UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to § 240.14a-12§240.14a-12
APPLIEDApplied DNA SCIENCES, INC.Sciences, Inc.
(Name of Registrant as Specified inIn Its Charter)
Not applicable
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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Date Filed:
APPLIED DNA SCIENCES, INC.
50 HEALTH SCIENCES DRIVE
STONY BROOK, NEW YORK 11790
(631) 240-8800
October 8, 2019August 3, 2021
Dear Fellow Stockholder:
You are cordially invited to attend a Specialthe 2021 Annual Meeting of Stockholders (the “Special Meeting”) of Applied DNA Sciences, Inc. (“Applied DNA Sciences,” the “Company,” “we” or “us”) to be held at 9:10:00 a.m., local time, on October 31, 2019,Wednesday, September 15, 2021.
We are very pleased that this year’s annual meeting will be a completely virtual meeting of stockholders, which will be conducted via live webcast. In light of the Coronavirus (COVID-19) pandemic, for the safety of our stockholders and in accordance with federal, state and local guidance that has been issued regarding group gatherings, we have decided that the Annual Meeting will be held in a virtual format only, via the Internet, with no physical in-person meeting. You will be able to attend the 2021 Annual Meeting of Stockholders online and submit your questions during the meeting by visiting www.virtualshareholdermeeting.com/APDN2021. You will also be able to vote your shares electronically at the Long Island High Technology Incubator located at 25 Health Sciences Drive, Stony Brook, New York 11790.annual meeting.
We are pleased to use the latest technology to increase access, to improve communication and to obtain cost savings for our stockholders and the Company. Use of a virtual meeting will enable increased stockholder attendance and participation as stockholders can participate from any location.
At the meeting, you will be asked to (i) to approveelect eight directors, (ii) ratify the approval, filing and effectiveness of an amendment to our Certificate of Incorporation to decrease the Company’s certificatenumber of incorporation to effect a reverse stock splitour authorized shares of common stock atto 200,000,000 and (iii) ratify our appointment of Marcum LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2021. In addition, we will be pleased to report on our affairs and a ratio in the range from one-for-fifteendiscussion period will be provided for questions and comments of general interest to one-for-fifty, with such specific ratio to be determined by the Company’s board of directors following the Special Meeting; and (ii) if necessary, to adjourn the Special Meeting to permit the Company to solicit additional proxies if there are insufficient proxies at the Special Meeting to approve the reverse stock split proposal.stockholders. Detailed information with respect to these matters is set forth in the accompanying proxy statement (the “Proxy Statement,”), which we encourage you to carefully read in its entirety.
We look forward to greeting personally those stockholders who are able to attend the meeting in person. Please note that each stockholder who wishes to attend the Special Meeting will be required to present valid government-issued photo identification to be admitted to the Special Meeting.online. However, whether or not you plan to be withjoin us at the meeting, it is important that your shares be represented. Stockholders of record at the close of business on October 4, 2019July 19, 2021 are entitled to notice of and to vote at the meeting. We will be using the “Notice and Access” method of providing proxy materials to you via the Internet. On or about August 3, 2021, we will mail to our stockholders a Notice of Availability of Proxy Materials (“Notice”) containing instructions on how to access our Proxy Statement and our 2020 Annual Report, as amended, and vote electronically via the Internet. The Notice also contains instructions on how to receive a printed copy of your proxy materials.
You may vote over the Internet, as well as by telephone or, if you requested to receive printed proxy materials, you can also vote by mail pursuant to instructions provided on the proxy card. Please readreview the instructions for each of your voting options described in the Proxy Statement, and then, regardless of whether you plan to attendas well as in the Special Meeting, vote your shares as promptly as possible. Please see page 4 for information about voting by Internet, telephone, mail or in person at the Special Meeting. Please note that voting in advance in any of the ways described will not prevent you from attending the Special Meeting should you choose to do so. You may revoke your proxy at any time before the vote is taken by delivering to the Company’s Corporate Secretary a written revocation, submitting a proxy with a later date or by voting your shares in person at the Special Meeting, in which case your prior proxy will be disregarded. I hope thatNotice you will attendreceive in the Special Meeting, but even if you cannot, please vote your shares as promptly as possible.mail.
Thank you for your ongoing support of Applied DNA Sciences.
Very truly yours,
| | | | | Very truly yours, | |
| | | | | /s/ James A. Hayward James A. Hayward James A. Hayward
Chairman, President and Chief Executive Officer | |
APPLIED DNA SCIENCES, INC.
NOTICE OF SPECIALANNUAL MEETING OF STOCKHOLDERS
Notice is hereby given that a Specialthe 2021 Annual Meeting of Stockholders (the “SpecialAnnual Meeting”) of Applied DNA Sciences, Inc. (“Applied DNA Sciences” or the “Company”), will be held virtually at www.virtualshareholdermeeting.com/APDN2021 on October 31, 2019Wednesday, September 15, 2021 at 9:10:00 a.m., local time, at the Long Island High Technology Incubator, located at 25 Health Sciences Drive, Stony Brook, New York 11790 for the following purposes:
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to elect eight directors, constituting the entire board of directors of the Company (the “Board of Directors”), to serve until the Company’s next annual meeting of stockholders, or until their respective successors are duly elected and qualified;
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to approve an amendmentratify the approval, filing and effectiveness of the Certificate of Amendment to our Certificate of Incorporation, filed with the Company’s certificateSecretary of incorporationState of the State of Delaware on September 16, 2020 to effect a reverse stock splitdecrease the number of our authorized shares of common stock (the “to 200,000,000;
Reverse Stock Split•”), at a ratio in
to ratify the range from one-for-fifteen to one-for-fifty, with such specific ratio to be determined byappointment of Marcum LLP as our independent registered public accounting firm for the Company’s board of directors following the Special Meeting;fiscal year ending September 30, 2021; and
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if necessary,to consider and act upon such other matters as may properly come before the meeting or any postponement or adjournment of the Special Meeting to solicit additional proxies in favor of the Reverse Stock Split proposal.meeting.
These matters are more fully described in the accompanying proxy statement.Proxy Statement.
Only stockholders of record at the close of business on October 4, 2019July 19, 2021 are entitled to notice of and to vote at the meetingAnnual Meeting and any adjournment or any postponements or adjournmentspostponement thereof. In light of the Coronavirus (COVID-19) pandemic, for the safety of our stockholders and in accordance with federal, state and local guidance that has been issued, we have decided that the Annual Meeting will be held in a virtual format only, via the Internet, with no physical in-person meeting. Stockholders will have the ability to attend, vote and submit questions before and during the virtual meeting from any location via the Internet at www.virtualshareholdermeeting.com/APDN2021.
A complete list of these stockholders eligible to vote at the meeting will be available for inspectionin electronic form at the meetingAnnual Meeting and will be accessible for a period of ten days prior to the meeting during regular business hours at our corporate headquarters at Applied DNA Sciences, 50 Health Sciences Drive, Stony Brook, New York 11790.
YouAnnual Meeting. All stockholders are cordially invited to virtually attend the Special Meeting in person.Annual Meeting. On or about August 3, 2021, the Company will mail to stockholders a Notice of Availability of Proxy Materials (the “Notice”) containing instructions on how to access our Proxy Statement and our 2020 Annual Report on Form 10-K, how to vote electronically via the Internet or vote by telephone, and how to request printed proxy materials.
Your vote is very important. Whether or not you expectplan to attend the SpecialAnnual Meeting, please vote onlinewe encourage you to read the Proxy Statement and submit your proxy or voting instructions as soon as possible by Internet, telephone or mail. For specific instructions on how to vote your shares, please complete, sign and daterefer to the proxy provided toinstructions on the Notice of Internet Availability of Proxy Materials you and return it promptlywill receive in the envelope provided to you, which does not require any postage if mailed inmail, the United States, in order to ensure your representation atsection entitled “About the Special Meeting. EvenAnnual Meeting” beginning on page 1 of the Proxy Statement or, if you have voted byrequest to receive printed proxy you may still vote in person if you attend the Special Meeting. Please note, however, that ifmaterials, your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must obtain a proxy issued in your name from that record holder in order to vote in person.
Ms. Judith Murrah
Secretary
Stony Brook, New York
October 8, 2019
You can help avoid the necessity and expense of sending follow-up letters to ensure a quorum by promptly returning the enclosed proxy card. Please fillnote that shares held beneficially in sign and return the enclosed proxy card in order that the necessary quorumstreet name may be representedvoted by you in person at the Special Meeting.Annual Meeting only if you obtain a legal proxy from the broker, bank, trustee, or other nominee that holds your shares giving you the right to vote the shares.
Ms. Judith Murrah
Secretary
Stony Brook, New York
August 3, 2021
APPLIED DNA SCIENCES, INC.
50 HEALTH SCIENCES DRIVE
STONY BROOK, NEW YORK 11790
PROXY STATEMENT
Proxies are being solicitedOur Board of Directors has made this Proxy Statement and related materials available to you on behalfthe Internet, or, upon your request, has delivered printed proxy materials to you by mail, in connection with the Board of the boardDirectors’ solicitation of directors (the “Board”)proxies for use at a Specialthe 2021 Annual Meeting of Stockholders (the “Special Meeting”) of Applied DNA Sciences, Inc. (“Applied DNA Sciences,” the “Company,” “we” or “us”) to be held online on October 31, 2019,Wednesday, September 15, 2021, beginning at 9:10:00 a.m., local time, at the Long Island High Technology Incubator, 25 Health Sciences Drive, Stony Brook, New York 11790, and at any postponements or adjournments of the SpecialAnnual Meeting. As a stockholder, you are invited to attend the SpecialAnnual Meeting and are requested to vote on the items of business described in this Proxy Statement.
ABOUT THE ANNUAL MEETING
Why did I receive a notice in the mail regarding the Internet availability of proxy statement (the “Proxy Statementmaterials instead of a full set of proxy materials?”).
Applied DNA Sciences is usingIn accordance with rules adopted by the Securities and Exchange Commission (the “(“SEC”) rule that allows us, we are providing access to deliver a “full set” of our proxy materials by mailover the Internet. Accordingly, we are sending a Notice Regarding Availability of Proxy Materials (the “Notice”) to all of our stockholders of record and beneficial owners as of October 4, 2019 (the “Record Date”). Our proxy materials include the Notice of Special Meeting (the “Notice”), this Proxy Statement and a proxy card (collectively,record date (for more information on the “Proxy Materials”), and we will mail our Proxy Materials on or about October 11, 2019. In addition to mailing our Proxy Materials, we will also provide access to our Proxy Materials over the Internet, by October 11, 2019. The Notice and the Proxy Statement instruct you on how to access and review all of the important information contained in the Proxy Materials via the Internet. The Notice and the Proxy Statement also instruct you on how you may submit your vote by mail, the Internet, toll-free number, or in person at the Special Meeting.
ABOUT THE SPECIAL MEETING
Why am I receiving these materials?
We have sent you these Proxy Materials because the Boardrecord date, see “— Who is soliciting your proxyentitled to vote at the Special Meeting, including at any adjournments or postponements of the meeting. You are invited to attend the Special Meeting to vote on the proposals described in this Proxy Statement. However, you do not need to attend the meeting to vote your shares. Instead, you may simply complete, sign and return the enclosed proxy card, or follow the instructions below to submit your proxy over the telephone or through the Internet.Annual Meeting?”). The mailing of our Proxy Materialsthe Notice to our stockholders is scheduled to begin on or about October 11, 2019.August 3, 2021. All stockholders will have the ability to access the proxy materials and our Annual Report on Form 10-K for the fiscal year ended September 30, 2020, as amended (the “Annual Report”) on a website referred to in the Notice or to request to receive a printed set of the proxy materials and the Annual Report. Instructions on how to access the proxy materials over the Internet or to request a printed copy may be found in the Notice. Stockholders may also request to receive proxy materials and our Annual Report in printed form by mail or electronically by email on an ongoing basis.
How do I get electronic access to the proxy materials?
The Notice will provide you with instructions regarding how you can:
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View our proxy materials for the Annual Meeting and our Annual Report on the Internet; and
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Instruct us to send our future proxy materials to you electronically by email.
Choosing to receive your future proxy materials by email will save us the cost of printing and mailing documents to you, and will reduce the impact of printing and mailing these materials on the environment. Stockholders may also request to receive proxy materials and our Annual Report in printed form by mail or electronically by email on an ongoing basis. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting website. Your election to receive proxy materials by email will remain in effect until you terminate it.
What is the purpose of the SpecialAnnual Meeting?
