are required to maintain liability insurance coverage
appropriate to the risk involved in marketing the products, for which we
obtained liability insurance in the amount of $2,000,000 that expires in August,
2005. There is no assurance that we can obtain continued coverage on reasonable
terms.
We
received notification from B.C. International Corporation on July 29, 2002 that
a gene utilized in its licensed, patented strain of S.
mutans infringes
a patent which it holds under a license. Their notification did not state that
they intended to pursue legal remedies. We do not believe that the gene in
question infringes that patent and we sent them correspondence setting out our
position. We have received no further communication from them.
Manufacturing,
Marketing and Distribution
The
manufacturing methods for producing our genetically engineered strain of
S.
mutans are
standard fermentation methods. These methods involve culturing bacteria in large
vessels and harvesting them when mature by centrifuge or filtration. The cells
are then suspended in a pharmaceutical medium appropriate for application in the
human mouth. These manufacturing methods are commonplace and readily available
within the pharmaceutical industry.
Upon
successful completion of Phase I clinical trials, we intend to consider
sublicensing our replacement therapy technology to one or more strategic
partners that would be responsible for advanced clinical development and
commercialization including product manufacturing, marketing and distribution.
Market
Opportunity
Despite
the introduction of fluorides in public water systems, fluoridated toothpastes,
fluoride treatments in the dental office and dental sealants, tooth decay still
affects the majority of children and adults. There are a number of factors that
are likely to increase the incidence and frequency of tooth decay which
include:
| · |
increasing
consumption of dietary sugar; |
| · |
increasing
consumption of bottled water, which generally does not contain fluoride;
and |
| · |
increasing
age of the population. |
During
the last 20 years, sugar consumption has increased. Higher dietary intake of
sugar predisposes individuals to higher rates of tooth decay. Moreover,
according to the Beverage Marketing Corporation, by 2005 consumers will drink
more bottled water than any other alcoholic or non-alcoholic beverage, with the
exception of carbonated soft drinks. Since bottled water generally does not
contain fluoride, the protective effects of fluoridated public water systems are
lost. With the aging of the population, the incidence and frequency of tooth
decay is likely to further increase as most of the baby boomers upon reaching
retirement age will have a relatively intact dentition unlike previous
generations. Teeth lose density with age and become more susceptible to decay.
Therefore, more teeth will be at risk for tooth decay.
Replacement
therapy represents a novel approach to preventing tooth decay. The technology
confers potentially lifelong protection against tooth decay with one treatment,
is suitable for use by the general population and involves minimal patient
education and compliance.
Competition
We are
not aware of any direct competitors with respect to our licensed, patented
replacement therapy technology. However, there may be several ways to disable or
eradicate S.
mutans. We know
that certain companies and several academic and research institutions are
developing and testing caries vaccines aimed at eradicating S.
mutans. An
alternative approach involves topical application of adhesion-blocking synthetic
peptides that prevent S.
mutans from
attaching to the tooth surface. Products that result in the elimination of
S.
mutans from the
natural ecosystem would require major studies to determine whether such
eradication of a naturally occurring bacteria might not create serious,
unintended consequences. The problem with eradicating S.
mutans is that
it disrupts the natural ecosystem leaving a void for another pathogen
potentially more harmful than S.
mutans to
dominate.
Academic
institutions, government agencies and other public and private research
organizations may conduct research, seek patent protection and establish
collaborative arrangements for discovery, research and clinical development of
technologies and products that are similar to our replacement therapy
technology. Also many of the potential competitors have research and development
capabilities that may allow them to develop new or improved products that may
compete with products based on our technologies.
Any
product based on our replacement therapy technology will compete against
traditional oral care products used to combat tooth decay. These products
include fluoride-based toothpastes as well as fluoride treatments and tooth
sealants administered by dentists. These competitors could include, among
others, Colgate; Procter & Gamble; Unilever; GlaxoSmithKline; and Dentsply.
All of these companies are much larger and have far greater technical and
financial resources than us.
Probiotics
Probiotics
are live microorganisms that are believed to confer a health benefit to their
host when administered in adequate amounts. In probiotic therapy, beneficial
microorganisms are colonized in areas normally colonized by pathogens. By being
better adapted to their ecosystem than the pathogens, these beneficial bacteria
crowd out harmful bacteria and inhibit colonization and growth of the
disease-causing pathogens. Examples of common probiotic applications are the use
of yogurt containing live cultures to improve digestion, immune system response,
and vaginal and urinary tract health.
The oral
cavity provides an ecological niche for 400 -500 bacterial species, some of
which are responsible for periodontal disease (gum disease) and dental caries
(tooth decay). Of all of the bacteria normally residing in a person’s mouth,
only about half a dozen are the primary cause of periodontal disease and are
bacteria believed to be principally responsible for dental caries. Our oral
rinse probiotics’ technology employs three natural strains of beneficial
bacteria which promote oral health and inhibit the growth of harmful bacteria
that cause periodontal disease and tooth decay.
Technical
Background
Through
our research, we have developed a probiotic product containing three natural
strains of beneficial bacteria that we believe promote oral health. The three
bacterial strains are Streptococcus
oralis and
Streptococcus uberis for the
maintenance of periodontal health and Streptococcus
rattus for the
maintenance of dental health.
Streptococcus
oralis and
Streptococcus uberis are among
several hundred bacterial species of bacteria that constitute normal dental
plaque. These bacteria, by virtue of their ability to produce hydrogen peroxide,
appear to promote periodontal health by keeping the number of potentially
pathogenic organisms below the threshold level necessary to initiate disease.
These bacteria have demonstrated an ability to inhibit bacteria implicated in
periodontal disease in both laboratory and animal studies. Human studies have
correlated presence of these bacteria with the absence of periodontal pathogens.
Probiotics containing these bacteria applied frequently may provide significant
protection against causative organisms of periodontal disease.
Similarly,
we have identified a bacterial strain closely related to S.
mutans, Streptococcus rattus, which is
naturally deficient in its ability to produce lactic acid. Studies have shown
that daily treatment with this strain results in decreased numbers of
S.
mutans, most
likely by competition for essential nutrients or attachment sites on the tooth
surfaces. Daily application of this strain may provide significant protection
against tooth decay.
Preclinical
Studies
We
believe preclinical studies have demonstrated the ability of our probiotic to
maintain a healthy oral environment. The probiotic creates a healthful balance
of total bacteria by reducing the numbers of bacteria that are causative agents
of periodontal disease and dental caries.
Periodontal
disease. We
believe research conducted by our scientists and others has shown that certain
types of natural bacteria normally present in dental plaque can prevent the
growth of bacteria that are widely believed to be responsible for periodontal
disease. Streptococcus
oralis and
Streptococcus
uberis have
been shown in studies to inhibit the growth of disease-causing bacteria both in
laboratory and animal models of infection. Data
indicate that the presence of Streptococcus
oralis and
Streptococcus
uberis provide a
good indication of the health of the periodontium (gums). In
healthy periodontal sites, Streptococcus
oralis and
Streptococcus
uberis are
commonly found in significant amounts while levels of the pathogenic bacteria
are usually low. In diseased periodontal sites, the opposite situation prevails;
Streptococcus
oralis and
Streptococcus
uberis are
usually undetectable. When these bacteria are absent from sites in the
periodontium, the sites are much more prone to disease.
Dental
caries. We
believe probiotics can also be used to suppress levels of S.
mutans, the
principal cause of tooth decay. S.
mutans converts
dietary refined sugar to lactic acid. The lactic acid, in turn, erodes the
mineral in enamel and dentin, which weakens the tooth resulting in tooth decay.
Research conducted by our scientists have led to the discovery of a close
relative of S.
mutans, a
strain of Streptococcus
rattus,which is
naturally deficient in its ability to produce lactic acid and thus unable to
cause tooth decay. Because
Streptococcus
rattus is very
closely related to S.
mutans,
Streptococcus
rattus reduces
the number of S.
mutans by competing
for nutrients, attachment sites, and other important colonization factors. As
animal studies have revealed, daily treatment with this beneficial strain can
promote dental health by significantly reducing the numbers of dental
caries-causing S.
mutans.
We are
currently performing acute and chronic toxicity tests of our probiotic
technology in laboratory rats. Further work will involve studies to determine an
appropriate and stable delivery system, and to determine the optimum dosage
levels to be used in human clinical trials.
Regulatory
Status
Probiotic
products that claim to confer a health benefit are generally able to enter
certain market without the need for extensive regulatory filings and clinical
testing. This avenue is available for products that do not make any claim that
they treat, prevent, or cure a disease, which are considered to be drug claims.
We intend to market our probiotic product without any drug claims. In the
European Union, regulatory approval is not required for commercialization of the
product.
Intellectual
Property
In August
2003, we filed a patent application for our probiotic technology for use in
developing oral care products for the maintenance of dental and periodontal
health. We own the patent rights to this technology.
Manufacturing,
Marketing and Distribution
Manufacturing
methods used to produce probiotic strains are the standard fermentation methods
which involve culturing bacteria in large vessels and harvesting them when
mature by centrifuge or filtration. These methods are relatively commonplace and
readily available within the pharmaceutical industry. We intend to seek one or
more strategic partners for the manufacturing, marketing and distribution of our
oral probiotic technology in Asia and Europe. Product launch in select markets
is currently expected to occur in 2006 and 2007.
Market
Opportunity
Probiotics
are common in Japan and are being adopted with increasing frequency in Europe.
The probiotics market in the U.S. is still in a nascent state and we expect the
U.S. market will develop slowly. If successfully developed, we expect our
technology will be one of the first probiotics to be marketed for the promotion
of oral health.
Competition
Many
companies sell probiotics that are principally designed for digestive health,
vaginal and urinary tract health, and immune system support. Our product will
not compete directly with the products of these companies. Recently, researchers
at the University of Hiroshima have published studies indicating that
Lactobacillus
reuteri aids in
the prevention of tooth decay. Lactobacillus
reuteri is widely
used as a probiotic for other indications and may be used in the future for
dental health. We are not aware of any product on the market today that is
targeted to maintain periodontal health.
Mutacin
1140
Mutacin
1140 is an antibiotic which we believe has the potential to treat a wide variety
of infectious diseases. Extensive in vitro studies we have conducted demonstrate
its effectiveness against all tested Gram-positive bacteria, including such
commercially relevant pathogens as Staphylococcus
aureus, Streptococcus pneumoniae, Enterococcus faecalis and
Listeria monocytogenes. To
date, our research has not identified any pathogen resistance to Mutacin 1140.
Currently,
Mutacin 1140 is in the early stages of preclinical development and we have not
yet filed an IND with the FDA, however, such filing is expected after successful
completion of animal studies that are currently expected to begin in 2005,
provided sufficient funding is available.
Preclinical
Studies
Our
researchers and others have conducted laboratory studies on Mutacin 1140 to
determine its efficacy as an antibacterial agent. To test Mutacin 1140’s ability
to kill bacteria, standard microbiological testing methods were employed.
Mutacin 1140 was purified and incorporated into growth medium at different
concentrations. The medium was then inoculated with the bacterium under study,
and its ability to grow in the presence of Mutacin 1140 was observed. The
minimal inhibitory concentration (MIC), which is defined as the lowest
concentration of Mutacin 1140 observed to inhibit growth of the test bacterium,
was recorded.
We
believe the results of our laboratory studies demonstrate that Mutacin 1140 is
effective at killing a broad spectrum of bacteria, including the streptococci
that cause pharyngitis (“strep throat”), the predominant type of pneumonia, and
bacterial endocarditis. The antibiotic has also been shown to be effective
against vancomycin-resistant Staphylococcus
aureus and
Enterococcus
faecalis infections,
both of which are rapidly growing problems within the medical community. Mutacin
1140 was found to kill all Gram-positive bacteria tested at concentrations
comparable to many therapeutically effective antibiotics. A particularly
interesting feature of Mutacin 1140 is that none of the sensitive species of
bacteria tested was able to acquire genetically stable resistance to purified
Mutacin 1140.
Mutacin
1140 currently is in preliminary stages of development. We currently plan to
initiate animal studies in 2005. Upon completion of the animal studies, we will
submit an IND for Mutacin 1140 to the FDA. Once the FDA has approved an IND and
we have completed Phase I clinical trials, we would expect to seek a strategic
partner for further clinical development and commercialization. We will continue
to work to optimize production of the product.
Intellectual
Property
We have
exclusively licensed the intellectual property for our Mutacin 1140 technology
from the University of Florida Research Foundation, Inc. See the discussion
regarding our license in the Intellectual
Property section
under our Replacement Therapy technology.
Market
Opportunity
The need
for novel antibiotics is increasing as a result of the growing resistance of
target pathogens. The Center for Disease Control estimates that bacteria
resistant to known antibiotics cause 44% of hospital infections. Vancomycin,
introduced in 1956, serves as the last line of defense against certain
life-threatening infections. Unfortunately, certain bacteria have developed
strains which resist even vancomycin.
Our
antibiotic, Mutacin 1140, is a new broad-spectrum antibiotic that has
demonstrated effectiveness against a wide variety of disease-causing bacteria in
preclinical studies. Moreover, we believe there is no evidence of pathogen
resistance to Mutacin 1140 based on such preclinical studies. In light of the
fact that pathogen resistance has become a major problem associated with the six
leading classes of antibiotics in use today, Mutacin 1140 offers the potential
to fulfill a significant medical need.
Competition
Mutacin
1140 competes directly with antibiotic drugs such as vancomycin. Given the
growing resistance of target pathogens to many antibiotics, even vancomycin, we
believe that there is ample room in the marketplace for new antibiotics. We are
aware of a mutacin peptide similar to Mutacin 1140 patented by the University of
Laval. Successful development of that technology would constitute major
competition for Mutacin 1140.
Many of
our competitors are taking approaches to drug development differing from our
approach. These approaches include traditional screening of natural products,
genomics to identify new targets and combinatorial chemistry to generate new
chemical structures. Competition in the pharmaceutical industry is based on drug
safety, efficacy, ease of use, patient compliance, price, marketing and
distribution. Commercial success of Mutacin 1140 technology will depend on our
ability and the ability of our sublicensees to compete effectively in all of
these areas. There can be no assurance that competitors will not succeed in
developing products that are more effective than Mutacin 1140 or would render
Mutacin 1140 obsolete and non-competitive.
Any
products based on the Mutacin 1140 technology will compete against a large
number of prescription antibiotics currently on the market, and against new
antibiotic products that will enter the market over the next several years.
Producers of antibiotic products include many large, international
pharmaceutical companies, all of which have much greater financial and technical
resources than us. We intend to compete in the market for antibiotic products by
obtaining a strategic partner with an established sales force calling on doctors
and hospitals. There can be no assurance that we will be able to obtain any such
partner. If not, we will be obliged to develop our own channels of distribution
for products based on the Mutacin 1140 technology. There can be no assurance
that we will be able to do so.
IVIAT
and CMAT
In March
2004, we licensed from iviGene Corporation, a company whose major stockholders
also own a significant number of shares of our common stock, applications of a
novel technology that enables the simple, fast identification of novel and
potentially important gene targets associated with the natural onset and
progression of cancers and other diseases in humans and other living organisms,
including plants. This licensed technology will offer us the potential to
generate and develop a number of product candidates for future out-licensing to
corporate partners, particularly in the area of cancer.
