Form 10-K/A APPLIED DNA SCIENCES For: Sep 30
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 1
x ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30,
2020
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to
_____
Commission File Number 001-36745
APPLIED DNA SCIENCES, INC.
(Exact name of registrant as specified in
its charter)
| Delaware | 59-2262718 | |
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
| 50 Health Sciences Drive, | ||||
| Stony Brook, New York | 11790 | (631) 840-8800 | ||
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code) |
Securities registered under Section 12(b) of
the Act:
| Title of Each Class | Trading Symbol(s) | Name of each Exchange on Which Registered |
| Common Stock, $0.001 par value | APDN | The Nasdaq Capital Market |
Securities registered under Section 12(g) of
the Act: None
Indicate by check mark if the registrant
is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
¨ Yes x No
Indicate by check mark if the registrant
is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
¨ Yes x No
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
x Yes ¨ No
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
x Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions
of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging
growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filer x | Smaller reporting company x |
| Emerging growth company ¨ |
If an emerging growth company, indicate by a check mark if the
registrant has elected not to use the extended transition period of complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Act). ¨ Yes x No
The aggregate market value of the Registrant’s voting
and non-voting common stock held by non-affiliates of the Registrant, based upon the last sale price of the common stock reported
on The Nasdaq Capital Market as of the last business day of the Registrant’s most recently completed second fiscal quarter
(March 31, 2020), was approximately $13.5 million. Shares of the Registrant’s common stock held by each executive officer
and director and by each entity or person that, to the Registrant’s knowledge, owned 5{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} or more of the Registrant’s
outstanding common stock as of March 31, 2020 have been excluded in that such persons may be deemed to be affiliates of the
Registrant. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
As of January 22, 2021, the Registrant had outstanding
7,471,474 shares of common stock, par value $0.001 per share.
DOCUMENTS INCORPORATED BY REFERENCE
None.
EXPLANATORY NOTE
Applied DNA Sciences, Inc. (the “Company”,
“we”, “us”, or “our”) is filing this Amendment No. 1 to Form 10-K (this “Amendment”)
to amend its Annual Report on Form 10-K for the fiscal year ended September 30, 2020, which was originally filed with
the Securities and Exchange Commission (the “SEC”) on December 17, 2020 (the “Original Filing”).
We are filing this Amendment solely for the purpose of including
in Part III the information that was to be incorporated by reference from the Company’s definitive proxy statement for
its 2021 Annual Meeting of Stockholders because the Company’s definitive proxy statement will not be filed with the SEC within
120 days after the end of the Company’s fiscal year ended September 30, 2020. This amendment amends and restates in
its entirety Items 10, 11, 12, 13 and 14 of Part III and amends and restates in its entirety Part IV of the Original
Filing to include the prior exhibits and additional certifications required of the principal executive officer and principal financial
officer under Section 302 of the Sarbanes-Oxley Act of 2002. Because no financial statements are contained within this Amendment,
we are not including new certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Except as described above, no other changes have been made to
the Original Filing and the Original Filing continues to speak as of the date of the Original Filing. Except as expressly set forth
herein, this Amendment does not reflect events occurring after the date of the Original Filing or modify or update any of the other
disclosures contained therein in any way other than as required to reflect the amendments discussed above. Accordingly, this Amendment
should be read in conjunction with the Original Filing and the Company’s other filings with the SEC.
All warrants, option, share and per share information in this
report gives retroactive effect to a one-for-forty reverse stock split that was effective on November 1, 2019.
TABLE OF CONTENTS
Part III
| ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE |
Board of Directors, Executive Officers and Key Employees
The Board of Directors (the “Board
of Directors”) currently consists of eight members. The term of each Director expires at our next annual meeting or until
his or her successor is appointed. Our executive officers are elected by, and serve at the discretion of the Board of Directors.
There are no family relationships between any directors or executive officers.
The ages of the directors and executive officers are shown as
of January 22, 2021.
| Name | Ages | Position | ||
| James A. Hayward | 67 | Chief Executive Officer, President and Chairman of the Board of Directors | ||
| Scott L. Anchin | 46 | Director | ||
| John Bitzer, III | 59 | Director | ||
| Robert B. Catell | 83 | Director | ||
| Joseph D. Ceccoli | 57 | Director | ||
| Sanford R. Simon | 77 | Director | ||
| Yacov A. Shamash | 70 | Director | ||
| Elizabeth M. Schmalz Ferguson | 69 | Director | ||
| Beth Jantzen | 43 | Chief Financial Officer | ||
| Judith Murrah | 62 | Chief Operating Officer, Chief Information Officer and Secretary |
Set forth below is biographical information with respect to
the aforementioned individuals.
[***]James A. Hayward, Ph.D., Sc.D.
Dr. James A. Hayward has been our
Chief Executive Officer since March 17, 2006 and our President and the Chairman of the Board of Directors since June 12,
2007. He was previously our acting Chief Executive Officer since October 5, 2005. He also served as Acting Chief Financial
Officer from August 20, 2013 through October 13, 2013. Dr. Hayward received his Ph.D. in Molecular Biology from
the State University of New York at Stony Brook (“Stony Brook”) in 1983 and an honorary Doctor of Science
from the same institution in 2000. His experience with public companies began with the co-founding of one of England’s first
biotechnology companies — Biocompatibles. Following this, Dr. Hayward was Head of Product Development
for the Estee Lauder companies for five years. In 1990 he founded The Collaborative Group, a provider of products and services
to the biotechnology, pharmaceutical and consumer-product industries based in Stony Brook, where he served as Chairman, President
and Chief Executive Officer for 14 years. During this period, The Collaborative Group created several businesses, including
The Collaborative BioAlliance, a contract developer and manufacturer of human gene products that was sold to Dow Chemical in 2002,
and Collaborative Labs, a service provider and manufacturer of ingredients for skincare and dermatology that was sold to Engelhard
(now BASF) in 2004. He is the winner of the first Helix Award from BIO and has been twice elected Entrepreneur of the
Year by Inc Magazine and the Long Island Technology Hall of Fame. He has served on the Boards of The Stony Brook Foundation,
the NYS Research Foundation, and the NYS Regents Advisory Board. Dr. Hayward also serves on the advisory board of the Manufacturing
and Technology Resource Consortium of Stony Brook University, and serves on the boards of Softheon Corporation and NeoMatrix
Formulations, Inc.
Dr. Hayward’s experience and senior leadership positions
in companies in the biotechnology, pharmaceutical and consumer-product industries, and specifically his qualifications and skills
in the areas of general operations, financial operations and administration, as well as his role as the Company’s Chief Executive
Officer and President led the Board of Directors to conclude that Dr. Hayward should serve as a director of the Company.
[***]Yacov A. Shamash
Dr. Yacov A. Shamash has been a member of the Board of
Directors since March 17, 2006. Dr. Shamash is a Professor of Electrical and Computer Engineering at Stony Brook, a position
he has held since 1992. From 1992 to 2015, he was the Dean of Engineering and Applied Sciences, and from 1995 to 2004, Dr. Shamash
was also the Dean of the Harriman School for Management and Policy at Stony Brook. He served as VP for Economic Development at
Stony Brook from 2001-2019. He was founder of the New York State Center for Excellence in Wireless and Information Technology at
Stony Brook. Dr. Shamash developed and directed the NSF Industry/University Cooperative Research Center for the Design of
Analog/Digital Integrated Circuits from 1989 to 1992 and also served as Chairman of the Electrical and Computer Engineering Department
at Washington State University from 1985 until 1992. Dr. Shamash serves on the board of directors of public companies Comtech
Telecommunications Corp., and Keytronic Corp. He is on the boards of several not for profit organizations: the Long Island First
Robotics, Listnet and Broad Hollow Science Park. Dr. Shamash holds a Ph.D. degree in Electrical Engineering from Imperial
College of Science and Technology in London, England.