At our SpecialAnnual Meeting, stockholders will act upon the matters outlined in the Noticenotice of meeting accompanying this Proxy Statement, consisting of:
Proposal 1 — to approveof (i) the election of eight directors; (ii) the ratification of the approval, filing and effectiveness of an amendment to the Company’s certificate of incorporation, as amended, (the “our Certificate of Incorporation”) to effect a reverse stock splitdecrease the number of our authorized shares of common stock (the “Reverse Stock Split”), at a ratio into 200,000,000; (iii) the range from one-for-fifteen to one-for-fifty, with such specific ratio to be determined by the Board following the Special Meeting. The purpose of this proposal is to enable the Company to regain compliance with the minimum per share bid price requirement of The Nasdaq Capital Market (“Nasdaq”) so that we may continue our listing on Nasdaq; and
Proposal 2 — if necessary, the adjournmentratification of the Special Meetingappointment of Marcum LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2021; and (iv) such other business that may properly come before the meeting or any postponement or adjournment thereof. In addition, management will report on our performance during the fiscal year ended September 30, 2020 and more recent developments and respond to solicit additional proxies in favorquestions from stockholders. Our Board of the Reverse Stock Split proposal.
Our BoardDirectors is not currently aware of any other matters which will come before the Special Meeting.
If Proposal 1 is approved by the Company’s stockholders at the Special Meeting, the Reverse Stock Split will be effected, if at all, only upon a subsequent determination by the Board of Directors that the Reverse Stock Split is in the best interests of the Company and our stockholders. The Board may make this determination as soon as immediately following the conclusion of the Special Meeting, and the Reverse Stock Split could become effective as soon as the business day immediately following the Special Meeting.meeting.
Notwithstanding approval of the Reverse Stock Split proposal by our stockholders, the Board reserves its right to elect not to proceed with implementing the Reverse Stock Split proposal at any time prior to the date on which the amendment to our Certificate of Incorporation becomes effective under Delaware law, if it determines, in its sole discretion, that the Reverse Stock Split is no longer in the best interests of the Company or its stockholders.
Each of these proposals is described in further detail below.
Why does the Company need stockholders to vote on the Reverse Stock Split?
Our common stock and publicly traded warrants are listed on Nasdaq under the symbols “APDN” and “APDNW,” respectively. For our common stock and publicly traded warrants to continue to be listed on Nasdaq, we must meet the current continued listing requirements, including the requirements that (1) our common stock must maintain a minimum closing bid price of $1.00 pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”); and (2) we must maintain net income from continuing operations (in the latest fiscal year or two of the three last fiscal years) of at least $500,000, a market value of listed securities of at least $35 million (the “Minimum Value of Listed Securities Requirement”), or stockholders’ equity of at least $2.5 million, pursuant to Nasdaq Listing Rule 5550(b).
On January 29, 2019 and January 30, 2019, we received written notices from the Listing Qualifications Department of Nasdaq notifying us that we are not in compliance with the Minimum Bid Price Requirement as well as the Minimum Value of Listed Securities Requirement, or the alternative standards of Nasdaq Listing Rule 5550(b)(1) or 5550(b)(3) which require a company to have minimum stockholders equity of at least $2.5 million or for it to have had net income from continuing operations of at least $500,000 in the latest fiscal year or in two of the last three fiscal years, respectively.
On July 30, 2019, we received written notice from Nasdaq indicating that, based upon our continued non-compliance with the Minimum Bid Price Requirement and Minimum Value of Listed Securities Requirement, the staff of Nasdaq (the “Staff”) had determined to delist our securities (including our common stock and publicly traded warrants) from Nasdaq unless we timely requested a hearing before the Nasdaq Hearings Panel (the “Panel”). We requested a hearing before the Panel and the hearing was held on September 19, 2019. On October 1, 2019, the Company received written notice from the Panel indicating that the Panel has granted the Company’s request for the continued listing of the Company’s securities on Nasdaq, subject to the Company evidencing compliance on or before December 31, 2019 with all Nasdaq continued listing requirements. During this time, the Company’s securities will remain listed and trading on Nasdaq. There can be no assurance that we will be able to regain compliance with the applicable continued listing criteria within the period of time granted by the Panel.
The Board has determined that an amendment to our Certificate of Incorporation to effect the Reverse Stock Split is necessary to the continued listing of our common stock on Nasdaq and is in the best interests of our stockholders.
In addition to bringing the per share trading price of our common stock above $1.00, we also believe that the Reverse Stock Split will make our common stock more attractive to a broader range of institutional and other investors, as we have been advised that the current per share trading price of our common stock may affect its acceptability to certain institutional investors, professional investors and other members of the investing public. Many brokerage houses and institutional investors have internal policies and practices that either prohibit them from investing in low-priced stocks or tend to discourage individual brokers from recommending low-priced stocks to their customers. In addition, some of those policies and practices may function to make the processing of trades in low-priced stocks economically unattractive to brokers.
How do proxies work and how are votes counted?
The Board of Directors is asking for your proxy. Giving us your proxy means that you authorize us to vote your shares at the SpecialAnnual Meeting in the manner you direct. You may vote for all of our director nominees or withhold your vote as to some or all of our director nominees. You may also vote for or against, or abstain from voting on the ratification of the approval, filing and effectiveness of Proposals 1an amendment to our Certificate of Incorporation to decrease the number of our authorized shares of common stock to 200,000,000 and 2.the ratification of our selection of Marcum LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2021. If a stockholder of record does not indicate instructions with respect to one or more matters on his, her or its proxy, the shares represented by that proxy will be voted as recommended by the Board of Directors (for more information, see “— How doesWhat are the Board recommend that I vote?of Directors’ recommendations as to the proposals to be voted on?”). If
a beneficial owner of shares held in street name does not provide instructions to the bank, broker, or other nominee holding those shares, please see the information below under the caption “—“— What if I am a beneficial owner and do not give voting instructions to my broker or other nominee?nominee?”
Who is entitled to vote at the SpecialAnnual Meeting?
Only stockholders of record at the close of business on October 4, 2019,July 19, 2021, the Record Date,record date for the meeting, are entitled to receive notice of and to participate in the SpecialAnnual Meeting, or any postponements and adjournments of the meeting. If you were a stockholder of record on that date, you will be entitled to vote all of the shares you held on that date at the meeting, or any postponements or adjournments of the meeting.
On July 19, 2021, the Record Date,record date for the meeting, there were 48,015,9387,486,120 shares of common stock outstanding. Each outstanding share of common stock is entitled to one vote on each of the matters presented at the SpecialAnnual Meeting or postponements and adjournments of the meeting.
What constitutes a quorum?
The presence at the meeting, in person or by proxy, of the holders of a majority of the outstanding shares of common stock as of the Record Daterecord date will constitute a quorum, permitting the SpecialAnnual Meeting to conduct its business. As of the Record Date, 48,015,938record date, 7,486,120 shares of common stock, representing the same number of votes, were outstanding. Thus, the presence of holders representing at least 24,007,9703,743,061 shares will be required to establish a quorum.
If a stockholder abstains from voting as to any matter or matters, the shares held by such stockholder shall be deemed present at the SpecialAnnual Meeting for purposes of determining a quorum. If a bank, broker, or other nominee returns a “broker non-vote” proxy, indicating a lack of voting instructions by the beneficial holder of the shares and a lack of discretionary authority on the part of the bank, broker, or other nominee to vote on a particular matter, then the shares covered by such broker non-vote proxy shall be deemed present at the SpecialAnnual Meeting for purposes of determining a quorum, but otherwise shall have no effect.quorum. For more information on broker non-votes,discretionary and non-discretionary matters, see “—“— What if I am a beneficial owner and do not give voting instructions to my broker or other nominee?”
What vote is required to approve each matter and how are votes counted?
Proposal No. 1: Election of Directors
The eight nominees who receive the highest number of affirmative votes of the shares present in person or represented by proxy and entitled to vote on the election of directors will be elected as our directors. Abstentions, broker non-votes and instructions on the accompanying proxy card to withhold authority to vote for one or more nominees will not be counted as votes in favor of the relevant nominee or nominees and will result in the relevant nominee or nominees receiving fewer total votes. However, the number of votes cast in favor of such nominee will not be reduced by any abstention, broker non-vote or instructions to withhold authority.
Proposal No. 2: Ratification of the Approval, Filing and Effectiveness of an Amendment to Our Certificate of Incorporation to Decrease the Number of Our Authorized Shares of Common Stock to 200,000,000
The affirmative vote of a majority of the outstanding shares of our common stock entitled to vote on this proposal is required for the approval of this proposal. An abstention from voting by a stockholder present in person or represented by proxy at the meeting or a broker non-vote by a broker who elects to non-vote instead of using its voting discretion has the same legal effect as a vote “against” the matter.
Proposal No. 3: Ratification of Appointment of Independent Registered Public Accounting Firm
The affirmative vote of a majority of the outstanding shares of our common stock present in person or represented by proxy at the Annual Meeting and entitled to vote on this proposal is required for the approval of this proposal.
An abstention from voting by a stockholder present in person or represented by proxy at the meeting or a broker non-vote by a broker who elects to non-vote instead of using its voting discretion has the same legal effect as a vote “against” the matter.
How can you attend the Annual Meeting?
We will be hosting the Annual Meeting live via audio webcast. Any stockholder can attend the Annual Meeting live online at www.virtualshareholdermeeting.com/APDN2021. If you were a stockholder as of the Record Date, or you hold a valid proxy for the Annual Meeting, you can vote at the Annual Meeting. A summary of the information you need to attend the Annual Meeting online is provided below:
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Instructions on how to attend and participate via the Internet, including how to demonstrate proof of stock ownership, are posted at www.virtualshareholdermeeting.com/APDN2021.
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Assistance with questions regarding how to attend and participate via the Internet will be provided at www.virtualshareholdermeeting.com/APDN2021 on the day of the Annual Meeting.
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Webcast will start on September 15, 2021, at 10:00 a.m., local time.
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You will need your 16-digit control number to enter the Annual Meeting.
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Stockholders may submit questions while attending the Annual Meeting via the Internet.
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Webcast replay of the Annual Meeting will be available until September 14, 2022.
To attend and participate in the Annual Meeting, you will need the 16-digit control number included in the Notice, on your proxy card, or on the instructions that accompanied your proxy materials. If your shares are held in “street name,” you should contact your bank or broker to obtain your 16-digit control number or otherwise vote through the bank or broker. If you lose your 16-digit control number, you may join the Annual Meeting as a “Guest” but you will not be able to vote, ask questions or access the list of stockholders as of the Record Date.
Why hold a virtual meeting?
As part of our effort to maintain a safe and healthy environment for our directors, members of management and stockholders who wish to attend the Annual Meeting, in light of the COVID-19 pandemic, we believe that hosting a virtual meeting is in the best interest of the Company and its stockholders. In addition, we are excited to use the latest technology to provide expanded access, improved communication and cost savings for our stockholders and the Company while providing stockholders the same rights and opportunities to participate as they would have at an in-person meeting. We believe the virtual meeting format enables increased stockholder attendance and participation because stockholders can participate from any location around the world.
How do I ask questions at the virtual Annual Meeting?
During the virtual Annual Meeting, you may only submit questions in the question box provided at www.virtualshareholdermeeting.com/APDN2021. We will respond to as many inquiries at the virtual Annual Meeting as time allows.
By proxy:
Whether you hold shares directly as the stockholder of record or beneficially in street name, you may direct how your shares are voted without attending the Special Meeting.
Stockholder of Record: Shares Registered in Your Name16 Digit Control Number
If you are a stockholderrecord holder, meaning your shares are registered in your name and not in the name of record,a broker, trustee, or other nominee, or a beneficial owner who has been provided by your broker with a 16 digit control number, you may vote:
By1.
Over the Internet or— If you have Internet access, you may authorize the voting of your shares by telephone: Followaccessing www.proxyvote.com and following the instructions includedset forth in the Proxy Materials. You must specify how you want your shares voted or your vote will not be completed and you will receive an error message. Your shares will be voted according to your instructions. You can also vote during the meeting by visiting www.virtualshareholdermeeting.com/APDN2021 and having available the control number included on your proxy card or on the instructions that accompanied your Proxy Materials.
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By Telephone — If you are a registered stockholder, you may call toll-free 1-800-690-6903 to vote by Internet or telephone.
By mail: You can If you are a beneficial owner who has been provided with a control number on the voting instruction form that accompanied your Proxy Materials, you may call toll-free 1-800-454-8683 to vote by mail by completing, signing, datingtelephone. Your shares will be voted according to your instructions.
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By Mail If You Are a Record Owner — Complete and returningsign the attached WHITE proxy card as instructed onand mail it in the card.enclosed postage prepaid envelope. Your shares will be voted according to your instructions. If you sign theyour WHITE proxy card but do not specify how you want your shares voted, they will be voted in accordanceas recommended by our Board. Unsigned proxy cards will not be voted.
Beneficial Owners
As the beneficial owner, you have the right to direct your broker, trustee, or other nominee on how to vote your shares. In most cases, when your broker provides you with the Board’s recommendations as noted below.
In person at the meeting: Ifproxy materials, they will also provide you attend the Special Meeting, you may deliverwith a completed proxy card in person or you may vote by completing a ballot,16 digit control number, which will be available at the meeting.
Telephone and Internet voting facilities for stockholders of record will be available 24 hours a day and will close at 11:59 p.m. Eastern Time on October 30, 2019.
If you return your signed proxy card to us before the Special Meeting, we will vote your shares as you direct. Whether or not you plan to attend the Special Meeting, we urgeallow you to vote by proxy to ensure your vote is counted. You may still attendas described above or at the Special Meeting and vote in person if you have already voted by proxy.