To
support the research for this technology in 2004, we received a $100,000 Phase I
SBIR Grant from the National Institute of Allergy and Infections Diseases
(NIAID) of the National Institutes of Health (NIH). This grant supported initial
research to help us identify genes of Mycobacterium
tuberculosis that are
specifically induced during human infections with that pathogen. This licensed
technology is in its early stages and will require further development which
will require additional capital.
Technical
Background
This
technology platform was developed by our founder and chief scientific officer,
Jeffrey D. Hillman, and University of Florida scientists. It is called
in
vivo induced
antigen technology (IVIAT). IVIAT can quickly and easily identify in
vivo induced
genes in human infections without the use of animal models, facilitating the
discovery of new targets for the development of vaccines, antimicrobials and
diagnostics. Dr. Hillman and his collaborators have further developed methods
based on this approach to create Change Mediated Antigen Technology (CMAT). CMAT
can be used to identify gene targets associated with the onset and progression
of cancerous processes and autoimmune diseases. It can also be used to identify
novel genes in plant diseases, including genes expressed by the pathogen when it
causes the disease and genes expressed by the plant in response to the
disease.
Intellectual
Property
Our
license provides us with exclusive worldwide rights to this broad platform
technology in the areas of cancer and tuberculosis, as well as agricultural and
other non-human uses. In return, we will pay royalties on revenues we are able
to generate from any products developed using the technology, including
royalties on sublicense fees, milestone payments and future product sales. Under
the terms of our license with iviGene we are not obligated to make any payments
to iviGene until we have achieved certain milestone or royalty payments.
However, we are required to pay all patent-related expenses and commit two
full-time staff or spend at least $200,000 toward product development annually
to maintain our license.
Federal
Food and Drug Administration (FDA) Regulation
The FDA
and comparable regulatory agencies in state and local jurisdictions and in
foreign countries impose substantial requirements upon the clinical development,
manufacture and marketing of drugs. These agencies and other federal, state and
local entities regulate research and development activities and the testing,
manufacture, quality control, safety, effectiveness, labeling, storage,
record-keeping, approval, advertising and protection of most products we may
develop.
General
The steps
required before a new drug may be produced and marketed in the United States
are:
|
1. |
Preclinical
laboratory and animal tests |
|
2. |
Investigational
new drug application |
|
3. |
Clinical
trials (Phases I, II and III) |
|
4. |
New
drug application (review and approval) |
|
5. |
Post-marketing
surveys |
The
testing and approval procedures require substantial time, effort and financial
resources and we cannot assure you that any approval will be timely granted, or
at all.
Preclinical
Trials and Investigational New Drug Application
Preclinical
tests are conducted in the laboratory, and usually involve animals. They are
done to evaluate the safety and efficacy of the potential product. The results
of the preclinical tests are submitted as part of the investigational new drug
application and are fully reviewed by the FDA prior to granting the applicant
permission to commence clinical trials in humans. Submission of an
investigational new drug application may not result in FDA approval to commence
clinical trials.
Clinical
Trials
Clinical
trials are conducted in three phases, normally involving progressively larger
numbers of patients.
Phase
I
Phase I
clinical trials consist of administering the drug and testing for safety and
tolerated dosages as well as preliminary evidence of efficacy in humans. They
are concerned primarily with learning more about the safety of the drug, though
they may also provide some information about effectiveness. Phase I testing is
normally performed on healthy volunteers. The test subjects are paid to submit
to a variety of tests to learn what happens to a drug in the human body; how it
is absorbed, metabolized and excreted, what effect it has on various organs and
tissues; and what side effects occur as the dosages are increased. The principal
objective is to determine the drug's toxicity.
Phase
II
Assuming
the results of Phase I testing present no toxicity or unacceptable safety
problems, Phase II trials may begin. In many cases Phase II trials may commence
before all the Phase I trials are completely evaluated if the disease is life
threatening and preliminary toxicity data in Phase I shows no toxic side
effects. In life threatening disease, Phase I and Phase II trials are sometimes
combined to show initial toxicity and efficacy in a shorter period of time.
Phase II trials involve a study to evaluate the effectiveness of the drug for a
particular indication and to determine optimal dosages and dose interval and to
identify possible adverse side effects and risks in a larger patient group. The
primary objective of this stage of clinical testing is to show whether the drug
is effective in treating the disease or condition for which it is intended.
Phase II studies may take several months or longer and involve a few hundred
patients in randomized controlled trials that also attempt to disclose
short-term side effects and risks in people whose health is impaired. A number
of patients with the disease or illness will receive the treatment while a
control group will receive a placebo. At the conclusion of Phase II trials, we
and the FDA will have a clear understanding of the short-term safety and
effectiveness of our technologies and their optimal dosage levels.
Phase
III
Phase III
clinical trials will generally begin after the results of Phase II are
evaluated. If a product is found to be effective in Phase II, it is then
evaluated in Phase III clinical trials. The objective of Phase III is to develop
information that will allow the drug to be marketed and used safely. Phase III
trials consist of expanded multi-location testing for efficacy and safety to
evaluate the overall benefit or risk index of the investigational drug in
relation to the disease treated. Phase III trials will involve thousands of
people with the objective of expanding on the clinical evidence.
Some
objectives of Phase III trials are to discover optimum dose rates and schedules,
less common or even rare side effects, adverse reactions, and to generate
information that will be incorporated into the drug's professional labeling and
the FDA-approved guidelines to physicians and others about how to properly use
the drug.
Pharmaceutical
Development
The
method of formulation and manufacture may affect the efficacy and safety of a
drug. Therefore, information on manufacturing methods and standards and the
stability of the drug substance and dosage form must be presented to the FDA and
other regulatory authorities. This is to ensure that a product that may
eventually be sold to the public has the same composition as that determined to
be effective and safe in the clinical studies. Production methods and quality
control procedures must be in place to ensure a relatively pure compound,
essentially free of contamination and uniform with respect to all quality
aspects.
New
Drug Application
The
fourth step that is necessary prior to marketing a new drug is the new drug
application submission and approval. In this step, all the information generated
by the preclinical and human clinical trials, as well as manufacturing
information for the drug, will be submitted to the FDA and, if successful, the
drug will be approved for marketing.
Post
Marketing Surveys
The final
step is the random surveillance or surveys of patients being treated with the
drug to determine its long-term effects. This has no effect on the marketing of
the drug unless highly toxic conditions are found.
The
required testing, data collection, analysis and compilation of an
investigational new drug application and a new drug application are labor
intensive and costly and may take a great deal of time. Tests may have to be
redone or new tests performed in order to comply with FDA requirements.
Therefore, we cannot estimate with any certainty the length or the costs of the
approval process. We can offer no assurance that we will ever receive FDA
approval of products derived from our licensed, patented technologies.
Competition
Industry. The
pharmaceutical and biotechnology industries are characterized by intense
competition, rapid product development and technological change. Competition is
intense among manufacturers of dental therapeutics and prescription
pharmaceuticals. Most of our potential competitors are large, well established
pharmaceutical, chemical or healthcare companies with considerably greater
financial, marketing, sales and technological resources than are available to
us. Academic institutions, government agencies and other public and private
research organizations may also conduct research, seek patent protection and
establish collaborative arrangements for discovery, research and clinical
development of technologies and products similar to ours. Many of our potential
competitors have research and development capabilities that may allow them to
develop new or improved products that may compete with products based on our
technologies. Products developed from our technologies could be rendered
obsolete or made uneconomical by the development of new products to treat the
conditions to be treated by products developed from our technologies,
technological advances affecting the cost of production, or marketing or pricing
actions by our potential competitors. This could materially affect our business,
financial condition and results of operations. We cannot assure you that we will
be able to compete successfully.
Personnel.
Competition
among biotechnology and biopharmaceutical companies for qualified employees is
intense, and there can be no assurance we will be able to attract and retain
qualified individuals. If we fail to do so, this would have a material, adverse
effect on the results of our operations.
We do not
maintain any life insurance on the lives of any of our officers and directors.
We are highly dependent on the services of our directors and officers,
particularly on those of Jeffrey Hillman and Mento Soponis. If one or all of our
officers or directors die or otherwise become incapacitated, our operations
could be interrupted or terminated.
Employees
We are an
early-stage biotechnology research and development company and currently have 17
full-time employees, none of whom is represented by a labor union. We believe
that our relationship with our employees is excellent
Property
Our
administrative office and laboratory facilities are located at 13700 Progress
Boulevard, Alachua, Florida 32615. We began leasing this property pursuant to a
five-year operating lease in November 2004. The facility is approximately 5,300
square feet of which approximately 60% is laboratory space and the remainder is
office space and common areas. The twelve months rental is $76,850, net of
insurance, taxes and utilities that are paid by us. Lease payments in subsequent
years escalate by 3% annually. In 2004, we paid approximately $469,000 for
leasehold improvements to outfit this facility. Such improvements included
equipping the building with sufficient air-handling and building laboratory
stations. We believe our facilities are sufficient for our current needs,
however, we expect to purchase an additional $100,000 of equipment for use in
the laboratories and offices in 2005.
LEGAL
PROCEEDINGS
We are
not a party to any material legal proceedings and there are no material legal
proceedings pending with respect to our property. We are not aware of any legal
proceedings contemplated by any governmental authorities involving either us or
our property. None of our directors, officers or affiliates is an adverse party
in any legal proceedings involving us, or has an interest in any proceeding
which is adverse to us.
MANAGEMENT
The
following table and text set forth the names and ages of all directors and
executive officers of our company as of May 31, 2005. The Board of Directors is
comprised of only one class. All of the directors will serve until the next
annual meeting of stockholders and until their successors are elected and
qualified, or until their earlier death, retirement, resignation or removal.
There are no family relationships between or among the directors, executive
officers or persons nominated or charged by our company to become directors or
executive officers. Executive officers serve at the discretion of the Board of
Directors, and are appointed to serve by the Board of Directors. Also provided
herein are brief descriptions of the business experience of each director and
executive officer during the past five years and an indication of directorships
held by each director in other companies subject to the reporting requirements
under the Federal securities laws.
As of May
31, 2005, the directors and executive officers of the company are as
follows:
|
Name |
|
Age |
|
Position |
|
David
J. Gury |
|
66 |
|
Chairman
of the Board |
|
Jeffrey
D. Hillman |
|
56 |
|
Director,
Chief Scientific Officer |
|
Mento
A Soponis |
|
61 |
|
Director,
Chief Executive Officer and President |
|
Robert
T. Zahradnik |
|
60 |
|
Director |
|
Brian
Anderson |
|
58 |
|
Director |
|
Paul
Hassie |
|
54 |
|
Chief
Financial Officer |
|
Eric
W.T. Chojnicki |
|
46 |
|
Vice
President of Product Development |
|
Edmund
Mickunas |
|
50 |
|
Vice
President of Regulatory and Clinical Affairs
|
David
J. Gury. Mr.
Gury has been a director since October 2003, serving as chairman of the board of
directors since December 2004. Mr. Gury was Chief Executive Officer of NABI
Biopharmaceuticals from April 1992 to June 2003 and was the chairman of the
board from April 1992 to May
2004. From
May 1984 until April 1992, Mr. Gury was President and Chief Operating Officer of
NABI. During his tenure, the Company successfully transitioned from a plasma
supplier into a fully integrated biopharmaceutical company. Prior to joining
NABI Biopharmaceuticals, Mr. Gury spent his career with Abbott Laboratories in
various administrative and executive positions and with Alpha Therapeutics
Corporation, a spin out from Abbott. Mr. Gury completed his A.B. in economics at
Kenyon College, Gambier, Ohio, in 1960 and received his MBA at the University of
Chicago in 1962, specializing in accounting and finance. Mr. Gury was Founding
Chairman and is a Board Member of the Florida Research Consortium and past
Chairman and a member of BioFlorida.
Jeffrey
D. Hillman. Dr.
Hillman has been our chief scientific officer since November 1996 and served as
chairman of the board of directors from November 1996 to December 2004. From
November 1991, Dr. Hillman has been Professor in the College of Dentistry at the
University of Florida in Gainesville, Florida where he teaches classes, trains
doctoral candidates and conducts research. However, Dr. Hillman has been on
leave from the University of Florida, since February 2001, in order to develop
our technologies and technologies owned by IviGene Corporation, Alachua,
Florida. Dr.
Hillman received undergraduate training from the University of Chicago (Phi Beta
Kappa), his D.M.D. degree (cum laude) from the Harvard School of Dental Medicine
and Ph.D. from Harvard Medical School. He has authored or co-authored more than
100 publications and textbook chapters on subjects related to the etiology and
cure of tooth decay, periodontal diseases, antibiotics and molecular
genetics.
Mento
A. Soponis. Mr.
Soponis has been our president, chief executive officer and a member of the
board of directors since August 2000. From December 2000 to June 2002, Mr.
Soponis was president and chief executive officer of IviGene Corporation,
Alachua, Florida. IviGene is engaged in the business of developing vaccines and
therapeutics. Mr. Soponis remains as Chairman of the Board of Directors of
IviGene Corporation. From January 2000 to May 2000, Mr. Soponis was a consultant
for the office of technology licensing at the University of Florida,
Gainesville, Florida where he reviewed agreements and negotiated the terms of
technology licenses. From December 1995 to December 1999, Mr. Soponis was
president and chief executive officer of USBiomaterials Corporation, Alachua,
Florida. US Biomaterials developed healthcare products for bone regeneration and
for dental care. He has
served as CEO for a number of early stage biotechnology companies. He has broad
experience in strategic positioning and negotiation of corporate partnerships. Mr.
Soponis is a
graduate of Princeton University and the George Washington University law
school with
honors.
Robert
T. Zahradnik. Dr.
Zahradnik has been a member of our board of directors since November 1996. Since
July 2000 Dr.
Zahradnik has been a director of IviGene Corporation, Alachua, Florida. IviGene
is engaged in the business of developing vaccines and therapeutics. Since
September 1999, Dr. Zahradnik has been general manager of ProHealth, Inc.,
Batesville, Arkansas. ProHealth,
Inc. is a manufacturer of nutritional supplements and household and skin care
products. Since February 1993, Dr.
Zahradnik has been a partner and general manager of Professional Dental
Technologies and Therapeutics, Batesville, Arkansas, an oral pharmaceutical
manufacturer. Since February 1986, Dr.
Zahradnik has been the chief executive officer and chairman of the board of
directors of Advanced Clinical Technologies, Inc., Medfield, Massachusetts, a
medical diagnostic manufacturer and technical consulting firm.
Dr.
Zahradnik is a
graduate of Penn State University with a Bachelor of Science degree in Chemistry
and Boston University with a PhD in Physical Chemistry.
Brian
Anderson. Mr.
Anderson has been a member of our board of directors since August 2002. Mr.
Anderson is Executive Vice President at Medicinova, Inc., San Diego, California.
From August 2002 to January 2002, Mr. Anderson was an advisor and consultant for
Montridge, LLC, Ridgefield CT, an investor relations firm. From 1998 to June of
2002, Mr. Anderson was the President and Chief Executive Officer of Cognetix,
Inc., Salt Lake City, Utah, a research and therapeutics development company.
From 1995 to 1998, Mr. Anderson was Senior Vice President, Marketing and
Commercial Development of Interneuron Pharmaceuticals, Inc., Lexington,
Massachusetts (now called Indevus Pharmaceuticals Inc.), a specialty
pharmaceutical company whose shares are listed on the NASDAQ National Market.
