=========================================================================
FORM 10-QSB
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended June 30, 2005.
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ________ to __________
Commission File Number: 000-50614
ORAGENICS, INC.
(Exact name of small business issuer as specified in its charter)
FLORIDA 59-3410522
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
13700 Progress Boulevard
Alachua, Florida 32653
(Address of principal executive offices)
(386) 418-4018
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
As of August 10, 2005, there were 15,208,617 shares of Common Stock, $.001 par
value, outstanding.
Transitional Small Business Disclosure Format (check one): Yes |_| No |X|
=====================================================================
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of June 30, 2005 (unaudited) and December 31, 2004 3
Statements of Operations for the Three and Six Months ended June 30, 2005 and 2004
(unaudited) 4
Statements of Cash Flows for the Six Months ended June 30, 2005 and 2004 (unaudited) 5
Notes to Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis or Plan of Operations 11
Item 3. Controls and Procedures 22
PART II - OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 23
Item 5. Other Information 23
Item 6. Exhibits 24
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Oragenics, Inc.
Balance Sheets
June 30, December 31,
2005 2004
------------ ------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 1,682,240 $ 3,666,244
Prepaid expenses and other current assets 178,655 108,895
------------ ------------
Total current assets 1,860,895 3,775,139
Property and equipment, net 1,234,686 690,932
------------ ------------
Total assets $ 3,095,581 $ 4,466,071
============ ============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses $ 243,884 $ 429,627
Current portion of notes payable 194,000 --
------------ ------------
Total current liabilities 437,884 429,627
Long term liabilities:
Notes payable 374,261 --
------------ ------------
Total liabilities 812,145 429,627
Stockholders' equity:
Preferred stock, no par value; 20,000,000 shares
authorized; none issued and outstanding at
June 30, 2005 and December 31, 2004 -- --
Common stock, $0.001 par value; 100,000,000 shares
authorized; 15,186,525 and 14,594,924 shares
issued and outstanding at June 30, 2005 and
December 31, 2004, respectively 15,187 14,595
Additional paid in capital 9,479,043 9,493,833
Accumulated deficit (7,210,794) (5,471,984)
------------ ------------
Total stockholders' equity 2,283,436 4,036,444
------------ ------------
Total liabilities and stockholders' equity $ 3,095,581 $ 4,466,071
============ ============
See accompanying notes.
3
Oragenics, Inc.
Statements of Operations
(Unaudited)
Three months ended Six months ended
June 30 June 30
---------------------------- ----------------------------
2005 2004 2005 2004
------------ ------------ ------------ ------------
Revenue $ -- $ 44,235 $ -- $ 44,235
Operating expenses:
Research and development 517,717 418,384 1,164,903 680,679
General and administration 357,246 304,818 589,164 586,983
------------ ------------ ------------ ------------
Total operating expenses 874,963 723,202 1,754,067 1,267,662
------------ ------------ ------------ ------------
Loss from operations (874,963) (678,967) (1,754,067) (1,223,427)
Other income (expense):
Interest income 12,292 11,305 26,911 18,325
Interest expense (10,010) -- (11,655) --
------------ ------------ ------------ ------------
Total other income, net 2,282 11,305 15,256 18,325
------------ ------------ ------------ ------------
Net loss $ (872,681) $ (667,662) $ (1,738,811) $ (1,205,102)
============ ============ ============ ============
Basic and diluted net loss per share $ (0.06) $ (0.05) $ (0.12) $ (0.09)
============ ============ ============ ============
Shares used to compute basic and diluted
net loss per share 14,764,331 14,318,407 14,681,061 13,865,983
============ ============ ============ ============
See accompanying notes.
4
Oragenics, Inc.
