UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the
Securities Exchange Act of 1934
(Amendment No. )
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
under § 240.14a-12
Rennova
Health, Inc.
(Name of Registrant as Specified
In Its Charter)
(Name of Person(s) Filing Proxy Statement,
if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Fee computed
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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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Proposed maximum aggregate value of transaction:
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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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Form, Schedule or Registration Statement No.:
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Date Filed:
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RENNOVA HEALTH, INC.
400 South Australian Avenue
Suite 800
West Palm Beach, Florida 33401
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 22, 2016
To Our Stockholders:
The Annual Meeting of Stockholders (the
“Annual Meeting”) of Rennova Health, Inc., a Delaware corporation, will be held on Thursday, December 22, 2016,
at 11:00 a.m., Eastern Time, at the offices of Akerman LLP located at 777 South Flagler Drive, Suite 1100, West Tower, West
Palm Beach, Florida 33401, for the following purposes, as described in the attached Proxy Statement:
1. To elect six members to our Board of
Directors to hold office until our next Annual Meeting of Stockholders or until their successors are duly elected and qualified;
2. To ratify the appointment of Green &
Company, CPAs as our Independent Registered Public Accounting Firm for the fiscal year ending December 31, 2016;
3. To approve an amendment to our Certificate
of Incorporation to effect a reverse stock split of all of the outstanding shares of our common stock, par value $0.01 per share,
at a specific ratio within a range from 1-for-10 to 1-for-30, and to grant authorization to our Board of Directors to determine,
in its sole discretion, the specific ratio and timing of the reverse stock split any time before December 31, 2017, subject to
the Board of Directors' discretion to abandon such amendment;
4. To approve an advisory (non-binding)
resolution on the Company’s executive compensation; and
5. To transact such other business as
may properly come before the Annual Meeting and any adjournments or postponements thereof.
All of the above matters are more fully
described in the accompanying Proxy Statement.
The Board of Directors has fixed the close
of business on November 30, 2016, as the record date for determining those stockholders entitled to notice of, and to vote at,
the Annual Meeting and any adjournments or postponements thereof.
Important Notice regarding the Availability
of Proxy Materials for our Annual Stockholders Meeting to be held on December 22, 2016
.
The Proxy Statement and a copy
of our Annual Report on Form 10-K, as amended, for the year ended December 31, 2015 are available at
www.rennovahealth.com
under "Investors."
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By Order of the Board of Directors,
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/s/ Seamus Lagan
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Chief Executive Officer
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West Palm Beach, Florida
December 5, 2016
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU
ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING PRE-ADDRESSED POSTAGE-PAID ENVELOPE OR
USE THE INTERNET VOTING SYSTEM AS DESCRIBED IN THE ENCLOSED PROXY CARD. YOUR PROXY, GIVEN THROUGH THE RETURN OF THE ENCLOSED PROXY
CARD OR BY USE OF THE INTERNET VOTING SYSTEM, MAY BE REVOKED PRIOR TO ITS EXERCISE BY FILING WITH OUR SECRETARY PRIOR TO THE MEETING
A WRITTEN NOTICE OF REVOCATION OR A DULY EXECUTED PROXY BEARING A LATER DATE, OR BY ATTENDING THE MEETING AND VOTING IN PERSON.
RENNOVA HEALTH, INC.
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
Rennova Health, Inc.
(“Rennova" or the “Company”) is furnishing you this Proxy Statement on behalf of its Board of
Directors to solicit proxies for its Annual Meeting of Stockholders (the “Annual Meeting”), and any adjournments
or postponements of the Annual Meeting. We plan to hold the Annual Meeting on Thursday, December 22, 2016, at 11:00 a.m.
Eastern Time, at the offices of Akerman LLP located at 777 South Flagler Drive, Suite 1100, West Tower, West Palm Beach,
Florida 33401. The approximate date that this Proxy Statement, the accompanying Notice of Annual Meeting, and the enclosed
Form of Proxy are first being sent to stockholders is on or about December 5, 2016. The Company’s Annual Report on Form
10-K for the year ended December 31, 2015, as amended (the “Annual Report”), will be mailed or delivered concurrently
with this Proxy Statement. The Annual Report is not to be regarded as proxy soliciting materials. The Company’s
principal executive offices are located at 400 South Australian Avenue, Suite 800, West Palm Beach, Florida 33401.
Matters To Be Considered at the Annual Meeting
At the Annual Meeting, our stockholders
who are entitled to vote will consider and vote upon proposals to:
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(1)
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elect six members to our Board of Directors to hold office until our next Annual Meeting of Stockholders or until their successors
are duly elected and qualified (the "Election of Directors Proposal");
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(2)
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ratify the appointment of Green & Company, CPAs as our Independent Registered Public Accounting Firm for the fiscal year
ending December 31, 2016 (the "Auditor Ratification Proposal");
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(3)
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approve an amendment to our Certificate of Incorporation to effect a reverse stock split of all of the outstanding shares of
our common stock, par value $0.01 per share, at a specific ratio within a range from 1-for-10 to 1-for-30, and to grant authorization
to our Board of Directors to determine, in its sole discretion, the specific ratio and timing of the reverse stock split any time
before December 31, 2017, subject to the Board of Directors' discretion to abandon such amendment (the "Reverse Split Proposal");
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(4)
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approve an advisory (non-binding) resolution on the Company’s executive compensation (the "Say on Pay Proposal");
and
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(5)
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transact such other business as may properly come before the Annual Meeting and any adjournments or postponements thereof.
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Outstanding Shares; Voting Rights
The Board of Directors has set
the close of business on November 30, 2016, as the record date for determining stockholders entitled to notice of and to vote
at the Annual Meeting and any adjournments or postponements thereof. The Company's common stock is the only class of
securities of the Company entitled to vote at the Annual Meeting. Each share of common stock has one vote. Only common
stockholders of record as of the close of business as of the record date will be entitled to vote. A list
of stockholders entitled to vote at the Annual Meeting will be available at our executive offices, 400 South Australian
Avenue, Suite 800, West Palm Beach, Florida 33401, for a period of ten days prior to the Annual Meeting for examination by
any stockholder. As of the record date, there were 56,384,594 shares of common stock issued and outstanding.
Stockholders that own their shares in “street
name” through a stock brokerage account or through a bank or nominee may attend the Annual Meeting but may not grant a proxy
or vote at the Annual Meeting. Instead, the broker, bank or nominee is considered the record holder of those shares and those stockholders
must instruct the record holder how they wish their shares to be voted. Stockholders are entitled to one vote for each share held,
and do not have the right to cumulate their votes.
A majority of
the shares of our common stock entitled to vote at the Annual Meeting, present in person or represented by proxy, is
necessary to constitute a quorum with respect to all matters presented. The Election of Directors Proposal will be approved
by the affirmative vote of a plurality of the shares of our common stock, present in person or represented by proxy at the
Annual Meeting and entitled to vote on such matter. The Auditor Ratification Proposal and the Say on Pay Proposal will
be approved by the affirmative vote of a majority of votes cast at the Annual Meeting by the holders of shares of our
common stock, present in person or represented by proxy at the Annual Meeting and entitled to vote on such matter.
The Reverse Split Proposal will be approved by the affirmative vote of a majority of the outstanding shares of our common
stock. If less than a majority of the shares of our common stock entitled to vote are represented at the Annual Meeting, a
majority of the shares so represented may adjourn the Annual Meeting to another date, time or place, and notice need not be
given of the new date, time, or place if the new date, time, or place is announced at the Annual Meeting before an
adjournment is taken.
Prior to the
Annual Meeting, we will select one or more inspectors of election for the Annual Meeting. Such inspectors shall determine the
number of shares of common stock represented at the Annual Meeting, the existence of a quorum and the validity and effect
of proxies, and shall receive, count and tabulate ballots and votes and determine the results thereof. Abstentions will
be considered as shares present and entitled to vote at the Annual Meeting but will not be counted as votes cast for or
against any given matter, other than the Reverse Split Proposal. Abstentions will count as a vote against the Reverse Split
Proposal, and will have no effect on the other proposals.
Broker
“non-votes” occur when a broker, bank or other nominee who holds shares in “street name” for a
beneficial owner does not have discretionary authority to vote on a matter and has not received instructions on how to vote
from the beneficial owner of the shares. Under New York Stock Exchange ("NYSE") rules, a broker does not have the
discretion to vote on the Election of Directors Proposal, the Reverse Split Proposal, or the Say on Pay Proposal. As
a result, any broker that is a member of the NYSE will not have the discretion to vote on the Election of Directors Proposal,
the Reverse Split Proposal, or the Say on Pay Proposal. A broker "non-vote" will have no effect on the Election
of Directors Proposal or on the Say on Pay Proposal. A broker "non-vote" will count as a vote against the
Reverse Split Proposal.
Shares of common stock represented by a
properly executed proxy received in time to permit its use at the Annual Meeting and any adjournments or postponements thereof,
will be voted in accordance with the instructions indicated therein. If no instructions are indicated on a properly executed proxy,
the shares of common stock represented by the proxy will be voted (a) FOR the election of all six nominees for director; (b)
FOR the Auditor Ratification Proposal; (c) FOR the Reverse Split Proposal; (d) FOR the Say on Pay Proposal; and (e) FOR the
authorization to act upon such other business as may properly come before the Annual Meeting, and any and all adjournments or postponements
thereof. We do not anticipate that any of our nominees for director will be unavailable for election and we do not know of any
other matters that may be brought before the Annual Meeting. In the event that any other matter should come before the Annual Meeting
or any nominee is not available for election, the persons named in the enclosed proxy will have discretionary authority to vote
all proxies not marked to the contrary with respect to such matters in accordance with their best judgment.
You are requested, regardless of the
number of shares you hold, to sign the proxy and return it promptly in the enclosed envelope, or use the internet voting
system as described in the enclosed proxy card.
Revocability of Proxies
If you grant a proxy, you may revoke your
proxy at any time until it is voted by:
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delivering a notice of revocation to the attention of the
Secretary, Rennova Health, Inc., 400 South Australian Avenue, Suite 800, West Palm Beach, Florida 33401;
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submitting a proxy with a later date prior to the Annual
Meeting; or
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appearing at the Annual Meeting, revoking the proxy and
voting in person.
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Attendance at the Annual Meeting will not
in and of itself revoke a proxy that you submitted prior to the Annual Meeting.
Solicitation of Proxies
The enclosed proxy is solicited on behalf
of our Board of Directors. We will bear the cost of the solicitation of proxies and will solicit proxies by mail. In addition,
our directors, officers and employees may solicit proxies from stockholders by telephone, in person or by any other lawful means.
We will make arrangements with brokerage houses and other custodians, nominees and fiduciaries for forwarding proxy solicitation
material to the beneficial owners of common stock, and held of record by those persons, and we will reimburse them for reasonable
out-of-pocket expenses.
Security Ownership of Certain Beneficial Owners
Security Ownership
The following table summarizes certain information
regarding the beneficial ownership (as such term is defined in Rule 13d-3 under the Securities Exchange Act of 1934) of our outstanding
common stock as of November 30, 2016 by (i) each person known by us to be the beneficial owner of more than 5% of the outstanding
common stock, (ii) each of our directors, (iii) each of the Named Executive Officers (as defined in Item 403(a) of Regulation S-K
under the Securities Act of 1933, as amended), and (iv) all executive officers and directors as a group. Except as indicated in
the footnotes below, the stockholders listed below possess sole voting and investment power with respect to their shares. The address
of each of the following (other than Aella Ltd. and Epizon Ltd.) is c/o Rennova Health, Inc., 400 S. Australian Avenue, Suite 800,
West Palm Beach, Florida 33401.
Name of Beneficial Owner
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No. of Shares of Common Stock Owned
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Percentage of
Ownership
(1)
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Seamus Lagan
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6,521,162
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(2)
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10.8%
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Dr. Paul Billings
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57,230
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(3)
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*
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Christopher E. Diamantis
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3,582,979
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(4)
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6.2%
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Benjamin Frank
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261,444
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(5)
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*
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Michael L. Goldberg
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633,777
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(6)
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1.1%
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Robert Lee
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740,254
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(7)
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1.3%
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Thomas R. Mika
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234,492
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(8)
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*
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Jason P. Adams
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601,725
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(9)
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1.1%
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Samuel R. Mitchell, Jr.
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–
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–
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Clifford Baron, Ph.D.
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80,000
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(10)
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*
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George Lundberg, M.D.
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33,450
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(11)
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*
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Aella Ltd.
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3,073,493
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(12)
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5.5%
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Epizon Ltd.
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3,887,222
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(13)
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6.9%
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Dr. Thomas F. Mendolia
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6,517,246
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(14)
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11.0%
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Francisco Roca, III
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6,477,246
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(15)
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11.0%
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Steven Sramowicz
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6,477,246
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(16)
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11.1%
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All Directors and Executive Officers as a Group (6 persons)
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11,796,946
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(17)
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18.6%
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*
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Less than one percent.