Beneficial Owner: Shares Registered in the Name of Broker or BankAnnual Meeting.
If your broker has not provided you arewith a beneficial owner of shares registered in the name of16 digit control number, please contact your broker for instructions on how to vote your shares.
Stockholders who submit a proxy by Internet or telephone need not return a proxy card or any form forwarded by your broker, bank, trust or other nominee, you should have received a proxy card and voting instructions with these Proxy Materials from that organization rather than from us. Simply complete and mail the proxy card to ensure that your vote is counted. To vote in person at the Special Meeting, you must obtain a valid proxy from your broker, bank, or other agent. Follow the instructions from your broker or bank included with these Proxy Materials, or contact your broker or bank to request a proxy card.
nominee. Stockholders who submit a proxy through the Internet or telephone should be aware that they may incur costs to access the Internet or telephone, such as usage charges from telephone companies or Internet service providers, and that these costs will notmust be reimbursedborne by the Company.stockholder.
What am I voting on at the Annual Meeting?
The following proposals are scheduled for a vote at the Annual Meeting:
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Proposal No. 1: to elect eight directors, constituting the entire Board of Directors, to serve until the Company’s next annual meeting of stockholders, or until their respective successors are duly elected and qualified;
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Proposal No. 2: to ratify the approval, filing and effectiveness of the Certificate of Amendment to our Certificate of Incorporation to decrease the number of our authorized shares of common stock to 200,000,000; and
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Proposal No. 3: to ratify the appointment of Marcum LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2021.
Each of these proposals is described in further detail below.
What happens if additional matters are presented at the SpecialAnnual Meeting?
Other than the items of business described in this Proxy Statement, we are not currently aware of any other business to be acted upon at the SpecialAnnual Meeting. If you grant a proxy, the persons named as proxy holders, Ms. Beth Jantzen and Ms. Judith Murrah, will have the discretion to vote your shares on any additional matters properly presented for a vote at the meeting. If for any reason any of the nominees is not available as a candidate for director, the persons named as proxies will vote your proxy for such other candidate or candidates as may be nominated by the Board of Directors.
How does the Board of Directors’ recommend that I vote?
As to the proposals to be voted on at the SpecialAnnual Meeting, the Board of Directors unanimously recommends that you vote:
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FOR Proposal No. 1, for the election of each of the eight nominated candidates for director;
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FOR Proposal No. 2, for the ratification of the approval, filing and effectiveness of an amendment to our Certificate of Incorporation and authorizationto decrease the number of the Boardour authorized shares of common stock to effect the Reverse Stock Split;200,000,000; and
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FOR Proposal 2, for approval of a proposalNo. 3, for the adjournmentratification of the Special Meeting to permitappointment of Marcum LLP as our independent registered public accounting firm for the Company to solicit additional proxies if there are insufficient proxies at the Special Meeting to approve Proposal 1.
fiscal year ending September 30, 2021.
your bank, broker, or other nominee, whether your shares can be voted by such person or entity depends on the type of item being considered for vote.
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Non-Discretionary Items.The approvalelection of Proposal 1, an amendment to our Certificate of Incorporation and authorization of the Board to effect the Reverse Stock Split, and the approval of Proposal 2, the adjournment of the Special Meeting to permit the Company to solicit additional proxies if there are insufficient proxies at the Special Meeting to approve Proposal 1, are eachdirectors is a non-discretionary itemsitem and may not be voted on by brokers, banks or other nominees who have not received specific voting instructions from beneficial owners. A broker non-vote occurs when a broker holding shares for a beneficial owner does not vote on a particular proposal because the broker does not have discretionary voting authority and has not received voting instructions from the beneficial owner. Therefore, broker non-votes may exist in connection with Proposals 1
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Discretionary Items. The ratification of the approval, filing and 2. For Proposal 1, regardingeffectiveness of an amendment to our Certificate of Incorporation to decrease the Reverse Stock Split, broker non-votes will be excluded entirely from the vote and will, therefore, have the same effect as a vote “AGAINST” such proposal. Broker non-votes will not be considered votes cast by the holdersnumber of all of theour authorized shares of common stock presentto 200,000,000 and the ratification of the appointment of Marcum LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2021 are discretionary items. Generally, brokers, banks and other nominees that do not receive voting instructions from beneficial owners may vote on this proposal in person or by proxy at the Special Meeting and voting affirmatively or negatively and will therefore not have any effect with respect to Proposal 2.their discretion if they so choose to.
We encourage you to provide instructions to your broker regarding the voting of your shares.
Can I change my vote or revoke my proxy?
Yes. (1) If you are a stockholder of record, you may revoke your proxy by (i) following the instructions on the proxy cardNotice and entering a new vote by telephone or over the Internet up until 11:59 p.m.P.M. Eastern Time on October 30, 2019,September 14, 2021, (ii) attending the SpecialAnnual Meeting and voting in person (although attendance at the SpecialAnnual Meeting will not in and of itself revoke a proxy) or (iii) entering a new vote by mail. Any written notice of revocation or subsequent proxy card must be received by the Secretary of the Company prior to the holding of the vote at the SpecialAnnual Meeting at 9:10:00 a.m.,AM, Eastern Time, on October 31, 2019.September 15, 2021. Such written notice of revocation or subsequent proxy card should be hand delivered to the Secretary of the Company or sent to the Company’s principal executive offices at 50 Health Sciences Drive, Stony Brook, New York 11790, Attention: Corporate Secretary. (2) If a broker, bank, or other nominee holds your shares, you must contact them in order to find out how to change your vote.
The last proxy or vote that we receive from you will be the vote that is counted.
Who will bear the cost of soliciting votes for the SpecialAnnual Meeting?
We will pay the entire cost of preparing, assembling, printing, mailing, and distributing these Proxy Materialsproxy materials and soliciting votes. If you choose to access the Proxy Materialsproxy materials and/or vote over the Internet, you are responsible for Internet access charges you may incur. If you choose to vote by telephone, you are responsible for telephone charges you may incur. In addition to the mailing of these Proxy Materials,proxy materials, the solicitation of proxies or votes may be made in person, by telephone, or by electronic communication by our directors, officers, and employees, who will not receive any additional compensation for such
PROPOSAL NO. 1
TO APPROVE THE AMENDMENT TO THE COMPANY’S CERTIFICATEELECTION OF INCORPORATION EFFECTING THE REVERSE STOCK SPLIT IN THE RANGE FROM ONE-FOR-FIFTEEN TO ONE-FOR-FIFTYDIRECTORS
Introduction
AtEight directors (constituting the Specialentire Board of Directors) are to be elected at the Annual Meeting stockholdersto serve until the 2022 Annual Meeting of Stockholders, or until their respective successors are elected and qualified. All of the nominees are our current directors and have been nominated for re-election by our Board of Directors. The Company intends that the proxy in the form presented will be askedvoted, unless otherwise indicated, for the election of these nominees to approve an amendment (the “Amendment”) toserve until the Company’s2022 Annual Meeting of Stockholders, or until their successors are elected and qualified. Our Certificate of Incorporation provides that will effect the Reverse Stock Split at a rationumber of directors that constitute the whole Board of Directors shall be fixed exclusively in the range from one-for-fifteen to one-for-fifty, with such specific ratio to bemanner designated in the Company’s Bylaws. The Company’s Bylaws provide that the number of directors is determined by resolution of the Board of Directors, provided that the Board of Directors shall consist of at least one member.
On July 11, 2011, Delabarta, Inc. (“Delabarta”), a wholly owned subsidiary of ABARTA, Inc. (“ABARTA”), participated as an investor in the Company’s private placement of our common stock, as described in our Current Report on Form 8-K filed with the SEC on July 15, 2011. In connection with the investment in the Company by Delabarta, we agreed to use best efforts to nominate its designee, Mr. John Bitzer, III to the Board following the Special Meeting (the “Reverse Stock Split Ratio”). Upon the effectivenessof Directors and elect Mr. Bitzer as a director within 30 days of the Amendment (the “Split Effective Time”),closing and to nominate and include Mr. Bitzer on the issuedslate of nominees for the Board of Directors for election by stockholders at the annual meetings of stockholders for so long as Delabarta owns at least 2% of the outstanding shares of common stock outstanding immediately prior to the Split Effective Time will be reclassified into a smaller number of shares. The ultimate Reverse Stock Split Ratio will be based on a number of factors, including market conditions, existing and expected trading prices for the common stock and the listing requirements of Nasdaq.
The proposed Amendment to effect the Reverse Stock Split is attached as the Appendix to this Proxy Statement. The formstock. As of the Amendment, as more fully described below, will effect the reverse stock split but will not change the number of authorized shares of common stock or preferred stock, or the par valueRecord Date, Delabarta owned less than 1% of the common stock or preferred stock. The following discussion is qualified in its entirety by the full text of the Amendment, which is incorporated herein by reference.
Purpose
The Board approved the proposal approving the Amendment for the following reasons:
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the Board believes that the Reverse Stock Split is the best option available to the Company to increase its stock price as required for continued listing on Nasdaq;
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the Board believes a higher stock price may help generate investor interest in the Company and help the Company attract and retain employees; and
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if the Reverse Stock Split successfully increases the per share price of the common stock, the Board believes this increase may increase trading volume in the common stock and facilitate future financings by the Company.
Reasons for the Reverse Stock Split and Nasdaq Listing Requirements
Our common stock and publicly traded warrants are listed on Nasdaq under the symbols “APDN” and “APDNW,” respectively. For our common stock and publicly traded warrants to continue to be listed on Nasdaq, we must meet the current continued listing requirements, including the requirements that (1) our common stock must maintain the Minimum Bid Price Requirement; and (2) we must maintain net income from continuing operations (in the latest fiscal year or two of the three last fiscal years) of at least $500,000, the Minimum Value of Listed Securities Requirement, or stockholders’ equity of at least $2.5 million, pursuant to Nasdaq Listing Rule 5550(b).
On January 29, 2019 and January 30, 2019, we received written notices from the Listing Qualifications Department of Nasdaq notifying us that we are not in compliance with the Minimum Bid Price Requirement as well as the Minimum Value of Listed Securities Requirement, or the alternative standards of Nasdaq Listing Rule 5550(b)(1) or 5550(b)(3) which require a company to have minimum stockholders equity of at least $2.5 million or for it to have had net income from continuing operations of at least $500,000 in the latest fiscal year or in two of the last three fiscal years.
On July 30, 2019, we received written notice from Nasdaq indicating that, based upon our continued non-compliance with the Minimum Bid Price Requirement and Minimum Value of Listed Securities Requirement, the Staff had determined to delist our securities (including our common stock and publicly traded warrants) from Nasdaq unless we timely requested a hearing before the Panel. We requested a hearing before the Panel and the hearing was held on September 19, 2019. On October 1, 2019, the Company received written notice from the Panel indicating that the Panel has granted the Company’s request for the continued listingoutstanding shares of the Company’s securities on Nasdaq, subjectcommon stock. Although the Company is no longer obligated to nominate a designee of Delabarta, the Company values Mr. Bitzer’s contributions to the CompanyBoard and is renominating him.
Should one or more of these nominees be unable to accept nomination or election as a director, the individuals named as proxy holders, Ms. Beth Jantzen and Ms. Judith Murrah, will vote the shares that they represent for such other persons as the Board of Directors may recommend. The Board of Directors has no present knowledge that any of the nominees for director named below will be unavailable to serve.
The directors standing for re-election, together with their ages as of July 19, 2021 and certain other information, are:
| Director | | | Age | | | Year First
Became
Director | | | Principal Occupation and Other Board of Directors
Service During the Past Five Years | |
| James A. Hayward, Ph.D., Sc.D. | | | 68 | | | 2006 | | | 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 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 | |
evidencing compliance on or before December 31, 2019 with all Nasdaq continued listing requirements. During this time, the Company’s securities will remain listed and trading on Nasdaq. There can be no assurance that we will be able to regain compliance with the applicable continued listing criteria within the period of time granted by the Panel. To regain compliance with the Minimum Bid Price Requirement, the bid price of the common stock must have a closing bid price of at least $1.00 per share for a minimum of 10 consecutive trading days.
The Board has determined that the Amendment to effect the Reverse Stock Split is necessary to the continued listing of our common stock on Nasdaq and is in the best interests of our stockholders.
In addition to bringing the per share trading price and closing bid price of our common stock back above $1.00, we also believe that the Reverse Stock Split will make our common stock more attractive to a broader range of institutional and other investors, as we have been advised that the current per share trading price of our common stock may affect its acceptability to certain institutional investors, professional investors and other members of the investing public. Many brokerage houses and institutional investors have internal policies and practices that either prohibit them from investing in low-priced stocks or tend to discourage individual brokers from recommending low-priced stocks to their customers. In addition, some of those policies and practices may function to make the processing of trades in low-priced stocks economically unattractive to brokers.