Statements of Cash Flows
(Unaudited)
Six months ended June 30
----------------------------
2005 2004
------------ ------------
Operating activities
Net loss $ (1,738,811) $ (1,205,102)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 117,320 10,375
Stock-based compensation (credit) (304,432) (27,277)
Changes in operating assets and liabilities:
Prepaid expenses (69,760) (123,581)
Accounts payable and accrued expenses (185,743) 71,061
Accrued interest -- (25,582)
Deferred compensation -- (44,672)
------------ ------------
Net cash used in operating activities (2,181,426) (1,344,778)
Investing activity
Purchases of property and equipment (661,074) (43,025)
------------ ------------
Net cash used in investing activity (661,074) (43,025)
Financing activities
Net proceeds from issuance of common stock 290,235 2,950,299
Proceeds from note payable 615,192 --
Principal payments on note payable (46,931) --
------------ ------------
Net cash provided by financing activities 858,496 2,950,299
Net (decrease) increase in cash and cash equivalents (1,984,004) 1,562,496
Cash and cash equivalents at beginning of period 3,666,244 3,583,757
------------ ------------
Cash and cash equivalents at end of period $ 1,682,240 $ 5,146,253
============ ============
See accompanying notes.
5
Oragenics, Inc.
Notes to Financial Statements
(Unaudited)
1. Organization and Significant Accounting Policies
Oragenics, Inc. (formerly known as Oragen, Inc.) (the Company) was
incorporated in November 1996; however, operating activity did not commence
until 1999. We are dedicated to developing technologies associated with oral
health, broad spectrum antibiotics and general health benefits.
Basis of Presentation
The accompanying unaudited condensed financial statements as of and for
the three and six months ended June 30, 2005 and 2004 have been prepared in
accordance with accounting principles generally accepted in the United States
(GAAP) for interim financial information and with the instructions to Form
10-QSB and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by GAAP for complete financial
statements. In the opinion of management, the accompanying financial statements
include all adjustments, consisting of normal recurring accruals, necessary for
a fair presentation of the financial condition, results of operations and cash
flows for the periods presented. The results of operations for the interim
period June 30, 2005 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2005 or any future period.
These financial statements should be read in conjunction with the audited
financial statements and notes thereto for the year ended December 31, 2004
which are included in our Annual Report on Form 10-KSB filed with the Securities
and Exchange Commission on March 14, 2005. In that report the Company disclosed
that it expects to need to incur substantial expenditures to further develop
each of its technologies. It further stated that it believed its working capital
will be insufficient to meet the business objectives as presently structured and
without sufficient capital to fund its operations, the Company will be unable to
continue as a going concern. In February 2005, the Company entered into an
agreement with an investment advisory firm to assist in raising additional
capital by acting as a financial advisor and placement agent. Also, on May 23,
2005, the Company entered into a Common Stock Purchase Agreement with Fusion
Capital Fund II, LLC ("Fusion Capital") allowing the Company to sell up to
$15,000 worth of its common stock daily to Fusion Capital at a price based on
the market price. Although the Company has entered into this agreement and is
continuing to work with the investment advisory firm, there can be no assurance
that sufficient financing will be available on acceptable terms, or at all.
Without sufficient capital to fund our operations, we 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.
6
Oragenics, Inc.
Notes to Financial Statements
(Unaudited)
1. Organization and Significant Accounting Policies (continued)
Stock-Based Compensation
In December 2002, the FASB issued Statement of Financial Accounting
Standards No. 148, Accounting for Stock-Based Compensation - Transition and
Disclosure (FAS 148). FAS 148 amends an earlier standard on accounting for
stock-based compensation, Accounting for Stock-Based Compensation (FAS 123), to
provide alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation. In
addition, FAS 148 amends the disclosure requirements of FAS 123 to require more
prominent disclosure about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. The Company
continues to follow the intrinsic value method of accounting as prescribed by
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, to account for employee stock options issued.
The table on the following page illustrates the effects on net loss and
net loss per share as if the Company had applied the fair value recognition
provisions of FAS 123 to stock-based employee compensation.
7
Oragenics, Inc.