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(1) Based on 56,384,594 shares of common stock issued and outstanding as of November 30, 2016, and additional shares deemed to be outstanding as to a particular person, in accordance with applicable rules of the SEC. Beneficial ownership is determined in accordance with SEC rules to generally include shares of common stock subject to options or issuable upon conversion of convertible securities, and such shares are deemed outstanding for computing the percentage of the person holding such options or securities, but are not deemed outstanding for computing the percentage of any other person.
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(2) Includes 344,234 shares of common stock and 4,250,000 stock options to purchase a like number of shares of
common stock, owned of record by Mr. Lagan. Also includes 1,926,928 shares of common stock owned of record by Alcimede LLC,
of which Mr. Lagan is the sole manager.
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(3) Includes 55,000 stock options to purchase a like number of shares of common stock owned of record by Dr.
Billings.
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(4) Includes 1,814,864 shares of common stock, 301,444 stock options to purchase a like number of shares of common stock, and 1,466,671 warrants to purchase a like number of shares of common stock, owned of record by Mr. Diamantis.
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(5) Consists of 261,444 stock options to purchase a like number of shares of common stock owned of record by Mr. Frank.
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(6) Includes 7,110 shares of common stock and 600,000 stock options to purchase a like number of shares of common stock, owned of record by Mr. Goldberg. Also includes 26,667 shares of common stock owned of record by Monarch Capital LLC, of which Mr. Goldberg is a principal.
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(7) Includes 500,254 shares of common stock and 240,000 stock options to purchase a like number of shares of common stock, owned of record by Mr. Lee.
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(8) Mr. Mika has currently exercisable options to purchase 206,769 shares of
common stock. Mr. Mika resigned as Chairman and a member of the Board of Directors effective November 3, 2016.
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(9) Includes 1,725 shares of common stock and 600,000 stock options to purchase a like number of shares of common stock, owned of record by Mr. Adams. Mr. Adams resigned as Chief Financial Officer effective September 30, 2016.
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(10) Dr. Baron has options to purchase 79,000 shares of common stock exercisable within the next 60 days.
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(11) Dr. Lundberg has options to purchase 32,450 shares of common stock exercisable within the next 60 days.
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(12) All of the outstanding capital stock of Aella Ltd. is owned by The Olive Tree Trust, of which P. Wilhem F. Toothe serves as the trustee. Ms. Sharon L. Hollis is the settlor and Ms. Hollis and her family are the beneficiaries of The Olive Tree Trust. Aella Ltd. owns of record 3,073,493 shares of common stock. The address of Aella Ltd. is Suite 104a, Saffrey Square, Bank Lane, P.O. Box N-9306, Nassau, Bahamas.
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(13) All of the outstanding capital stock of Epizon Ltd. is owned by The Shanoven Trust, of which P. Wilhelm F. Toothe serves as trustee. Mr. Lagan is the settlor and Mr. Lagan and his family are the beneficiaries of The Shanoven Trust. Epizon Ltd. owns of record 3,887,222 shares of common stock. The address of Epizon Ltd. is Suite 104a, Saffrey Square, Bank Lane, P.O. Box N-9306, Nassau, Bahamas.
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(14) Includes 3,739,847 shares of common stock, 2,040,000 stock options to purchase a like number of shares of common
stock, and 737,399 warrants to purchase a like number of shares of common stock, owned of record by Dr. Mendolia.
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(15) Includes 3,739,847 shares of common stock, 2,000,000 stock options to purchase a like number of shares of common
stock, and 737,399 warrants to purchase a like number of shares of common stock, owned of record by Mr. Roca.
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(16) Includes 3,962,069 shares of common stock, 2,000,000 stock options to purchase a like number of shares of common
stock, and 737,399 warrants to purchase a like number of shares of common stock owned of record by Mr. Sramowicz.
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(17) Includes Messrs. Lagan, Diamantis, Frank, Goldberg and Lee and Dr. Billings. Includes 4,620,057 shares of common
stock, 5,707,888 stock options to purchase a like number of shares of common stock, and 1,466,671 warrants to purchase a like
number of shares of common stock, owned by Messrs. Lagan, Diamantis, Frank, Goldberg and Lee and Dr. Billings, as
described in the above footnotes.
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PROPOSAL 1 – ELECTION OF DIRECTORS AND MANAGEMENT INFORMATION
The Board of Directors will submit to the
stockholders for their vote at the Annual Meeting a slate of directors comprising of six nominees, who are all currently directors.
Nominees
Our Bylaws provide that the number of
directors may be fixed from time to time by resolution of the Board of Directors, which number shall not be less than two.
The number of directors is currently fixed at seven, and the Board of Directors has fixed the number of directors at six at
the effective time of the Annual Meeting
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Our executive officers serve at
the discretion of the Board of Directors and are elected by our Board of Directors annually.
Each director elected at the Annual Meeting
will serve for a term expiring at the next Annual Meeting of Stockholders or until a successor has been duly elected and qualified.
Seamus Lagan, Dr. Paul Billings, Christopher E. Diamantis, Benjamin Frank, Michael L. Goldberg, and Robert Lee have been nominated
as directors to be elected by the stockholders at this Annual Meeting, and proxies will be voted for all six nominees, absent contrary
instructions. All nominees are currently directors of Rennova. The biographical information regarding the nominees for election
to our Board of Directors, including the experiences, qualifications, attributes or skills that have caused the Company to currently
determine that each such person should serve as a director of the Company, is set forth below under “Executive Officers and
Directors.” No nominee is related to any other nominee to the Board of Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE “FOR” ALL NOMINEES FOR DIRECTOR.
Executive Officers and Directors
Nominees for Director
Seamus Lagan
, 47, was appointed Chief
Executive Officer and President and a director of the Company on November 2, 2015 and as Chief Executive Officer and a director
of Medytox Solutions, Inc., a wholly-owned subsidiary of the Company (“Medytox”), effective September 15, 2014. Mr.
Lagan was appointed Interim Chief Financial Officer of the Company upon the resignation of Jason Adams effective September 30,
2016. Mr. Lagan has been, either individually or through Alcimede LLC, a consultant to Medytox since May 2011. Mr. Lagan has been
a director of Alcimede since its formation in 2007. Alcimede is a privately-held, Delaware limited liability company which provides
various consulting services, including management, organization, and financial consulting services. Mr. Lagan also currently serves,
through Alcimede, as chief executive officer of the following subsidiaries of the Company: Medytox Diagnostics, Inc. (since February
2012), and Health Technology Solutions, Inc. (since June 2011) and as president of Medical Billing Choices, Inc. (since July 2013).
From September 2008 through May 2011, Mr. Lagan was a private investor. In 2008, TecEnergy UK Limited (“TEC”), a waste
management and alternative energy company in England and Wales, of which Mr. Lagan served as a director, was placed into administration
to protect it from bankruptcy. The relevant taxing authorities in the United Kingdom alleged that the directors reduced the debt
of TEC to its creditors at the expense of tax liabilities to the taxing authorities. There were no other allegations of wrongdoing,
but based on such allegations, the taxing authorities sought to have each of the directors of TEC banned from acting as a director
in the United Kingdom for a three-year period. At the time of such action, Mr. Lagan had significant health issues and did not
defend himself. As a result, Mr. Lagan was banned in his absence from acting as a director of a United Kingdom company from October
8, 2010 until October 2015 (In the Matter of TecEnergy UK Limited and in the Matter of the Company Directors Disqualifications
Act of 1986 between the Secretary of State for Business, Innovation and Skills and Seamus Lagan (Norwich County Court, UK, Claim
No. 0NR00656)). Mr. Lagan graduated from Ballymena Technical College in Ireland in 1989.
Our Board believes that Mr. Lagan's experience
as the Chief Executive Officer of the Company and its subsidiaries provides us with highly valuable specific business, leadership
and management experience.
Dr. Paul Billings
,
M.D.,
Ph.D, FACP, FACMG
, 63, joined the board of directors on April 7, 2014. A Board certified internist and
clinical geneticist, Dr. Billings is currently the Chairman of Biological Dynamics, Inc., an innovative cancer testing
company in San Diego, CA and Executive Chairman and Co-Founder of PlumCare, a direct to consumer genomics start-up. He is
also a member of the board of directors of Trovagene, Inc. (NASDAQ: TROV) since October 2013, acting Chief Medical Officer
(CMO) of Omicia, Inc., and serves on other for-profit and not-for-profit boards including the Council for Responsible
Genetics, the country’s oldest independent biotechnology "watchdog" organization. He is a principal in the
Bethesda Group, a full service consulting group in the diagnostic sector. In the recent past, Dr. Billings completed
significant consultancies at Johnson & Johnson (from 2014 to 2015) and ThermoFisher Scientific (creating and
directing the IMPACT Cancer Program) from 2013 to 2015 and was the CMO of Life Technologies Inc. (Lifetech) from 2012 to 2014
and then the CMO (consulting) of the Genetic Sciences Division of ThermoFisher Scientific, both positions aimed at improving
patient care through expanding the use of medically relevant genomic technologies in clinical settings. Dr. Billings was
formerly a director of Ancestry.com, the Executive Chairman of Signature Genomics Inc., and a Founder of the Cordblood
Registry, Inc. Additionally, he was a founder or chief executive officer of several companies involved in genetic and
diagnostic medicine including GeneSage Inc., Omicia Inc., and CELLective Dx Corporation, and was senior vice president for
corporate development at Laboratory Corporation of America Holdings (NYSE; LH). Dr. Billings has extensive expertise and
experience in the areas of genomics and molecular medicine. He has served on the Scientific Advisory Board of the Food and
Drug Administration, the Genomic Medicine Advisory Committee at the Department of Veterans Affairs, and as a Director of
the Personalized Medicine Coalition. Prior to the appointments at Lifetech and TFS, Dr. Billings was the Director and
Chief Scientific Officer of the Genomic Medicine Institute at El Camino Hospital, the largest community hospital in Silicon
Valley. He was also a member of the United States Department of Health and Human Services Secretary's Advisory Committee on
Genetics, Health and Society. In addition, Dr. Billings has had a distinguished career as a physician and researcher. He has
held academic appointments at Harvard University, U.C. San Francisco, Stanford University and U.C. Berkeley, and has served
as a physician at a number of leading medical centers. He is the author of nearly 200 publications and books on experimental
and clinical medicine. His work on genetic discrimination was instrumental in the creation and passage of the federal Genetic
Information Non-Discrimination Act of 2008. Dr. Billings holds an M.D. from Harvard Medical School and a Ph.D. in immunology
from Harvard University.
Our Board believes that Dr.
Billings’ scientific and healthcare background, as well as his experience as an executive and director of public
companies, puts him in a position to assist the Board of Directors and management in the Company’s business.
Christopher E. Diamantis
, 48, has
served as a director of the Company since November 2, 2015 and previously served as a director of Medytox from April 24, 2013 to
November 2, 2015. Mr. Diamantis has served, since 1999, as Chairman and Chief Executive Officer of Integrated Financial Settlements,
Inc., a structured settlement consulting firm in Tallahassee, Florida. He has also been, since April 2000, a director and managing
partner of The Gabor Agency, Inc., a 65-year old Florida-based company specializing in investment and insurance planning for public
employees and universities. In addition, since 2007, Mr. Diamantis has been a director and partner in Counsel Financial Services,
Inc., a specialty financial firm catering to the needs of the legal community and the largest non-bank lender to law firms in the
United States. He is a past member of the Board of Governors of the Florida State University College of Business and past president
of the National Structured Settlements Trade Association.
Our Board believes that Mr. Diamantis' experience
as a Chief Executive Officer and director of private companies provides us with highly valuable business, leadership and management
experience.
Benjamin Frank
, 82, has served as
a director of the Company since November 2, 2015 and previously served as a director of Medytox from April 24, 2013 to November
2, 2015. Mr. Frank is a retired lawyer and businessman, with particular experience in healthcare, foreign trade, retail, business
development and government. After practicing as an attorney, from 1962 to 1966, he was a Senior Vice President and member of the
Board of Directors of Allied Stores Corporation, which owned department stores and specialty stores, including Jordan Marsh, Brooks
Brothers, Ann Taylor and others. He also served, from 1971 to 1987, as a Vice President and Trustee of North Shore University Hospital,
currently North Shore University Hospital, Long Island Jewish Hospital System. Mr. Frank was appointed in February 2009 by former
Florida Governor Charlie Crist to the Board of the Health Care District of Palm Beach County and he served as Chair of the Board
from October 2011 to February 2013.
Our Board believes that Mr. Frank's
experience as an executive and director of private organizations and as a lawyer specializing in healthcare and government
affairs provides us with highly valuable regulatory, business and management experience.
Michael L. Goldberg
, 66,
has served as a director of the Company since November 2, 2015 and previously served as a director of Medytox from August 6,
2015 to November 2, 2015. Mr. Goldberg has been, through Monarch Capital LLC, a consultant of Medytox since August 2015. Mr.
Goldberg has been the Managing Director of Monarch Capital LLC since April 2006. Monarch is a corporate consulting
company primarily servicing small to mid-sized public and private companies. As such, he served in a corporate restructuring
capacity as a Director, Acting Chief Executive Officer and President of IDO Security, Inc., from July 2006, until May 2013.
