Quarterly report pursuant to Section 13 or 15(d)

Common Stock

Common Stock
9 Months Ended
Sep. 30, 2012
Common Stock [Abstract]  
Common Stock
7. Common Stock

On March 23, 2012, pursuant to the terms of the Debt Exchange Agreement, the Company issued 6,285,619 shares of common stock to the KFLP. See Note 9 — Convertible Revolving Notes Payable to Shareholder.

On June 5, 2012, in conjunction with the Company’s execution and delivery of the Channel Agreement with Intrexon, the Company entered into a Stock Issuance Agreement which included certain registration rights, with Intrexon. On June 5, 2012, pursuant to that Stock Issuance Agreement, Intrexon was issued 4,392,425 shares of the Company’s common stock, which was deemed consideration for the execution and delivery of the Channel Agreement. This resulted in the Company recording a non-cash expense of $5,798,001 during the quarter ended June 30, 2012. Under the terms of the Stock Issuance Agreement, the Company agreed to issue to Intrexon additional shares of its common stock based upon the achievement of certain milestones. See Note 4 — Commitments and Contingencies.

The registration rights granted to Intrexon in the Stock Issuance Agreement by the Company consisted of “piggyback registration” rights which permit Intrexon to participate in any firm commitment underwritten offering of securities by the Company, subject to underwriter cutbacks and lockups. In addition, the Company is precluded from granting registration rights in connection with a private placement unless (i) all shares held by Intrexon are, at the time of such private placement, included on a registration statement, or (ii) the Company agrees, in connection with such private placement, to grant Intrexon the right to include on the registration statement a number of Intrexon’s Company shares equal to one half of the number of shares to be registered on behalf of the other holders or prospective holders.

Pursuant to the Stock Issuance Agreement, Intrexon is also entitled, at its election, to participate in future securities offerings of the Company that constitute “qualified financings” and purchase securities equal to 30% of the number of shares of common stock or other securities sold in such offering (exclusive of Intrexon’s purchase). For this purpose, a “qualified financing” means a sale of common stock or equity securities convertible into common stock in a public or private offering, raising gross proceeds of at least $1,000,000, where the sale of shares is either registered under the Securities Act of 1933, as amended, at the time of issuance or the Company agrees to register the resale of such shares.

The Company’s former chief financial officer resigned on January 27, 2012 and as a result of such resignation, 5,000 shares of restricted common stock previously awarded but not yet vested at the time of his resignation were forfeited back to the Company.

On July 30, 2012, the Company entered into a Stock Purchase Agreement (the “Purchase Agreement”) with certain accredited investors (the “Purchasers”) pursuant to which the Company: (i) sold to the Purchasers an aggregate of 8,666,665 shares of the Company’s Common Stock at a price per share of $1.50 (the “Common Shares”) for aggregate gross proceeds of approximately $13,000,000 (the “Offering”). The Company intends to use the net proceeds from this offering to accelerate development of several of the Company’s key initiatives including its recently announced Channel Agreement with Intrexon relating to the Company’s lantibiotics program, sales and marketing of the Company’s probiotic product lines and general corporate purposes.

Griffin Securities, Inc. (the “Placement Agent”) served as the placement agent for the Offering. In consideration for services rendered as the Placement Agent in the Offering, the Company agreed to (i) pay to the Placement Agent cash commissions equal to $899,698, or 7.0% of the gross proceeds received in the Offering, less certain excluded proceeds, (ii) issue to the Placement Agent, or its designee, a five-year warrant to purchase up to 771,169 shares of the Company’s Common Stock (representing 9% of the Common Shares sold in the Offering) with an exercise price of $1.50 per share (the “Agent Warrants”); and (iii) reimburse the Placement Agent for its reasonable actual out-of-pocket expenses, incurred in connection with the Offering, including reasonable legal fees and disbursements up to a maximum aggregate amount of $50,000. The determination of the Placement Agent’s fees did not include any shares issued to the KFLP, (in connection with the automatic conversion of its secured debt with us described below) or shares acquired by any officers or directors participating in the Offering.

The total amount charged to additional paid-in-capital as a result of the Offering was $1,086,558. This amount is comprised of $949,698 for services provided by Griffin Securities, Inc., $130,520 for services provided by the Company’s legal counsel and independent accountants, and $6,340 for other services.


In connection with the Offering, the Company also entered into a registration rights agreement with the Purchasers (the “Registration Rights Agreement”). The Registration Rights Agreement required that the Company file a registration statement (the “Initial Registration Statement”) with the Securities and Exchange Commission (the “SEC”) within forty-five (45) days of the closing date of the Offering (the “Filing Date”) for the resale by the Purchasers of all of the Common Shares and all shares of Common Stock issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect thereto (the “Registrable Securities”). The Initial Registration Statement must be declared effective by the SEC within ninety (90) days of the closing date of the Offering (the “Effectiveness Date”) subject to certain adjustments. Upon the occurrence of certain events (each an “Event”), including, but not limited to, that the Initial Registration Statement is not filed prior to the Filing Date, the Company will be required to pay liquidated damages to each of the Purchasers equal to 1.5% of the aggregate purchase price paid by such Purchaser for the Registrable Securities upon the date of the Event and then monthly thereafter until the earlier of: (i) the Event is cured, or (ii) the registrable shares are eligible for resale under Rule 144 without manner of sale or volume limitations. In no event shall the aggregate amount of liquidated damages payable to each of the Purchasers exceed in the aggregate 10% of the aggregate purchase price paid by such Purchaser for the Registrable Securities.

On August 31, 2012, the Company filed Form S-1 Registration Statement with the SEC. On September 21, 2012 the Company filed Amendment No. 1 to Form S-1 Registration Statement with the SEC. On September 26, 2012 the Registration Statement was declared effective by the SEC.

In connection with the Offering, the KFLP waived receiving comparable registration rights as the Purchasers in the Offering as well as its piggyback registration rights applicable to the Offering. Intrexon also waived its piggyback registration rights applicable to the Offering and waived its participation rights.