Notes to Financial Statements
(Unaudited)
1. Organization and Significant Accounting Policies (continued)
Stock-Based Compensation (continued)
Three months ended Six months ended
June 30 June 30
---------------------------- ----------------------------
2005 2004 2005 2004
------------ ------------ ------------ ------------
Net loss, as reported $ (872,681) $ (667,662) $ (1,738,811) $ (1,205,102)
Effect of stock-based employee
compensation (credit) included
in reported net loss (91,329) (17,832) (304,432) (27,277)
Total stock-based employee
compensation expense determined
under fair value based method
for all awards (65,013) (32,835) (123,468) (61,845)
------------ ------------ ------------ ------------
$ (1,029,023) $ (718,329) $ (2,166,711) $ (1,294,224)
Pro forma net loss
============ ============ ============ ============
Net loss per share:
Basic and diluted --as reported $ (0.06) $ (0.05) $ (0.12) $ (0.09)
============ ============ ============ ============
Basic and diluted --pro forma $ (0.07) $ (0.05) $ (0.15) $ (0.09)
============ ============ ============ ============
Shares used to compute basic and
diluted net loss per share 14,764,331 14,318,407 14,681,061 13,865,983
============ ============ ============ ============
8
Oragenics, Inc.
Notes to Financial Statements
(Unaudited)
2. Initial Public Offering
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 June 30, 2005, all 500,000 underwriter warrants were exercised providing
additional proceeds to the Company of $625,000. 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.
Through June 30, 2005 we have applied a total of $7,338,552 of the
$8,231,391 in net proceeds from our initial public offering as follows:
Reduction of notes payable and accrued interest thereon to directors
and officers:
Brian McAlister (Cornet Capital Corp.) $ 179,757
Robert Zahradnik 88,477
Jeffrey Hillman 15,429
Deferred compensation payable to officers 189,302
Patent expenses paid to University of Florida 100,000
Regulatory consulting and clinical trial costs 657,320
Mutacin 1140 production research 661,393
Pre-clinical research 2,269,849
General and administration costs 2,369,164
Purchase of computer and laboratory equipment 807,861
------------
$ 7,338,552
Other than normal and recurring compensation and payments on notes payable,
there were no other payments, directly or indirectly, to any of our officers or
directors or any of their associates, or to any persons owning ten percent or
more of our outstanding common stock from the proceeds of the offering.
Unexpended proceeds are held in one financial institution and invested overnight
in obligations of the U. S. Government or its agencies. Management believes that
the Company has used, and continues to use, the net proceeds from the offering
consistent with its business strategy described in the Form SB-2 registration
statement.
9
Oragenics, Inc.
Notes to Financial Statements
(Unaudited)
3. Net Loss Per Share
Net loss per share is computed using the weighted average number of
shares of common stock outstanding. Common equivalent shares from stock options
and warrants are excluded as their effect is anti-dilutive.
4. Note Payable
On February 24, 2005, the Company entered into a Business Loan
Agreement with a bank that funded 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 $19,000 per month. Interest will be calculated at the prime rate
as published in the Wall Street Journal (6.25% at June 30, 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. During the three and six months ended June 30, 2005, the Company
incurred interest of $10,010 and $11,655, respectively.
5. Financing Arrangement with Fusion Capital
On May 23, 2005, the Company entered into a Common Stock Purchase
Agreement ("Purchase Agreement") with Fusion Capital. Pursuant to the terms of
the Purchase Agreement, Fusion Capital has agreed to purchase from the Company
up to $9,000,000 of the Company's common stock over a 30 month period. Pursuant
to the terms of a Registration Rights Agreement, dated May 23, 2005, the Company
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. The
registration statement was declared effective on June 23, 2005 and the American
Stock Exchange approved the listing of the shares on July 7, 2005. On each
trading day during the term of the Purchase Agreement, the Company has the right
to sell to Fusion Capital $15,000 of the Company's 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 the Company's option, Fusion Capital can
be required to purchase fewer or greater amounts of common stock each month.
Fusion Capital does not have the right or obligation to purchase shares of our
common stock from us in the event that the price of our common stock is less
than $0.75. The Company has the right to control the timing and the number of
shares sold to Fusion Capital. This offering was made pursuant to an exemption
from registration provided by Section 4(2) of the Securities Act, 1933, as
amended.
6. 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
10
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 believe, upon the adoption of Statement 123(R), the impact on
our results of operations or financial position will be similar to the impact as
reflected in Footnote 1 describing Stock Based Compensation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following information should be read in conjunction with the Financial
Statements, including the notes thereto, included elsewhere in this Form 10-QSB,
and the Management's Discussion and Analysis of Financial Condition and Results
of Operations included in our 2004 Annual Report on Form 10-KSB filed with the
Securities and Exchange Commission on March 14, 2005.