Mr. Goldberg served as a Director and Chief Executive Officer of Rx Medical Services Corp. (“RXM”), an American Stock
Exchange listed company, a position he held from May 1991 through June 2006. RXM was a medical company, which at one time
managed and owned rural hospitals, clinical laboratories and MRI/CT centers across the United States. While there he was
responsible for in excess of 25 acquisitions across the country. Mr. Goldberg has been involved as a consultant to a number
of private and public companies in varying industries, assisting in their formation and capital structures. Mr. Goldberg
began his career as an Asper Fellow in the US Attorney's office in 1974 with the Criminal division of the Department of
Justice in Washington, D.C. (Watergate prosecution team) before becoming an Assistant District Attorney in Philadelphia where
he rose to the major trial and then homicide division. Mr. Goldberg was also a litigator in Philadelphia where he maintained
a private practice before he transitioned into a career in corporate restructuring. Mr. Goldberg has served as a Director of
both private and publicly traded companies and has served on audit and compensation committees.
Our Board believes that Mr. Goldberg's
experience as an executive and director of private and publicly traded companies, as a member of both audit and compensation
committees, and as a lawyer specializing in healthcare and government affairs will provide us with highly valuable
regulatory, business and management experience.
Robert Lee
, 62, has served as a
director of the Company since November 2, 2015 and previously served as a director of Medytox from August 6, 2015 to November
2, 2015. Mr. Lee is currently the Managing Partner of Sheffield Investment Partners, and has served in such capacity since
2010. Prior thereto, from 2008 until 2010, Mr. Lee served as a Managing Director of New Stream Capital, and from 2000 until
2007, Mr. Lee was a Managing Director at CRT Capital Group (“CRT”). Prior to joining CRT, Mr. Lee was a Managing Director of Morgan
Stanley Dean Witter from 1984 until 2000. Mr. Lee ran several units of Dean Witter's Investment Bank including the M&A
Group. After the merger of Dean Witter with Morgan Stanley, Mr. Lee was a Managing Director in the M&A group at Morgan
Stanley working most closely with the Financial Sponsors. Mr. Lee also serves as a Board member of SL Investment Management,
and has served in such capacity since 2011. From 2001 to 2008, Mr. Lee served on the Board of Springs Industries, and from
2008 until 2013, Mr. Lee served on the Board of Springs Window Fashions. Mr. Lee is also on the board of visitors for the
Wake Forest School of Business, and previously served as Chairman of such Board. Mr. Lee received his undergraduate degree in
economics from Dartmouth College (BA 1976) and attended the University of Chicago Graduate School of Business.
Our Board believes that Mr. Lee's experience
as an executive and director of various entities, as well as his experience in investments and capital markets will provide us
with highly valuable regulatory, business and management experience.
Required Vote
Nominees are elected by
a plurality of votes cast at the Annual Meeting. Abstentions and broker non-votes will not be counted as votes for or against this
proposal and will not be included in counting the number of votes necessary for approval of this proposal.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR EACH NOMINEE FOR DIRECTOR.
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely on our review of such forms
furnished to us, and written representations from certain reporting persons, we believe that all filing requirements applicable
to our executive officers, directors and greater-than-10% stockholders during the fiscal year ended December 31, 2015 were timely
filed, except for a Form 3 filing for each of Seamus Lagan and Alcimede LLC filing jointly, Christopher Diamantis, and Benjamin
Frank, a Form 4 reporting one transaction for Thomas Mika, a Form 4 reporting four transactions for Clifford Baron, a Form 4 reporting
four transactions for George Lundberg, and a Form 4 reporting four transactions for Smruti Vidwans.
Board Meetings and Committees
Our Board of Directors held five
meetings during our fiscal year ended December 31, 2015. Our Board of Directors has affirmatively determined that each
of Dr. Paul Billings, Benjamin Frank and Robert Lee is an “independent director” as defined under the Listing
Rules of The NASDAQ Stock Market. The Listing Rules of The NASDAQ Stock Market provide a list of disqualifying criteria for
the independence determination. For example, under these rules, a director who is, or during the past three years was,
employed by the company or by any parent or subsidiary of the company, other than prior employment as an interim chairman or
interim chief executive officer, would not be considered independent. No director qualifies as independent unless the board
of directors affirmatively determines that the director does not have a material relationship with the listed company that
would interfere with the exercise of independent judgment. During our fiscal year ended December 31, 2015, no director
attended less than 75% of the aggregate number of Board of Directors meetings held.
We encourage all of our directors to attend
our Annual Meeting of Stockholders. We anticipate that a Board of Directors meeting will be held immediately following our Annual
Meeting of Stockholders.
The Board of Directors has an audit committee,
a compensation committee and a nominating/corporate governance committee. Each of these committees operates under a charter that
has been previously approved by the board of directors and has the composition and responsibilities described below. The Board
of Directors from time to time may establish other committees to facilitate the management of the Company and may change the composition
and the responsibilities of the existing committees.
The table below summarizes
the current membership of each of the three standing board committees of the Company.
Director
|
Audit
|
Compensation
|
Nominating/
Corporate Governance
|
Seamus Lagan
|
|
|
|
Dr. Paul R. Billings
|
X
|
Chairman
|
X
|
Christopher E. Diamantis
|
|
|
|
Benjamin Frank
|
X
|
X
|
Chairman
|
Michael L. Goldberg
|
|
|
|
Robert Lee
|
Chairman
|
X
|
X
|
Audit Committee
The purpose of the audit committee
of the Company is to review the Company's audited financial statements with management, review the performance of the
Company's independent registered public accountants, approve audit fees and fees for the preparation of the Company's
tax returns, review the Company's accounting policies and internal control procedures and consider and appoint the
Company's independent registered public accountants. The audit committee has the authority to engage the services of outside
experts and advisors as it deems necessary or appropriate to carry out its duties and responsibilities.
The audit committee charter is
available on the Company's website at
www.rennovahealth.com
by selecting “Investors” and then
“Corporate Governance” from the available options.
The audit committee of the Company
currently consists of Dr. Paul Billings, Robert Lee and Benjamin Frank. Dr. Paul Billings was appointed a member of the Audit
Committee on November 30, 2016, and Christopher Diamantis resigned as a member of the Audit Committee on November 30, 2016.
Each member of the audit committee qualifies as “independent” for purposes of membership on audit
committees pursuant to the Listing Rules of The NASDAQ Stock Market and the rules and regulations of the SEC and is
“financially literate” as required by the Listing Rules of The NASDAQ Stock Market. In addition, the Board of
Directors of the Company has determined that Mr. Lee qualifies as an “audit committee financial expert” as
defined by the rules and regulations of the SEC and meets the qualifications of “financial sophistication” under
the Listing Rules of The NASDAQ Stock Market.
Compensation Committee
The purpose of the compensation committee
of the Company is to assist the Board of Directors of the Company in the discharge of its responsibilities with respect to employee
compensation including the adoption, periodic review and oversight of the Company's compensation strategy, policies and plans.
The compensation committee of the Company administers equity plans of the Company. The compensation committee has the authority
to engage the services of outside experts and advisors as it deems necessary or appropriate to carry out its duties and responsibilities.
The compensation committee charter is
available on the Company's website at
www.rennovahealth.com
by selecting “Investors” and then
“Corporate Governance” from the available options.
The compensation
committee of the Company currently consists of Robert Lee, Dr. Paul Billings and Benjamin Frank. Robert Lee was appointed a
member of the Compensation Committee on November 30, 2016.
Nominating/Corporate Governance Committee
The purpose of the
nominating/corporate governance committee of the Company is to oversee all aspects relating to corporate governance,
including acting as an independent committee evaluating transactions between the Company and directors and officers. The
nominating/corporate governance committee also assists the Board of Directors by identifying individuals qualified to become
board members, recommending for selection by the Board of Directors the director nominees to stand for election at the next
annual meeting of the Company's stockholders and recommending to the board director nominees for each committee of the board.
When reviewing related party transactions,
the nominating/corporate governance committee considers all relevant facts and circumstances, including:
|
·
|
the commercial reasonableness of the terms;
|
|
·
|
the benefit and perceived benefits, or lack thereof, to the Company;
|
|
·
|
opportunity costs of alternate transactions; and
|
|
·
|
the materiality and character of the related person's interest, and the actual or apparent conflict of interest of the related person.
|
The nominating/corporate governance committee
will only approve or ratify a related party transaction when it determines that, upon consideration of all relevant information,
the transaction is in, or is not inconsistent with, the best interests of the Company and stockholders. No related party transactions
will be consummated without the approval or ratification of the nominating/corporate governance committee and the disinterested
members of the Board of Directors. Any directors interested in a related party transaction will recuse themselves from
any vote relating to a related party transaction in which they have an interest.
The nominating/corporate governance committee
has the authority to engage the services of outside experts and advisors as it deems necessary or appropriate to carry out its
duties and responsibilities.
The nominating/corporate governance committee
charter is available on the Company's website at
www.rennovahealth.com
by selecting “Investors” and
then “Corporate Governance” from the available options.
The nominating/corporate governance
committee of the Company currently consists of Benjamin Frank, Dr. Paul Billings and Robert Lee. Dr. Paul Billings was
appointed a member of the Nominating/Corporate Governance Committee on November 30, 2016.
We will consider proposed nominees for election
to our Board of Directors whose names are submitted to our Chief Executive Officer by stockholders; however, we do not have a formal
process for that consideration. We have not to date adopted a formal process given the Company’s size and given the historically
small number of proposed nominees. We believe it is desirable to be flexible and open as to whom the board of directors might consider
for board membership. Generally, however, our board member selection criteria include: integrity; high level of education and/or
business experience; broad-based business acumen; understanding of our business and industry; strategic thinking and willingness
to share ideas; ability to work as a constructive member of a team for the benefit of stockholders; network of contacts; and diversity
of experiences, expertise and background. Director nominees have normally been identified based upon suggestions by directors,
management members and/or stockholders. Proposed nominees are not evaluated differently depending upon who has made the proposal.
All of our board members will participate in the consideration of any proposed nominees. We have not to date paid any third party
fees to assist in this process.
If a stockholder wishes to suggest a
proposed name for consideration as a nominee for Board membership at an annual meeting, the name of that nominee and related
personal and other information, as indicated in our Bylaws, should be forwarded to us, in care of the Company’s Chief
Executive Officer, at least 120 days before the annual meeting to assure time for meaningful consideration by our board of
directors. That time frame is shortened when the annual meeting is scheduled for a date that varies more than 30 days from
the anniversary date of the last annual meeting. See also “Stockholder Proposals” below for requirements for
nominations for the next annual meeting.
Family Relationships amongst Directors and Executive Officers
There are no family relationships between
the executive officers and directors.
Board Leadership Structure and Role in Risk Oversight
Our Board of Directors has no current policy
regarding the need to separate or combine the offices of Chairman of the Board of Directors and Chief Executive Officer. Our Board
of Directors may review in the future whether a policy is appropriate for us. Recently, we have separated the positions of Chairman
of the Board of Directors and Chief Executive Officer, although historically, such positions were held by one person. In the future,
we may continue to separate such positions or combine them, based on our then assessment as to whether our then Chief Executive
Officer is in the best position to fulfill the Chairman of the Board of Director’s responsibilities, including those related
to identifying emerging issues facing us and our industry, and communicating essential information to our Board of Directors about
our performance and strategies. Currently, we have not designated a Chairman of the Board or a lead independent director. We believe
that our current leadership structure is appropriate based upon our size and characteristics, and the involvement of our independent
directors. The Board of Directors as a whole monitors and considers policies to manage risk as part of its regular activities.
The committees of the board focus on and manage specific forms of risk and report their activities to the Board of Directors. The
audit committee is primarily responsible for the identification and review of financial risk. The compensation committee works
to minimize risks associated with the executive compensation plans and stock benefit plans that it establishes. The nominating/corporate
governance committee considers risks presented by changing law and regulation and recommend changes in governance and operations
to comply.
Stockholder Communications to the Board of Directors
The Board of Directors does not have a formal
process for stockholders to send communications to the Board of Directors. Due to the infrequency of stockholder communications
to the Board of Directors, our Board of Directors does not believe that a formal process is necessary. Written communications to
the Board of Directors, or to any member of the Board of Directors, may be sent to the Board of Directors, or the individual Board
member, at the Company’s executive offices at 400 South Australian Avenue, Suite 800, West Palm Beach, Florida 33401, and the
Company will promptly circulate such communications to all members of the Board of Directors (or to those particular directors
to whom such communication is specifically addressed). Such communications will be screened to the extent necessary in order to
ascertain the intended recipients or appropriate recipients among the members of the Board of Directors.