From 1987 to 1995 Mr. Anderson held a number of executive positions at
Bristol-Myers Squibb, including responsibilities in business development,
strategic planning and marketing. Mr.
Anderson is a graduate of the University of Manitoba with a Bachelor of Science
degree in Physical Education.
Paul
A. Hassie. Mr.
Hassie has been our chief financial officer, Secretary and Treasurer since July
2002. From February 2000 to December 2003, Mr. Hassie was president of
BioFlorida, a trade organization located in Gainesville, Florida that supports
biosciences in Florida. From November 1999 to December 2003, Mr. Hassie was also
engaged in the business of financial consulting to bioscience companies in the
Gainesville, Florida area. From June 1997 to November 1999, Mr. Hassie was chief
financial officer of USBiomaterials Corporation located in Alachua, Florida.
USBiomaterials develops healthcare products for bone regeneration and for dental
care. From January 1992 to May 1997, Mr. Hassie was controller for Transkaryotic
Therapies, Inc. located in Cambridge, Massachusetts. Transkaryotic Therapies is
engaged in the business of research and development of gene therapy products.
From January 1984 to September 1991, Mr. Hassie was senior manager in the Boston
office of Ernst & Young LLP, Certified Public Accountants. Mr. Hassie
received a Bachelor of Science degree in Accounting from Bryant University,
Smithfield, Rhode Island in 1977; an MBA in Management from Bryant University in
1981; and, a Masters of Science degree in Taxation from Bryant University in
1996. Mr. Hassie is a member of the American Institute of Certified Public
Accountants and is a licensed Certified Public Accountant in the Commonwealth of
Massachusetts.
Eric
W.T. Chojnicki. Dr.
Chojnicki joined Oragenics in February 2004 as the Vice President, Product
Development. He most
recently held the position of Director of Product Development at Acorda
Therapeutics, Inc. and has held positions of increasing managerial
responsibilities at Bristol-Myers Squibb Co., Athena Neurosciences, Inc. and
Amgen. He brings to Oragenics a broad based hands-on management experience in
drug development gained in the environments of both large pharmaceutical and
small biotech startup
companies. He holds
a B.A. from Washington & Jefferson College, an M.S. and Ph.D. in Genetics
& Development Biology from West Virginia University and an M.B.A. in
Pharmaceutical Management from Fairleigh Dickinson University.
Edmund
Mickunas. Prior to
joining Oragenics in September 2004, Mr. Mickunas was an independent consultant
offering professional services in the areas of regulatory, clinical and
compliance consulting. Before that time, he held a variety of management
positions from 1996 to 2003 in the area of regulatory affairs and compliance
with such companies as Control Delivery Systems, Inc., Bioheart, Inc.,
Leukosite, Inc., and Del Laboratories. From 1989 to 1996, Mr. Mickunas was a
clinical and regulatory affairs consultant for the CLINNOVATION Company, and
before that held a series of increasingly responsible positions in the field of
clinical research at such companies as PAREXEL International Corporation,
Analytical Biosystems, Sandoz Research Institute, and Vicks Research Center. He
holds an M.A. degree in corporate and political communications from Fairfield
University in Connecticut and received his B.S. degree from Fairleigh Dickinson
University.
Scientific
Advisory Board
We use
scientists and physicians with expertise related to our technologies to advise
us on scientific and medical matters. Currently, our scientific advisory board
members are:
Howard
K. Kuramitsu, Ph.D. Dr.
Kuramitsu is a retired UB Distinguished Professor at the State University of New
York at Buffalo. He is a leading expert in the area of the biology of the oral
cavity and studies diseases associated with the oral cavity. Dr. Kuramitsu
serves on the Editorial Boards of the International Journal of Oral Biology,
Oral Microbiology and Immunology and Infection and Immunity. He also
serves on the NIH-NIDCR Advisory Council. Dr. Kuramitsu's work includes more
than 170 publications.
Per-Erik
J. Saris, Ph.D. Dr.
Saris is a professor in food microbiology at the University of Helsinki in
Finland. He is an expert in antibacterial peptides produced by bacteria. His
team is part of the Centre of Excellence "Microbial Resources" appointed by the
Academy of Finland. He was the first to amplify DNA directly from bacteria in
1990 and has since been active in different fields of molecular biology of
bacteria including vaccine development, protein production, metabolic
engineering and targeting of bacteria.
EXECUTIVE
COMPENSATION
The
following table sets forth the compensation paid by us from January 1, 2002 to
December 31, 2004, for our Chief Executive Officer and our next most highly
compensated officers who earned more than $100,000 during the fiscal year ended
December 31, 2004 (the “Named Officers”).
Summary
Compensation Table
| |
|
Annual
Compensation |
|
|
Name
and Principal
Position |
|
Year |
|
Salary |
|
Bonus |
|
All
Other (1) |
|
| |
|
|
|
|
|
|
|
|
|
|
Mento
A. Soponis |
|
|
2004 |
|
$ |
180,000 |
|
$ |
18,000 |
|
$ |
5,490 |
|
| Chief
Executive Officer & President |
|
|
2003 |
|
|
180,000 |
|
|
0 |
|
|
0 |
|
|
|
|
2002 |
|
|
121,978 |
|
|
0 |
|
|
0 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey
D. Hillman |
|
|
2004 |
|
|
180,000 |
|
|
0 |
|
|
4,950 |
|
|
Chief
Scientific Officer |
|
|
2003 |
|
|
135,000 |
|
|
0 |
|
|
0 |
|
| |
|
|
2002 |
|
|
63,824 |
|
|
0 |
|
|
0 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul
A. Hassie |
|
|
2004 |
|
|
135,000 |
|
|
13,500 |
|
|
4,118 |
|
| Chief
Financial Officer, Secretary and Treasurer |
|
|
2003 |
|
|
43,000 |
|
|
0 |
|
|
0 |
|
|
|
|
2002 |
|
|
15,000 |
|
|
0 |
|
|
0 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric
Chojnicki |
|
|
2004 |
|
|
124,667 |
|
|
12,467 |
|
|
17,424 |
|
|
Vice
President, Product Development |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The
Company retirement plan requires the Company to match employee
contributions up to the first 3% of compensation earned and amounts
presented represent the Company’s matching contribution. For Mr.
Chojnicki, the amount presented also includes $13,450 paid to Mr.
Chojnicki in connection with his commencement of employment with the
Company in 2004 to assist with relocation expenses.
|
Options
to Purchase Securities
Our
directors and stockholders have previously approved the adoption of our 2002
Stock Option and Incentive Plan and
subsequent
amendment ("Plan").
The shares
of common stock available for issuance under
the Plan
are
1,500,000. The
purpose of the Plan is to enable our company to attract, retain and motivate
qualified directors and employees, to reward directors and employees and key
consultants, such as members of our Scientific Advisory Board, for their
contribution toward our long term goals, and to enable and encourage such
individuals to acquire our shares as long term investments.
We will
not require or seek stockholder approval for the grant of options under the
stock option plan, or the exercise of options. We may grant options under the
stock option plan to employees of our company regularly employed on a full-time
or part-time basis, our directors and officers, and persons who perform services
for us on an ongoing basis or who have provided, or are expected to provide,
services of value to us.
There are
no stock option plans or profit sharing plans for the benefit of our officers
and directors other than as described herein. We do not have any long-term
incentive plans that provide compensation intended to serve as incentive for
performance.
Option
Grants in Last Fiscal Year
The
following table sets forth grants of options to purchase our common stock during
the fiscal year ended December 31, 2004 to each Named Officer.
|
Name |
|
Number
of
Securities
Underlying
Options |
|
Percentage
of Total Options granted to Employees in
Fiscal
Year |
|
Exercise
Price |
|
Expiration
Date |
|
| |
|
|
|
|
|
|
|
|
|
|
Mento
A. Soponis |
|
|
0 |
|
|
0 |
|
|
--- |
|
|
--- |
|
|
Jeffrey
D. Hillman |
|
|
0 |
|
|
0 |
|
|
--- |
|
|
--- |
|
|
Eric
Chojnicki |
|
|
60,000 |
|
|
16.0 |
% |
$ |
3.30 |
|
|
February
2, 2009 |
|
|
Eric
Chojnicki |
|
|
25,000 |
|
|
6.67 |
% |
$ |
2.30 |
|
|
September
30, 2009 |
|
|
Paul
A. Hassie |
|
|
25,000 |
|
|
6.67 |
% |
$ |
2.30 |
|
|
September
30, 2009 |
|
|
Edmund
Mickunas |
|
|
75,000 |
|
|
20.0 |
% |
$ |
2.30 |
|
|
September
30, 2009 |
|
Aggregated
Option Exercises in Last Fiscal Year and
Fiscal
Year-End Option Values
The
following table sets forth information with respect to the aggregate stock
option exercises by Named Officers during 2004 and the year end value of
unexercised options held by the Named Officers.
|
Name |
|
Number
of Shares Acquired on Exercise |
|
Value
Realized
(US $) |
|
Number
of Securities Under-lying Options at Fiscal Year End Unexercised Options
Exercisable/
Unexercisable |
|
Value
of Unexercised In-the-Money Options at Fiscal Year End
Exercisable/
Unexercisable
(US
$) (1) |
|
| |
|
|
|
|
|
|
|
|
|
|
Mento
A. Soponis |
|
|
0 |
|
|
0 |
|
|
0 /
0 |
|
|
0 /
0 |
|
|
Jeffrey
D. Hillman |
|
|
0 |
|
|
0 |
|
|
0 /
0 |
|
|
0 /
0 |
|
|
Paul
A. Hassie |
|
|
0 |
|
|
0 |
|
|
31,666
/ 58,334 |
|
|
61,249
/ 83,251 |
|
|
Eric
W.T. Chojnicki |
|
|
0 |
|
|
0 |
|
|
0 /
85,000 |
|
|
0 /
71,750 |
|
|
Edmund
Mickunas |
|
|
0 |
|
|
0 |
|
|
0 /
75,000 |
|
|
0 /
116,250 |
|
| (1) |
Values
shown in this column reflect the difference between the closing price of
the Company's common stock on December 31, 2004 on the American Stock
Exchange of $3.85 per share, and the exercise prices of the underlying
options. |
Employment
Contracts and Change in Control Arrangements
We have
employment agreements with Mento A. Soponis, Jeffrey D. Hillman and Paul A.
Hassie. On
January 1, 2004, we entered into employment agreements with Messrs. Hassie,
Hillman and Soponis, which superseded our prior employment agreements with Mr.
Soponis and Dr. Hillman. Each of the agreements is for three years and provides
for automatic one-year extensions after December 31, 2007. Under the terms of
our employment agreements with Mr. Soponis, Dr. Hillman and Mr. Hassie dated
January 1, 2004, we are obligated to pay initial compensation of $180,000,
$180,000 and $135,000 per annum, respectively. These executive officers are also
eligible for participation in incentive bonus compensation plans. The employment
agreements also provide for other benefits including the right to participate in
fringe benefit plans, life and disability insurance plans, expense reimbursement
and 4 weeks accumulating vacation/sick leave annually. If any of these executive
officers' employment is terminated by the Company without cause (as defined in
the agreements) or within twelve months following a change of control (as
defined in the agreements), they will be entitled to severance payments, at
their 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. The employment agreements also include
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.
Messrs.
Hillman, Zahradnik, Anderson, Chojnicki, Kuramitsu, Gury, Saris, and Mickunas
have entered into Proprietary
Information and Invention Agreements with us. Under these agreements,
they have
each agreed
to hold all our proprietary information in the strictest confidence, and
assigned to us all of their right,
title and interest in any inventions which they
make during
the term of their
employment or
affiliation with us
that incorporate, are based on or relate to any of our proprietary intellectual
property rights.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The
following table sets forth certain information with respect to the beneficial
ownership of Common Stock of the Company as of May 31, 2005 by (i) each person
who is known by the Company to beneficially own more than five percent of the
Common Stock, (ii) each nominee for Director of the Company, (iii) each of the
Named Officers
(as defined under "Election of Directors -- Executive Compensation" above), and
(iv) all officers and Directors as a group.
|
Name
and Address of
Beneficial
Owners (1) |
|
Number
of Shares
Beneficially
Owned |
|
Percentage
of
Ownership |
|
| |
|
|
|
|
|
|
Directors
and Officers |
|
|
|
|
|
|
Jeffrey
D. Hillman (2) |
|
|
5,327,358 |
|
|
35.4 |
% |
| |
|
|
|
|
|
|
|
|
Mento
A. Soponis (3) |
|
|
1,120,133 |
|
|
7.5 |
% |
| |
|
|
|
|
|
|
|
|
Robert
Zahradnik |
|
|
756,000 |
|
|
5.0 |
% |
| |
|
|
|
|
|
|
|
|
Brian
Anderson (4) |
|
|
45,333 |
|
|
* |
|
| |
|
|
|
|
|
|
|
|
David
J. Gury (5) |
|
|
20,500 |
|
|
* |
|
| |
|
|
|
|
|
|
|
|
Paul
A. Hassie (6) |
|
|
38,333 |
|
|
* |
|
| |
|
|
|
|
|
|
|
|
Eric
Chojnicki (7) |
|
|
22,000 |
|
|
* |
|
| |
|
|
|
|
|
|
|
|
All
Officers and Directors as a Group
(7 Persons) |
|
|
7,329,657 |
|
|
48.8 |
% |
| |
|
|
|
|
|
|
|
| (1) |
Except
as indicated in the footnotes set forth below, the persons named in the
table have sole voting and investment power with respect to all shares
shown as beneficially owned by them. The numbers of shares shown include
shares that are not currently outstanding but which certain stockholders
are entitled to acquire or will be entitled to acquire within 60 days,
upon the exercise of stock options. Such shares are deemed to be
outstanding for the purpose of computing the percentage of Common Stock
owned by the particular stockholder and by the group but are not deemed to
be outstanding for the purpose of computing the percentage ownership of
any other person. Except as indicated in the table, the business address
of all persons named in the table is 13700 Progress Boulevard, Alachua,
Florida 32615. |
| (2) |
Represents
shares held directly by Jeffrey D. Hillman 2002 Trust and Jeffrey D.
Hillman Grantor Retained Annuity Trust. |
| (3) |
Represents
shares held directly by Mento A. Soponis and The Soponis Family
Trust. |
| (4) |
Represents
2,000 shares owned and 43,333 stock options currently exercisable or
exercisable within 60 days. |
| (5) |
Represents
500 shares owned and 20,000 stock options currently exercisable or
exercisable within 60 days. |
| (6) |
Represents
stock options currently exercisable or exercisable within 60
days. |
| (7) |
Represents
2,000 shares owned and 20,000 stock options currently exercisable or
exercisable within 60 days. |
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
The Audit
Committee of the Board of 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.