Overview
We are an emerging, early-stage biotechnology company aimed at
adding value to 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
addresses 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, which is the primary etiologic agent
in tooth decay. Present in the normal flora of the mouth, Streptococcus
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 Streptococcus mutans with a
patented, genetically engineered strain of Streptococcus 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. To facilitate further patient recruitment in our Phase I clinical
trial, we have opened an additional clinical site in Miamiville, Ohio. Our
efforts regarding patient enrollment continue and we remain committed to
complete the human safety study of replacement therapy to the satisfaction
of the FDA.
Mutacin 1140 is a highly potent bactericidal peptide that is
produced by our strain of Streptococcus mutans. Our proprietary mutacin
11
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. During the second
quarter of 2005, we completed development of a proprietary manufacturing
process for mutacin 1140, which overcame a previous hurdle to that
molecule's development. We are now able to manufacture in sufficient
quantities to allow us to conduct preclinical studies needed to enable the
filing of an Investigational New Drug (IND) application. We currently plan
to perform in vitro antimicrobial susceptibility and genotoxicity testing
during the second half of 2005 before performing more detailed animal
safety and efficacy studies using mutacin 1140. Upon successful completion
of this testing and the animal studies we expect to be positioned to file
an IND in the fourth quarter of 2006.
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. Because probiotic treatments may be
marketed 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. We are continuing our efforts
to seek partners in Europe and Asia for market opportunities for our oral
probiotic technology. If successfully developed, our oral rinse product
will be one of the first probiotics to be marketed for the maintenance of
oral health.
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.
12
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.
Probiotic Technology
1. Develop appropriate manufacturing and packaging systems.
2. Complete one human study.
The above actions, individually and in the aggregate, are expected to
be costly to undertake and complete and will require additional capital over and
above what we currently have available to us. Our current available capital
limits our ability to continue the development of all of our technologies. We
expect the near-term focus of our capital resources to be primarily on the
continued development of our replacement therapy and the ongoing Phase I
clinical study. We also anticipate focusing on preparing for animal studies of
our mutacin 1140 technology. See Liquidity and Capital Resources below. We
believe, provided sufficient capital is available, that we will be able to begin
to generate ongoing revenue from our development efforts with our oral
probiotics technology sometime within the next two years. This time period could
change depending on the progress of our development efforts and our ability to
negotiate a partnering arrangement, as well as our efforts to raise additional
capital.
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 believe, upon the adoption of Statement 123(R), the impact on
our results of operations or financial position will be similar to the impact as
reflected in Footnote 1 describing Stock Based Compensation.
13
Results of Operations
Three Months Ended June 30, 2005 and 2004
We had no revenues in the three months ended June 30, 2005 and revenues
associated with an SBIR grant were $44,235 in the three months ended June 30,
2004. Our operating expenses increased 21% to $874,963 in the three months ended
June 30, 2005 from $723,202 in the same period in 2004. Research and development
expenses increased 24% to $517,717 in the three months ended June 30, 2005 from
$418,384 in the same period in 2004. The increase, amounting to approximately
$99,500, reflects additional depreciation for new equipment approximating
$58,500, costs relating to the clinical trial program for replacement therapy
totaling approximately $43,500, increased research and development salaries and
associated costs of approximately $44,500, minimum royalty payments for our
technologies of $25,000, additional costs to operate our new facilities
amounting to approximately $17,500, increased costs of approximately $5,000 for
outside consultants on our technologies other than replacement therapy, less
reductions in patent protection expenses of approximately $64,000, and expenses
in connection with compensation expense for options approximating $30,500 caused
by a significantly lower stock price in 2005. General and administration
expenses increased 17% to $357,246 in the three months ended June 30, 2005 from
$304,818 in the same period in 2004. The total increase of approximately $52,500
reflects fees paid to assist with financing of approximately $107,500 and
$48,000 in associated legal fees, additional premiums of approximately $14,000
for directors' and officers' liability insurance, increased personnel costs of
approximately $24,000, increased costs to operate our new facilities of
approximately $9,000, offset by higher fees charged by the American Stock
Exchange in 2004 due to our initial filing totaling $58,000, compensation
expense for options approximating $43,000 caused by a significantly lower stock
price in 2005, reduced travel costs of approximately $33,000 and reduced use of
consultants approximating $15,000.