Code of Conduct
The Company has adopted a written code of
conduct ("Code"), which Code is applicable to the Board of Directors and officers of the Company, including, but not
limited to the Company's Chief Executive Officer, Chief Financial Officer, Controller and all persons performing similar functions
to the foregoing officers of the Company. We intend to post amendments to or waivers from the Code (to the extent applicable to
our Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer or Controller, or persons performing
similar functions) on our website at
www.rennovahealth.com
. A copy of the Code will be provided to any person free of charge
upon request by writing to Rennova Health, Inc., Attention: Secretary, 400 South Australian Avenue, Suite 800, West Palm Beach,
Florida 33401.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee reviews
the Company’s financial reporting process on behalf of the Board of Directors. Management has the primary
responsibility for establishing and maintaining adequate internal control over financial reporting, for preparing the
financial statements and for the financial reporting process. The Audit Committee members do not serve as professional
accountants or auditors, and their functions are not intended to duplicate or to certify the activities of management or the
independent registered public accounting firm. We have engaged our independent public accountants to report on the conformity
of the Company’s financial statements to accounting principles generally accepted in the United States of America. In this
context, the Audit Committee hereby reports as follows:
|
1.
|
The Audit Committee has reviewed and discussed the audited financial statements with management of the Company.
|
|
2.
|
The Audit Committee has discussed with Green & Company, CPAs, our independent registered public accounting firm, the matters required to be discussed by Public Company Accounting Oversight Board Auditing Standard No. 16,
Communications with Audit Committees.
|
|
3.
|
The Audit Committee has also received the written disclosures and the letter from Green & Company, CPAs required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the Audit Committee concerning independence and the Audit Committee has discussed the independence of Green & Company, CPAs with that firm.
|
|
4.
|
Based on the review and discussion referred to in paragraphs (1) through
(3) above, the Audit Committee recommended to the Board and the Board approved the inclusion of the audited
financial statements in the Company’s Annual Report on Form 10-K, as amended, for the fiscal year ended
December 31, 2015, for filing with the SEC.
|
The foregoing has been furnished by the
Audit Committee:
Robert Lee (Chairman)
Christopher Diamantis
Benjamin Frank
This “Audit Committee Report”
is not “Soliciting Material,” and is not deemed filed with the SEC and is not to be incorporated by reference in any
filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934
,
as amended,
whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
EXECUTIVE COMPENSATION
The
following table sets forth all of the compensation awarded to, earned by or paid to (i) each individual that served as our principal
executive officer during the fiscal year ended December 31, 2015; (ii) the Company's two most highly compensated executive officers
other than the principal executive officer at the conclusion of the fiscal year ended December 31, 2015; and (iii) the Company's
two most highly compensated executive officers other than the principal executive officer but for the fact that these persons were
not serving as executive officers at the conclusion of the fiscal year ended December 31, 2015 (collectively, the Named Executive
Officers).
SUMMARY COMPENSATION TABLE
Name
and
Principal
Position
|
|
Fiscal Year
|
|
|
Salary
|
|
|
Bonus
|
|
|
Stock
Awards
(7)
|
|
|
Option Awards
|
|
|
Nonequity Incentive
Plan Compensation
|
|
|
Nonqualified Deferred
Compensation Earnings
|
|
|
All
Other Compensation
(8)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Seamus Lagan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President, CEO,
Interim CFO
|
|
|
2015
|
(1)
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
371,375
|
|
|
$
|
371,375
|
|
and Director
|
|
|
2014
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
144,375
|
|
|
$
|
144,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas R. Mika
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Chairman,
|
|
|
2015
|
(2)
|
|
$
|
321,923
|
|
|
$
|
150,000
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
1,179
|
|
|
$
|
473,102
|
|
President, CEO and Acting Chief
|
|
|
2014
|
|
|
$
|
287,419
|
|
|
$
|
–
|
|
|
$
|
230,500
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
10,560
|
|
|
$
|
528,479
|
|
Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jason P. Adams
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Chief Financial Officer
|
|
|
2015
|
(3)
|
|
$
|
70,833
|
|
|
$
|
10,000
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
1,031
|
|
|
$
|
81,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Samuel R. Mitchell, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Chief
|
|
|
2015
|
(4)
|
|
$
|
204,343
|
|
|
$
|
20,521
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
13,323
|
|
|
$
|
238,187
|
|
Operating Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clifford Baron, Ph.D.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Vice President
|
|
|
2015
|
(5)
|
|
$
|
207,692
|
|
|
$
|
15,000
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
222,692
|
|
and Chief Operating
|
|
|
2014
|
|
|
$
|
163,846
|
|
|
$
|
–
|
|
|
$
|
24,950
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
5,527
|
|
|
$
|
194,323
|
|
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George Lundberg, M.D.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Editor in Chief
|
|
|
2015
|
(6)
|
|
$
|
155,769
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
155,769
|
|
and Chief Medical
|
|
|
2014
|
|
|
$
|
150,000
|
|
|
$
|
–
|
|
|
$
|
8,485
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
4,500
|
|
|
$
|
162,985
|
|
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
__________
(1)
|
Mr. Lagan was appointed Medytox’s President and Chief Executive Officer on September 15, 2014 and the Company’s President and Chief Executive Officer on November 2, 2015. The compensation information presented includes the period from September 15, 2014 to December 31, 2015. Mr. Lagan was appointed Interim Chief Financial Officer of the Company upon the resignation of Jason Adams effective September 30, 2016.
|
|
|
(2)
|
Effective November 2, 2015, Mr. Mika ceased being the Company’s Chief Executive Officer. The compensation information presented for the fiscal year ended December 31, 2015, includes all compensation for the full year as Mr. Mika served as the Company’s Chairman through November 3, 2016.
|
(3)
|
Mr. Adams became Medytox’s Chief Financial Officer on September 12, 2015 and the Company’s Chief Financial Officer on November 2, 2015. The Company paid Mr. Adams a one-time relocation bonus of $10,000 in September 2015. The compensation information presented for the fiscal year ended December 31, 2015 includes the period from September 12, 2015 through December 31, 2015. Mr. Adams resigned as Chief Financial Officer of the Company effective September 30, 2016.
|
(4)
|
Mr. Mitchell was appointed Medytox’s Chief Operating Officer on February 4, 2015 and the Company’s Chief Operating Officer on November 2, 2015. On January 11, 2016, Mr. Mitchell ceased being the Company’s Chief Operating Officer. The compensation information presented for the fiscal year ended December 31, 2015 includes the period of February 4, 2015 through December 31, 2015.
|
(5)
|
Dr. Baron was appointed the Company’s Vice President and Chief Operating Officer on March 5, 2014 and ceased occupying that position on November 2, 2015. The compensation information presented includes the period from March 5, 2014 through November 2, 2015.
|
(6)
|
Dr. Lundberg was appointed the Company’s Chief Medical Officer on September 4, 2013 and ceased occupying that position on November 2, 2015. The compensation information presented for the year ended December 31, 2015 includes the period from January 1, 2015 to November 2, 2015.
|
(7)
|
This column reflects the aggregate grant date fair value of stock awards computed in accordance with FASB ASC Topic 718. In determining the grant date fair value, the Company used the closing price of the Company’s common stock on the grant date.
|
(8)
|
All other compensation for the year ended December 31, 2015 includes (1) for Mr. Lagan, consulting fees of $359,375 and automobile allowance of $12,000 described below, (2) for Mr. Mika, premiums on excess group term life insurance, (3) for Messrs. Adams and Mitchell, health insurance premiums paid by the Company, and (4) for Drs. Baron and Lundberg, 401(k) matching funds paid by the Company. All other compensation for the year ended December 31, 2014 includes (1) for Mr. Lagan, consulting fees of $144,875 which includes a bonus of $35,000 paid under the consulting agreement with Alcimede LLC, and (2) for Mr. Mika and Drs. Baron and Lundberg, 401(k) matching funds paid by the Company.
|
OUTSTANDING EQUITY
AWARDS AT FISCAL YEAR END
The following table provides information
regarding outstanding equity awards held by the Named Executive Officers at December 31, 2015:
|
|
Option
Awards
|
|
|
Stock
Awards
|
|
Name
|
|
Number
of shares underlying unexercised options exercisable
|
|
|
Number
of shares underlying unexercised options unexercisable
|
|
|
Equity
Incentive Plan Awards: Number of shares underlying unexercised unearned options
|
|
|
Option
exercise price
$
|
|
|
Option
expiration date
|
|
|
Number
of shares or units of stock that have not vested
|
|
|
Market
value of shares or units of stock that have not vested
$
|
|
|
Equity
Incentive Plan Awards: Number of unearned shares, units or other rights that have not vested
|
|
|
Equity
Incentive Plan Awards: Market or payout value of unearned shares, units or other rights that have not vested
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Seamus Lagan
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
–
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas R. Mika
|
|
|
327
|
|
|
|
–
|
|
|
|
–
|
|
|
$
|
230.00
|
|
|
11/15/2016
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
|
2,073
|
|
|
|
–
|
|
|
|
–
|
|
|
$
|
210.00
|
|
|
12/18/2017
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
|
4,369
|
|
|
|
–
|
|
|
|
–
|
|
|
$
|
117.00
|
|
|
11/5/2018
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jason P. Adams
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
–
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Samuel R. Mitchell, Jr.
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
–
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clifford Baron, Ph. D.
|
|
|
4,000
|
|
|
|
–
|
|
|
|
–
|
|
|
$
|
32.20
|
|
|
03/05/2024
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
|
1,000
|
|
|
|
–
|
|
|
|
–
|
|
|
$
|
7.50
|
|
|
12/08/2024
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
|
1,500
|
|
|
|
–
|
|
|
|
–
|
|
|
$
|
19.90
|
|
|
07/03/2024
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
|
–
|
|
|
|
145,000
|
(1)
|
|
|
–
|
|
|
$
|
4.80
|
|
|
11/02/2025
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George Lundberg, M.D.
|
|
|
1,500
|
|
|
|
–
|
|
|
|
–
|
|
|
$
|
39.40
|
|
|
07/12/2022
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
|
500
|
|
|
|
–
|
|
|
|
–
|
|
|
$
|
7.50
|
|
|
12/08/2024
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
|
450
|
|
|
|
–
|
|
|
|
–
|
|
|
$
|
19.90
|
|
|
07/03/2024
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
|
–
|
|
|
|
60,000
|
(1)
|
|
|
–
|
|
|
$
|
4.80
|
|
|
11/02/2025
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
–
|
|
|
$
|
–
|
|
__________
(1) These options were granted on November 2, 2015. The options
vest with respect to fifty percent (50%) of the total number of shares on the six-month anniversary of the date of grant, and the
remaining fifty percent (50%) of the total number of shares on the twelve-month anniversary, subject to the person's continued
status as an employee on each applicable vesting date, such that all shares shall be fully vested on the first anniversary of the
date of grant of the option.
Agreements with Named Executive Officers
Seamus Lagan
Medytox and Seamus Lagan entered into a
non-exclusive Consulting Agreement on May 25, 2011. Under the agreement, Mr. Lagan rendered management consulting and business
advisory services and advised on marketing strategies. Medytox paid Mr. Lagan $15,000 per month. In connection with the consulting
agreement, Mr. Lagan received approximately $65,000 in cash and was issued 1,300,000 shares of common stock of Medytox with a value
of $13,000. This agreement was in effect through October 3, 2011, when it was replaced by a consulting agreement between Medytox
and Alcimede LLC, which is controlled by Mr. Lagan. Under this new agreement, Alcimede agreed to assist Medytox by providing management
as may be required by Medytox, assisting with Medytox 's capital structure and funding, completing acquisitions and funding, and
structuring and securing financing. The term of the Alcimede agreement was from October 3, 2011 to December 31, 2013, with automatic
renewals for an additional year unless one party delivered notice of nonrenewal. Medytox agreed to pay Alcimede a retainer of $20,000
a month and issued Alcimede options to purchase 200,000 shares of common stock of Medytox, exercisable at $3.00 per share through
January 1, 2014, and an additional 200,000 shares of common stock of Medytox exercisable at $6.00 per share through January 1,
2015. Medytox also reimbursed Alcimede's expenses.
Medytox and Alcimede entered into
a revised Consulting Agreement as of October 1, 2012. This agreement replaced and superseded the prior Alcimede
consulting agreement. This new agreement originally was for three years, and is now subject to annual renewals, unless
either party gives notice of non-renewal. The retainer remained at $20,000 a month and Medytox continues to reimburse
Alcimede for its expenses. The parties agreed to cancel the options issued pursuant to the prior agreement. Under the new
agreement the Company issued Alcimede 4,500,000 shares of common stock of Medytox and 1,000 shares of Series B Preferred
Stock of Medytox. In addition, Alcimede received options to purchase (i) 1,000,000 shares of common stock of Medytox
exercisable at $2.50 per share through December 31, 2017, (ii) 1,000,000 shares of common stock of Medytox exercisable at
$5.00 per share through December 31, 2017 and (iii) 1,000,000 shares of common stock of Medytox exercisable at $10.00 a share
through December 31, 2022. On June 29, 2015, Alcimede exercised the option to purchase 1,000,000 shares of common stock of
Medytox at an exercise price of $2.50 per share (See Related Party Transactions below for additional information). The
parties agreed to cancel the remaining options to purchase 1,000,000 shares of common stock of Medytox at an exercise price
of $5.00 per share and 1,000,000 shares of common stock at an exercise price of $10.00 per share in connection with the
business combination on November 2, 2015. The share amounts and exercise prices in this paragraph are on a pre-split and
pre-merger basis, as described in the Company’s Current Report on Form 8-K filed with the Securities and Exchange
Commission on November 6, 2015.