License
Agreement
In March
2004, the Company entered
into a license agreement with IviGene
Corporation, a company whose stockholders
include Messrs. Hillman, Soponis and Zahradnik who own 15.13%, 7.57% and 4.01%
of IviGene’s outstanding shares, respectively. Messrs. Hillman and Soponis also
serve on the board of IviGene. The license covers the
applications of two novel technologies referred to as IVIAT and CMAT. Our
license provides us with exclusive worldwide rights to this broad platform
technology in the areas of cancer and tuberculosis, as well as agricultural and
other non-human uses. In return, we will pay royalties on revenues we are able
to generate from any products developed using the technology, including
royalties on sublicense fees, milestone payments and future product sales. Under
the terms of our license with IviGene we are not obligated to make any payments
to IviGene until we have achieved certain milestone or royalty payments,
however, we are required to spend up to $200,000 annually on these technologies
to maintain our license. To support the research for this technology in 2004, we
received a Phase I Small Business Innovation Research Grant from the National
Institute of Allergy and Infections Diseases (NIAID) of the National Institutes
of Health (NIH) that paid to us $96,210. No
payments were made by the Company to IviGene in 2004.
Indebtedness
On
February 22, 2001, Robert T. Zahradnik, a member of the board of directors,
loaned us $57,418 as evidenced by a promissory note of even date therewith which
accrued interest at the rate of 7% per annum until paid. The note was payable on
demand, or 2 years from its date if demand was not made earlier. In December
2003, the principal portion of this note was repaid to Mr. Zahradnik. In January
2004, the outstanding balance of accrued interest totaling $11,331 was
paid.
On
February 22, 2001, Jeffrey Hillman, our Chief Scientific Officer and member of
the board of directors, loaned us $12,186 as evidenced by a promissory note of
even date therewith which accrued interest at the rate of 7% per annum until
paid. The note was payable on demand, or 2 years from its date if demand was not
made earlier. In December 2003, the principal portion of this note was repaid to
Dr. Hillman. In January 2004, the outstanding balance of accrued interest
totaling $2,393 was paid.
On
February 28, 1999, Robert T. Zahradnik, a member of the board of directors,
loaned us $15,000 as evidenced by a promissory note of even date therewith which
accrued interest at the rate of 7% per annum until paid. The note was payable on
demand, or 2 years from its date if demand was not made earlier. In December
2003, the principal portion of this note was repaid to Mr. Zahradnik. In January
2004, the outstanding balance of accrued interest totaling $4,728 was
paid.
In 2001
and 2002 we incurred consulting fees of $60,000 and $15,000, respectively,
payable to Dr. Jeffrey Hillman. The entire amount remains outstanding at
December 31, 2004, however, $20,000 was paid in January 2005 leaving a balance
currently owed of $55,000.
DESCRIPTION
OF SECURITIES
General
We are
authorized to issue up to 100,000,000 shares of common stock, $0.001 par value
per share, and 20,000,000 shares of preferred stock, with no par value per
share. As of May 31, 2005, 14,912,645 shares of common stock and no shares of
preferred stock were issued and outstanding. All of the outstanding capital
stock is, and will be, fully paid and non-assessable.
Common
Stock
Holders
of common stock are entitled to one vote per share. All actions submitted to a
vote of stockholders are voted on by holders of common stock voting together as
a single class. Holders of common stock are not entitled to cumulative voting in
the election of directors.
Holders
of common stock are entitled to receive dividends in cash or in property on an
equal basis, if and when dividends are declared on the common stock by our board
of directors, subject to any preference in favor of outstanding shares of
preferred stock, if there are any.
In the
event of liquidation of our company, all holders of common stock will
participate on an equal basis with each other in our net assets available for
distribution after payment of our liabilities and payment of any liquidation
preferences in favor of outstanding shares of preferred stock.
Holders
of common stock are not entitled to preemptive rights and the common stock is
not subject to redemption.
The
rights of holders of common stock are subject to the rights of holders of any
preferred stock that we designate or have designated. The rights of preferred
stockholders may adversely affect the rights of the common stockholders.
Preferred
Stock
Our board
of directors has the ability to issue up to 20,000,000 shares of preferred stock
in one or more series, without stockholder approval. The board of directors may
designate for the series:
|
|
• |
the
number of shares and name of the series, |
|
|
• |
the
voting powers of the series, including the right to elect directors, if
any, |
|
|
• |
the
dividend rights and preferences, if any, |
|
|
• |
redemption
terms, if any, |
|
|
• |
liquidation
preferences and the amounts payable on liquidation or dissolution, and
|
|
|
• |
the
terms upon which such series may be converted into any other series or
class of our stock, including the common stock and any other terms that
are not prohibited by law. |
It is
impossible for us to state the actual effect it will have on common stock
holders if the board of directors designates a new series of preferred stock.
The effects of such a designation will not be determinable until the rights
accompanying the series have been designated. The issuance of preferred stock
could adversely affect the voting power, liquidation rights or other rights held
by owners of common stock or other series of preferred stock. The board of
directors’ authority to issue preferred stock without stockholder approval could
make it more difficult for a third party to acquire control of our company, and
could discourage any such attempt. We have no present plans to issue any
additional shares of preferred stock.
Options
and Warrants
As of May
31, 2005, 970,000 options for shares were outstanding under our approved stock
option plans and 530,000 shares were available for future grants under our stock
option plans. We have also issued warrants totaling 436,380 common stock shares.
Holders of options and warrants do not have any of the rights or privileges of
our stockholders, including voting rights, prior to exercise of the options and
warrants. The number of shares of common stock for which these options and
warrants are exercisable and the exercise price of these options and warrants
are subject to proportional adjustment for stock splits and similar changes
affecting our common stock. We have reserved sufficient shares of authorized
common stock to cover the issuance of common stock subject to the options and
warrants.
Escrowed
Securities
We made
our initial public offering of common stock in the Canadian provinces of British
Columbia and Alberta. In connections with our initial public offering, our
common stock was listed on the TSX Venture Exchange. As such, we were subject to
the requirements of TSX Venture Exchange. Shortly after we became listed on the
American Stock Exchange we voluntarily delisted from the TSX Venture Exchange.
As part of our initial public offering, certain of our stockholders were subject
to escrow requirements. Under
Canadian National Policy 46-201 "Escrow for Initial Public Offerings,"
shares of
common stock which were held
by our principals (as defined under the National Escrow Policy) at the
time of
our
initial public offering were required
to be held in escrow.
Under the
National Escrow Policy, we entered
into an escrow agreement with Computershare Trust Company of Canada as escrow
agent, and the
principals named
below, dated
March 28, 2003
(prior to our initial public offering). Under the
escrow agreement, our principals initially deposited their common shares
aggregating 8,200,764 or 68.8% of our
then outstanding shares in
escrow with the escrow agent. The number and holders of our common shares that
were initially subject to escrow under the escrow agreement were as
follows:
|
Name
of Principal |
|
Number
of Escrow
Shares
Held |
|
| |
|
|
|
|
Jeffrey
Hillman |
|
|
5,400,108 |
|
|
Mento
A. Soponis |
|
|
1,244,592 |
|
|
Robert
Zahradnik |
|
|
756,000 |
|
|
Cornet
Capital Corp. (1) |
|
|
800,064 |
|
| |
|
|
8,200,764 |
|
|
(1) |
Brian
McAlister, one of our directors at
the time of our initial public offering,
is the sole stockholder and director of Cornet Capital
Corp. |
______________________
Under the
terms of the escrow agreement, the escrow agent released 10%, 15%,
15% and 15%
of our Principals' common shares from escrow on June 24, 2003, December 24,
2003, June 24, 2004 and December 24, 2004 respectively. As of March 31, 2005, an
aggregate of 3,690,344 shares of our principals' common stock,
(25.3% of the
currently outstanding shares) remain
in escrow.
The
remaining common shares held in escrow will be released from escrow every 6
months as set forth in the following table.
|
Release
Date |
|
%
of Escrowed Shares
to
be Released |
|
| |
|
|
|
|
June
24, 2005 |
|
|
15 |
% |
|
December
24, 2005 |
|
|
15 |
% |
|
June
24, 2006 |
|
|
15 |
% |
At the
time of our initial public offering we were an
"emerging issuer" as defined in the National Escrow Policy. A faster, 18 month
(from the initial public offering date) release schedule applies to "established
issuers" under the policy. If we become an "established issuer" while our
principals' common shares are in escrow, we will "graduate." If we graduate,
there will be a catch-up release and an accelerated release of our principals'
common shares that remain in escrow under the 18 month schedule as if we were
originally an established issuer. We will "graduate" from being an "emerging"
issuer to an "established" issuer if:
|
1. |
Our
shares of common stock are listed on the Toronto Stock
Exchange; |
|
2. |
We
are classified as a Tier 1 issuer on the TSX Venture
Exchange. |
We
currently do not have any plans to list our common stock on Tier 1 of the TSX
Venture Exchange or the Toronto Stock Exchange.
Under the
escrow agreement, our principals' common shares may not be transferred or
otherwise dealt with while they are in escrow unless the transfers or dealings
are:
|
(i) |
transfers
to our directors and senior officers, with approval of our board of
directors; |
|
(ii) |
transfers
to a person or company that before the transfer holds more than 20% of the
voting rights attached
to our outstanding securities; |
|
(iii) |
transfers
to a person or company that after the transfer will hold more than 10% of
the voting rights attached
to our outstanding securities and has the right to elect or appoint one or
more of our directors or senior officers; |
|
(iv) |
transfers
to an RRSP or similar trusteed plan provided that the only beneficiaries
are the transferor or the transferor's
spouse or children; |
|
(v) |
transfers
upon bankruptcy to the trustee in bankruptcy; pledges to a financial
institution as collateral for a good
faith loan, and upon a realization; or |
|
(vi) |
tenders
of escrowed securities to a take-over bid, provided that if the person
tendering to the bid is a Principal
of the company resulting from completion of the take-over bid, the
securities the Principal receives in exchange for tendered escrowed
securities will be placed in escrow on the basis of the resulting
company's escrow classification. |
Shares
must remain in escrow after a permitted transfer. The Principals are able to
vote all shares held in escrow.
In
addition to the above, in connection with our initial public offering, the TSX
Venture Exchange required certain shares held by the University of Florida
Research Foundation to be held in escrow with a similar release schedule. As of
May 31, 2005, approximately 269,973 of this stockholder’s shares remain subject
to escrow and the release schedule described.
Registrar
and Transfer Agent
Computershare
Trust Company of Canada is the Company’s registrar and transfer agent for our
securities.
Registration
Rights
University
of Florida Research Foundation. Pursuant
to the license of our replacement therapy technology from the University of
Florida Research Foundation, Inc., we have entered into an Equity Agreement with
the University of Florida Research Foundation, Inc. The Equity Agreement
provides that if, at any time, we determine to register any shares of our common
stock under the United States Securities
Act of 1933,
we will include in such registration the shares which we issued to the
University of Florida Research Foundation, Inc. as partial consideration for the
license, if the University of Florida Research Foundation, Inc. requests us to
do so. Under a further agreement with the University of Florida Research
Foundation, Inc., dated May 25, 2005, the University of Florida Research
Foundation, Inc. waived its registration rights under the Equity Agreement with
respect to this registration statement.
Fusion
Capital. In
connection with the May 2005 Fusion Capital transaction (See Fusion Capital
Transaction), we entered into a registration rights agreement with Fusion
Capital. Pursuant
to the terms of the registration rights agreement, the Company is obligated to
file a registration statement with the Securities and Exchange Commission
covering shares which may be purchased by or which have been issued to Fusion
Capital under the purchase agreement.
SHARES
ELIGIBLE FOR FUTURE SALE
Future
sales of a substantial number of shares of our common stock in the public market
could adversely affect market prices prevailing from time to time. Under the
terms of this offering, the shares of common stock offered may be resold without
restriction or further registration under the Securities Act of 1933, except
that any shares purchased by our “affiliates,” as that term is defined under the
Securities Act, may generally only be sold in compliance with Rule 144 under the
Securities Act.
Sale
of Restricted Shares
Certain
shares of our outstanding common stock were issued and sold by us in private
transactions in reliance upon exemptions from registration under the Securities
Act and have not been registered for resale. Additional shares may be issued
pursuant to outstanding warrants and options. Such shares may be sold only
pursuant to an effective registration statement filed by us or an applicable
exemption, including the exemption contained in Rule 144 promulgated under the
Securities Act.
In
general, under Rule 144 as currently in effect, a stockholder, including one of
our affiliates, may sell shares of common stock after at least one year has
elapsed since such shares were acquired from us or our affiliate. The number of
shares of common stock which may be sold within any three-month period is
limited to the greater of: (i) one percent of our then outstanding common stock,
or (ii) the average weekly trading volume in our common stock during the four
calendar weeks preceding the date on which notice of such sale was filed under
Rule 144. Certain other requirements of Rule 144 concerning availability of
public information, manner of sale and notice of sale must also be satisfied. In
addition, a stockholder who is not our affiliate, who has not been our affiliate
for 90 days prior to the sale, and who has beneficially owned shares acquired
from us or our affiliate for over two years may resell the shares of common
stock without compliance with many of the foregoing requirements under Rule 144.
Options
We have
filed a registration statement on Form S-8 under the Securities Act to register
shares of common stock issuable under the 2002 Stock Option and Incentive Plan.
Shares issued upon the exercise of stock options are eligible for resale in the
public market without restriction, subject to Rule 144 limitations applicable to
affiliates.
SELLING
STOCKHOLDERS
The
following table presents information regarding the selling
stockholders. Neither
the selling stockholders nor any of its affiliates has held a position or
office, or had any other material relationship, with us. Unless otherwise
indicated, the percentage of outstanding shares beneficially owned is based on
14,912,645 shares issued and outstanding at May 31, 2005.
|
Selling
Stockholder |
|
Shares
Beneficially
Owned
Before
Offering |
|
Percentage
of Outstanding
Shares
Beneficially
Owned
Before
Offering |
|
Shares
to be Sold
in the
Offering |
|
Percentage
of Outstanding
Shares
Beneficially
Owned
After
Offering |
|
|
Fusion
Capital Fund II, LLC (1) (2) |
|
|
315,421 |
|
|
1.7 |
% |
|
4,315,421 |
|
|
— |
|
|
Grisham
Living Trust(3)(4) |
|
|
112,700 |
|
|
* |
|
|
75,000 |
|
|
— |
|
|
The
Arbitrage Fund (3)(5) |
|
|
255,000 |
|
|
1.7 |
% |
|
255,000 |
|
|
— |
|
|
Mark
Campbell(3)(6) |
|
|
45,000 |
|
|
* |
|
|
45,000 |
|
|
— |
|
|
Westminster
Securities Corp.(7) |
|
|
37,500 |
|
|
* |
|
|
37,500 |
|
|
— |
|
| |
|
|
765,621 |
|
|
|
|
|
4,727,921 |
|
|
|
|
| (1) |
As
of the date hereof, 315,421 shares of our common stock have been acquired
by Fusion Capital under the common stock purchase agreement. Fusion
Capital may acquire up to an additional 4,000,000 shares under the common
stock purchase agreement. Percentage of outstanding shares is based on
14,912,645 shares of common stock outstanding as of May 31, 2005, together
with such additional 4,000,000 shares of common stock that may be acquired
by Fusion Capital from us under the common stock purchase agreement after
the date hereof. Fusion
Capital may not purchase shares of our common stock under the common stock
purchase agreement if Fusion Capital, together with its affiliates, would
beneficially own more than 9.9% of our common stock outstanding at the
time of the purchase by Fusion Capital. Fusion Capital has the right at
any time to sell any shares purchased under the common stock purchase
agreement which would allow it to avoid the 9.9% limitation. Therefore, we
do not believe that Fusion Capital will ever reach the 9.9%
limitation. |
| (2) |
Steven
G. Martin and Joshua B. Scheinfeld, the principals of Fusion Capital, are
deemed to be beneficial owners of all of the shares of common stock owned
by Fusion Capital. Messrs. Martin and Scheinfeld have shared voting and
disposition power over the shares being offered under this
prospectus. |
| (3) |
Represents
shares acquired in the private placement or able to be acquired upon
exercise of the outstanding warrants issued as part of a private
placement. |
| (4) |
Includes
25,000 shares issuable upon exercise of warrants. Harold R. Grisham is the
trustee and beneficiary and has sole voting and investment power over the
shares. Also, includes 37,700 shares beneficially owned by Harold R.