Dr. Shamash daily encounters leaders of businesses large
and small, regional and global in their reach and, as a member of our Board of Directors, has played an integral role in our business
development by providing the highest-level introductions to customers, channels to market and to the media. Dr. Shamash also
brings to our Board of Directors his valuable experience gained from serving as a director at other private and public companies.
The Board of Directors believes that Dr. Shamash’s technical experience and other abilities make him a valuable member
of the Board of Directors.
[***]Sanford R. Simon
Dr. Sanford R. Simon has been a member of the Board of
Directors since March 17, 2006. Dr. Simon has been a Professor of Biochemistry, Cell Biology and Pathology at Stony Brook
since 1997. He joined the faculty at Stony Brook as an Assistant Professor in 1969 and was promoted to Associate Professor with
tenure in 1975. Dr. Simon was a member of the board of directors of The Collaborative Group from 1995 to 2004. From 1967 to
1969, Dr. Simon was a Guest Investigator at Rockefeller University. Dr. Simon received a B.A. in Zoology and Chemistry
from Columbia University in 1963, a Ph.D. in Biochemistry from Rockefeller University in 1967, and studied as a postdoctoral fellow
with Nobel Prize winner Max Perutz in Cambridge, England. He maintains an active research laboratory studying aspects of cell invasion
in cancer and inflammation, the uses of small molecules in modulating diverse cell functions, and novel strategies of drug delivery;
he also teaches undergraduate, graduate, medical and dental students. Dr. Simon has worked in the use of large biomolecules
in commercial media, and we have made use of his expertise in formulating DNA into commercial carriers for specific customers.
As a member of our Board of Directors, Dr. Simon has advised
us on patents, provided technical advice, and introduced us to corporate partners and customers. The Board of Directors believes
that Dr. Simon’s advice makes him a valuable member of the Board of Directors.
[***]John Bitzer, III
John Bitzer, III, joined the Board of Directors on August 10,
2011. Mr. Bitzer is the former President and Chief Executive Officer of ABARTA, Inc. (“ABARTA”), a private,
third and fourth generation family holding-company with operations in the soft drink and energy drink industries. In 1985, Mr. Bitzer
began his career in sales for the Cleveland Coca-Cola Bottling Company. He has been Publisher of Atlantic City Magazine in Atlantic
City, N.J. In 1994, he founded the ABARTA Media Group and held the position of Group Publisher. In 1997, he was named President
and Chief Operating Officer of ABARTA and was President and Chief Executive Officer from 1999 to 2019. Mr. Bitzer has a bachelor’s
degree from the University of Southern California and a Masters of Business Administration (“MBA”) from the University
of Michigan.
Mr. Bitzer’s experience as an executive officer
and director of several private companies and organizations led the Board of Directors to conclude that he should serve as a director
of the Company.
[***]Joseph D. Ceccoli
Joseph D. Ceccoli was appointed to the Board of Directors on
December 3, 2014. Since 2010, Mr. Ceccoli has been the Founder, President and CEO of Biocogent, LLC (“Biocogent”),
a bioscience company located at the Stony Brook Long Island High Technology Incubator. Biocogent is focused on the invention, development
and commercialization of skin-active molecules and treatment products used in regulated (over-the-counter/med-care), personal care
and consumer products. Prior to starting Biocogent, Mr. Ceccoli was Global Director of Operations for BASF Corporation, a
global Fortune 100 company and the world’s largest global chemical company, where he was responsible for the integration,
operations and growth of domestic and overseas business units from 2007 to 2008. Prior to BASF, Mr. Ceccoli was a General
Manager for Engelhard Corporation, a U.S.-based Fortune 500 company and chief operating officer of Long Island-based The Collaborative
Group from 2004 to 2007. Mr. Ceccoli holds a Bachelor of Science (“B.S.”) degree in Biotechnology from Rochester
Institute of Technology and advanced professional training in various pharmaceutical sciences, emulsion chemistry, engineering
and management disciplines. He is a member of numerous professional organizations such as the American Chemical Society and the
Society of Cosmetic Chemists.
The Board of Directors believes that Mr. Ceccoli’s
experience across the bioscience and chemical markets, including in global and U.S.-based operations and management, enriches our
Board of Directors. Mr. Ceccoli’s experience as an executive officer and director of several bioscience and chemical
companies and organizations led the Board of Directors to conclude that he should serve as a director of the Company.
[***]Robert B. Catell
Robert B. Catell was appointed to the Board of Directors on
October 7, 2016. Since 2006, Mr. Catell has been serving as Chairman of the Advanced Energy Research and Technology Center
(AERTC) at Stony Brook. He served on the Board of New York State Energy Research & Developmental Authority. Among other
accomplishments, Mr. Catell was formerly Chairman and CEO of KeySpan Corporation and KeySpan Delivery (formerly Brooklyn Union
Gas), and Chairman of National Grid, U.S. and Deputy Chairman of National Grid plc, upon National Grid’s acquisition of KeySpan.
He also serves on the board of several business and not-for-profit organizations. He has been Chairman of Applied DNA Sciences’
Strategic Advisory Board since its inception in February 2016. Mr. Catell holds both a Master’s and Bachelor’s
degree in Mechanical Engineering from City College of New York and is a registered Professional Engineer. He has attended Columbia
University’s Executive Development Program, and the Advanced Management Program at the Harvard Business School.
The Board of Directors believes that Mr. Catell’s
extensive executive-level management experience, including as a director at other private and public companies and within regulated
and technical industries, qualifies him to serve as one of our directors.
[***]Scott L. Anchin
Mr. Anchin was appointed to the Board of Directors on November 7,
2019. Mr. Anchin is a partner at Cormont Strategic Services, LLC, which provides special situation consulting and operational
support. Previously Mr. Anchin served as a managing director with Opportune LLP from March 2016 to October 2018,
where he provided restructuring advisory services to companies and stakeholders in distressed situations. From 2009 to February 2016,
Mr. Anchin was employed by Alvarez & Marsal North America, LLC, a global professional services firm specializing
in turnaround and interim management and performance improvement. He is a non-practicing certified public accountant in the State
of New York and holds a B.S. in Accounting from the Wharton School of Business at the University of Pennsylvania and an M.B.A.
with a concentration in Management from Columbia Business School. Mr. Anchin currently serves as a director of Genasys Inc. (Nasdaq:
GNSS) and Kopin Corporation (Nasdaq: KOPN).
The Board of Directors believes that
Mr. Anchin’s executive-level management experience qualifies him to serve as one of our
directors.
[***]Elizabeth M. Schmalz Ferguson
Ms. Elizabeth M. Schmalz Ferguson
has been a member of the Board of Directors since June 2017. She has served as President of American Flavors & Fragrances,
a fragrance company, since 2007. Ms. Ferguson also serves as President of her own consulting firm, Betsy Schmalz Ferguson &
Associates. She served as Senior Vice President of Corporate Product Development at Estée Lauder. Ms. Ferguson’s
responsibilities included overseeing product development for some of the company’s most prominent brands. Subsequently, she
was Executive Vice President of Product Development at Bath and Body Works and Victoria’s Secret for The Limited. Ms. Ferguson
started her senior management career at Revlon with responsibility for new product development for brands including Borghese, Ultima
II and Prestige fragrances. She is an active member of Cosmetic Executive Women. She earned a bachelor’s degree in psychology
from Georgian Court University.
Ms. Ferguson’s track record
of accomplishments as a strategist and products leader within the cosmetics and personal care industries led the Board of Directors
to conclude she should serve as a director of the Company.
[***]Beth Jantzen
Beth Jantzen was appointed as our Chief Financial Officer, effective
February 15, 2015. Previously, Ms. Jantzen held the position of Controller from May 2013 to her appointment as Chief
Financial Officer. Prior to joining the Company, Ms. Jantzen was a senior manager at Marcum LLP, our independent registered
accounting firm from January 2000 until June 23, 2014, where she managed multiple engagements and specialized in SEC
policies, practices and procedures, including Sarbanes-Oxley compliance. Ms. Jantzen holds a B.S. in Accounting from the State
University of New York at Binghamton and is also a Certified Public Accountant (CPA).