Effective September 11, 2014 and in conjunction
with the appointment of Mr. Lagan as our Chief Executive Officer, such consulting agreement with Alcimede was amended to provide
for a monthly retainer of $31,250, and we agreed to provide Mr. Lagan with an automobile.
Thomas R. Mika
The Company previously entered into an at-will
employment agreement with Mr. Mika, which was amended and restated as of February 12, 2013. The employment agreement had an initial
term of two years and was subject to annual automatic one-year extensions unless either party provided prior notice of its intention
not to renew. Under the agreement, Mr. Mika’s annual base salary was initially set at $284,000 per year subject to review
and potential increase in accordance with Company policy. The employment agreement also provided for an annual target bonus equal
to 50% of Mr. Mika’s annual base salary payable upon achievement of targets and other objectives set by the Board and for
annual long-term incentive awards with a fair market value on the date of grant equal to 100% of Mr. Mika’s annual base salary.
Effective December 1, 2014, Mr. Mika’s salary was increased to $310,000 annually.
In connection with the merger of the Company
with Medytox, Mr. Mika agreed to enter into a new employment agreement with CollabRx, Inc. (“CollabRx”), a newly-formed
subsidiary of the Company upon the effectiveness of the merger. Mr. Mika also agreed that the merger would not constitute a change
of control or constitute or give rise to good reason under his prior employment agreement. As a result, on November 2, 2015, CollabRx
entered into an at-will employment agreement for Mr. Mika to serve as President and Chief Executive Officer of CollabRx. The employment
agreement had an initial term of one year and was subject to annual one-year extensions unless either party provided prior written
notice of its intention not to renew. Mr. Mika’s annual base salary was set at $310,000, subject to review and potential increase
in accordance with Company policy.
The employment agreement provided that
in the event Mr. Mika’s employment was terminated by the Company other than for cause (as defined in the employment
agreement) or if he resigned for “good reason,” died or became disabled, he would receive a payment equal to two
times his then-prevailing base salary (or one times his then-prevailing salary if after the initial one-year term), plus
$266,667 (if during the initial one-year term), plus 24 months of COBRA payments (or 12 months if after the initial one-year
term), all payable in two equal lump sum payments, the first within 60 days following the date of separation and the second
on the first anniversary of the date of separation. If Mr. Mika had any outstanding long-term incentive awards that were
not fully vested and, if applicable, exercisable, the Company would cause them to be vested and exercisable immediately prior
to the date of termination. Any notice of non-renewal of the term by the Company would constitute a termination of Mr. Mika
without cause during a period after the initial one-year term. The employment agreement was not renewed by the Company beyond
its initial one year term and, as a result, the employment agreement was terminated on November 2, 2016. Subject to the terms
and conditions in the employment agreement, Mr. Mika is eligible to receive an amount equal to his base salary of $310,000
and 12 months of COBRA premiums for Mr. Mika.
Jason P. Adams
Medytox entered into a
two-year employment agreement with Jason Adams effective September 9, 2015, pursuant to which he was compensated at the rate
of $200,000 per year, and entitled to participate in any annual bonus plans that may be approved by the Board of Directors.
In addition, Mr. Adams was entitled to receive 33,000 stock options under the Company’s option plan on December 31,
2015 and 100,000 stock options under the Company’s option plan on each December 31 thereafter under the
Company’s option plan then in effect so long as Mr. Adams remained employed with the Company on December 31st of each
calendar year during the term of the employment agreement. The Company and Mr. Adams agreed that he would leave the Company
effective September 30, 2016 to pursue other interests. The Company and Mr. Adams entered into an Executive Transition and
Separation Agreement and General Release (the “Transition Agreement”) effective October 6, 2016. Under the
Transition Agreement, Mr. Adams agreed to assist in the transition of duties and to remain available as a consultant for a
period of three months to ensure a complete transition. Mr. Adams will be paid $8,000 per month during that three-month
period. He will also receive a grant of 83,333 shares of the Company’s common stock under the 2007 Incentive Award
Plan. Mr. Adams’ health insurance was continued through November 30, 2016, including payment of 100%
of the premiums for family dependent coverage. In addition, Mr. Adams granted the Company a full and general
release.
Samuel R. Mitchell, Jr.
Medytox entered into a two-year employment
agreement with Samuel R. Mitchell, Jr. effective February 4, 2015, pursuant to which he was compensated at the rate of $205,000
per year, and was entitled to participate in any annual bonus plans that may be approved by the Board of Directors. In addition,
Mr. Mitchell was entitled to receive 100,000 stock options under the Company’s option plan then in effect so long as Mr.
Mitchell remained employed by the Company on December 31st of each calendar year during the term of the employment agreement. Mr.
Mitchell’s employment was terminated by the Company effective January 11, 2016.
Clifford Baron, Ph.D.
The Company entered into an at-will employment
agreement with Dr. Baron on March 5, 2014. The employment agreement had an initial term of two years and was subject to annual
automatic one-year extensions unless either party provided prior notice of its intention not to renew. Under the agreement, Dr. Baron's annual base salary was initially set at $200,000 per year subject to review and potential increase in accordance with Company
policy. The employment agreement also provided that Dr. Baron was eligible to receive incentive bonus payments from time to time
in accordance with any incentive bonus program adopted by the Company. This agreement was terminated in connection with the merger
with Medytox. Dr. Baron has entered into a new employment agreement with CollabRx, Inc. (“CollabRx”), a wholly-owned
subsidiary of the Company.
George Lundberg, M.D.
The Company entered into an at-will employment
agreement with Dr. Lundberg on July 12, 2012. Under the agreement, Dr. Lundberg’s annual base salary was initially set at
$125,000 per year subject to review and potential increase in accordance with Company policy, taking into account that Dr. Lundberg
serves the Company in a capacity which is less than a full-time employee. Dr. Lundberg was made an officer of the Company effective
September 2, 2013, and as a result received an increase in his annual base salary to $150,000. This agreement was terminated in
connection with the merger with Medytox. Dr. Lundberg has entered into a new employment agreement with CollabRx.
Compensation of Directors
Non-employee directors receive an annual
cash retainer of $40,000 and are granted stock options upon joining the Board of Directors. We do not pay employee directors for
Board service in addition to their regular employee compensation. The Board has the primary responsibility for considering and
determining the amount of director compensation. On March 23, 2016, the Board of Directors approved a change to its compensation,
whereby, in addition to receiving $40,000 annually in cash, non-employee directors would receive 100,000 options to purchase the
Company’s common stock on May 2, 2016, and each January 31st thereafter.
The following table shows amounts earned
by each non-employee Director in the fiscal year ended December 31, 2015:
Director
(1)
|
|
|
Fees earned
or paid
in cash
|
|
|
|
Stock
Awards
|
|
|
|
Option
Awards
(3)
|
|
|
|
Non-equity
Incentive Plan
Compensation
|
|
|
|
All Other
Compensation
(2)
|
|
|
|
Total
|
|
Dr. Paul Billings
|
|
$
|
32,000
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
32,000
|
|
Christopher Diamantis
|
|
$
|
6,668
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
6,668
|
|
Benjamin Frank
|
|
$
|
6,668
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
6,668
|
|
Michael L. Goldberg
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
57,500
|
|
|
$
|
57,500
|
|
Robert Lee
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
James Karis
|
|
$
|
24,000
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
24,000
|
|
James M. Krauss
|
|
$
|
35,500
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
35,500
|
|
Carl Muscari
|
|
$
|
33,000
|
|
|
|
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
33,000
|
|
__________
(1)
|
|
Messrs. Diamantis, Frank, Goldberg and Lee were appointed directors on November 2, 2015. Messrs. Karis, Krauss and Muscari resigned as directors on November 2, 2015.
|
(2)
|
|
All other compensation includes consulting fees. Medytox and Monarch Capital LLC, of which
Mr. Goldberg is the Managing Director, entered into a one-year consulting agreement on August 1, 2015. Under the
agreement, Monarch Capital LLC renders management consulting and business advisory services and advises
on strategic alternatives. Monarch Capital LLC is currently paid at the rate of $240,000 per year under the
agreement.
|
(3)
|
|
As of December 31, 2015, the following
derivative securities were held by our directors:
|
|
a.
|
Mr. Frank held 61,444 options to purchase our common stock at $6.11 per share expiring on April 19, 2017.
|
|
b.
|
Mr.
Diamantis held 61,444 options to purchase our common stock at $6.11 per share expiring on April 19, 2017.
|
|
c.
|
Dr.
Billings held 250 options to purchase our common stock at $10.50 per share expiring on September 25, 2024, 3,250 options to purchase
our common stock at $7.50 per share expiring on December 8, 2024, 500 options to purchase our common stock at $19.90 per share
expiring on July 3, 2024, and 1,000 options to purchase our common stock at $15.00 per share expiring on August 12, 2024.
|
Certain
Relationships and Related Transactions
Related Party Transactions
Our Nominating/Corporate Governance
Committee reviews related party transactions and only approves or ratifies a related party transaction when it determines
that, upon consideration of all relevant information, the transaction is in, or is not inconsistent with, the best interests
of the Company and its stockholders. The Company’s policy with respect to transactions in which any of its directors or
officers may have an interest, requires that such transaction (i) be on terms no less favorable to the Company than could be
obtained from unaffiliated third parties and (ii) be approved by the Nominating/Corporate Governance Committee and a majority
of the uninterested, outside members of the board. It is the Company’s policy that directors interested in a related
party transaction will recuse themselves from any vote relating to a related party transaction in which they have an
interest. All related party transactions in fiscal years 2013, 2014 and 2015 and up to the latest practicable date before the
date of this Proxy Statement were approved in accordance with the Company’s policy.
William Forhan was employed as
Medytox’s Chief Executive Officer through his resignation on September 11, 2014 pursuant to the terms of an
employment agreement dated June 1, 2011, as amended as of September 1, 2013. In connection with his voluntary resignation he
entered into an agreement, to be effective as of the date of appointment of a new Chief Executive Officer, pursuant to which
he received a severance of $500,000, the first installment of $200,000 was paid prior to the effective date of resignation,
and the balance was paid in monthly installments through August 31, 2016. In addition, the Agreement provided that Mr.
Forhan could participate in any executive bonus plan adopted for calendar year 2014. Mr. Forhan also agreed under the
Agreement that any stock options previously issued to him, would remain outstanding, subject to their terms, for no longer
than 24 months such that the options would expire no later than August 31, 2016. In addition, the Agreement provided, among
other things, for the return and cancellation of 1,241,550 shares of Common Stock owned by Mr. Forhan; for the release by Mr.
Forhan of any and all claims he may have had against Medytox and/or its affiliates; and for Mr. Forhan to abide by
certain restrictive covenants, including using his best efforts to protect and maintain Medytox’s confidential
information.
Alcimede LLC, of which the CEO of
the Company is the sole manager, had advanced loans to the Company for the payment of certain operating expenses. The loans
were non-interest bearing and were due on demand. Alcimede was paid $372,000 and $364,375 for consulting fees pursuant to
a consulting agreement for the years ended December 31, 2015 and 2014, respectively. Alcimede billed the Company $0.3
million for consulting fees for each of the nine months ended September 30, 2016 and 2015. The Company reimbursed Alcimede
$450,408 for certain operating expenses and asset purchases paid by Alcimede on the Company’s behalf in the year ended
December 31, 2014. On February 3, 2015, the Company borrowed $3,000,000 from Alcimede. The note has an interest rate of 6%
and is due on February 2, 2017. On June 29, 2015, Alcimede exercised options granted in October 2012 to purchase one million
shares of the Company’s common stock at an exercise price of $2.50 per share. The loan outstanding was reduced in
satisfaction of the aggregate exercise price of $2,500,000. In August 2016, a portion of the remaining $500,000 balance was
repaid by the Company through the issuance of shares of common stock and the remaining balance on this loan as of September
30, 2016 was $200,000. On February 27, 2015, the Company borrowed $30,000 from Alcimede. The loan was repaid on April 15, 2015.
Dr. Thomas Mendolia, the former Chief Executive
Officer of the Company’s Laboratories and a shareholder, was reimbursed $32,439 and $254,966 for certain operating expenses
and asset purchases paid by Dr. Mendolia on the Company’s behalf in the years ended December 31, 2015 and 2014, respectively.
On June 30, 2015, the Company issued 200,000
shares of common stock to SS International Consulting Ltd., of which a former director of the Company is the sole manager.