Grisham that were purchased in the open market. |
| (5) |
Includes
85,000 shares issuable upon exercise of warrants. John Orrico is Managing
Partner of the Arbitrage Fund and has sole voting and investment power
over the shares. |
| (6) |
Includes
15,000 shares issuable upon exercise of warrants.
|
| (7) |
Westminster
Securities Corp. was the placement agent for a private placement offering
and the shares listed represent the shares able to be acquired by
Westminster Securities Corp. on the outstanding placement agent warrants
held by Westminster Securities Corp. which it received in connection with
our private placement offering (warrants to acquire 25,000 shares of our
common stock at $2.25 and warrants to acquire 12,500 shares of our common
stock at $2.75). Each of the placement agent warrants is exercisable until
November 30, 2008. |
The
Private Placement Transaction
On
November 30, 2004, we issued a total of 250,000 shares of our common stock and
warrants to purchase 162,500 shares of our common stock in a private placement
to three accredited investors (The Arbitrage Fund, Mark Campbell and The Living
Trust of Harold Richard Grisham) and a placement agent pursuant to a placement
agent agreement and subscription agreements which were amended pursuant to a
warrant amendment agreement effective May 31, 2005. The issuance of the shares
of common stock and warrants was made pursuant to the exemptions from
registration provided by Section 4(2) of the Securities Act and Regulation D
promulgated thereunder. We received gross proceeds of $687,500 in the private
placement and incurred costs of approximately $142,500 resulting in net proceeds
of approximately $545,000. Warrants representing 125,000 shares of common stock
are exercisable by the three accredited investors over a four-year period at a
price of $3.50 per share. As the
placement agent, Westminster Securities Corp., a member of the NASD and a
registered broker-dealer, received (i) $35,000 (ii) commission of 8% on the
gross proceeds to us, and (iii) placement agent warrants exercisable over a
four-year period to purchase 25,000 shares of common stock at a purchase price
of $2.75 per share and 12,500 shares of common stock at 3.50. In addition to
Westminster's commission, we incurred further expenses in connection with the
offering of $52,573. This prospectus covers the resale of the shares acquired by
the investors and shares underlying the warrants issued in the private
placement. We are registering the resale of the shares issued in the private
placement and resale of shares that may be issued upon exercise of the warrants,
pursuant to our agreement to do so.
In
connection with our November 2004 private placement we entered into subscription
agreements with the investors which granted certain resale registration rights
to the investors. In the event a registration statement for resale of the shares
issued to the investors was not filed within 30 days of closing, or not declared
effective within 120 days of the closing, or in certain other events of default,
the terms of the subscription agreements provided that each investor (pro rated
on a daily basis) was entitled to compensatory payment from us of an amount
equal to one percent of the amount invested by that investor, and thereafter one
percent for each successive month or any portion of that month until the
registration statement is effective or we have cured the other events of
default. The subscription agreement further provides that if a compensatory
payment is not timely made, we will also be obligated to pay the investor
interest at the rate of 12% per annum, or the highest rate permitted by law, if
less, until such amounts have been paid in full.
Effective
May 31, 2005, we entered into a warrant amendment agreement with the private
placement investors and Westminster. The warrant amendment agreement provided
for (i) the elimination and termination of the registration rights contained in
the subscription agreement, subject to the effectiveness of this registration
statement, (ii) the waiver of any compensation amount that may have been owed
pursuant to the registration rights and the elimination and termination of such
compensatory amounts, and (iii) the amendment of warrants to Westminster and the
investors to eliminate the warrant anti-dilution adjustment provision. In
exchange for the foregoing, we made a one time adjustment to the exercise prices
of the investor and Westminster warrants and issued replacement warrants to the
investors and Westminster. The replacement warrants were for the same number of
shares as in the private placement except that the exercise prices of the
warrants were revised from $3.50 to $2.75 per share and from $2.75 to $2.25 per
share.
PLAN
OF DISTRIBUTION
The
common stock offered by this prospectus is being offered by the selling
stockholders. The common stock may be sold or distributed from time to time by
the selling stockholders only for cash directly to one or more purchasers or
through brokers, dealers, or underwriters who may act solely as agents at market
prices prevailing at the time of sale, at prices related to the prevailing
market prices, at negotiated prices, or at fixed prices, which may be changed.
The sale of the common stock offered by this Prospectus may be effected in one
or more of the following methods:
| |
• |
ordinary
brokers’ transactions; |
| |
• |
transactions
involving cross or block trades; |
| |
• |
through
brokers, dealers, or underwriters who may act solely as
agents |
| |
• |
“at
the market” into an existing market for the common
stock; |
| |
• |
in
other ways not involving market makers or established trading markets,
including direct sales to purchasers or sales effected through
agents; |
| |
• |
in
privately negotiated transactions; or |
| |
• |
any
combination of the foregoing. |
In order
to comply with the securities laws of certain states, if applicable, the shares
may be sold only through registered or licensed brokers or dealers. In addition,
in certain states, the shares may not be sold unless they have been registered
or qualified for sale in the state or an exemption from the registration or
qualification requirement is available and complied with.
Brokers,
dealers, underwriters, or agents participating in the distribution of the shares
as agents may receive compensation in the form of commissions, discounts, or
concessions from the selling stockholders and/or purchasers of the common stock
for whom the broker-dealers may act as agent. The compensation paid to a
particular broker-dealer may be less than or in excess of customary
commissions.
Fusion
Capital and Westminster Securities are “underwriters” within the meaning of the
Securities Act.
Neither
we nor Fusion Capital can presently estimate the amount of compensation that any
agent will receive. We know of no existing arrangements between Fusion Capital,
any other stockholder,
broker, dealer, underwriter, or agent relating to the sale or distribution of
the shares offered by this Prospectus. At the time a particular offer of shares
is made, a prospectus supplement, if required, will be distributed that will set
forth the names of any agents, underwriters, or dealers and any compensation
from the selling stockholder, and any other required information.
We will
pay all of the expenses incident to the registration, offering, and sale of the
shares to the public other than commissions or discounts of underwriters,
broker-dealers, or agents. We have also agreed to indemnify Fusion Capital and
related persons against specified liabilities, including liabilities under the
Securities Act.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to our directors, officers, and controlling persons, we have been
advised that in the opinion of the SEC this indemnification is against public
policy as expressed in the Securities Act and is therefore,
unenforceable.
Fusion
Capital and its affiliates have agreed not to engage in any direct or indirect
short selling or hedging of our common stock during the term of the common stock
purchase agreement.
We have
advised Fusion Capital that while it is engaged in a distribution of the shares
included in this Prospectus it is required to comply with Regulation M
promulgated under the Securities Exchange Act of 1934, as amended. With certain
exceptions, Regulation M precludes the selling stockholders,, any affiliated
purchasers, and any broker-dealer or other person who participates in the
distribution from bidding for or purchasing, or attempting to induce any person
to bid for or purchase any security which is the subject of the distribution
until the entire distribution is complete. Regulation M also prohibits any bids
or purchases made in order to stabilize the price of a security in connection
with the distribution of that security. All of the foregoing may affect the
marketability of the shares offered hereby this Prospectus.
This
offering will terminate on the date that all shares offered by this Prospectus
have been sold by the selling stockholders.
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES
ACT LIABILITIES
Our
Articles of Incorporation limit the personal liability of our officers and
directors for monetary damages for breach of their fiduciary duty as directors,
except for liability that cannot be eliminated under the Florida Business
Corporation Act (the “FBCA”). Our Articles of Incorporation and Bylaws also
provide for the Company to indemnify directors and officers to the fullest
extent permitted by the FBCA. In addition, we have indemnification agreements
with its directors and executive officers.
The
indemnification provisions described above would provide coverage for claims
arising under the Securities Act and the Exchange Act. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Company pursuant
to our Articles of Incorporation, Bylaws, Indemnification agreements, the FBCA,
or otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
LEGAL
MATTERS
The
validity of the issuance of the common stock offered hereby will be passed upon
for us by Shumaker, Loop & Kendrick, LLP.
EXPERTS
The
financial statements of Oragenics, Inc. at December 31, 2004, and for each of
the two years in the period ending December 31, 2004 appearing in this
Prospectus and Registration Statement have been audited by Ernst & Young
LLP, independent registered public accounting firm, as set forth in their report
(which contains an explanatory paragraph describing conditions that raise
substantial doubt about Oragenics, Inc.’s ability to continue as a going concern
as described in Note 1 to the financial statements) appearing elsewhere herein,
and are included in reliance upon such report given on the authority of such
firm as experts in accounting and auditing.
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
We file
current, quarterly and annual reports with the SEC on forms 8-K, 10-QSB and
10-KSB. We have filed with the SEC under the Securities Act of 1933 a
registration statement on Form SB-2 with respect to the shares being offered in
this offering. This prospectus does not contain all of the information set forth
in the registration statement, certain items of which are omitted in accordance
with the rules and regulations of the SEC. The omitted information may be
inspected and copied at the Public Reference Room maintained by the SEC at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. You can obtain
information about operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also
maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that
file
electronically with the SEC
at http://www.sec.gov. Copies of such material can be obtained from the public
reference section of the SEC at prescribed rates. Statements contained in this
prospectus as to the contents of any contract or other document filed as an
exhibit to the registration statement are not necessarily complete and in each
instance reference is made to the copy of the document filed as an exhibit to
the registration statement, each statement made in this prospectus relating to
such documents being qualified in all respects by such reference.
For
further information with respect to us and the securities being offered hereby,
reference is hereby made to the registration statement, including the exhibits
thereto and the financial statements, notes, and schedules filed as a part
thereof.
FINANCIAL
STATEMENTS
Oragenics,
Inc.
Financial
Statements
Years
ended December 31, 2004 and 2003
and for
the three months ended March 31, 2005 and 2004
Contents
|
Index
to Financial Statements |
F-1 |
|
Report
of Independent Registered Public Accounting Firm on Financial
Statements |
F-2 |
|
Financial
Statements |
|
|
Balance
Sheets |
F-3 |
|
Statements
of Operations |
F-4 |
|
Statements
of Changes in Stockholders’ Equity (Deficit) |
F-5 |
|
Statements
of Cash Flows |
F-6 |
|
Notes
to Financial Statements |
F-7 |
Report of
Independent Registered Public Accounting Firm on Financial
Statements
The Board
of Directors and Stockholders of
Oragenics,
Inc.
We have
audited the accompanying balance sheet of Oragenics, Inc. as of December 31,
2004, and the related statements of operations, changes in stockholders’ equity
(deficit) and cash flows for each of the two years in the period ended December
31, 2004. These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Oragenics, Inc. at December 31,
2004, and the results of its operations and its cash flows for each of the two
years in the period ended December 31, 2004, in conformity with accounting
principles generally accepted in the United States.
The
accompanying financial statements have been prepared assuming that Oragenics,
Inc. will continue as a going concern. As more fully described in Note 1, the
Company has incurred recurring operating losses, negative operating cash flows
and has an accumulated deficit. These conditions raise substantial doubt about
the Company's ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 1. The financial statements
do not include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.
January
28, 2005 except for Note 11, as to which the date is February 24,
2005
Tampa,
Florida /s/ Ernst
& Young LLP
Oragenics,
Inc.
Balance
Sheets
| |
|
December
31, 2004 |
|
March
31,
2005
(unaudited) |
|
|
Assets |
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
Cash
and cash equivalents |
|
$ |
3,666,244 |
|
$ |
2,381,383 |
|
|
Prepaid
expenses and other current assets |
|
|
108,895 |
|
|
209,018 |
|
|
Total
current assets |
|
|
3,775,139 |
|
|
2,590,401 |
|
| |
|
|
|
|
|
|
|
|
Property
and equipment, net |
|
|
690,932 |
|
|
1,203,591 |
|
|
Total
assets |
|
$ |
4,466,071 |
|
$ |
3,793,992 |
|
| |
|
|
|
|
|
|
|
|
Liabilities
and stockholders’ equity |
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses |
|
$ |
429,627 |
|
$ |
277,544 |
|
|
Current
portion of notes payable |
|
|
-- |
|
|
192,858 |
|
|
Total
current liabilities |
|
|
429,627 |
|
|
470,402 |
|
| |
|
|
|
|
|
|
|
|
Long
term liabilities: |
|
|
|
|
|
|
|
|
Notes
payable |
|
|
-- |
|
|
363,503 |
|
|
Total
liabilities |
|
|
429,627 |
|
|
833,905 |
|
| |
|
|
|
|
|
|
|
|
Stockholders’
equity: |
|
|
|
|
|
|
|
Preferred
stock, no par value; 20,000,000 shares authorized; none issued and
outstanding |
|
|
-- |
|
|
-- |
|
Common
stock, $0.001 par value; 100,000,000 shares authorized; 14,594,924
and 14,597,224 shares issued and outstanding at December 31, 2004 and
March 31, 2005, respectively |
|
|
14,595 |
|
|
14,597 |
|
|
Additional
paid in capital |
|
|
9,493,833 |
|
|
9,283,604 |
|
|
Accumulated
deficit |
|
|
(5,471,984 |
) |
|
(6,338,114 |
) |
|
Total
stockholders’ equity |
|
|
4,036,444 |
|
|
2,960,087 |
|
|
Total
liabilities and stockholders’ equity |
|
$ |
4,466,071 |
|
$ |
3,793,992 |
|
See
accompanying notes.
Oragenics,
Inc.
Statements
of Operations
| |
|
Year
ended December 31 |
|
Three
months ended |
|
| |
|
2004 |
|
2003 |
|
2005 |
|
2004 |
|
| |
|
|
|
|
|
(unaudited) |
|
| |
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
196,210 |
|
$ |
-- |
|
$ |
-- |
|
$ |
-- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development |
|
|
1,990,979 |
|
|
929,355 |
|
|
647,186 |
|
|
262,295 |
|
|
General
and administration |
|
|
1,329,983 |
|
|
738,596 |
|
|
231,919 |
|
|
282,166 |
|
|
Total
operating expenses |
|
|
3,320,962 |
|
|
1,667,951 |
|
|
879,105 |
|
|
544,461 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations |
|
|
(3,124,752 |
) |
|
(1,667,951 |
) |
|
(879,105 |
) |
|
(544,461 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income |
|
|
47,306 |
|
|
7,874 |
|
|
14,620 |
|
|
7,021 |
|
|
Interest
expense |
|
|
(442 |
) |
|
(12,877 |
) |
|
(1,645 |
) |
|
-- |
|
|
Total
other income (expense), net |
|
|
46,864 |
|
|
(5,003 |
) |
|
12,975 |
|
|
7,021 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(3,077,888 |
) |
$ |
(1,672,954 |
) |
$ |
(866,130 |
) |
$ |
(537,440 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted net loss per share |
|
$ |
(0.22 |
) |
$ |
(0.15 |
) |
$ |
(0.06 |
) |
$ |
(0.04 |
) |
|
Shares
used to compute basic and diluted net loss per share |
|
|
14,118,129 |
|
|
10,814,198 |
|
|
14,596,866 |
|
|
13,413,558 |
|
See
accompanying notes.