[***]Judith Murrah
Ms. Judith
Murrah has been our Chief Operating Officer since January 19, 2021, our Chief Information Officer since
June 1, 2013, and our Secretary since December 22, 2017. Ms. Murrah is responsible for information
technology strategy and implementation. Ms. Murrah is also responsible for our operations functions including
the development of key customer and partner relationships, quality assurance oversight and operations management.
Ms. Murrah was previously the Senior Director of Information Technology at Motorola Solutions, which had acquired her
former firm, Symbol Technologies. Her role at Motorola Solutions included overseeing the global IT program
management office, financial and supplier operations and quality assurance. At Symbol Technologies, Ms. Murrah held
leadership positions in product line management, global account sales, corporate and marketing communications and IT.
Ms. Murrah holds an MBA from Harvard Business School, and a B.S. in Industrial Engineering from the University of Rhode
Island. She is an inventor on fourteen U.S. patents. Ms. Murrah is active in Long Island’s
business and academic community. She has co-founded and volunteers with non-profits engaging students in science, technology,
engineering, and math disciplines. She serves on the boards of the Middle Country (N.Y.) Library Foundation, the Tesla
Science Center at Wardenclyffe, and Stony Brook University’s Center for Corporate
Education. Ms. Murrah was named to 2005 and 2006 Top 50 Women of Long Island and received the inaugural
2001 Diamond Award for Long Island Women Leaders in Technology.
Delinquent Section 16(a) Reports
Section 16(a) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), requires our officers and directors and persons who beneficially
own more than 10{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} of any class of our equity securities registered pursuant to Section 12 of the Exchange Act to file reports
of securities ownership and changes in such ownership with the SEC. Officers, directors and greater than 10{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} beneficial owners
(“10{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} stockholders”) also are required by SEC rules to furnish us with copies of all Section 16(a) forms
they file. Based solely upon a review of the copies of such forms furnished to us during or with respect to the fiscal year ended
September 30, 2020, as the case may be, and upon written representations from these reporting persons, we believe that all
reports required by Section 16(a) applicable to our officers, directors and 10{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} stockholders were filed on a timely basis,
as disclosed in the forms described above, during the fiscal year ended September 30, 2020, except as set forth below.
Scott L. Anchin did not timely file one
Form 4 to report two transactions. Based on a review of public filings with the SEC, we believe that Mr. Anchin has prepared
and filed the required Form 4 to report his transactions.
Governance of the Company
Code of Ethics
Our Board of Directors has adopted a “code
of ethics” as defined by regulations promulgated under the Securities Act of 1933, as amended, and the Exchange Act (our
“Code of Business Conduct and Ethics”) that applies to all of our employees, officers and directors, including our
chief executive officer, our chief financial officer and those officers and employees responsible for financial reporting. The
Code of Business Conduct and Ethics is designed to codify the ethical standards that we believe are reasonably designed to deter
wrong-doing and promote honest and ethical conduct.
We have established procedures to ensure
that suspected violations of the Code of Business Conduct and Ethics may be reported anonymously. A current copy of our Code
of Business Conduct and Ethics is available on our website at [***]www.adnas.com/adnas_home/investors/. A copy may also be obtained,
free of charge, from us upon a request directed to Applied DNA Sciences, Inc., 50 Health Sciences Drive, Stony Brook, New
York 11790, c/o Investor Relations. We intend to disclose any amendments to or waivers of a provision of the Code of Business Conduct
and Ethics granted to directors and officers by posting such information on our website available at [***]www.adnas.com and/or
in our public filings with the SEC.
Board Committees
The Board of Directors maintains three committees,
the audit committee, compensation committee and the nominating committee.
[***]Audit Committee
Messrs. Bitzer (Chairperson), Ceccoli
and Shamash served on the audit committee during the fiscal year ended September 30, 2020 and currently continue to serve
on the audit committee. The Board of Directors has determined that each member of the audit committee is independent within the
meaning of the director independence standards of the Company and The Nasdaq Capital Market (“Nasdaq”) as well as the
heightened director independence standards of the SEC for audit committee members, including Rule 10A-3(b)(1) under the
Exchange Act. The Board of Directors has also determined that each of the members of the audit committee is financially sophisticated
and is able to read and understand consolidated financial statements and that Mr. Bitzer is an “audit committee financial
expert” as defined in the Exchange Act.
The composition and responsibilities of
the audit committee and the attributes of its members, as reflected in the audit committee charter, are intended to be in accordance
with applicable requirements for corporate audit committees. The audit committee charter will be reviewed, and amended if necessary,
on an annual basis.
The audit committee assists the Board of
Directors in fulfilling its oversight responsibility relating to our financial statements and the disclosure and financial reporting
process, our system of internal controls, our internal audit function, the qualifications, independence and performance of our
independent registered public accounting firm, compliance with our code of ethics and legal and regulatory requirements. The audit
committee has the sole authority to appoint, retain, terminate, compensate and oversee the work of the independent registered public
accounting firm, as well as to pre-approve all audit and non-audit services to be provided by the independent registered public
accounting firm.
[***]Compensation Committee
Messrs. Bitzer, Ceccoli, and Shamash
(Chairperson) served on the compensation committee during the fiscal year ended September 30, 2020 and currently continue
to serve on the compensation committee. The Board of Directors has determined that each member of the compensation committee is
independent within the meaning of the director independence standards of the Company, Nasdaq and the SEC. The compensation committee
reviews and approves salaries and bonuses for all officers, administers options outstanding under our stock incentive plan, provides
advice and recommendations to the Board of Directors regarding directors’ compensation and carries out the responsibilities
required by SEC and Nasdaq rules. The compensation committee believes that its processes and oversight should be directed toward
attracting, retaining and motivating employees and non-employee directors to promote and advance our interests and strategic goals.
As requested by the compensation committee, the Chief Executive Officer will provide information and may participate in discussions
regarding compensation for other executive officers. The compensation committee does not utilize outside compensation consultants
but considers other general industry information and trends if available.
[***]Nominating Committee
Messrs. Shamash (Chairperson), Bitzer
and Simon served on the nominating committee during the fiscal year ended September 30, 2020, and currently continue to serve,
on the nominating committee. The Board of Directors has determined that each member of the nominating committee is independent
within the meaning of the director independence standards of the Company, Nasdaq and the SEC.
The nominating committee is responsible
for, among other things: reviewing Board of Directors composition, procedures and committees, and making recommendations on these
matters to the Board of Directors; and reviewing, soliciting and making recommendations to the Board of Directors and stockholders
with respect to candidates for election to the Board of Directors.
| ITEM 11. | EXECUTIVE COMPENSATION |
Compensation Overview
Our compensation approach is necessarily
tied to our stage of development as a company. We have historically been principally devoted to developing DNA embedded biotechnology
security solutions, but have more recently also supplied DNA for use in in vitro medical diagnostics, preclinical biotechnology
and preclinical drug and biologic development and manufacturing markets. We have established diagnostic and surveillance testing
programs for COVID-19, further positioned our proprietary LinearDNA™ manufacturing platform as an alternative to traditional
vaccine development technologies, and redirected resources to our biotherapeutics and diagnostics markets, including vaccine development
programs. We also have undertaken preliminary steps towards the development of drugs and biologics.
We have necessarily limited the establishment
of extensive administrative and operating infrastructure, and a formal executive compensation policy has not been established.