On August 1, 2015, Medytox entered
into a non-exclusive consulting agreement with Monarch Capital, LLC (“Monarch”). Michael Goldberg, at the time a
director of Medytox and currently a director of the Company, is the Managing Director of Monarch. Under this agreement,
Monarch provides business and financial advice. The original term of the agreement was through August 31, 2016, and is
subject to automatic renewal for an additional one year unless Medytox provides the consultant with 180 days’ prior
written notice of its intent not to renew. The agreement has been renewed for another year. Medytox paid $7,500 at signing
and paid $12,500 a month for the first three months, $15,000 a month for the second three months, $17,500 a month for the
third three months and $20,000 a month for the fourth three months. Since August 31, 2016, Monarch has been paid at the rate
of $240,000 per year under the agreement. Monarch billed the Company $0.2 million for consulting fees pursuant to this
agreement for the nine months ended September 30, 2016.
On September 4, 2015, the
Company borrowed $500,000 from Christopher Diamantis, a director of the Company. This loan was repaid in the fourth quarter
of 2015 with a 10% fee in cash. In the fourth quarter of 2015, the Company borrowed $1,600,000 from Mr. Diamantis which
was due, along with $100,000 of interest, on January 7, 2016. These amounts were repaid by the Company in January 2016.
During the nine months ended September 30, 2016, the Company received additional short-term advances from Mr. Diamantis
aggregating $4.2 million, of which $3.7 million was repaid during the period. In connection with these advances, the Company
agreed to pay Mr. Diamantis interest in the amount of $0.4 million.
On December 31, 2014, the
Company borrowed $3,000,000 (the “D&D Debenture”) from D&D Funding II, LLC (“D&D”).
Christopher Diamantis, a director of the Company, is the manager and 50% owner of D&D. In January 2016, the Company temporarily repaid $3,000,000 of the amounts due under the D&D Debenture.
In addition to the principal amount, the Company paid $300,000 in cash for interest for 2015. In March 2016, the Company
re-borrowed 100% of the principal amount repaid in January 2016. In April 2016, the Company repaid $2,250,000 of the amount
outstanding under the D&D note from proceeds of the accounts receivable transaction discussed below, leaving an
outstanding balance on the D&D Debenture of $750,000 as of June 30, 2016, all of which was repaid in July 2016. This note
was convertible into the Company’s Common Stock at a 25% discount to the trailing ten-day average closing price at any
time prior to the repayment. In the event of conversion, the holder of the D&D Debenture was also entitled to receive a
number of warrants to purchase the Company’s common stock equal to the number of shares issued upon conversion with
exercise prices equal to the trailing ten-day average price of the common stock.
On March 31, 2016, the Company
entered into an agreement to pledge certain of its accounts receivable as collateral against a prepaid forward purchase
contract. The receivables had an estimated collectable value of $8,700,000 and had been adjusted down to approximately
$4,300,000 on the Company’s balance sheet as of March 31, 2016. As of September 30, 2016, the carrying value of these
receivables was $0.2 million. The consideration received was $5,000,000. In exchange for the consideration received, the
counterparty received the right to: (i) a 20% per annum investment return from the Company on the consideration, with a
minimum repayment term of six months and minimum return of $500,000, (ii) all payments recovered from the accounts receivable
up to $5,250,000, if paid in full within six months, or $5,500,000, if not paid in full within six months, and (iii) 20% of
all payments of the accounts receivable in excess of amounts received in (i) and (ii). On March 31, 2017, to the
extent that the counterparty has not been paid $6,000,000, the Company is required to pay the difference. Christopher
Diamantis, a director of the Company, guaranteed the Company’s payment obligation of up to $6,000,000. For providing
the guarantee, and to the extent that the counterparty receives amounts payable under clause (ii) above exceeding $5,000,000,
Mr. Diamantis will be paid a fee by the counterparty equal to the amount by which the amount received under clause (ii)
above exceeds $5,000,000 ($250,000 or $500,000, depending on the timing of payment). In addition, the Company agreed to pay
Mr. Diamantis $0.5 million in connection with his providing the guarantee. This amount was settled in August 2016 with the
issuance of shares of the Company’s common stock and warrants to purchase shares of common stock as discussed below.
During the second quarter of 2016, the Company
received a short-term advance from Jason Adams, then the Company’s Chief Financial Officer, in the amount of $50,000, all
of which was repaid during the quarter.
On August 5, 2016, the
Company exchanged (i) an aggregate of $351,500 of debt and interest payments payable to Alcimede LLC for 1,171,667
shares of common stock; (ii) $500,000 of interest payments payable to Christopher E. Diamantis for 1,111,111 shares of
common stock and warrants to purchase 1,111,111 shares of common stock; (iii) an aggregate of $1,152,618.60 of
accrued dividends payable to Epizon Ltd., Francisco Roca, III, Steven Sramowicz and Dr. Thomas F. Mendolia for 2,846,076
shares of common stock and warrants to purchase 1,989,977 shares of common stock; (iv) $8,000 of consulting fees payable
to Monarch Capital LLC for 26,667 shares of common stock; (v) an aggregate of $95,010 of board of directors fees
and expenses payable to Christopher E. Diamantis, Robert Lee and Dr. Paul R. Billings for 305,588 shares of common stock
and warrants to purchase 22,227 shares of common stock; and (vi) $25,000 of interest payments payable to Aella Ltd.
for 83,334 shares of common stock. On November 15, 2016, the Company exchanged $100,000 of accrued dividends payable to
Steven Sramowitz for 222,222 shares of common stock and warrants to purchase 222,222 shares of common stock. The warrants
issued have an exercise price of $0.45 per share, are immediately exercisable and have a five-year term. The issuance of the
shares of common stock and warrants was exempt from the registration requirements of the Securities Act of 1933, as amended,
in accordance with Section 4(a)(2) thereof, as a transaction by an issuer not involving any public offering.
All of these transactions were completed
at arm’s length at values commensurate with those of independent third parties.
PROPOSAL 2 – TO RATIFY THE APPOINTMENT OF GREEN &
COMPANY, CPAS AS THE COMPANY'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2016
On
March 23, 2016, the Company’s Audit Committee approved the dismissal of Burr, Pilger & Mayer LLP (“BPM”)
as the Company’s independent registered public accounting firm, effective March 23, 2016. Also, on March 23, 2016, the Company’s
Audit Committee approved the engagement of Green & Company, CPAs (“Green & Company”) as the Company’s
independent registered public accounting firm for the fiscal year ending December 31, 2016. The engagement of Green & Company
was effective March 23, 2016. We expect representatives of Green & Company to be present at the Annual Meeting and be available
to respond to appropriate questions, and they will have the opportunity to make a statement if they desire.
Principal Accounting Fees and Services
Below are the aggregate fees billed for
audit, audit-related and tax services rendered by BPM and Green & Company during the years ended December 31, 2015 and December
31, 2014:
Description of Services:
|
|
Fiscal 2015
|
|
|
Fiscal 2014
|
|
Audit
|
|
$
|
412,389
|
|
|
$
|
220,000
|
|
Audit-Related
|
|
|
47,750
|
|
|
|
–
|
|
Tax
|
|
|
23,000
|
|
|
|
50,000
|
|
All Other
|
|
|
–
|
|
|
|
–
|
|
Total Fees
|
|
$
|
483,139
|
|
|
$
|
270,000
|
|
Audit Fees
The aggregate
fees billed by Green & Company for audit services related to the fiscal year ended December 31, 2015 were $223,639.
The aggregate fees
billed for professional services rendered by BPM for audit services during the year ended December 31, 2015, the reviews of the
financial statements included in our quarterly reports on Form 10-Q during the year ended December 31, 2015, and services that
are normally provided by BPM in connection with statutory and regulatory filings and engagements for that fiscal year were approximately
$188,750.
The aggregate fees
billed for professional services rendered by BPM for the audit of our annual financial statements for the fiscal year ended March
31, 2014, the reviews of the financial statements included in our quarterly reports on Form 10-Q for the fiscal year ending March
31, 2014, and services that are normally provided by BPM in connection with statutory and regulatory filings and engagements for
that fiscal year were approximately $220,000.
Audit-Related Fees
The
aggregate fees billed by Green & Company for audit-related services,which primarily pertain to fees associated with the
Company’s filing and maintaining effecting registration statements with the SEC, were $38,500.
The aggregate fees
billed for professional services rendered by BPM for evaluation of technical accounting policy related to the audit of our annual
financial statements for the fiscal year ended December 31, 2015 were approximately $9,250.
The Company has
a co-employer relationship with a professional employer organization ("PEO"). The PEO audits the related 401(k)
plan. The audit is performed annually as required by the size of the PEO organization employee base. The cost of the
401(k) audit is incorporated into the PEO service fees.
Tax Fees
The aggregate fees
billed by BPM for professional services rendered for tax compliance, tax advice, and tax planning were $23,000 for the fiscal year
ended December 31, 2015.
The aggregate
fees billed by BPM for professional services rendered for tax compliance, tax advice, and tax planning were approximately $50,000
for the fiscal year ended March 31, 2014.
All Other Fees
The Company incurred
no other fees with its principal accountants.
Audit Committee Pre-Approval Policies
The Audit Committee has adopted a policy
that requires the Audit Committee to approve all audit and permissible non-audit services to be provided by the independent auditors.
The Audit Committee has established a general pre-approval policy for certain audit and non-audit services, up to a specified amount
for each identified service that may be provided by the independent auditors. The Chairman of the Audit Committee may specifically
approve any service within the pre-approved audit and non-audit service category if the fees for such service exceed the maximum
set forth in the policy, as long as the excess fees are not reasonably expected to exceed $50,000. Any such approval by the Chairman
must be reported to the Audit Committee at its next scheduled meeting. The general pre-approval fee levels for all services to
be provided by the independent auditors are reviewed annually by the Audit Committee. The Audit Committee approved all services
provided by BPM and Green & Company during 2015 and 2014.
Required Vote
Ratification
of the appointment of Green & Company as our Independent Registered Public Accounting Firm is not required by our bylaws
or other applicable legal requirements. However, our Board of Directors is submitting the selection of Green & Company to
our stockholders for ratification as a matter of good corporate practice. Ratification requires the favorable vote of a
majority of the votes cast at the Annual Meeting by the holders of shares of our common stock, present and entitled to vote.
Abstentions will not be counted as votes for
or against this proposal and will not be included in counting the number of votes necessary for approval of this
proposal. If our stockholders fail to ratify the selection, the Audit Committee of the Board of Directors will
reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit Committee, at its discretion, may
direct the appointment of a different independent accounting firm at any time during the year if it determines that such a
change would be in our best interests and in the best interests of our stockholders.
Recommendation of the Board of Directors
THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF GREEN & COMPANY, CPAS
AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2016.
PROPOSAL 3 – TO AUTHORIZE THE BOARD OF DIRECTORS TO
AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE SPLIT OF OUR OUTSTANDING COMMON STOCK AT THEIR DISCRETION
Introduction
Our Board of Directors has
unanimously authorized and approved, and is submitting for stockholder approval, a proposal to amend our certificate of
incorporation, as amended, to effect a reverse stock split of our issued and outstanding common stock at a ratio to be
established by our Board of Directors in its discretion, within the range of 1-for-10 and 1-for-30 (the “Reverse
Split”), and to grant the Board of Directors discretionary authority, until December 31, 2017, to determine whether or not to effect the Reverse Split and the exact whole number ratio within the range at
which to effect the Reverse Split. In setting the ratio for the Reverse Split, the intention of our Board of Directors would
be to increase the trading price of our common stock sufficiently above the $1.00 minimum bid price that is required for
continued listing on The NASDAQ Capital Market in order to reduce the risk that our common stock is delisted from The NASDAQ
Capital Market and to sustain long term compliance with the listing rules of The NASDAQ Stock Market LLC
(“NASDAQ”). The full text of the proposed amendment is attached hereto as Exhibit A (the
“Amendment”).
If the Board of Directors implements the
Reverse Split, the exact ratio for the Reverse Split will be fixed by the Board of Directors. We believe that this discretion is
essential because it provides the Board of Directors with the maximum flexibility to react to changing market conditions and to
therefore act in the best interests of our Company and our stockholders.
One principal effect of the Reverse Split
would be to decrease the number of outstanding shares of our common stock. Except for minimal adjustments that may result from
the treatment of fractional shares as described below, the Reverse Split will not have any dilutive effect on our stockholders
since each stockholder would hold the same percentage of common stock outstanding immediately following the Reverse Split as such
stockholder held immediately prior to the Reverse Split. The relative voting and other rights that accompany the shares of common
stock would not be affected by the Reverse Split.
Although the Reverse Split will not have
any dilutive effect on our stockholders, the proportion of shares owned by our stockholders relative to the number of shares authorized
for issuance will decrease. As a result, the additional authorized shares of common stock will be available for issuance at such
times and for such purposes as the Board of Directors may deem advisable without further action by our stockholders, except as
required by applicable laws and regulations. We do not have any present plan or intention to issue the additional shares of authorized
but unissued common stock that would become available as a result of the proposed Reverse Split.
The Reverse Split is not intended as, and
will not have the effect of, a “going private transaction” subject to Rule 13e-3 under the Securities Exchange Act
of 1934 (the "Exchange Act").