Oragenics,
Inc.
Statements
of Changes in Stockholders’ Equity (Deficit)
| |
|
Common
Stock |
|
Additional
Paid In |
|
Accumulated |
|
Total
Stockholders’
Equity |
|
| |
|
Shares |
|
Amount |
|
Capital |
|
Deficit |
|
(Deficit) |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2002 |
|
|
9,425,704 |
|
$ |
9,426 |
|
$ |
628,234 |
|
$ |
(721,142 |
) |
$ |
(83,482 |
) |
|
Issuance
of common stock and warrants |
|
|
2,500,000 |
|
|
2,500 |
|
|
2,280,112 |
|
|
-- |
|
|
2,282,612 |
|
|
Exercise
of common stock warrants |
|
|
1,370,500 |
|
|
1,370 |
|
|
2,628,817 |
|
|
-- |
|
|
2,630,187 |
|
|
Compensation
expense relating to option issuances |
|
|
-- |
|
|
-- |
|
|
283,534 |
|
|
-- |
|
|
283,534 |
|
|
Net
loss |
|
|
-- |
|
|
-- |
|
|
-- |
|
|
(1,672,954 |
) |
|
(1,672,954 |
) |
|
Balance
at December 31, 2003 |
|
|
13,296,204 |
|
|
13,296 |
|
|
5,820,697 |
|
|
(2,394,096 |
) |
|
3,439,897 |
|
|
Exercise
of common stock warrants |
|
|
1,048,720 |
|
|
1,049 |
|
|
3,034,724 |
|
|
-- |
|
|
3,035,773 |
|
|
Costs
associated with filing initial public offering post effective
amendment |
|
|
-- |
|
|
-- |
|
|
(62,421 |
) |
|
-- |
|
|
(62,421 |
) |
|
Issuance
of common stock and warrants |
|
|
250,000 |
|
|
250 |
|
|
544,676 |
|
|
-- |
|
|
544,926 |
|
|
Compensation
expense relating to option issuances |
|
|
-- |
|
|
-- |
|
|
156,157 |
|
|
-- |
|
|
156,157 |
|
|
Net
loss |
|
|
-- |
|
|
-- |
|
|
-- |
|
|
(3,077,888 |
) |
|
(3,077,888 |
) |
|
Balance
at December 31, 2004 |
|
|
14,594,924 |
|
|
14,595 |
|
|
9,493,833 |
|
|
(5,471,984 |
) |
|
4,036,444 |
|
|
Exercise
of common stock warrants (unaudited) |
|
|
2,300 |
|
|
2 |
|
|
2,873 |
|
|
-- |
|
|
2,875 |
|
|
Compensation
expense credit relating to option issuances (unaudited) |
|
|
-- |
|
|
-- |
|
|
(213,102 |
) |
|
-- |
|
|
(213,102 |
) |
|
Net
loss (unaudited) |
|
|
-- |
|
|
-- |
|
|
-- |
|
|
(866,130 |
) |
|
(866,130 |
) |
|
Balance
at March 31, 2005 (unaudited) |
|
|
14,597,224 |
|
$ |
14,597 |
|
$ |
9,283,604 |
|
$ |
6,338,114 |
|
$ |
2,960,087 |
|
See
accompanying notes.
Oragenics,
Inc.
Statements
of Cash Flows
| |
|
Year
ended December 31 |
|
Three
months ended March 31 |
|
| |
|
2004 |
|
2003 |
|
2005 |
|
2004 |
|
| |
|
|
|
|
|
(unaudited) |
|
|
Operating
activities |
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(3,077,888 |
) |
$ |
(1,672,954 |
) |
$ |
(866,130 |
) |
$ |
(537,440 |
) |
|
Adjustments
to reconcile net loss to net cash used in operating
activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
41,987 |
|
|
12,545 |
|
|
48,803 |
|
|
5,163 |
|
|
Non-cash
issuance of common stock and common stock options |
|
|
-- |
|
|
54,000 |
|
|
-- |
|
|
-- |
|
|
Stock-based
compensation expense |
|
|
156,157 |
|
|
229,534 |
|
|
(213,102 |
) |
|
(9,445 |
) |
|
Changes
in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
associated with initial public offering |
|
|
-- |
|
|
271,937 |
|
|
-- |
|
|
-- |
|
|
Prepaid
expenses and other current assets |
|
|
(84,258 |
) |
|
(15,896 |
) |
|
(100,123 |
) |
|
(2,322 |
) |
|
Accounts
payable and accrued expenses |
|
|
289,013 |
|
|
(92,197 |
) |
|
(152,083 |
) |
|
69,166 |
|
|
Accrued
interest |
|
|
(25,582 |
) |
|
8,120 |
|
|
-- |
|
|
(25,582 |
) |
|
Deferred
compensation |
|
|
(44,672 |
) |
|
(13,999 |
) |
|
-- |
|
|
(44,672 |
) |
|
Net
cash used in operating activities |
|
|
(2,745,243 |
) |
|
(1,218,910 |
) |
|
(1,282,635 |
) |
|
(545,132 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing
activity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases
of property and equipment |
|
|
(690,548 |
) |
|
(50,258 |
) |
|
(561,462 |
) |
|
(24,212 |
) |
|
Net
cash used in investing activity |
|
|
(690,548 |
) |
|
(50,258 |
) |
|
(561,462 |
) |
|
(24,212 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from notes payable to stockholders |
|
|
-- |
|
|
175,000 |
|
|
-- |
|
|
-- |
|
|
Payment
of notes payable to stockholders |
|
|
-- |
|
|
(260,454 |
) |
|
-- |
|
|
-- |
|
|
Net
proceeds from issuance of common stock |
|
|
3,518,278 |
|
|
4,912,799 |
|
|
2,875 |
|
|
2,997,906 |
|
|
Proceeds
from note payable |
|
|
-- |
|
|
-- |
|
|
556,361 |
|
|
-- |
|
|
Net
cash provided by financing activities |
|
|
3,518,278 |
|
|
4,827,345 |
|
|
559,236 |
|
|
2,997,906 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents |
|
|
82,487 |
|
|
3,558,177 |
|
|
(1,284,861 |
) |
|
2,428,562 |
|
|
Cash
and cash equivalents at beginning of period |
|
|
3,583,757 |
|
|
25,580 |
|
|
3,666,244 |
|
|
3,583,757 |
|
|
Cash
and cash equivalents at end of period |
|
$ |
3,666,244 |
|
$ |
3,583,757 |
|
$ |
2,381,383 |
|
$ |
6,012,319 |
|
|
Supplemental
disclosure of non-cash financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock and common stock options issued in connection with investment bank
and related financing services |
|
$ |
-- |
|
$ |
54,000 |
|
$ |
-- |
|
$ |
-- |
|
|
Supplemental
disclosure of cash flow information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
paid |
|
$ |
26,024 |
|
$ |
4,757 |
|
$ |
1,160 |
|
$ |
-- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes.
Oragenics,
Inc.
Notes to
Financial Statements
December 31,
2004
1.
Organization and Significant Accounting Policies
Oragenics,
Inc. is dedicated to developing technologies associated with oral health, broad
spectrum antibiotics and other general health benefits. The Company has licensed
two unique technologies from the University of Florida: replacement therapy for
the prevention of tooth decay and Mutacin 1140, a novel antibiotic. The Company
has also developed a probiotics technology to provide protection against the
causative organisms of periodontal disease and has licensed two related platform
technologies that enable the simple, fast identification of gene targets
associated with the natural onset and progression of infections, cancers and
other diseases.
Basis
of Presentation
The
financial statements of the Company have been prepared in accordance with
accounting principles generally accepted in the United States including the
assumption of a going concern basis which contemplates the realization of assets
and the settlement of liabilities and commitments in the normal course of
business. The Company incurred a net loss of $3,077,888 for the year ended
December 31, 2004 and as of that date had an accumulated deficit of $5,471,984.
Cash used in operations for the years ended December 31, 2004 and
December 31, 2003 was $2,745,243 and $1,218,910, respectively, and cash
flow from operations was negative throughout 2004. The Company expects to incur
substantial expenditures to further develop each of its technologies. The
Company believes the working capital at December 31, 2004 will be insufficient
to meet the business objectives as presently structured. Management recognizes
that the Company must generate additional capital resources or consider
modifications to its technology development plans to enable it to continue as a
going concern. Management’s plans include seeking financing, alliances or other
partnership agreements with entities interested in the Company’s technologies,
or other business transactions that would generate sufficient resources to
assure continuation of the Company’s operations and research and development
programs.
The
Company intends to seek additional funding through sublicensing arrangements,
joint venturing or partnering, sales of rights to technology, government grants
and public or private financings. During 2004 the Company conducted a private
placement to raise capital. During 2005 the Company expects to raise additional
capital through selling additional debt or equity securities on terms acceptable
to the Company. There can be no assurance that additional financing will be
available to the Company on acceptable terms, or at all. The Company’s future
success depends on its ability to raise capital and ultimately generate revenue
and attain profitability. The Company cannot be certain that additional capital,
whether through selling additional debt or equity securities or obtaining a line
of credit or other loan, will be available to it or, if available, will be on
terms acceptable to the Company. If the Company issues additional securities to
raise funds, these securities may have rights, preferences, or privileges senior
to those of its common stock, and the Company’s current stockholders may
experience dilution. If the Company is unable to obtain funds when needed or on
acceptable terms, the Company may be required to curtail their current
development programs, cut operating costs and forego future development and
other opportunities. Without sufficient capital to fund their operations, the
Company will be unable to continue as a going concern. The accompanying
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Unaudited
Interim Information
The
accompanying unaudited financial statements as of and for the three-month
periods ended March 31, 2005 and 2004 have been prepared in accordance with
generally accepted accounting principles for interim financial information. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three months ended March 31, 2005 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2005.
Oragenics,
Inc.
Notes to
Financial Statements (continued)
1.
Organization and Significant Accounting Policies
(continued)
Concentrations
of Credit Risk
The
Company’s cash and cash equivalents are deposited in two financial institutions
and consist of demand deposits and overnight repurchase agreement investments.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fair
Value of Financial Instruments
The fair
value of the Company’s cash and cash equivalents, accounts payable and accrued
expenses approximate their carrying values due to their short-term
nature.
Cash
Equivalents
The
Company considers all highly liquid investments with an original maturity of
three months or less when purchased to be cash equivalents.
Property
and Equipment
Property
and equipment is stated at cost less accumulated depreciation and amortization.
Depreciation is provided on the straight-line method over the estimated useful
lives of the assets (three to seven years). Leasehold improvements are amortized
over the shorter of the estimated useful life or the lease term of the related
asset (five years).
Business
Segments
Pursuant
to Statement of Financial Accounting Standards (SFAS) No. 131, Disclosure
About Segments of a Business Enterprise and Related Information, the
Company is required to report segment information. As the Company only operates
principally in one business segment, no additional reporting is
required.
Stock-Based
Compensation
The
Company has a stock-based employee compensation plan, which is described more
fully in Note 5. The Company accounts for the plan under the recognition and
measurement principles of APB Opinion No. 25, Accounting
for Stock Issued to Employees, and
related Interpretations. The following table illustrates the effect on net loss
per share if the Company had applied the fair value recognition provisions of
SFAS No. 123, Accounting
for Stock-Based Compensation, to
stock-based employee compensation.
Oragenics,
Inc.
Notes to
Financial Statements (continued)
1.
Organization and Significant Accounting Policies
(continued)
| |
|
Years
ended December 31 |
|
Three
months ended March 31 |
|
| |
|
2004 |
|
2003 |
|
2005 |
|
2004 |
|
| |
|
|
|
|
|
(unaudited) |
|
|
Net
loss, as reported |
|
$ |
(3,077,888 |
) |
$ |
(1,672,954 |
) |
$ |
(866,130 |
) |
$ |
(537,440 |
) |
|
Add:
Total stock-based employee compensation expense reported in net
loss |
|
|
156,157 |
|
|
229,534 |
|
|
(213,102 |
) |
|
(9,445 |
) |
Deduct:
Total stock-based employee compensation expense determined under
fair value based method for all awards |
|
|
(152,545 |
) |
|
(44,371 |
) |
|
(58,455 |
) |
|
(30,747 |
) |
|
Pro
forma net loss |
|
$ |
(3,074,276 |
) |
$ |
(1,487,791 |
) |
$ |
(1,137,687 |
) |
$ |
(577,632 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted - as reported |
|
$ |
(0.22 |
) |
$ |
(0.15 |
) |
$ |
(0.06 |
) |
$ |
(0.04 |
) |
|
Basic
and diluted - pro forma |
|
$ |
(0.22 |
) |
$ |
(0.14 |
) |
$ |
(0.08 |
) |
$ |
(0.04 |
) |
|
Shares
used to compute basic and diluted net loss per share |
|
|
14,118,129 |
|
|
10,814,198 |
|
|
14,596,866 |
|
|
13,413,558 |
|
Net
Loss Per Share
During
all periods presented, the Company had securities outstanding that could
potentially dilute basic earnings per share in the future, but were excluded
from the computation of diluted net loss per share, as their effect would have
been antidilutive. Because the Company reported a net loss for all periods
presented, shares associated with the stock options and warrants are not
included because they are antidilutive. Basic and diluted net loss per share
amounts are the same for the periods presented.
Revenue
Recognition
Grant
revenues are recognized as the reimbursable expenses are incurred over the life
of the related grant.
Impairment
of Long-Lived Assets
The
Company reviews their long-lived assets for impairment and reduces the carrying
value to fair value whenever events or changes in circumstances indicate that
the carrying value may not be recoverable. There were no impairment losses
recorded during the years ended December 31, 2004 and 2003.
Research
and Development Expenses
Expenditures
for research and development are expensed as incurred. The majority of the
Company’s activities are research and development related.
Oragenics,
Inc.
Notes to
Financial Statements (continued)
1.
Organization and Significant Accounting Policies
(continued)
Income Taxes
Income
taxes are accounted for under the asset and liability method. Deferred tax
assets and liabilities are recognized for future tax consequences attributable
to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases and operating loss and tax
credit carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rate is recognized in
operations in the period that includes the enactment date. Deferred tax assets
are reduced to estimated amounts expected to be realized by the use of a
valuation allowance.
Recently
Issued Accounting Pronouncements
In
December 2004, the FASB issued Statement of Financial Accounting Standards No.
123 (revised 2004) "Share Based Payment" ("FAS 123(R)"), which is a revision of
FASB Statement No. 123 "Accounting for Stock Based Compensation" ("Statement
123"). This statement supersedes APB Opinion No. 25, "Accounting for Stock
Issued to Employees" ("Opinion 25") which allowed companies to use the intrinsic
value method of valuing share-based payment transactions and amends FAS
Statement No. 95, "Statement of Cash Flows". FAS 123(R) requires all share-based
payments to employees, including grants of employee stock options, to be
recognized in the income statement based on their fair values. Pro forma
disclosure is no longer an alternative. The Company expects to adopt Statement
123 (R) on January 1, 2006.