Interest income increased 9% to $12,292 in the three months ended June
30, 2005 from $11,305 during the same period in 2004, reflecting the higher
interest rates in 2005. We incurred interest expense of $10,010 in the three
months ended June 30, 2005 as result of interest on a note payable to our bank.
There was no interest expense in the same period in 2004 as we had no
outstanding debt that incurred such charges.
We incurred net losses of $872,681 and $667,662 during the three months
ended June 30, 2005 and 2004, respectively. The increase in our net loss
amounting to $205,019 was principally caused by our hiring additional personnel
and the increase in costs associated with supporting those employees, the costs
relating to financing activities, the costs associated with conducting clinical
studies and performing basic research and depreciation expenses on new equipment
purchases to support our research efforts.
Six Months Ended June 30, 2005 and 2004
We had no revenues in the six months ended June 30, 2005 and revenues
associated with an SBIR grant were $44,235 in the six months ended June 30,
2004. Our operating expenses increased 38% to $1,754,067 in the six months ended
June 30, 2005 from $1,267,662 in the same period in 2004. Research and
development expenses increased 71% to $1,164,903 in the six months ended June
30, 2005 from $680,679 in the same period in 2004. The increase amounting to
approximately $484,000, reflects $269,000 in costs associated with the clinical
trial program of our replacement therapy technology, increased research and
14
development salaries and associated costs of approximately $137,500, increased
depreciation for new equipment purchased amounting to approximately $97,500,
costs of operating the new facility approximating $44,000, increased costs for
supplies of approximately $28,000 as a result of the increase in our research
staff, minimum royalty payments for our technologies of $50,000, an increase of
approximately $15,000 for the use of consultants on our probiotics technology,
less reductions in expenses in connection with compensation expense for options
approximating $106,500 caused by a significantly lower stock price in 2005 and
patent protection expenses of approximately $50,500. General and administration
expenses increased less than 1% to $589,164 in the six months ended June 30,
2005 from $586,983 in the same period in 2004. Major differences during the two
six-month periods related to higher costs in 2005 for financing fees and related
legal fees approximating $147,000, higher personnel related costs of
approximately $60,500, increased accounting fees of approximately $28,000,
increased premiums for directors' and officers' insurance of approximately
$28,000, increased costs for our Board of Directors approximating $16,500,
higher facility costs approximating $11,500, offset by reduced expenses in
connection with compensation expense for options approximating $170,500 caused
by a significantly lower stock price in 2005, higher fees charged by the
American Stock Exchange in 2004 due to our initial filing totaling $58,000,
decreased costs associated with travel approximating $34,000, and decreased
consulting costs approximating $27,000.
Interest income increased 47% to $26,911 in the six months ended June
30, 2005 from $18,325 during the same period in 2004, reflecting the higher
interest rates in 2005. We incurred interest expense of $11,655 in the six
months ended June 30, 2005 as result of a note payable to our bank. 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 $1,738,811 and $1,205,102 during the six
months ended June 30, 2005 and 2004, respectively. The increase in our net loss
amounting to $533,709 was principally caused by our hiring additional personnel
and the increase in costs associated with supporting those employees, the costs
relating to financing activities, the costs associated with conducting clinical
trials and performing basic research and depreciation expenses on new equipment
purchases to support our research efforts.
Liquidity and Capital Resources
Our operating activities used cash of $2,181,426 for the six
months ended June 30, 2005 and $1,344,778 for the six months ended June 30,
2004. Our working capital was $1,423,011 as of June 30, 2005. Cash used by
operations in the six months ended June 30, 2005 resulted primarily from our net
loss from operations of $1,738,811 as well as an increase to prepaid expenses of
approximately $70,000, a decrease in accounts payable and accrued expenses of
approximately $185,700 and non-cash reversal of expenses for stock-based
compensation of approximately $304,400, offset by depreciation of approximately
$117,300.
Our investing activities used cash of approximately $661,100 for
the six months ended June 30, 2005 for the acquisition of property and
equipment. We anticipate spending less than $50,000 on additional property and
equipment during the second half of 2005.