Reasons for the Reverse Split
The Board of Directors’ primary objective
in proposing the Reverse Split is to increase the per share trading price of our common stock on The NASDAQ Capital Market. The
Board of Directors believes that by increasing the price per share of our common stock, the Company may meet and maintain compliance
with the listing requirements of The NASDAQ Capital Market. The Board of Directors believes that the liquidity and marketability
of our common stock will be adversely affected if it is not quoted on a national securities exchange, as investors may find it
more difficult to dispose of, or to obtain accurate quotations as to the market value of, our common stock. The Board of Directors
believes that current and prospective investors will view an investment in our common stock more favorably if our common stock
remains quoted on The NASDAQ Capital Market.
The Board of Directors also believes that
the Reverse Split and any resulting increase in the per share price of our common stock should also enhance the acceptability and
marketability of our common stock to the financial community and investing public. Many institutional investors have policies prohibiting
them from holding lower-priced stocks in their portfolios, which reduces the number of potential buyers of our common stock. Additionally,
analysts at many brokerage firms are reluctant to recommend lower-priced stocks to their clients or monitor the activity of lower-priced
stocks. Brokerage houses also frequently have internal practices and policies that discourage individual brokers from dealing in
lower-priced stocks. Further, because brokers’ commissions on lower-priced stock generally represent a higher percentage
of the stock price than commissions on higher priced stock, investors in lower-priced stocks pay transaction costs which are a
higher percentage of their total share value, which may limit the willingness of individual investors and institutions to purchase
our common stock.
If effected, we cannot assure you that the
Reverse Split will have any of the desired effects described above. More specifically, we cannot assure you that after the Reverse
Split the trading price of our common stock will increase proportionately to reflect the ratio for the Reverse Split, that the
trading price of our common stock will not decrease to its pre-Reverse Split level, that our market capitalization will be equal
to the market capitalization before the Reverse Split, or that we will be able to maintain our listing on The NASDAQ Capital Market.
NASDAQ Requirements for Continued Listing on The NASDAQ Capital
Market
Our common stock is currently traded on
The NASDAQ Capital Market. On March 16, 2016, we were notified by NASDAQ that the bid price of our common stock closed below the
minimum $1.00 per share requirement for continued inclusion under Marketplace Rule 5550(a)(2) (the “Bid Price Rule”).
In accordance with Marketplace Rule 5810(c)(3)(A), we had 180 calendar days, or until September 12, 2016, to regain compliance.
On September 13, 2016, The NASDAQ Capital Market granted the Company an 180-day extension, or until March 17, 2017, to regain
compliance. If at any time before March 17, 2017 the bid price of our common stock closes at $1.00 per share or more for a minimum
of 10 consecutive business days, we will regain compliance with the Bid Price Rule. If we do not regain
compliance by March 17, 2017, our common stock may be delisted from The NASDAQ Capital Market.
The Board of Directors has considered the
potential harm to the Company of a delisting from The NASDAQ Capital Market and believes it is in the best interests of the Company
and our stockholders for the Company to regain compliance with the Bid Price Rule.
Potential Disadvantages of a Reverse Stock Split
As noted above, the principal purpose of
the Reverse Split would be to help increase the trading price per share of our common stock by a factor of between 10 and 30. We
cannot assure you, however, that the Reverse Split will accomplish this objective for any meaningful period of time. While we expect
that the reduction in the number of outstanding shares of common stock will increase the trading price of our common stock, we
cannot assure you that the Reverse Split will increase the trading price of our common stock by a multiple equal to the Reverse
Split ratio to be determined by the Board of Directors, or result in any permanent increase in the trading price of our common
stock, which is dependent upon many factors, including our business and financial performance, general market conditions, and prospects
for future success. Should the trading price decline after the Reverse Split, the percentage decline may be greater, due to the
smaller number of shares outstanding, than it would have been prior to the Reverse Split. In some cases, the per share stock price
of companies that have effected reverse stock splits has subsequently declined back to pre-reverse split levels. In addition, a
reverse stock split is often viewed negatively by the market and, consequently, can lead to a decrease in our overall market capitalization.
If the per share trading price does not increase proportionately as a result of the Reverse Split, then the value of the Company
as measured by our stock capitalization will be reduced, perhaps significantly.
The number of shares held by each individual
stockholder would be reduced if the Reverse Split is implemented. This will increase the number of stockholders who hold less than
a “round lot,” or 100 shares. Typically, the transaction costs to stockholders selling “odd lots” are higher
on a per share basis. Consequently, the Reverse Split could increase the transaction costs to existing stockholders in the event
they wish to sell all or a portion of their position.
Although the Board of Directors believes
that the decrease in the number of shares of our common stock outstanding as a consequence of the Reverse Split and the anticipated
increase in the trading price of our common stock could encourage interest in our common stock and possibly promote greater liquidity
for our stockholders, such liquidity could also be adversely affected by the reduced number of shares outstanding after the Reverse
Split.
Effecting the Reverse Split; Board Discretion to Implement
Reverse Split
If approved by stockholders at the
Annual Meeting and our Board of Directors decides that it is in the best interests of the Company and our stockholders to
effect the Reverse Split, the Board of Directors will establish an appropriate ratio for the Reverse Split based on several
factors existing at such time and the Company will subsequently file the Amendment. Our Board of Directors will consider,
among other factors, prevailing market conditions, the likely effect of the Reverse Split on the trading price of our common
stock, and on our compliance with applicable NASDAQ listing requirements, and the marketability and liquidity of our common
stock. The Board of Directors will determine the timing of the filing of the Amendment with the Secretary of State of the
State of Delaware to effect the Reverse Split. If, for any reason, the Board of Directors deems it advisable, the Board of
Directors, in its sole discretion, may abandon the Reverse Split at any time prior to the effectiveness of any filing of the
Amendment, without further action by our stockholders. The Reverse Split will be effective as of the date and time set forth
in the Amendment (the “Effective Time”).
Upon the filing of the Amendment, without
further action on the part of the Company or the stockholders, the outstanding shares of common stock held by stockholders of record
as of the Effective Time would be converted into a lesser number of shares of common stock calculated in accordance with the terms
of the Amendment, based on a reverse split ratio within the range of 1-for-10 and 1-for-30. In the event of a Reverse Split at
a ratio of 1-for-10, for example, if a stockholder holds 10,000 shares of common stock as of the Effective Time, such stockholder
would hold 1,000 shares of common stock following such Reverse Split.
Effect on Outstanding Shares, Options, and Certain Other
Securities
If the Reverse Split is implemented, the
number of shares of our common stock owned by each stockholder will be reduced in the same proportion as the reduction in the total
number of shares outstanding, such that the percentage of our common stock owned by each stockholder will remain unchanged, except
for any de minimis change resulting from the issuance of one whole share in exchange for any fractional shares that such stockholder
would have received as a result of the Reverse Split. The number of shares of common stock that may be purchased upon exercise
of outstanding options or other securities convertible into, or exercisable or exchangeable for, shares of our common stock, and
the exercise or conversion prices for these securities, will also be adjusted in accordance with their terms, as of the Effective
Time. Additionally, the aggregate number of equity-based awards that remain available to be granted under our equity incentive
plans and other benefit plans will be reduced proportionately to reflect the Reverse Split.
No Effect on Par Value
If we file the Amendment and implement the
proposed Reverse Split, the par value of our common stock will not be affected.
Effect on Registration and Stock Trading
Our common stock is currently registered
under Section 12(b) of the Exchange Act and we are subject to the periodic reporting and other requirements of the Exchange Act.
The proposed Reverse Split will not affect the registration of our common stock under the Exchange Act.
If we implement the proposed Reverse Split,
our common stock will continue to trade on The NASDAQ Capital Market under the symbol “RNVA”. However, our common stock
would have a new CUSIP number, which is a number used to identify our common stock.
Mechanics of Reverse Split
If this Proposal No. 3 is approved by the
stockholders at the Annual Meeting and our Board of Directors decides that it is in the best interests of the Company and our stockholders
to effectuate the Reverse Split (i.e., we have not otherwise regained compliance with NASDAQ’s minimum bid requirement),
our stockholders will be notified that the Reverse Split has been effected. The mechanics of the Reverse Split will differ depending
upon whether a stockholder holds its shares in brokerage accounts or “street name” or whether the shares are registered
directly in a stockholder’s name and held in book-entry form or certificate form.
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Our stockholders who hold shares in “street name” through a nominee (such as a bank or broker) will be treated
in the same manner as stockholders whose shares are registered in their names, and nominees will be instructed to effect the Reverse
Split for their beneficial holders. However, nominees may have different procedures for processing the Reverse Split and stockholders
holding shares in “street name” are encouraged to contact their nominees.
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Our registered stockholders may hold some or all of their shares electronically in book-entry form under the direct registration
system for securities. These stockholders will not have stock certificates evidencing their ownership of our common stock. They
are, however, provided with a statement reflecting the number of shares registered in their accounts. Stockholders holding registered
shares of our common stock in book-entry form need not take any action to receive post-Reverse Split shares as a transaction statement
will automatically be sent to the stockholders address of record indicating the number of shares held.
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Some of our registered stockholders hold all their shares in certificate form or a combination of certificate and book-entry
form. Stockholders holding shares of common stock in certificate form will receive a transmittal letter from Computershare Trust
Company, N.A. (the “Transfer Agent”) as soon as practicable after the Effective Date of the Reverse Split for use in
transmitting the existing certificates representing shares of our common stock (the “Old Certificates”) to our Transfer
Agent. The letter of transmittal will contain instructions for the surrender of the Old Certificates to our Transfer Agent in exchange
for new certificates representing the appropriate number of whole shares of new common stock giving effect to the Reverse Split.
No new stock certificates will be issued to any stockholder until such stockholder has surrendered all certificates, together with
a properly completed and executed letter of transmittal, to our Transfer Agent. The stockholders will then receive, at their option,
either a new certificate or certificates or book-entry shares representing the number of whole shares of common stock into which
their pre-Reverse Split shares have been converted as a result of the Reverse Split. Until surrendered, the Company will deem outstanding
Old Certificates held by stockholders to be cancelled and only to represent the number of whole shares of post-Reverse Split common
stock to which the stockholders are entitled. STOCKHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT SUBMIT ANY
CERTIFICATE(S) UNTIL REQUESTED TO DO SO.
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Treatment of Fractional Shares
No fractional shares of common stock would
be issued as a result of the proposed Reverse Split. Instead, in the event the Reverse Split results in any stockholder being entitled
to receive fractional shares that, when aggregated, equal less than a whole share of common stock, such fractional shares will
be reclassified and converted from and after the Effective Time into one whole share of common stock in lieu of such fractional
shares.
For example, if the Board of Directors determines
to effect the Reverse Split at a ratio of 1-for-15, then a stockholder who holds one hundred (100) shares on a pre-split basis
would hold seven (7) whole shares on a post-split basis.
Accounting Consequences
The Reverse Split will not affect the common
stock capital account on our balance sheet. However, because the par value of our common stock will remain unchanged as of the
Effective Time, the components that comprise the common stock capital account will change by offsetting amounts. Specifically,
on our balance sheet, the common stock value would be adjusted downward commensurate with the ratio of the Reverse Split, such
that the common stock value would become an amount equal to the aggregate par value of the shares of post-Reverse Split common
stock. The additional paid-in capital amount recorded on our balance sheet would be increased by an amount equal to the amount
by which the common stock was decreased. Additionally, net loss per share would increase proportionately as a result of the Reverse
Split since there would be fewer shares outstanding.
No Dissenter’s Rights
Under the Delaware General Corporation Law,
stockholders will not be entitled to dissenter’s rights with respect to the proposed Amendment to effect the Reverse Split,
and the Company does not intend to independently provide stockholders with any such right.
Federal Income Tax Consequences
The following is a summary of certain material
United States federal income tax consequences of the Reverse Split that we anticipate would affect our stockholders. This discussion
is based on the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), final, temporary and proposed
U.S. Treasury regulations promulgated thereunder and current administrative rulings and judicial decisions, all as in effect as
of the date hereof. This summary is provided for your general information only and does not address all aspects of the possible
federal income tax consequences of the Reverse Split and
IS NOT INTENDED AS TAX ADVICE TO ANY PERSON
. In particular, this
summary does not consider the federal income tax consequences to our stockholders in light of their individual investment circumstances
or to holders subject to special treatment under the federal income tax laws, and does not address any consequences of the Reverse
Split under any state, local or foreign tax laws. Moreover, this description does not address the U.S. federal estate and gift
tax, alternative minimum tax, or other tax consequences of the Reverse Split.
ACCORDINGLY, YOU MUST CONSULT WITH YOUR
TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE REVERSE SPLIT TO YOU, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL,
STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.
Additionally, there can be no assurance
that the Internal Revenue Service (“IRS”) will not take a contrary position to the tax consequences described herein
or that such position will be sustained by a court. In addition, U.S. tax laws are subject to change, possibly with retroactive
effect, which may result in U.S. federal income tax considerations different from those summarized below. No ruling from the IRS
has been obtained with respect to the U.S. federal income tax consequences of the Reverse Split.