We have a compensation committee of the Board of Directors that is responsible for all compensation matters of our directors and
executive officers. The compensation of all our named executive officers, which consists of our three executive officers, is approved
by our compensation committee, which in turn reviewed the recommendation of our Chief Executive Officer (except with respect to
his own compensation). As discussed below, the recommendation of our Chief Executive Officer is largely discretionary, based on
his subjective assessment of the particular executive. As we continue to grow, we expect that the specific direction, emphasis
and components of our executive compensation program will continue to evolve. The compensation committee has overall responsibility
for approving and evaluating our executive officers’ compensation plans, policies and programs. Our compensation program
is designed to employ best practices in executive compensation and consider all relevant regulatory guidance regarding sound incentive
compensation policies. The remainder of this section provides a general summary of our compensation policies and procedures.
Our Executive Compensation Philosophy and Objectives
[***]General
The fundamental purpose of our executive
compensation program is to assist us in achieving our financial and operating performance objectives. Specifically, we attempt
to tailor an executive’s compensation to (1) retain and motivate the executive, (2) reward him or her upon the
achievement of Company-wide and individual performance, and (3) align the executive’s interest with the creation of
long-term stockholder value, without encouraging excessive risk taking. To that end, and within the context of the stage of our
Company, we have historically compensated our named executive officers through a mix of base salary, equity-based incentives, and
cash bonuses.
Our business model is based on our ability
to establish long-term relationships with clients and to maintain our strong mission, client focus, entrepreneurial spirit and
team orientation. We have sought to create an executive compensation package that balances short-term versus long-term components
when considering cash bonuses and employee equity awards, in ways we believe are most appropriate to motivate senior management
and reward them for achieving the following goals:
| • | Develop a culture that embodies a commitment for our business, creative contribution and a drive to achieve established goals and performance objectives; |
| • | Provide leadership to the organization in such a way as to maximize the results of our business operations; |
| • | Lead us by demonstrating forward thinking in the operation, development and expansion of our business; |
| • | Effectively manage organizational resources to derive the greatest value possible from each dollar invested; and |
| • | Take strategic advantage of the market opportunity to expand and grow our business and revenues. |
We believe that having a compensation program
designed to align executive officers to meet our business objectives and to reinforce excellent performance and accountability
is the cornerstone to successfully implement and achieve our strategic plan. In determining the compensation of our executive officers,
we are guided by the following key principles:
| • | [***]Competition. Compensation should reflect the competitive marketplace, so we can retain, attract and motivate talented executives. |
| • | [***]Accountability for Business Performance. Compensation should be tied to financial performance, so that executives are held accountable through their compensation for contributions to the performance of our Company as a whole as well as their performance of the business unit for which they are responsible. |
| • | [***]Accountability for Individual Performance. Compensation should be tied to the individual’s performance to encourage and reflect individual contributions to our Company’s performance. We consider individual performance as well as performance of the business and responsibility areas that an individual oversees, and weigh these factors as appropriate in assessing a particular individual’s performance. |
| • | [***]Alignment with Stockholder Interests. Compensation should be tied to our financial performance through equity awards to align executives’ interests with those of our stockholders. |
Our executive compensation structure not
only aims to be competitive in our industry, but also to be fair relative to compensation paid to other professionals within our
organization, relative to our short-term and long-term performance and relative to the value we deliver to our stockholders. We
seek to maintain a performance-oriented culture and a compensation approach that rewards our executive officers when we achieve
our goals and objectives, while putting at risk an appropriate portion of their compensation against the possibility that our goals
and objectives may not be achieved.
The Chief Executive Officer is the only
named executive officer with an employment agreement. In addition, there are no change in control, severance or noncompetition
agreements with any other named executive officer, nor are we otherwise obligated to pay any named executive officers any amounts
if there is a change in control of the Company or if such named executive officer’s employment with us terminates, except
for the Chief Executive Officer, as described below in the section entitled “—Employment Agreement with Dr. James
Hayward.”
[***]Determination of Executive Compensation Awards
The compensation committee establishes and
monitors the basic philosophy governing the compensation of the Chief Executive Officer. On an annual basis, the compensation committee
reviews the compensation of the Chief Executive Officer including incentive compensation plans and equity-based plans. Compensation
decisions for all of our other executive officers are also approved by our compensation committee, after reviewing the recommendations
of our Chief Executive Officer. We have traditionally placed significant emphasis on the recommendation of our Chief Executive
Officer with respect to the determination of executive compensation (other than his own), in particular with respect to the determination
of base salary, cash incentive and equity incentive awards, and typically followed such recommendations as presented by our Chief
Executive Officer. However, the compensation committee in reviewing such recommendations is free to make decisions that are contrary
to the Chief Executive Officer’s recommendations. The compensation committee’s composition and oversight of our executive
compensation program is described in more detail above in the section entitled “—Governance of the Company—Board
Committees —Compensation Committee.”
For purposes of determining our executive
officer compensation in the fiscal year ended September 30, 2020 and in prior fiscal years, we considered the following factors:
our understanding of the amount of compensation generally paid by similarly situated companies to their executives with similar
roles and responsibilities; the roles and responsibilities of our executives; the individual experience and skills of, and expected
contributions from, our executives; the amounts of compensation being paid to our other executives; our executives’ historical
compensation at our Company; an assessment of the professional effectiveness and capabilities of the executive officer; the Company’s
performance and financial position and the performance of the executive officer against the corporate and other scorecards used
to determine incentive compensation. While we have not used any formula or formal benchmarking to determine compensation based
on these factors, we have placed the most emphasis in determining compensation on our understanding of the amount of compensation
generally paid by similarly situated companies to their executives with similar roles and responsibilities and the subjective assessment
of the professional effectiveness and capabilities of the executive officer. Our understanding of the amount of compensation generally
paid by similarly situated companies was based on our compensation committee’s and our Chief Executive Officer’s own
business judgment and collective experience in such matters.
[***]Base Salary
Our compensation committee
sets the Chief Executive Officer’s base salary annually in accordance with the terms of his employment agreement (provided
that unless otherwise consented to by the Chief Executive Officer, any change by the compensation committee may increase, but not
decrease, the Chief Executive Officer’s annual rate of base salary). As of September 4, 2019, Dr. Hayward voluntarily
reduced his salary from the then-current rate of $250,000 to $50,000. Dr. Hayward’s salary was subsequently increased
to $150,000 during December 2019. On October 3, 2020, Dr. Hayward’s regular annual salary rate of $400,000
was reinstated.
The base salary for each of the other named
executive officers is reviewed annually by the Chief Executive Officer and any adjustments recommended by him are subject to the
review and approval by the compensation committee. As of October 2019, Ms. Jantzen’s salary was $ 228,000 and Ms. Murrah’s
salary was $228,000. In December of 2019, such salaries were both increased to $250,000.
At the start of the 2021 fiscal year, Ms. Jantzen’s
base salary was maintained at $250,000. Ms. Murrah’s base salary was increased to $300,000. Ms. Murrah’s
salary was then subsequently increased to $325,000 in connection with her promotion to COO, effective January 23, 2021. Adjustments
to base salary are based upon a review of a variety of factors, including the following:
| • | individual and Company performance, measured against quantitative and qualitative goals, such as our growth, revenue, profitability and other matters; |
| • | duties and responsibilities as well as the executive’s experience; and |
| • | the types and amount of each element of compensation to be paid to the named executive officer. |
The current fiscal year 2021 base salaries for our named executive
officers are as follows:
| Dr. James A. Hayward | $400,000 | |
| Beth M. Jantzen | $250,000 | |
| Judith Murrah | $325,000 |
[***]Cash
Bonuses
The Chief Executive Officer is paid cash
bonuses in accordance with the terms of his employment agreement as well as based on the discretion of the compensation committee.
We pay discretionary cash bonuses to our other named executive officers, which are recommended by the Chief Executive Officer,
although the final determination of such bonuses are made by the compensation committee. The cash bonuses, if any, which are determined
after the end of each fiscal year and may be paid annually, are intended to recognize and reward those named executive officers
who have contributed meaningfully to our performance for the prior year. Both personal and the Company’s performance are
factors that the compensation committee and Chief Executive Officer typically consider in deciding whether to award a cash bonus
to a named executive officer and the amount of such bonus.