FAS
123(R) permits public companies to adopt its requirements using one of two
methods. A "modified prospective" method in which compensation cost is
recognized beginning with the effective date (a) based on the requirements of
FAS 123(R) for all share-based payments granted after the effective date and (b)
based on the requirements of Statement 123 for all awards granted to employees
prior to the effective date of FAS 123(R) that remain unvested on the effective
date. A "modified retrospective" method which includes the requirements of the
modified prospective method described above, but also permits entities to
restate based on the amounts previously recognized under Statement 123 for
purposes of pro forma disclosures either (a) all prior periods presented or (b)
prior interim periods of the year of adoption. The Company will determine which
method to adopt prior to the effective date of FAS 123(R).
The
impact of adoption of FAS 123(R) cannot be accurately predicted at this time
since it will depend on levels of share-based payments granted in the future.
However, had the Company adopted FAS 123(R) in prior periods, the impact of the
standard would have approximated the impact of FAS 123 as described in the
disclosure of pro forma net loss and loss per share in Note 1 to the financial
statements. Statement 123(R) also requires the benefits of tax deductions in
excess of recognized compensation cost to be reported as a financing cash flow,
rather than as an operating cash flow as required under current literature. This
requirement will reduce net operating cash flows and increase net financing cash
flows in periods after adoption. While the Company cannot estimate what those
amounts will be in the future (because they depend on, among other things, when
employees exercise stock options), there were no amounts of operating cash flows
recognized in prior periods for such excess tax deductions in 2003 and 2004.
As
permitted by Statement 123, the Company currently accounts for share-based
payments using Opinion 25's intrinsic value method and, as such, generally
recognizes no compensation cost for employee stock options.
Oragenics,
Inc.
Notes to
Financial Statements (continued)
2.
Property and Equipment
Property
and equipment consists of the following as of December 31, 2004:
|
Leasehold
improvements |
|
$ |
469,327 |
|
|
Laboratory
equipment |
|
|
226,070 |
|
|
Office
and computer equipment |
|
|
54,127 |
|
| |
|
|
749,524 |
|
|
Accumulated
depreciation |
|
|
(58,592 |
) |
| |
|
$ |
690,932 |
|
Depreciation
expense for 2004 and 2003 was $41,987 and $12,545, respectively.
3.
Obligations to Stockholders
The
Company issued promissory notes for cash to two stockholders in the amounts of
$69,604 and $15,000 in 2001 and 1999, respectively. These notes were payable
upon demand and accrued interest at 7% per year. The principal portion of the
notes was repaid in December 2003 and related accrued interest totaling $18,452
was paid in January 2004.
In 2003,
the Company issued two demand promissory notes to a stockholder in the amounts
of $100,000 and $75,000 bearing interest at 10% per annum. Both notes and
interest totaling $4,757 were repaid in June 2003.
At
December 31, 2004 and 2003, $75,000 was owed and included in accounts payable
and accrued expenses for consulting services provided by a stockholder of the
Company in prior years. In January 2005, $20,000 was paid on this obligation. No
interest is being accrued on this outstanding debt.
4.
Deferred Compensation
During
2000, the Company entered into a two-year employment agreement with an officer
and stockholder. The agreement provided for the deferral of compensation until a
certain level of investment funding was received and required the Company to
accrue interest on the deferred balance at 7% per year. Beginning July 1, 2001,
the agreement was amended whereby the deferral of compensation ceased. No
compensation expense was recognized in 2004 or 2003 and interest expense
relating to the employment agreement for the years ended December 31, 2004 and
2003 was $0 and $2,409, respectively. In January 2004, payments totaling $41,539
were made in settlement of this obligation.
Between
December 2002 and June 2003, compensation payments totaling $149,263 to three
officers of the Company were deferred due to limited cash flow of the Company.
As of December 31, 2003, payments of $139,000 were made and the balance of
$10,263 was paid in January 2004. There was no provision to pay interest on
these deferred compensation payments.
Oragenics,
Inc.
Notes to
Financial Statements (continued)
5.
Stockholders’ Equity
Common
Stock
On June
24, 2003, the Company completed the filing of 2,400,000 units at $1.25 per unit
as an initial public offering (IPO) for gross proceeds of $3,000,000. Each unit
consisted of one share of the Company’s common stock, one-half Series A Common
Share Purchase Warrant and one-half Series B Common Share Purchase Warrant. One
whole Series A warrant allowed the holder to purchase a share of the Company’s
stock at $2.00 per share until December 24, 2003. All Series A warrants were
exercised before the expiration date providing proceeds to the Company of
$2,400,000. One whole Series B warrant allowed the holder to purchase a share of
the Company’s stock at $3.00 per share until March 24, 2004. A total of 995,400
Series B warrants were exercised on or before March 24, 2004 providing proceeds
of $2,986,200 and the remaining 204,600 Series B warrants expired unexercised on
March 24, 2004. In addition to receiving a cash commission for each share sold,
the underwriting agent for the IPO received 100,000 shares of common stock of
the Company and warrants to purchase 500,000 shares of common stock of the
Company at $1.25 per share until June 24, 2005. As of December 31, 2004, 223,820
underwriter warrants were exercised providing proceeds to the Company of
$279,775. The cost of the IPO, including the filing of a post effective amended
registration statement in October 2004, was $779,809 including the agent’s
commission.
On
November 30, 2004, the Company completed a private placement of its stock
through an underwriter selling 25 units at $27,500 per unit totaling $687,500.
Each unit consisted of 10,000 shares of common stock and 5,000 warrants to
purchase common stock at a price of $3.50 per share until November 30, 2008. The
total cost associated with this financing was approximately $142,500 including
the underwriter’s commission.
Stock
Compensation Plan
The
Company’s 2002 Stock Option and Incentive Plan (the Plan) was adopted by the
Board of Directors (the Board). The purpose is to advance the interests of the
Company by affording certain employees and directors of the Company and key
consultants and advisors an opportunity to acquire or increase their proprietary
interests in the Company. The Plan authorizes the grant of stock options
(incentive and non-statutory), stock appreciation rights and restricted stock.
As of December 31, 2004, the Company had not awarded stock appreciation rights
or restricted stock under the Plan. The Company has reserved an aggregate of
1,500,000 shares of common stock for grants under the Plan, of which 430,000
shares are available for future grants as of December 31, 2004. The exercise
price of each option shall be determined by the Board and an option’s maximum
term is five years.
In
September 2002, the Company issued 195,000 options that were re-priced upon the
change in the initial public offering price. As a result, these options were
subjected to variable accounting treatment. In accordance with Financial
Accounting Standards Board Interpretation No. 44, Accounting
for Certain Transactions Involving Stock Compensation (FIN
44), stock options must be accounted for as variable under such circumstances.
Variable accounting requires companies to re-measure compensation costs for the
variable options until the options are exercised, cancelled, or forfeited
without replacement. Compensation is dependent on fluctuations in the quoted
stock prices for the Company's common stock. Such compensation costs will be
recognized over a three-year vesting schedule until the options are fully
vested, exercised, cancelled, or forfeited, after which time the compensation
will be recognized immediately at each reporting period. During 2004 and 2003,
the Company recognized compensation expense of $156,157 and $229,534,
respectively.
Oragenics,
Inc.
Notes to
Financial Statements (continued)
5.
Stockholders’ Equity (continued)
A summary
of the status of the Company’s outstanding stock options, including employee
stock options discussed above, as of December 31, 2004 and 2003 and changes
during the periods ending on those dates is presented below:
| |
|
Options |
|
Option
Price Per Share |
|
Weighted
Average
Exercise
Price |
|
| |
|
|
|
|
|
|
|
|
Outstanding
at January 1, 2003 |
|
|
315,000 |
|
$ |
1.25 |
|
$ |
1.25 |
|
|
Granted |
|
|
285,000 |
|
$ |
2.65
- 4.00 |
|
$ |
3.29 |
|
|
Outstanding
at December 31, 2003 |
|
|
600,000 |
|
|
1.25
- 4.00 |
|
|
2.22 |
|
|
Forfeited |
|
|
(20,000 |
) |
|
2.65 |
|
|
2.65 |
|
|
Granted |
|
|
175,000 |
|
|
3.30
- 4.25 |
|
|
3.83 |
|
|
Granted |
|
|
315,000 |
|
|
2.25
- 2.65 |
|
|
2.38 |
|
|
Outstanding
at December 31, 2004 |
|
|
1,070,000 |
|
|
1.25
- 4.25 |
|
$ |
2.52 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Exercisable
at end of year |
|
|
246,667 |
|
$ |
1.25
- 4.00 |
|
$ |
1.89 |
|
| |
|
|
|
|
|
|
|
|
|
|
The range
of exercise price is $1.25 to $4.25 per share. The weighted-average per option
fair value of options granted during 2004 and 2003 was $1.48 and $1.26,
respectively, and the weighted average remaining contractual life of those
options is 4.3 years. Options vest over a period of three to four years from
respective grant dates and the options expire 5 years after the date of grant.
The fair value of these options was estimated at the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions: weighted average risk-free interest rate of 1.00-2.87%; dividend
yields of 0%; weighted-average volatility factors of the expected market price
of the Company’s common stock of 55%; and an expected life of the option of four
years.
6.
Licenses
The
Company has two license agreements with the University of Florida Research
Foundation, Inc. (“UFRF”) for their technologies. The Company issued 599,940
shares of common stock as partial consideration. The license agreements provide
for, among other things, the Company to make minimum annual research
expenditures of $600,000 in 2003 and $1,000,000 thereafter, to adhere to
specific milestones and pay royalties on product sales, which beginning December
31, 2005 will be a minimum of $50,000 annually per agreement. The agreement also
required the Company to pay $100,000 to UFRF as reimbursement for patent filing
costs upon the closing of any financing in excess of $1,000,000. If the Company
fails to perform certain of its obligations, UFRF may terminate the license
agreements. Upon completion of the initial public offering in June 2003, the
Company paid UFRF $100,000.
Oragenics,
Inc.
Notes to
Financial Statements (continued)
6.
Licenses (continued)
In March
2004, the Company licensed from iviGene Corporation, a company whose major
stockholders also own a significant number of shares of the Company’s common
stock, applications of two novel technologies referred to as IVIAT and CMAT. Our
license provides us with exclusive worldwide rights to this broad platform
technology in the areas of cancer and tuberculosis, as well as agricultural and
other non-human uses. In return, we will pay royalties on revenues we are able
to generate from any products developed using the technology, including
royalties on sublicense fees, milestone payments and future product sales. Under
the terms of our license with iviGene we are not obligated to make any payments
to iviGene until we have achieved certain milestone or royalty payments,
however, we are required to spend up to $200,000 annually on these technologies
to maintain our license. To support the research for this technology in 2004, we
received a Phase I Small Business Innovation Research Grant from the National
Institute of Allergy and Infections Diseases (NIAID) of the National Institutes
of Health (NIH) that paid to us $96,210.
7.
Retirement Plan
In
January 2004, the Company established a defined contribution retirement plan,
replacing the previous plan that had been established in 2001. The new plan
covers all employees and provides for a Company match of up to 3% of all
employee contributions to the plan. During 2004, employee contributions are
limited to $9,000 except for individuals 50 years or older for which the
contribution limitation is $10,500. Total matching contributions made by the
Company in 2004 were $28,315. There were no contributions made under the prior
plan in 2003.
8.
Income Taxes
At
December 31, 2004, the Company had temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and their
respective income tax bases, as measured by enacted state and federal tax rates,
as follows:
|
Deferred
tax assets: |
|
|
|
|
Net
operating loss carryforward |
|
$ |
1,833,321 |
|
|
Consulting
services |
|
|
28,223 |
|
|
Non
qualified stock options |
|
|
64,977 |
|
|
Tax
credits |
|
|
129,275 |
|
|
Total
deferred tax assets |
|
|
2,055,796 |
|
|
Less
valuation allowance |
|
|
(2,055,796 |
) |
|
Total
net deferred taxes |
|
$ |
-- |
|
Oragenics,
Inc.
Notes to
Financial Statements (continued)
8.
Income Taxes (continued)
The
following is a reconciliation of tax computed at the statutory federal rate to
the income tax benefit in the statements of operations for the years ended
December 31, 2004 and 2003:
| |
|
Year
ended December 31 |
|
| |
|
2004 |
|
2003 |
|
| |
|
|
|
|
Income
tax benefit computed at statutory federal rate of 34% |
|
$ |
(1,046,482 |
) |
$ |
(568,804 |
) |
|
State
income tax benefits, net of federal expense/benefit |
|
|
(111,727 |
) |
|
(60,728 |
) |
|
Change
in valuation allowance |
|
|
1,178,040 |
|
|
596,049 |
|
|
Non-deductible
expenses |
|
|
60,721 |
|
|
60,303 |
|
|
Research
and development credit |
|
|
(80,552 |
) |
|
(32,512 |
) |
|
Other |
|
|
-- |
|
|
5,692 |
|
|
Total
|
|
$ |
-- |
|
$ |
-- |
|
| |
|
|
|
|
|
|
|
SFAS No.
109, Accounting
for Income Taxes,
requires a valuation allowance to reduce the deferred tax assets reported if,
based on the weight of the evidence, it is more likely than not that some
portion or all of the deferred tax assets will not be realized. After
consideration of all of the evidence, both positive and negative, management has
determined that a valuation allowance of $2,055,796 at December 31, 2004 is
necessary to reduce the deferred tax assets to the amount that will more likely
than not be realized. The change in the valuation allowance for the year ended
December 31, 2004 was $1,178,040. At December 31, 2004, the Company has
available net operating loss carryforwards of $4,871,968 that begin to expire in
2022.
In
connection with the initial public offering, it is possible that the Company
experienced a change in control within the meaning of Section 382 of the
Internal Revenue Code. If so, the ability of the Company to use its net
operating losses may be limited and subject to annual limitation that could
result in the expiration of some net operating losses prior to
utilization.
Oragenics,
Inc.
Notes to
Financial Statements (continued)
9.
Commitments and Contingencies
The
Company leased its laboratory and office space, as well certain equipment, under
a 12-month cancelable operating lease with annual renewal options. Total rent
expense under this lease was $47,376 and $33,583 for the years ended December
31, 2004 and 2003, respectively. The lease agreement ended in November 2004 when
the Company moved into its new facility that is being leased from a real estate
developer for a term of five years subject to renewal provisions. This operating
lease agreement required the Company to pay a deposit of $6,400 and provides for
monthly lease payments of $6,400, exclusive of utilities, insurance, sales taxes
and real estate taxes. Total rent expense under this lease was $10,184 for the
year ended December 31, 2004.
In
addition, the Company has entered into certain operating leases for office
equipment. Future annual minimum payments under all noncancelable operating
leases are approximately as follows:
|
Year
ended: |
|
|
|
| |
|
|
|
|
2005 |
|
$ |
84,200 |
|
|
2006 |
|
|
86,600 |
|
|
2007 |
|
|
88,600 |
|
|
2008 |
|
|
87,800 |
|
|
2009 |
|
|
82,600 |
|
|
Thereafter |
|
|
-- |
|
| |
|
$ |
429,800 |
|
| |
|
|
|
|
10.