We believe that the reverse stock split
should qualify as a “recapitalization” for U.S. federal income tax purposes. Accordingly, a stockholder should not
recognize any gain or loss as a result of the Reverse Split. A stockholder’s aggregate tax basis in its post-Reverse Split
shares of common stock to be received should be the same as the aggregate tax basis in the pre-Reverse Split shares of common stock
to be exchanged therefor. The holding period for the post-Reverse Split shares of common stock received should include the period
during which such stockholder held the pre-Reverse Split shares of common stock surrendered therefor, provided all such common
stock was held as a capital asset at the Effective Time. Stockholders should consult their tax advisors as to application of the
foregoing rules where shares of our common stock were acquired at different times or at different prices.
The Company will not recognize any gain
or loss for accounting or tax purposes as a result of the Reverse Split.
Our beliefs regarding the tax
consequences of the Reverse Split are not binding upon the IRS, or federal, state or local courts, and there can be no
assurance that the IRS or the courts will concur with the positions expressed above. The state and local tax consequences of
the Reverse Split may vary significantly as to each stockholder, depending on where he or she resides.
Consequences if the Reverse Split is Not Approved
If this Proposal No. 3 is not approved,
we may be unable to maintain the listing of our common stock on The NASDAQ Capital Market.
Required Vote
The Reverse Split
Proposal requires the favorable vote of a majority of the outstanding shares of our common stock. Abstentions and broker
non-votes will have the same effect as votes against this proposal.
Recommendation
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
“FOR” THE PROPOSAL TO APPROVE THE AMENDMENT TO OUR CERTIFICATE OF INCORPORATION, AS AMENDED, TO AUTHORIZE THE BOARD OF DIRECTORS
TO EFFECT A REVERSE STOCK SPLIT, IN ITS DISCRETION IN THE RANGE BETWEEN 1-FOR-10 AND 1-FOR-30, SUBJECT TO THE BOARD OF DIRECTORS’
DISCRETION TO ABANDON SUCH AMENDMENT.
PROPOSAL 4 – TO APPROVE AN ADVISORY (NON-BINDING) RESOLUTION
ON THE COMPANY’S EXECUTIVE COMPENSATION
As a result of the Dodd-Frank Wall Street
Reform and Consumer Protection Act, we are required to include in this Proxy Statement a non-binding, advisory stockholder vote
to approve the compensation of our named executive officers, as described above under "Executive Compensation," and the
compensation tables set forth in this Proxy Statement.
This proposal, commonly known as a “say-on-pay”
proposal, is a non-binding vote, but it gives stockholders the opportunity to express their views on the compensation of the Company’s
named executive officers. This vote is not to address any specific item of compensation, but rather the overall compensation of
our named executive officers.
Accordingly, the following resolution is
submitted for a non-binding, advisory stockholder vote at the Annual Meeting:
RESOLVED
, that the stockholders of
Rennova Health, Inc. approve, on a non-binding, advisory basis, the compensation of its named executive officers, as disclosed
in the Proxy Statement for the Annual Meeting of Stockholders to be held on December 22, 2016, pursuant to Item 402 of Regulation
S-K, promulgated under the Securities Act of 1933, as amended, including any narrative discussion of executive compensation, the
accompanying tabular disclosure regarding named executive officer compensation and the corresponding narrative disclosure and footnotes.
This vote is advisory, which means that
it is not binding on the Company, or our Board of Directors. The Company recognizes that stockholders may have different views
regarding the Company, and therefore we look forward to hearing from our stockholders as to their preferences on the compensation
of our named executive officers. The Board of Directors will review the outcome of the vote; however, when considering the compensation
of our named executive officers, the Board of Directors may decide that it is in the best interests of our stockholders and the
Company to continue its current compensation practices regardless of the result of the vote on this proposal.
Since 2013, a majority of stockholders present
and entitled to vote on the proposal have approved the say-on-pay proposal. At our 2013 Annual Meeting, a majority of stockholders
present and entitled to vote on the proposal selected three years as the desired frequency of future stockholder say-on-pay votes
with respect to the say-on-frequency proposal. As such, the Board of Directors adopted a resolution to hold “say-on-pay”
votes triennially. Unless this policy changes, the next advisory vote on the compensation of our named executive officers will
be held during the 2019 Annual Meeting of Stockholders.
Required Vote
Approval of the advisory (non-binding)
resolution on the Company’s executive compensation will require that a majority of the votes cast at the Annual Meeting
by the holders of shares of our common stock, present and entitled to vote. Abstentions and broker non-votes will not be counted
as votes for or against this proposal and will not be included in counting the number of votes necessary for approval of this
proposal.
Recommendation of
the Board of Directors
The
Board of Directors UNANIMOUSLY recommends a vote in favor of the RESOLUTION, on a non-binding, advisory basis, APPROVING the
compensation paid to our named executive officers, as disclosed in this Proxy Statement.
STOCKHOLDER PROPOSALS
Stockholders who, in accordance with
Rule 14a-8 under the Exchange Act, wish to present proposals for inclusion in our proxy statement in connection with next
year’s annual meeting must submit their proposals so that they are received by the Company’s Chief Executive
Officer at our principal executive offices, 400 South Australian Avenue, Suite 800, West Palm Beach, Florida 33401, no later
than August 7, 2017. As the rules of the Securities and Exchange Commission make clear, simply submitting a proposal
does not guarantee that it will be included.
For any proposal that is not
submitted for inclusion in next year’s proxy statement (as described in the preceding paragraph) but is instead sought
to be presented directly at the next year’s annual meeting (including director nominations or other proposals), the
proposal must be submitted to the Company’s Chief Executive Officer at our principal executive offices, 400 South
Australian Avenue, Suite 800, West Palm Beach, Florida 33401, no later than October 20, 2017, as required by Rule
14a–4(c)(1) of the Exchange Act. Even if a stockholder makes a timely notification, the proxies may still exercise
discretionary voting authority under circumstances consistent with the SEC’s proxy rules.
ANNUAL REPORT
WE WILL PROVIDE TO THE RECIPIENTS OF THIS
DOCUMENT, UPON WRITTEN REQUEST AND WITHOUT CHARGE, ADDITIONAL COPIES OF OUR ANNUAL REPORT ON FORM 10-K, AS AMENDED, FOR THE FISCAL
YEAR ENDED DECEMBER 31, 2015. Written requests for the Annual Report should be addressed to: Secretary, Rennova
Health, Inc., 400 South Australian Avenue, Suite 800, West Palm Beach, Florida 33401.
OTHER MATTERS
The Board of Directors is not aware of any
other matters to be presented at the Annual Meeting. If any other matter properly comes before the Annual Meeting, or postponement
or adjournment thereof, requiring a vote of the stockholders, it is the intention of the persons named in the accompanying proxy
to vote the shares represented thereby on such matters in accordance with the recommendations of management, unless such authority
has been withheld.
EXHIBIT A
FORM
OF
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
RENNOVA
HEALTH, INC.
It is hereby certified that:
1. The
name of the corporation is Rennova Health, Inc. (the “
Corporation
”), a corporation duly organized and existing
under the General Corporation Law of the State of Delaware (the “
DGCL
”).
2. The
Certificate of Incorporation of the Corporation, as amended, is hereby amended by deleting Article FOURTH thereof and inserting
in lieu of said Article the following new Article FOURTH:
“
FOURTH
:
The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is five
hundred and five million (505,000,000) shares, comprised of five hundred million (500,000,000) shares of Common Stock,
par value $0.01 per share, and five million (5,000,000) shares of Preferred Stock, par value $0.01 per share. Effective as
of 5:00 p.m., Eastern time, on the date this Certificate of Amendment is filed with the Secretary of State of the State
of Delaware (the “Effective Time”), [•] shares of the Corporation’s Common Stock, par value $0.01
per share, issued and outstanding shall, automatically and without any action on the part of the respective holders
thereof, be combined, converted and changed into one (1) share of Common Stock, par value $0.01 per share, of the
Corporation (the “Reverse Split”);
provided
,
however
, that the Corporation shall issue no
fractional shares of Common Stock. In the event the Reverse Split results in any stockholder being entitled to receive
fractional shares that, when aggregated, equal less than a whole share of common stock, such fractional shares will be
reclassified and converted from and after the Effective Time into one whole share of common stock in lieu of such fractional
shares. The designation, powers, preferences and relative, participating, option or other special rights, including voting
rights, qualifications, limitations or restrictions of the Preferred Stock shall be established by resolution of the Board
of Directors pursuant to Section 151 of the General Corporation Law of the State of Delaware.”
3. The
amendment of the Certificate of Incorporation herein certified has been duly adopted in accordance with the provisions of Section
242 of the DGCL.
IN WITNESS WHEREOF, the Corporation has
caused this Certificate of Amendment to Certificate of Incorporation to be executed by its duly authorized officer this
____ day of ____________.
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RENNOVA HEALTH, INC.
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By:
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Name:
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Title:
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RENNOVA HEALTH, INC.
Annual Meeting of Stockholders, December
22, 2016
This Proxy is Solicited on Behalf of
the Board of Directors
The undersigned stockholder of Rennova
Health, Inc. (the “Company”) hereby appoints Seamus Lagan and Marc Gelberg, or either of them, as Proxies, each with
the power to appoint a substitute, and hereby authorizes them to vote all such shares of the Company as to which the undersigned
is entitled to vote at the Annual Meeting of Stockholders of the Company and at all adjournments or postponements thereof, to be
held at the offices of Akerman LLP located at 777 South Flagler Drive, Suite 1100, West Tower, West Palm Beach, Florida 33401,
in accordance with the following instructions:
THE SHARES REPRESENTED HEREBY WILL BE VOTED
AS SPECIFIED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR: (I) THE ELECTION OF DIRECTORS, (II) THE RATIFICATION
OF THE APPOINTMENT OF GREEN & COMPANY, CPAS AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING
DECEMBER 31, 2016, (III)
THE approvAL OF THE amendment to THE COMPANY's Certificate of
Incorporation to effect a reverse stock split of all of the outstanding shares of our common stock, par value $0.01 per share,
at a specific ratio within a range from 1-for-10 to 1-for-30, and to grant authorization to our Board of Directors to determine,
in its sole discretion, the specific ratio and timing of the reverse stock split any time before December 31, 2017, subject to
the Board of Directors' discretion to abandon such amendment
, (IV) APPROVAL OF AN ADVISORY (NON-BINDING) RESOLUTION ON THE
COMPANY’S EXECUTIVE COMPENSATION, AND (V) AUTHORIZATION TO ACT UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL
MEETING, AND ANY AND ALL ADJOURNMENTS OR POSTPONEMENTS THEREOF.
Important Notice regarding the Availability
of Proxy Materials for our Annual Stockholders Meeting to be held on December 22, 2016
.
The Proxy Statement and a copy
of our Annual Report on Form 10-K, as amended, for the year ended December 31, 2015 are available at
www.rennovahealth.com
under "Investors."
(DETACH BELOW AND RETURN USING THE ENVELOPE
PROVIDED)
RENNOVA HEALTH,
INC.
ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 22, 2016
THE BOARD OF DIRECTORS
RECOMMENDS THAT YOU VOTE “FOR” EACH DIRECTOR NOMINEE LISTED AND “FOR” EACH OF PROPOSALS 2, 3, 4 AND 5.
1.
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ELECTION OF DIRECTORS:
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1. SEAMUS
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2. DR. PAUL
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3. CHRISTOPHER
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4. BENJAMIN
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5. MICHAEL L.
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6. ROBERT
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LAGAN
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BILLINGS
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DIAMANTIS
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FRANK
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GOLDBERG
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LEE
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☐
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FOR
all nominees listed above (except as specified below)
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☐
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WITHHOLD AUTHORITY
to vote for all nominees listed above
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To withhold authority to vote for any indicated nominee(s), write the number(s) in the box provided to the right: ☐ ☐ ☐ ☐ ☐ ☐
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2.
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approve the ratification of the APPOINTMENT of
GREEN
& COMPANY, CPAS
as the Company's independent REGISTERED PUBLIC ACCOUNTING FIRM
for the fiscal year DECEMBER 31, 2016.
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☐
FOR
☐
AGAINST
☐
ABSTAIN
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3.
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APPROVE THE AMENDMENT to THE COMPANY's Certificate of Incorporation to effect a reverse stock split of all of the outstanding shares of our common stock, PAR value $0.01 per share,
at a specific ratio within a range from 1- for-10 to 1- for-30, AT THE DISCRETION OF THE BOARD OF DIRECTORS.
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☐
FOR
☐
AGAINST
☐
ABSTAIN
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4.
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approve an advisory (non-binding) resolution on the Company’s executive compensation.
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☐
FOR
☐
AGAINST
☐
ABSTAIN
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To act upon such other business as may properly come
before the Annual Meeting and any and all adjournments or postponements thereof.
☐
FOR
☐
AGAINST
☐
ABSTAIN
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Check appropriate box and indicate changes below:
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☐Address Change? ☐ Name Change?
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SIGNATURE(S)
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________________________________
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________________________________
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________________________________
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________________________________
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(Please sign exactly as your name appears on your proxy card. When shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee or partner, please give full title as such. If a corporation, please sign in full corporate name by president or by other authorized officer. If a partnership, please sign in partnership name by authorized person.)