Effective March 15, 2018, the compensation
committee approved a bonus of $121,125 that would be payable to Dr. Hayward if and when the Company reaches $3,000,000 in
revenues for two consecutive quarters or $12,000,000 in revenues for a fiscal year (the “Revenue Goals”), provided
that Dr. Hayward is still employed by the Company on such date (the “Revenue Bonus”). Effective May 2, 2018,
the compensation committee increased the amount of the Revenue Bonus to $403,623; effective December 27, 2018, to $553,623,
and effective December 5, 2019 to $753,623. The revenue targets underlying the Revenue Bonus have not yet been achieved. The
Revenue Bonus has no expiration date and may be earned at any time during Dr. Hayward’s employment if the Revenue Goals
are achieved.
In recognition of Dr. Hayward’s
contributions to the Company, on October 19, 2020, the Company awarded Dr. Hayward a one-time discretionary bonus of
$250,000 which was paid on October 30, 2020. Ms. Beth Jantzen and Ms. Murrah were each awarded on October 2,
2020 a cash bonus of $42,116 which was paid on October 16, 2020.
[***]Long-Term Stock-Based Compensation
Our long-term compensation program has historically
consisted solely of stock options. Option grants made to executive officers are designed to provide them with an incentive to execute
their responsibilities in such a way as to generate long-term benefit to us and our stockholders. Through possession of stock options,
our executives participate in the long-term results of their efforts, whether by appreciation of our Company’s value or the
impact of business setbacks, either Company-specific or industry-based. Additionally, stock options provide a means of ensuring
the retention of our executive officers, in that they are in most cases subject to vesting over an extended period of time.
Stock options provide executives with a
significant and long-term interest in our success. By only rewarding the creation of stockholder value, we believe stock options
provide our executive officers with an effective risk and reward profile. Although it is our current practice to use stock options
as our sole form of long-term incentive compensation, the compensation committee reviews this practice on an annual basis in light
of our overall business strategy, existing market-competitive best practices and other factors.
Stock options are granted to our executive
officers in amounts determined by the compensation committee in its discretion. Stock grants have not been formula-based, but instead
have historically been granted taking into account a mixture of the following qualitative factors: the executive’s level
of responsibility; the competitive market for the executive’s position; the executive’s potential contribution to our
growth; and the subjective assessment of the professional effectiveness and capabilities of these executives.
Stock options are granted periodically.
Historically we have granted our executive officers a combination of stock options that vest over a period of time and stock options
that are immediately exercisable. On June 3, 2020, we granted each of our named executive officers a stock option to purchase
6,965 shares of our common stock, which were immediately exercisable upon grant and have a ten year term.
[***]Benefits
We provide the following benefits to our
executive officers on the same basis as the benefits provided to all employees:
| • | health and dental insurance; |
| • | short-and long-term disability; and |
| • | 401(k) Plan (currently there is no employer matching) |
These benefits are generally consistent
with those offered by other companies and specifically with those companies with which we compete for employees.
[***]Compensation Committee Report
The compensation committee has reviewed
and discussed the Compensation Discussion and Analysis with management and based on the review and discussions, the compensation
committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Amendment.
Compensation Committee:
| 1. | Yacov A. Shamash (Chairman) |
[***]Compensation Committee Interlocks and Insider Participation
None of the members of our compensation
committee is or has been an officer or employee of our company. None of our executive officers currently serves, or in the past
year has served, as a member of the compensation committee or director (or other board committee performing equivalent functions
or, in the absence of any such committee, the entire Board of Directors) of any entity that has one or more executive officers
who will serve on our compensation committee or our Board of Directors.
Summary Compensation Table
The following table sets forth the compensation
of our named executive officers for the fiscal years ended September 30, 2020 and 2019.
| Year | Salary ($) |
Bonus ($) |
Stock Awards ($) |
Option Awards ($) (1) |
All Other Compensation ($) (2) |
Total ($) |
||||||||||||||||||||||
| James A. Hayward | 2020 | 125,000 | 250,000 | — | 51,339 | 16,615 | 442,954 | |||||||||||||||||||||
| Chairman, President and CEO | 2019 | 232,692 | — | — | 125,693 | 16,615 | 375,000 | |||||||||||||||||||||
| Beth M. Jantzen | 2020 | 236,154 | 42,116 | — | 51,339 | — | 329,609 | |||||||||||||||||||||
| CFO | 2019 | 221,538 | — | — | 1,456 | — | 222,994 | |||||||||||||||||||||
| Judith Murrah | 2020 | 236,154 | 42,116 | 51,339 | — | 329,609 | ||||||||||||||||||||||
| CIO | 2019 | 221,538 | — | 2,419 | — | 223,957 | ||||||||||||||||||||||
| (1) | Represents the grant date fair value calculated in accordance with FASB ASC Topic 718, or ASC 718, based on the Black Scholes value of the options on the grant date. Information concerning these amounts and the assumptions used to calculate these amounts are set forth in our Form 10-K for the fiscal year ended September 30, 2020 filed with the SEC on December 17, 2020 under the caption “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations —Equity Based Compensation.” | |
| (2) | Represents reimbursement payments to Dr. Hayward for costs associated with an automobile used by Dr. Hayward. |
Outstanding Equity Awards at Fiscal Year-End
The following table shows information concerning
outstanding equity awards as of September 30, 2020 held by the named executive officers.
| Option Awards | |||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable |
Number of Securities Underlying Unexercised Options (#) Unexercisable |
Option Exercise Price ($) |
Option Expiration Date |
|||||||||||
| James A. Hayward | 16,666 | — | 140.40 | 7/10/2028 | |||||||||||
| 20,833 | — | 232.80 | 10/17/2023 | ||||||||||||
| 4,375 | — | 114.40 | 12/21/2024 | ||||||||||||
| 1,250 | — | 119.60 | 12/21/2025 | ||||||||||||
| 3,750 | — | 82.00 | 12/20/2026 | ||||||||||||
| 6,250 | — | 47.60 | 08/29/2028 | ||||||||||||
| 6,965 | — | 8.36 | 06/02/2030 | ||||||||||||
| Beth M. Jantzen | 104 | — | 205.20 | 10/14/2023 | |||||||||||
| 104 | — | 278.40 | 11/28/2023 | ||||||||||||
| 104 | — | 326.40 | 12/09/2023 | ||||||||||||
| 1,000 | — | 114.40 | 12/21/2024 | ||||||||||||
| 750 | — | 138.00 | 2/14/2025 | ||||||||||||
| 1,250 | — | 119.60 | 12/21/2025 | ||||||||||||
| 1,500 | — | 82.00 | 12/20/2026 | ||||||||||||
| 2,500 | — | 47.60 | 08/29/2028 | ||||||||||||
| 6,695 | — | 8.36 | 06/02/2030 | ||||||||||||
| Judith Murrah | 833 | — | 280.80 | 12/01/2023 | |||||||||||
| 1,875 | — | 114.40 | 12/21/2024 | ||||||||||||
| 104 | — | 326.40 | 12/09/2023 | ||||||||||||
| 1,250 | — | 119.60 | 12/21/2025 | ||||||||||||
| 1,500 | — | 82.00 | 12/20/2026 | ||||||||||||
| 3,750 | — | 47.60 | 08/29/2028 | ||||||||||||
| 6,965 | — | 8.36 | 06/02/2030 | ||||||||||||
Employment Agreement with Dr. James A. Hayward
[***]The following is a discussion of our
employment agreement with Dr. Hayward as of September 30, 2020 and, where indicated, compensation actions prior to such
date.
On July 28, 2016, an employment agreement
was entered into with Dr. Hayward, effective July 1, 2016. The employment agreement provides that Dr. Hayward will
be the Company’s CEO and will continue to serve on the Board of Directors. The initial term was from July 1, 2016 through
June 30, 2017, with automatic one-year renewal periods. As of June 30, 2020, the employment agreement renewed for an
additional year. Under the employment agreement, Dr. Hayward will be eligible for a special cash incentive bonus of up to
$800,000, $300,000 of which is payable if and when annual revenue reaches $8 million and $100,000 of which would be payable for
each $2 million of annual revenue in excess of $8 million, provided Dr. Hayward is still employed by the Company on such date(s).