If we were unable to maintain compliance with the Minimum Bid Price Requirement and our common stock were delisted from Nasdaq, trading of our common stock would most likely take place on an over-the-counter market established for unlisted securities, such as the OTCQX, the OTCQB or the OTC Pink markets maintained by OTC Markets Group Inc. An investor would likely find it less convenient to sell, or to obtain accurate quotations in seeking to buy, our common stock on an over-the-counter market, and many investors would likely not buy or sell our common stock due to difficulty in accessing over-the-counter markets, policies preventing them from trading in securities not listed on a national exchange or other reasons. In addition, as a delisted security, our common stock would be subject to SEC rules as a “penny stock,” which impose additional disclosure requirements on broker-dealers. The regulations relating to penny stocks, coupled with the typically higher cost per trade to the investor of penny stocks due to factors such as broker commissions generally representing a higher percentage of the price of a penny stock than of a higher-priced stock, would further limit the ability of investors to trade in our common stock. For these reasons and others, delisting would adversely affect the liquidity, trading volume and price of our common stock, causing the value of an investment in us to decrease and having an adverse effect on our business, financial condition and results of operations, including our ability to attract and retain qualified employees and to raise capital.
Reverse Stock Split Ratio
If approved by stockholders, this Reverse Stock Split proposal would permit (but not require) the Board to effect a Reverse Stock Split of our common stock at any time before December 31, 2019 by the Reverse Stock Split Ratio, with the specific ratio to be fixed within this range by the Board in its sole discretion without further stockholder approval. We believe that enabling the Board to fix the specific Reverse Stock Split Ratio within the stated range will provide us with the flexibility to implement it in a manner designed to maximize the anticipated benefits for our stockholders. In fixing the Reverse Stock Split Ratio, the Board may consider, among other things, factors such as:
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the total number of shares of common stock outstanding;
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Nasdaq requirements for the continued listing of common stock;
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the historical trading price and trading volume of common stock;
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the then prevailing trading price and trading volume for common stock;
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the anticipated impact of the Reverse Stock Split on the trading price of and market for common stock;
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the administrative and transaction costs associated with potential exchange ratios;
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potential financing opportunities; and
| Director | | | Age | | | Year First
Became
Director | | | Principal Occupation and Other Board of Directors
Service During the Past Five Years | |
| | | | | | | | | | service provider and manufacturer of ingredients for skincare and dermatology that was sold to Engelhard (now BASF) in 2004. Dr. Hayward also serves on the advisory board of the Manufacturing and Technology Resource Consortium of Stony Brook University, and serves on the board 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. | |
| John Bitzer, III | | | 60 | | | 2011 | | | 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., 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. In connection with the investment in the Company by Delabarta, Inc. (“Delabarta”), a wholly owned subsidiary of ABARTA, during July 2011, we agreed to use best efforts to nominate its designee, Mr. Bitzer, to the Board of Directors and elect Mr. Bitzer as a director within 30 days of the closing and to nominate and include Mr. Bitzer on the slate of nominees for the Board of Directors for election by stockholders at the annual meetings of stock holders for so long as Delabarta owns at least 2% of the outstanding shares of common stock of the Company. As of July 19, 2021, Delabarta owned less than 1% of the outstanding shares of common stock of the Company. The Board of Directors believes that Mr. Bitzer’s advice makes him a valuable member of the Board of Directors. 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. | |
PROPOSAL NO. 2
RATIFICATION OF THE APPROVAL, FILING AND EFFECTIVENESS OF AN AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO DECREASE THE NUMBER OF OUR AUTHORIZED SHARES OF COMMON STOCK TO 200,000,000
Our board of directors has determined that the Reverse Stock Splitit is no longer in the best interests of the Company and itsour stockholders and decide to abandon the Reverse Stock Split at any time before, during or after the Special Meeting and priorratify, pursuant to its effectiveness, without further action by the stockholders.
EffectivenessSection 204 of the Reverse Stock Split
If approved by our stockholders,Delaware General Corporation Law, or the Reverse Stock Split would become effective uponDGCL, the approval, filing and effectiveness of the Certificate of Amendment to our Certificate of Incorporation, filed with the Secretary of State of Delaware on September 16, 2020 (the “September 2020 COI Amendment”) to decrease the number of our authorized shares of common stock from 500,000,000 to 200,000,000 (the “Authorized Shares Decrease”) which became effective on September 17, 2020 (the “COI Amendment Ratification”). This ratification would be retroactive to the effectiveness of the September 2020 COI Amendment.
The Authorized Shares Decrease reduced the Company’s annual Delaware franchise tax by approximately 50%. The board of directors believes that such reduction allows the Company to maintain an adequate reserve of authorized but unissued shares for future events that would require the issuance of additional shares of our common stock, such as capital-raising transactions, issuance of equity-based compensation and, to the extent opportunities may arise in the future, strategic transactions that may involve our issuance of stock-based consideration. Therefore, the board of directors is seeking ratification of the approval, filing and effectiveness of an amendment to our COI to reduce our authorized shares of common stock.
At our 2020 Annual Meeting held on September 16, 2020, we sought stockholder approval of an amendment to our Certificate of Incorporation to decrease the number of authorized shares of our common stock from 500,000,000 to 200,000,000 shares (we refer to the proposal presented at the 2020 Annual Meeting in connection with the Authorized Shares Decrease as the “Prior Proposal”). At the 2020 Annual Meeting, our inspector of elections determined that the Prior Proposal received the requisite stockholder approval and certified that the Prior Proposal passed. We subsequently filed the September 2020 COI Amendment with the Secretary of State of the State of Delaware on September 16, 2020.
As part of our inspector of elections’ determination of our voting results, votes cast by brokers, trustees, banks or other nominees without instruction from the beneficial owners of certain of our outstanding shares were counted in favor of the Prior Proposal in accordance with the rules of New York Stock Exchange (the “NYSE”) that govern how brokers, trustees, banks or other nominees may cast such votes. These NYSE rules are applicable to brokers, trustees, banks and other nominees regardless of whether the issuer is listed on the NYSE or Nasdaq. Therefore, these rules apply to us as a Nasdaq listed company. Certain statements made in the definitive proxy statement for the 2020 Annual Meeting, which was filed on Schedule 14A with the SEC on July 16, 2020, or the Prior Proxy Statement, were inconsistent with this treatment. The Prior Proxy Statement stated that brokers, trustees, banks and other nominees would not have discretion to vote for approval of the Prior Proposal without instruction.
Although our inspector of elections certified that the Prior Proposal passed, our board of directors has determined that the description of the authority of brokers and nominees to vote on the Prior Proposal without instruction in the Prior Proxy Statement may create some uncertainty as to the effect of the vote obtained at the later2020 Annual Meeting and, accordingly, uncertainty regarding the validity of the September 2020 COI Amendment and the Authorized Shares Decrease. As a result, the board of directors has determined that it is in the best interests of the company and our stockholders to ask our stockholders to ratify the approval, filing and effectiveness of the September 2020 COI Amendment and the Authorized Shares Decrease pursuant to Section 204 of the DGCL in order to eliminate any uncertainty regarding their validity or effectiveness. If the COI Amendment Ratification is approved by stockholders and becomes effective, the ratification will be retroactive to (i) in the case of the Authorized Shares Decrease, September 16, 2020, which was the date the Authorized Shares Decrease became effective, and (ii) in the case of the September 2020 COI Amendment, September 17, 2020, which was the date of effectiveness of the September 2020 COI Amendment.
Our Board of Directors Approved the Ratification of the September 2020 COI Amendment and the Authorized Shares Decrease
Section 204 of the DGCL allows a Delaware corporation, by following specified procedures, to ratify a corporate act retroactive to the date the corporate act was originally taken. We do not believe that it is clear that the approval, filing and effectiveness of the September 2020 COI Amendment and the Authorized Shares Decrease are invalid and ineffective. However, on July 8, 2021, after consultation with counsel, our board of directors determined that it would be advisable and in the best interests of the Company and our stockholders to ratify the approval, filing and effectiveness of the September 2020 COI Amendment and the Authorized Shares Decrease pursuant to Section 204 of the DGCL in order to eliminate any uncertainty related to their validity or effectiveness, and unanimously adopted the resolutions attached hereto as Appendix A (such resolutions are incorporated herein by reference) approving the COI Amendment Ratification. Our board of directors also recommended that our stockholders approve the COI Amendment Ratification for purposes of Section 204 of the DGCL, and directed that the COI Amendment Ratification be submitted to our stockholders for approval.
The text of Sections 204 and 205 of the DGCL are attached hereto as Appendix B.
Filing of a Certificate of Validation
Upon the receipt of the required vote of the stockholders to approve the COI Amendment Ratification, we intend to file a certificate of validation with respect to the September 2020 COI Amendment and the Authorized Shares Decrease with the Secretary of State of the State of Delaware (the “Certificate of Validation”). The time that the filing of the Certificate of Validation with the Secretary of State of the State of Delaware becomes effective in accordance with the DGCL will be the “validation effective time” of the COI Amendment Ratification within the meaning of Section 204 of the DGCL.
Retroactive Ratification of the September 2020 COI Amendment and the Authorized Shares Decrease
The effect of the ratification will be retroactive (i) in the case of the Authorized Shares Decrease, September 16, 2020, which was the date the Authorized Shares Decrease became effective, and (ii) in the case of the September 2020 COI Amendment, September 17, 2020, which was the date of effectiveness of the September 2020 COI Amendment. When the Certificate of Validation becomes effective in accordance with the DGCL, it should eliminate any possible uncertainty as to whether the September 2020 COI Amendment and the Authorized Shares Decrease are void or voidable as a result of the potential failure of authorization described above.
Time Limitations on Legal Challenges to the Ratification of the September 2020 COI Amendment and the Authorized Shares Decrease
If the COI Amendment Ratification becomes effective, under the DGCL, any claim that (i) the September 2020 COI Amendment or the Authorized Shares Decrease ratified pursuant to the COI Amendment Ratification is void or voidable due to a failure of authorization, or (ii) the Delaware Court of Chancery should declare in its discretion that the COI Amendment Ratification not be effective or be effective only on certain conditions, must be brought within 120 days from the time that the filing of the Certificate of Validation with the Secretary of State of the State of Delaware becomes effective in accordance with the DGCL.
The Consequences if the COI Amendment Ratification is Not Approved by Stockholders
If the COI Amendment Ratification is not approved by the requisite vote of the stockholders, we will not be able to file the Certificate of Validation with the Secretary of State of the State of Delaware and the COI Amendment Ratification will not become effective, in accordance with Section 204 of the DGCL. The failure to approve the COI Amendment Ratification may leave us exposed to potential claims that (i) the vote on the Authorized Shares Decrease proposal did not receive the requisite stockholder approval, (ii) the September 2020 COI Amendment was therefore not validly implemented by our board of directors, and the Authorized Shares Decrease was not validly effected, and (iii) actions taken by us in reliance on the Authorized Shares Decrease were improperly effected.
Vote Required
The affirmative vote of at least a majority of the outstanding shares of common stock is required to approve this proposal. Abstentions will have the same effect as shares voted against this proposal. The NYSE has informed us that a vote on this proposal will be considered a discretionary item. Generally, brokers, banks and other nominees that do not receive voting instructions from beneficial owners may vote on this proposal in their discretion if they so choose to. However, should such a broker, bank or other nominee elect to broker non-vote on this proposal, such broker non-vote will be counted as a vote against this proposal. The Company intends that the proxy in the form presented will be voted, unless otherwise indicated, for the ratification of the COI Amendment Ratification. If no instructions are indicated on such proxy, the shares will be voted “FOR” the ratification of the COI Amendment Ratification.
Our Board of Directors May Abandon the COI Amendment Ratification
The General Corporation Law of the State of Delaware permits a board of directors to abandon an amendment to a certificate of incorporation, notwithstanding the ratification of same by the stockholders, at any time before the effectiveness of the filing of such amendment to the certificate of incorporation with the Secretary of State of the State of Delaware, if so provided in the resolution authorizing such amendment. Your ratification of the COI Amendment Ratification set forth in the Amendment, whichthis Proposal No. 2 will constitute the Split Effective Time. The exact timingpermit our board of the Amendment will be determined by the Board based on its evaluation asdirectors to, when such action will be the most advantageous to the Company and its stockholders. In addition, the Board reserves the right, notwithstanding stockholder approval and without further action by the stockholders, to abandon the Amendment and the Reverse Stock Split if, at any time prior to the effectiveness of the filing of the COI Amendment Ratification with the Secretary of State of the State of Delaware, and notwithstanding the Board, in its sole discretion, determines that it is no longer inratification of such COI Amendment Ratification by the stockholders of the Company, abandon such amendment without further action by our best interest andstockholders.
Effectiveness of the best interestsCOI Amendment Ratification
If the vote of our stockholders required to proceed.
The proposed formratification the COI Amendment Ratification set forth in this Proposal No. 2 is obtained, and our board of directors does not abandon the COI Amendment to effectRatification, we will file the Reverse Stock Split is attached as the Appendix to this Proxy Statement. AnyCOI Amendment to effect the Reverse Stock Split will include the Reverse Stock Split Ratio fixed by the Board, within the range approved by the stockholders.