Our financing activities provided approximately $778,500 in cash
for the six months ended June 30, 2005, which consists of $615,192 in proceeds
from a note payable to our bank less approximately $47,000 in principal payments
on the note as well as $290,200 from the issuance of common stock. On February
15
24, 2005, we entered into a Business Loan Agreement with our bank that funded
$615,192 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 $19,000 per month. Interest
is calculated at the prime rate as published in the Wall Street Journal (6.25%
at June 30, 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 us and the agreement requires us to maintain
working capital of $750,000.
Because of our limited available financial resources, we have had to
take initial steps to slow the pace of our development efforts until additional
capital is available to us. We now anticipate that direct costs in 2005
associated with conducting Phase I of the clinical testing program on our
replacement therapy technology will be approximately $800,000, of which
approximately $500,000 was spent in the six months ended June 30, 2005. These
costs have been lowered primarily due to our plan to delay the contract
manufacturing of additional supplies of our replacement therapy technology to be
used in later clinical studies until we have sufficient capital to fund that
manufacturing. Those contract manufacturing costs are expected to be
approximately $900,000. During the remainder of 2005, provided sufficient
funding is available, we would anticipate spending approximately $225,000 for
performing animal studies on our mutacin 1140 technology. Such costs are
expected to consist of approximately $80,000 for contract research, $90,000 for
employee salaries and fringe benefits and $55,000 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 $7,210,794 as of June
30, 2005. Cash used in continuing operations for 2004 was $2,745,243 and for the
first six months of 2005 was $2,181,426. At June 30, 2005, our principal source
of liquidity was $1,682,240 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, as well as conducting basic research. 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 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
June 30, 2005 is not adequate 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
16
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.
In February 2005, the Company entered into an agreement with an
investment advisory firm to assist in raising additional capital by acting as a
financial advisor and placement agent. Also, on May 23, 2005, the Company
entered into a Common Stock Purchase Agreement with Fusion Capital Fund II, LLC
("Fusion Capital") allowing the Company to sell up to $15,000 worth of its
common stock daily to Fusion Capital at a price based on the market price.
Fusion Capital does not have the right or obligation to purchase shares of our
common stock from us in the event that the price of our common stock is less
than $0.75 per share. Although the Company has entered into this agreement and
is continuing to work with the investment advisory firm, there can be no
assurance that sufficient financing will be available through our agreement with
Fusion Capital. Our future success depends on our ability to continue 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.
To date, we have not obtained financing sufficient to support all of
our plans going forward. Until such time as additional financing for our
operations is obtained, we expect to curtail our spending on certain programs.
Accordingly, we have taken steps to reduce our operating costs including, but
not limited to, curtailing new hires, limiting the use of outside consultants
and reducing other operating costs. These cost restraints may cause a delay in
some of our development plans, however, we will continue to focus on our
replacement therapy technology and the completion of Phase I clinical trials. As
a result of these limits on spending, we currently believe we will have
sufficient cash resources to continue operations through the end of 2005.
Thereafter, without sufficient capital to fund our operations, we will be unable
to continue as a going concern and will have to cease operations.
17
Risk Factors Affecting Our Business
You should carefully consider the risks described below as well as the risk
factors set forth in our previously filed annual report on Form 10-KSB in the
"Risk Factors" section before making an investment decision in our securities.
All of these risks may impair our business operations. The risk factors set
forth below are the specific risk factors which have been updated to reflect
material changes to the risk factors previously disclosed in our Form 10-KSB for
the year ended December 31, 2004. The forward-looking statements in this Form
10-QSB and in the documents incorporated herein by reference involve risks and
uncertainties and actual results may differ materially from the results we
discuss in the forward-looking statements. If any of the risks described below
or in our Form 10-KSB, or any other risks and uncertainties that we have not yet
identified or that we currently believe are not material, actually occur and are
material, 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.
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
June 30, 2005 we had an accumulated deficit of $7,210,794. 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 June 30, 2005, we had working capital of approximately $1,423,000.