This bonus is separate from and in addition to the Revenue Bonus described above. Pursuant to the employment agreement, Dr. Hayward’s
initial annual salary was $400,000, although as discussed above, his salary was reduced during fiscal years 2019 and 2020.
The employment agreement also provides for
the following limited perquisites: an automobile allowance of up to $1,500 per month1,
a gas allowance, the use of an outside driver for up to twenty hours per week, a gym membership and an airline club membership.
The Board of Directors, acting in its discretion, may grant annual bonuses to Dr. Hayward. Dr. Hayward will be eligible
to participate in retirement, welfare and incentive plans available to the Company’s other employees.
The agreement with Dr. Hayward also
provides that if he is terminated by the Company without cause or if Dr. Hayward terminates his employment for good reason,
then, in addition to earned and unpaid salary, bonus and benefits, and subject to the delivery of an executed general release and
continuing compliance with restrictive covenants, Dr. Hayward will be entitled to receive a pro rata portion (based on the
number of days elapsed from the beginning of the Company’s fiscal year to his termination of employment) of the greater of
(X) the annual bonus he would have received if employment had continued through the end of the year of termination or (Y) the
prior year’s bonus; installment payments for two years following termination in an aggregate amount equal to the greater
of (i) 2.99 times Dr. Hayward’s base salary or (ii) two times the sum of (A) Dr. Hayward’s
base salary and (B) Dr. Hayward’s prior year’s bonus (or, if greater, Dr. Hayward’s target bonus
for the year of termination); Company-paid COBRA continuation coverage for 18 months post-termination; continuing life insurance
benefits (if any) for two years; and extended exercisability of outstanding vested options (for three years from termination date
or, if earlier, the expiration of the fixed option term).
Upon termination due to death or disability,
Dr. Hayward will generally be entitled to receive the same payments and benefits he would have received if his employment
had been terminated by the Company without cause, other than the installment payments.
If termination of employment by the Company
without cause or by Dr. Hayward for good reason occurs within six months before or two years after a change in control of
the Company (as defined in the employment agreement), then, the severance payments that would otherwise have been paid in installments
will be paid in a lump sum. Further, unless assumed or continued by the acquiror, all of Dr. Hayward’s outstanding options
and other equity incentive awards will become fully vested upon the occurrence of a change in control of the Company (whether or
not his employment is terminated in connection with such change in control). The exercisability period of outstanding options would
be extended until three years following the change in control (or if later, termination), or the earlier expiration of the fixed
option term.
Dr. Hayward is subject to standard
restrictive covenants, including a two year post-employment non-compete and non-solicit of employees or customers.
Director Compensation: Fiscal 2020
During the fiscal year that ended September 30,
2020, we did not provide any cash compensation to our non-employee directors for their service on our Board of Directors. On May 13,
2020, the Board of Directors approved the recommendation from the compensation committee that each of the non-employee directors
shall annually receive, for as long as they are a member of the Board of Directors, a stock option with a 10-year term to purchase
a number of shares of common stock having a fair value of $125,000 on the date of grant as determined using the Black Scholes value,
eligible to vest in full on the first anniversary of the date of grant, subject to continued board membership through such date.
Our Board of Directors, upon recommendation from the compensation committee, may also grant additional stock options to purchase
shares of our common stock to certain non-employee directors from time to time. In 2020, many of our non-employee directors received
additional stock options with a fair value of $10,000 in recognition of their committee service or other additional time spent
in fulfillment of their duties on the Board of Directors.
On November 7, 2019, Scott L. Anchin
was appointed as a director of the Board of Directors. In connection with Mr. Anchin’s appointment to the Board of Directors,
we entered into a consulting agreement, with Meadow Hill Place, LLC (“Meadow Hill”), a company wholly owned by Mr. Anchin,
whereby Meadow Hill agreed to provide certain advisory services to the Company. The agreement expired on June 12, 2020. The
agreement provided for compensation in the form of both cash and equity. Meadow Hill received $25,000 for the first month of the
term, and $20,000 for each of the second through sixth months of the term. In addition, in satisfaction of the equity compensation
portion of the agreement, (i) the Company granted an option to purchase 20,834 shares of its common stock to Mr. Anchin
on December 12, 2019 at an exercise price equal to $4.26 per share, which vested on June 12, 2020, and (ii) the
Company granted an option to purchase 20,786 shares of its common stock to Mr. Anchin on January 2, 2020 at an exercise
price equal to $4.43 per share, which vested with respect to 9,121 shares on July 2, 2020, with the remainder forfeited prior
to becoming vested upon the expiration of the consulting agreement on June 12, 2020.
Due to limits under our 2005 Stock Incentive
Plan, we were not able to issue to Mr. Anchin all of the options due to him as a non-employee director in fiscal year 2020.
Once our 2020 Stock Incentive Plan was approved, however, we granted Mr. Anchin an option with respect to 24,038 shares, at
an exercise price of $7.54, on October 19, 2020. The grant was immediately exercisable with respect to 5,573 shares and will
vest on May 22, 2021 with respect to 18,465 shares. The grant was intended to represent (i) an annual non-employee director
stock option grant, pro-rated with respect to his service on the Board from November 7, 2019 through May 21, 2020, and
(ii) an annual non-employee director stock option grant in respect of his service on the Board for the one year period commencing
on May 22, 2020. It will be reflected in next year’s Summary Compensation Table as fiscal year 2021 compensation.
| Fees Earned or Paid in Cash ($) |
Stock Awards ($) |
Option Awards ($) (4) |
All Other Compensation ($) |
Total ($) |
||||||||||||||||
| Sanford R. Simon (2) | — | — | 135,000 | — | 135,000 | |||||||||||||||
| Yacov A. Shamash (2) | — | — | 135,000 | — | 135,000 | |||||||||||||||
| John Bitzer, III (1) | — | — | 125,000 | — | 125,000 | |||||||||||||||
| Joseph D. Ceccoli(2) | — | — | 135,000 | — | 135,000 | |||||||||||||||
| Scott L. Anchin (3) | — | — | — | 325,000 | 325,000 | |||||||||||||||
| Robert C. Catell(2) | — | — | 135,000 | — | 135,000 | |||||||||||||||
| Elizabeth M. Schmalz Ferguson(2) | — | — | 135,000 | — | 135,000 | |||||||||||||||
| (1) | An option to purchase 12,598 shares of our common stock was granted to Mr. Bitzer on May 22, 2020 at an exercise price of $11.04 per share. |
| (2) | An option to purchase 13,606 shares of our common stock was granted to each of Messrs. Catell, Ceccoli, Simon and Shamash and Ms. Schmalz Ferguson on May 22, 2020, at an exercise price of $11.04 per share. |
| (3) | This represents the cash paid to Mr. Anchin under his consulting agreement, as well as the grant date fair value of options granted as part of the same consulting agreement. The method by which we calculated the grant date fair value for this option grant is described in footnote 4 below. As described in the narrative above, Mr. Anchin forfeited a portion of this option grant when he ceased to provide consulting services to us during fiscal year 2020. | |
| (4) | The amounts represent the grant date fair value calculated in accordance with ASC 718 based on the Black Scholes value of the options on the grant date. Information concerning these amounts and the assumptions used to calculate these amounts are set forth in our Form 10-K for the fiscal year ended September 30, 2020 filed with the SEC on December 17, 2020 under the caption “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations —Equity Based Compensation.” As of September 30, 2020, Messrs. Simon, Shamash, Bitzer, Ceccoli, Catell, and Anchin and Ms. Schmalz Ferguson had total outstanding option awards (including warrants) of 23,814, 25,028, 22,318, 23,278, 22,400, 29,955 and 21,374 shares of our common stock, respectively. |
| ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
Equity
Compensation Plan Information
The
following table provides information as of September 30, 2020 with respect to shares of our common stock that may be issued
under our existing equity compensation plans.
| 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 the first Column) |
|||||||||
| Equity compensation plans approved by security holders | ||||||||||||
| Applied DNA Sciences, Inc.2005 Incentive Stock Plan, as amended | 291,035 | $ | 63.25 | 44,343 | ||||||||
| Applied DNA Sciences, Inc. 2020 Incentive Plan | — | — | 3,500,000 | |||||||||
| Equity compensation plans not approved by security holders | — | — | — | |||||||||
| TOTAL | 291,035 | $ | 63.25 | 139,169 | ||||||||
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information
regarding the shares of our common stock beneficially owned as of January 22, 2021, (i) by each person who is known to
us to beneficially own 5{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} or more of the outstanding common stock, (ii) by each of the executive officers named in the table
under “Executive Compensation” and by each of our directors and (iii) by all executive officers and directors
as a group.