Potential Market Effects of the Reverse Stock Split
The Reverse Stock Split proposal is intended primarily to increase the Company’s per share bid price and satisfy the Minimum Bid Price Requirement. Reducing the number of outstanding shares of common stock should, absent other factors, increase the per share market price of the common stock, although the Company cannot provide any assurance that it will be able to meet or maintain a bid price over the Minimum Bid Price Requirement for continued listing on Nasdaq or any other exchange. The delisting of the common stock from Nasdaq may result in decreased liquidity, increased volatility in the price and trading volume of our common stock, a loss of current or future coverage by certain sell-side analysts, a diminution of institutional investor interest and/or the impairment of the Company’s ability to raise capital. Delisting could also cause a loss of confidence of the Company’s customers, collaborators, vendors, suppliers and employees, which could harm its business and future prospects.
Reducing the number of outstanding shares of common stock through a Reverse Stock Split is intended, absent other factors, to increase the per share market price of our common stock. The market price of our common stock will also be based on and may be adversely affected by our performance, financial results market conditions, the market’s perception of our business and other factors which are unrelated to the number of shares outstanding. As a result, there can be no assurance that the Reverse Stock Split, if completed, will result in the intended benefits described above, that the market price of our common stock will increase following the Reverse Stock Split or that the market price of the common stock will not decrease in the future. Additionally, Applied DNA Sciences cannot assure you that the market price per share of common stock after a Reverse Stock Split will increase in proportion to the reduction in the number of shares of common stock outstanding before the Reverse Stock Split. In addition, the Reverse Stock Split may not result in a market price per share that will attract certain segments of the institutional investor community and the investing public that previously refrained from investing in Applied DNA Sciences because of the low market price of common stock, especially if we are listed on the OTCQB or OTC Pink markets. If the Reverse Stock Split is effected and the market price of common stock declines, the percentage decline as an absolute number and as a percentage of the overall market capitalization of Applied DNA Sciences may be greater than would occur in the absence of a Reverse Stock Split. Furthermore, the liquidity of common stock could be adversely affected by the reduced number of shares that would be outstanding after the Reverse Stock Split.
In evaluating the Reverse Stock Split proposal, in addition to the considerations described above, the Board also took into account various negative factors associated with Reverse Stock Splits generally. These
factors include: the negative perception of Reverse Stock Splits held by some investors, analysts and other stock market participants; the fact that the stock price of some companies that have effected Reverse Stock Splits has subsequently declined in share price and corresponding market capitalization; the adverse effect on liquidity that might be caused by a reduced number of shares outstanding; and the costs associated with implementing a Reverse Stock Split.
Potential Increased Investor Interest
On October 7, 2019, the Company’s common stock closed at $0.24 per share. An investment in the common stock may not appeal to brokerage firms that are reluctant to recommend lower priced securities to their clients. Investors may also be dissuaded from purchasing lower priced stocks because the brokerage commissions, as a percentage of the total transaction, tend to be higher for such stocks. Moreover, the analysts at many brokerage firms do not monitor the trading activity or otherwise provide coverage of lower priced stocks. Also, the Board believes that most investment funds are reluctant to invest in lower priced stocks. The Board believes that the anticipated higher market price expected to result from a Reverse Stock Split will reduce, to some extent, the negative effects of the practices of brokerage houses and investors described above on the liquidity and marketability of the common stock.
There are risks associatedRatification with the Reverse Stock Split, including that the Reverse Stock Split may not result in an increase in the per share priceSecretary of the common stock. The Company cannot predict whether the Reverse Stock Split will increase the market price for the common stock. The history of similar stock split combinations for companies in like circumstances is varied. There is no assurance that:
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the market price per share of the common stock after the Reverse Stock Split will rise in proportion to the reduction in the number of shares of the common stock outstanding before the Reverse Stock Split;
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the Reverse Stock Split will result in a per share price that will attract brokers and investors who do not trade in lower priced stocks;
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the Reverse Stock Split will result in a per share price that will increase the ability of the Company to attract and retain employees;
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the market price per share will either exceed or remain in excess of $1.00, the Minimum Bid Price Requirement by Nasdaq for continued listing; or
•
the Company would otherwise meet the Nasdaq listing requirements even if the per share market price of the common stock after the Reverse Stock Split meets the Minimum Bid Price Requirement.
The market price of the common stock will also be based on the Company’s performance and other factors, some of which are unrelated to the number of shares outstanding. If the Reverse Stock Split is effected and the market price of the common stock declines, the percentage decline as an absolute number and as a percentage of the overall market capitalization of the Company may be greater than would occur in the absence of a Reverse Stock Split. Furthermore, the liquidity of the common stock could be adversely affected by the reduced number of shares that would be outstanding after the Reverse Stock Split.
Potential Effects of Proposed Amendment
If our stockholders approve the Reverse Stock Split and the Board effects it, the number of shares of common stock issued and outstanding will be reduced, depending upon the Reverse Stock Split Ratio determined by the Board. The Reverse Stock Split will affect all holders of our common stock uniformly and will not affect any stockholder’s percentage ownership interest in the Company, except that, as described below in “Fractional Shares,” holders of our common stock otherwise entitled to a fractional share as a result of the Reverse Stock Split because they hold a number of shares not evenly divisible by the Reverse Stock Split Ratio will, in lieu of a fractional share, receive one whole share of common stock. In addition, the Reverse Stock Split will not affect any stockholder’s proportionate voting power (subject to the treatment of fractional shares).
The Reverse Stock Split alone would have no effect on our authorized capital stock, and the total number of authorized shares would remain the same as before the Reverse Stock Split. This would have the effect of increasing the number of shares of our common stock available for issuance. The additional available shares would be available for issuance from time to time at the discretion of the Board when opportunities arise, without further stockholder action or the related delays and expenses, except as may be required for a particular transaction by law, the rules of any exchange on which our securities may then be listed, or other agreements or restrictions (including rights of first refusal, pursuant to the terms of certain of our outstanding secured convertible notes). Any issuance of additional shares of our common stock would increase the number of outstanding shares of our common stock and (unless such issuance was pro-rata among existing stockholders) the percentage ownership of existing stockholders would be diluted accordingly. In addition, any such issuance of additional shares of our common stock could have the effect of diluting the earnings per share and book value per share of outstanding shares of our common stock.
In addition to sales of our common stock, if our stockholders approve the Reverse Stock Split and the Board effects it, the additional available shares of our common stock would also be available for conversions of convertible securities that we may issue, acquisition transactions, strategic relationships with corporate and other partners, stock splits, stock dividends and other transactions that may contribute to the growth of our business. Any decision to issue equity will depend on, among other things, our evaluation of funding needs, developments in business and technologies, current and expected future market conditions and other factors. There can be no assurance, however, even if the Reverse Stock Split is approved and implemented, that any financing transaction or other transaction would be undertaken or completed.
The Reverse Stock Split will not change the terms of our common stock. After the Reverse Stock Split, the shares of common stock will have the same voting rights and rights to dividends and distributions and will be identical in all other respects to common stock now authorized.
The Reverse Stock Split may result in some stockholders owning “odd-lots” of less than 100 shares of common stock. Brokerage commissions and other costs of transactions in odd-lots are generally higher than the costs of transactions in “round-lots” of even multiples of 100 shares.
After the Split Effective Time, the Company will continue to be subject to the periodic reporting and other requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Subject to compliance with applicable continued listing requirements, our common stock will continue to be listed on Nasdaq and traded under the symbol “APDN,” although the exchange will add the letter “D” to the end of the trading symbol for a period of 20 trading days after the Split Effective Time to indicate that a Reverse Stock Split has occurred. After the Split Effective Time, it is expected that our common stock will have a new CUSIP number. The Reverse Stock Split is not intended as, and will not have the effect of, a “going private transaction” as described by Rule 13e-3 under the Exchange Act.
After the Split Effective Time, the post-split market price of our common stock may be less than the pre-split price multiplied by the Reverse Stock Split Ratio. In addition, a reduction in the number of shares outstanding may impair the liquidity for our common stock, which may reduce the value of the common stock.
Beneficial Holders of Common Stock
Upon the implementation of the Reverse Stock Split, Applied DNA Sciences intends to treat shares held by stockholders through a stockbroker, bank or other nominee in the same manner as registered stockholders whose shares are registered in their names. Stockbrokers, banks or other nominees will be instructed to effect the Reverse Stock Split for their beneficial holders holding common stock in street name. However, these stockbrokers, banks or other nominees may have different procedures than registered stockholders for processing the Reverse Stock Split. Stockholders who hold shares of common stock with a stockbroker, bank or other nominee and who have any questions in this regard are encouraged to contact their stockbrokers, banks or other nominees.
Registered “Book-Entry” Holders of Common Stock
Certain registered holders of common stock may hold some or all of their shares electronically in book-entry form with our transfer agent. These stockholders do not have stock certificates evidencing their ownership of the common stock. They are, however, provided with statements reflecting the number of
shares registered in their accounts. Stockholders who hold shares electronically in book-entry form with our transfer agent will not need to take action to receive evidence of their shares of post-Reverse Stock Split common stock.
Holders of Certificated Shares of Common Stock
Stockholders holding shares of our common stock in certificated form will be sent a transmittal letter by our transfer agent after the effective time of the Reverse Stock Split. The letter of transmittal will contain instructions on how a stockholder should surrender his, her or its certificate(s) representing shares of our Common Stock (the “Old Certificates”) to the transfer agent. Unless a stockholder specifically requests a new paper certificate or holds restricted shares, upon the stockholder’s surrender of all of the stockholder’s Old Certificates to the transfer agent, together with a properly completed and executed letter of transmittal, the transfer agent will register the appropriate number of shares of post-Reverse Stock Split common stock electronically in book-entry form and provide the stockholder with a statement reflecting the number of shares of common stock registered in the stockholder’s account. No stockholder will be required to pay a transfer or other fee to exchange his, her or its Old Certificates. Until surrendered, we will deem outstanding Old Certificates held by stockholders to be cancelled and only to represent the number of shares of post-Reverse Stock Split common stock to which these stockholders are entitled. Any Old Certificates submitted for exchange, whether because of a sale, transfer or other disposition of stock, will automatically be exchanged for the appropriate number of shares of post-Reverse Stock Split common stock. If an Old Certificate has a restrictive legend on its reverse side, then a new certificate will be issued with the same restrictive legend on its reverse side.
STOCKHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT SUBMIT ANY STOCK CERTIFICATE(S) UNTIL REQUESTED TO DO SO.
Fractional Shares
Applied DNA Sciences will not issue fractional shares in connection with the Reverse Stock Split. Instead stockholders who would otherwise be entitled to receive a fractional share as a result of the Reverse Stock Split will receive one whole share of our common stock in lieu of such fractional share.
Effect of the Reverse Stock Split on Stock Option Awards and Equity Incentive Plans
Based upon the Reverse Stock Split Ratio, proportionate adjustments are generally required to be made to the per share exercise price or the per share base price and the number of shares issuable upon the exercise of all outstanding options and to the per share exercise price of all outstanding options. This would result in approximately the same aggregate price being required to be paid under such options upon exercise, and approximately the same value of shares of our common stock being delivered upon such exercise immediately following the Reverse Stock Split as was the case immediately preceding the Reverse Stock Split. However, to comply with certain regulations under the Internal Revenue Code of 1986, as amended (the “Code”), the per share exercise price of each outstanding option would be rounded up to the nearest whole cent and the number of shares of our common stock that could be acquired upon the exercise of each option would be rounded down to the nearest whole share. The number of shares of our common stock reserved for issuance pursuant to the 2005 Incentive Stock Plan, as amended, (the “2005 Plan”) will be reduced proportionately based upon the Reverse Stock Split Ratio.
Effect of the Reverse Stock Split on Warrants and Convertible Notes
In addition to adjusting the number of shares of our common stock, we would adjust all shares underlying any of our outstanding warrants and secured convertible notes as a result of the Reverse Stock Split, as required by the terms of these securities. In particular, we would reduce the conversion ratio for each instrument, and would increase the applicable exercise price or conversion price in accordance with the terms of each instrument and based on the Reverse Stock Split Ratio.
Accounting Matters
The proposed Amendment will not affect the par value of $0.001 of our common stock. As a result, at the Split Effective Time, the stated capital on our balance sheet attributable to the common stock will be
reduced in the same proportion as the Reverse Stock Split Ratio, and the additional paid-in capital account will be credited with the amount by which the stated capital is reduced. The per share net income or loss and net book value of the common stock will be reclassified for prior periods to conform to the post-Reverse Stock Split presentation.
