4. Related Party Transactions

On November 8, 2017, we completed a private placement of $3,300,000 of Series B Non-Voting, Convertible Preferred Stock (the “Series B Convertible Preferred Stock”) pursuant to a Securities Purchase Agreement with four existing shareholders who are accredited investors (the “Series B Preferred Stock Financing”). The investors in the private placement included current Company shareholder, KFLP who purchased 1,500,000 shares of the Series B Convertible Preferred Stock and warrants to purchase, after giving effect to the reverse stock split (see Note 14 - Subsequent Events), 241,936 shares of our common stock.

The full $3,300,000 of Series B Convertible Preferred Stock is convertible, after giving effect to the reverse stock split (see Note 14 - Subsequent Events), into one million three hundred and twenty thousand shares of our Common Stock, based on a conversion of one share of Series B Preferred Stock into two shares of Common Stock. The purchase price per share of the Series B Preferred Stock is represented by $2.50 per share of the Common Stock on an as converted basis. In addition, we issued to the investors in the private placement accompanying common stock purchase warrants to purchase an aggregate, after giving effect to the reverse stock split (see Note 14 - Subsequent Events), of 1,064,518 shares of Common Stock (the “Fall 17 Warrants”). The Fall 17 Warrants have a term of seven years from the date of issuance, and are non-exercisable until six (6) months after issuance, and have an exercise price, after giving effect to the reverse stock split (see Note 14 - Subsequent Events),of $3.10 per share.

Concurrently with the Series B Preferred Stock Financing, we also entered into a Debt Conversion Agreement (the “Intrexon Debt Conversion Agreement”) with Intrexon Corporation (“Intrexon”) pursuant to which Intrexon exchanged the $2,400,000 unsecured non-convertible promissory note previously issued by us to Intrexon (the “Intrexon Note”), the accrued interest on the Intrexon Note and trade payables owed by us (collectively the “Debt”) in the aggregate amount of approximately $3,400,000 for equity in the form of 100 shares of Series C, Non-Voting, Non-Convertible Preferred Stock (the “Series C Preferred Stock”) issued by us to Intrexon pursuant to the Debt Conversion Agreement which 100 shares have a stated value equal to the amount of the Debt.

On May 10, 2017 the Company entered into a Note Purchase Agreement with Intrexon pursuant to which the Company issued a $2.4 million unsecured non-convertible promissory note to Intrexon and amended the first milestone in its Oral Mucositis ECC with Intrexon. The note matures in two (2) years and has a simple interest rate of 12% per annum. Proceeds from the note will be used to fund the Company’s AG013 research and clinical trials.

On June 27, 2016, the Company completed the sale of its consumer probiotics business to ProBiora Health, LLC, (“ProBiora Health”) an entity owned by Ms. Christine L. Koski, a director at the time of the transaction. The purchase price was $1,700,000 in cash of which $1,250,000 was paid at closing and $450,000 was payable on or before July 31, 2016. The note accrued interest at the rate of 1% per annum and was paid in full on July 29, 2016. In connection with the sale, ProBiora Health assumed certain liabilities. ProBiora Health is obligated to pay the Company contingent consideration annually over a 10 year period based on a percentage of sales of products using the Purchased Assets, with a maximum obligation to the Company of $2,000,000.

The transaction was approved by a special committee of the Company’s board of directors consisting solely of disinterested directors and Griffin Securities rendered a fairness opinion in connection with the transaction. Ms. Koski, a director since 2009, and a significant shareholder of the Company through the Koski Family Limited Partnership, resigned as a director of the Company upon completion of the sale. In addition, the Company entered into a Transition Services Agreement (the “Agreement”) with ProBiora Health. Under the terms of the agreement, the Company provided accounting, inventory management, shipping, logistics, customer, vendor, supplier, general business support, IT, pharmacovigilance, quality assurance, regulatory, and clinical services to ProBiora Health. In exchange for the services, ProBiora Health paid the Company three percent (3%) of is net sales of all ProBiora3 products sold during the term of the Agreement. The term of the Agreement was for a ninety day (90) period. The Company also sublet space to ProBiora Health at the rate of $1,623 per month. The sublease ran through February 2017. The Company also provided fulfillment services to ProBiora Health during the term that the sublease is in effect. The Company received compensation for those services in an amount equal to the direct costs in providing such services.

During the years ended December 31, 2017 and 2016, we received $10,388 and $26,333, respectively, from ProBiora Health under our Transition Services, sublease, and fulfillment services agreements with ProBiora Health.

One June 30, 2016, the Company closed on a private placement, after giving effect to the reverse stock split (see Note 14 - Subsequent Events), of 904,568 shares of its common stock to three accredited investors. The investors in the private placement included current Company shareholders, KFLP (581,508 shares) and Intrexon Corporation (“Intrexon”) (226,142 shares), as well as the Company’s Chairman, Dr. Frederick Telling (96,918 shares). Approximately $4.667 million was raised of which $2,000,000 was payable by the KFLP under a note payable on or before September 30, 2016. On September 15, 2016, the note payable with the KFLP was amended. Under the terms of the amendment, the KFLP paid $1,000,000 on September 30, 2016 which was first applied to accrued interest and then to the outstanding principal balance. In addition, the amendment extended the maturity date on the remaining principal balance of the note payable to December 31, 2016 and increased the interest rate on the note payable from 3% per annum to 6% per annum. On December 29, 2016, the KFLP made a payment of $1,000,000 which was first applied to accrued interest and then to the outstanding principal balance. The note was paid in full in January of 2017. The private placement was approved by the Company’s audit committee and disinterested directors. As of December 31, 2016, including the results of the financing, Intrexon and the KFLP beneficially owned 31.5% and 34.5%, respectively of the Company’s common stock.

During the year ended December 31, 2017 we paid cash of $594 and issued Series C Preferred Stock with a value of $1,188, and during the year ended December 31, 2016, we paid cash of $548,994, to Intrexon under our exclusive channel collaborative (“ECC”) agreement with Intrexon (See Note 9 – Licenses and Exclusive Channel Collaboration Agreements) to develop and commercialize lantibiotics (the “Lantibiotic ECC”).

During the year ended December 31, 2017 we paid cash of $524,026 and issued Series C Preferred Stock with a value of $763,189, and during the year ended December 31, 2016, we paid cash of $932,645, to Intrexon under the ECC (See Note 9 – Licenses and Exclusive Channel Collaboration Agreements) agreement to develop and commercialize AG013 (the “Oral Mucositis ECC”).

Included in accounts payable and accrued expenses at December 31, 2017 and 2016 are $39,457 and $524,620, respectively, related to unpaid invoices received from Intrexon relating to work performed under the ECC agreements. As of December 31, 2017 and 2016 Intrexon owned approximately 32% of our outstanding common stock.