Unless otherwise indicated below, each person
or entity has an address in care of our principal executive offices at 50 Health Sciences Drive, Stony Brook, New York 11790.
| Name and Address of Beneficial Owner | Title of Class | Number of Shares Owned (1) |
Percentage of Class (2) |
|||||||
| Executive Officers and Directors: | ||||||||||
| James A. Hayward | Common Stock | 291,481 | (3) | 3.82 | {14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} | |||||
| Yacov A. Shamash | Common Stock | 13,007 | (4)(15) | * | ||||||
| John Bitzer, III | Common Stock | 44,955 | (5)(6)(16) | * | ||||||
| Robert C. Catell | Common Stock | 10,734 | (10)(15) | * | ||||||
| Joseph D. Ceccoli | Common Stock | 10,241 | (7)(15) | * | ||||||
| Beth M. Jantzen | Common Stock | 27,389 | (11) | * | ||||||
| Judith Murrah | Common Stock | 31,863 | (12) | * | ||||||
| Scott L. Anchin | Common Stock | 25,528 | (17) (18) | * | ||||||
| Sanford R. Simon | Common Stock | 10,280 | (8)(15) | * | ||||||
| Elizabeth Schmalz Ferguson | Common Stock | 8,544 | (13)(15) | * | ||||||
| All directors and officers as a group (10 persons) | Common Stock | 484,272 | (9) | 6.23 | {14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} | |||||
| 5{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} Stockholder: | ||||||||||
| Bruce Grossman | Common Stock | 658,739 | (14) | 8.10 | {14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} | |||||
| Empery Asset Management, LP | Common Stock | 480,000 | (19) | 6.51 | {14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} | |||||
| CVI Investments, Inc. | Common Stock | 455,000 | (20) | 6.09 | {14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} | |||||
| * | indicates less than one percent |
| (1) | Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to the shares shown. Except as indicated by footnote and subject to community property laws where applicable, to our knowledge, the stockholders named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. A person is deemed to be the beneficial owner of securities that can be acquired by such person within 60 days upon the exercise of options, warrants or convertible securities (in any case, the “Currently Exercisable Options”). |
| (2) | Based upon 7,471,474 shares of common stock outstanding as of January 22, 2021. Each beneficial owner’s percentage ownership is determined by assuming that the Currently Exercisable Options that are beneficially held by such person (but not those held by any other person) have been exercised and converted. |
| (3) | Includes 157,295 shares underlying currently exercisable options. |
| (4) | Includes 11,422 shares underlying currently exercisable options. |
| (5) | Includes 9,720 shares underlying currently exercisable options. |
| (6) | Includes 34,563 shares of common stock owned by Delabarta, a wholly-owned subsidiary of ABARTA. Mr. Bitzer is the former President and a member of the board of directors of each of Delabarta and ABARTA. Mr. Bitzer disclaims beneficial ownership of the shares held by Delabarta except to the extent of his pecuniary interest therein. |
| (7) | Includes 9,672 shares underlying currently exercisable options. |
| (8) | Includes 10,208 shares underlying currently exercisable options. |
| (9) | Includes 307,040 shares underlying currently exercisable options. |
| (10) | Includes 8,794 shares underlying currently exercisable options. |
| (11) | Includes 727,317 shares underlying currently exercisable options. |
| (12) | Includes 29,316 shares underlying currently exercisable options. |
| (13) | Includes 7,768 shares underlying currently exercisable options. |
| (14) | This information is based on a Form 13GA filed with the SEC on January 21, 2021 by Bruce Grossman. Bruce Grossman reported sole and shared voting and sole and shared dispositive power of 658,739 shares of common stock underlying currently exercisable warrants. The address of Bruce Grossman is c/o Dillon Hill Capital LLC, 200 Business Park Drive, Suite 306, Armonk, NY 10504. | |
| (15) | Excludes 13,606 shares underlying options for Ms. Schmalz Ferguson, Messrs. Shamash, Ceccoli, Simon and Catell that were granted on May 22, 2020 and vest in full on May 22, 2021. | |
| (16) |
Excludes 12,598 shares underlying options for Mr. Bitzer
|
|
| (17) | Includes 35,528 shares underlying currently exercisable options. | |
| (18) | Excludes 18,465 underlying options that were granted on October 19, 2020 and vest in full on May 22, 2020. | |
| (19) |
This information is based on a Form 13G filed |
|
| (20) | This information is based on a Form 13G filed with the SEC on January 19, 2021 by CVI Investments, Inc. (“CVI”). CVI reported shared voting and shared dispositive power of 455,000 shares of common stock. The address of CVI is P.O. Box 309GT, Ugland House, South Church Street, George Town, Grand Cayman, KY1-1104, Cayman Islands. |
| ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
Other Relationships
On December 12,
2019, we entered into a consulting agreement, with Meadow Hill, a company wholly owned by Mr. Anchin, a board member, whereby
Meadow Hill provided certain advisory services to the Company. The initial term of the agreement ended on June 12, 2020. The
agreement provided for compensation in the form of both cash and equity. Meadow Hill was eligible to receive $125,000 for the initial
six month term. In addition, in satisfaction of the equity compensation portion of the agreement, (i) the Company granted
an option to purchase 20,834 shares of its common stock to Mr. Anchin on December 12, 2019 at an exercise price equal
to $4.26 per share, which vested on June 12, 2020, and (ii) the Company granted an option to purchase 20,786 shares of
its common stock to Mr. Anchin on January 2, 2020 at an exercise price equal to $4.43 per share, of which 9,121 vested
on July 2, 2020. The consulting agreement was completed on June 12, 2020 in full satisfaction of all obligations. As
a result, the agreement was not extended and therefore expired on June 12, 2020. As a result, 11,665 of the options granted
on January 2, 2020, which were related to the extension period, did not vest and were cancelled on June 12, 2020.
On July 17, 2019, we issued $1.5 million
of secured convertible notes (the “July 2019 Notes”), bearing interest at a rate of 6{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} per annum, in a non-brokered
private placement with an accredited investor, Dillon Hill Capital, LLC. Dillion Hill Capital, LLC and Dillion Hill Investment
Company (together the “Warrant Investors”) are both controlled by Bruce Gross and are included in the table “Security
Ownership of Certain Beneficial Owners and Management.”
On November 15, 2019, we closed an
underwritten public offering where we issued and sold 2,285,000 shares of our common stock and 2,285,000 accompanying common warrants
(the “2019 Warrants”) each with the right to purchase one share of our common stock at an exercise price of $5.25 per
share. In such offering, the Warrant Investors purchased certain of the 2019 Warrants. On October 7, 2020, we entered into
Warrant Exercise Agreements (each, a “Warrant Exercise Agreement”) with each of the Warrant Investors, whereby 318,000
of our 2019 Warrants were exercised. The gross proceeds to the Company from this partial exercise of the 2019 Warrants was $1,669,500.