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 $2,181,426 for the six months ended June
30, 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 neither have the right
18
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
initially registered 4,000,000 shares for sale by Fusion Capital, 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 registered 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
$1.70 per share (the closing sale price of the common stock on June 30, 2005)
and the purchase by Fusion Capital of 2,602,564 shares under the common stock
purchase agreement, proceeds to us would only be $4,424,359, 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.
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.
19
The sale of shares by the selling stockholders as contemplated by the
registration statement filed by us 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 of our common stock by the selling stockholders named in the
registration statement we filed as contemplated thereby 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 the registration statement 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 acquired by Fusion Capital and resold pursuant to the
registration statement will be 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 pursuant to the registration statement we filed
in connection with our obligation under the Fusion Capital transaction will be
sold over a period of up to 30 months from the date of the effectiveness of the
registration statement. Depending upon market liquidity at the time, a sale of
such shares 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, 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. To the extent our stock price declines
below $0.75 we will not be able to sell any shares of our common stock to Fusion
Capital in which case our ability to acquire needed capital will be adversely
affected and our business could be harmed.
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 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
20
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:
o quarter-to-quarter variations in our operating results;
o the results of testing, technological innovations, or new commercial
products by us or our competitors;
o governmental regulations, rules, and orders;
o general conditions in the healthcare, dentistry, or biotechnology
industries;
o comments and/or earnings estimates by securities analysts;
o developments concerning patents or other intellectual property
rights;
o litigation or public concern about the safety of our products;
o announcements by us or our competitors of significant acquisitions,
strategic partnerships, joint ventures or capital commitments;
o additions or departures of key personnel;
o release of escrow or other transfer restrictions on our outstanding
shares of common stock or sales of additional shares of common
stock;
o potential litigation;
o adverse announcements by our competitors; and
o 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 July 31,
2005 our stock price has fluctuated from $4.45 to $1.40 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.
Forward-Looking Statements
Certain oral statements made by management from time to time and
certain statements contained herein and in documents incorporated herein by
reference that are not historical facts are "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 and, because such statements involve risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements. The terms "Oragenics," "Company,"
"we," "our," and "us" refer to Oragenics, Inc. The words "expect," "believe,"
"goal," "plan," "intend," "anticipate," "estimate," "will" and similar
expressions and variations thereof if used, are intended to specifically
identify forward-looking statements. Forward-looking statements are statements
21
regarding the intent, belief or current expectations, estimates or projections
of Oragenics, our directors or our officers about Oragenics and the industry in
which we operate, and assumptions made by management, and include among other
items, (i) our strategies regarding growth, including our intention to develop
and market our products; (ii) our financing plans; (iii) trends affecting our
financial condition or results of operations; (iv) our ability to continue to
control costs and to meet our liquidity and other financing needs; (v) our
ability to respond to and meet regulatory demands; and (vi) our expectation with
respect to generating revenues from our technologies. These statements are not
guarantees of future performance and are subject to a number of known and
unknown risks, uncertainties, and other factors, including those discussed above
and elsewhere in this report and those set forth under "Risk Factors Affecting
Our Business" in our 2004 Annual Report on Form 10-KSB filed with the Securities
and Exchange Commission, that could cause actual results to differ materially
from future results, performances, or achievements expressed or implied by such
forward-looking statements. Consequently, undue reliance should not be placed on
these forward-looking statements. Although we believe our expectations are based
on reasonable assumptions, we can give no assurance that the anticipated results
will occur. We undertake no obligation to update publicly any forward-looking
statements, whether as a result of new information, future events or otherwise.
Investors and prospective investors are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, and that actual results may differ materially from
those in the forward-looking statements as a result of various factors which
include, among others, (i) general economic conditions, particularly those
affecting our ability to raise additional capital; (ii) conditions in the
capital markets, including the interest rate environment and the availability of
capital, which could affect our internal growth and possibilities for licensing
and/or strategic alliances; (iii) changes in the competitive marketplace that
could affect our expected revenue and/or costs of product development; (iv) our
rights to the use of intellectual property and the potential for others to
challenge and otherwise adversely affect or impair such rights; (v) our
inability to successfully partner with manufacturers and distributors with
respect to our technologies; and (vi) other factors including those identified
in our filings from time to time with the SEC.