Unaudited Quarterly Financial Information
The
quarterly interim financial information shown below has been prepared by the
Company’s management and is unaudited. It should be read in conjunction with the
audited financial statements appearing herein.
|
|
|
2004 |
|
|
|
|
First |
|
Second |
|
Third |
|
Fourth |
|
|
Revenue |
|
$ |
-- |
|
$ |
44,235 |
|
$ |
118,642 |
|
$ |
33,333 |
|
|
Total
operating expenses |
|
|
544,461
|
|
|
723,202 |
|
|
745,561 |
|
|
1,307,738 |
|
|
Net
loss |
|
|
(537,440 |
) |
|
(667,662 |
) |
|
(613,770 |
) |
|
(1,259,016 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and Diluted |
|
$ |
0.04 |
|
$ |
0.05 |
|
$ |
0.04 |
|
$ |
0.09 |
|
| |
|
2003 |
|
| |
|
First |
|
Second |
|
Third |
|
Fourth |
|
|
Total
operating expenses |
|
$ |
207,899 |
|
$ |
432,440 |
|
$ |
398,426 |
|
$ |
629,186 |
|
|
Net
loss |
|
|
(211,442 |
) |
|
(437,319 |
) |
|
(396,722 |
) |
|
(627,471 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and Diluted |
|
$ |
0.02 |
|
$ |
0.05 |
|
$ |
0.03 |
|
$ |
0.05 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
11.
Subsequent Event
On
February 24, 2005, the Company entered into a Business Loan Agreement with a
bank that will fund approximately $615,000 of laboratory equipment purchases.
The loan has a term of 37 months with the first month payment of interest only
and the remaining monthly payments of principal and interest of approximately
$18,900 per month. Interest will be calculated at the prime rate as published in
the Wall Street Journal (currently 5.5%) plus 1.00%. Interest can never be below
5.75% or above 17.5%. The loan is collateralized by the equipment being
purchased, as well as all equipment currently owned by the Company.
Oragenics,
Inc.
You
should rely only on the information contained in this prospectus. We have not
authorized anyone to provide you with information different from that contained
in this prospectus. This prospectus may only be used where it is legal to sell
these securities. The information contained in this prospectus may only be
accurate on the date of this prospectus.
PART
II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM
24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As
provided in our bylaws and under Florida law, our directors shall not be
personally liable to our company or any other person for monetary damages for
breach of duty of care or any other duty owed to our company as a director,
unless the breach of or failure to perform those duties
constitutes:
|
|
* |
a
violation of criminal law, unless the director had reasonable cause to
believe his conduct was lawful, or had no reasonable cause to believe his
conduct was unlawful; |
|
|
* |
a
transaction from which the director received an improper personal benefit,
directly or indirectly; |
|
|
* |
in
a proceeding by or in the right of our company or a stockholder, an act or
omission which involves a conscious disregard for the best interests of
our company or which involves willful misconduct; |
|
|
* |
in
a proceeding by or in the right of someone other than our company or a
stockholder, an act of recklessness or an act or omission which was
committed in bad faith or with malicious purpose or in a manner exhibiting
wanton and willful disregard of human rights, safety, or property;
or |
|
|
* |
a
distribution made in violation of Florida
law. |
Our
bylaws provide that we are required to indemnify any director, officer, employee
or agent made a party to a proceeding because he is or was our director,
officer, employee or agent against liability incurred in the proceeding if he
acted in good faith and in a manner the director reasonably believed to be in or
not opposed to our best interests and, in the case of any criminal proceeding,
he had no reasonable cause to believe his conduct was unlawful.
Our
bylaws and Florida law also provide that we shall indemnify a director, officer,
employee or agent who has been successful on the merits or otherwise in the
defense of any proceeding to which he was a party, or in defense of any claim,
issue or matter therein, because he is or was a director, officer, employee or
agent of our company against expenses actually and reasonably incurred by him in
connection with such defense.
ITEM
25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The
estimated expenses of this offering, all of which are to be paid by the
registrant, are as follows:
|
SEC
Registration Fee |
|
$ |
1,364 |
|
|
American
Stock Exchange Additional Listing Fees |
|
|
45,000 |
|
|
Accounting
Fees and Expenses |
|
|
25,000 |
|
|
Legal
Fees and Expenses |
|
|
40,000 |
|
|
Transfer
Agent Fees |
|
|
--- |
|
|
Miscellaneous
Expenses |
|
|
8,636 |
|
|
TOTAL
|
|
$ |
120,000 |
|
| |
|
|
|
|
ITEM
26. RECENT SALES OF UNREGISTERED SECURITIES
During
the past three years, we have sold the following shares of common stock which
were not registered under the Securities Act of 1933, as amended.
On
November 30, 2004 we issued a total of 250,000 shares of our common stock at
$2.75 per share and warrants to purchase 162,500 shares of our common stock
(137,500 shares at $3.50 and 25,000 shares at $2.75) in a private placement to
three accredited investors (The Arbitrage Fund, Mark Campbell and The Living
Trust of Harold Richard Grisham) and a placement agent. We received gross
proceeds of $687,500 in the private placement and incurred costs of
approximately $142,500 resulting in net proceeds of approximately $545,000.
Effective May 31, 2005, a warrant amendment agreement was entered into which
resulted in the exercise prices of the warrants to purchase 162,500
shares of our common stock being reduced from $3.50 to $2.75 and from $2.75 to
$2.25.
On May
23, 2005 we issued 315,421 shares to Fusion Capital Fund II, LLC pursuant to the
terms of a common stock purchase agreement.
We issued
the above restricted securities to the named individuals and entities pursuant
to exemptions under the Securities Act of 1933.
ITEM
27. EXHIBITS.
The
following exhibits are filed as part of this registration statement, pursuant to
Item 601 of Regulation S-B.
Exhibit
Index
| |
|
|
|
Incorporated
by Reference |
|
Exhibit
Number |
|
Exhibit
Description |
|
Form |
|
File
No |
|
Exhibit |
|
Filing
Date |
|
Filed
Herewith |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1 |
|
Amended
and Restated Articles of Incorporation |
|
SB-2 |
|
333-100568 |
|
3.3 |
|
10/16/02 |
|
|
|
3.2 |
|
Bylaws |
|
SB-2 |
|
333-100568 |
|
3.2 |
|
10/16/02 |
|
|
|
4.1 |
|
Specimen
Stock Certificate |
|
SB-2 |
|
333-100568 |
|
4.1 |
|
10/16/02 |
|
|
|
4.2 |
|
Specimen
initial public offering underwriter’s warrant certificate |
|
SB-2 |
|
333-100568 |
|
4.4 |
|
10/16/02 |
|
|
|
4.3 |
|
Form
of private placement warrant |
|
10-KSB |
|
000-50614 |
|
4.3 |
|
03/14/05 |
|
|
|
4.4 |
|
Form
of private placement Subscription Agreement (including registration
rights) |
|
10-KSB |
|
000-50614 |
|
4.4 |
|
03/14/05 |
|
|
|
4.5 |
|
Warrant
Amendment Agreement (including form of replacement warrant) between the
Company and The Arbitrage Fund, Mark Campbell, The Harold T. Grisham
Living Trust and Westminster Securities dated May 31, 2005 |
|
|
|
|
|
|
|
|
|
X |
|
4.6 |
|
Common
Stock Purchase Agreement with Fusion Capital Fund II, LLC, dated as of May
23, 2005 |
|
8-K |
|
000-50614 |
|
4.5 |
|
05/23/05 |
|
|
|
4.7 |
|
Registration
Rights Agreement with Fusion Capital Fund II, LLC, dated as of May 23,
2005 |
|
8-K |
|
000-50614 |
|
4.6 |
|
05/23/05 |
|
|
|
4.8 |
|
Business
Loan Agreement, Collateral Security Agreement and Promissory Note between
the Company and Merchants & Southern Bank dated February 24,
2005 |
|
10-QSB |
|
000-50614 |
|
10.47 |
|
05/13/05 |
|
|
|
5.1 |
|
Opinion
of Shumaker, Loop & Kendrick, LLP |
|
|
|
|
|
|
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X |
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10.1 |
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License
Agreement between the Company and the University of Florida Research
Foundation, Inc. effective August 4, 1998 for Replacement Therapy for
Dental Caries (the “Replacement Therapy License
Agreement”) |
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SB-2 |
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333-100568 |
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10.1 |
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10/16/02 |
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10.2 |
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First
Amendment to Replacement Therapy License Agreement dated September 15,
2000 |
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SB-2 |
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333-100568 |
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10.2 |
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10/16/02 |
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10.3 |
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Second
Amendment to Replacement Therapy License Agreement dated June
2002 |
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SB-2 |
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333-100568 |
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10.3 |
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10/16/02 |
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10.4 |
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Third
Amendment to Replacement Therapy License Agreement dated September 25,
2002 |
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SB-2 |
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333-100568 |
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10.4 |
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10/16/02 |
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10.5 |
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Fourth
Amendment to Replacement Therapy License Agreement and Mutacin 1140
License Agreement dated March 2003 |
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SB-2/A-3 |
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333-100568 |
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10.36 |
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4/9/03 |
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10.6 |
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License
Agreement between the Company and the University of Florida Research
Foundation, Inc. effective June 22, 2000 (the “Mutacin 1140 License
Agreement”) |
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SB-2 |
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333-100568 |
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10.5 |
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10/16/02 |
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10.7 |
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First
Amendment to the Mutacin 1140 License Agreement dated September 15,
2000 |
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SB-2 |
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333-100568 |
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10.6 |
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10/16/02 |
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10.8 |
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Second
Amendment to the Mutacin 1140 License Agreement dated June 10,
2002 |
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SB-2 |
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333-100568 |
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10.7 |
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10/16/02 |
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Incorporated
by Reference |
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Exhibit
Number |
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Exhibit
Description |
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Form |
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File
No |
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Exhibit |
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Filing
Date |
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Filed
Herewith |
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10.9 |
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Third
Amendment to the Mutacin 1140 License Agreement dated September 25,
2002 |
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10.10 |
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Equity
Agreement between the Company and the University of Florida Research
Foundation dated August 4, 1998 (including registration
rights) |
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SB-2/A-2 |
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333-100568 |
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10.8 |
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2/10/03 |
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10.11 |
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Escrow
Agreement between our principals, ourselves and Computershare Trust
Company |
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SB-2 |
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333-100568 |
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99.10 |
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10/16/02 |
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10.12 |
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Value
Escrow Agreement between ourselves, the University of Florida Research
Foundation, Inc. and Computershare Trust Company |
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SB-2 |
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333-100568 |
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99.11 |
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10/16/02 |
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10.20+ |
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2002
Stock Option and Incentive Plan |
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SB-2 |
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333-100568 |
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99.16 |
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10/16/02 |
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10.21+ |
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Amendment
No. 1 to the 2002 Stock Option and Incentive Plan |
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DEF
14A |
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333-100568 |
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App.
E |
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4/22/04 |
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10.22 |
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Warrant
Agent and Registrar Agreement between the Company and Computershare Trust
Company |
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SB-2/A-1 |
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333-100568 |
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10.28 |
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12/23/02 |
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10.31 |
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Proprietary
Information Agreements between ourselves and Brian Anderson, Brian
McAlister, Robert Zahradnik, Howard Kuramitsu, and Steven
Projan |
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SB-2 |
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333-100568 |
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99.23 |
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10/16/02 |
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10.32* |
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Proprietary
Information and Invention Agreement between the Company and Jeffrey D.
Hillman |
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SB-2 |
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333-100568 |
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99.4 |
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10/16/02 |
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10.42* |
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Employment
agreement of Mento Soponis |
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10-KSB |
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000-50614 |
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10.42 |
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3/17/04 |
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10.43* |
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Employment
agreement of Jeffrey Hillman |
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10-KSB |
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000-50614 |
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10.43 |
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3/17/04 |
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10.44* |
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Employment
agreement of Paul Hassie |
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10-KSB |
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000-50614 |
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10.44 |
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3/17/04 |
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10.45 |
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Memorandum
of Agreement - License Agreement between iviGene Corporation and the
Company |
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10-QSB |
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000-50614 |
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10.1 |
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8/11/04 |
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10.46 |
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Lease
Agreement between the Company and Hawley-Wiggins LLC dated January 28,
2004; Subordination Agreement dated April 14, 2004; and First Amendment
dated November 15, 2004 |
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23.1 |
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Consent
of Shumaker, Loop & Kendrick, LLP (incorporated by reference to
Exhibit 5.1) |
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23.2 |
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Consent
of Ernst & Young LLP |
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X |
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24.1 |
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Power
of Attorney (Signature Page) |
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__________________
*
management contract
+
compensatory plan or arrangement
ITEM
28. UNDERTAKINGS.
The
undersigned registrant hereby undertakes:
| 1. |
To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
|
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a. |
To
include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933; |
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b. |
To
reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the
registration statement; and |
|
c. |
To
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any change to
such information in the registration statement. |
| 2. |
That,
for the purpose of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof. |
| 3. |
To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering. |
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the SEC such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant certifies that
it has reasonable grounds to believe that it meets all of the requirements for
filing of this Form SB-2 Registration Statement and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Alachua, Florida, on this 9th day of June, 2005.
| |
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ORAGENICS, INC. |
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By: |
/s/ Mento A.
Soponis |
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Mento A. Soponis,
President and Chief Executive Officer |
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By: |
/s/ Paul A.
Hassie |
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Paul A. Hassie,
Secretary, Treasurer, Principal Accounting
Officer and Chief
Financial Officer |
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POWER
OF ATTORNEY
KNOW ALL
MEN BY THESE PRESENTS that each individual whose signature appears below
constitutes and appoints Mento A. Soponis and Paul A. Hassie, and each of them
singly, as his true and lawful attorneys-in-fact and agents for the undersigned,
with full power of substitution, for and in the name, place and stead of the
undersigned, to sign and file with the Securities and Exchange Commission under
the Securities Act any registration statement relating to this offering that is
to become effective upon filing pursuant to Rule 462 under the Securities Act (a
“462 Registration Statement”), any and all amendments and exhibits to this
Registration Statement or any 462 Registration Statement, and any and all
applications and other documents to be filed with the Securities and Exchange
Commission pertaining to the registration of the securities covered hereby or
thereby, with full power and authority to do and perform any and all acts and
things whatsoever requests and necessary or desirable.
Pursuant
to the requirements of the Securities Act of 1933, this Form SB-2 Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
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Signature |
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Title |
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Date |
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/s/
Mento A. Soponis |
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President,
Principal Executive Officer and a Member of the Board of
Directors |
|
June
9, 2005 |
| Mento
A. Soponis |
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/s/
Paul A. Hassie |
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Principal
Accounting Officer and Chief
Financial Officer |
|
June
9, 2005 |
| Paul
A. Hassie |
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/s/
David J. Gury |
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Chairman
of the Board of Directors |
|
June
9, 2005 |
| David
J. Gury |
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/s/
Brian Anderson |
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Member
of the Board of Directors |
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June
9, 2005 |
| Brian
Anderson |
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/s/
Jeffrey D. Hillman |
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Member
of the Board of Directors |
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June
9, 2005 |
| Jeffrey
D. Hillman |
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/s/
Robert Zahradnik |
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Member
of the Board of Directors |
|
June
9, 2005 |
| Robert
Zahradnik |
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