Pro Forma Capitalization of Common Stock
The table below summarizes the Company’s pro forma capitalization of common stock, as of October 7, 2019, before and after giving effect to a hypothetical reverse stock split of one-for-fifteen (1-for-15), one-for-twenty (1-for-20), one-for-twenty-five (1-for-25), one-for-thirty (1-for-30), one-for- thirty-five (1-for-35), one-for-forty (1-for-40), one-for-forty-five (1-for-45) and one-for-fifty (1-for-50). The table below does not include the 10,000,000 shares of preferred stock authorized under the Certificate of Incorporation, none of which is currently outstanding. The Reverse Stock Split alone would have no effect on our authorized capital stock, including our authorized preferred stock. For purposes of the figures below, share numbers have been rounded down to the nearest whole share.
| | | | Prior to
Reverse
Stock Split | | | After Reverse Stock Split | |
| | 1-for-15 | | | 1-for-20 | | | 1-for-25 | | | 1-for-30 | | | 1-for-35 | | | 1-for-40 | | | 1-for-45 | | | 1-for-50 | |
Authorized Shares of Common
Stock | | | | | 500,000,000 | | | | | | 500,000,000 | | | | | | 500,000,000 | | | | | | 500,000,000 | | | | | | 500,000,000 | | | | | | 500,000,000 | | | | | | 500,000,000 | | | | | | 500,000,000 | | | | | | 500,000,000 | | |
Shares of Common Stock Issued and Outstanding(1) | | | | | 48,015,938 | | | | | | 3,201,063 | | | | | | 2,400,797 | | | | | | 1,920,638 | | | | | | 1,600,531 | | | | | | 1,371,884 | | | | | | 1,200,398 | | | | | | 1,067,021 | | | | | | 960,319 | | |
Shares of Common Stock
Reserved for Future Issuance
but not Issued and
Outstanding(1)(2) | | | | | 27,078,384 | | | | | | 1,805,226 | | | | | | 1,353,919 | | | | | | 1,083,135 | | | | | | 902,613 | | | | | | 773,668 | | | | | | 676,960 | | | | | | 601,742 | | | | | | 541,568 | | |
Shares of Common Stock Available for Future Issuance(1) | | | | | 424,905,678 | | | | | | 494,993,711 | | | | | | 496,245,284 | | | | | | 496,996,227 | | | | | | 497,496,856 | | | | | | 497,854,448 | | | | | | 498,122,642 | | | | | | 498,331,237 | | | | | | 498,498,113 | | |
(1)
These estimates do not reflect the potential effects of rounding up of fractional shares that may result from the Reverse Stock Split.
(2)
Includes, as of October 7, 2019, (i) 10,543,527 shares issuable upon the exercise of outstanding warrants at a weighted average exercise price of $3.28; (ii) 8,051,996 shares issuable upon the exercise of outstanding stock options, at a weighted average exercise price of $2.47; (iii) 5,484,267 shares reserved for future issuance under the 2005 Plan; and (iv) 2,998,594 shares reserved for the conversion of secured convertible notes. Does not include any shares of common stock issuable upon the exercise or conversion of securities that may have been issued since October 7, 2019.
Material U.S. Federal Income Tax Consequences of the Reverse Stock Split
The following discussion is a summary of the material U.S. federal income tax consequences of the proposed Reverse Stock Split to U.S. Holders (as defined below) of common stock. This discussion is based on the Code, U.S. Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the Internal Revenue Service (“IRS”), in each case in effect as of the date hereof. These authorities may change or be subject to differing interpretations. Any such change or differing interpretation may be applied retroactively in a manner that could adversely affect a holder of common stock. Applied DNA Sciences has not sought and will not seek any rulings from the IRS regarding the matters discussed below. There can be no assurance the IRS or a court will not take a contrary position to that discussed below regarding the tax consequences of the proposed Reverse Stock Split.
For purposes of this discussion, a “U.S. Holder” is a beneficial owner of common stock that, for U.S. federal income tax purposes, is or is treated as:
•
an individual who is a citizen or resident of the United States;
•
a corporation (or any other entity or arrangement treated as a corporation for U.S. federal income tax purposes) created or organized under the laws of the United States, any state thereof or the District of Columbia;
•
an estate, the income of which is subject to U.S. federal income tax regardless of its source; or
•
a trust that (1) is subject to the primary supervision of a U.S. court and all substantial decisions of which are subject to the control of one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Code) or (2) has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a United States person for U.S. federal income tax purposes.
This discussion is limited to U.S. Holders who hold their common stock as a “capital asset” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all U.S. federal income tax consequences relevant to the particular circumstances of a U.S. Holder, including the impact of the alternative minimum tax or the Medicare contribution tax on net investment income or the application of the constructive sale provisions of the Code, the “qualified small business stock” provisions of Section 1202 of the Code, the “Section 1244 stock” provisions of Section 1244 of the Code, or special rules relevant to tax-qualified retirement plans. In addition, it does not address consequences relevant to U.S. Holders that are subject to special rules, including, without limitation:
•
persons who are not U.S. Holders;
•
U.S. Holders whose functional currency is not the U.S. dollar;
•
persons holding our common stock as part of a hedge, straddle or other risk reduction strategy or as part of a conversion transaction or other integrated investment;
•
banks, insurance companies and other financial institutions;
•
real estate investment trusts or regulated investment companies;
•
brokers, dealers or traders in securities;
•
tax-exempt organizations or governmental organizations; and
•
persons who actually or constructively own 10% or more of our voting stock.
If a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) is the beneficial owner of common stock, the U.S. federal income tax treatment of a partner in the partnership will generally depend on the status of the partner, the activities of the partnership and certain determinations made at the partner level. Accordingly, partnerships (and other entities treated as partnerships for U.S. federal income tax purposes) holding common stock and the partners in such entities should consult their tax advisors regarding the U.S. federal income tax consequences of the proposed Reverse Stock Split to them.
In addition, the following discussion does not address the U.S. federal estate and gift tax laws or any applicable state, local or non-U.S. tax law consequences of the proposed Reverse Stock Split. Furthermore, the following discussion does not address any tax consequences of transactions effected before, after or at the same time as the proposed Reverse Stock Split, whether or not they are in connection with the proposed Reverse Stock Split.
HOLDERS OF OUR COMMON STOCK SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES OF THE PROPOSED REVERSE STOCK SPLIT ARISING UNDER OTHER U.S. FEDERAL TAX LAWS (INCLUDING ESTATE AND GIFT TAX LAWS), UNDER THE LAWS OF ANY STATE, LOCAL OR NON-U.S. TAXING JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX TREATY.
Tax Consequences of the Reverse Stock Split
The proposed Reverse Stock Split is expected to constitute a “recapitalization” for U.S. federal income tax purposes pursuant to Section 368(a)(1)(E) of the Code. As a result, a U.S. Holder generally should not recognize gain or loss upon the proposed Reverse Stock Split. A U.S. Holder’s aggregate adjusted tax basis in the shares of our common stock received pursuant to the proposed Reverse Stock Split should equal the aggregate adjusted tax basis of the shares of the common stock surrendered (excluding any portion of such basis that is allocated to any fractional share of common stock), and such U.S. Holder’s holding period in the shares of common stock received should include the holding period in the shares of common stock surrendered. U.S. Treasury Regulations provide detailed rules for allocating the tax basis and holding period of the shares of common stock surrendered to the shares of common stock received in a recapitalization pursuant to the proposed Reverse Stock Split. U.S. Holders of shares of common stock acquired on different dates and at different prices should consult their tax advisors regarding the allocation of the tax basis and holding period of such shares.
As noted above, we will not issue fractional shares in connection with the Reverse Stock Split. Instead, stockholders who otherwise would be entitled to receive fractional shares will be automatically entitled to receive an additional fraction of a share of our common stock to round up to the next whole post-split share. The U.S. federal income tax treatment of the receipt of such a fractional share in a reverse stock split is not clear. It is possible that the receipt of such an additional fraction of a share of common stock may be treated as a distribution taxable as a dividend or as an amount received in exchange for common stock. We intend to treat the issuance of such an additional fraction of a share of our common stock in the Reverse Stock Split as a non-recognition event, but there can be no assurance that the IRS or a court would not successfully assert otherwise.
Appraisal Rights
Under the General Corporation LawState of the State of Delaware at such time as our board of directors determines in its sole discretion. If the vote of our stockholders required to ratify the COI Amendment Ratification set forth in this Proposal No. 2 is not obtained, the COI Amendment Ratification will not be entitled to dissenter’s rights with respect tobecome effective.
The Board of Directors deems Proposal No. 2 “Ratification of the proposedApproval, Filing and Effectiveness of an Amendment to effect the Reverse Stock Split, and Applied DNA Sciences does not intend to independently provide stockholders with such rights.
Proposal 1, the approval of the Amendment effecting the Reverse Stock Split, requires the affirmative vote of a majority of the shares of our common stock outstanding on the Record Date and entitled to vote. Abstentions and broker non-votes will be excluded entirely from the vote and will, therefore, have the same effect as a vote “AGAINST” such proposal.
The Board Recommends a Vote To Approve the Amendment to the Company’sOur Certificate of Incorporation, EffectingFiled with the ReverseSecretary of State of the State of Delaware on September 16, 2020 to Decrease the Number of Our Authorized Shares of Common Stock Splitto 200,000,000, Which Became Effective on September 16, 2020” to be in the Range from One-for-Fifteen to One-for-Fifty. Proxies that are Returned will be so Voted Unless Otherwise Instructed.our and our stockholders’ best interests and unanimously recommends a vote “FOR” ratification thereof.
PROPOSAL 2NO. 3
APPROVALRATIFICATION OF THE ADJOURNMENTAPPOINTMENT OF THE SPECIAL MEETING TO SOLICIT
ADDITIONAL PROXIESINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
AdjournmentOur Board of Directors has appointed Marcum LLP (“Marcum,” the “principal accountant” or the “independent accountant”) as the independent registered public accounting firm to audit our consolidated financial statements as of and for the fiscal year ending September 30, 2021. Marcum has been our independent registered public accounting firm since it was appointed on June 23, 2014 to audit our consolidated financial statements for the fiscal year ended September 30, 2014. Since that date, Marcum has also provided us certain tax and other audit-related services. The Board of Directors has directed that management submit the selection of our independent registered public accounting firm for ratification by the stockholders at the Annual Meeting. Representatives of Marcum LLP are expected to be present at the Annual Meeting, in person or telephonically, will have an opportunity to make a statement if they so desire, and will be available to respond to appropriate questions. Notwithstanding its selection, the Board of Directors, in its discretion, may appoint another independent registered public accounting firm at any time during the year if the Board of Directors believes that such a change would be in our and our stockholders’ best interests. If the appointment is not ratified by our stockholders, the Board of Directors may reconsider whether it should appoint another independent registered public accounting firm.
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 Special Meetingaudit 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.
InMarcum 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 eventaudit 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 numberperformance 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 Report
The audit committee of the Board of Directors (the “audit committee”) operates under a written charter approved by the Board of Directors, which provides that its responsibilities include assisting the Board of Directors in monitoring the integrity of the Company’s financial statements, the qualifications and independence of the Company’s independent auditors, the performance of the Company’s internal audit function and independent auditors and the compliance by the Company with legal and regulatory requirements. For more information on the audit committee, see “Management and Corporate Governance — Board of Directors Structure and Committee Composition — Audit Committee.”
The audit committee oversees the Company’s financial reporting process on behalf of the Board of Directors. Management is responsible for the Company’s internal controls, financial reporting process, and compliance with laws and regulations and ethical business standards. Marcum was responsible for performing an independent audit of the Company’s consolidated financial statements for the fiscal year ending September 30, 2020 in accordance with the standards of the Public Company Accounting Oversight Board of Directors (United States) (the “PCAOB”). The audit committee’s main responsibility is to monitor and oversee this process.
The audit committee reviewed and discussed our audited consolidated financial statements as of and for the fiscal year ended September 30, 2020 with management. The audit committee discussed with Marcum the matters required to be discussed by PCAOB Auditing Standard No. 16. The audit committee has received the written disclosures and the letter from the independent accountant required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the audit committee concerning independence, and has discussed with the independent accountant the independent accountant’s independence.
The audit committee considered any fees paid to Marcum for the provision of non-audit related services and does not believe that these fees compromised Marcum’s independence in performing the audit.
Based on the review and discussions referred to above in this report, the audit committee recommended to the Board of Directors that such audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2020 for filing with the SEC.
THE AUDIT COMMITTEE
John Bitzer, III (Chairperson)
Joseph Ceccoli
Yacov Shamash
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
The audit committee has adopted a policy and procedures for the pre-approval of audit and non-audit services provided by the independent auditors. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent auditors and management are required to periodically report to our audit committee regarding the extent of services provided by the independent auditors in accordance with this pre-approval, and the fees for the services performed to date. The audit committee may also pre-approve particular services on a case-by-case basis.
Vote Required
The affirmative vote of a majority of the outstanding shares of our common stock present in person or represented by proxy at the SpecialAnnual Meeting and voting “FOR” the adoption of the Reverse Stock Split is insufficient to adopt the Reverse Stock Split, we may move to adjourn the Special Meeting in order to enable the Board to solicit additional proxies in favor of the adoption of the Reverse Stock Split. In that event, we will ask stockholders to vote only upon this Proposal 2 and not on Proposal 1. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote aton this proposal is required for the meeting.