ITEM 3. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We have established and are currently maintaining disclosure controls
and procedures for our Company designed to ensure that information required to
be disclosed in our filings under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the required time periods
specified in the SEC's rules and forms. Our Chief Executive Officer and Chief
Financial Officer conducted an evaluation of the effectiveness of the Company's
disclosure controls and procedures and have concluded that our disclosure
controls and procedures are effective as of the end of the period covered by
this report.
Changes in Internal Controls
We have also evaluated our internal controls over financial reporting,
and there have been no changes in our internal controls over financial reporting
during the period covered by this report that have materially affected, or are
reasonably likely to materially affect, our internal controls over financial
reporting.
22
PART II - OTHER INFORMATION
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
a. We issued the following restricted securities during the period
covered by this report to the named individuals and entities
pursuant to exemptions under the Securities Act of 1933 including
Section 4(2).
On May 23, 2005, we issued 315,421 shares to Fusion Capital Fund II,
LLC as payment of a commitment fee in connection with a common stock
purchase agreement entered into between the Company and Fusion
Capital.
During the period, we issued a total 273,880 shares of common stock
upon the exercise of outstanding warrants at an exercise price of
$1.25 per share. These warrants were originally acquired by the
underwriters of our initial public offering, Haywood Securities,
Inc., in connection with the consummation of our offering and were
subject to expiration unless exercised on or before June 24, 2005.
b. Note 2 of the Financial Statements included in Part I of this filing
of Form 10-QSB as to use of proceeds through June 30, 2005 is hereby
incorporated by reference.
c. None
ITEM 5. OTHER INFORMATION
Subsequent to the end of the period covered by this report we entered into a
severance agreement with our former Chief Executive Officer, Mento A. Soponis.
Mr. Soponis resigned his position as our Chief Executive Officer in early July
2005, however, he remains a director of the Company. Consistent with the terms
of Mr. Soponis' employment agreement, we will continue to pay him $15,000 per
month until July 6, 2006. A copy of the Agreement of Separation and Release is
included in the Exhibits in Part II, Item 6.
Effective July 6, 2005, Dr. Robert T. Zahradnik was named acting president and
chief executive officer of the Company replacing Mento A. Soponis. Dr. Zahradnik
resigned his position on the Board of Directors in order for the Company to
comply with the American Stock Exchange's small business required ratio of at
least 50% of the board being independent board members. The Company agreed to a
compensation arrangement with Dr. Zahradnik and the material terms include
monthly compensation of $15,000, as well as medical and dental insurance and
retirement compensation consistent with the Company benefits offered to all
employees. Copies of letters to Dr. Zahradnik summarizing his employment
arrangement are included in the Exhibits in Part II, Item 6.
23
ITEM 6. EXHIBITS
Incorporated by Reference
--------------------------------------------------
Exhibit Filed
Number Exhibit Description Form File No Exhibit Filing Date Herewith
====== =================== ==== ======= ======= =========== ========
4.4 Form of private placement Subscription 10-KSB 000-50614 4.4 03/14/05
Agreement (including registration rights)
4.5 Warrant Amendment Agreement (including form SB-2 333-125660 4.5 06/09/05
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
4.6 Common Stock Purchase Agreement with Fusion 8-K 000-50614 4.5 05/23/05
Capital Fund II, LLC, dated as of May 23,
2005
4.7 Registration Rights Agreement with Fusion 8-K 000-50614 4.6 05/23/05
Capital Fund II, LLC, dated as of May 23,
2005
10.1 Agreement of Separation and Release with
Mento A. Soponis X
10.2 Letters summarizing the employment X
arrangement with Robert T. Zahradnik
31.1 Rule 13a-14(a)/15d-14(a) Certification X
31.2 Rule 13a-14(a)/15d-14(a) Certification X
32.1 Section 1350 Certifications X
32.2 Section 1350 Certifications X
24
******************************************************************************
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized on this 11th day of August, 2005.
ORAGENICS, INC.
BY: /s/ Robert T. Zahradnik
Robert T. Zahradnik, Acting President and
Principal Executive Officer
BY: /s/ Paul A. Hassie
Paul A. Hassie, Secretary, Treasurer, Principal
Accounting Officer and Principal Financial Officer
25