On October 9, 2020, the Company entered
into a letter agreement with Dillon Hill Capital, LLC as sole holder of the July 2019 Notes for the repayment in full of such
notes, in an aggregate amount of $1,665,581, representing their outstanding principal amount plus accrued but unpaid interest through
their scheduled maturity date. The Company paid such payoff amount on October 9, 2020.
In consideration of this partial exercise
of the 2019 Warrants and of the consent to repayment of the July 2019 Notes, the Company agreed to issue pursuant to the Warrant
Exercise Agreement (the “Private Placement”), in addition to the 318,000 shares of common stock issued upon exercise
of the 2019 Warrants, 159,000 replacement warrants (the “Replacement Warrants”) to the Warrant Investors, which is
an amount equal to one-half the amount of the 2019 Warrants exercised pursuant to the Warrant Exercise Agreements. The Replacement
Warrants have an average exercise price of $7.54, the closing price on The Nasdaq Capital Market of the Company’s common
stock on the date of the applicable warrant exercise.
The quantity, issue date, exercise price
and expiration date of the Replacement Warrants are listed in the table below:
| Quantity | Issuance Date | Exercise Price | Expiration Date | ||||||
| 159,000 | October 7, 2020 | $ | 7.54 | October 7, 2025 | |||||
| 50,000 | December 9, 2020 | $ | 6.57 | December 9, 2025 | |||||
| 50,000 | December 10, 2020 | $ | 6.46 | December 10, 2025 | |||||
Each Replacement Warrant is exercisable
for one share of common stock beginning on the date of issuance thereof and ending on the five year anniversary of such date. The
exercise price and number of shares of common stock issuable upon exercise of the Replacement Warrants are subject to adjustment
in the event of any stock dividend, split, recapitalization, reorganization or similar transaction, as described in the Replacement
Warrants. Subject to limited exceptions, a holder of a Replacement Warrant will not have the right to exercise any portion of its
Replacement Warrant if the holder, together with its affiliates, would beneficially own in excess of 9.99{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} of the number of shares
of common stock outstanding immediately after giving effect to such exercise (the “Beneficial Ownership Limitation”);
provided that upon 61 days’ prior notice to the Company, the holder may elect to increase or decrease the Beneficial Ownership
Limitation, although in no event may the Beneficial Ownership Limitation exceed 9.99{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3}. Each Replacement Warrant includes an adjustment
provision that, subject to certain exceptions, reduces its exercise price if the Company issues common stock or common stock equivalents
at a price lower than the then-current exercise price of such Replacement Warrant, subject to a minimum exercise price of 21{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} of
such Replacement Warrant’s initial exercise price per share. Under certain limited circumstances, including that the daily
volume weighted average price of the common stock for each of 20 consecutive trading days has exceeded three times the exercise
price of such Replacement Warrant, the Company may call for cancellation of all or any portion of such Replacement Warrant for
which a notice of exercise has not yet been delivered for consideration equal to $0.001 per share of common stock for which such
Replacement Warrant is excisable.
As of October 9,
2020, all of the obligations and liabilities of the Company and its affiliates under the July 2019 Notes, the related purchase
agreement, and related Security Agreements, and any other related documents and instruments, was automatically satisfied in full,
and all related liens, mortgages or other security interests were automatically released.
[***]Director Independence
The Board of Directors has determined
that currently and at all times during the fiscal year ended September 30, 2020, each of our directors other than
Dr. Hayward and Mr. Anchin—consisting of John Bitzer, III, Robert B. Catell, Joseph D. Ceccoli, Yacov A.
Shamash, Sanford R. Simon, and Elizabeth M. Schmalz Ferguson —are and were “independent” as defined by the
listing standards of Nasdaq, constituting a majority of independent directors on our Board of Directors as required by the
rules of Nasdaq. The Board of Directors considers in its evaluation of independence whether any director has a
relationship with us that would interfere with the exercise of independent judgment in carrying out his or her
responsibilities of a director.
| ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
Audit and Other Fees
The following table sets forth fees billed
to us by our current independent auditors during the fiscal years ended September 30, 2020 and 2019 for: (i) services
rendered for the audit of our annual financial statements and the review of our quarterly financial statements, (ii) services
by our auditor that are reasonably related to the performance of the audit or review of our financial statements and that are not
reported as Audit Fees, (iii) services rendered in connection with tax compliance, tax advice and tax planning, and (iv) all
other fees for services rendered.
| [***]Marcum LLP | ||||||||||
| Fiscal year ended September 30, 2020 |
Fiscal year ended September 30, 2019 |
|||||||||
| (i) | Audit Fees | $ | 221,780 | $ | 251,835 | |||||
| (ii) | Audit-Related Fees | — | — | |||||||
| (iii) | Tax Fees | 27,329 | 17,000 | |||||||
| (iv) | All Other Fees | — | — | |||||||
| Total Fees | $ | 249,109 | $ | 268,835 | ||||||
[***]Audit Fees — Consists of fees billed for professional
services rendered for the audit of our consolidated financial statements, review of the interim consolidated financial statements
included in quarterly reports, and services that are normally provided by our independent auditors in connection with statutory
and regulatory filings or engagements, including registration statements.
[***]Audit-Related Fees — Consists of fees billed for
assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial
statements and are not reported under “Audit Fees,” such as accounting consultation and audits in connection with acquisitions.
[***]Tax Fees — Consists of fees billed for professional
services for tax compliance, tax advice and tax planning.
[***]All Other Fees — Consists of fees for products
and services other than the services reported above.
The Board of Directors has considered whether
the provision of non-audit services is compatible with maintaining the principal accountant’s independence and has determined
that independence has been maintained.
Audit Committee Pre-Approval Policy
Our audit committee is responsible for approving
all audit, audit-related, tax and other services. The audit committee pre-approves all auditing services and permitted non-audit
services, including all fees and terms to be performed for us by our independent auditor at the beginning of the fiscal year. Non-audit
services are reviewed and pre-approved by project at the beginning of the fiscal year. Any additional non-audit services contemplated
by us after the beginning of the fiscal year are submitted to the chairman of our audit committee for pre-approval prior to engaging
our independent auditor for such services. These interim pre-approvals are reviewed with the full audit committee at its next meeting
for ratification. During the fiscal years ended September 30, 2020 and 2019, all services performed by Marcum LLP were pre-approved
by our audit committee in accordance with these policies and applicable SEC regulations.
| ITEM 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES |
(3) [***]Exhibits
† Indicates a management contract or any compensatory
plan, contract or arrangement.
* A request for confidentiality has been granted for certain
portions of the indicated document. Confidential portions have been omitted and filed separately with the SEC as required by Rule 24b-2
promulgated under the Exchange Act.
+ Portions of this exhibit have been omitted because the information
is both not material and would likely cause competitive harm to the registrant if publicly disclosed. The omissions have been indicated
by bracketed asterisks (“[***]”).
SIGNATURES
Pursuant to the requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: January 27, 2021
| APPLIED DNA SCIENCES, INC. | |
| /s/ James A. Hayward | |
| James A. Hayward | |
| President and Chief Executive Officer |
Exhibit 31.3
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, James A. Hayward, certify that:
| 1. | I have reviewed this Amendment No. 1 to Annual Report on Form 10-K of Applied DNA Sciences, Inc.; and |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. |
Date: January 27, 2021
| /s/ James A. Hayward | |
| James A. Hayward | |
| [***]President, Chief Executive Officer and Chairman | |
| [***](Principal Executive Officer) |
Exhibit 31.4
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Beth Jantzen, certify that:
| 1. | I have reviewed this Amendment No. 1 to Annual Report on Form 10-K of Applied DNA Sciences, Inc.; and |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. |
Date: January 27, 2021
| /s/ Beth Jantzen | |
| Beth Jantzen, CPA | |
| [***]Chief Financial Officer | |
| [***](Principal Financial Officer) |