If a quorum is present, Proposal 2, approvalratification of the proposalappointment of Marcum as our independent registered public accounting firm for the fiscal year ending September 30, 2021. Abstentions will be considered in determining the total number of votes required to adjourn the Special Meeting toattain a later date, requires the affirmative vote of the majority of the shares present in person or represented by proxy at the meeting entitled to vote. Accordingly, an abstention from voting by a stockholder present in person or represented by
MANAGEMENT AND CORPORATE GOVERNANCE
Information Regarding the Board of Directors
Members
Our Board of Directors currently consists of eight members: James A. Hayward, John Bitzer, III, Robert B. Catell, Joseph D. Ceccoli, Scott L. Anchin, Yacov A. Shamash, Sanford R. Simon, and Elizabeth M. Schmalz Ferguson. Our Board of Directors has nominated the eight incumbent directors for re-election at the Annual Meeting. Please see “Proposal No. 1 — Election of Directors” for the names, ages and business experience of each of the Company’s director nominees for election at the Annual Meeting.
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 — consisting of John Bitzer, III, Robert B. Catell, Joseph D. Ceccoli, Scott L. Anchin, 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.
Board of Directors Leadership Structure and Role in Risk Oversight
Our Board of Directors does not have a policy on whether the same person should serve as both the Chief Executive Officer and Chairman of the Board of Directors or, if the roles are separate, whether the Chairman should be selected from the non-employee directors or should be an employee. The Board of Directors believes that Dr. Hayward’s dual role as both Chairman of the Board of Directors and Chief Executive Officer serves the best interests of both us and our stockholders. His combined role enables decisive leadership, ensures clear accountability, and enhances our ability to communicate our message and strategy clearly and consistently to our stockholders, employees, customers and suppliers. Dr. Hayward possesses detailed and in-depth knowledge of the issues, opportunities and challenges facing us and our business and is thus best positioned to develop agendas that ensure that the time and attention of the Board of Directors are focused on the most critical matters. This structure also enables our Chief Executive Officer to act as a bridge between management and the Board of Directors, helping both to act with a common purpose.
The Board of Directors appreciates that the advantages gained by having a single Chairman and Chief Executive Officer must be viewed in light of potential independence concerns. The Board of Directors considers, however, that we have adequate safeguards in place to address those concerns, including, for example, our Board of Directors consisting of a supermajority of independent directors. In addition, our audit, compensation and nominating committees, which oversee critical matters such as the integrity of our financial statements, the compensation of executive management, the selection and evaluation of directors, and the development and implementation of corporate governance policies, each consist entirely of independent directors.
Our risk management program is overseen by our Chief Executive Officer. Material risks are identified and prioritized by management, and each prioritized risk is referred to a Board of Directors committee or the full Board of Directors for oversight. For example, strategic risks are referred to the full Board of Directors while financial risks are referred to the audit committee. The Board of Directors regularly reviews information regarding our liquidity and operations, as well as the risks associated with each. Also, the compensation committee periodically reviews the most important risks to our business to ensure that compensation programs do not encourage excessive risk-taking and promote our goals and objectives.
Board of Directors Structure and Committee Composition
In June 2008, our Board of Directors established a standing compensation committee (the “compensation committee”) and in September 2011, our Board of Directors established an audit committee and a
nominating committee (the “nominating committee”). Each of the committees operates under a written charter adopted by the Board of Directors. All of the committee charters are available on our web site at www.adnas.com/adnas_home/investors/ or by writing to Applied DNA Sciences, Inc., 50 Health Sciences Drive, Stony Brook, New York 11790, c/o Investor Relations. The information found on, or accessible through, our website is not incorporated into, and does not form a part of, this Proxy Statement or any other report or document we file with or furnish to the SEC.
During fiscal 2020, the Board of Directors held fourteen formal meetings (including regularly scheduled and special meetings) and acted by unanimous written consent two times. During fiscal 2020, each director attended at least 75% of all meetings of the Board of Directors during the time such director was a member of the Board of Directors and of all meetings of the committee or committees on which he served, with the exception of John Bitzer, III and Robert B. Catell. Directors are strongly encouraged to attend our annual meetings of stockholders. All directors then serving on the Board of Directors attended the Company’s annual meeting of stockholders held in 2020.
The membership of each of the audit committee, the compensation committee, and the nominating committee is composed, and was composed during the fiscal year ended September 30, 2020, entirely of independent directors. In addition, the members of the audit committee meet the heightened standards of independence for audit committee members required by SEC rules and Nasdaq rules. The committee membership and the responsibilities of each of the committees during the fiscal year ended September 30, 2020 are described below.
| Name | | | Audit | | | Compensation | | | Nominating | |
| James A. Hayward | | | — | | | — | | | — | |
John Bitzer, III(I) | | | | | | | | | | |
Robert B. Catell(I) | | | — | | | — | | | — | |
Joseph D. Ceccoli(I) | | | | | | | | | — | |
Sanford R. Simon(I) | | | — | | | — | | | | |
Yacov A. Shamash(I) | | | | | | | | | | |
Elizabeth M. Schmalz Ferguson(I) | | | — | | | — | | | — | |
| Scott L. Anchin | | | | | | | | | | |
Chairperson
Member
(I)
Independent director
Audit Committee
Messrs. Bitzer (Chairperson), Ceccoli and Shamash served 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 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. During fiscal 2020, the audit committee held four formal meetings.
The composition and responsibilities of the audit committee and the attributes of its members, as reflected in the 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 compensation committee reviews and approves salaries and bonuses for all officers, reviews and approves directors’ compensation, administers options outstanding under our stock incentive plan, provides advice and carries out the responsibilities required by SEC 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. During fiscal 2020, the compensation committee held four formal meetings.
Nominating Committee
Messrs. Shamash (Chairperson), Bitzer and Simon served during the fiscal year ended September 30, 2019, 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 did not hold any formal meetings during fiscal 2020.
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.
Process for Identifying and Evaluating Nominees for the Board of Directors
Director Qualifications. The nominating committee has not formally established any specific, minimum qualifications that must be met by each candidate for the Board of Directors or specific qualities or skills that are necessary for one or more of the members of the Board of Directors to possess.
Identifying Nominees. The nominating committee has two primary methods for identifying director candidates (other than those proposed by our stockholders, as discussed below). First, on a periodic basis, the nominating committee will solicit ideas for possible candidates from a number of sources, including members of the Board of Directors, our executive officers and individuals personally known to the members of the Board of Directors. Second, the nominating committee is authorized to use its authority under its charter to retain at our expense one or more search firms to identify candidates (and to approve such firms’ fees and other retention terms).
Stockholder Candidates. The nominating committee will consider candidates for nomination as a director submitted by stockholders. Although the nominating committee does not have a separate policy that addresses the consideration of director candidates recommended by stockholders, the Board of Directors does not believe that such a separate policy is necessary because our bylaws permit stockholders to nominate candidates and one of the duties set forth in the nominating committee charter is to consider director candidates submitted by stockholders in accordance with our bylaws. The nominating committee will evaluate individuals recommended by stockholders for nomination as directors according to the criteria discussed above and in accordance with our bylaws and the procedures described under “Stockholder Proposals and Nominations” below.
Review of Director Nominees. The nominating committee will evaluate any candidates recommended by stockholders against the same criteria and pursuant to the same policies and procedures applicable to the evaluation of candidates proposed by our directors, executive officers, third-party search firms or other sources. In evaluating proposed director candidates, the nominating committee may consider, in addition to any minimum qualifications and other criteria for Board of Directors membership approved by the Board of Directors from time to time, all facts and circumstances that it deems appropriate or advisable, including, among other things, the proposed director candidate’s understanding of our business and industry on a technical level, his or her judgment and skills, his or her depth and breadth of professional experience or other background characteristics, his or her independence, his or her willingness to devote the time and effort necessary to be an effective board member, and the needs of the Board of Directors. We do not have a formal policy with regard to the consideration of diversity in identifying director nominees. However, the Board of Directors believes that it is essential that its members represent diverse viewpoints, with a broad array of experiences, professions, skills, geographic representation and backgrounds that, when considered as a group, provide a sufficient mix of perspectives to allow the Board of Directors to best fulfill its responsibilities to the long-term interests of our stockholders. The nominating committee considers at least annually, and recommends to the Board of Directors suggested changes to, if any, the size, composition, organization and governance of the Board of Directors and its committees.
Stockholder Proposals and Nominations. In order for a stockholder to nominate a person for election as a director at the 2021 Annual Meeting of stockholders, you must provide written notice to Applied DNA Sciences, Inc., 50 Health Sciences Drive, Stony Brook, New York 11790, c/o Corporate Secretary. The notice of a proposed director nomination must provide information and documentation as required in our bylaws which, in general, require that the notice of a director nomination include the information about the nominee that would be required to be disclosed in the solicitation of proxies for the election of a director under federal securities laws; the nominee’s written consent to be named in the proxy statement as a nominee and to serve as a director if elected; a description of any transaction or arrangement during the last three years between the stockholder making the nomination and the nominee in which the nominee had a direct or indirect material interest; and a completed and signed questionnaire (after such form has been provided by the Company), representation and agreement. A copy of the bylaw requirements will be provided upon request to the Corporate Secretary at the address above.
Stockholder Communications with the Board of Directors
Stockholders and other interested parties may make their concerns known confidentially to the Board of Directors or the independent directors by submitting a communication in an envelope addressed to the “Board of Directors,” a specifically named independent director or the “Independent Directors” as a group, in care of the Corporate Secretary. All such communications will be conveyed, as applicable, to the full Board of Directors, the specified independent director or the independent directors as a group.
Code of Ethics
Our Board of Directors adopted a “code of ethics” as defined by regulations promulgated under the Securities Act and the Exchange Act (our “Code of Business Conduct and Ethics”) that applies to all of our employees, officers and directors, including those officers 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.
Code of Ethics
Our Board of Directors has not adopted a hedging policy with respect to transactions by our directors, officers and employees that hedge or offset, or are designed to hedge or offset, any decrease in the market value of our equity securities.
Executive Officers
Our current executive officers, and their ages and positions as of July 19, 2021, are set forth below.
Dr. James A. Hayward, age 68, 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 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. Dr. Hayward also serves on the board of directors Softheon Corporation and NeoMatrix Formulations, Inc.
Beth Jantzen, age 44, appointed as our Chief Financial Officer, effective February 15, 2015. Ms. Jantzen has held the position of Controller since May 2013. 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, age 63, 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 operations functions, including the development of key customer and partner relationships, quality assurance oversight, and operations management, as well as information technology strategy. 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 global IT program management office, financial and supplier operations and quality assurance. At Symbol, 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 author on fourteen U.S. patents. Ms. Murrah is co-founder and President of non-profit ConnectToTech, a recognized leader in engaging students in science, technology, engineering and math disciplines and serves on the Middle Country Library Foundation Board. 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.
Clay Shorrock, age 37, has been our Chief Legal Officer and Executive Director, Business Development, since April 1, 2021. Mr. Shorrock leads the Company’s legal, regulatory, IP, and business development functions. Mr. Shorrock served as in-house general and IP counsel to the Company from 2016 through 2019, and thereafter as outside general and IP counsel before returning to the full time employ of the Company. Mr. Shorrock has been instrumental in the development of the CertainT® platform utilized in supply chain security applications and the expansion of the Company’s core PCR-manufacturing capabilities into biotherapeutics and diagnostics. He also led the effort to secure Emergency Use Authorization for the Company’s LineaTM COVID-19 Assay Kit and subsequent amendments that increased the assay’s utility. Mr. Shorrock holds a B.A. in Biology from Franklin and Marshall College and a J.D. with a concentration in intellectual property from Seton Hall University Law School.
Our executive officers are elected by, and serve at the discretion of, our Board of Directors. There are no family relationships between any director, executive officer, or person nominated or chosen by us to become a director or executive officer.
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, 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;
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Provide leadership to the organization in such a way as to maximize the results of our business operations;
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Lead us by demonstrating forward thinking in the operation, development and expansion of our business;
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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 A. 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 recommendations 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 “— 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. As of October 3, 2020, the Company re-affirmed the employment agreement’s annual salary of $400,000, and from that date Dr. Hayward’s salary was paid at that rate.
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. At the beginning of fiscal 2020, the salaries of Mses. Jantzen and Murrah were $228,000. As of December 3, 2019, the salaries of Mses. Jantzen and Murrah were each increased to $250,000. At the start of the 2021 fiscal year, Ms. Jantzen’s base salary was maintained at $250,000 and then subsequently increased to $300,000 effective March 5, 2021. At the start of the 2021 fiscal year, Ms. Murrah’s base salary was increased to $300,000, and 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.
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.
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, paid on October 16, 2020.
In addition, 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 $803,623, plus interest. The revenue targets underlying the Revenue Bonus have not yet been achieved. However, on March 2, 2021, the Company entered into a letter agreement with Dr. Hayward whereby the Company accelerated the payment of $566,840 of the
Revenue Bonus in recognition of his contributions to the Company, in exchange for Dr. Hayward agreeing to waive his right to earn any remaining portions of the Revenue Bonus.
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;
•
life 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.
| | | �� | Option Awards | |
| Name | | | Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable | | | Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable | | | Option
Exercise
Price
($) | | | Option
Expiration
Date | |
| 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 annual salary is $400,000. The employment agreement also provides for the following limited perquisites: an automobile allowance of up to $1,500 per month, 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 Director Compensation Table as fiscal year 2021 compensation.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Delabarta
John Bitzer, III, one of our directors, is President and Chief Executive Officer of ABARTA, a private, third- and fourth-generation family holding-company, which owns Delabarta. In connection with the investment in the Company by Delabarta during July 2011, we agreed to use best efforts to nominate its designee, Mr. Bitzer, to the Board of Directors and elect Mr. Bitzer as a director within 30 days of the closing and to nominate and include Mr. Bitzer on the slate of nominees for the Board of Directors for election by stockholders at the annual meetings of stockholders for so long as Delabarta owns at least 2% of the outstanding shares of common stock. As of the Record Date, Delabarta owned less than 1% of the outstanding shares of the Company’s common stock.
Meadow Hill
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.
Other Relationships
Conversion of Notes
On August 31, 2018, we entered into a securities purchase agreement with certain investors, including Delabarta and William Montgomery, who subsequently became a 5% or greater stockholder, and certain of our officers and directors, pursuant to which we issued and sold an aggregate of $1.65 million in principal amount of secured convertible notes (the “2018 Notes”) bearing interest at a rate of 6% per annum to persons in the amounts listed below.
On November 29, 2018, we entered into a securities purchase agreement (“Purchase Agreement”), pursuant to which we issued and sold an aggregate of $550,000 in principal amount of additional 2018 Notes. Dr. Hayward, our chairman, president and chief executive officer, purchased $500,000 in principal amount of the 2018 Notes.
During September 2019, such 2018 Notes were converted into 102,893 shares of our common stock. Included in the conversion, Dr. James A. Hayward, our chief executive officer, converted approximately $1.59 million of such 2018 Notes, into approximately 72,500 shares of our common stock. In addition, other directors, officers, and affiliates of the Company converted approximately $409,000 of such 2018 Notes in September 2019 into 18,929 shares of our common stock.
Private Placement of Secured Convertible Notes.
On July 17, 2019, we issued $1.5 million of secured convertible notes (the “July 2019 Notes”), bearing interest at a rate of 6% 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.”
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information regarding the shares of our common stock beneficially owned as of October 7, 2019,July 19, 2021, (i) by each person who is known to us to beneficially own 5% or more of the outstanding common stock, (ii) by each of our principalthe executive officer, our principal financial officer and our other 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)(2) | | | Percentage of
of Class(3)(2) | |
| Executive Officers and Directors: | | | | | | | | | | | | | | | | |
| James A. Hayward | | | Common Stock | | | | | 8,038,697291,481(4)(3) | | | | | | 15.863.81% | | |
| Yacov A. Shamash | | | Common Stock | | | | | 321,13726,613(5)(4) | | | | | | * | | |
| John Bitzer, III | | | Common Stock | | | | | 1,699,48357,553(5)(6)(7) | | | | | | 3.52%* | | |
| Robert C. Catell | | | Common Stock | | | | | 230,40524,340(11)(10) | | | | | | * | | |
| Joseph D. Ceccoli | | | Common Stock | | | | | 210,65223,847(8)(7) | | | | | | * | | |
| Beth M. Jantzen | | | Common Stock | | | | | 282,84227,389(12)(11) | | | | | | * | | |
| Judith Murrah | | | Common Stock | | | | | 461,86431,863(13)(12) | | | | | | * | | |
Charles S. RyanScott L. Anchin | | | Common Stock | | | | | 227,38224,288(6)(17) | | | | | | * | | |
| Sanford R. Simon | | | Common Stock | | | | | 212,14923,886(9)(8) | | | | | | * | | |
| Elizabeth Schmalz Ferguson | | | Common Stock | | | | | 142,88822,150(10)(13) | | | | | | * | | |
| Clay Shorrock | | | Common Stock | | | | | 1,417(15) | | | | | | * | | |
All directors and officers as a group (10(11 persons) | | | Common Stock | | | | | 11,827,499554,827(14)(9) | | | | | | 22.427.06% | | |
5% Stockholders:Stockholder: | | | | | | | | | | | | | | | | |
William W. MontgomeryBruce Grossman | | | Common Stock | | | | | 6,030,900658,739(15)(14) | | | | | | 12.568.09% | | |
Dillon HillEmpery Asset Management, LP | | | Common Stock | | | | | 2,777,777486,876(16) | | | | | | 5.476.50% | | |
| CVI Investments, Inc. | | | Common Stock | | | | | 455,000(18) | | | | | | 6.08% | | |
*
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)
Does not include the remaining unvested shares subject to options granted on December 21, 2015 pursuant to the 2005 Incentive Stock Plan, which vest 25% of the underlying shares ratably on each anniversary date thereafter until fully vested on the fourth anniversary date of grant, including 12,500 for each of Dr. Hayward, Ms. Jantzen and Ms. Murrah.
(3)
Based upon 48,015,9387,486,120 shares of common stock outstanding as of October 7, 2019.July 19, 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.
(4)(3)
Includes 2,671,262157,295 shares underlying Currently Exercisable Options.currently exercisable options.
(5)(4)
Includes 257,76725,028 shares underlying Currently Exercisable Options.currently exercisable options.
(6)(5)
Includes 213,17722,318 shares underlying Currently Exercisable Options for Messrs. Bitzer and Ryan.
currently exercisable options.
(7)
Includes 187,92423,278 shares underlying Currently Exercisable Options.currently exercisable options.
(9)(8)
Includes 209,30823,814 shares underlying Currently Exercisable Options.currently exercisable options.
(10)(9)
Includes 111,858377,595 shares underlying Currently Exercisable Options.currently exercisable options.
(11)(10)
Includes 152,83022,400 shares underlying Currently Exercisable Options.currently exercisable options.
(12)(11)
Includes 280,00127,317 shares underlying Currently Exercisable Options.currently exercisable options.
(13)(12)
Includes 360,00129,316 shares underlying Currently Exercisable Options.currently exercisable options.
(14)(13)
Includes 4,734,22821,374 shares underlying Currently Exercisable Options.currently exercisable options.
(15)(14)
This information is based on a Form 413GA filed with the SEC on September 16, 2019January 21, 2021 by William W. Montgomery. William W. MontgomeryBruce Grossman. Bruce Grossman reported sole and shared voting and sole and shared dispositive power of 6,030,900 shares of common stock. The address of William W. Montgomery is 34211 Seavey Loop Road, Eugene, Oregon 97405.
(16)
This information is based on a Schedule 13G filed with the SEC on July 24, 2019 by Bruce Grossman, the sole member of Dillon Hill Capital, LLC (“Dillon Hill”). Bruce Grossman reported indirect beneficial ownership, and sole voting and sole dispositive power, of 2,777,777658,739 shares of common stock issuable upon conversion of secured convertible notes payable. Until October 13, 2019, Dillon Hill has the right to purchase up to an additional $500,000 principal amount of such secured convertible notes, which would be convertible into an additional 925,925 shares of common stock of the Company. Such secured convertible notes include a provision limiting conversion of such notes to the extent that conversion would result in the holder beneficially owning more than 9.99% of the Company’s 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)
Includes 1,417 shares underlying currently exercisable options.
(16)
This information is based on a Form 13G filed with the SEC on January 14, 2021 by Empery Asset Management LP (“Empery”). Empery reported shared voting and shared dispositive power of 480,000 shares of common stock and 6,876 shares of common stock issuable upon exercise of Warrants. The address for Empery is 1 Rockefeller Plaza, Suite 1205 New York, New York 10020.
(17)
Includes 24,038 shares underlying currently exercisable options.
(18)
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.
PROPOSED FORM OF
FOURTH CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
APPLIED DNA SCIENCES, INC.
Applied DNA Sciences, Inc. (the “CorporationAppendix A”), a corporation organized and existing under the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY THAT:
FIRST:Ratification Resolutions Article IV
WHEREAS, on September 16, 2020, the Company filed a Certificate of Amendment to the Company’s Certificate of Incorporation, as amended (the “Certificate of Incorporation”), setting forth an amendment (the “September 2020 COI Amendment”) that effected a decrease in the total number of the Corporation is hereby amended by adding the following paragraph at the end thereof:
“Upon the filing and effectiveness (the “Reverse Split Effective Time”) pursuant to the DGCL of this Certificate of Amendment to the Certificate of Incorporation of the Corporation, each [fifteen to fifty] [(15 – 50)]authorized shares of the Corporation’sCompany’s Common Stock, par value $0.001$0.01 per share issued(“Common Stock”), from 500,000,000 shares to 200,000,000 shares (the “Authorized Shares Decrease”);
WHEREAS, the Board believes that the September 2020 COI Amendment and outstanding immediately prior to the Reverse Split Effective Time, shall automatically be reclassified, combined,Authorized Shares Decrease effected thereby were validly authorized by the Board and converted into one (1) validly issued, fully paid, and non-assessable sharethe Company’s stockholders at the Company’s 2020 Annual Meeting of Common Stock, par value $0.001 per share, of the Corporation, without any action by any holder thereof; provided that no fractional share interests shall be issued as a result of the foregoing reclassification, combination, and conversion. Any stockholder of record of Common Stock immediately prior to the Reverse Split Effective Time that would otherwise be entitled to fractional share interestsStockholders, held on September 16, 2020 (the “2020 Annual Meeting”), pursuant to the provisionsCompany’s stockholders’ approval of this Article, shall be entitled, upon the Reverse Split Effective Time, to receive one whole share of Common Stock in lieu of such fractional share interests.
From and after the Reverse Split Effective Time, certificates that, immediately priorproposals submitted to the Reverse Split Effective Time, representCompany’s stockholders at the 2020 Annual Meeting in connection with the September 2020 COI Amendment;
WHEREAS, the Board has been advised that uncertainty has been raised regarding whether the September 2020 COI Amendment and the Authorized Shares Decrease effected thereby were properly approved; and
WHEREAS, in order to eliminate any uncertainty regarding the validity of the September 2020 COI Amendment and the Authorized Shares Decrease effected thereby, the Board has determined that it is advisable and in the best interests of the Company and its stockholders to adopt the following resolutions to ratify such actions.
NOW, THEREFORE, BE IT RESOLVED, that the potentially defective corporate acts to be ratified by this resolution are (i) the approval, filing and effectiveness of the September 2020 COI Amendment filed with the Office of the Secretary of State of the State of Delaware (the “State Office”) on September 16, 2020, and (ii) the Authorized Shares Decrease effected thereby (collectively, the “Potentially Defective Corporate Acts”);
FURTHER RESOLVED, that the nature of the potential failures of authorization in respect of the Potentially Defective Corporate Acts identified in the paragraph immediately above are as follows: (i) the September 2020 COI Amendment proposal was submitted to the Company’s stockholders for their approval at the 2020 Annual Meeting, and, at the 2020 Annual Meeting, the Company’s inspector of elections determined that the proposal to approve the September 2020 COI Amendment received the requisite stockholder approval, and based in part on that determination, the Company filed the September 2020 COI Amendment with the State Office on September 16, 2020, thereby effecting the Authorized Shares Decrease as of September 17, 2020; (ii) as part of the determination that the September 2020 COI Amendment proposal received the requisite stockholder approval, votes cast by brokers/nominees without instruction from the beneficial owners of certain shares of Common Stock (the “Broker Votes”) were counted as votes in favor of the approval of the September 2020 COI Amendment proposal; however, the counting of the Broker Votes in favor of such approval was inconsistent with certain statements made in the Company’s proxy materials for its 2020 Annual Meeting, which stated that are helda broker/nominee would not have discretion to vote on the September 2020 COI Amendment proposal without instruction from the applicable beneficial owner and that the failure of a beneficial owner to provide his, her or its broker/nominee with instruction regarding how to vote on the September 2020 COI Amendment proposal would have no effect with respect to the September 2020 COI Amendment proposal; (iii) if such Broker Votes were counted as votes “against” the September 2020 COI Amendment proposal, the September 2020 COI Amendment proposal would not have been approved by any stockholder shall thereafter represent the numberholders of at least a majority of the outstanding shares of Common Stock into which such shares shall have been reclassified, combined,entitled to vote on the September 2020 COI Amendment proposal, as required by the Company’s Certificate of Incorporation;
FURTHER RESOLVED, that the Board hereby approves, adopts and converted atauthorizes, in all respects, the Reverse Split Effective Timeratification of the Potentially Defective Corporate Acts pursuant to this Certificate of Amendment.”
SECOND: This Certificate of Amendment shall become effective on , 2019, at 12:01 a.m.
THIRD: That pursuant to resolutionSection 204 of the Board of Directors, the proposed amendment was submitted to the stockholders of the Corporation for consideration at the special meeting of stockholders held on October 31, 2019 and was duly adopted by the stockholders of the Corporation in accordance with the applicable provisions of Section 242 of theDelaware General Corporation Law of Delaware.
IN WITNESS WHEREOF,(the “DGCL”) and approves, adopts, authorizes and ratifies the Corporation has caused this Fourth Certificate of Amendment of Certificate of Incorporation to be signed by its Chief Executive Officer, on , 2019.Potentially Defective Corporate Acts;
APPLIED DNA SCIENCES, INC.
By:
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